HONG CHI YUNG v. CHUNG NGAI KIT (the executor of the Estate of CHUNG HUNG CHONG, Deceased)

HCA 54/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 54 OF 2014

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J U D G M E N T

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Introduction

1.  This is a dispute about the ownership interests in a property situated at Flat B, 23^rd Floor, Block 13, 1 Pak Lee Street, City One Shatin, Shatin, New Territories (“the Property”).

2.  In 1981, the Property was purchased by Chung Hung Chong (“the Deceased”) and his then (his first) wife Madam Lau Lai Wah (“Madam Lau”).  In 1989, the Deceased apparently bought out the half interest of Madam Lau, and the Property was held thereafter in the sole name of the Deceased.

3.  The Deceased and Madam Lau had two sons, of which the elder one is the defendant (“CNK”), born in 1972.  The Deceased and Madam Lau divorced in 1994.

4.  In June 1994, the Deceased married the plaintiff (“Madam Hong”), with whom he had been co‑habiting since 1989.  They had one son (“CHW”), who was born in 1989.

5.  In late 1994, the Deceased was admitted to hospital and diagnosed as suffering with cirrhosis.  From then on, his health continuedto deteriorate.  He became unemployed from 1998 (having previously been a licenced securities broker), and eventually passed away on 2 August 2001.

6.  It appears to have been originally thought that the Deceased left no will.  Hence, in May 2002, Madam Hong applied for letters of administration to the estate of the Deceased.  For reasons which remain somewhat unclear, no letters of administration were granted.

7.  In any event, over a decade later, on 30 January 2014, probate was granted on the last will and testament of the Deceased dated 8 November 1996 (“the Will”).  Probate was sought by, and granted to, CNK as sole executor and sole beneficiary under the Will.  CNK says he discovered the Will only in around 2012.

8.  A short while prior to the grant of probate, CNK had written through solicitors to Madam Hong asserting that as the Deceased was the legal owner of the Property at the time of his death, CNK was the sole beneficiary of the Property under the Will.  A demand was made to account for all mesne profits from the Property.

9.  That demand, and subsequent demands, eventually prompted Madam Hong to commence these proceedings against CNK as executor of the estate of the Deceased, so as to assert her ownership interests in the Property.

The claim, defence and counterclaim

10.  The pleaded bases of the Claim rely upon representations said to have been made by the Deceased to Madam Hong in circumstances where the Deceased asked for her help in settling his debts.

11.  Madam Hong says that she suggested selling the Property in about October 2000, when the Deceased asked her for help because he owed approximately $152,000 to a securities company (“Luen Fat”), through whom he had apparently engaged in various loss‑making stock investments. However, the Deceased insisted that the Property was not for sale, and was to be left for Madam Hong and their son CHW to receive rent to support their living expenses.

12.  Relying on that representation, and on the promise that the Property would be given to her in future, Madam Hong issued a cheque to Luen Fat for the approximately $150,000 and settled the debt on behalf of the Deceased.

13.  In about February 2001, the Deceased re‑mortgaged the Property and was able to settle some of his credit card loans.  But there remained other credit cards and an overdraft account payable by him, which he could not afford, notwithstanding receiving rent from leasing out the Property.  Madam Hong says the Deceased requested her to make payments of between $3,000 and $5,000 a month to settle his overdraft and mortgage instalments.

14.  Again, Madam Hong suggested selling the Property and again, the Deceased reiterated that the Property was not for sale, but was to be kept for Madam Hong and their son CHW, so that they would have some asset to rely upon in future.

15.  It is pleaded that relying on that representation and promise, Madam Hong continued to pay the Deceased about $3,000 – $5,000 a month and to make payments for his overdraft accounts so that he need not sell the Property and could continue to make use of the rent received to pay the mortgage instalments and some other expenses (which included interest charges on credit cards and an overdraft).

16.  In July 2001, shortly before his death, the Deceased asked Madam Hong to promise him not to sell the Property until their son CHW was grown‑up, at which time she could consider putting the Property for sale and decide herself how to distribute the proceeds of sale.

17.  Following that, the Deceased went with Madam Hong to a solicitors firm, intending to make a will which would bequeath the Property to her.  It is pleaded that the solicitor asked for a copy of CNK’s identity card, and when he was called to ask him to come to the firm’s offices, CNK said he would but did not turn up.  Therefore, no will was signed that day, and before the identity card could be provided by CNK, the Deceased was admitted to hospital, where he passed away shortly thereafter.

18.  It is pleaded that in the circumstances it would be unconscionable for the Deceased to resile from his words, and CNK is estopped from denying Madam Hong’s beneficial interest in the Property.

19.  Further or alternatively, it is pleaded that Madam Hong has acquired a beneficial interest in the Property on account of the direct and indirect contributions towards the mortgage repayments and in settling other outgoings in circumstances where, but for the payments made by Madam Hong to settle the Deceased’s debts (both before and after he passed away), the mortgagee bank would have foreclosed.  Hence, it is pleaded that Madam Hong is vested with the entire beneficial interest in the Property, or such share as the court should determine by way of constructive or resulting trust.

20.  The Defence largely puts Madam Hong to strict proof of the matters in the claim, many of which are expressly accepted to be outside CNK’s knowledge.

21.  The Defence does plead the circumstances under which the Will was made.  CNK accompanied the Deceased to a solicitors firm on 8 November 1996, and after showing his own identity card to the solicitors’ staff, the Deceased gave him a sealed envelope (subsequently found to contain the Will) asking that it be kept safely.

22.  CNK specifically denies that he was ever asked for a copy of his identity card for making a will in 2001, or at any other time.

23.  The Defence avers that the alleged conduct of the Deceased and Madam Hong do not give rise to any interest or benefit to her in the Property by way of trust or on any other legal ground.

