WONG KWOK KI STEPHEN AND ANOTHER v. LEE LAI YING AND ANOTHER

DCCJ 677/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 677 OF 2013

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JUDGMENT

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Introduction

1. This is a dispute concerning the ownership of residential premises located at 1/F, Section F, Lot No 1138, DD 123, Yuen Long, New Territories, Hong Kong (the “Property”).

2. The Property is and has at all material times been legally owned by both the 1^st defendant (“Madam Lai”) and the 2^nd defendant (“Lai Kam Po”). Lai Kam Po is the son of Madam Lai.

3. The background is as follows.

Bankruptcy of Lai Kam Po

4. On 8 December 2003, Lai Kam Po voluntarily filed a Bankruptcy Petition for his own bankruptcy.  According to the Proof of Debt filed by his creditors, his outstanding total debts amounted to HK$574,206.60.  A Bankruptcy Order was made against Lai Kam Po on 3 February 2004.

5. At the general meeting of creditors of Lai Kam Po on 15 April 2004 and 10 May 2005 respectively, it was resolved that the plaintiffs would be appointed “joint and several trustees of the property of Lai Kam Po under section 17 of the Bankruptcy Ordinance, Cap 6 (“BO”).”

6. Lai Kam Po was discharged from his bankruptcy under section 30A BO on 3 February 2008.

The Proceedings

7. The plaintiffs bring this action against the defendants.  They take no issue that Lai Kam Po and Madam Lai (together, the “defendants”) are the legal owners of the Property.  Their contention is that the defendants are also equal beneficial owners of the Property.  As a result, they seek an order for sale in respect of the Property whereby the proceeds of Lai Kam Po’s share can be paid to his bankruptcy estate account for the benefit of his creditors in the bankruptcy.

8. The defendants, on the other hand, contend that they are not equal beneficial owners of the Property but that it is Madam Lai alone who has sole beneficial ownership of the Property.

List of issues

9. The parties have filed a Statement of Issues in Dispute which are as follows:-

(1)  whether Madam Lai and Lai Kam Po hold the Property as beneficial tenants in common in equal shares;

(2)  whether Madam Lai is the sole beneficial owner of the Property;

(3)  alternatively, what is the respective interest of Madam Lai and Lai Kam Po in the Property; and

(4)  whether there should be an order for sale of the Property.

Burden of proof

10. Since the Property was conveyed to the defendants as joint tenants, the starting point (which counsel agreed) is that, prima facie, they each have both legal and beneficial joint tenancy until the contrary is proved: Stack v Dowden [2007] 2 AC 432, per Baroness Hale.

“The burden will therefore be on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests, and in what way.”

11. In other words, as the parties have put their cases, the burden is on the defendants to establish that, instead of an equal beneficial tenancy, there is a common intention trust in respect of the Property in Madam Lai’s favour.

12. The plaintiffs’ position is summarised at §15 of Ms Lau’s Opening submission:-

(1)  It cannot be disputed that (Madam Lai) and (Lai Kam Po) have joint legal ownership of the Property. Prima facie, (Madam Lai) and (Lai Kam Po) also have joint beneficial ownership;

(2)  There was no common intention constructive trust in respect of the Property in favour of (Madam Lai) as contended for by the defendants;

(3)  Both (Madam Lai) and (Lai Kam Po) have contributed equally to the purchase price of the Property.  Beneficial ownership will follow the joint legal tenancy in a case where the contributions are equal; and

(4)  In any event, (Madam Lai) intended to make a gift of the Property to her son, (Lai Kam Po).  The presumption of advancement applies.

13. The defendants contend that “it was always the common intention that the (loan) would be repaid by (Madam Lai), with no contribution from (Lai Kam Po), and that despite (Lai Kam Po)’s paper title to the Property, (Madam Lai) would be the only beneficial owner.”

Intention

14. Both parties agree that the “intention” of the defendants is the main issue in these proceedings, as set out in Jones v Kernott [2012] 1 AC 776: “the search is primarily to ascertain the parties’ actual shared intentions, whether expressed or to be inferred from their conduct.”

