FCMC 1332/2022
[2024] HKFC 124
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MATRIMONIAL CAUSES NO. 1332 OF 2022
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BETWEEN
W, YC
Petitioner
and
T, WK
Respondent
TWF
Intervener
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Coram:
HH Judge C.K. Chan in Chambers (Not Open to Public)
Dates of Hearing:
31 May, 1-2, 9, 15 June and 13 September 2023
Date of Handing Down Judgment:
13 June 2024
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J U D G M E N T
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1. This is a trial of a preliminary issue on the beneficial ownership of a house situated at XX Tsuen, Wo Hop Shek, Fanling New Territories, Hong Kong (Lot No. xxxx in D.D. 51) (“the House”), which was purchased in February 2018 in the sole name of the Petitioner Wife (“W”). The House has 3 floors, namely Ground Floor, 1st Floor and 2nd Floor (together with the roof top).
2. The Respondent (“H”) is the husband of W. The Intervener (“F”) is the younger half-brother of H. It is now the case of F that he owns 84.6% in the House and have exclusive possession of the Ground Floor and 1st Floor thereof, mainly based on common intention constructive trust, resulting trust and equitable compensation. H raised no objection to such claims. But they were heavily disputed by W and therefore, a trial on the beneficial ownership of the House as a preliminary issue has become necessary.
3. After considering all the evidence at trial, I have come to a conclusion and made the following orders:
(1) F is the beneficial owner of 65% of the House by virtue of his ownership of the Ground Floor and 1st Floor thereof.
(2) F’s 65% beneficial ownership is subject to 52% of the outstanding mortgage loan as at the date of this judgement.
4. These are my reasons.
Brief Background
5. W is now aged 39 and a registered nurse by occupation. H is aged 40 and he runs his own computer business. They were married in 2009. Within wedlock, 2 children were born, with the elder daughter now aged 12 and younger son aged 10. On 17 February 2022, W issued a petition for divorce based on behaviour which was later amended to 1-year separation with consent. A decree nisi of divorce was granted on 13 July 2023. For the children, the parties agreed to have joint custody with care and control to W and reasonable access to H.
6. In about 2012, W and H started to rent the Ground Floor of the House from the previous owner (“Mr. Lee”) as their matrimonial home. Subsequently, they were interested in purchasing the Ground Floor from Mr. Lee who was the owner of the whole House. Between 2015 and 2018, there were discussions with Mr. Lee initially focusing on the purchase of Ground Floor but later developed into the purchase of the whole House. There were also discussions on whether the House would be partitioned into separate floors (i.e. Ground Floor, 1st Floor and 2nd Floor) for the purpose of the purchase. By June 2017, Mr. Lee only agreed to sell the House if in its entirety at HK$10,000,000, but if partitioned, the sale price would be increased to HK$4,000,000 for the Ground Floor, HK$3,000,000 for 1st Floor and HK$4,000,000 for 2nd Floor (including the roof top), making it a total sum of HK$11,000,000. It was finally decided that the House would be purchased as a whole without being partitioned at HK$10,000,000.
7. The purchase was completed on 1 February 2018 in the sole name of W, who took out a mortgage loan from the Hang Seng Bank in the sum of HK$4,915,000 (after deducting HK$85,000 rebate). The balance of HK$5,000,000 was paid by W as down payment, the source of which is now in dispute.
8. The Intervener, F, is the younger half-brother of H. Their mother is Madam Ng (“N”) who has also given evidence at this trial. Basically, F is saying that a great majority of the down payment was made by N and him pursuant to the parties’ mutual understanding that F would be the owner of the Ground Floor and 1st Floor. W disputes such agreement or mutual understanding. She also disputes N and F having made any payment towards the purchase of the House. The moneys paid by N and F were transactions purely between N, F and H, but not directly related to the purchase moneys paid for the House.
9. In the ancillary relief proceeding between W and H, the beneficial ownership of the House has become a central issue. Directions were given for F to be joined as an intervener and the beneficial ownership of the House was ordered to be tried as a preliminary issue, with pleadings to be filed to identify the disputed issues for this court’s determination.
F’s Points of Claim
10. F’s case against W and H in the preliminary issue trial is mainly based on a claim of common intention constructive trust/resulting trust. In F’s Points of Claim (A/8-16), he pleaded that:
(1) The House was an un-partitioned 3-storeys village house without a Deed of Mutual Covenants (“DMC”).
(2) W and H started to rent the Ground Floor of the House in about 2012 from the previous owner Mr. Lee as their matrimonial home.
(3) Starting from about 2016, W, H, N and F started to negotiate with Mr. Lee for the purchase of the House. The original plan was for the House to be partitioned into 3 floors upon obtaining government approval. The initial sale price offered by Mr. Lee was HK$8,000,000.
(4) N and F started to arrange the capital for the purchase and paid over various sums of money to H at different times.
(5) In about June 2017, Mr. Lee informed that government approval had been obtained for the partition but:
(i) if the House was to be partitioned into 3 floors, then the sale price would be HK$4,000,000 for Ground Floor; HK$3,000,000 for 1st Floor; and HK$4,000,000 for 2nd Floor; and
(ii) if the House was not to be partitioned, the sale price would be HK$10,000,000 for the whole House.
(6) After discussion between W, H, N and F, they decided that there was no need for the House to be partitioned. W suggested that as she was a registered nurse with stable income, it would be easier for her to obtain mortgage approval from banks and so the House could be purchased in her name.
(7) All parties had the understanding that since F had serious visual problem, N would pay on behalf of F to acquire beneficial interest in the House in order to provide F with a stable future.
(8) They also reached the following mutual understanding after discussion (“the mutual understanding”):
(i) 2nd Floor of the House belonged to W and H as their matrimonial home;
(ii) 1st Floor belonged to F and the rental income therefrom would be used to repay the mortgage loan, and any balance of the monthly mortgage repayment would be paid by W and H;
(iii) Ground Floor belonged to F and the rental income therefrom would be used to support F and N’s living expenses; and
(iv) W would hold the Ground Floor and 1st Floor on trust for F.
(9) The Agreement for Sale and Purchase of the House was signed on 4 December 2017 at a purchase price of HK$10,000,000.
(10) The purchase was completed on 1 February 2018. W, H, N (on behalf of F) and F jointly paid HK$5,000,000 as down payment. The balance of HK$5,000,000 was paid by a mortgage obtained by W from Hang Seng Bank. After deducting HK$85,000 rebate from the bank, the actual mortgage loan was HK$4,915,000.
(11) Between 10 March 2017 and 26 January 2018, N and F had transferred a total of HK$4,230,000 to W and H. N had paid HK$3,970,000 on behalf of F. F himself had paid HK$260,000. All these moneys represent 84.6% of the down payment of HK$5,000,000.