24.  The Counterclaim is predicated on the averment that since the death of the Deceased Madam Hong has unlawfully and without the consent of CNK taken possession of the Property or rented it out and caused the rent to be paid to her.  Hence, it is counterclaimed that the estate of the Deceased has suffered loss and damage in terms of lost rent and mesne profits. In addition, the prayer in the Counterclaim seeks an order for delivery of vacant possession and all title deeds of the Property to be made to CNK.

25.  The Reply and Defence to Counterclaim avers that in late 2001, Madam Hong invited CNK to be co‑administrator of the estate of the Deceased.  When the two attended a solicitor’s office for that purpose, both told the solicitor that the Deceased had no will.  CNK then asked Madam Hong to sign papers authorizing him to sell the Property but she refused, explaining that it was all along the Deceased’s intention and wish not to sell.

26.  Since then CNK refused to answer Madam Hong’s telephone calls, and she was unable to make contact with him.  She continued to pay the Deceased’s debts, settled the mortgage instalments and outgoings in respect of the Property, and later redeemed the mortgage in 2005/2006 (having settled all the Deceased’s indebtedness due to the mortgagee bank, as pleaded in the Claim).

27.  There is also a plea to estoppel by laches or conduct, not least in the inactivity in applying for a grant of probate until after the debts of the Deceased and the mortgage instalments had been repaid by Madam Hong.

28.  The Defence to Counterclaim pleads in the alternative that Madam Hong should be permitted to set off the various payments made by her in respect of the mortgage, outgoings, common area repair and renovation costs, and funeral expenses, in extinction or diminution of the counterclaim.

29.  As would be expected, all pleadings were verified by the respective party making them.

The Issues

30.  It was made clear in the opening submissions of Mr Jeremy Cheung, Counsel for Madam Hong, that the claim was being pursued on an alleged proprietary estoppel and a common intention constructive trust.

31.  In his opening submissions, Mr Wifred Tsui, Counsel for CNK, stated that CNK has no knowledge of any promise made by the Deceased to Madam Hong, and CNK defends the case (and makes his counterclaim) simply on the basis of being the sole beneficiary and sole executor of the Will.

32.  In those circumstances, it can be seen that the central issues for determination include:

(a)  whether Madam Hong can rely on a proprietary estoppel to establish a share of the beneficial interest in the Property;

(b)  whether Madam Hong can rely on a constructive trust to establish a share of the beneficial interest in the Property;

(c)  if either basis of claim can be established, what share of the beneficial interest does Madam Hong have;

(d)  if neither basis of claim can be established, is CNK entitled to vacant possession of the Property and rent/mesne profits and, if so, in what amount; and

(e)  if CNK is entitled to possession of the Property and an account of rent/mesne profits, is there any entitlement to a set off as a result of the payments made by Madam Hong, and if so in what amount.

33.  As regards the various figures, CNK through Mr Tsui was helpfully able to agree that certain amounts paid by Madam Hong as regards (i) mortgage loan repayments from August 2001 to September 2005; (ii) payments in respect of the Deceased’s credit card account from August 2001 to September 2005; (iii) payments made to the Deceased’s overdraft account from August 2001 to April 2006; and (iv) funeral expenses, totalling $785,403.25, are reimbursable from the Deceased’s estate against the rent/mesne profits received or assessed on the basis agreed.

34.  That basis of rental received or mesne profits to be assessed was agreed as monthly rental of $16,500 from September 2001 to October 2011, then monthly rental of $17,500 from November 2011 to August 2013, and mesne profits since then at the monthly rate of $22,000.  Up to September 2016, this totals $3,212,000.

35.  In other words, should I find no trust or estoppel, it is agreed that Madam Hong received (or is to be taken to have received) $3,212,000.  But, it is also agreed that she would be entitled to reimbursement of $785,403.25. Whether any other reimbursement would be apt in such a scenario remains an issue.

36.  This is because there is disagreement that a sum of $152,435.23 should be deducted.  That sum has been expressed as a ‘first mortgage’ in respect of the Property, but it is actually the sum paid to Luen Fat in October 2000 (as Mr Cheung noted in his opening submissions).

Applicable principles

37.  The principles applicable to the particular nature of the claim were not significantly in dispute between the parties.

38.  The starting point to note is that the onus is upon the person seeking to show that the beneficial interest is different from legal ownership: see, for example, Stack v Dowden [2007] 2 AC 432 at §56, as cited by the Court of Appeal in Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, [2015] 3 HKC 104 at §5.5.

39.  Though there is discussion as to the extent to which promissory estoppel and proprietary estoppel overlap, there is a body of opinion inclining towards the view that there is no real difference between them.

40.  A proprietary estoppel is established when there is shown (a) a representation or assurance has been made to a claimant, (b) reliance has been placed on the representation by the claimant, and (c) there is detriment to the claimant by reason of his (reasonable) reliance: see Snell’s Equity 33^rd Ed at §12‒033.

41.  The three requirements are inter‑related, and underpinned by the notion of unconscionability.  However, even if the three requirements appear to have been satisfied, yet it would not “shock the conscience of the court” to refuse the claim, then the proprietary estoppel claim may still fail.  As stated by Robert Walker LJ in Gillett v Holt [2001] 1 Ch 210 at 225:

“... the doctrine of proprietary estoppel cannot be treated as subdivided into three or four watertight compartments. ... Moreover the fundamental principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine. In the end the court must look at the matter in the round.”

42.  As regards the concept of detriment, although that element is an essential ingredient of proprietary estoppel, the requirement is to be approached as part of a broader inquiry as to whether repudiation of an assurance is unconscionable in all the circumstances.

43.  As to questions of constructive trust, the development of the law has recently been summarised by the Court of Appeal in Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, [2015] 3 HKC 104 at §§5.6 to 5.10.

