WONG YUK KUN v. WONG YUK WAN AND ANOTHER

DCCJ 4846/2016

[2021] HKDC 1197

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4846 OF 2016

---------------------------

---------------------------

--------------------

JUDGMENT

--------------------

Background

1.  The dispute arises over a property situated at Unit 8, 2/F, Block D, Trend Plaza, Tuen Mun (“the Property”).  The plaintiff (“P”) and the 1^st defendant (“D1”) are registered joint tenants.

2.  The 2^nd defendant (“D2”) is the elder sister of D1.  D1 and D2 are cousins of P.

3.  P is seeking, inter alia:-

(a)     a declaration that she is the sole beneficial owner of the Property and that D1 holds her interest in the Property on trust for her;

(b)     an order that D1 shall vest, assign, and transfer all her rights, title and interest in or relating to the Property to her.

4.  Originally under the Writ of Summons and Statement of Claim dated 30 September 2016, P sued D1 only. D2 was subsequently added in the Amended Writ of Summons dated 27 August 2018.

5.  D1 and D2 jointly defend P’s claim and counterclaim for, inter alia:-

(a)     a declaration that P and D1 are holding the Property on trust for P, D1 and D2 in proportion to their respective contribution towards the price and costs of the acquisition of the Property; alternatively, such proportion as the court shall determine;

(b)     a declaration that P is liable to pay compensation to D1-2 for P’s (and her family members’) occupation of the Property to the exclusion of D1 and D2;

(c)     an inquiry as to the amount of such compensation payable to D1 and D2 since February 2014;

(d)     an injunction to restrain P from transferring, selling, agreeing to sell, assigning, charging, mortgaging or otherwise dealing with the Property including but not limited to, any interest she has.

6.  It is helpful to set out a brief chronology:-

Date	Events
24.11.1996	Viewing of the Property
24.11.1996	Provisional Sale and Purchase Agreement with P & D1 as joint purchasers (“PSPA”)
06.12.1996	Sale and Purchase Agreement with P & D1 as joint purchasers (“SPA”)
18.01.1997	Mortgage granted by Hang Seng Finance Limited with P & D1 as co-mortgagors (“Mortgage”)
03.02.1997	Assignment of Property with P & D1 as joint tenants (“Assignment”)
March 1997	P and family moved into the Property
26.04.2011	Mortgage was fully paid
25.06.2015	Letter from P’s solicitors to D1
17.08.2015	Letter from D1’s solicitors to P’s solicitors
30.09.2016	Writ of Summons and Statement of Claim
16.01.2018	Interrogatories taken out by D1
27.08.2018	Amended Writ of Summons
28.08.2018	Re-re-re-Amended Statement of Claim
01.08.2019	Re-re-re-re Amended Defence and Counterclaim
16.08.2019	Re-re-re Amended Reply and Defence to Counterclaim

7.  The following are undisputed:-

(a)     Under the PSPA, D1 was named as a co-purchaser, and the PSPA was signed by P “for and on behalf of D1” as well as in her own capacity.

(b)     On 18 January 1997, Hang Seng Finance Limited granted a mortgage loan in the sum of HK$1 million in favour of P and D1 as co-mortgagors, with P’s husband Chan Wing Tim (“Chan”) as a guarantor.  The relevant documents were registered in the Land Registry on 3 February 1997.

(c)     The Assignment dated 3 February 1997 was executed between the vendors of the Property and P and D1 as joint tenants.

(d)     P and her family (including Chan and their two children) started to reside in the Property in March 1997.  Chan moved back to the original family home at Room 2314, Oi Hei House, Yau Oi Estate, Tuen Mun, New Territories shortly afterwards.

(e)     The total acquisition costs of the Property amounted to a sum of $2,226,435 (inclusive of purchase price in the sum of $2,115,000, agency fees, stamp duty and legal fees), out of which $700,000 came from D2, $1,000,000 came from the Mortgage granted by Hang Seng Finance Limited, and the remaining $526,435 was contributed by P.

(f)     P was responsible for the Mortgage repayments.

(g)     On or about 26 April 2011, the Mortgage was fully repaid.  The discharge was registered with the Land Registry on 5 May 2011.

(h)     Out of the total acquisition costs of $2,226,435, except for the $700,000 contribution from D2, P was responsible for the remaining $1,566,435.

(i)     P made payments to D2 in a total sum of $1.01 million from early 1997 up to 10 January 2014.

8.  P’s case is that D2 loaned her $700,000 to purchase the Property.  There was however no discussion or agreement whatsoever on the terms of the alleged loan (the interest rate, the mode and time of repayment etc).  It was the “common intention” of the parties that D1 was named joint purchaser / joint tenant for the sole purpose of facilitating the mortgage loan application, that P would be the sole beneficial owner of the Property (and neither D1 nor D2 had any beneficial interest).

9.  Ds’ case is that D2 agreed to invest $700,000 in the Property jointly with P.  D2 requested the name of D1 be used as the joint purchaser and joint tenant of the Property.  It was agreed between D1 and D2 that, out of the $700,000 advanced by D2, D1 would contribute $100,000.

10.  It is Ds’ case that P and her family would be in sole occupation of the Property (to the exclusion of Ds) and there was no discussion about any rent or compensation to be paid by P to Ds, as it was anticipated that P would be able to acquire Ds’ share of interests in the Property within a relatively short period of time, after P had obtained a Government loan in the sum of $600,000.

11.  Ds contend that since P had failed and refused to acquire Ds’ share of interests in the Property as anticipated, Ds then demanded rent or compensation from P for P’s exclusive occupation of the Property.  The $1.01 million represented such rent or compensation.

12.  On the other hand, P said that the sum of $1.01 million represented repayment of the alleged loan of $700,000 with interest in the sum $310,000.00.  The loan was fully repaid on 10 January 2014.

Preliminary matters

P’s objection to “Illegality”

13.  Mr Lam for Ds in his Opening Submission sought to argue “illegality”.  Mr Lam submitted that the “common intention” of the parties pleaded by P, that D1’s name was added for the sole purpose of facilitating P’s mortgage application, is an act to defraud the bank (ie Hang Seng Finance Limited).

14.  Mr Lam referred to the rule in Tinsley v Milligan [1994] 1 AC 340 at 366:-

“First, it is trite law that the court will not give its assistance to the enforcement of executory provisions of an unlawful contract whether the illegality is apparent ex facie the document or whether the illegality of purpose of what would otherwise be a lawful contract emerges during the course of the trial: Holman v. Johnson, 1 Cowp. 341, 343, per Lord Mansfield C.J.; Pearce v. Brooks (1866) L.R. 1 Ex. 213, 217-218, per D Pollock C.B.; Alexander v. Rayson [1936] 1 K.B. 169, 182; Bowmakers Ltd. v. Barnet Instruments Ltd. [1945] K.B. 65, 70.

Second, it is well established that a party is not entitled to rely on his own fraud or illegality in order to assist a claim or rebut a presumption. Thus when money or property has been transferred by a man to his wife or children for the purpose of defrauding creditors and the transferee resists his claim for recovery he cannot be heard to rely on his illegal purpose in order to rebut the presumption of advancement: Gascoigne v. Gascoigne [1918] 1 K.B. 223, 226; Palaniappa Chetiiar v. Arunasalam Chettiar [1962] A.C. 294, 302; Tinker v. Tinker [1970] P. 136, 143, per Salmon L.J.

