CHAN SANG v. CHAN KWOK

HCA 1539/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1539 OF 2012

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JUDGMENT
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INTRODUCTION

1.  The subject matter of this action is a shop known as No 15, Block B, Ground Floor, Walton Estate, 341-343 Chai Wan Road, Chai Wan, Hong Kong (“the Shop”).

2.  The Shop was assigned to the plaintiff and the defendant as tenants-in-common in equal shares by an assignment dated 29 March 1983 for the consideration of HK$381,600.  The plaintiff and the defendant have, for some 32 years, been, and currently still are, the registered co-owners of the Shop.

3.  It is, however, the plaintiff’s case that he is the sole beneficial owner of the Shop, and the defendant has all along been holding his half share in the Shop on trust for him.  In his opening submissions for the plaintiff, Mr Jose-Antonio Maurellet stated that this case comes down to one issue, namely, whether there was a common intention as between the plaintiff and the defendant that the defendant would hold the half share in the Shop on trust for the benefit of the plaintiff until the latter’s repayment of a loan of HK$60,000 which the plaintiff obtained from their father to finance the purchase of the Shop.

4.  In this regard, it may be noted that in the statement of claim, the plaintiff’s case is put on the basis of an “implied trust” arising from the fact that the plaintiff paid the whole consideration for the purchase of the Shop, and the defendant made no financial contribution whatsoever in relation to the purchase of the Shop.  The plaintiff’s case of a “common intention constructive trust” is raised only in the reply and defence to counterclaim. Mr Jonathan Chang for the defendant informed the court at the trial that the defendant is not taking any pleading point that the plaintiff is not entitled to run the case of a common intention constructive trust, but asked the court to take the plaintiff’s pleadings into account when assessing the credibility of his case.

5.  Although the plaintiff has made various monetary claims against the defendant in the statement of claim, including a claim for damages for trespass, those claims do not feature in either Mr Maurellet’s opening or closing submissions.  In any event, the plaintiff has not particularised, or adduced evidence of, any damage, and there would be no basis to make any award of damages in the plaintiff’s favour.

6.  Accordingly, the only substantive question that falls to be determined in this action is whether the plaintiff and defendant are legally and beneficially tenants-in-common in equal shares of the Shop, or whether the plaintiff is the sole beneficial owner of the Shop.

7.  If the plaintiff’s claim that he is the sole beneficial owner of the Shop is upheld, he seeks a declaration to that effect and an order to compel the defendant to convey his half share in the Shop to the plaintiff.  On the other hand, if the court finds that the plaintiff and defendant are legally and beneficially tenants-in-common in equal shares of the Shop, the defendant seeks an order for the sale of the Shop under section 6 of the Partition Ordinance.

8.  In the course of these proceedings, many factual issues have been raised by the parties and many allegations have been made against each other.  In view of the relationship of the parties and the fact that the only substantive question which falls for determination in this action is whether the plaintiff is the sole beneficial owner of the Shop, I consider that no useful purpose will be served by resolving all those factual issues and allegations unless they are essential for a proper adjudication of the question of beneficial ownership of the Shop.  Thus, I propose to make findings only on those disputed issues which, in my view, are necessary for determining that question.

Background facts

9.  The plaintiff and the defendant are brothers.  Their father was Chan Yung Kan, deceased (“Chan Senior”), who had 8 children, including:-

(1) the defendant – the 3^rd child;

(2) Chan Siu Nu (“Siu Nu”) – the 4^th child;

(3) the plaintiff – the 5^th child;

(4) Chan Wing Tong (“Wing Tong”) – the 6^th child; and

(5) Chan Yu Kwong, deceased (“Yu Kwong”) – the 7^th child.

10.  Chan Senior used to be a fisherman.  He lived on board a fishing boat for many years.  Chan Senior was assisted by the defendant and Yu Kwong in his fishing business.  There is a dispute as to whether, and if so when, the defendant took over Chan Senior’s fishing business.  I shall come back to this matter later in this judgment.  In any event, there is no dispute that Chan Senior moved to Hong Kong in or about 1982, followed by the defendant and his family in or about 1983.

11.  As for the plaintiff, he moved to Hong Kong from Macau when he was about 18 years old in the late 1960s.  After moving to Hong Kong, he initially worked as a maintenance technician for audio companies and factories, and later began to operate a small business engaging in the repairs of television and electrical appliances.

12.  On 16 March 1982, the plaintiff started to carry on business as the sole proprietor of “Mayking Electrical Company” (“Mayking”) at Ground Floor, No 8, Block 16, Chai Wan Estate (“the Old Shop”).  Mayking was mainly engaged in the business of installation and repairs of electrical appliances with a small retail component on the side.  At that time, Wing Tong also assisted the plaintiff in relation to the Mayking business from time to time.

13.  By late 1982, the plaintiff came to know that the Old Shop would soon be demolished for redevelopment.  He later identified the Shop as being suitable for the purpose of continuing the Mayking business.

