TSANG WAI FAN v. HUI SIU KWONG

HCMP 1505/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLLANEOUS PROCEEDINGS NO. 1505 OF 2014

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JUDGMENT

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Introduction

1.  This is an application of Madam Tsang by her originating summons dated 19 June 2014 for an order for sale of a property situated at Flat B, 11^th Floor, Block 5, Locwood Court, Kingswood Villa, New Territories (“the Property”) and directions pertaining to such a sale pursuant to section 6 of the Partition Ordinance, Cap. 352.

2.  At present, Madam Tsang and Mr Hui are the registered owners of the Property co-owning the same as tenants in common. Madam Tsang is the sister-in-law of Madam Hui’s mother, Madam ST Lau.

3.  This matter first came before Mr Recorder Stewart Wong SC. At that hearing, Madam Tsang asked the court to dispose of the originating summons summarily pursuant to Order 28 rule 4 whilst Mr Hui by his counter notice urged the court to give directions to enable the proceedings to be continued as if they were begun by writ. The Recorder adjourned the hearing of these applications to this court for substantive argument.   

Madam Tsang’s case

4.  Madam Tsang’s case is simple. She is a housewife and she entered into a provisional agreement for sale and purchase agreement of the Property with Madam SM Lau, her another sister-in-law in the consideration of HK$1.5 million on 20 February 2013 whereby Madam SM Lau agreed to transfer to her 50% share of and in the Property. She became one of the registered owners after the assignment was executed on the same day (“the Assignment”).

5.  Prior to the Assignment, Madam SM Lau had once held the Property with Mr Hui as joint tenants. However, she issued a notice to sever the joint tenancy dated 21 August 2012 (“the Notice”) to Mr Hui and the Notice was duly registered with the Land Registry on 18 September 2012.

6.  Despite the apparent co-ownership, Mr Hui refuses Madam Tsang access to the Property and has occupied the same to the exclusion of Madam Tsang ever since Madam Tsang acquired her interest in the Property.

7.  Under these circumstances, Madam Tsang asks this court to make an order for sale so that she can rid herself of the shackles of co-ownership. It is not argued that partition is a feasible alternative. Nor is it argued that a sale would cause serious hardship.  

Mr Hui’s case

8.  In his first affirmation in opposition, Mr Hui explained the devolution of the title to the Property. The Property was first acquired by his late uncle Mr YP Lau in 1992. Mr YP Lau passed away on 31 March 1994 and shortly before his death he assigned the Property to Mr Hui and Madam SM Lau as a bed-death gift on 24 March 1994.

9.  Whilst Mr YP Lau had a bad relationship with his brothers in his big family after many litigations relating to the estate of their father, he was close to Madam ST Lau and Mr Hui, who took good care of him in his final days.

10.  Initially Mr YP Lau intended to assign the Property to Mr Hui in his sole name. Mr Hui, out of sympathy to Madam SM Lau, who was a widow residing in New York, suggested to Mr YP Lau that Madam SM Lau should also be made a co-owner of the Property too so that she could have a place to stay in Hong Kong. As a result, Mr YP Lau assigned the Property to them as joint tenants. Neither of them paid any consideration for their acquisition of the Property.

11.  Since October 1998, Mr Hui has occupied the Property as his home. Allegedly, Madam SM Lau told him over the phone that she was not interested in the Property and Mr Hui could do whatever he liked with the Property to her exclusion.

12.  Mr Hui received the Notice from Madam SM Lau and felt furious. Madam SM Lau tried to avoid him and upon confrontation she allegedly could not explain why she issued the Notice.

13.  Against this background, Mr Hui claims adverse possession of the half interest of Madam SM Lau by reason of his sole occupation of the Property for over 14 years. He said he verily believed that Madam SM Lau’s title to the Property has thereby been extinguished.

14.  In her reply affirmation, Madam Tsang exhibited a secretive audio-recording of her conversation with Mr Hui on 4 August 2013 covering their discussion about the intended disposal of the Property. A transcript of the recorded conversation is provided (“the Transcript”).

Mr Hui’s application to adduce further evidence

15.  On 19 January 2016, Mr Hui took out a summons for his application to adduce his second affirmation which narrated a very recent conversation between Madam SM Lau and him during his visit to her in the U.S.. Allegedly Madam SM Lau said she knew nothing about the Assignment but she did not agree to give a statement for the purposes of these proceedings.

16.  I heard the application this morning and I refused it with my reasons given orally. In gist, I do not accept that there is any good explanation for the lateness of the application. I am further of the view that, as a matter of fairness, I cannot allow the affirmation to be adduced as it contained, apart from a number of irrelevant matters, serious allegations raised (including forgery) on the basis of hearsay evidence without any corroborative documentary evidence at the eleventh hour.