44.  There are two separate questions involved in the consideration of whether or not there is a constructive trust.  First, was it intended that the parties should share the beneficial interest in a property conveyed to only one of them?  Secondly, if it was so intended, in what proportions was it intended that they share the beneficial interest?

45.  The constructive trust does not have to come into being at the time of the original conveyance.  A constructive trust can arise even some years after the relevant property has been acquired by, and registered in sole name of one party who (at the time of its acquisition) was, beyond dispute, the sole beneficial owner: see Mo Ying at §6.5.

46.  In the Mo Ying case, at §5.8, Cheung JA cited with approval a passage from the speech of Lord Bridge of Harwich in Lloyds Bank plc v Rosset [1991] 1 AC 107 at 132:

“The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The findingof an agreement or arrangement to share in this sense only must, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made, it will only be necessary for the partner asserting claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment, or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.

In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or arrangement to share, however, reasonable, it might have been for the parties to reach such an arrangement if they had applied their minds to the question, and whether court must rely entirely on the conduct of the parties, both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust.  In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust.  But, as I read the authorities, it is at least extremely doubtful whether anything less will do.”

47.  In his submissions, Mr Cheung made it clear he was relying on both the existence of express discussions and/or conduct (even though he also fairly accepted that it is rare to find a constructive trust on the basis of conduct alone).

48.  It is to be remembered that the inferences to be drawn from the conduct of husband and wife may be different from those to be drawn from the conduct of parties to more commercial transactions.  But the matrimonial relationship is no more than one of the factors to be taken into consideration in the inference exercise: see Mo Ying at §7.14.

49.  At the end of the day, the search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it: see Stack at §60, cited in Mo Ying at §5.13.  As in many areas of the law, ‘context is everything’, and (as already stated) it must be recognised that the domestic context is very different from the commercial world: see Stack at §69, cited in Mo Ying at §5.14.

50.  There is also a difference in approach, depending upon whether the relevant property is held in joint names or in sole name.  In the latter case, the first issue remains whether it was intended that the otherparty should have any beneficial interest in the property at all.  If he or she does,the second issue is what that interest is.  There is no presumption of joint beneficial ownership.  But their common intention is once again to be deduced objectively from their conduct: see Jones v Kernott [2012] 1 AC 776 at §§51 and 52, cited in Mo Ying at §§5.16 and 5.17.

51.  Where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared, then the court may be driven to impute an intention to the parties which they never had.  But whilst the conceptual difference between inferring and imputing may be clear, the difference in practice may not be so great: see Mo Ying at §6.10 quoting Jones at §§31 and 34.

52.  One example of a possible approach is to be found in the Australian decision of Green v Green (1989) 17 NSWLR 343, where on the facts of that case, and having found the establishment of a constructive trust, the NSW Court of Appeal held (at 356A–359D) that the conclusion which best gave effect to the intention of the parties was that at the time of death of the de facto husband he and the de facto wife were beneficially entitled to the property as joint tenants, thus giving the de facto wife the absolute beneficial ownership of the property by right of survivorship.

53.  The approach to common intention constructive trusts and the related requirements of promissory and proprietary estoppel have also been considered by the Court of Final Appeal in Luo Xing Juan Angela v The Estate of Hui Shui See Willy (2009) 12 HKCFAR 1.  Amongst other points, the court emphasized (at §37) that a constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another.

54.  Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters.  The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom: Luo at §38.

55.  While the promise need not be express, the meaning of the promise conveyed by the promisor’s words or conduct must be clear and unequivocal.  He must make it clear that he is promising not to enforce the relevant rights or powers.  Whether there is sufficient clarity is to be assessed objectively by the court: see Luo at §59.

56.  A further point to bear in mind is that the court does not grant relief beyond the minimum necessary to do justice.  Although this does not require the court to be constitutionally parsimonious, the court must also do justice to the defendant.  Where the equity is raised by operation of the doctrine of estoppel in relation to a clear‑cut promise that can readily be given effect, the court’s natural response is to fulfil the claimant’s expectations. But this is subject to the remedy not being disproportionate to the detriment which its purpose is to avoid: see Luo at §70.

57.  Mr Tsui also reminds me, and I bear in mind, that in a case such as this there is a danger of relying on uncorroborated evidence, and that I must carefully scrutinize the evidence of Madam Hong in the circumstances that the other party to the alleged agreement, understanding or arrangement (ie the Deceased) is unable to give his version of events: see Lui Kam Lau v Leung Ming Fai [1994] 3 HKC 477, at 482I and 483B.

58.  As a follow up to this point, it seems to me that I must take some care when considering the weight to be attached to events subsequentto an alleged promise.  First, a promise cannot be found by the cumulation of individual statements which are not in themselves promises.  It is also important to establish the point at which the commitment was first made, as it is only from that point that the person asserting the trust or estoppel can satisfy the reliance element of the claim.  The role of later conduct is not to create a promise, but to support or deny the finding that a promise had already been made.  Later conduct may assist in answering the factual question of whether a promise had been made.

Evidence and Review of it

59.  Many of the material facts necessary to consideration of this matter have been set out by me in the introductory section above.  They arelargely undisputed, or indisputable, because of the contemporaneous documents which support them.  For example, all of the relevant mortgages, relevant cheques, and many relevant bank statements and receipts were produced.

60.  At trial, evidence was given by Madam Hong and CNK.  Both adopted their witness statements as the main part of their evidence in chief,and both were subject to cross‑examination (Madam Hong for rather longer than CNK).

61.  Madam Hong described how she met the Deceased in about 1984 and commenced a courtship in about 1987, when the Deceased told her that Madam Lau had migrated to Canada without the Deceased.  In oral evidence, Madam Hong described how she had lent the Deceased $100,000 in about 1984, and how that had deepened the relationship between them.  That money was later repaid.