14.  According to the plaintiff, the owner of the Shop was willing to sell it to him for HK$381,600 (excluding deposit and agency commission), but he did not have enough money to purchase it.  He approached Siu Nu for a loan of HK$60,000 to assist in his purchase of the Shop, but Siu Nu was unable to help because she too was going to purchase a shop in Macau and had no spare money to lend to the plaintiff.  Siu Nu suggested to the plaintiff to turn to Chan Senior for assistance.

15.  In or about early 1983, the plaintiff indicated to Chan Senior and the defendant that the Old Shop would soon be demolished for redevelopment, and he wished to acquire the Shop to continue the Mayking business but needed financial assistance to enable him to do so. The financial arrangement for the purchase of the Shop eventually agreed between the plaintiff, the defendant and Chan Senior represents the crux of the present dispute between the parties.

16.  On 5 March 1983, the plaintiff entered into a preliminary agreement with Chiu Fai Nam, the owner of the Shop, for the sale and purchase of the Shop.

17.  On 29 March 1983, the Shop was assigned to the plaintiff and the defendant as tenants-in-common in equal shares of the Shop.  The purchase price was HK$381,600.  It is not in dispute that part of the purchase price was paid for using funds from Chan Senior, but the amount and whether the sum was a loan from Chan Senior to the plaintiff are in dispute.

18.  Also on 29 March 1983, the plaintiff and the defendant as “mortgagors”, Mayking as “requesting party” and Hua Chiao Commercial Bank Limited (“the Bank”) as “mortgagee” entered into a mortgage deed (“the Mortgage”).  Under the Mortgage, the Shop was mortgaged to the Bank as security for (i) a fixed loan in the amount of HK$250,000 (“the Mortgage Loan”), repayable by 120 monthly instalments of HK$3,568.77 each commencing on 29 April 1983, advanced by the Bank to Mayking, and (ii) general banking facilities to the extent of HK$30,000 (“the Bank Loan”) made available by the Bank to Mayking.

19.  It is not in dispute that the original common understanding of the plaintiff and the defendant was that the plaintiff would be solely responsible for repaying the Mortgage Loan, and that it was fully repaid in March 1993.  Whether the Mortgage Loan was in fact repaid solely by the plaintiff is, however, a matter in dispute.

20.  Following the purchase of the Shop:-

(1) Chan Senior, the plaintiff and the defendant’s family (including the defendant, his wife and his 6 children) all lived in a garret of the Shop.

(2) A nephew of Chan Senior also at one stage stayed in the garret of the Shop.

(3) The plaintiff carried on the business of Mayking at the Shop.

(4) The defendant and his family moved out in 1988.

(5) The plaintiff moved out of the Shop in 1990 upon getting married.

(6) Chan Senior moved out of the Shop in 1998 to live with the defendant in a flat at Walton Estate.  Chan Senior started to live in an old people’s home in 2001, and passed away in 2005.

21.  According to the defendant, he left Hong Kong to work as chief officer at Macau Entertainment Company in or about 1984, and returned to Hong Kong in or about 1991.

22.  Shortly after the purchase of the Shop, a fruit vending business began to be operated in front of the Shop (“the Fruit Business”).  There is a dispute as to whether the Fruit Business was initiated by, or belonged to, (i) Chan Senior, or (ii) the defendant and his wife, Leung Woon Ho (“Woon Ho”).

23.  According to the defendant and Woon Ho, in or around 1983 to 1984, the idea of operating a fruit vending business in front of the Shop was suggested to Woon Ho by a customer of the restaurant at which Woon Ho was then working as a “dim sum” lady.  In view of the fact that the wages earned by Woon Ho from working at the restaurant were modest and the plaintiff had refused to work with the defendant in relation to the Mayking business or disclosed to him the revenue generated from the Mayking business, the defendant and Woon Ho decided to set up a stall in front of the Shop and started the Fruit Business.  Woon Ho was responsible for carrying on the Fruit Business while the defendant continued to work at Macau Entertainment Company.  Further, the defendant let Chan Senior manage the account of the Fruit Business.  He asked Woon Ho to pass all the daily revenue from the Fruit Business to Chan Senior for him to manage on the defendant’s behalf.  Chan Senior would first cover the household expenses and operating costs of the Fruit Business with the revenue from the Fruit Business and save the remaining balance for the future use of the defendant’s children.  Also, Chan Senior and Woon Ho opened a joint account at Guongdong Provincial Bank (“the Joint Account”) in or about July 1985 to manage and save the revenue from the Fruit Business.

24.  On the other hand, it is the plaintiff’s case that the Fruit Business was started by Chan Senior who was later assisted by Woon Ho and, later still, the defendant (after his return to Hong Kong from working as chief officer at Macau Entertainment Company).  However, owing to health reasons, several years before 2001, Chan Senior gradually reduced his involvement in the Fruit Business and it came to be taken up by the defendant and his family.

25.  The significance of the Fruit Business is that according to the defendant, he also made contributions to the repayment of the Mortgage Loan from time to time from income generated from that business.