Third, it has, however, for some years been recognised that a completely executed transfer of property or of an interest in property made in pursuance of an unlawful agreement is valid and the court will assist the transferee in the protection of his interest provided that he does not require to found on the unlawful agreement: Ayerst v. Jenkins, L.R. 16 Eq. 275, 283; Alexander v. Rayson [1936] 1 K.B. 169, 184-185; Bowmakers Ltd. v. Barnet Instruments Ltd. [1945] K.B. 65 and Singh v. All [1960] A.C. 167, 176. …”

(emphasis added).

15.  Mr Lam further referred to para 25-014 of Snell’s Equity (33^rd Edition):-

“A person may not rely on his own unlawful purpose to rebut the presumption of resulting trust or of advancement. The rule that a person cannot plead his own illegality to found his claim applies to all kinds of trusts. But it is particularly relevant to resulting trusts since the existence of the trust and the effect of any counter-presumption of advancement depend on informal evidence of the parties’ intentions. Thus where a husband puts property into his wife’s name, he cannot be heard to say that he did so to defeat his creditors, or to evade government restrictions or taxes, and that his wife knew this. The presumptions will apply unless a separate ground for rebutting them is both pleaded and proved.”

(Emphasis added)

16.  P is therefore not entitled to rely on her own fraud against the bank in order to rebut the presumption of resulting trust.

17.  Mr Chan for P strongly objected to Mr Lam’s submissions on “illegality” and invited the court to make a preliminary ruling in rejecting the same.

18.  Mr Chan pointed out that Master Peony Wong had, on 30 July 2019, refused Ds’ proposed inclusion of “illegality” to the Re-re-re Amended Defence & Counterclaim.

19.  The paragraph rejected by the Master was paragraph 14A of the Re-re-re Amended Defence & Counterclaim, which states:-

“Furthermore, the common intention as alleged in Paragraph 20 [of the Re-re-re Amended Statement of Claim], the existence of which is denied, amounted to a conspiracy to defraud Hang Seng Finance into granting the Mortgage which it otherwise would not grant, and was illegal and/or unlawful. The alleged common intention is and at all material times was therefore void and/or unenforceable by reason of illegality and/or public policy.”

(emphasis added)

20.  Mr Chan submitted that this issue has been determined by the Master and Ds should not be allowed to argue again at trial.  What Mr Lam was doing amounts to abuse of process and the parties are bound by the operation of res judicata and issue estoppel.

21.  Mr Lam however said the court has inherent jurisdiction to deal with illegality (even if it is not pleaded) if it is “ex facile” illegal.

22.  Mr Lam submitted that illegality need not be pleaded, nor even raised by either of the parties.  In suitable cases, the court will raise the issue on its own motion, so as not to lend itself to a fraudulent or illegal purpose.  He referred to Snell v Unity Finance Co Ltd [1963] 2 QB 203 at 215:-

“That expression of view by Lord Moulton was followed by Devlin J. in Edler v. Aucrbach [[1950] 1 K.B. 359; 65 T.L.B.] …. I refer to the case for the statement of principle by Devlin J. where, following a reference to North Western Salt Co. Ltd. v. Electrolytic Alkali Co. Ltd. [[1914] A.C. 461], the judge went on to say this[at 371]: "That case, I think, authorises four propositions: first, that, where a contract is ex facie illegal, the court will not enforce it, whether the illegality is pleaded or not; secondly, that where, as here, the contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be admitted unless the circumstances relied on are pleaded; thirdly, that, where unpleaded facts, which taken by themselves show an illegal object, have been revealed in evidence (because, perhaps, no objection was raised or because they were adduced for some other purpose), the court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it; but, fourthly, that where the court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object, it may not enforce the contract, whether the facts were pleaded or not.” I see nothing to criticise in that statement of principle by the judge; and it seems to me that the defendants are right in their contention that the fourth of those propositions enunciated by Devlin J. exactly covers the circumstances of this case; that is to say, the court can be satisfied in the circumstances of this case that all the facts have come to light.”

(emphasis added)

23.  Mr Lam was effectively saying that the court should allow Ds (and P) to give “all the relevant facts” at trial to show the “illegal object”, ie to defraud the bank into granting the Mortgage, despite that it was not part of the pleadings.

24.  In relation to the court’s power to entertain “illegality” in lieu of pleadings, Mr Chan referred to Igal Dafni v CMA CGM SA [2013] 2 HKLRD 73, where Recorder Horace Wong SC held:-

“31. I cannot accept Mr Kat’s arguments. In my judgment, the authorities are clear that it is only in the case where the relevant contract is ex facie illegal – or if it is not, the Court is nonetheless satisfied that all the relevant facts and circumstances bearing on the question of illegality are fully known to it – that the Court becomes entitled to decide that the contract is unenforceable by reason of illegality even though the issue of illegality has not been pleaded by either party. As Lord Moulton pointed out in the case of North Western Salt Company Ltd v Electrolytic Alkaline Company Ltd (supra, at p.476), the position:

“…… may be shortly put as follows: if the contract and its setting be fully before the Court it must pronounce on the legality of the transaction.  But it may not do so if the contract be not ex facie illegal, and it has before it only a part of the setting, which it is not entitled to take, as against the plaintiffs, as fairly representing the whole setting.”

32. The proper approach which the court should adopt in a case where evidence of illegality is before the court but has not been relied on in the pleaded defence is that set out in the judgment of Devlin J inEdler v Auerbach[1950] 1 QB 359, 371, cited by Potter LJ in the case of Pickering v McConville [2003] EWCA Civ 554, at §18, as follows:

“First that, where a contract is ex facie illegal, the court will not enforce it whether the illegality is pleaded or not.  Secondly, that where, as here, the contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be admitted unless the circumstances relied on are pleaded.  Thirdly, that where unpleaded facts, which taken by themselves show an illegal object, have been revealed in evidence (because perhaps no objection was raised or because they are adduced for some other purpose) the court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it but, fourthly, that where the court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object, it may not enforce the contract whether the facts are pleaded or not.”

33. It is hence clear that unless a contract is ex facie illegal, evidence of its illegality is not admissible unless the circumstances or facts relied on have been pleaded. In situations where unpleaded facts are revealed or become known to the Court (for example, through evidence admitted for some other purpose) which tend to show illegality, the Court is only entitled to act on them if it is satisfied that all the relevant facts bearing on the perceived illegality are known to it. No finding of illegality should be made on unpleaded facts unless the Court is sure that it has all the relevant facts before it to enable it to see clearly that the contract is in fact tainted with illegality. The following reminder of Devlin J, given in the Auerbach case (at p.371) in regard to the danger for making a finding of illegality on unpleaded facts is worth repeating:

“… the court must be satisfied of the illegality of the transaction; that means that it must be satisfied that it knows all the relevant facts.  On any issue which is raised on the pleadings the court may safely assume that the relevant facts will be brought before it by one side or the other: where notice or the issue is not given on the pleadings, there is a danger that that assumption may break down, and the decision in North Western Salt Company Ltd v Electrolytic Alkaline Company Ltdis a warning against overlooking that danger.”

34. As is often pointed out, in our adversarial system the Court is not on an “independent truth-finding mission” (to use the words of Mr Bartlett in his submissions) but is there to resolve the dispute between the parties in accordance with justice and procedural fairness. Our rules of pleadings provide an important means for safeguarding procedural fairness. I accept Mr Bartlett’s submission that it cannot be the case that merely because a party has raised an allegation of illegality the Court’s function is thereby radically altered to that of an inquisitorial tribunal as opposed to one that resolve disputes following the normal adversarial procedure. Where the contract concerned is ex facie illegal, the illegality concerned, as Lord Moulton pointed out in the Electrolytic Alkaline Companycase (see p. 475 of the judgment of Lord Moulton), is a question of law and the Court may safely conclude on the face of the contract that it is unenforceable for being illegal or in contravention of public policy. Where the contract is not ex facie illegal, and the Court is not satisfied that it has all the relevant facts bearing on an allegation of illegality before it, it is highly dangerous for the Court to make findings of illegality; and in my judgment it is equally dangerous for it to abdicate its function as a Court of adjudication working within an adversarial system and take on the role of an independent investigator by embarking on an investigation based on unpleaded facts. Illegality and breach of public policy are (except in cases where the contract concerned is ex facie illegal) issues that are often facts-sensitive, and the relevant facts have to be pleaded to enable proper findings of facts to be made (c.f. Chao San San v Worldport Industrial Limited (unrep.) CACV 158/2002, 21 March 2003, at §9 per Yuen JA).”