(12) In accordance with such ratio, F now claims to have 84.6% beneficial interest in the House with exclusive possession of Ground Floor and 1st Floor thereof (and/or any other fair and reasonable share as determined by the Court). W is now holding F’s interest as constructive trustee based on the mutual understanding and F’s payments.
(13) After completion, F did rent out Ground Floor and the rents received were used to defray certain outgoings.
(14) On 3 September 2018, W and F signed a Power of Attorney authorising F to rent out Ground Floor.
(15) On 8 September 2018, W and F signed a transfer agreement stating that after the repayment of the mortgage loan, F was at liberty to use, manage or sell the Ground Floor of the House.
(16) As F had no intention to gift or lend HK$4,230,000 to W and H, F said he is entitled to a fair and reasonable equitable compensation.
H’s Points of Defence
11. In his Points of Defence, H basically agreed with the case of F. H further pleaded that:
(1) N always wanted to buy a property for F in order to provide him with stable income. N indicated that she was willing to pay on behalf of F to acquire the Ground Floor and 1st Floor of the House.
(2) The owner Mr. Lee did once promise to apply for a partition of the House for the purpose of the sale. Upon discussion of the parties, including N, the original plan was for the Ground Floor to be held by H’s another brother T, WW (“WAH”) on behalf of F and 1st Floor to be held by H on behalf of F. As to the 2nd Floor, it would be held by W on behalf of both W and H as their matrimonial home.
(3) On 18 June 2017, Mr. Lee increased the sale price and upon discussion among the parties and N, they decided to buy the House at HK$10,000,000 but without partition.
(4) The parties and N also discussed about the ownership of the House, during which it was once proposed that H would hold the House with the Ground Floor and 1st Floor being held by him on behalf of F. However, W suggested that she had familiar bank and as a registered nurse with stable income, it would be easier for her to get a mortgage. On the other hand, H was doing business by way of an unlimited company, it might not be an appropriate arrangement for him to hold the House. Therefore, H, F and N all accepted W’s proposal that the House would be held in the sole name of W.
(5) N continued to transfer money into the bank accounts of W and H for the down payment and other related expenses.
(6) H issued a cheque of HK$376,000 from the bank account of his unlimited company to pay for the stamp duty of the purchase.
(7) From March 2017 to 26 January 2018, H had received HK$3,270,000 from N as down payment for the purchase of the House and related expenses. During the latter half of January 2018, W also received a total of HK$960,000 from N and F for such purposes.
(8) Based on the mutual understanding between the parties, H issued a cheque of HK$2,800,000 to W on 26 January 2018 from his unlimited company payable to the name of the solicitors as part of the down payment for the purchase.
(9) Upon request from W and based on the mutual understanding, H issued another cheque of HK$430,000 to W for the purchase and other expenses.
(10) These 2 sums of money amounting to HK$3,230,000 were previous transfers from N to H for the purchase of the House.
(11) H admitted that F had paid over 80% of the down payment. H admitted that F should have the equivalent share of beneficial ownership in the House and exclusive possession of Ground Floor and 1st Floor. W is now holding such interest on behalf of F as trustee.
(12) H further admitted that under the principles of resulting trust, F should be entitled to the corresponding share in the beneficial ownership of the House and the possession of Ground Floor and 1st Floor thereof.
W’s Points of Defence
12. In her Points of Defence, W pleaded that:
(1) It was W who started the negotiation with Mr. Lee for the purchase in 2015.
(2) W discussed with Mr. Lee for the House to be partitioned into 3 floors and her initial intention was only to buy one or two floors.
(3) In the end, W found that she was able to secure mortgage to buy the whole House and so there was no need for Mr. Lee to divide up the lot and partition the House into 3 floors.
(4) During the course of 2 years’ negotiation, various amounts were suggested and the sum of HK$8,000,000 might have been mentioned. All discussion was conducted between W and Mr. Lee. H, N and F had never been engaged in discussion with Mr. Lee.
(5) It was denied that N and F had made any payment towards the purchase of the House. All funds for the said purchase, including down payment and mortgage repayments came from either W or H.
(6) It was averred that the purchase of the House was a decision made in 2017 by W and H but no one else. Neither N nor F was involved in the decision.
(7) There was never any agreement, understanding or consensus among W, H, F and N in respect of the House, or on its ownership. In other words, the mutual understanding as pleaded by F (repeated in paragraph 10(8) above) is denied.
(8) It was denied that F or N would have any interest, whether legal or beneficial, in the House. W and H never held and do not hold the House, or any part thereof, on trust for F or anyone.
(9) All alleged payments from N to H were not admitted. F is put to strict proof of those payments.
(10) In respect of 3 specific payments:
(i) HK$260,000 (16 January 2018) was lent by F to H to help him in purchasing the House, and upon H’s instruction, the sum was paid by F to W directly.
(ii) HK$500,000 (17 January 2018) was a gift from N to W and H to help them purchase the House and settle the related expenses such as renovations.
(iii) HK$200,000 (24 January 2018) was H’s repayment of a previous loan from W. H asked N to make such repayment directly to W on his behalf.
Applicable Legal Principles
13. There is not any serious dispute on the applicable principles in respect of common intention constructive trust and resulting trust. In this regard, I would gratefully adopt the succinct discussion given by Madam Recorder Winnie Tam SC in the case of Chin Nai Man v Chin Yat Keung Alex [2020] HKCFI 403 at §§10-15:
“10. The following legal principles are not in dispute. Legal ownership of a property is normally consistent with the beneficial entitlement. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership: see Chan Hin v Chen Bai Dyi (unreported, HCA 680/2014, 25.7.2017, Anthony Chan J) at §21; Stack v Dowden [2007] 2 AC 432 at §§56, 68. In the present case, the burden rests on the plaintiff.
11. 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: see the recent Court of Appeal decision of Primecredit Ltd v Yeung Chun Pang Barry (unreported, CACV 246/2016, 21.7.2017) at §1.3 (per Lam VP).
12. In ascertaining the (alleged) common intention;
(a) The plaintiff must prove (i) there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the property despite that it was acquired in the defendant’s name; (ii) the plaintiff altered his position in detrimental reliance upon such common intention; and (iii) it is unconscionable for the defendant to assert ownership in reliance on his legal title to the property;
(b) In ascertaining whether there was a common intention, it is the objective intention of each party which was reasonably understood by the other party to be manifested by that party’s words and conduct that one must examine;
(c) Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions. It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention;
(d) Even where reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.
See Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §§46‑50, Godfrey Lam J, approved in WML v LCK (unreported, CACV 82/2014, 27.2.2015 at §41).
13. The modern approach in conducting the assessment is to adopt a holistic approach having regard to the context. Context was even described as a “fundamental consideration”: Chan Hin v Chen Bai Dyi (unreported, HCA 680/2014, 25.7.2017).