26.  According to the plaintiff, after he had fully repaid the loan of HK$60,000 in about June 1998 to Chan Senior, the latter on behalf of the plaintiff asked the defendant to remove his name from the Shop on many occasions.  However, the defendant avoided that matter or refused to do so.  The relationship between the families of the plaintiff and the defendant turned sour.  After Chan Senior passed away in 2005, the plaintiff continued to ask the defendant to remove his name from the Shop, but the defendant kept stalling on the matter.

27.  The plaintiff says that in or about 2011, the defendant alleged for the first time that he had some beneficial interest in the Shop.  This allegation was also made in a letter dated 6 February 2012 from the defendant’s solicitors (Chow, Griffiths & Chan) to the plaintiff’s solicitors (Deacons).

28.  It is also the defendant’s case that since about 1998, the relationship between the plaintiff and the defendant deteriorated.  The defendant says that the plaintiff started asserting in or about 2001 that he was the sole owner of the Shop and there were arguments between the plaintiff and the defendant and his family members on this matter.

29.  In passing, I should mention that there were disputes between the plaintiff and the defendant regarding the use and occupation by the defendant and his wife of part of the Shop and the Shop front for the purpose of the Fruit Business in or after 2008.  In view of the fact that the plaintiff apparently no longer pursues the claim for damages for trespass, it is not necessary for me to set out the details of those disputes in this judgment.

30.  According to the defendant, he and his wife ceased operating the Fruit Business in about May 2012.

31.  On 28 August 2012, the plaintiff commenced the present action against the defendant.

The plaintiff’s case of common intention constructive

32.  The plaintiff’s case, as pleaded in the reply and defence to counterclaim, is as follows:-

(1) In or about the end of 1982, the plaintiff started to look for a shop to continue the Mayking business due to the impending demolition of the Old Shop.  The plaintiff also orally inquired with her sister, Siu Nu, who was then residing in Macau, as to the possibility of her lending money to him to finance his purchase of a replacement shop, but Siu Nu could not help and instead told the plaintiff to seek a loan from their father.

(2) In or about early 1983, the plaintiff identified the Shop and looked for a loan to finance its purchase.  At a family gathering at Siu Nu’s shop in Macau during the Chinese New Year in 1983 at which Chan Senior, the plaintiff, the defendant and Siu Nui were present:-

(a) The plaintiff asked Chan Senior for a loan of HK$60,000 (“the Loan”) to finance his purchase of the Shop.

(b) Chan Senior agreed but the defendant objected saying that would be unfair to the other siblings and questioned the plaintiff’s ability to repay the Loan and the lack of assurance that the plaintiff would repay the Loan.

(c) In order to overcome the defendant’s objection, the plaintiff suggested adding Chan Senior’s name as a co-owner of the Shop so as to secure the repayment of the Loan and that once the Loan was repaid Chan Senior’s name would be removed.

(d) Chan Senior agreed to the plaintiff’s suggestion but, in view of his old age and the fact that he did not want to be bothered with the signing of documents, proposed to have one of his sons rather than himself to be named as a co-owner of the Shop.

(e) Siu Nu then suggested having Wing Tong named as a co-owner of the Shop as he was then working with the plaintiff, but the defendant objected to Siu Nu’s suggestion.

(f) Chan Senior told the plaintiff, the defendant and Siu Nu that it did not matter which of his sons was named as a co-owner of the Shop as that person’s name would be removed once the Loan was repaid.

(g) Eventually, it was agreed amongst Chan Senior, the plaintiff and the defendant that Chan Senior would make the Loan to the plaintiff and the defendant would be named as a co-owner of the Shop for securing the repayment of the Loan to Chan Senior and once the Loan was repaid the name of the defendant would be removed.

(3) The Shop was then purchased in the name of the plaintiff and the defendant as tenants-in-common in equal shares at the price of HK$381,600, which was financed by, inter alia, the Mortgage Loan of HK$250,000, the Bank Loan of HK$30,000 and the Loan of HK$60,000 from Chan Senior.

(4) The plaintiff was solely responsible for repaying the Mortgage Loan and Bank Loan. He also paid for all expenses and fees incurred incidental to the purchase and fitting out of the Shop.

(5) In addition, the plaintiff paid the management fees, capital expenditure, and government rent and rates of the Shop ever since its purchase.

(6) The plaintiff paid off the Mortgage Loan in 1993, and the Loan between 26 April 1993 and 3 March 1997.

(7) The relationship between the plaintiff and the defendant turned bad since about 1988 after the plaintiff had repaid the Loan to Chan Senior.

(8) After the plaintiff had fully repaid the Loan, both the plaintiff and Chan Senior orally demanded the defendant to have his name removed as a co-owner of the Shop on repeated occasions but the defendant refused and/or otherwise failed to do so.

The defendant’s case regarding his beneficial half share in the Shop

33.  The defendant’s case, as pleaded in the defence, is as follows:-

(1) Since about 1979, he was the owner of a fishing boat with registration mark “Chu Heung 293” (“the Boat”).  He was assisted by Chan Senior and Yu Kwong in his fishing business.  The defendant gave most of the income that he derived from the fishing business to Chan Senior for household and other expenses.  He was also informed by Chan Senior that part of the money was set aside as savings for the defendant and his family.