Two issues identified

17.  I need say no more about this application save that on the basis of the affirmation, Mr Lai, for Mr Hui, abandons any reliance on the plea of adverse possession. After my refusal of the application, Mr Lai helpfully indicates to this court that he can confine his submissions to two matters only so as to resist the present application of Madam Tsang, both of which go to the core issue concerning the legal title of Madam Tsang to the Property.

18.  First, Mr Lai submits that Madam SM Lau was a bare trustee of Mr Hui and she merely held the 50% share of the Property on trust for Mr Hui. It follows that she had no right to transfer the 50% interest to Madam Tsang by the Assignment at all.

19.  Second, Mr Lai submits that Mr Lau Yu Fun (“Mr YF Lau”) as the lawful attorney of Madam SM Lau executed the Assignment purportedly on the strength of a power of attorney (“the POA”). Mr YF Lau was, and still is, the husband of Madam Tsang. There appears to be a likely question of breach of fiduciary duties on the part of Mr YF Lau in that he might arguably obtain secret profits out of the transaction whereby his wife obtained half share of the Property.  

Applicable legal principles

20.  Before my analysis of the two issues identified by Mr Lai, it is pertinent to pay heed to the relevant legal principles helpfully referred to me by Mr Wong, appearing for Madam Tsang.

21.  On a summary judgment application of an action commenced by an originating summons, Fok J (as he then was) in Billion Wealth Group Limited v Strategic Media International Limited, unreported, HCMP2586/2009, 3 May 2010 had this to say at §§4 and 5:

“And it is trite that on a summary judgment application, the court simply has to determine two questions: firstly, whether what the defendant says is believable as opposed to whether its version of events is to be believed; and secondly, if it is, whether what the defendant says amounts to an arguable defence in law.

Whether a party’s assertions are believable is a question to be answered not by taking the assertion in isolation but by taking them in context of so much of the background as it is either undisputed or beyond reasonable dispute: per Deputy Judge To (as he then was) in Ip Kam Wah v Fair City Group Ltd [2005] 4 HKLRD 168 at §8.” 

22.  The following three propositions relating to an application under the Partition Ordinance were accepted by Mr Recorder Fok S.C. (as he then was) in Wong Chun Kei v Poon Vai Chung [2007] 1 HKLRD 825 at p.842:

“(a) A co-owner has a basic right to rid himself of the shackles of co-ownership and ask for an order for partition or sale.

(b) When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner(s)) that such an order will not be beneficial to all the co-owners.

(c) Whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial. It has to be determined by the court objectively.”

23.  With these principles in mind, I turn to the two issues. I note that the objection of Mr Hui is not really about the probable effect of the proposed sale of the Property. It goes to a more fundamental question, viz, whether Madam Tsang is a co-owner of the Property at all.

Analysis

Trustee issue

24.  The evidence of Mr Hui simply does not support his present contention that there was a bare trust subsisting between Madam SM Lau and him in regard to the Property. I have no hesitation that I should summarily dismiss his contention.

25.  First, throughout his entire affirmation, he made no mention whatsoever about the existence of the alleged bare trust. Quite on the contrary, Mr Hui claims that he verily believes that Madam SM Lau’s share in the Property has been extinguished by reason of his adverse possession. It follows that first and foremost he accepts the legal title of Madam SM Lau albeit extinguished pursuant to the Limitation Ordinance. It is a volte-face for Mr Hui to now say that Madam SM Lau was his bare trustee.

26.  Second, in his explanation as to why Madam SM Lau was made a party to the conveyance whereby Mr YP Lau assigned the Property to the joint names of Madam SM Lau and Mr Hui, I cannot accept that Mr Hui found it necessary to suggest to Mr YP Lau to transfer the half share of the Property to Madam SM Lau so that she could have a place to stay in Hong Kong though for a long time she had resided in the United States. If, according to his own version, Mr YP Lau had intended to assign the entire interest in the Property to him in his sole name, Madam SM Lau would not have required the half share or indeed any share at all in the Property to stay at the Property. Given his express sympathy and concern, there is no reason why Mr Hui as the sole owner of the Property did not give Madam SM Lau his permission to stay at the Property. I reject his explanation.

27.  In any event, even on his own account, it would appear more likely than not Mr YP Lau did intend to pass the half share in the Property to Madam SM Lau at his suggestion. As observed above, Mr Hui never claims that he asked Mr YP Lau to add Madam SM Lau as a joint transferee holding the half share on trust for him.

28.  Curiously enough, Mr Hui asserts that the issuance of the Notice is contrary to the wishes of Mr YP Lau. He does not complain that Madam SM Lau was in breach of the bare trust in doing so. There is no evidence to the effect that Mr YP Lau did not want any severance of the joint tenancy of the Property. In any event, this assertion does not sit comfortably with his present contention that Madam SM Lau was not a genuine co-owner but was his bare trustee only.