Background to the purchase of the Property

15. Madam Lai’s evidence is that her husband (Lai Wai Hai) inherited two properties from his father in 1974 – a 40% share in a shop on the ground floor of No 301 Shanghai Street (with the other 60% share inherited by Lai Wai Hai’s older brother) and a flat on the 5^th floor of the same address.  The shop was rented out and Lai Wai Hai received monthly his 40% share of the rental (amounting to HK$7,100 initially, and after 2003 in the amount of HK$7,500).  Madam Lai, Lai Wai Hai and their children (including Lai Kam Po) lived at the 5^th floor flat, but later moved to the rooftop on the 6^th floor.  The 5^th floor flat was rented out to earn extra income.

16. Madam Lai says that she thought of purchasing the Property because Lai Wai Hai, in his advancing years, was finding it more and more difficult to climb stairs to the 6^th floor rooftop.  Also the Buildings Department had told the family that they could no longer live on the rooftop.

17. She says that her second son, Lai Kam Yuen first told her about the Property – it was located in the same building in which he was staying at the time.  He was not living in the family home by that stage.

18. She went to view the Property with Lai Kam Yuen.  She considered that it was suitable for old people to live there, believed it to be suitable for her family and told Lai Kam Yuen that she liked it and intended to purchase it.

19. On 14 November 1995, Madam Lai entered into a Sale and Purchase Agreement in relation to the Property (the “SPA”), as sole owner (per Schedule 1 of the SPA), and for a consideration of HK$1,080,000.  Madam Lai testified that she paid the initial deposit of HK$10,000 as well as a further deposit of HK$98,000 to the vendor, as required under the terms of the SPA.

20. She says that she had money at hand (some of which she also kept at home), which she used to pay the initial deposit. I will come back to this later.

21. After paying the deposit, she announced to Lai Wai Hai and three of her children (Lai Kam Sing, Lai Kam Lin and Lai Kam Po) at family dinner that she had placed a deposit on the Property.

22. Lai Wai Hai, who gave evidence as a witness called by the defendants, stated that when he was first told about the Property at dinner he thought that it was a good idea that Madam Lai had sought to purchase a new home for the family to live in – it was more spacious than the rooftop flat and there was a lift.  He said that Madam Lai had not discussed her intention to purchase the Property beforehand but that it did not matter as they had been married for a long time by then and that he trusted her completely.

23. Lai Kam Po, Lai Kam Lin and Lai Kam Sing (the latter two also called as witnesses for the defendants) also stated in evidence that the first time they heard Madam Lai mention that she had placed a deposit on the Property was at the same family dinner.

24. In addition to the deposits, Madam Lai stated that she also paid the stamp duty of HK$15,500 in respect of the purchase.

The payments

25. There was no dispute that payments were made in respect of the initial deposit, further deposit and stamp duty.  Receipts were produced that purported to evidence that the further deposit and stamp duty had been paid by Madam Lai (her name appeared as payor on the respective receipts).  Whilst there was no receipt to show that she had paid the initial deposit, this was not challenged by the plaintiffs and I accept that the initial deposit had been paid.

26. There does arise a question as to the source of the monies used to pay these sums, which I deal with below.

The Mortgage

27. After the SPA had been signed, Madam Lai’s evidence is that she approached HSBC (the “Bank”) so that she could take out a mortgage for the balance of the purchase price of the Property, namely HK$972,000.  She says that the Bank told her that since she was elderly (she was 59 years old at the time) and did not have an income she could not take out a mortgage in her own name.  The Bank (she says) required the name of an income-earning co-borrower to be added to the proposed mortgage.  She asked her children at a subsequent family dinner at home whether any of them could act as a co-borrower on the proposed mortgage.  After speaking to Lai Kam Sing and Lai Kam Lin she believed that only Lai Kam Po was suitable and asked him if he was willing to help her.  He agreed.

28. Lai Kam Po’s evidence is that he was at first reluctant to get involved as he was very busy with work but agreed after Lai Kam Sing was considered unsuitable.  About a month after first raising the issue, Madam Lai informed Lai Kam Po that she needed his help with the proposed mortgage.  He says that he agreed to co-sign the proposed mortgage simply because of the further security requirement of the Bank but that it was understood that he would never make any of the monthly payments nor would he have any beneficial interest in the Property.