(2) In or about 1982, the plaintiff borrowed HK$40,000 from Chan Senior to finance his commencement of business of Mayking at the Old Shop.  Chan Senior told the defendant that the HK$40,000 that he lent to the plaintiff came from the defendant’s fishing business.

(3) In or about 1983, the defendant sold the Boat and other fishing equipment for HK$200,000 (“the Sale Proceeds”) with a view to purchasing a new boat.  At around the same time, the plaintiff was interested in purchasing the Shop as the Old Shop was about to be demolished for redevelopment.

(4) As a result of discussion between Chan Senior, the plaintiff and the defendant, it was agreed that:-

(a) The defendant would invest in the Shop by using the Sale Proceeds for the purchase of the Shop and for renovation and other incidental expenses.

(b) The HK$40,000 previously borrowed by the plaintiff from Chan Senior, which came from the defendant’s fishing business, would be treated as part of the defendant’s investment.

(c) The purchase of the Shop was also to be partly financed by a mortgage loan and the plaintiff would be responsible for repaying the mortgage loan.

(5) As a result, the Shop was registered in the joint names of the plaintiff and the defendant as tenants-in-common in equal shares.

Whether the doctrine of common intention constructive trust can only be invoked in the domestic consumer context

34.  Before I consider the various factual issues in the present case, I shall first deal with a point of principle raised by Mr Chang.  He argues that the doctrine of “common intention constructive trust” can only be invoked in the “domestic consumer context”, and if the primary purpose of the acquisition is an investment the doctrine cannot apply even if the relationship between the parties are familial.  He refers me to the decision of Lord Neuberger MR in Laskar v Laskar [2008] 1 WLR 2695, paragraph 17, and Lewin on Trusts, 19^th Ed, paragraph 9-063.

35.  In Laskar v Laskar, Lord Neuberger MR stated as follows at paragraphs 16 to 17 of his judgment:-

“ 16 Lady Hale's speech began by identifying the problem to be addressed as relating to “a cohabiting couple”: see para 40 (and see para 14 of the speech of Lord Walker of Gestingthorpe). But a number of the remarks in the course of her speech indicate that her reasoning was intended to apply to other personal relationships, at least where the property is purchased as a home for two (or indeed more than two) people who are the legal owners: see especially, at para 58, with the reference to “the domestic consumer context”. Accordingly I think Judge Behrens was right to conclude in Adekunle v Ritchie [2007] WTLR 1505 in the Leeds County Court that the reasoning in the Stack case applied to a case where a house was purchased by a mother and a son in joint names as a home for them both.

17 It was argued that this case was midway between the cohabitation cases of co-ownership where property is bought for living in, such as the Stack case, and arm's length commercial cases of co-ownership, where property is bought for development or letting. In the latter sort of case, the reasoning in Stack v Dowden would not be appropriate and the resulting trust presumption still appears to apply. In this case, the primary purpose of the purchase of the property was as an investment, not as a home. In other words this was a purchase which, at least primarily, was not in “the domestic consumer context” but in a commercial context. To my mind it would not be right to apply the reasoning in Stack v Dowden to such a case as this, where the parties primarily purchased the property as an investment for rental income and capital appreciation, even where their relationship is a familial one.”

36.  My reading of the above passages in the judgment of Lord Neuberger MR in Laskar v Laskar is not that the doctrine of common intention constructive trust can have no application outside the “domestic consumer context”, but that the presumption established in Stack v Dowden [2007] 2 AC 432 (namely, where members of the same family purchased in joint names a property which they intended to be and in fact was occupied by them as a home there was a presumption of equality) would not apply in a “commercial context” (or outside the “domestic consumer context”).  In other words, in a “commercial context” (or outside the “domestic consumer context”), the presumption of resulting trust would apply.

37.  The passage in Lewin on Trusts relied on by Mr Chang, properly read, also does not, in my view, supports his general proposition that the doctrine of “common intention constructive trust” can only be invoked in the “domestic consumer context”.

38.  I see no reason why, as a matter of principle, the doctrine of “common intention constructive trust” can have no application outside the “domestic consumer context”, although I can see that the context can be relevant in considering the common intention of the parties as regards the beneficial ownership of a property purchased either in their joint names or in the sole name of one of the parties.

39.  In any event, the plaintiff’s case here is based on an express agreement that he allegedly made with the defendant.  If I should come to the conclusion that the alleged agreement was in fact made between the plaintiff and the defendant such that it was agreed that the defendant’s name would be removed as soon as the plaintiff had repaid the Loan to Chan Senior, I can see no reason in principle why the court should not or would not give effect to that agreement upon full repayment of the Loan by the plaintiff.