(emphasis added)

25.  Mr Chan analyzed a number of authorities including Tinsley v Milligan, supra, North Western Salt Company Ltd. v Electrolytic Alkali Company [1914] AC 461, Snell v Unity Finance Co. Ltd. supra, Poojary v Kotecha, Chancery Division, unreported, 10 May 2002 and, Fu Kai Wa v Luk Ngai Ling Irene HCA 3074/2001, and submitted that there is nothing “ex facile” illegal.

26.  The Mortgage was fully repaid and the mortgagee suffered no prejudice.

27.  Mr Chan submitted it is not necessary for Ds, nor that it is their case, to say that the “common intention” pleaded by P or that the Mortgage was illegal, in order to prove “joint investment” with P.  Ds’ case is premised on resulting trust for the $700,000 contribution and do not rely on D1’s role as co-mortgagors to assert beneficial interest.

28.  I have considered carefully the authorities referred to by both Mr Chan and Mr Lam, and I agree with Mr Chan’s analysis. 

29.  I do not see anything “ex facile” illegal about the Mortgage or the alleged “common intention”.  Even if I were to allow the parties to present “all the relevant facts”, there is no evidence to show that the mortgagee bank would have refused the mortgage application if D1 was not a co-mortgagor.

30.  As pointed out by Mr Chan, the Mortgage was fully repaid and the bank suffered no prejudice.  There is nothing to show that the bank was defrauded in any way.  From the bank’s point of view, both P and D1, as co-mortgagors, are liable for mortgage repayment irrespective of whatever arrangement or agreement between them.

31.  Also, as held by Recorder Horace Wong S.C. in Igal Dafni, the court should not take on the role of an independent investigator by embarking on an investigation based on unpleaded facts.

32.  I see no reason why Ds should be allowed to raise “illegality” of the Mortgage in the absence of proper pleadings. It was argued before and dismissed by Master Peony Wong and is subject to the principles of res judicata / issue estoppel.

33.  I therefore ruled that Ds should not be allowed to argue “illegality” nor adduce evidence of the same in the absence of pleadings.

34.  However, the parties should be allowed to extract / adduce evidence regarding the circumstances as to how the Mortgage came about as defined by the parties’ respective pleaded case under the Re-re-re Amended Statement of Claim and Re-re-re-re Amended Defence & Counterclaim.

35.  In particular, under paragraphs 14 to 16 of Re-re-re Amended Statement of Claim:-

“14. A few days after the signing of the PSPA, the Plaintiff and the 2^nd Defendant visited Hang Seng Bank to enquire about a potential mortgage loan application for the Property with the two of them as joint applicants. The 2^nd Defendant also suggested to the Plaintiff that the 2^nd Defendant could be added as a joint purchaser/owner of the Property in the documents relating to the acquisition of the Property in order to and for the purpose of facilitating the Plaintiff’s application for a mortgage loan. The 2^nd Defendant told the Plaintiff that it would be easier for the Plaintiff to obtain a mortgage loan from the bank when there were on record two purchasers as opposed to one. However, the Plaintiff and the 2^nd Defendant were informed by the bank that the potential mortgage loan application would most likely be rejected as the Plaintiff could not provide any proof of her income as a local domestic helper whilst the 2^nd Defendant was unemployed at the time.”

“15. In view of this information given by the bank, the 2^nd Defendant then suggested that the Plaintiff could turn to the 1^st Defendant for assistance with the Plaintiff’s intended mortgage loan application for the Property. The 2^nd Defendant explained to the Plaintiff that since the 1^st Defendant was a civil servant and had a stable income, the Plaintiff could add the 1^st Defendant as a joint paper purchaser/owner of the Property in order to facilitate the Plaintiff’s intended mortgage loan application for the Property.”

“16. Out of her deep trust in the 1^st Defendant (and the 2^nd Defendant) and in view of the very close and harmonious relationship between the Plaintiff and the 1^st Defendant, the Plaintiff agreed to add the 1^st Defendant as a joint purchaser/owner in the intended acquisition of the Property for the sole purpose of facilitating the intended mortgage loan application.”

36.  Also under paragraph 12 of the Re-re-re-re Amended Defence & Counterclaim:-

“12. Save it is admitted that the PSPA was entered into by the vendors of the Property on one part and the Plaintiff and the 1^st Defendant as joint purchasers of the Property on the other part on 24 November 1996, that the Plaintiff signed the PSPA for herself and on behalf of the 1^st Defendant, and that the 1^st Defendant was a civil servant with stable income, paragraphs 13 to 16 are denied. The 1^st and 2^nd Defendants aver that since the Property was purchased in the joint names of the Plaintiff and the 1^st Defendant the mortgage from Hang Seng Finance Limited (“Hang Seng Finance”) (“the Mortgage”) was applied under their joint names. The 2^nd Defendant had never suggested to the Plaintiff to add herself as joint owner/purchaser of the Property for the purpose of facilitating the application for the Mortgage. The 1^st Defendant further avers that she would never break the law and would not have permitted the Plaintiff to use her name to deceive Hang Seng Finance into granting the Mortgage if she in fact did not have any interest in the Property. The 1^st and 2^nd Defendants repeat paragraph 8 hereinabove.”

Ds’ application to strike out

37.  Right after my ruling on “illegality”, Mr Lam immediately applied to strike out part of the Re-re-re Amended Statement of Claim, and P’s witness statements, on the basis that:-

(a)     Mr Chan conceded in his oral submissions that he will not rely on the reason why D1 was named as a co-mortgagor to prove P’s case; and

(b)     Ds would be prejudiced because they are not allowed to argue “illegality” at trial.

38.  Mr Chan objected to such application for lack of proper summons and supporting affirmation. 

39.  Despite that, I have allowed Mr Lam to proceed with the application.

40.  Regarding Mr Lam’s argument on prejudice, as I have said in my ruling on “illegality” above, the parties are allowed to adduce / extract evidence as to how the Mortgage came about as defined by the pleadings. I do not see Ds would be prejudiced in anyway.

41.  As for Mr Chan’s “concession”, Mr Chan has reiterated that D1’s name was added to facilitate mortgage application but ultimately his case is that the $700,000 from D2 was a loan, that D1 (and D2) held no beneficial interest in the Property.

42.  In any event, I agree with the observation of Mr Chan that it is not necessary for Ds (nor that it is their case) to say that the “common intention” pleaded by P or that the Mortgage was illegal in order to prove their case of “joint investment” with P.