62.  In his evidence, CNK pointed out that Madam Lau lives in Hong Kong and had never emigrated nor had any such intention.  But I do not think I need to resolve this peripheral difference in evidence, not least because it is possible that the Deceased over‑stated his separation from Madam Lau at the time he commenced a closer relationship or co‑habitation with Madam Hong.

63.  Madam Hong and the Deceased began cohabiting in 1989, and Madam Hong said in evidence that the couple had in fact gone through a wedding banquet at that time, though no marriage was registered (nor could it have been, as the Deceased was then still married to Madam Lau).  In the same year 1989 CHW was born.

64.  At that time, they lived together in a property (“6F”) said by Madam Hong to have been owned by her, for which she had made the down payment and made the mortgage payments.  6F was subsequently sold in June 1995.

65.  Though the ownership and affordability of 6F was tested in cross‑examination, I accept that the property was indeed paid for wholly by Madam Hong.  Madam Hong gave clear evidence of her work and earnings, and hence her ability to save for a down payment and for other purposes, as well as to service mortgage instalments.  I accept that evidence.

66.  Madam Hong and the Deceased married in June 1994, after the Deceased had divorced Madam Lau.  But later in the same year, the Deceased was diagnosed with cirrhosis and his health began to deteriorate.  From that time, Madam Hong paid most of the common living expenses and outgoings, including medical costs, of the Deceased.

67.  In around June 1995, the Deceased and Madam Hong moved to a new property (“7L”) which she says was purchased and owned by her.  Again her ability to have afforded 7L was tested in cross‑examination, but I accept her evidence that the earnings increased significantly in the 1990s and she could have afforded a down payment and loan repayments.

68.  It was suggested to Madam Hong by Mr Tsui that in so far as she claimed the Deceased had no involvement in the purchase of 7L, that must be untrue because the Land Registry entries for the property show that a provisional sale and purchase agreement was entered into by the Deceased and Madam Hong as joint tenants, and that Madam Hong only took sole ownership as a result of the joint nomination by them both.

69.  Madam Hong’s explanation was that the property was found by the Deceased, but she was adamant that he had not contributed either to the down payment or to the mortgage or loan repayments.  Not only do I accept that explanation, it seems to me in any event more likely to be a reason for the change from joint tenants to sole owner as was made between the provisional and actual purchase that Madam Hong was going to be solely responsible for the purchase moneys.

70.  As an aside, Madam Hong was cross‑examined by Mr Tsui on the matters relating to the purchase of 7L inadvertently using an incomplete Land Registry record, which did not show any mortgage taken out at the time of purchase in 1995.  ‌Even when faced with that document, Madam Hongdid not change her story, and insisted that the mortgage had been taken out by her.  Subsequently, the complete Land Registry record was produced, which showed that to be true.  I take that into account in my overall assessment of the truthfulness of the evidence given by Madam Hong.

71.  From 1998, when the Deceased’s broker license was suspended by the SFC and he became unemployed, all living expenses (including thoserelating to the Property) were paid by Madam Hong.  This was despite the Deceased’s continued investment in the stock market, his rental income from the Property, and in circumstances where his expenses included the need to pay $6,000 each month as maintenance to his ex‑wife.

72.  In her oral evidence, Madam Hong described what she called a problem in the Deceased’s character in that he was always insolvent.  As she put it, when he had five bottles he only had four covers, and if he had four bottles he only had three covers.

73.  The problem arose out of speculation in shares, so that the Deceased was always asking to borrow money from Madam Hong.  In the beginning he was always able to repay what he borrowed from her, but that changed.

74.  Hence, Madam Hong accepted in cross‑examination that it was normal for a wife in her position to give financial assistance to her husband.  She also accepted that on many occasions before 1998 she did as asked by the Deceased when he gave her slips of paper for payments which she was asked to make in respect of his credit card and other expenses.

75.  But she said that she did not always do it when he requested it, particularly as she became increasingly frustrated about the Deceased’s speculating so much in shares.  She told him not to do so, and not to ‘follow money’.

76.  It seemed to me in watching her give evidence that the degreeof frustration felt all those years ago was clear in the vehemence with which she addressed this aspect of the evidence all these years later.  So, whilst I accept that there must have been a number of years of ordinary borrowing and repayment between husband‑and‑wife, on the basis of their relationship as husband‑and‑wife alone, I also accept the situation changed.

77.  Madam Hong does not suggest that the earlier payments, whether repaid or not, give rise to any part of her claim to an interest in the Property.  But it seems to me that the nature and extent of them provide context to the subsequent events, and to how the situation changed.

78.  It also seems to me to be unlikely that Madam Hong did not show the Deceased in clear terms that the situation had indeed changed, so that if he were to continue to obtain her financial assistance he would need to think of the longer term.

79.  At least a significant driver of that change occurred in 2000, when Madam Hong paid the sum of approximately $152,000 to settle trading losses on behalf of the Deceased.

80.  In her written evidence, Madam Hong confirmed her pleaded case as to how she came to pay the sum of approximately $152,000 to Luen Fat in October 2000.  She did so at the request of the Deceased, and after she had suggested to him that he might sell the Property in order to pay off his debt, and he had told her that the Property was not for sale and was to be left for her to collect rent to support her and CHW’s living expenses.

81.  In her oral evidence, Madam Hong gave further colour to the event.  Luen Fat had called the Deceased for repayment.  But he did not have the necessary funds.  When he asked Madam Hong for assistance, she was reluctant to give him any more money, and suggested that he should sellthe Property and solve his problems.  The Deceased said no, the flat could not be sold as in the future it would be for her and their son.  He said the problem would be solved so long as Madam Hong helped him pay money to Luen Fat.

82.  I do not accept Mr Tsui’s submission that it is highly doubtful that Madam Hong made the suggestion to sell the Property as a suitable solution, because she did not know the extent of the debt, or even the value of the Property at the time.  Rather, it seems to me to be entirely likely that Madam Hong would have assumed that the equity in the Property, whatever it was, would likely have satisfied the indebtedness to Luen Fat.