The ownership of the Boat

40.  According to the defendant, shortly after his marriage in around 1970, Chan Senior’s heath condition started to deteriorate and he gradually reduced his participation in the fishing activities until a point when he stopped working altogether.  The defendant, his wife and Yu Kwong continued to work on board a previous fishing boat (“the Old Boat”) owned by Chan Senior.  In around 1976 to 1977, the Old Boat began to wear out.  Also, it could not undertake fishing voyages in the abysmal sea. Upon the defendant’s suggestion, the Old Boat was sold to repay debts owed by Chan Senior.  A new fishing boat, ie the Boat, was purchased by the defendant in around 1978 with the assistance of a loan of around HK$110,000 obtained from machinery owners and fisheries as well as a loan of HK$30,000 obtained from Woon Ho’s relatives.  Although the Boat was purchased by the defendant, he continued to use Chan Senior’s fishing boat licence and registered him as the owner of the Boat because the application procedures for a new fishing boat licence were very complicated and time-consuming, and he urgently needed the new boat to resume the fishing business.  The defendant further says that because the Boat could be operated in the abysmal sea, the catches improved substantially and he was able to repay the aforesaid debts in the second year after the purchase of the Boat, ie in around 1980.  Afterwards, he let Chan Senior manage the income derived from the fishing business, and Chan Senior told him more than once that he would keep the net income (after paying the expenses for carrying on the fishing business, including wages, fuel, costs of maintenance and repairs, etc, and the usual household expenses and outgoings) for the future use of the defendant’s children.  The defendant’s evidence is supported by that of Woon Ho and, to a lesser extent, that of Chan Cho (a cousin of the defendant and the plaintiff).

41.  According to Chan Cho: (i) Chan Senior did not take part in the work of the Old Boat due to his old age and deteriorating health conditions, (ii) the defendant told him in around 1978 that the defendant intended to purchase a new boat (ie the Boat) to operate in the abysmal sea, (iii) he referred the defendant to purchase the Boat from a friend, and (iv) Chan Senior told him in around 1983 that the defendant had decided to sell the Boat and live on shore and would not continue with any fishing activities.

42.  There is no contemporaneous documentary evidence which supports the defendant’s case that the Boat was purchased by, or belonged to, the defendant.  On the other hand, such contemporaneous documents as they exist suggest that the Boat belonged to Chan Senior.  In particular, the Registration Certificate of the Boat dated 7 March 1988 states that Chan Senior is the owner of the Boat, and lists the defendant, Woon Ho and Leung Yong Mui (the wife of Yu Kwong) as persons living on board the Boat.  In a Certificate of Floating Fishermen for Guangdong, Hong Kong and Macau issued to Leung Yong Mui dated 1 May 1988, it is also stated that Chan Senior is the owner of the Boat.

43.  Leung Yong Mui, who gave evidence at the trial for the plaintiff, told the court that she had been working on the Boat all along and confirmed that Chan Senior was the person-in-charge of the Boat. All crew members would address Chan Senior as “the master” and everyone working on board the Boat (including the defendant) would seek his instructions on all matters relating to the Boat.  Leung Yong Mui said that Chan Senior was very healthy and energetic.  His health conditions did not deteriorate, and he did not participate less in the fishing business after the defendant’s marriage in 1970 as alleged by the defendant.  Leung Yong Mui also said she moved to Hong Kong in July 1990 and lived in the Shop for a period of about 2 months. During that time, she saw Chan Senior going to the fruit market alone in the morning at about 4:00 am to purchase fruits about once every two days, and carrying cartons of fruits from the Shop front into the Shop and even to the attic upstairs.

44.  I consider the two contemporaneous documents mentioned above provide the most reliable evidence that Chan Senior was the owner of the Boat.  I also accept the evidence of Leung Yong Mui, whom I regard as being an independent witness, to that effect, and that Chan Senior remained the person-in-charge of the fishing activities and the master of the Boat at all material times until he moved to Hong Kong in about 1982.  I reject the defendant, Woon Ho and Chan Cho’s contrary evidence on the above matters.  I also do not accept the defendant’s explanation that the Boat was registered in the name of Chan Senior because the application procedures for a new fishing boat licence were very complicated and time-consuming and he needed to use the Boat urgently to resume his fishing business.

45.  I may add that, in so far as the evidence of Chan Cho is concerned, it would appear that much of what he said regarding the ownership of the Boat was based on what he allegedly had been told by the defendant and/or Chan Senior.  Chan Cho himself never worked on board the Boat.  I am not prepared to accept his evidence as proof that the Boat was owned by or belonged to the defendant.

46.  In all, I find that Chan Senior was the owner of the Boat, and that at all material times until Chan Senior moved to Hong Kong in about 1982 the income derived from the fishing activities using the Boat belonged to him.

47.  It follows from the above findings that I also reject the defendant’s case that:-

(1) He let Chan Senior manage the income derived from the fishing business carried on with the Boat, or Chan Senior ever informed him that part of the money that the defendant gave him had been set aside as savings for the defendant and his family.

(2) The alleged loan of HK$40,000 made by Chan Senior to the plaintiff in or about 1982 came from the defendant’s fishing business, or was later agreed to be treated as part of the defendant’s investment in the Shop.

48.  I do not, in any event, accept the defendant’s evidence that Chan Senior made a loan of HK$40,000 to the plaintiff.  The plaintiff’s evidence is that he only borrowed $60,000, but not $40,000, from Chan Senior.  For reasons explained below, I accept the plaintiff’s evidence on this matter.