43.  I therefore rejected Mr Lam’s application.

Issues

44.  On 25 September 2019, the parties filed a Revised Agreed Statement of Issues in Dispute which sets out the following:-

(a)     Was the $700,000 a personal loan to P or was it an investment in the Property by D1 and /or D2? (Issue 1)

(b)     Why was D1 registered as a joint tenant of the Property? (Issue 2)

(c)     What was the nature of the payments in the total sum of $1.01 million from P to D2 from January 1997 to January 2014? (Issue 3)

(d)     Did D1 make any direct or indirect monetary contributions towards the sum of $700,000 which D2 paid for the purchase price of the Property? (Issue 4)

(e)     Is D1 holding the Property on trust (common intention constructive trust and/or resulting trust) for P? (Issue 5)

(f)     If the answer to Issue (5) above is in the negative, whether the Property is held by D1 and P on trust for P, D1 and D2? (Issue 6)

(g)     If the answer to Issue (6) above is in the affirmative,

(i)     What are the respective contributions of P, D1 and D2 towards the costs of acquisition of the Property; (Issue 7(a))

(ii)     What are the respective proportions of the beneficial interest of P, D1 and D2 in the Property; (Issue 7(b))

(iii)     Whether P is liable to pay Ds compensation for P’s and her family members’ occupation of the Property to the exclusion of Ds; (Issue 7(c)) and

(iv)     If the answer to Issue 7(c) is affirmative, the amount of compensation payable. (Issue 7(d))

45.  The main issue is Issue 1, ie whether the $700,000 was a personal loan from D2 to P or an investment by D2 (and D1).

46.  There is no documentary evidence to show one way or the other.

47.  It is entirely a matter of oral evidence from the witnesses.

48.  As to Issue 3, it is common ground that it was P who unilaterally decided when and how much to pay, and to stop payment on 10 January 2014.

49.  There is no expert evidence or independent evidence of the prevailing lending rate or the market rental value of the Property for the relevant period to assist the court in ascertaining whether the $1.01 million was repayment of loan (with interest) or rental payment of the Property.

50.  Again, it is a matter of oral evidence from witnesses.

The law

Resulting trust /common intention constructive trust

51.  Both P and Ds plead resulting trust and common intention constructive trust to advance their respective case.

52.  Mr Lam clarified that the “common intention” pleaded by Ds is no different from resulting trust, that Ds are entitled to such interests in the Property as proportionate to their contribution towards the costs of acquisition of the Property.

53.  Both Mr Chan and Mr Lam have referred to a number of authorities on resulting trust and common intention constructive trust.

54.  The law is well settled.

55.  In Pettitt v Pettitt [1970] AC 777, Lord Upjohn held at 813-814:-

“First, then, in the absence of all other evidence, if the property is conveyed into the name of one spouse at law that will operate to convey also the beneficial interest and if conveyed to the spouses jointly that operates to convey the beneficial interest to the spouses jointly, i.e. with a benefit of survivorship, but it is seldom that this will be determinative. It is far more likely to be solved by the doctrine of resulting trust, namely, that in the absence of evidence to the contrary if the property be conveyed into the name of a stranger he will hold it as trustee for the person putting up the purchase money and if the purchase money has been provided by two or more persons the property is held for those persons in proportion to the purchase money that they have provided.

My Lords, all this is trite law but I make no apology for citing the judgment of Eyre C.B. in 1788 in the leading case of Dyer v. Dyer (1788) 2 Cox, Eq.Cas. 92, 93, 94, set out in full in White and Tudor's Leading Cases in Equity, 9th ed. (1928), Vol. 2, 749—

‘The clear result of all the cases, without a single exception, is that the trust of a legal estate, whether freehold, copyhold, or leasehold; whether taken in the names of the purchasers and others jointly, or in the names of others without that of the purchaser; whether in one name or several; whether jointly or successive—results to the man who advances the purchase-money.This is a general proposition, supported by all the cases, and there is nothing to contradict it; and it goes on a strict analogy to the rule of the common law, that where a feoffment is made without consideration, the use results to the feoffor. It is the established doctrine of a court of equity, that this resulting trust maybe rebuttedby circumstances in evidence.’ ”

56.  Ultimately, the question for the court is whether the beneficial interest in the Property shall follow the legal title, ie P and D1, as joint tenants, each held 50% beneficial interest in the Property.

57.  It is not Ds’ case that they are collectively entitled to 50% of the beneficial interest.  They are only relying on the $700,000 advanced by D2 (of which $100,000.00 allegedly came from D1).

58.  The presumption of resulting trust dictates that P and D1 held D2’s beneficial interest in the Property to the extent of $700,000 and it is for P to rebut the same in order to prove her case of 100% beneficial interest.

59.  The case of P is that the $700,000 from D2 was a personal loan.  The mere fact that D1 was named as joint tenant/co-mortgagor is insufficient and cannot be equated as monetary contribution towards the purchase price of the Property.  The “common intention” was that P would be the sole beneficial owner of the Property.

60.  In respect of common intention constructive trust, Mr Chan referred to Mo Ying and Brillex Development Ltd [2014] 3 HKLRD 224 where DHCJ Eugene Fung SC held at paragraph 33 that:-

“Where a property is vested only in one person’s name (A), the other party (B), in order to establish a beneficial interest, may be able to establish a constructive trust by showing that it would be inequitable or unconscionable for A to claim the entirety of the beneficial ownership. This requires two matters to be proved: (1) that there was a common intention that both should have a beneficial interest; and (2) that B has acted to his/her detriment on the basis of that common intention.”

61.  The onus of proof is upon the person seeking to show that the beneficial ownership is different from the legal ownership, ie P.

62.  Mr Chan further referred to Leung Hang Lin and Another v Lam Mei Yung, unrep, HCA 1374/2017:-

“8. In summary:

(1) 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 bears the burden of showing, on the balance of probabilities, that the defendant held the property on trust for him or her such that the beneficial ownership differs to the legal ownership. See: Liu Wai Keung paragraph 44; Mo Ying paragraph 5.16; Primecredit paragraph 17.

(2) 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 paragraph 38; Liu Wai Keung paragraph 46.

(3) The approach to ascertaining common intention is objective. One looks to the intention of each party which was reasonably understoodby the other party to be manifested by the first party’s words and conduct. See: Liu Wai Keung paragraph 47; Mo Ying paragraph 5.16.

(4) The doctrine is sometimes described as having two limbs. First, where at any time prior to the acquisition (or exceptionally, at a later date), there is an agreement, arrangement or understanding reached between the parties as to how the property is to be held beneficially, based on evidence of express discussions. Second, where there is no evidence to support such a finding but the court relies on the parties’ conduct as a basis from which to infer a common intention.There is some authority that under the second limb, direct contributions to the purchase price by a party who is not a legal owner will readily justify the inference. See: Mo Ying paragraph 5.8; Primecredit paragraphs 2.3 and 2.4.

(5)     However, the modern approach is to assess the parties’ common intention by a holistic approach having regard to the context and the particular facts. The court is not constrained to consider only pure direct monetary contributions to the purchase price. In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family are not that common, the court has to pay more regard to circumstantial matters. See: Mo Ying pargaraphs 5.14 and 5.15; Primecredit paragraph 1.6.”

63.  Mr Lam said that P’s primary case (as pleaded) is that of resulting trust, on the basis that “the entirety of the purchase price of the Property was contributed by the Plaintiff”.  Since it is common ground that $700,000 of the acquisition money of the Property came from Ds, Mr Lam submitted that it cannot be right that P is the sole beneficial owner of the Property under resulting trust.

64.  As far as actual common intention is concerned, P’s pleaded case is premised on the conduct of parties mostly occurred after the acquisition of the Property on 24 November 1996 to infer the “common intention”.

65.  The “detriment” pleaded by P is “repaying the Mortgage entirely on her own”.  Mr Lam submitted that since Ds acknowledge that the mortgage loan is to be treated entirely as P’s contribution towards the acquisition of the Property, and that P should be given appropriate interests in the Property, it cannot be treated as “detriment”.