29. Lai Kam Po’s name was then added to the mortgage as a co-borrower, which was executed on 11 December 1995 (the “Mortgage”).  The Mortgage was in the amount of HK$756,000.

Common intention

30. As stated above, in relation to their intentions vis-à-vis the Property, the defendants plead that there was a common intention constructive trust in favour of Madam Lai.

31. There is no dispute that determining a claim of beneficial ownership under a common intention constructive trust involves a two-stage test.  First, the key is to establish the parties’ true common intention as to who should have a beneficial interest.  Second, it is necessary to ascertain the extent of the parties’ respective interests in the Property, by adopting a holistic approach to the quantification, surveying the whole course of dealing and conduct, which threw light on what shares the parties, must have intended.  The court could not impose its own view of what it considered fair: Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343 at 350; Chan Gordon v Lee Wai Hing [2011] 2 HKLRD 506, 520-1.

32. In their respective witness statements, the defendants each stated that there was an understanding reached between them, in spite of Lai Kam Po’s name being added to the Mortgage, that this was a Bank requirement only and that all along it was intended that Madam Lai would be the one making all of the mortgage repayments in respect of the Property.  Lai Kam Po would not be making any contribution and thus would not have any interest in the Property.

Payments made by Madam Lai

33. Madam Lai’s evidence was that she paid the two deposits and stamp duty (the “three payments”), amounting to about HK$115,000, out of her personal savings.  In support, her witness statement states that “the money for these payments came from the money I had saved over the years and deposited into my personal account held at HSBC.”

34. During cross-examination, Madam Lai was taken to her Bank passbook and it was pointed out to her that the three payments could not have been made from the Bank account.  When she was further cross-examined, Madam Lai stated that the sums making up the three payments were in fact from monies that she had kept at home.

35. I pause here.

36. Much was made by Ms Lau that Madam Lai had never mentioned in her witness statement that she had kept large amounts of money at home, referring to her statement that “the money for these payments came from the money I had saved over the years and deposited into my personal account held at HSBC.”  Although Madam Lai did not specifically mention the large amounts of money in her statement, I take the view that the statement above is not so restrictively worded and accept that it does not posit that Madam Lai only kept her savings in her account at the Bank.

37. However, it is true that Madam Lai’s account that she held such large amounts of cash at home only came to light in the course of her cross-examination at trial and it is relevant to my assessment of Madam Lai’s evidence overall.

38. The thrust of her evidence was that the money to pay for the above deposits was taken from her account with the Bank.  If there were insufficient funds in the Bank account then she would top it up with her own cash which she kept at home. 

39. Her Bank passbook, however, reveals monthly balances that did not exceed HK$35,000 during this period and in fact, in December 1995, only held around HK$12,000.  Simply by reviewing the transactions at the time, it is quite evident that her monies in the Bank account were not used at all to pay the initial deposit, further deposit or stamp duty, let alone the payment on 9 December 1995 (see paragraph 49 below).  There were insufficient funds in the account.  On the other hand, Madam Lai is asking this court to believe that she held at least HK$370,000 at home in around November/December 1995, but which she never mentioned at all until during the trial.

Payments by Lai Kam Yuen

40. As to the three payments, Madam Lai said that they were actually made by Lai Kam Yuen, with whom she had gone to see the Property before purchase.  She says she had transferred cash amounts making up the three payments to him and he then issued cheques on her behalf on three separate occasions.

41. I note that this was evidence also first elicited during the trial and in this case did not arise from Madam Lai’s witness statement.  It was only after the court raised a query in relation to the cheque numbers that appeared on the receipts that Madam Lai first mentioned that Lai Kam Yuen was involved as described.

42. In spite of Madam Lai’s evidence, however, her assertion that Lai Kam Yuen issued cheques on her behalf was not supported by other evidence - Lai Kam Yuen was neither called by the defendants as a witness nor were his bank records or other documents produced in support.

43. Clearly someone had made the three payments as there are receipts in respect of these sums.  It is for the defendants to satisfy the court (as they assert) that the monies were paid by Madam Lai.