29.  Mr Wong draws my attention to certain parts of the Transcript, which plainly show that Mr Hui fully accepted the half interest of Madam Tsang. They actually had a genuine discussion about the disposal of the Property. They first talked about a sale of the Property. Mr Hui even suggested that they should spend some money to have the Property partitioned into small rooms and put them up for lease. Mr Hui said it sounded illegal but the government might legalise this practice.

30.  I should add that throughout the Transcript, I find no assertion of any bare trust relating to the Property by Mr Hui.

31.  Mr Lai objects to any reliance on the alleged affirmation of the interest of Madam Tsang by way of some short answers given by Mr Hui shown in the Transcript. He submits that those short affirmative answers might only mean that Mr Hui was following the conversation without really agreeing to the assertions of Madam Tsang.

32.  I do not accept his objection. The Transcript was disclosed to Mr Hui by way of service of the 2^nd affirmation of Madam Tsang on 27 March 2015. Mr Hui has had ample time to raise all sorts of objections to any part of its contents. Even in his last affirmation which I refused to admit, he did not find it necessary to make any comment on the Transcript. If Mr Hui did not accept the beneficial interest of Madam Tsang, it is inexplicable that he discussed the possible use of the Property with her at all and he even asked her to contribute to its renovation costs. 

33.  In light of the foregoing evidence, it is clear to me that the assertion of the bare trust is nothing more than a prevarication. I do not accept that there is any problem with the beneficial interest of Madam SM Lau and hence Madam Tsang in the Property.

The POA issue

34.  Mr Lai submits that this court should order that Mr YF Lau be joined in these proceedings and be cross-examined on whether his execution of the Assignment was in breach of the terms of the POA or his fiduciary duties owing to Madam SM Lau. He complains that Madam Tsang did not produce the POA to support her present application. He submits that Madam Tsang has failed to prove her legal title to the Property as a result.

35.  The starting point is that Madam Tsang being one of the registered owners of the Property is assumed to be the beneficial owner of the Property. It is for Mr Hui to adduce evidence to prove otherwise. It should be noted that this is not a conveyancing dispute where the vendor has to prove his good title beyond reasonable doubts. I do not accept the criticism that Madam Tsang should produce the POA to prove her title.

36.  Both the POA and the Assignment were registered with the Land Registry.  The POA was in fact registered on the same day when the Notice was issued and registered in August 2012. If Mr Hui wishes to make any points about the POA, he has had ample time and opportunities to do so. Thus far, he has done nothing about it and said nothing about it in his affirmation. It now lies ill in his mouth to say that he has been denied a copy of the POA by Madam Tsang.

37.  As regards the complaints about any breach of fiduciary duties, Mr Lai fairly accepts that if Madam SM Lau knew and accepted Mr YF Lau transferred her half interest to his wife on her behalf by the Assignment, there was no breach.

38.  There is simply no evidence that Madam SM Lau did not know and/or did not accept the conveyance to Madam Tsang. Madam SM Lau refuses to give evidence. I cannot accept Mr Lai’s submission that then it gives rise to a triable issue warranting a trial wherein Madam SM Lau should be compelled to testify about her knowledge and acceptance or the lack of them. This court requires an arguable defence supported by credible evidence in the first place. Mere speculation cannot suffice.

39.  The POA and the Assignment were executed and registered long before the commencement of these proceedings. Mr Hui should be alive to the fact that it was Mr YF Lau who executed the Assignment on behalf of Madam SM Lau to his wife. Again Mr Hui should have investigated into any suspected breach of trust much earlier on and come back with cogent evidence of such breach. He did not even mention about his suspicion in his first affirmation. This court is not convinced that there is any merit in this POA issue.

Conclusion and Order

40.  In the premises, this court sees no reason why Madam Tsang should be denied her basic right to an order for sale given the fact that partition of the Property is not a feasible alternative and the absence of evidence to the effect that a sale will not be beneficial to both Madam Tsang and Mr Hui.

41.  This court therefore is minded to accede to the application of Madam Tsang. Since Mr Hui has been in sole occupation of the Property, I agree that it is reasonable for him to bear the management fee and Government rents and rates of the Property accrued (if any) before completion of the sale.  I shall make order in terms of the draft order and I expect that Mr Hui will do everything reasonably required by Madam Tsang to effect and complete the sale. Should the parties be unable to agree on the selling price and/or the reserve price in the event of a sale by public auction, the parties should try to obtain joint expert evidence before writing to this court to seek further directions.

42.  There is no reason why costs should not follow the event. I make a costs order nisi that Mr Hui do pay Madam Tsang her costs of these proceedings including all the costs previously reserved (if any) and Mr Hui’s application to file his 2^nd affirmation, to be taxed if not agreed.  

43.  Lastly, it remains for me to thank both Mr Wong and Mr Lai for their helpful assistance in this matter.