66.  Mr Chan, other than, argued that Mr Lam’s criticism of P’s failure to prove “reliance” and “detriment” are baseless as these elements must be determined on a “holistic basis” after taking into the entire circumstances of the present case including the entire course of conduct that transpired between P, D1 and D2 respectively: Leung Hang Lin, paragraph 8(5).

67.  Mr Chan also relied on the Court of Appeal’s decision of Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 where Lam VP outlined the approach in determining a common intention constructive trust, which Mr Chan paraphrased as follows:-

“(1) Of resulting trust and common intention constructive trust, in a local and domestic context, preference should be given to an analysis based on the common intention constructive trust (See: paragraph 1.3);

(2) In both resulting trust and common intention constructive trust, the court should take into account of the inherent probabilities in the light of the surrounding circumstances when the property was acquired (See: paragraph 1.4);

(3) For a common intention constructive trust, the search is to assess the common intention of the parties by a holistic approach having regard to the peculiar context prevailing in a particular case (See: paragraph 1.6);

(4) In the Chinese setting, where explicit discussions on property rights within the family are not that common, the court has to pay more regard to circumstantial matters (See: paragraph 1.6).”

68.  I have considered the authorities cited by both Mr Chan and Mr Lam.  As said, the law in this regard is well settled.

69.  While I agree with the court’s approach in Leung Hang Lin and Primecredit (relied on by Mr Chan), Mr Lam’s criticism on P’s pleaded case in relation to “reliance” and “detriment” is not unfounded.

70.  The main issue, I agree with Mr Lam, is whether or not P can rebut the presumption of resulting trust in that the entire beneficial interest in the Property was held by P.

71.  Ultimately, the question for the court is whether the $700,000 from D2 was a personal loan which attracts no beneficial interest in the Property.  If the $700,000 was an investment from D2, the next question is whether D1 did contribute $100,000 so that she also held proportionate beneficial interest in the Property.

72.  As said, there is no documentary evidence to show whether the $700,000 was a loan or an investment.  There is also no document to show D1’s contribution of $100,000 towards the $700,000.

73.  All the questions are to be determined by reference to oral evidence of the witnesses.

The evidence

Factual witnesses

74.  On P’s side, the witnesses are P herself and her husband Chan.  On Ds’ side, there are D1, D2 and Madam So Lin Kiu (“So”).

75.  I shall briefly summarize their evidence.

P’s witnesses

Evidence of P

76.  P adopted her 2 witness statements as her evidence in chief.

77.  According to P, she and her daughter had the habit of viewing properties in Tuen Mun area for leisure.  P had never thought of purchasing private residential premises (the family was residing in public housing at Yau Oi Estate at the material time) until 24 November 1996.

78.  On 24 November 1996:-

(a)     P, together with Chan and their daughter, accompanied D2 to view the Property.

(b)     D2 suggested to her that she should purchase the Property since her public housing unit was too small for the family.

(c)     The price of the Property was $2,155,000.  As P had insufficient fund, D2 offered to lend a sum of $700,000 to her and suggested P to apply for Government loan (in the sum of $600,000) from Hong Kong Housing Society.  P thought she could repay D2 once the Government loan was approved.

(d)     D2 further suggested P to apply for mortgage.  D2 worked out that it is best for P to repay the mortgage in 20 years by monthly repayment of $8,000.

(e)     There was no discussion that the $700,000 was D2’s investment nor that D2 would have any share of beneficial interest in the Property.

79.  According to P, she and her daughter went for first viewing of the Property with D2 in the afternoon on 24 November 1996.  Her husband Chan joined them for a second viewing of the Property later in the evening. So, contrary to Ds’ case, was not present at the viewings.  P did not invite D2 and So to visit her home in Yau Oi Estate that day for discussion about the Property.

80.  Under cross-examination by Mr Lam, P admitted that she had not, at the time she signed the PSAP, contacted any bank, and that she had no idea whether she would be able to secure $1,000,000 mortgage loan.  She also had no idea how long the application process would take.  She had not thought of the consequences if she was not able to obtain mortgage loan to the extent of $1,000,000.

81.  P categorically denied that the $700,000 was an investment from D2 and insisted that it was a loan offered by D2.  There was, however, no discussion on 24 November 1996 about the terms of the loan, eg interest rate and repayment schedule.

82.  P said, under cross-examination, that either at the bank (for mortgage application) or at the solicitors’ firm (for signing the SPA), P did ask D2 to charge a lower interest rate (收平啲息), whereupon D2 replied “okay” (得喇).  However, the notion of “interest” was never raised in her pleadings nor witness statements.

83.  P said that her intention was to repay D2 when she was able to do so (有錢便還；有就還、有就還).  She has paid a total sum of $1.01 million to D2 which, according to P, represents the principal sum of $700,000 plus interest, although P could not say precisely what the interest rates were.

84.  P said that the first repayment was on 22 January 1997 in the sum of $30,000.

85.  P said that the $700,000 was already “out-pocketed” by D2 on 18 January 1997, and since P had some money on hand, she repaid $30,000 to D2 on 22 January 1997.  Out of the blue, she said that 18 January 1997 was too close (to 22 January 1997), and that D2 should have made her contribution of $700,000 in December 1996. 

86.  In paragraph 25(1) of her first witness statement, P said on 5 or 6 December 1996, D2 used the money from P to pay the estate agent and to Mr Yeung, her solicitor in handling the purchase of the Property, for stamp duty.

87.  Mr Lam suggested to P that the $30,000 was not for repayment of loan but was for D2 to pay Mr Yeung. P said that she has already paid Mr Yeung prior to 22 January 1997.

88.  Mr Lam said the sale and purchase of the Property was not completed until 3 February 1997.  A sum of $957,060.00 (including Ds’ contribution of $700,000) was not paid by D2 to Mr Yeung until 30 January 1997.  P cannot explain why her first “repayment” to D2 was on 22 January 1997, even before the “loan” was advanced.

89.  P said that she did not consider that she had to repay the loan of $700,000 so soon since she has not discussed with D2 on repayment schedule. P then went on to say that it was based on mutual trust, that D2 lent her money and they “joined names to purchase property” (夾名買樓) like “doing business together” (㚒份做生意).  She then changed to say that it was like “sharing the costs of a meal” (夾錢食飯).

90.  P was cross-examined by Mr Lam extensively as to why she signed on behalf of D1 as a co-purchaser on the PSPA dated 24 November 1996.

91.  In paragraph 13 of her first witness statement, P said she only learnt that D1 was a joint purchaser after she commenced the present proceedings when she passed a copy of the PSPA to her solicitors.

92.  P stated in her witness statement that she was instructed by D2 to put 2 signatures on the PSPA (ie one “for and on behalf of D1” and one in her own capacity).  In court, P said that she was asked by the estate agent to sign.

93.  Mr Lam pointed out that the estate agent was an “ad hoc” one randomly engaged by the parties on 24 November 1996.  P’s daughter was with P during the viewing, but P did not bother to ask the daughter to read and explain to her the PSPA before signing.

94.  Mr Lam also questioned P about the reason why P did not obtain the Government loan of $600,000. 

95.  In paragraph 29 of P’s first witness statement, the reason given is that she was not eligible because she had already purchased the Property before putting in the application for the loan. 

96.  Under cross-examination, P at first said that the Government loan was available only for acquiring properties under the Home Ownership Scheme and thus was not available for purchasing properties in the open market.  Upon further cross-examination, P said that the loan was also available for buying flats from the private property market.

Chan’s evidence

97.  When Chan was asked to confirm his witness statement in court, he said he had not read his witness statement, and that he signed on it without knowing its content.

98.  I allowed time for Chan to review his witness statement with the assistance of P’s legal representatives.  Chan eventually confirmed his witness statement as his evidence in chief.

