SUEN SHU TAI v. TAM FUNG TAI

CACV 187/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 187 OF 2013

(ON APPEAL FROM HCA NO. 1466 OF 2010)

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BETWEEN

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Hon Cheung JA :

The appeal

1.1   The plaintiff was the registered owner of two properties, namely, a shop situated in Che Cheung Building (‘the shop’) and a flat situated in Ha Heung Road, Kowloon (‘the flat’).

1.2   On 22 September 1999 and 5 October 1999 respectively, these two properties were transferred by the plaintiff to the defendant who is her daughter, purportedly for the consideration of $300,000 and $500,000. There was no dispute that the consideration was never paid by the defendant.

1.3   About eleven years after the transfer, the plaintiff commenced the present action seeking, among other things, a declaration that the defendant held the properties for the plaintiff.

1.4   Mr Recorder H Wong SC found for the plaintiff and held that the defendant held the properties as trustee on resulting trust for the plaintiff.

1.5   The defendant now appeals.

Facts

2.1   The plaintiff is now 87 years old (85 at trial).  She was married to Mr Tam Yuk Lam (‘Mr Tam’) and gave birth to four children including the defendant.  The defendant is 53 years old (51 at trial).  She was married in 1984 and divorced in 1995.  She has three children of her own.

2.2   The plaintiff and her four children used to live in the Mainland.  Mr Tam was living in Hong Kong and had formed a union with another woman called Lou Nui who became his concubine.  Mr Tam had three children from his union with Lou Nui.

2.3   In 1982, the plaintiff and the defendant came to Hong Kong and joined Mr Tam.  They moved to a flat occupied by Mr Tam and his new family.

2.4   In 1986, Mr Tam purchased the flat and the plaintiff moved into this flat.   By then the defendant had already moved out from Mr Tam’s home and she had never lived in the flat.

2.5   In 1994, Mr Tam was in ill health after having a stroke.  In 1997, he decided to divide his properties between the plaintiff and Lou Nui.  The flat which was purchased in 1986 in the joint names of Mr Tam and the plaintiff, was assigned by him to the plaintiff in August 1997.  The shop which was purchased by Mr Tam in his sole name was also assigned by him to the plaintiff.  He also assigned another property to Lou Nui.

2.6   After the plaintiff transferred the properties to the defendant, she continued to live in the flat.  Between 2003 and 2009, she resided both in Hong Kong and the Mainland where her three sons were living. In June 2009 when she returned to Hong Kong but was unable to gain access to the flat as the locks had been changed.  In August 2010 the defendant sold the flat to a purchaser for $4,316,000.  The present action was commenced by the plaintiff in the following month.  The defendant completed the sale in December 2011 and the proceeds of sale were held by a firm of solicitors as stakeholders.

The plaintiff’s case on the transfer

3.  The Recorder summarised the plaintiff’s case on her transfer of the two properties to the defendant as follows :

‘ 24. It is the Plaintiff’s case that after Tam had transferred the Properties to her, she began to collect rent from the Properties herself, and Tam ceased to support her living. The rental income was her only source of income.

25. According to the Plaintiff, one day in early 1999 the Defendant came to see her in the Flat and showed her a letter. The Defendant told her that Tam had instructed his lawyers to claim back the Properties from her, and to transfer the same to his concubine.  The Plaintiff was told that she only had 10 days to move out.

26. The Plaintiff became very worried.  She told me in Court that if the Properties were taken back from her and transferred to Tam’s concubine, she would have no place in the family (“企都無地企”).  The Defendant suggested to the Plaintiff that, in order to avoid Tam’s claim, she should transfer the Properties into the Defendant’s name.  The Defendant told her that if the Properties were transferred into her name, Tam would not be able to recover the Properties from her.

27. According to the Plaintiff’s witness statement, which she confirmed in Court, the Defendant promised (collectively as “the alleged Promises”) her that she would support her living in the future and would give her a proper burial when she died (“生養死葬”).  The Defendant further promised her that she would also hire a foreign domestic helper to look after her.  In her oral evidence given in Court, the Plaintiff claimed that the Defendant had also promised to give her $3,000 per month (this is however not mentioned in either the Amended Statement of Claim or in the Plaintiff’s witness statement – rather in paragraph 17 of her witness statement, the Plaintiff mentioned that in 2007, the Defendant had promised to give her $3,000 per month if she would go back to Huidong to live).