14. In the context of a traditional Chinese family involving older generations, where explicit discussions on property rights within the family was not that common, the Court has to pay more regard to circumstantial matters: Primecredit Ltd v Yeung Chun Pang Barry (unreported, CACV 246/2016, 21.7.2017).
15. As to the demeanour of witnesses, Chu J (as Chu JA then was) in Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5.5.2011 at §§35, 39-41) also gave helpful guidance:
“… it will not be a satisfactory approach to assess the creditability and reliability of [the witnesses] by reference to their demeanours or solely with regard to how they respond to questions and behave in the witness box. The appropriate approach is to assess their evidence in terms of their inherent probabilities or improbabilities.” ”
14. Since it is generally presumed that beneficial title of a property is the same as its legal title, the onus is therefore on the claiming party to show that the beneficial ownership is indeed different from the legal ownership. This could be achieved by way of proving a common intention constructive trust or resulting trust. In order to establish a common intention constructive trust, the claiming party has to prove:
(1) There was indeed a common intention between him and the legal owner that he was to be the beneficial owner of the property despite that it was acquired in the legal owner’s name;
(2) The claiming party altered his position in detrimental reliance upon such common intention; and
(3) It is unconscionable for the legal owner to assert ownership in reliance on his legal title to the property.
15. For resulting trust, it arises from a party’s contribution in money or in some other way towards the property’s acquisition. Equity holds the legal owner to be a trustee of that property for the contributor in an appropriate share, giving effect to the parties’ presumed intention. In a domestic context, and also generally, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust: per Coleman J in Lam Ka Kui v Choi Yuen Ling [2020] HKCFI 2647 , at §13.
16. Mr. Chow for F also referred this court to F’s claim for equitable compensation by citing the case of Ng Po Yu & Another v. Lam Kai On (as the executor of the estate of Wong Mui) [2018] HKCFI 1618 , in which Au-Yeung J did say at §144:
“144. The Daughter’s repayment of the mortgage (not just the capital but also interest) saved the House from re-possession, housed the Mother and spared her from her repayment obligation. It would be wholly inequitable and an unjust enrichment for the Estate to take the House without the burden of repaying the Daughter.”
17. It is my view that if this case could be resolved by F’s primary claims of common intention constructive trust/resulting trust, there is no need to consider this alternative claim of equitable compensation.
Main Issue for Determination: Mutual Understanding?
18. In considering F’s claim of common intention constructive trust/resulting trust, the most important issue to be determined by this court is whether there was a mutual understanding between the parties on the beneficial ownership of the House, and if yes, the terms or contents of that mutual understanding.
Mutual Understanding on Beneficial Ownership?
F’s Evidence
19. F is now aged 32. He stated in his narrative affidavit (A/139-150) that when he was about 15-16 years of age, he was diagnosed with serious visual problem in that his current visibility has been reduced to about 10% of a normal person. Although he has received university education, he only earns small income and still needs assistance in his daily living. He first started working as a teaching assistant in 2015, but had to stop in 2018 due to his visual impairment. He is now working as a masseur on hourly rate with a monthly income of about HK$8,000-HK$10,000.
20. In or about 2015-2016, W and H started to discuss with the owner Mr. Lee for the purchase of the House. They did not have enough money and so they discussed with F and his mother N to see if they could pool their capital together. N indicated that she was interested as she wanted to buy the House to provide some protection for F’s future living. F also agreed and so W, H and N agreed that the capital paid by N would be counted as F’s contribution.
21. During many family dinner gatherings, the parties had discussed about the purchase. Towards the end of 2017, N told F that they had agreed with the owner that the whole House would be purchased at HK$10,000,000 in the sole name of W due to her stable income as a registered nurse. F raised no objection to this arrangement.
22. Despite the fact that no DMC was executed in respect of the House, W, H , F and N reached the mutual understanding after discussion, namely that:
(1) 2nd Floor would be used as W and H’s matrimonial home;
(2) 1st Floor belonged to F and the rent received therefrom would be used towards the monthly mortgage repayment, with the balance to be paid by W and H;
(3) Ground Floor belonged to F and the rent received therefrom would be used to support F and N’s living expenses; and
(4) W would hold the Ground Floor and 1st Floor on trust for F.
23. According to F, N started to arrange capital for the purchase and transferred moneys to H or W’s bank accounts from time to time between 10 March 2017 and 26 January 2018.
24. At one time, N asked F to contribute something as well. F had about HK$270,000 and so he contributed HK$260,000 upon N’s request. This represented most of his savings at the time, and he would not have contributed if he had no interest in the House.
25. In about March 2018, i.e. 1 month after completion, W and H still resided at Ground Floor but W refused to pay the rent thereof leading to an argument between N and W. At the end, H paid the 2 months’ rent to N with an additional HK$2,000. Mistrust started to grow and in order to protect F’s interest, they started to seek legal advice on the matter. Since it would be difficult to effect a legal transfer of Ground Floor at the time, and upon advice, a Power of Attorney was drafted and was signed by W. As F felt that the Power of Attorney’s protection might not be enough, he requested and W did sign another Property Transfer Agreement on 8 September 2018.
26. Lastly, F denied that he had agreed to lend any money to H, nor was he aware of any gift or loan being made by N to H.
N’s Evidence
27. N is aged 66 and the mother of F, WAH and H. H’s father passed away in 1989. N cohabited with another gentleman Mr. To (“Mr. To Senior”) and gave birth to F. F is therefore a half-brother of H.
28. At trial, N was called to give evidence which was basically in line with that of F. In her narrative affirmation (A/151-161), N stated that in 2016, H told her that he intended to buy the whole House but did not have enough capital. W originally had the intention to buy both 1st Floor and 2nd Floor as she wanted to construct a duplex to be their matrimonial home. But since neither W, nor N had the ability to buy the 1st Floor on their own, they decided to pull their resources together to buy the whole House together. W and H would pay for the 2nd Floor; N and F would pay for the Ground Floor. Whoever could pay for the 1st Floor in the future, that side would become owner of 1st Floor as well. At the time, it was also understood that N would pay for the 1st Floor. Based on these understandings, N started to prepare the capital for the purchase of the House.
29. At a later time, the owner Mr. Lee raised the sale price in that the Ground Floor would be sold at HK$4,000,000; 1st Floor at HK$3,000,000; and 2nd Floor (with the roof top) at HK$4,000,000. But if the House was to be sold as a whole, the sale price would be HK$10,000,000. After discussion between W, H, F and N, they reached the mutual understanding, namely that:
(1) 2nd Floor would be used as W and H’s matrimonial home;
(2) 1st Floor belonged to F and the rent received therefrom would be used towards the monthly mortgage repayment, with the balance to be paid by W and H;
(3) Ground Floor belonged to F and the rent received therefrom would be used to support F and N’s living expenses; and
(4) W would hold the Ground Floor and 1st Floor on trust for F.