83.  Anyway, as a result of the conversation with the Deceased, Madam Hong went to Luen Fat, and they told her how much to pay. Produced in evidence was a copy of the cheque, which showed that the words “THE SUM HK$152,435.23CTS” had been printed.  Madam Hong says it was printed on her cheque by Luen Fat, which I accept, although she wrote the figures in her own hand writing in the HKD box.

84.  It is correct, as Mr Tsui pointed out, that there are no documents which demonstrate that the cheque was in fact cleared, but I nevertheless accept the evidence that the cheque was paid and cleared through Madam Hong’s account. One of the reasons is that the payment was apparently in part made to prevent the Deceased being sued.  As there is no evidence that the Deceased was sued by Luen Fat (or anyone else), the logical conclusion is that the preventative payment was in fact made.

85.  When asked by Mr Tsui why Madam Hong had not transferred the money to the Deceased, so that he could pay Luen Fat himself, she saidthat she told the Deceased that this was the last time and then he should not speculate again, that if he did speculate again she would not give him money even if he went to prison.  She also said that she went to Luen Fat in part to tell them that they should not lend the Deceased money as she was not going to pay for him any more.

86.  When Mr Tsui put to Madam Hong that she simply went to Luen Fat to pay them as the Deceased asked her to, she said that was not true, and that the reason why she acted in that way to pay Luen Fat was because the Deceased told her he would give her the flat in the future.  In submission, Mr Tsui suggested that could not be right, if the purpose of making payment was to prevent the Deceased being sued.  However, it seems to me that the two reasons to pay (namely, to prevent a lawsuit and in response to a promise that he would give her the Property) are not mutually exclusive.  In essence, Madam Hong was prepared to make a payment which prevented the Deceased from being sued, but did so in reliance upon the promise she says was made about the Property.

87.  As it happens, that was not the end of the assistance given by Madam Hong to the Deceased.  The next occasion is said to give rise to the second promise he made to her.

88.  There was, as the documents show, the re‑mortgaging of the Property in February 2001, from which the Deceased settled some credit card loans.  The exact figures are not entirely clear, but it seems when the existing Shanghai Commercial Bank mortgage was discharged and replaced by the re‑mortgage with Hang Seng Bank, perhaps $390,000 was made available to the Deceased for use in paying off some debt.  But there were still other credit cards and overdraft account payments due and payable, which he could not settle even though he had income from renting out the Property.

89.  I accept that Madam Hong knew about the re‑mortgage at the time, if not the precise sums involved, and that she either agreed to it or did not object to it.  This was the Deceased’s apparent preferred alternative to selling the Property.  That the Deceased might have asked Madam Hong whether she objected to the re‑mortgage is relevant to his view of her having an interest in that question, even though it is apparent that Madam Hong did not know the details of the then outstanding mortgage and the amount achieved on re‑mortgage.

90.  Of course, though the papers in evidence do not reveal what sum was required to discharge the previous mortgage, the whole purpose of the re‑mortgage was to release some equity from the Property to be applied toward some of the Deceased’s debt.  Madam Hong said in evidence that she thought that the Deceased would pay off the debt of at least two credit cards.

91.  It was in those circumstances that the Deceased requested and relied upon Madam Hong to pay him between $3,000 and $5,000 each month to help him settle other credit card and the overdraft account payments and mortgage instalments.  This was at the time of the Lunar New Year.  Again, Madam Hong’s suggestion to sell the Property was rejected by the Deceased, who reiterated that the Property was definitely not for sale and that it had to be left for her and CHW, who was still young, so that they would have some asset to rely upon in future.

92.  Madam Hong says that it was in reliance upon that representation and promise that she did pay those monthly amounts, and made payments to the overdraft account so that the Property need not be sold, and so that the rental income could continue to be used to pay off the mortgage instalments.

93.  From the oral evidence, it emerged that Madam Hong had asked for a list of all debt interest to be given to her by the Deceased, and she saw the maintenance due to Madam Lau.  Madam Hong suggested that the Deceased should stop paying that, as CNK could afford to support his mother from his income at the Immigration Department, but it seems the Deceased continued to pay it (at least, there was no suggestion in the evidence that he did not).

94.  There was some attempt in cross‑examination to show that the Deceased could have afforded to service his debt from the rental income from the Property alone.  But it seems to me that even if that was sometimes the case (as in some months it seems it was), that would only have ‘held the fort’, and would not have ultimately addressed the problem of the existence of the debt on which interest payments continued to accrue and which had to be met.  This is what continued to concern Madam Hong.

95.  When pressed by Mr Tsui, Madam Hong nevertheless confirmed that the Deceased did say he would leave the property to her, for her and the son to rely on.

96.  Madam Hong also confirmed in her evidence that in about July 2001, the Deceased asked her to promise that she would not sell the Property until CHW was grown‑up, by which time she could consider selling it and deciding how to distribute the sale proceeds.  This is the third occasion of a ‘promise’ by the Deceased on which she relied.

97.  Mr Tsui pointed out that this was not really a promise by the Deceased, but a promise by Madam Hong in response to a request by him.  On that basis, Mr Tsui submitted any estoppel based on this event was a non‑starter, for if there was no promise moving from the Deceased there could not have been any material detrimental reliance.

98.  That is correct up to a point, but it misses a key point.  The Deceased’s request, if made in this way, presupposes that Madam Hong was or would be in a position to sell the Property after the death of the Deceased.  That the request was made in this way, as I accept it was, also supports that the earlier promises were indeed made as alleged.  Mr Tsui was constrained at accept that, if true, this request and promise was at least capable of evidencing a prior promise which had moved from the Deceased and on which Madam Hong might have detrimentally relied.