44. Apart from my observations at paragraphs 41-42 above there is also no evidence, apart from her bare allegations, that Madam Lai held large amounts of money at home - Lai Wai Hai’s evidence was that he believed that she held sufficient monies in her Bank account. There is also no evidence, apart from her testimony during cross-examination, to support her case that she did pass such sums to Lai Kam Yuen.

45. I do not believe Madam Lai on both aspects – that she held such large sums at home as well as that she passed such sums to Lai Kam Yuen as described.

46. Clearly if Lai Kam Yuen had been called as a witness, both issues likely could have been resolved. In light of the defendants’ failure to call Lai Kam Yuen as a witness, Ms Lau has invited me to draw an adverse inference in this regard against the defendants, citing Wisniewski v Central Manchester Health Authority [1998] PIQR 324, 340.  Whilst I take on board the principles cited in that case, I do not think I need to draw any such adverse inferences against the defendants.

47. However, I am not satisfied on the evidence that Madam Lai was the source of the three payments in respect of which receipts were issued in her name.

Two further payments

48. At this stage, it is relevant to point out that two additional receipts were produced during the trial which were, however, issued in the names of both defendants (rather than in the name of Madam Lai alone).

49. First, there was a solicitors’ firm receipt dated 9 December 1995 in the sum of HK$247,177.  This comprised conveyancing fees and the balance of the purchase price of the Property which had not been covered by the Mortgage.  Madam Lai’s evidence was that she also gave this sum of money to Lai Kam Yuen from her savings which she kept at home, in respect of which he issued a cheque.

50. A second receipt, in the amount of HK$2,000 was again issued in the name of both defendants.

The various documents

51. Although the Mortgage was subsequently executed with the names of Madam Lai and Lai Kam Po as co-borrowers, a number of documents have been referred to by the plaintiffs as being relevant for the court’s consideration of the defendants’ intentions at the material time.  The first two documents were executed at around the time of the purchase, namely, the Assignment and the Memorandum of Nomination.

The Assignment

52. I have stated above that the SPA dated 14 November 1995 sets out Madam Lai as being the sole owner.  However, by the time of the Assignment dated 11 December 1995, both Madam Lai and Lai Kam Po were stated to be joint owners.

53. That their joint names appear in the Assignment is relevant because, as Ms Lau put it to them during their respective testimony and to which both Madam Lai and Lai Kam Po agreed, the fact of their names both appearing on the Mortgage would not have had any effect on the title of the Property.  That there are two or more co-borrowers in relation to a property which only states on the title that there is a sole owner does not in any way affect the sole owner’s legal title to that property.

54. Indeed, if Madam Lai had continued to hold herself out as sole owner in the Assignment, the Mortgage obligations would not have been any different.  Yet, Lai Kam Po’s name was added to the title of the Property.

55. Lai Kam Po states that he was told by the conveyancing solicitors that it was necessary for his name to be added to the title, but that he did not insist on this happening.

56. The conveyancing solicitors were not called to give evidence in these proceedings and I was told by Mr Sherry, counsel for the defendants, that the conveyancing file could not be located and had likely been destroyed, the events having occurred more than 17 years ago.

57. Madam Lai said that she left the legal formalities to her solicitors to handle and understood that they prepared certain legal documents to ensure that Lai Kam Po’s name was put on the title of the Property so the loan could be made.

58. There is no evidence produced by the defendants to establish that the Bank required Lai Kam Po’s name to be added to the title rather than simply remain on the Mortgage as a co-borrower.  Mr Sherry suggested that the preponderance of the evidence shows that Lai Kam Po only acquired the legal interest in the Property to meet the bank’s lending criteria, but I am unable to agree.  I am not satisfied, on the evidence, that this was the reason for Lai Kam Po’s name to be added to the title.  In the absence of such evidence, it seems to me that adding Lai Kam Po’s name was intended by Madam Lai and not the Bank.

Memorandum of Nomination

59. The second important document that the plaintiffs relied on to further challenge Madam Lai’s contention that she alone paid the purchase price of the Property was the Memorandum of Nomination dated 22 November 1995, which was signed by Madam Lai prior to the Assignment (the “Memorandum”).