30. Upon consideration of the offered sale price made by the owner, it was also decided that the sale price to be apportioned to each floor would be as follows:
(1) Ground Floor at HK$3,500,000;
(2) 1st Floor at HK$3,000,000; and
(3) 2nd Floor and roof top at HK$3,500,000.
31. Originally, the parties intended to ask WAH (the second son of N) to hold the House but WAH declined because he was contemplating marriage and buying a property of his own. As H was running his business with an unlimited company, whilst W had a stable employment and income making her easier to get a mortgage, it was then agreed that the whole House would be purchased in the sole name of W who would also hold the Ground Floor and 1st Floor on behalf of F.
32. N confirmed that she and F had paid various sums of money totalling HK$4,230,000 towards the purchase of the House between the period of 10 March 2017 and 26 January 2018.
33. After the purchase on 1 February 2018, W and H continued to stay at Ground Floor, whilst the 2nd Floor was in renovation pending their moving in. They were supposed to pay rent for Ground Floor but did not. This was later resolved by H paying HK$16,600 (HK$8,300 per month) as rent with an additional payment of HK$2,000 in order to pacify N. After this incident, W did start to pay HK$8,300 as rent, but the trust between W and N had broken down leading to the signing of the Power of Attorney and Property Transfer Agreement in order to provide some form of protection for F’s interest in the House.
34. N finally stated that all her intention was to protect F and no payments were ever made to H or W as gift or loan.
H’s Evidence
35. H is the half-brother of F and husband of W. He basically supports F’s evidence. In his narrative affirmation (A/113-138), H stated that he started to run a computer business in 2005, which was incorporated into a limited company in 2018. He all along knew his mother N had the intention of providing financial security to F who has been diagnosed with visual impairment since 2008.
36. In about 2015, as his children were growing older, H resumed his plan to buy a property. Since N also had the same intention, H started to discuss the idea of buying a property with his family (i.e. the To family) from time to time. When the owner Mr. Lee returned to Hong Kong from overseas, H started to talk to him to see if he had any intention to sell the House. The discussion process was quite long and various prices ranging from HK$8,000,000 to HK$11,000,000 were quoted and negotiated between the parties and Mr. Lee. In June 2017, the parties decided to purchase the whole House at a lower price of HK$10,000,000 and to save stamp duty.
37. In mid to late 2017, the subject of the purchase was constantly discussed during family dinners. Finally, W, H , F and N reached an understanding that:
(1) The value of the 3 floors would be split into HK$3,500,000 for Ground Floor; HK$3,000,000 for 1st Floor; and HK$3,500,000 for 2nd Floor.
(2) The parties would apply for the maximum mortgage of 50% of the purchase price.
(3) N would pay for the whole sum of HK$3,500,000 for the Ground Floor, which would not be subject to the mortgage. The title of the Ground Floor would belong to F, including all rent received. F who would pay all outgoings of the Ground Floor.
(4) 2nd Floor would belong to W and H as their matrimonial home. They would pay about HK$1,000,000 and half of the mortgage loan (about HK$2,500,000) would be attributed to 2nd Floor. They would pay that part of the mortgage repayment and other relevant outgoings.
(5) N would pay a larger share of the purchase price for the 1st Floor, with rental income therefrom to pay the other half of the mortgage loan (HK$2,500,000) and expenses.
(6) W and H would be responsible to deal with the mortgage repayment. If the rental income of 1st Floor was not enough for mortgage repayment, W and H would pay the balance.
(7) Since the 1st Floor belonged to F, if W and H would like to use the 1st Floor in the future, they could do so by paying monetary compensation to F.
38. H confirmed that N and F had paid over HK$4,230,000 for the purchase through various transfers to either H or W. In comparison, H and W had only paid about HK$1,043,400 for the purchase price and stamp duty.
39. H also confirmed that he and W continued to occupy the Ground Floor after completion. They were supposed to pay rent for Ground Floor and this had caused an argument between W and N. Eventually, H paid a sum of HK$16,600 for the rent of February and March 2018. As to subsequent rent, there was another argument between W and N on whether it was HK$8,300 or HK$8,000 per month. Eventually W agreed to pay HK$8,300 per month as rent for Ground Floor.
40. H’s relationship with W also started to turn sour in the year of 2018 and the topic of divorce was mentioned. In December 2021 when W raised the issue of divorce, there was discussion on how to divide up the House; effect the necessary transfer; and deal with each floor’s mortgage. At the end, they reached agreement in that the 2nd Floor would go to W; 1st Floor would go to H; and the Ground Floor would go to H free of mortgage but to be held on behalf of F. Therefore, H now asks for a ruling that:
(1) The Ground Floor was purchased by N for the benefit of F without mortgage.
(2) A great majority of the capital for the purchase of 1st Floor was made by N on behalf of F, and the repayment of its mortgage was from its rental income. Therefore, a great majority of its title should belong to F.
(3) The 2nd Floor and the relevant part of the mortgage should be part of the family assets of W and H to be dealt with in the ancillary relief proceeding.
(4) The beneficial ownership of the House should be distributed according to the monetary contribution of the parties and the contribution from N should be regarded as F’s.
W’s Evidence
41. In her narrative affirmation (A/93-112), W stated as follows.
42. Starting from about 2015 up to the final decision to purchase in 2017, it was W who did the negotiation with the owner and H almost did not join in the communication at all. There was discussion with the owner for the House to be divided up into 3 floors because they thought they could only buy 1 or 2 floors instead of the whole House. Later, after W’s enquiry with the bank, it was discovered that W could take out a mortgage for the whole House, and with H’s agreement to jointly pay the down payment and mortgage repayments, there was no need to buy the House in different floors. W said during those 2-3 years of negotiation, she only discussed the matter with H but never involved N or F. She did not discuss with N or F, nor sought their views as she was not buying the property on their behalf. Since W had stable income as a registered nurse and was easier to get mortgage, they decided that the Property would be purchased in W’s sole name.
43. W stated that between December 2017 and February 2018, both W and H had paid HK$2,304,000 and HK$3,176,000 respectively towards the purchase price and related expenses. Although W knew that H’s family members might have provided financial assistance to H by way of gifts or loans, which does not mean that they did have a share in the House. Any loans to H had nothing to do with W. There was also no agreement or understanding among the parties that N or F should have any interest in the House and W denied that she was holding any interest of the House on behalf of F.
44. After completion, W rented out 1st Floor and she signed the tenancy agreement as landlord and the rent received was paid directly into her bank account. As to the Ground Floor, W explained that as N had lent money to H for his business, so W agreed to H’s suggestion to let N’s family to live there or let out for rental, purely out of filial piety.