99.  In her oral evidence, Madam Hong described the circumstances in which the July 2001 request and promise were made as follows.  She said that the attitude of the Deceased was very serious in July 2001, and he thought he was going to die.  He told her he was intending to transfer shares to her, and asked to help her take revenge.  The revenge was explained in evidence as selling the shares when the price went back up.  At the same time, the Deceased requested or told Madam Hong that she had to promise him that she would not sell the Property as soon as he died. He told her that all people have to go through difficulties, and she would be going through some difficulty, for which he apologised.  But if she sold the flat, she definitely would not be able to recover, so she should wait for the son to grow up.  She says that in response she made that promise.

100.  Madam Hong’s evidence included that the Deceased also referred to problems with his other sons; one (the younger) had been caught with drugs and the other (CNK) gambled and owed money to the bank. So the Deceased told her that if, when their son CHW had grown up, the brothers had turned over a new leaf, she could consider giving them some money.  In his own evidence, CNK denied that either he had gambling problems or his brother had any drug problem.  I do not think I need to decide on this, though I note that the younger son was in any event not included as a beneficiary under the Will.  I place no weight on this point, and do not consider its inclusion in Madam Hong’s description of the conversation in July 2001 as lending weight one way or another to the probability of the remainder of the conversation she described.

101.  Madam Hong gave evidence that she then went with the Deceased to Pang, Wan & Choi Solicitors (“PW&C”), as he intended to make a will under which he would leave the Property to her.  But when the Deceased called CNK to come to the solicitors’ firm, to bring his identity card, CNK failed to come.  So no will was actually made on that day.  In oral evidence, Madam Hong referred to needing the identity card of both CNK and his brother.

102.  Mr Tsui argued that this version of events is inherently improbable, as an intention to leave the Property only to Madam Hong (or to her and CHW) would not require the identity card particulars of CNK and his brother.  The alternate submission was that if there was the needfor the identity card particulars of CNK and his brother, that demonstrated the Deceased’s intention that they be included as beneficiaries to his estate. Either submission was described as fatal to Madam Hong’s case.

103.  But — though I bear in mind that there is no evidence as to what the Deceased might have said to the solicitor in July 2001, when Madam Hong accepted that she stayed in the firm’s reception area whilst the Deceased met the solicitor in a conference room — I think it is at least equally likely that CNK’s presence and identity card was required if he was to remain as executor of the Deceased’s estate under the (new) will, though he might also have remained a beneficiary of other parts of the estate, such as the shareholdings.

104.  In short, I accept Madam Hong’s evidence that she and the Deceased did go to the solicitors’ firm in July 2001, and that the Deceased had told her the reason to do so was to make a will leaving the Property to her.  I also accept that Madam Hong was told the reason why the will could not be made that day was because the identity card details of CNK (and perhaps his brother) were needed.  Mr Tsui posited the possibility that if the Deceased did say that it might have been false, showing the Deceased did not really intend to leave the Property to Madam Hong.  But I do not see how that assists CNK’s case, as that would simply give rise to conduct from which it might be thought unconscionable to permit the Deceased to resile, if what he said was relied on by Madam Hong to her detriment.

105.  However, in the event, before another will could be made, other events intervened.

106.  Unfortunately, the Deceased was admitted to hospital and passed away on 2 August 2001.  But before that, Madam Hong said in evidence, the Deceased had entrusted her with the Property and had instructed the tenant of the Property to pay the rent to her after he had died, which I accept as that is what the tenant later did.

107.  As is now accepted for CNK, Madam Hong paid the funeral expenses for the Deceased of around $100,000, and continued to pay off the Deceased’s credit card and overdraft debts (including accrued interest) and to settle the mortgage loan instalments.  I accept this was done at least partly using the rental income received from the Property.

108.  In September 2005, Madam Hong made a lump sum payment to the mortgagee bank intending to redeem the Property.  In the evidence is the copy of a cheque dated 5 September 2005 payable to the Hang Seng Bank and drawn on Madam Hong’s HSBC bank account for the sum of $235,800.72.  That cheque was paid the same day into an account in the name of “Chung H C (Dec)”, that account being the instalment loan (mortgage) account.

109.  The immediately subsequent numbered cheque was also produced in evidence, being one also dated 5 September 2005 payable to the Deceased in the sum of $279,534.85, which was apparently paid into a current account held at the mortgagee bank in his name.  Though that payment was not explained, nor explored, in evidence, it seems tolerably clear from the papers in the case that the money was to pay off the remaining debt on the overdraft facility.

110.  Added to the evidence bundle during the trial was a letter dated 24 August 2001 from Hang Seng Bank to PW&C detailing the accounts held by the Deceased at the bank, and the particulars of them as at the date of death, including as to an overdraft of $492,909.10 in the current account into which the $279,534.85 was paid in 2005.  The letter also set out the credit card indebtedness and the outstanding principle and interest then owed under the mortgage.  The total indebtedness was some $1,022,232 and there was no credit balance in any account.

111.  As it happened, the discharge of the mortgage could not happen until a remaining outstanding credit card loan of $25,000 was also paid.  This sum was also paid by Madam Hong, and the mortgage was eventually discharged in May 2006.

112.  That means that by late 2005 or early 2006, Madam Hong had not only arranged and effected payment of various interest payments as continued to accrue on the indebtedness on a monthly basis, she had arranged to clear the total indebtedness of the Deceased outstanding at the time of his death totalling some $1,022,232.

113.  Throughout that period, Madam Hong also settled the necessary share of the repair works renovation costs and expenses of the common area of the building in which the Property is, and paid for certain internal renovation costs and expenses.