60. The relevant excerpt reads:-

“WHEREAS the Vendor agreed to sell and I agreed to purchase (the Property) … I HEREBY DECLARED that all moneys paid to the Vendor under the (SPA) were in fact paid by me and my son Lai Kam Po (the “nominee”) … I HEREBY NOMINATE the nominee and myself to complete the (SPA) and to take up the Assignment of the (Property) in pursuance of the terms and conditions contained in the (SPA) as if I and the nominee were purchasers therein and I DIRECT AND REQUEST the Vendor to execute the Assignment of the (Property) direct to the nominee and myself to the intent that the (Property) shall be vested in me and the nominee as joint tenants absolutely” (Emphases added)

61. First, the Memorandum suggests that Madam Lai is declaring that the defendants jointly paid the monies under the SPA.  This comprises the items at Schedule 2 of the SPA, namely the initial deposit of HK$10,000, the further deposit of HK$98,000 and the remaining balance of HK$962,000 – which comprises the Mortgage sum of HK$756,000 and the main part of the cheque of HK$247,177 referred above.  In other words, the purchase price of the Property.

62. Second, she appears to be stating that the intention is that both she and Lai Kam Po will be joint tenants of the Property.

63. In response to the perceived effect of the Memorandum, the defendants amended their Defence to insert the plea of “non est factum” and took issue (i) that what Madam Lai had declared about the monies being jointly paid was not true, being proforma wording; and (ii) that the Memorandum was signed simply to comply with the Bank’s requirements (as set out above).

64. When questioned in relation to the Memorandum, Madam Lai stated that she did not know what she was being asked to sign.  She said that she did not receive any explanation about the detail of the Memorandum nor did she ask about its contents, this in spite of the fact that an interpretation clause appears on the penultimate page confirming that the contents had been interpreted to Madam Lai by a trainee solicitor.

65. Mr Sherry submitted that although a Hearsay Notice had been filed in respect of, inter alia, the Memorandum, it was for the plaintiffs to call the trainee solicitor to give light as to how the interpretation of the document had been conducted by him.

66. I reject the submission that the plaintiffs had any such burden.  Since the defendants are taking issue with the interpretation by the trainee solicitor, it is a matter for them.  The defendants knew that a Hearsay Notice had been filed in respect of the Memorandum – they could have raised the issue of calling the trainee solicitor as a witness with the plaintiffs.

67. As to the Memorandum not setting out what Madam Lai had thought she was agreeing, I agree with Ms Lau that it is for the defendants to show why the Memorandum should not be taken as the truth, having already been confirmed by Madam Lai.

Non est factum

68. The law in relation to non est factum is well established and there was no dispute as to the relevant principles.

(1)  Unless a vitiating factor (such as non est factum) is involved, a person is bound by the act of signature and whether the person has read or understands the documents is wholly immaterial.  It is no defence to say that he or she did not read or understand the contents of a legal document.  See Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334, §§84 to 90; Chitty on Contracts, 31^st edition, Volume 1, §5-102.

(2)  If a party has been misled into executing a deed or signing a document essentially different from that which he intended to execute or sign, he can plead non est factum in an action against him.  In such a case, the deed or writing would be void.  See Chitty, supra, §5-102.

(3)  The requirements for non est factum have also been stated as follows by the learned authors of Cartwright, Misrepresentation, Mistake and Non-disclosure, 3^rd edition, §§13-55 to 13-58:-

(a) a permanent or temporary inability to understand the document;

(b) the document must be fundamentally, radically or totally different from what he believed it to be; and

(c) the person signing must not have been careless.

(4)    The burden of proof is squarely on a person seeking to rely upon a plea of non est factum, and the burden is a heavy one.  See Saunders v Anglia Building Society [1971] AC 1004, 1016:-

“So there must be a heavy burden of proof on the person who seeks to invoke this remedy [of non est factum]. He must prove all the circumstances necessary to justify its being granted to him, and that necessarily involves his proving that he took all reasonable precautions in the circumstances. I do notsay that the remedy can never be available to a man of full capacity. But that could only be in veryexceptional circumstances: certainly not where his reason for not scrutinising the document before signing it was that he was too busy or too lazy. In general I do no think he can be heard to say that he signed in reliance on someone he trusted. But, particularly when he was led to believe that the document which he signed was not one which affected his legal rights, there may be cases where this plea can properly be applied in favour of a man of full capacity.