45. According to W, N’s partner Mr. To Senior (the birth father of F) was very unhappy about a fraud case in 2012-2014 which had caused N to have lost HK$800,000. In July to August 2018, Mr. To Senior and N had another argument and in order to pacify him, W was requested to sign some documents to prove that the rent from the Ground Floor would belong to N. But since N was a registered tenant of a public housing unit, and upon her direction, the Power of Attorney was signed to appoint F as the attorney. N and F even drafted the Property Transfer Agreement and asked W to sign the same before Mr. To Senior on 8 September 2018.
46. As to the payments made by N, W denied that they were made for the purchase of the House. Basically, W was saying that those payments from N or F were either financial assistance given or lent to H. They were purely matters between H and his family but had nothing to do with the ownership of the House.
Discussion
47. The central issue in dispute is whether the parties did reach the mutual understanding, which according to F, H and N are of the following terms (A/10-11):
(1) 2nd Floor would be used as W and H’s matrimonial home;
(2) 1st Floor belonged to F and the rent received therefrom would be used towards the monthly mortgage repayment, with the balance to be paid by W and H;
(3) Ground Floor belonged to F and the rent received therefrom would be used to support F and N’s living expenses; and
(4) W would hold the Ground Floor and 1st Floor on trust for F.
It is to be noted that the mutual understanding, according to F, N and H, was not reached on a particular date or during a single occasion, but over a rather long period of time during which the whole family had gone into various discussion and finally reached the said mutual understanding on how the House was to be purchased.
48. On the contrary, W’s evidence was very much different in that she denied having such mutual understanding being reached between the parties, or at all. It is important to note that she was not advancing a case that a different agreement or mutual understanding had been reached. Her case is a simple and complete denial. She even denied that F and N had ever been involved in the discussion and decision to purchase the House (§§7 & 11 of W’s Points of Defence, A/26-28, and §11 of W’s narrative affirmation, A/95).
49. In resolving the 2 sides’ divergence on evidence, I was referred to the decision of Chung J on the assessment of witness’ credibility in Sun Hoi Tat v. Profectus Investment Group Ltd. [2016] HKEC 1691 at §11:
“11. The approach I adopted in earlier decisions when assessing the credibility is repeated:
‘The assessment of a witness’s credibility and/or reliability is a task frequently undertaken by the court in litigation (in fact, very often an essential task). I consider the following to be appropriate test to adopt:-
‘There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-
(a) Whether that part of his testimony is inherently plausible or implausible;
(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).
Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest.’
(See, for example, the decision in Chiu Chi Tong v. Lau Chong Sai & Another, HCA 765/2002 (para 28) and Yu Ming Investment Ltd. v. Peng Ru Chuan, Richard, HCA 814/2002 (para.13)).’ ”
50. I will adopt the same approach in that I will assess the witnesses’ credibility by reference to inherent plausibility and other undisputed or indisputable evidence.
Proof of F’s Case on Mutual Understanding
51. In proving his case on the mutual understanding, F has introduced evidence in 4 areas:
(1) The involvement of the To family in the discussion and decision of the purchase of the House.
(2) The Ground Floor being purchased on behalf of F without mortgage.
(3) The signing of the Power of Attorney and Property Transfer Agreement.
(4) The payment of HK$4,230,000 by N and F towards the purchase of the House.
Contemporaneous WhatsApp Messages
52. At trial, extensive reference has been made to various WhatsApp messages starting from 2015. In this regard, I take note of Mr. Cheung (counsel for W)’s submission that those cited messages do not cover all the parties’ exchanges, in particular, the period shortly before completion, i.e. from December 2017 to February 2018. Be that as it may, I note that there was no challenge to the authenticity to those exchanges produced. Furthermore, there was no attempt by W to provide the WhatsApp messages during the “missing” period, if they were indeed relevant to the present case.
53. Since the reference to WhatsApp messages was quite extensive, I will only refer to some of the more relevant and important messages in this judgment.
Discussion involving other To family members
54. I was referred to 4 dialogues in WhatsApp messages to show that the discussion on buying the House did involve H’s other family members:
(1) 13/10/2015 (B/99) :
6:01pm: [H]
「杜生杜太您好，940萬這個價都應該可以接受的，至於分層出售方面，價錢分配上我設有一個條件，就是地下及三樓各要價375萬，餘下的190萬歸二樓。」
6:11pm: [W]:
「咁都OK的」
6:12pm: [W]:
「點同媽咪講?」
6:17pm: [H]
「這樣分配更好，因為少過二百萬的房子稅金比較少，我們同意。但是容我先小人後君子說在前，地下和二樓我會用弟弟及太太名買，兩至三個月後我會買埋一樓的，你千萬不要轉賣給他人哦，因為數字上地下和二樓是貴了的，這個大家都明白。」
7:34pm: [W]:
「其實可否你自己先成交2樓」
7:35pm: [W]:
「一個月後我同華再買地下和三樓」
7:35pm: [W]:
「同媽咪有D $要下年才到期」
(2) 19/10/2015 (B/100):
3:36pm: [H]:
「華仔同阿媽去銀行估價，話都仲係貴左少少。另外問左仔仔，地下400萬太貴佢話遲下等樓價平返先睇。」
4:14pm: [W]:
「咁即係點」
4:15pm: [H]:
「華仔佢地唔知點」
(3) 19/10/2015 (B/360) :
9:20pm: [WAH]:
「即唔係xx號 你囉黎對比 ?」
9:21pm: [H]:
「Dd51lotxxxx 係xx村xx號」
9:22pm: [WAH]:
「咁得啦 我叫媽咪聽日去問」
9:22pm: [H]:
「圖係一年前入好多的新村屋價目表」
9:22pm: [H]:
「xx村xx號 一年多前估1100左右」
(4) 5/9/2017 (D/408):
8:51pm: [Mr. Lee]:
「應該還沒有這麼快，可能畫個圖則要點時間，則師陳先生還未有消息給我。我想你定期再做續期會好些。」
[W]:
「是嗎? 那我先多存三個月吧」
[Mr. Lee]:
「應該好。」
[W]:
「希望快一點搞定，我奶奶老問我為什麼政府咁耐」
55. The above 「華仔」or 「華」should be a reference to WAH (another younger brother of H) and 「媽咪」or 「奶奶」should be a reference to N. It is quite clear from the above dialogues that the involvement of N and WAH in the purchase started from the very beginning, i.e. in about 2015.
56. At 6:12pm on 13/10/2015, W asked H how to talk to「媽咪」 (i.e. N) on the offer from the owner. At 7:34pm and 7:35pm, W was in contemplation that H would buy 2nd Floor first, whilst she and 「華仔」(i.e. WAH) would buy Ground Floor and「三樓」later. W also mentioned that N had some money maturing the following year, suggesting that the financial contribution from N towards the purchase was also contemplated.