The agreement made in early 1983

49.  The plaintiff’s case summarised above regarding the agreement allegedly reached in Macau in early 1983 between the plaintiff, the defendant and Chan Senior is supported by the evidence of both the plaintiff and Siu Nu.

50.  As pointed out by Mr Chang in his closing submissions for the defendant, there are various discrepancies and/or omissions when one compares the plaintiff’s pleadings, his witness statements, his evidence in chief and his evidence in cross examination, including the following:-

(1) whether he spoke to Siu Nu for a possible loan (for no specific amount) by the end of 1982 (at a time when he had not yet identified the Shop) before he spoke to her again for a loan of HK$60,000 close to the Chinese New Year in 1983;

(2) whether he also spoke to Chan Senior for a loan (for no specific amount) in 1982 who told him to buy the Shop and said he would support him in his purchase of the Shop;

(3) whether he first spoke to Siu Nu or to Chan Senior for a loan of HK$60,000;

(4) whether Siu Nu declined the plaintiff’s request for a loan prior to the meeting in Macau or said that they would discuss the matter later when he next went to Macau;

(5) whether the plaintiff again asked Siu Nu for a loan of HK$60,000 at the Macau meeting;

(6) whether the defendant gave any reason why he questioned the plaintiff’s ability to repay the Loan, and whether Chan Senior explained why he did not want his name to be added to the Shop, at the Macau meeting; and

(7) what Chan Senior said at the Macau meeting.

51.  I may add that, in Siu Nu’s oral evidence, she said that the first time that the plaintiff asked her for a loan was at the Macau meeting. This is inconsistent with her witness statement, as well as the evidence of the plaintiff.

52.  The above discrepancies and/or omissions do not, in my view, indicate that the plaintiff and Siu Nu were telling lies in the witness box bearing in mind that the plaintiff and Siu Nu were asked to recall events which took place more than 30 years ago.  Furthermore, these discrepancies and/or omissions do not go to the critical issue of why the defendant’s name was added to the Shop.

53.  Mr Chang has also raised various points as tending to show the inherent improbability of the plaintiff’s case, including the following:-

(1) The plaintiff is unable to explain how adding Chan Senior or the defendant’s name to the Shop would be any form of assurance of or security for repayment of the Loan.  Also, according to the plaintiff, he never discussed with Chan Senior or the defendant as to how the “security” arrangement would work.

(2) The plaintiff has failed to explain why he proposed adding Chan Senior’s name to the Shop in the first place.

(3) Instead of simply making a written record (such as an IOU) of the plaintiff’s indebtedness to Chan Senior, the plaintiff proposed an arrangement which was said (i) to be complex, (ii) to involve unnecessary expenses and legal documents to be prepared and entered into, and (iii) would lead to uncertainly.

(4) Under the Mortgage, the defendant was jointly and severally liable, as one of the mortgagors, for all the liabilities thereunder. The liabilities covered not only the Mortgage Loan and the Bank Loan, but also all monies owed by Mayking to the Bank.  It is said that it flouts common sense that the defendant would be willing to bear such liabilities were it not his understanding that he would be a 50% beneficial owner of the Shop.

54.  The above points regarding the inherent probability, or improbability, of the plaintiff’s case would, in my view, be persuasive if I were dealing with a commercial transaction between sophisticated professionals.  However, I am here dealing with an informal transaction between family members who are, it would appear, relatively unsophisticated.  It is not at all surprising that they would not have thought through the legal and/or practical implications of what they were doing, and what they did could have been done or documented in a more satisfactory manner.

55.  There are other relatively minor points raised in Mr Chang’s written closing submissions which I do not propose to repeat here.

56.  In assessing the plaintiff’s case in respect of the alleged agreement reached at the Macau meeting in early 1983, I also bear in mind the following matters –

(1) the pleading point referred to in paragraph 4 above;

(2) the alleged agreement was not mentioned in the letters dated 19 January 2012 and 28 August 2012 respectively sent by the plaintiff’s solicitors, Deacons, to the defendant or his solicitors; and

(3) the plaintiff has delayed many years before taking action against the defendant to compel him to transfer his half share in the Shop back to the plaintiff.

57.  Having carefully considered the evidence of the plaintiff and Siu Nu (whom I regard as being an independent witness) as a whole, I am prepared to accept and find as a fact that there was an agreement reached at the Macau meeting in early 1983 amongst the plaintiff, the defendant and Chan Senior that:-

(1) Chan Senior would make the Loan of HK$60,000 to the plaintiff to finance his proposed purchase of the Shop;

(2) the defendant’s name would be added to the Shop as security for the plaintiff’s repayment of the Loan to Chan Senior; and

(3) the defendant’s name would be removed from the Shop once the plaintiff repaid the Loan to Chan Senior.

The Fruit Business

58.  I have already outlined the parties’ respective contentions and evidence regarding the Fruit Business above, and I shall not repeat them here.

59.  Siu Nu also said in evidence that, to her knowledge, Chan Senior started the Fruit Business as a “pastime”, and Woon Ho later assisted Chan Senior in the Fruit Business.  I do not consider that much weight can be attached to Siu Nu’s evidence on this matter because she did not live in Hong Kong and is unlikely to have detailed personal knowledge regarding the origin and/or ownership of the Fruit Business.