114.  These facts identify the error in Mr Tsui’s submission that Madam Hong did not suffer any detriment, because she made all the various payments out of the rental income from the Property.  It was not in dispute that the relevant rental income was $16,500 per month from September 2001 until sometime in 2011.  That means that by September 2005, the gross rental income generated from the Property would have been only $792,000.  As a result, for Madam Hong to have settled the entirety of the indebtedness, and to have paid the additional interest which accrued over that period, and to have met the various other expenses, she must have had resort to her own resources – and substantially so.

115.  As Mr Cheung submitted, that is a course of conduct which is difficult to explain in the absence of the promises and reliance put forward.  I consider this therefore helps prove the promises were made.

116.  CNK spoke about the day in November 1996, when the Deceased called him and asked him to meet him at what he discovered to be a solicitors’ office, which he did as he often accompanied the Deceased on personal errands.  At the office, in a conference room, he was asked for his identity card.  The female solicitor then discussed matters with the Deceased, whilst CNK was told to sit on the other side of the table and so did not hear the content of their conversation.

117.  Later during the meeting, another female came in and also talk to the Deceased, though CNK could not hear that conversation either.  He then saw the Deceased sign some papers and the two females also signed them.  A copy of the document was put into a sealed envelope and handed to CNK by the Deceased, as one of the females told CNK that it was an important document that the Deceased wished him to keep.  CNK then took the envelope home and gave it to Madam Lau, to keep in her safe‑deposit box with the bank.

118.  It seems that the envelope was forgotten about, until many years later in 2012, when Madam Lau was sorting through her safe‑deposit box and found the envelope and gave it to CNK.  When he opened it, he discovered the Will and began to act on its terms, obtaining probate in January 2014, and eventually triggering these proceedings.

119.  Madam Hong gave evidence that it was not until receipt of the letter from CNK’s solicitors in June 2013 that she knew that the Deceased had executed the Will in November 1996.  Mr Tsui relies on that fact as support for CNK’s case, submitting that the alleged request made by the Deceased in July 2001 is inherently improbable, when the Deceased was the registered owner and had made the Will in 1996 bequeathing his estate to CNK, and so could not have been worried that Madam Hong might sell the property immediately after his death.

120.  I accept that the Will’s terms identify that in 1996, even after the Deceased and Madam Hong married in 1994, the Deceased considered himself to remain the full owner of the Property in line with the registered ownership in his sole name.  But it is also obvious that the Will was made some years before the circumstances now said to give rise to the constructive trust or estoppel.

121.  I have taken Mr Tsui’s submission into account in nevertheless accepting Madam Hong’s account of the discussion and activity in July 2001, and in my finding that that discussion is itself support for the existence of the previous promises given by the Deceased to Madam Hong.

122.  After the Deceased passed away, CNK was involved in the making of the funeral arrangements, though that gave rise to arguments with Madam Hong due to different views as to how it should be done.

123.  A few months later, Madam Hong called him to go to a solicitor’s office in Central (PW&C).  There a gentleman said something to the effect that the Deceased owned a property which was mortgaged to a bank, and an ideal way to deal with it would be to sell it, and the family could then decide the best way to distribute the net proceeds.  CNK says he told the man he needed to think about it and left without signing any papers or taking any papers with him.

124.  There was also mention of debt owed by the Deceased.  Madam Hong said in evidence that CNK expressed shock or surprise at the extent of the indebtedness when told about it.  But in his own evidence, CNK said that he did not know the extent of the indebtedness.  I tend to accept Madam Hong’s evidence on this point.

125.  When back at home, CNK was warned by Madam Lau to be careful with Madam Hong, and it was better not to bother, so he did not follow up the matter.  In cross‑examination, CNK agreed that he never went back to the solicitor at PW&C, nor told him of the results of his “thinking about it”.  Nor did he ever volunteer to anyone to help settle, or arrange settlement of, the Deceased’s indebtedness.  Whilst he did not accept the suggestion put to him that he simply considered the Deceased’s indebtedness as nothing to do with him, CNK at least accepted that he did not think about it, and the reality is that is how he acted.  Essentially, CNK was content to wash his hands of the entire matter, and to leave the estate to be resolved by whoever took up that task — the only likely candidate being Madam Hong.

126.  At no time over the next decade or so did it appear to have occurred to CNK that he had in any way missed out on anything from the estate of the Deceased.  He also accepted in evidence that at no time since the meeting at the solicitors’ office in 2001 had he had any contact with Madam Hong.  In the circumstances, including the advice that CNKsays he took from his mother that he should stay away from Madam Hong and that she was bound to be troublesome, it seems to me more likely than not that any contact sought to be initiated by Madam Hong would have been rebuffed or ignored by CNK (as she says).

127.  However, in around July or August 2012, Madam Lau was going through her safe deposit box and found the envelope which CNK had given her in 1996.  When he opened it, he discovered the Will, naming him as sole executor and beneficiary of the estate.  Hence he applied for, and obtained, probate.

128.  I accept Madam Hong’s evidence that, in addition to instructing solicitors to write to her, CNK also wrote to the tenant at the Property.  Whether or not it amounted to the degree of nuisance described by Madam Hong in her evidence, it does seem that the ultimate effect was that the tenant moved away.  It seems that event, and the approach adopted,has proved unhelpful overall for the parties to be able to resolve this matter other than by this trial.  I mention it only for that reason, as I do not think it can assist one way or the other in deciding what did or did not happen more than a decade earlier.

129.  An important part of the evidence underpinning part of Mr Tsui’s submissions relates to Madam Hong’s application for letters of administration on 16 May 2002.  The application was made jointly by Madam Hong with one Sit Wen Wen, whom she identified in evidence as CHW’s godmother.  When asked why the application was not proceeded with,Madam Hong stated that she was told that she could not make the application alone as CHW was a minor.  But, as Mr Tsui pointed out, that problem had been catered for by adding his godmother as co‑applicant.