99.  In short, Chan said he did not meet So on 24 November 1996 and he only joined the second viewing of the Property in the evening.  The family did not apply for the Government loan of $600,000 as P has already acquired the Property.

100.  Chan did not give any evidence whatsoever as to what was discussed between P and D2 on 24 November 1996.

101.  Under cross-examination, Chan said he was uncertain whether D2 visited his home in Yau Oi Estate before they went to view the Property.  He said that their family (ie, P, Chan and their two children) set off together from home to view the Property.

102.  Mr Lam noted that this is different from P’s evidence that Chan went to the Property by himself to join the others (for the second viewing in the evening).

Ds’ witnesses

D2’s evidence

103.  D2 confirmed her 2 witness statements as her evidence in chief.

104.  D2 outlined her experience in investing real properties and how she jointly invested with her siblings prior to November 1996.

105.  She said that she had purchased a shop premises in Tuen Mun before and in November 1996, she was minded to purchase residential property in Tuen Mun for the purpose of renting out.  She asked P for advice as she had been residing in Tuen Mun for years.

106.  In court, she further said that she was intending to purchase a property in the region of $1 million.

107.  On 24 November 1996, it was P who suggested that they should jointly invest in the Property and P would reside at the Property and would be responsible for the mortgage repayment.  P would also apply for Government loan in the sum of $600,000 and would “buy back” D2’s shares at market value within in a short time.

108.  D2 suggested the Property should be purchased in the joint names of P and D1, since D1 was a civil servant and it would be easier to apply for mortgage.

109.  When cross-examined by Mr Chan, D2 said by using D1’s name also reflects her $700,000 share in the Property.  She “conveniently” used D1’s name to apply for mortgage (順便做按揭) to protect her own interest until P obtained the Government loan of $600,000.00.

110.  D2 expected P to “buy back her share” within a “6 months to 1 year” (一年半載) at market value and did not discuss with P about rent (for P’s occupation of the Property).  D2 was confident that P could pay back her share fairly soon as Chan was making USD100 per day and that the Government loan would become available.

111.  Under cross-examination by Mr Chan, D2 admitted that “6 months to 1 year” (一年半載) was not suggested by P, as P only said “as soon as possible”.

112.  As P did not acquire her share in the Property within a short time at market value as promised, D2 considered that there was no reason why P and her family should have exclusive occupation of the Property for free (白住).  D2 therefore demanded P to acquire Ds’ interests in the Property and also required P to make payments for her exclusive occupation of the Property.  D2 said professional(s) / accountant(s) would be engaged to “do the calculation” (計數) eventually.

113.  Regarding P’s payment of $1.01 million (which were paid into her Bank of China account (“the BOC Account”)), D2 said in court that they were not “repayments” but “transfers” (轉數), and that she and P would “do the calculation” subsequently (日後計數).

114.  D2 admitted, contrary to what she has stated in her first witness statement, she never told P that those payments were “rent” and she did not request for “rent”.  The term “rent” were never used.  D2 reiterated that they would “do the calculation” eventually (日後計數) and professionals would be engaged for the purpose.

115.  D2 was questioned by Mr Chan about the BOC Account entries, in particular the $30,000 entry on 22 January 1997.  According to D2, she penciled in the word “Kun” (being the last word in P’s full name) and a tick to reflect:-

(a)     P deposited $30,000 into the BOC Account on 22 January 1997;

(b)     P then informed D2 over the phone of this deposit;

(c)     D2 retrieved the printed record from the bank and verified the $30,000 deposit.

116.  Mr Chan said the first payment of $30,000 predated P’s occupation of the Property in early March 1997 by about 2 months.  Mr Chan queried why P paid for “rental or compensation” when she and her family did not even reside at the Property during these 2 months.

117.  D2 said she could not recall whether the $30,000 was for other purposes, for example, repayment of solicitors’ fees or stamp duty which D2 used her personal cheques to pay on P’s behalf and P later paid her in cash.

118.  Regarding the alleged contribution of $100,000 from D1, D2 said she and D1 had all along been jointly investing in real properties and securities.  She was the decision maker and D1 left everything to her.  According to D2, it is not necessary for D1 to physically pass her any money as they kept “running account” of their joint investment.

119.  Mr Chan further questioned D2 whether she kept any bank account jointly with D1.

120.  D2 revealed that she held a bank account at Overseas Trust Bank with D1 and her sister-in-law (“the OTB Account”), which was the only bank account held by D1-2 jointly.  D2 did not produce the record of the OTB Account to her solicitors before trial as she considered them irrelevant.

121.  Regarding D1’s contribution of $100,000, D2 said it was done by a “deduction” within the OTB Account.  However, the alleged deduction was not shown in the OTB Account record produced by D2 at trial.

122.  She agreed that she did not communicate this “deduction” of $100,000 to P and P was not informed of D1’s contribution of $100,000 on 24 November 1996 (nor at any time before the present proceedings).

So’s evidence

123.  So confirmed her 2 witness statements.  Her evidence is that she went to Tuen Mun with D2 on 24 November 1996 and went viewing with P, Chan and D2.  She was also invited to P’s home.

124.  She considered herself a bystander and did not participate in the conversations and exchanges between P, Chan and D2.  However, she “overheard” Chan mentioned “jointly purchase property” (夾份買楼) with D2 and that it would take a few months to buy back D2’s share.

D1’s evidence

125.  D1 admitted that the contents of her 2 witness statements derived from information provided by D2.

126.  D1 has no personal knowledge regarding the circumstances under which the PSPA was executed and what was discussed between P and D2 on 24 November 1996.  She was only informed by D2 after the fact that her name was used as co-purchaser.

127.  There was no discussion between herself and D2 regarding her alleged contribution of $100,000 prior to (or during) the viewing of the Property.  D1 agreed that P was not told about her contribution of $100,000 at all.

128.  As to how she made her contribution of $100,000, her evidence is the same as D2, that it was done by way of “deduction”.

Analysis

129.  I have considered carefully all the evidence given by the witnesses.

130.  As to what happened on 24 November 1996, I appreciate that it was almost 25 years ago and witnesses’ memory may not be too reliable without the assistance of contemporaneous documents or record.

131.  The determination of the Issues depends on what was discussed between P and D2 on 24 November 1996.

132.  The evidence of Chan and So is not helpful as they did not take part in the discussion.  Chan could not even confirm his own witness statement without assistance and So considered herself a “bystander”.  I am not impressed with either of their evidence.

133.  D1 was not present at the viewing on 24 November 1996 and her name was used/added to the PSPA without her knowledge.  Her evidence is only relevant to her alleged contribution of $100,000 (which I shall discuss below).

134.  As to whether the $700,000 was a loan or an investment, ie Issue 1, P’s case is that it was D2 who suggested to her that she should purchase the Property for her family and offered to lend her $700,000 (without mentioning interest rate or repayment schedule).  D2 also suggested P to apply for mortgage and worked out the monthly mortgage repayment for her.

135.  Yet, as noted by Mr Lam, at the time of signing the PSPA, P had not contacted any bank and had no idea whether she would be successful in securing a loan to the extent of $1 million. She also had no idea how long the mortgage application would take.  She had not thought of the possible consequences if she was not able to secure a mortgage loan to the extent of $1 million.

136.  It is inconceivable that P would sign the PSPA for the Property valued at over $2 million without discussion with her own family and merely on the promise of D2 in lending her $700,000.

137.  Mr Lam submitted that, contrary to what P has portraited, the purchase of the Property must have been well-planned.  That I agree.  Purchasing a private property for the first time is a big decision for the entire family especially when mortgage was involved.  Mortgage repayment is a long-term commitment.