60.  What seems to me to be most telling is the fact, as stated by the defendant and Woon Ho, that in or about July 1985, Chan Senior and Woon Ho opened the Joint Account to manage and save the revenue from the Fruit Business, and every day Woon Ho would pass all the money derived from the Fruit Business to Chan Senior who would retain an amount required to purchase fruits and for daily living expenses and deposit the remaining balance into the Joint Account.  I infer from this arrangement that the Fruit Business was regarded as being the business of both Chan Senior and the defendant, and the income derived from the Fruit Business was regarded as being owned by both Chan Senior and the defendant (through his wife), and I reject the defendant’s evidence that the income derived from the Fruit Business was given to Chan Senior for him to manage on the defendant’s behalf and for the future use of the defendant’s children.

Repayment of Mortgage Loan

61.  Bank documents show that the Mortgage Loan was repaid by instalments which were deducted from Mayking’s current account with the Bank between April 1983 and March 1993.  Since the plaintiff was the sole proprietor of Mayking (as to which see further below), prima facie the repayment of the Mortgage Loan was made by the plaintiff.

62.  The defendant says, however, that he also made contributions to the repayment of the Mortgage Loan from time to time. According to the defendant, Chan Senior told him that he had made such contributions on the defendant’s behalf by transferring some of the income generated from the Fruit Business to the plaintiff regularly.  Although the defendant is unable to say what were the exact amounts paid by Chan Senior on his behalf or the dates of payment, he relies on various handwritten entries in a notebook apparently kept by Chan Senior which suggest that over a period of time between February 1984 and July 1988 Chan Senior paid some HK$39,000 described as “flat instalment payments” (供樓 or 供 or 交供).  The defendant says that those payments could only have been for repayment of the Mortgage Loan because neither Chan Senior nor the plaintiff had, at that time, any other mortgage loan to repay. An attempt has been made by the defendant to match some of the payments recorded in the notebook with entries in the bank statements of the Joint Account, but the dates of the withdrawal and the amounts withdrawn from the Joint Account do not always match the amounts and dates of payment as recorded in the notebook.

63.  I accept that Chan Senior probably made some payments to the plaintiff from time to time and the plaintiff might well have used the moneys or part of the moneys provided by Chan Senior to finance the repayment of the Mortgage Loan.  The evidence does not, however, enable one to draw any firm conclusion as to the exact amounts paid by Chan Senior to the plaintiff or how much was used by the plaintiff to repay the Mortgage Loan.

64.  I do not accept, however, that the moneys which Chan Senior paid to the plaintiff belonged to the defendant, or should be regarded as payments made on the defendant’s behalf.  Even if some of the payments made by Chan Senior to the plaintiff can be traced back to the Joint Account (which I regard as being doubtful on the evidence), as earlier mentioned, I consider that Chan Senior also had an interest in the moneys in the Joint Account.  As for payments made to the plaintiff which were not sourced from the Joint Account, it is simply speculative to suggest that such payments were made out of moneys provided by or belonging to the defendant in the first place.  I do not accept that the evidence establishes that Chan Senior did not have savings of his own.

65.  For the present purpose, it is not necessary to determine whether the payments made by Chan Senior to the plaintiff were loans or gifts.  In either case, the moneys received by the plaintiff would become his property.  If he used some such moneys to repay the Mortgage Loan, that would have no impact on the issue of beneficial ownership of the Shop, there being no suggestion that Chan Senior had any beneficial interest in the Shop.

Repayment of the Loan

66.  According to the plaintiff, he received the Loan in the amount of HK$60,000 in cash from Chan Senior on or about 8 March 1983 which he immediately deposited into Mayking’s account with the Bank on that date.  The plaintiff further says that Chan Senior agreed with him that he should start to repay the Loan only after he had fully repaid the Mortgage Loan (which he did by March 1993).  In accordance with an arrangement agreed to by Chan Senior, a joint bank account in the names of the plaintiff and Chan Senior was opened at the Standard Chartered Bank in or about April 1993, and the plaintiff’s repayments were deposited into that joint account.  The plaintiff says that he paid off the Loan by 16 June 1998.

67.  The plaintiff has produced a bank passbook in the joint names of Chan Senior and the plaintiff issued by the Standard Chartered Bank, and identified various deposit entries between 26 April 1993 and 16 June 1998 as representing his repayment of the Loan.  The total amount of those deposits comes to HK$67,000.  The plaintiff says that the excess payment (ie HK$7,000) was a token of his appreciation to Chan Senior.  The plaintiff also confirms in his evidence that he has never made any personal withdrawal from that joint account.

68.  Mr Chang criticised the plaintiff’s evidence regarding the repayment of the Loan and raised a number of points which tend to undermine his evidence, including the following:-

(1) The plaintiff’s evidence that the last repayment was made on 16 June 1998 is inconsistent with his pleaded case in the reply and defence to counterclaim which states that the last repayment was made on 3 March 1997.