The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document. Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisers without making any inquiry as to their purpose or effect. But the essence of the plea non est factum is that the person, signing believed that the document he signed had one character or one effect whereas in fact its character or effect was quite different. He could not have such a belief unless he had taken steps or been given information which gave him some grounds for his belief. The amount of information he must have and the sufficiency of the particularity of his belief must depend on the circumstances of each case.” (emphasis added)

69. The doctrine of non est factum was recently considered by Deputy High Court Judge G Lam SC (as G. Lam J then was) in Wing Hang Credit Limited v Hui Chun Kit Benjamin and Another, HCMP 732/2009, 3 November 2011:-

“92. The plea of non est factum requires positive evidence before it can be established. The evidence must show that Madam Wu’s consent to the documents in question was truly lacking. On my findings above, the Agreement and the Assignment had been explained to her and, at that time, she was prepared to sign them knowing broadly what they were. It follows that Madam Wu’s plea fails at the first hurdle.

93. Even if I accept Madam Wu’s oral evidence at trial, the plea [of non est factum] cannot be established. What she says in substance is that she simply signed the documents that she was asked to sign at the solicitors’ office, without knowing or trying to find out what they were. The plea of non est factum is not available to a person who appended her signature to a document in those circumstances: Gallie v Lee [1971] AC 1004, 1016D-E; Wing Hang Bank Ltd v Crystal Jet International Ltd [2002] 3 HKC 279, paragraph 41.

94. A person can only rely on the plea of non est factum if he was not careless in signing the document in question. It is for the person relying on the plea to prove that he took care. The opposite party bears no burden of proof of want of care: Gallie v Lee, supra, p 1019E per Lord Hodson, 1027B-C per Lord Wilberforce.

95. The standard of care in this context has necessarily to be subjective. It must take account of the actual attributes of the signer. But as Lord Wilberforce, referring to persons who are illiterate, blind or lacking in understanding, stated in Gallie v Lee, supra, at p 1027E-F, the law ‘will require of signers even in this class that they act responsibly and carefully according to their circumstances in putting their signature to legal documents’.

70. I agree with Ms Lau that :-

(1) Even assuming that the conveyancing solicitors failed to interpret or explain the Memorandum to Madam Lai, her evidence is that she never even asked her solicitors what the Memorandum meant.  She did not take any reasonable precautions; and

(2) In order for Madam Lai to fulfil the requirement that she signed the Memorandum believing that what she had signed had one character or one effect whereas in fact its character or effect was quite different, she necessarily needed to have a view or understanding of the document in the first place.  But her evidence is that she blindly signed the document, without any idea as to what it was about.

71. I am satisfied that the plea of non est factum fails. I accept that Madam Lai had declared in November 1995, as the truth, that the monies in respect of the purchase of the Property were paid by both herself and Lai Kam Po.

72. At the same time, I reject any attempt by Madam Lai to distance herself from the contents of the Memorandum by averring that it was a proforma document and that it was required by the Bank.  This is simply unsustainable given that the Memorandum was read and interpreted to her, which she subsequently signed.  As a matter of established law, she cannot use the excuse that she did not ask about the contents or that she failed to read it over by herself.

Additional documents

73. There were a number of additional documents which the plaintiffs pointed to from which Ms Lau sought to derive further support that the defendants held the Property as equal beneficial owners.

Attendance Note

74. The plaintiffs rely on an attendance note of an interview that Lai Kam Po conducted with the plaintiffs’ staff on 18 May 2004 (the “Attendance Note”). The Attendance Note purports to state the term “+ve assets”, which Ms Lau suggested was “positive assets”.

75. The Attendance Note purports also to record that Lai Kam Po and Madam Lai each hold half interest in the Property, that Lai Kam Po gave money to Madam Lai for mortgage repayments.  There is also a reference to a “few thousand dollars” and “$3,000”.

76. The relevant parts of the Attendance Note, written in Chinese, were not in dispute.  They were translated during the trial and do support Ms Lau’s submission as to what was set out there (see above).