138.  Further, though P and D2 were on good terms as at 24 November 1996, it is not reasonable that D2 would just lend $700,000 to P without any discussion on repayment terms.  D2 may be more well off than P but $700,000 is no small change.  There is no evidence that P and D2 had any monetary dealings prior to 24 November 1996 to show that P would merely lend large sums of money to P with no conditions.

139.  I do not find P’s version credible.

140.  On the other hand, D2’s version is more probable.  I accept that she was looking for residential property in Tuen Mun area and eventually agreed to invest $700,000 in the Property together with P, for P and her family to reside in the Property.  I also accept that it was agreed between P and D2 that P would for pay D2’s share of investment at market value within a short time (although they have not actually agreed on when exactly D2 would be paid).

141.  For Issue 2, I do not find P’s evidence regarding D1 as a co-purchaser under the PSPA convincing.

142.  P in her witness statement said that she only realized D1 was named as a co-purchaser on the PSPA and that she signed on D1’s behalf when she commenced the present proceedings.

143.  P’s evidence is that D2 initially suggested that D2’s name be added as a co-purchaser and co-mortgagee, and that it was only after enquiry with the bank a few days after the signing of the PSPA that the idea of using D1’s name came about.

144.  It is common ground that the estate agent was randomly engaged by the parties on 24 November 1996.  There is no way the estate agent would have put D1’s name as a co-purchaser without being instructed to do so.  It is more probable than not that the estate agent was requested by P and/or D2 to do so.

145.  In her witness statement, P said D2 asked her to sign on the 2 places on the PSPA.  In court, she said it was the estate agent who asked her to do so.

146.  In any event, as Mr Lam said, D2 could have asked her daughter to read the PSPA and explain to her the contents before putting her signatures on it.

147.  Even if I were to accept that she was not aware of D1’s name the very moment she signed the PSPA, she must have been advised by Mr Yeung on 6 December 1996 when she signed the SPA.  Her explanation that she could not remember whether Mr Yeung had explained to her about “joint tenancy” is unconvincing.

148.  Also, P signed a short-term tenancy agreement (dated 30 January 2997) with the vendors of the Property for them to stay on the Property for one month after completion.  P, too, signed that agreement for an on behalf of D1.

149.  Clearly, P’s contention that she did not realize that D1 was a co-purchaser or joint tenant prior to the commencement of the present proceedings cannot be true.

150.  I find D2’s version to be more credible in this regard.

151.  I find that it is more probable than not that it was agreed between P and D2 that D1 would be a co-purchaser or joint tenant of the Property on 24 November 1996.

152.  The reason why D1’s name was so added, I accept D2’s evidence that it was to “protect” D2’s interest in the Property as she has agreed to invest $700,000.  Also, D1 would be better suited (than D2) as a co-mortgagor.

153.  I do not accept P’s evidence that D1’s name was added solely to facilitate mortgage application, though it might be true that D1, as a civil servant, would have been viewed more favourably by the bank for the purpose of the application.

154.  I also note that P, when she was cross-examined about repayment of the alleged loan of $700,000, she said there was no discussion between herself and D2 about the terms of repayment, as it was based on mutual trust, in that D2 lent her money and they “joined names” to purchase the Property like “doing business together”.

155.  If it was purely a personal loan, there is no need to “join names” with D1/D2.

156.  In relation to the Government loan, the reason given by P in her witness statement was that she has acquired the Property before putting in the application for the loan.  Under cross-examination, P at first said that the loan was available only for acquiring properties under the Home Ownership Scheme, and subsequently P said that the loan was also available for buying flats from the private property market.

157.  There is no definite evidence before the court on the criteria for eligibility of the $600,000 loan.

158.  It is not necessary for me to make a finding as to the criteria.  The undisputed fact is that the loan was never available to P.  The various versions from P, as pointed by Mr Lam, reflects poorly on her credibility.

159.  Regarding the nature of the $1.01 million paid by P to D2 (Issue 3), P said it was principal (of the $700,000 loan) plus interest.

160.  Yet there was no discussion of any kind in relation to interest rate or repayment schedule.  It was entirely up to P as to when and how much she would pay.  P said that there was an occasion when she asked D2 whether she could charge a lower interest rate.  This was not recorded in her witness statements and not pleaded in the various versions of the Statement of Claim.

161.  D2, in her witness statement said that the sum of $1.01 million was rent.  When cross-examined by Mr Chan in court, D2 agreed she did not use the term “rent”.  She said it was payment of “her share” in the Property.

162.  Since I have found that the $700,000 was an investment from D2, the $1.01 million paid by P to D2 could not be treated as repayment of loan (with interest).

163.  On the other hand, the payments were not “rent or compensation” either as D2 never expressly requested P to pay her any rent or compensation.  All D2 said is that they will “do the calculation” at the end of the day.

164.  Mr Lam submitted that although the word “rent” or similar terms were not used, it was the common understanding between the parties that the payments were in the nature of rent or compensation for P’s exclusive occupation of the Property.

165.  However, there is no evidence before the court to show or even infer the alleged “common understanding” at all.

166.  There is no evidence to show that P and D2 has agreed or even discussed what those payments represent.  P just paid as and when it suited her and D2 simply acknowledged receipts.

167.  In any event, it is not necessary for me to determine the nature of the $1.01 million at this juncture as the parties are only asking for declaration in relation to the beneficial interest in the Property derived from their respective contribution towards the costs of acquisition of the Property.

168.  There is no alternative case pleaded by the parties to deal with the $1.01 million in case the court did not accept it to be repayment of loan (as pleaded by P) or payment of rent or compensation (as pleaded by Ds).  The $1.01 million would become relevant if the parties chose to proceed to equitable accounting.

169.  As for D1’s beneficial interest in the Property (Issues 4-6), D1’s case does not rely on her status as a co-mortgagor.  Her case is premised on the $100,000.

170.  Mr Chan noted that the very first time that D1 said she had contributed $100,000 was the defence dated 9 December 2016.  Her witness statements did not refer to “deduction” at all.  D2’s OTB Account entries did not show the “deduction” of $100,000 as alleged by D1 and D2.

171.  In short, there is no evidence to show that D1 has actually paid the $100,000.

172.  Mr Lam submitted that given D1 and D2’s history of making joint investments, it is sufficient for D2 to acknowledge that D1 had a $100,000 share in the investment of the Property as accounts will be settled in due course.  D1’s share in the Property was something “internal” between D1 and D2 and did not affect P’s interests therein.

173.  I am not convinced by the evidence of D1 and D2 in this respect.  It is more probable than not that such evidence is an afterthought in order to strengthen D1’s case.

174.  I do not find sufficient evidence to show that D1 has contributed $100,000 towards the $700,000 advanced by D2, either directly or by way of “deduction” as alleged.

My findings

175.  I find, on balance of probabilities, that:-

(a)     On 24 November 1996, D2, So, P, Chan and their daughter went viewing of the Property accompanied by an estate agent who was randomly chosen.

(b)     P and D2 agreed that they will jointly invest in the Property, which would be the residential home for P and her family.

(c)     D2 agreed to invest a sum of $700,000 and P would be responsible to pay off the mortgage and the other expenses. (Issue 1)

(d)     P would “buy back” D2 shares at market value within a short period of time but the exact period of time was not discussed on 24 November 1996.

(e)     D1 was registered as a joint tenant to reflect D2’s interest in the Property as well as to facilitate mortgage application. (Issue 2)

(f)     D2 did not inform D1 that D1’s name would be used before the PSPA was signed.

(g)     D1 never actually paid $100,000 to D2, either directly or by way of “deduction”. (Issue 4)

(h)     There was no discussion or agreement that P would pay D1/D2 for occupation of the Property either in the form of rent or compensation.