57. For the dialogue on 19/10/2015, it was said that WAH and N would seek valuation of the property.
58. For the dialogue on 5/9/2017 between W and the owner Mr. Lee, W said that she hoped the matter could be completed sooner and her mother-in-law (i.e. N) asked why it took so long.
59. Based on the above indisputable evidence, W’s evidence that no other person (apart from W and H) had ever been involved in the discussion and decision in the purchase of the House is rejected. I am satisfied that H’s other family members, including N, WAH and most likely F were all involved in the discussion and later the decision in the purchase of the House.
Was Ground Floor purchased on behalf of F without mortgage?
60. One of the important parts of the mutual understanding, as claimed by F and N is that the Ground Floor was to be purchased on behalf of F. They also testified that the purchase of the Ground Floor was not subject to the mortgage.
61. Reference was made to some post completion WhatsApp messages in the family group on 12 and 14 August 2018, i.e. about 6 months after completion and the deterioration of trust between the parties:
(1) 12/8/2018 (B/411):
10:13am:
[W]:
「F，請細看，跟住解釋比你爸爸聽」
(2) 14/8/2018 (B/411):
1:07pm:
[W]:
「樓價$10000000
---
1:13pm:
[W]:
「總數10000000 + 18300 + 20000 + 376000 = 10414300
1:29pm:
[F]:
「$19000先岩?」
1:32pm:
[W]:
「咁就系18300 + 19000 + 376000 除三份系 137766
1:32pm:
[W]:
「尾數我其實無同你計」
1:38pm:
[F]:
「你貸款借左500萬?」
2:01pm:
[W]:
「系，開戶優惠三月提早還左85000」
7:32pm:
[F]:
「睇返你D相，應該係咁?
7:34pm:
[F]:
「睇返你D相，應該係咁?
10:40pm:
[W]:
「系」
62. On the face of these conversations, they tend to support the fact that the Ground Floor was purchased separately on behalf of F. That was why W had to account for the purchase price of the Ground Floor (HK$3,500,000) and its 1/3 share of the other expenses (HK$137,833).
63. W did not dispute there was such a dialogue but she tried to explain that all these conversations were a sham in order to pacify Mr. To Senior. According to W, Mr. To Senior was very angry that N was paying money to assist H to purchase property and so they tried to create an impression that Ground Floor was purchased for F or N, instead of W or H. W said this was particular important because Mr. To Senior was not of good health and the sham dialogue was simply to pacify him.
My views
64. The first observation to be made is that W’s claim of a sham dialogue was based on her testimony only, but without any independent corroborating evidence.
65. If one considers the contents of the dialogue, one would see that they contained very detailed figures and calculation which may not be necessary if its sole purpose was just to pacify Mr. To Senior. The dialogue was made intermittently covering a time period of over 12 hours (from 10:13am to 10:40pm) suggesting that it was more of a natural and genuine dialogue, instead of a staged one which could be done within minutes in one go.
66. More importantly, from the above dialogue, one can see that W was trying to explain the account for the purchase of the House to F, in that the total price was HK$10,000,000, with HK$3,500,000 being apportioned to the Ground Floor. There were other expenses of HK$18,300, HK$20,000 and HK$376,000 (stamp duty). I suspect that the payment of HK$18,300 should be for solicitors’ costs and HK$20,000 for documentation fees. The total payment for Ground Floor was therefore HK$3,638,100 being HK$3,500,000 plus one third of the other expenses.
67. However, F thought that the payment of HK$20,000 should be HK$19,000. This was accepted by W, who then re-calculated the Ground Floor’s share. But later, after F seeing some photos from W, F further adjusted all 3 other expenses to HK$18,500 as solicitors’ costs (adjusted up HK$200); HK$18,500 as documentation fees (further adjusted down HK$500 from HK$19,000 to HK$18,500); and HK$376,500 as stamp duty (adjusted up HK$500). F then re-calculated the Ground Floor’s share to HK$3,637,833 and messaged W at 7:32pm. Upon receiving no response from W, F re-sent the message at 7:34pm. W finally agreed to this calculation 3 hours later at 10:40pm..
68. If these conversations were just a sham, there was no need for F to take all the troubles to adjust a few hundred dollars on each of the 3 other expenses in the calculation. There was equally no need for F to re-send the same message seeking W’s agreement upon receiving no response from her.
69. After considering these evidence in the round, I accept these were genuine dialogue and account between W and F at a time when the trust between the parties began to break down. This dialogue also supports F’s case that there was an understanding that the Ground Floor was purchased separately from the other 2 floors. Moreover, if F’s payment towards the Ground Floor was HK$3,637,766, the natural inference to be drawn must be that the Ground Floor was purchased not subject to any mortgage.
Other post completion dialogues
70. Reference was also made to other post completion WhatsApp communication between W and H when their relationship began to turn sour. There were heated and lengthy argument through WhatsApp:
6/11/2018: (D/331-332):
9:22pm:
[W]:
「---
In this dialogue, W said she would pay half of the mortgage and sign a will so that her property would be inherited by the 2 children. She also said she would transfer F’s share back to him.
71. Further reference was made to the WhatsApp messages when they were discussing about divorce settlement:
(1) 16/12/2021 (B/316):
7:07pm:
[H]:
「共同協議結果:
[H]:
「是否完全清楚明白及同意」
9:14pm:
[W]:
「我想要地下門口車位方便叉電，因為之前都系2樓單位跟門口車位」
9:50pm:
[W]:
「其他都無意見」
10:19pm:
[H]:
「Ok, 之前我在，媽咪讓個車位給我，一人一步吧:你人在揸電車時，門口位給你用，你搬走或不開電車時，車位歸地下使用。」
(2) 20/12/2021 (B/316):
7:59am:
[W]:
「最新樓按狀況，現時欠款，1樓按比例佔 220萬左右，for你計數」
10:24am:
[H]:
「咁樓上呢」
10:39am:
[H]:
「比例係幾多?」
10:49am:
[W]:
「210幾」
10:53am:
[W]:
「如要詳細計，我可以列細數，比例一定多過220萬。」
10:56am:
[W]:
「當初借500萬，240萬系2樓，260萬
11:10am:
[W]:
「如果要details，我可以拿返呢3年幾供樓的單，叫威威計一次再同你夾。」
72. In the dialogue on 16/12/2021, whilst the parties were discussing financial settlement, H offered that after partition of the House, W would have 2nd Floor with a parking space subject to the relevant mortgage; H would have 1st Floor with mortgage and pay relevant tax; Ground Floor with parking space outside would be transferred back to H to manage on behalf of F at nil consideration and without mortgage, but with the responsibility to pay tax. W seems to have accepted this position except that she requested to have the parking space outside Ground Floor for her own use. This arrangement actually corroborated with 2 aspects of F’s case, namely:
(1) Prior to the purchase, there was an understanding that someone would hold the property on behalf of F. That was why W agreed (or at least not objecting) to transfer the Ground Floor back to H to be managed on behalf of F. This is consistent with F’s case that F was indeed the beneficial owner, who needs someone to look after or manage his property due to his visual problem. H said W was previously allowed to use the parking space outside Ground Floor only because H got the permission from N. The suggestion that N had the final say on who could use that parking space was also consistent with the beneficial ownership of Ground Floor being owned by N or F, but not W.