77. As with the Memorandum, the Hearsay Notice filed by the plaintiffs included the Attendance Note yet the defendants did not seek to make enquiries in relation to calling the maker (i.e. the plaintiffs’ staff) but complain now that the maker was not called by the plaintiffs.

78. Mr Sherry also submitted that the court could not decide how accurate the Attendance Note was in the absence of examining the maker.

79. I reject this contention as a general proposition.  Courts are always asked to interpret documents, even in the absence of witnesses, and do their best taking into account the relevant principles.

80. Second, if a party wishes to present evidence to persuade the court to interpret a document in a certain way, it is free to do so.  Yet far from offering an explanation in relation to what was noted down, Lai Kam Po simply distanced himself from the Attendance Note.  He also complained that it might not have been a complete account of what he had told the plaintiffs’ staff that day.

81. He further stated that he may have been misled into saying what he is alleged to have said in the interview.  In essence, he simply failed to address what was recorded in the Attendance Note.

82. As to the monies he stated to the plaintiffs’ staff which he gave to his family as maintenance and for mortgage repayments, he said that it was in fact a lawyer who had suggested mentioning this, not him.

83. I did not find Lai Kam Po to be a credible witness in respect of this issue.  He neither addressed what was in the Attendance Note nor did he offer to the court what information he said was missing from the record.  I find that he did say to the plaintiffs staff on 8 May 2004, as the truth, that:-

(1) he held a half interest in the Property; and

(2) that he did give money to his family which were used to contribute to the household expenses and for mortgage repayments.

The Interview Record

84. The plaintiffs wrote a letter to Lai Kam Po on 22 June 2005 (the “22 June letter”).

85. The 22 June letter sets out a reference to the Attendance Note, particularly what he is stated to have discussed at the 18 May 2004 meeting whereby Lai Kam Po told the plaintiffs’ staff that he gave money to Madam Lai which she used, inter alia, to make the mortgage repayments.

86. Although it records that Lai Kam Po had subsequently written to the plaintiff’s staff on 26 January 2005 and told them, inter alia, that he actually never paid any monies towards the mortgage repayments and that he would provide details of this, it records that the plaintiff’s staff to date had not received any such details.  Further that they suspected that he was concealing certain matters which they hoped could be explained.  Lai Kam Po never responded to the 22 June letter.

87. Again, I was not impressed with Lai Kam Po’s evidence on this topic.  He was clearly searching for answers that seemed to suit his case and failed to address the issues at hand.  I did not believe that he did not recall what he had stated in the Attendance Note.

88. I find that Lai Kam Po did state to the plaintiff’s staff that he had given money to Madam Lai towards the mortgage repayments.  I note that this is consistent with what was also recorded in the Attendance Note.

Statement of Affairs

89. A Statement of Affairs dated 8 December 2003 was signed by Lai Kam Po (the “Statement of Affairs”).  The document appears to record Lai Kam Po’s statement (in Chinese, but which was translated when put to Lai Kam Po) that both he and Madam Lai each held 50% interest in the Property.  It was recorded that he estimated that the value of the Property at the time was HK$600,000 and that his share was HK$300,000.

90. The plaintiffs contend that this was an assertion by Lai Kim Po that he held a beneficial interest in the Property.

91. As with the other documents (above), Lai Kam Po appeared to distance himself from the Statement of Affairs.

92. In addition, Lai Kam Po argued that if he really did have a beneficial share in the Property he could have used his half share to pay off his debts.  But clearly, this was incorrect as he owed his unsecured creditors the sum of HK$568,027.11 which far exceeded the HK$300,000 value of his share.  Alternatively, Mr Sherry submitted, Lai Kam Po could have used the money to reduce the debt he owed, but this is neither here nor there in my assessment.

93. Lai Kam Po also alleged that a solicitor who was touting for business had helped him fill it out.  At the end of his evidence, with some reluctance, that what he had stated in the Statement of Affairs was true.

94. I find that Lai Kam Po had made the statements, as set out in the Statement of Affairs, as being the truth and that he was stating to the plaintiffs that he did hold a 50% beneficial share in the Property.

Contributions to the purchase price of the Property

95. The plaintiffs contend that beneficial ownership will follow the joint legal tenancy in a case where contributions are equal.