130.  Madam Hong then stated, in a part of her evidence which seemed to lack the degree of coherence found in the rest of her evidence, that havingbeen advised that she could not make the application alone, and that if there was to be another applicant it was better that it should be a close family member, and having failed to be able to re‑contact CNK, she understood that she would have to wait until CHW came of age before she could continue the application.  She also stated that when CHW did become of age, she asked him to make the application on several occasions but he said there wasno hurry.  ‌That explains, she said, why no application to allow her to administer the estate of the Deceased has ever been pursued even up to now.

131.  I did not find this part of her evidence convincing.  It seems to me more likely to be the case that, after some period of time when Madam Hong had been dealing with matters apparently without needing any formal administrative powers, the idea of making a formal application letters of administration simply faded.  I do not find it surprising that she might not have anticipated the long‑term problems that might occur if the Property were to remain registered in the sole ownership of the Deceased.

132.  The application also identified that a diligent search had failed to find any will, such that the surviving persons being the only persons entitled to share in the estate were Madam Hong, CNK, his younger brother and CHW.  The gross value of the estate was stated to be a little over $3 million, which must include the value of the Property.

133.  Mr Tsui therefore makes the submission that the inclusion of all three sons of the Deceased together with Madam Hong evidences the Deceased’s intention that all four persons should benefit from the estate. But I reject that submission, as it seems to me that the application was obviously drafted by the solicitor, not by reference to any intention on the part of the Deceased, but by reference to the operation of law in the absence of a stated testamentary intention.

134.  The far better submission arises from the fact that Madam Hong did not tell the solicitor in 2001/2002 that the Deceased had promised her the Property only a short time beforehand, in reliance upon which promise she had been acting and would continue to act detrimentally to her own position. During cross‑examination, Madam Hong accepted that she had not told the solicitor of any such promise, whether in the original meeting at which CNK was present or at any other time before the application for letters of administration was taken out.  (This point might be thought to go together with the fact that no application for administration was ever proceeded to conclusion — see above.)

135.  I accept that Madam Hong would unlikely have been thinking in legal terms of promise, reliance, detriment, trust or estoppel.  But obviously, the fact that Madam Hong did not make any contemporaneous averment as to the promise she now, much later, asserts was made to her by the Deceased that she should have the Property after his death must count against her case.  Indeed, it must count more strongly against her case that she did not mention it in the very circumstances that it might be thought it would most obviously have been brought forward by her.

136.  I have taken these points into account, and that the evidence did not entirely match this point as pleaded in the Reply, but strong as they are I do not think they out‑balance the other evidence.

137.  In his witness statement and oral evidence, CNK confirmed that apart from knowing the Deceased was a trader at the stock exchange, CNK had and has no knowledge at all about his financial matters, save that the Property should be generating income for him.  As I have already indicated, this was consistent with the pleaded case of CNK that he has no knowledge of the financial arrangements or dealings between the Deceased and Madam Hong.  Plainly, other than testing the evidence in this examination of Madam Hong against other evidence and the inherent likelihoods, CNK was in no position to raise a positive case as to the discussions or dealings she had with the Deceased about the Property.

138.  From the evidence overall, and amongst the other material matters to be weighed in looking at the whole course of conduct which I have touched on above, I have also borne in mind that:

(a)  the Property was purchased long before the Deceased and Madam Hong married;

(b)  the ownership of the Property changed at around the time that the Deceased and Madam Hong began co‑habitation in 1989, when the Deceased bought out Madam Lau’s share of the ownership and conveyed the Property into his sole name;

(c)  in contrast with the facts of many of the leading authorities in this type of situation, the Property was never the matrimonial home for the Deceased and Madam Hong, and it was used throughout to generate income primarily to service the mortgage debt;

(d)  although there was, on Madam Hong’s case, some discussion of a change to the Deceased’s testamentary arrangements so as to bequeath the Property to her, no such testamentary change was in fact effected;

(e)  there was no attempt by CNK (or his brother) to administer or be involved in any way in administering the estate of the Deceased or the Property (its only significant asset) between 2001 and 2012 or 2013.

139.  After taking all matters into account and weighing them as seems apt, I conclude by accepting that the Deceased did promise to Madam Hong that she would be the owner of the Property after his death, and that she should use the Property to support herself and CHW (who was only nearly 12 at the time).  It does not seem to me to matter under which precise legal principle I proceed, as on the evidence I would find both a common intention constructive trust and a proprietary estoppel.

140.  I think the best way in which to reflect the intention, or the equities arising from the estoppel, would be to treat the Deceased and Madam Hong as becoming joint tenants of the Property during his lifetime and immediately before his death, so that she became its sole owner upon his death through rights of survivorship.

141.  In so doing, I have specifically taken into account whether (if the matter is to be regarded by way of estoppel), that achieves the minimum necessary to do justice between the parties, including justice to CNK as representative of and beneficiary under the estate of the Deceased.  Taking into account the totality of material, including that Madam Hong has been made responsible for expenses which would otherwise be reimbursable from the estate, I believe that it does do proper justice.  In any event, I think this was the common intention.

Conclusion

142.  In the circumstances, I dismiss the counterclaim. I allow the claim to the extent of the relief sought in paragraphs (1) and (2) of the prayer, namely an order that there be:

(a)  a declaration that the plaintiff be vested with the entire beneficial interest in the Property;

(b)  an order that the defendant shall forthwith execute all necessary documents to transfer the legal and beneficial interests of the Property to the plaintiff, free from any encumbrance within 28 days (and that if the defendant fails to do so, the Registrar of the High Court shall be empowered to execute all necessary documents for that purpose on behalf of the defendant).

143.  For the avoidance of doubt, I dismiss the claimed orders sought by paragraphs (3), (4) and (5) in the prayer to the statement of claim.

144.  As to costs, I make an order nisi that the costs of the action be payable by the defendant (in his capacity as executor of the estate of the Deceased) to the plaintiff, to be taxed if not agreed.