(2) Ground Floor was purchased by N for F outright without any mortgage.
73. In the dialogue on 20/12/2021, W had given details on how the mortgage of HK$5,000,000 being allocated to different floors at the beginning (當初), namely HK$2,400,000 for 2nd Floor and HK$2,600,000 for 1st Floor, but nothing for Ground Floor. This corroborated with N and F’s evidence that Ground Floor was purchased free of mortgage.
WhatsApp audio recording of W, F and N’s conversations
74. At trial, W was referred to the transcript of 2 audio recordings between W and F on 7 July 2021; and W and N on 5 December 2021:
(1) 7/7/2021:
[W] to [F]:
「你同媽咪都要放心，唔洗驚，我從無諗過亦都唔會霸住你到層樓唔俾翻你地。如果唔賣，你地可以一路自已擁有自已放租，如果賣嘅話，賣左幾多錢我一定會比翻曬你地。我從來無咁嘅諗法，亦唔會咁樣做，因為嗰個系媽咪留俾你嘅心意，呢樣你大可以放心，你亦都可以叫媽咪放心。同埋叫媽咪唔洗唔開心，就算我同哥哥緣份盡咗，唔同佢一齊，我都一樣，我都一樣錫佢，…」
(2) 5/12/2021:
[W] to [N]:
「我知你擔心乜嘢，我知你因咩事唔開心。你放心呀，我應承你，層樓我唔會食左你嘅，就算離婚都好，欸…..只要你有個名話俾我聽，我隨時可以轉翻比你，欸…各樣收租嗰啲，我全部都唔會，唔會霸住唔會盛架。因為我知你大半世人努力咗，都係辛辛苦苦搵，一蚊一毫你都辛苦搵翻黎嘅，所以你可以放心，呢樣嘢我可以同你保證。」
75. In these conversations, W seems to have admitted that F and H did have a floor in the House and she promised to transfer back to them once a name was provided to her.
76. In her evidence, W did not deny that she had said those words, but tried to explain that they were said because she wanted to pay back the many loans owed by H to N.
77. In my view, these are W’s own words only. I do not find them being credible, especially when she was already contemplating divorce with H. I am satisfied that these conversations amount to clear admission that F and N did have interest in at least one floor in the House.
Power of Attorney (POA) and Property Transfer Agreement (PTA)
78. According to F, after the parties’ relationship deteriorated in February/March 2018, N started to worry about the transaction as no documentation and receipts were shown to them. N instructed F to make enquiries on the accounts and take steps to protect F’s interest in the House. On 13 August 2018, F, N and Mr. To Senior went to various solicitors’ firm to see if a transfer of the Ground Floor to F could be effected. But they were told that it was not possible to do an instant transfer of the Ground Floor as it would involve sale and purchase of the whole House once again. It was suggested by the staff of a firm that a POA could be signed instead. Upon F’s request, W did sign a POA on 3 September 2018 in which F was authorized to deal with the leasing of the Ground Floor (B/653-661).
79. Fearing that the POA could not provide sufficient protection, F requested W to sign another PTA in respect of the Ground Floor (B/663-664) on 8 September 2018 in which W agreed, inter alia, that the ownership and right to use Ground Floor belonged to F; F could freely sell, use and manage Ground Floor without permission of W; W to transfer the Ground Floor back to F upon full repayment of the mortgage; W would be responsible to repay the mortgage and F would not be responsible for any floor’s mortgage.
80. W does not dispute that she signed the POA and PTA as requested. However, she said again that it was only a scheme to pacify Mr. To Senior, instead of acknowledging F’s ownership of the Ground Floor.
My views
81. Mr. To Senior’s pacification was used by W to explain some of the earlier discussed WhatsApp messages which has already been rejected by this court. W’s use of the same reason to explain the POA and PTA is also not very convincing. Again, there was not corroborating evidence of W’s explanation, as far as the POA and PTA are concerned. There was also no explanation on why the PTA had to be signed just 4 days after the POA, if the only aim was to pacify Mr. To Senior.
82. On the contrary, the explanation of F sounds more logical. The POA only dealt with the leasing of Ground Floor, and fearing that this might not provide sufficient security, F requested the signing of PTA which dealt with the transfer of Ground Floor. On the whole, I find the evidence of F more credible than that of W.
Payment of HK$4,230,000 for the purchase of the House
83. According to F and N, they had made various payments towards the purchase of the House amounting to a total sum of HK$4,230,000. The details of those payments were contained in paragraph 31 of the narrative affirmation of N (A/157-158):
Date
Payer
Payee
Amount
1.
10/3/2017
N
H
HK$700,000
2.
13/3/2017
N
H
HK$200,000
3.
13/3/2017
N
H
HK$500,000
4.
25/5/2017
N
H
HK$500,000
5.
16/6/2017
N
H
HK$30,000
6.
8/7/2017
N
H
HK$50,000
7.
11/8/2017
N
H
HK$50,000
8.
21/8/2017
N
H
HK$50,000
9.
18/10/2017
N
H
HK$50,000
10.
9/11/2017
N
H
HK$35,000
11.
22/11/2017
N
H
HK$45,000
12.
29/11/2017
N
H
HK$25,000
13.
28/12/2017
N
H
HK$50,000
14.
31/12/2017
N
H
HK$45,000
15.
16/1/2018
N
H
HK$370,000
16.
16/1/2018
N
H
HK$470,000
17.
16/1/2018
F
W
HK$260,000
18.
17/1/2018
N
W
HK$500,000
19.
24/1/2018
N
W
HK$200,000
20.
26/1/2018
N
H
HK$100,000
Total:
HK$4,230,000
84. There were a total 20 payments for the period between 10/3/2017 and 26/1/2018. Out of these 20 payments, 17 were transfers from N to H; 1 from F to W; and 2 from N to W. For the transfer from F to W on 16/1/2018, it was F’s evidence that although nearly all the payments were made by N on his behalf, he as an owner would also like to make contribution. But since he only had about HK$270,000 savings, so all he could do was to contribute HK$260,000 which paid directly to W.