(2) The pattern of repayment, the amounts and the timing did not make any particular sense.  According to the plaintiff, he made five payments in 1993, and one payment in each of the years that followed until 1998.  However, on the plaintiff’s evidence, apart from 1994 and 1995 when his daughter was born, there was no particular year in which he was in financial need.

(3) It is said that making a total repayment of HK$67,000 when the loan was only HK$60,000 makes little sense.  In respect of the excess payment of HK$7,000, Mr Chang reminded the court that according to the plaintiff, he had been paying only HK$500 to HK$1,000 to Chan Senior as “tea money” on an irregular basis.

(4) Lastly, the plaintiff said in his evidence that it was in fact his intention to pay Chan Senior the total sum of HK$100,000 which bore no relation to the amount of the Loan.

69.  In respect of Mr Chang’s first point, there is undoubtedly a discrepancy between the plaintiff’s reply and defence to counterclaim and his evidence in relation to the date of the final repayment.  When this discrepancy was pointed out to the plaintiff, he maintained that the deposit of HK$10,000 into the joint account of the plaintiff and Chan Senior on 16 June 1998 was the last repayment.  It seems to me that the discrepancy is nothing more than a mistake in the preparation of the pleading.  In respect of the second point, although the plaintiff did say that he was in some financial needs in the years of 1994 and 1995 when his daughter was born but not in other years, one has to take into account the plaintiff’s evidence that Chan Senior agreed with him that it was essentially a matter for him to decide when, and how much, he would repay at any time.  It is not entirely surprising that the repayments did not follow any particular pattern in terms of dates or amounts. As regards the third point, I do not consider it to be odd or improbable that the plaintiff paid Chan Senior an additional HK$7,000 as a token of his appreciation to his father just because he had been paying him tea money in the amounts of HK$500 to HK$1,000 only on an irregular basis.  In respect of the fourth point, one should take into account the plaintiff’s explanation that after he had made the payment of HK$10,000 on 16 June 1998, Chan Senior told him that he had already repaid enough money and there was no need to make any more repayment.

70.  Overall, I am prepared to accept the plaintiff’s evidence and find as a fact that he fully repaid the Loan by 16 June 1998.

Miscellaneous points

71.  There are two other points which I should deal with.

72.  First, it is common ground that both the plaintiff and the defendant paid some of the utility bills, including telephone, electricity and water bills, in respect of the Shop during the period from 1983 to 2012.  I do not consider the fact that the defendant paid some of the utility bills is sufficient to prove that he has a beneficial interest in the Shop. The undisputed fact is that he used part of the Shop for the purpose of the Fruit Business (which, as earlier mentioned, I find to be a business of both Chan Senior and the defendant), and that could be an explanation for the defendant’s payments.

73.  Second, in paragraph 3(6) of the defence and counterclaim, it is stated that the defendant agreed to invest in the Shop, and in paragraph 6(2) it is stated that the plaintiff operated an electrical repairs and retail business inside the Shop.  There is no allegation in the defence and counterclaim that the defendant also agreed to invest in the business of Mayking. In Chow, Griffiths & Chan’s letter to Deacons dated 6 February 2012, it is mentioned the defendant and his family has been operating a fruit stall at the shop front while the plaintiff has been running an electrical business inside the Shop, and the parties were and are operating different businesses. However, in the defendant’s witness statement (which he adopted as his evidence in chief), it is stated that in early 1983 the plaintiff proposed to Chan Senior and him that the plaintiff and the defendant could operate the “Electrical Appliances Business” by way of a joint venture, and that the alleged loan of HK$40,000 would be considered as his investment in the “Electrical Appliances Business”.  In his oral evidence in court, the defendant maintained that he had a 50% interest in the Mayking business, and was entitled to 50% of any profits earned by that business.

74.  As a matter of fact, the defendant returned to work in Macau shortly after the purchase of the Shop, and did not receive any part of the income generated from that business.  He has never made any claim in Chow, Griffiths & Chan’s letter to Deacons dated 6 February 2012 or in his defence and counterclaim that he is entitled to any interest in the business of Mayking or any profits derived from that business.  I do not accept the defendant’s allegation that the plaintiff proposed to, or agreed with, him that he would be entitled to any interest in the business of Mayking or any profits derived from that business.

Conclusion

75.  In all, I find that the Shop was purchased and paid for solely by the plaintiff, and that the defendant was made a tenant-in-common of the Shop for the purpose of securing the plaintiff’s repayment of the Loan of HK$60,000 advanced by Chan Senior.  The Loan was fully repaid by the plaintiff in or about June 1998.

76.  In light of these findings, it seems to me clear that the plaintiff should be regarded as being at all material times the sole beneficial owner of the Shop (whether on the basis of a resulting trust or a common intention constructive trust), and I make a declaration to that effect.  I order the defendant to convey his half share in the Shop to the plaintiff, and I give liberty to the plaintiff to apply for further directions should it become necessary for the purpose of carrying into effect this judgment.  I also make an order nisi that the defendant shall pay to the plaintiff his costs of this action, to be taxed if not agreed.

77.  Lastly, it remains for me to thank counsel for their assistance rendered to the court.