(i)     The $1.01 million was not “rent” or “compensation” paid by P to D2 but was not repayment of loan with interest either.

(j)     P and D2 never agreed on the nature of P’s payment of $1.01 million. (Issue 3)

176.  I find that the Property was held by P and D1 on trust for P and D2 proportionate to their respective contributions towards the costs of acquisition of the Property.

177.  P had contributed $1,526,435 out of the total acquisition costs of $2,226,435 while D2 contributed $700,000.  Their respective beneficial interests are thus 68.56% and 31.44%: Issues 6 & 7 (a)(b).

178.  As for Ds’ counterclaim for occupation rent (Issue 7 (c)), parties have made further submissions in the light of the CFA judgment in Cheung Lai Mui v Cheung Wai Shing [2021] HKCFA 19.

179.  CFA in Cheung Lai Mui held that:-

“68. Initially, a co-owner out of occupation had very limited remedies against his co-owner in occupation in relation to the land. As Meagher JA put it:

“... a co-owner not in occupation was normally virtually without remedy. He could not sue in trespass unless there was an ouster. ... A co-owner out of occupation could not even recover his share of rents and profits if the co-owner in occupation appropriated them to himself; no action of account lay either at law or in equity.” ”

Forgeard v Shanahan (1994) 35 NSWLR 206

“Apart from statute, a co-owner out of occupation had remedies at law in two situations, and no more. If he had been ousted, he could bring ejectment and mesne profits ... If, on the other hand, his co-owner were in occupation by agreement that co-owner became an agent or bailiff and rendered himself liable in a common law action of account. In either case (ie of ouster or occupation by agreement) he would be liable for rents actually received and possibly also for an occupation fee.”

His Honour added:-

“Apart from Statute, in equity the plight of a co-owner not in occupation was little better. There did not seem to be any action which would render a co-owner in occupation liable to refund any rents received, much less liable for an occupation fee.”

“104. We conclude that the authorities considered above do not establish any new, free-standing “modern approach” such as that urged by the respondents and favoured by the Court of Appeal. Claims by one co-owner against a co-owner in occupation for payment of occupation rent or for an account of rent can only arise in accordance with the principles laid down in the established authorities. Unity of possession precludes such claims otherwise than in cases of ouster (including “constructive exclusion” as in domestic violence cases); or where an operative agreement renders the co-owner in occupation an agent or bailiff so as to come under a duty to account to the other. Where partition or analogous proceedings have been instituted, apart from cases of ouster, equity may recognise a defensive equity in favour of one of the co-owners regarding expenditure appropriately incurred and may, in the process of equitable accounting, require the other, viewed as a seeker of equity required to do equity, to be debited with an occupation rent to set off the expenditure incurred, thus reciprocally balancing the parties’ interests in the distribution of the realised proceeds of the co-owned property.

“105. The present case has proceeded throughout (including in this Court) on the basis that there has been no ouster. None of the other established bases for claiming occupation rent or an account of rent have been alleged, let alone made out. Accordingly, the action against P for “mesne profits”, occupation rent and an account of rent must fail. There is thus no basis for ordering any remitter to ascertain P’s building expenses since there is no viable claim for rent against which such expenses might be set off.”

180.  Mr Lam argued that Ds cannot possibly reside in the Property or derive any benefit or enjoyment from the Property while P and/or her family members are residing in it and thus there was “ouster”.

181.  Mr Chan pointed out that D1-2 did not plead “ouster” from the Property.  That should be the end of their case on occupation rent.

182.  Mr Chan also noted the CFA held that “actual ouster” is necessary, subject to “constructive ouster” restricted to domestic violence or similar scenarios in matrimonial and cohabitation cases: paragraph 70, Cheung Lai Mui.

183.  I agree with Mr Chan that there was no “actual ouster” in the present case.  Ds pleaded under the Defence and Counterclaim that “it was mutually understood and agreed between P and Ds that the Property would be occupied solely by P and/or her family members” is not “ouster”.

184.  As for the specific agreement that is required for a valid claim for occupation fee, Mr Chan submitted that it is an agreement for the occupying co-owner to be the bailiff to the other co-owners in respect of the Property.  The notion of bailiff is not pleaded to by D1-2 in their counterclaim.

185.  Further, D1-2 did not say that the “payments” made by P and received by D2 had been “rentals”.  The amount and timing of each payment was not agreed upon by P, D1-2 respectively.

186.  I have already found that there was no discussion nor agreement between P and D2 as to the nature of the $1.01 million.  There was no operative agreement that renders P an agent or bailiff to come under a duty to account to Ds.

187.  Despite Mr Lam’s admirable effort, I agree with Mr Chan’s analysis.

188.  Ds’ counterclaim for a declaration that P is liable to pay compensation for P’s occupation of the Property therefore fails.

Conclusion

189.  In view of my findings, P’s claim is therefore dismissed.

190.  In respect of Ds’ counterclaim, I grant the following:-

(a)     a declaration that the Property is held by P and D1 on trust for P and D2 proportionate to their respective beneficial interest in the Property, ie 68.56% and 31.44%.

(b)     an injunction to restrain P, whether by herself, her agent, her servant or otherwise from transferring, selling, agreeing to sell, charging, mortgaging, assigning or otherwise dealing with the Property including, but not limited to, any interest she has.

191.  Ds’ counterclaim for declaration for compensation payable by P for P’s and/or her family’s occupation of the Property to the exclusion of Ds is dismissed.

192.  Ds are the effective winners of the proceedings and should be entitled to costs, subject to the costs of the Preliminary Matters (which I have decided in favour of P).

193.  Mr Chan submitted that the costs incurred by P for the 1^st and 2^nd days of the trial dealing with the Preliminary Matters on “illegality” and “striking out” should be made against Ds on an indemnity basis.

194.  Mr Chan referred to Li Xiao Yun & Another v China Gas Holdings Limited, CACV38/2013, unreported, 11 March 2013, where Lam JA (as he then was) stated that:-

“18. … Last minute pre-trial applications also disrupt the preparation for the trial on the part of a trial judge in terms of reading into the case. Instead of getting himself or herself familiar with the issues that have to be tackled at the trial, the judge would have to divert attention and spend time and efforts on such applications. Thus, such practice has to be discouraged and, unless there are good justifications, the unsuccessful appellant should normally be expected to face an order for indemnity costs”

195.  Also, Mr Chan submitted that the costs thrown away by the whole day adjournment on 16 April 2021 should also be borne and paid by D1-2 as it was incurred as a result of D2’s medical conditions.

196.  Mr Chan relied on Elijah Saatori v Raffles Medical Group (Hong Kong) Limited, HCMP3224/2016, unreported, 13 September 2017, Court of Appeal, where Chu JA held that:-

“45. … The court invariably orders costs thrown away by the adjournment of the trial to be paid by the party who brings about the adjournment.”

197.  Having considered Mr Chan’s submission (I note that Mr Lam has not dealt with the issue of costs of the Preliminary Matters in his Closing), I agree with the proposed costs order by Mr Chan.

198.  I shall make the following order nisi:-

(a)     costs of the action (including all costs reserved, if any) be to Ds, with certificate for Counsel, to be taxed if not agreed, except:

(i)     costs of the Preliminary Matters be to P, with certificate for Counsel, on indemnity basis, to be taxed if not agreed; and

(ii)     costs thrown away on 16 April 2021 be to P, with certificate for Counsel, to be taxed if not agreed.

(b)     P’s own costs be taxed in accordance with Legal Aid Regulations.

199.  The above costs order nisi shall be made absolute within 14 days unless parties apply to vary in writing.

200.  I am grateful for Counsel’s assistance.