85. According to H, the payments he received from N were all used to pay towards the purchase of the House.
86. W’s stance on those HK$4,230,000 payment can be summarized as follows:
(1) HK$3,270,000 (i.e. items 1-16 and 20): they were paid into H’s account by N which might eventually go towards the purchase price of the House. However, it was W’s case that they were purely a matter between H and N and those payments, as far as she was concerned, had nothing to do with the purchase.
(2) HK$500,000 (item 18): it was a gift from N to W and H for renovating their newly purchase property.
(3) HK$260,000 (item 17): it was a loan from F to H for the purchase of the House.
(4) HK$200,000 (item 19): it was a loan repayment by N to W, made on behalf of H.
My views
87. I do not intend to repeat those relevant WhatsApp communications discussed in previous paragraphs. But if one looks at those communications again, there is very little doubt that the various payments from N into H and W’s accounts, which were eventually used to purchase the House, had to be made with such purpose known to W. This had to be the case, or otherwise, W would not have admitted that N had paid HK$3,637,833 for the purchase of the Ground Floor (message on 14/8/2018, paragraph 61 above).
88. W’s evidence on F lending a sum of HK$260,000 to H was even more incredible. Apart from W’s own words, there was nothing to support such a contention. Moreover, F had visual difficulty and only earned very small income. He only had HK$270,000 savings at the time. His evidence that he was willing to pay HK$260,000 only because he was an owner is certainly more believable than the evidence of W.
89. I find it as a fact that both N and F had made monetary contribution towards the purchase of the House with full knowledge of W.
Summary of findings
90. Based on the above discussion, I have come to the following finding of facts:
(1) W and H first had the intention to purchase one floor of the House to be their matrimonial home, which idea was later developed into the purchase of the whole House.
(2) Between 2015 and 2018, W, H and the To family (including N, F and WAH) had all participated in the discussion and finally the decision to purchase the whole House at HK$10,000,000.
(3) During the course of discussion, the mutual understanding was reached on the following terms:
(i) 2nd Floor would be used as W and H’s matrimonial home;
(ii) 1st Floor belonged to F and the rent received therefrom would be used towards the monthly mortgage repayment, with the balance to be paid by W and H;
(iii) Ground Floor belonged to F and the rent received therefrom would be used to support F and N’s living expenses; and
(iv) W would hold the Ground Floor and 1st Floor on trust for F.
(4) In addition to the mutual understanding, and by reference to the purchase price being allocated to each floor and the other evidence (in particular the WhatsApp message on 20/12/2021, paragraph 71 above), the court can also infer an agreement between all parties that:
(i) HK$3,500,000 (35% of HK$10,000,000) being purchase price for Ground Floor but not subject to mortgage;
(ii) HK$3,000,000 (30% of HK$10,000,000) being purchase price for 1st Floor but subject to 52% of the mortgage (ratio of 260/500); and
(iii) HK$3,500,000 (35% of HK$10,000,000) being purchase price for 2nd Floor with the roof top but subject to 48% of the mortgage (ratio of 240/500).
(5) Based on the mutual understanding, N and F had paid a total of HK$4,230,000 towards the purchase price of the House, with full knowledge of W.
Common Intention Constructive Trust on Ground Floor and 1st Floor?
91. Based on the above finding of facts, the next question to be asked is whether F succeeds in proving his case on common intention constructive trust in respect of his beneficial interest on the Ground Floor and 1st Floor.
92. It is worth repeating that in order to succeed on his claim for common intention constructive trust, F has to prove 3 elements, namely:
(1) There was indeed a common intention between him and W that he was to be the beneficial owner of the property despite that it was acquired in W’s name;
(2) F altered his position in detrimental reliance upon such common intention; and
(3) It is unconscionable for W to assert ownership in reliance on her legal title to the property.
93. From the finding of facts as stated in paragraph 90 above, this court is satisfied that there was a mutual understanding between all parties concerned that both the Ground Floor and 1st Floor belonged to F. Although the term of “beneficial ownership” might not have been used during the parties’ discussion as they were laymen, it is not difficult for this court to infer it meaning F being regarded as beneficial owner of the Ground Floor and 1st Floor by the parties.
94. Although the financial well-being of the parties was not the focus of this preliminary trial, it was quite clear that they were not very well-off people. They had to pull their resources together in purchasing the House. N lived in public housing. F had visual problem and his monthly income was only about HK$8,000 to HK$10,000, with saving in the region of about HK$270,000. I am satisfied that N and F would not have paid HK$4,230,000 without an understanding that F would be a beneficial owner. The element of detrimental reliance has been proved.
95. Following from the above, it would certainly be unconscionable to allow W to assert ownership of the Ground Floor and 1st Floor in reliance on her legal title to those 2 floors.
96. F succeeds in his claim of common intention constructive trust. This court is satisfied that F has succeeded in proving his beneficial ownership of the Ground Floor not subject to mortgage, and the 1st Floor but subject to mortgage. In view of the parties’ inferred agreement on the allocated purchase price for different floors, F should be 35% beneficial owner of the House by reference to his beneficial title to the Ground Floor, and a further 30% beneficial owner of the House by reference to his beneficial title to 1st Floor. Therefore, F is the beneficial owner of 65% of the House, but since 1st Floor is subject to 52% of the mortgage, F’s 65% beneficial interest is also subject to 52% of the outstanding mortgage loan as at the date of this judgment.
Resulting Trust and Equitable Compensation
97. As the dispute could be resolved by reference to common intention constructive trust, there is no need for this court to consider the other claims on resulting trust and equitable compensation.
Conclusion and Ruling
98. Based on the above analysis, it is the ruling of this court that:
(1) F is the beneficial owner of 65% of the House by virtue of his ownership of the Ground Floor and 1st Floor thereof.
(2) F’s 65% beneficial ownership is subject to 52% of the outstanding mortgage loan as at the date of this judgment.
Costs
99. Costs to follow event. F has to come to court before getting the above ruling on beneficial ownership. Both F and H should be regarded as the winners of the preliminary issue and be given costs of the application, including all costs reserved with certificate for counsel. Such costs are payable forthwith by W on a party and party basis, and to be taxed if not agreed. The costs order will be in the form of an order nisi to be made absolute after the expiry of 14 days from the handing down of this judgment.
Way Forward
100. After the determination of the preliminary issue, it is now time for the ancillary relief proceeding to be restored. I direct the parties to fix a one-hour hearing before a Master for First Appointment.
101. Last but not least, I thank counsel for their assistance.
C. K. Chan
Representation:
Mr. Bruce Tse SC and Mr. Justin Cheung, Barristers-at-law instructed by Messrs. A Lee & Partners, solicitors for the Petitioner
Mr. Ken Chan and Ms. Tiffany Tse, Barristers-at-law instructed by Messrs. Tung & Associates, solicitors for the Respondent
Mr. Enzo Chow and Ms. Christie Lee, Barristers-at-law instructed by Messrs. Hugill & Ip, solicitors for the Intervener