96. As submitted by Ms Lau, Madam Lai and Lai Kam Po obtained the Mortgage to finance the purchase of the Property.  Both of them executed the Mortgage as borrowers, and both were jointly and severally liable to the Bank to repay the loan secured thereby.  Under such circumstances, as a matter of law, Lai Kam Po ought to be taken to have contributed half of the sum raised for the purchase of the Property.

97. As explained in Re Superyield Holdings [2000] 2 HKC 90, 107 (Recorder Robert Kotewall SC):-

“(10) Where some or all of the purchase price is borrowed, the acceptance of a personal liability as against the lender to repay, for instance, by the execution of a mortgage containing a personal covenant to repay, constitutes a contribution to the purchase. Where the covenants to repay the lender is joint and several, each party to the covenant to repay is taken to have contributed half of the sum raised for the purchase ……”

98. I was also referred to Crisp v Mullings, [1976] 2 EGLR 103.  At p 103J-K, Russell LJ stated:-

“The crucial point in the judgment appealed from is that the judge, having quite correctly said that the plaintiff started, so to speak, with the advantage of being a joint tenant in law, concluded that this was entirely explained – and explained away – by the fact that her participation was necessary in order to persuade the building society to advance the £5,700. The judge said:-

‘The plaintiff was accordingly made a party to the contract, the mortgage and the transfer in order to enable a sufficient loan to be obtained, and not with the object to making a gift to the plaintiff of any share of the beneficial interest.’

With all respect, we do not think that that demonstrates that the plaintiff was to be a mere nominee.  It is, we think, a non sequitur.  On the contrary, the fact that the house for the ‘family’ could not be bought without the plaintiff incurring liability, or potential liability, would be some ground for inferring that the plaintiff was to be beneficially interested.”

99. On the basis of the above, I accept that Madam Lai and Lai Kam Po contributed equally to the purchase price of the Property on account of their liability under the Mortgage and, as such, are each equally beneficially interested in the Property.

Decision

100. Taking into account all the evidence presented before me, I am of the view that the defendants have failed to discharge their burden that their beneficial interests are different from their legal interests in the Property.

101. As referred to above, both defendants sought to disavow or distance themselves from the key documents presented to them.  I did not find either of their evidence in relation to the documents to be credible.

102. I also find, on the evidence which I have considered above, that there was no common intention constructive trust as contended for by the defendants.  

103. As a matter of completeness, I accept that Re Superyield Holdings is relevant to these proceedings, and I hold that as a matter of law, Lai Kam Po is to be taken to have contributed half of the sum for the purchase of the Property.

104. Given my decision, I do not need to deal with the issues of Resulting Trust or Presumption of Advancement.  I would have found in favour of the plaintiffs on both grounds (as submitted to me by Ms Lau) if required.

Equitable accounting

105. Mr Sherry submitted that an equitable accounting exercise between the parties be considered by the court.  This was not pleaded by the defendants and I agree with Ms Lau that it is too late to raise it. I note also that no leave was sought by Mr Sherry to amend the Defence in this respect.

The Issues

106. In view of the above, I answer the first three issues of the Statement of Issues in Dispute as follows (I deal with the fourth issue below):-

(1) Yes.

(2) No.

(3) Not applicable.

Order

107. Whilst I have much sympathy as to the effect of my decision on the defendants, I declare that the defendants hold the Property as beneficial tenants in common in equal shares.  

108. I dismiss the Counterclaim.

Relief

109. Extensive relief was sought by the plaintiffs, including appointment of trustees of the Property and an order for sale of the Property (the fourth issue).  In view of the declaration that I have granted in favour of the plaintiffs, I would like to hear counsel on the precise relief to be granted and the terms of the order to be made.

110. As a result, I direct that the parties fix a date for hearing before me, in consultation with counsel’s diaries, so that I can hear counsel on these matters.  I direct that the plaintiffs file their submission at the latest 7 days before the scheduled hearing and the defendants to file their submission in response within 3 days of the scheduled hearing.

Costs

111. I make an order nisi as to costs of the action, including any reserved costs, in favour of the plaintiffs, to be taxed if not agreed. I also grant a certificate for counsel.

112. It remains for me to thank both counsel for their industry and helpful submissions.