28. The Plaintiff agreed to transfer the Properties to the Defendant.  She had wanted to call her eldest son to discuss the matter but was stopped by the Defendant, who queried her for not trusting her.

29. Sometime later the Defendant took the Plaintiff to the office of a firm of solicitors in Mongkok, which was located on the 12^th Floor of a building.  The Plaintiff had wanted to be accompanied by her sons or a nephew, but when she mentioned this to the Defendant, the Defendant asked her if she did not trust her, and the Plaintiff accordingly did not insist.

30. At the offices of the solicitors, the Plaintiff was attended to by a Ms Wong and she was required to sign documents (which she did) that she did not quite understand.  All she knew was that by transferring the Properties into the name of the Defendant, her husband could not claim back the Properties from her for transfer to his concubine.  She remembered, however, that Ms Wong had told her that the price for the transfer of the Properties was $500,000 and $300,000, but it was a matter between the Plaintiff and the Defendant how the money was paid.  She also said that she had never expected such money to be paid by the Defendant to her.

31. After she had transferred the Properties into the name of the Defendant, the Plaintiff continued to live in the Flat and collect rent from the tenants of the Properties.  The Defendant however did not keep her promises: she had not supported the Plaintiff’s living, nor had she hired a domestic helper to take care of her.

32. It is the Plaintiff’s case the only reason why she transferred the Properties into the Defendant was to avoid the claim threatened by Tam.  She did not intend to make a gift to the Defendant.  She told me that she considered that the Properties still belonged to her after the transfer, even when she died (I take it to mean, in lawyers’ language, that she considered the Properties to belong to her estate upon her death).

33. The Plaintiff also alleges, as part of her case, that she had reposed trust and confidence in the Defendant.  The transfer of the Properties to the Defendant was, according to the Plaintiff, manifestly disadvantageous to her.  She claims that the transfer of the Properties was a result of the undue influence by the Defendant, and for that reason, is liable to be set aside.

34. Tam never in fact pursued any claim for recovery of the Properties from the Plaintiff.  It is part of the Plaintiff’s case that she had relied upon what the Defendant’s represented to her (about Tam seeking to claim back the Properties for the benefit of his concubine) in transferring the Properties to the Defendant.  It is alleged that the representation made by the Defendant was false, and that accordingly the Assignments should be set aside inasmuch as the Plaintiff was relying upon such misrepresentation when she executed the Assignments.

35. The Plaintiff further says that she made the transfer of the Properties in reliance on the alleged Promises made by the Defendant.  As the Defendant had failed to keep her promises, she says that she is entitled to have the Assignments set aside on this ground as well.

36. Finally, the Plaintiff contends that she has a life interest in the Properties.  I note that this contention was introduced by way of an amendment to the prayers of the Statement of Claim, but it is not clear from the body of the Statement of Claim what is the legal basis for the contention.  Nothing was said by Ms Tjia in her Closing Submission about this contention.’

The defendant’s case on the assignment

4.  The Recorder summarised the defendant’s case on the transfer as follows :

‘ 37. The Defendant’s case is quite different from the Plaintiff. She claimed that in early September 1999, her mother called her and told her that she had received a letter (in both English and Chinese) from a law firm which stated that Tam intended to claim back the Properties from the Plaintiff. The Plaintiff asked the Defendant to come to see her as soon as possible.

38. The next day the Defendant went to see the Plaintiff who showed her the letter.  The Defendant recognised that the letter was from the Legal Aid Department which stated that Tam’s legal aid application had been refused.  The Defendant told me in her oral evidence (when she was asked why she would relate the letter to the Properties if the letter only mentioned that Tam’s legal aid application had been refused) that the letter also stated that if Tam wanted to pursue his claim for the Properties, he would have to instruct his own private lawyers.

39. According to the Defendant, the Plaintiff was very upset with this and a few days later she called the Defendant again and offered to transfer the Properties to her.  The Plaintiff told her that she would rather benefit her own daughter than the concubine and her sons.  The Plaintiff told the Defendant that as Tam had provided financial assistance to her brothers to set up factories in China and had not given the Defendant anything, she would give the Properties to her.

40. It is hence the Defendant’s case that her mother did not merely offer to transfer the Properties into her name, but to give her the beneficial interest in the Properties.  Her case is that her mother did so not merely to avoid her father’s threatened claim, but also because her mother considered that she had been left out of her father’s financial provisions, which her father had given to her brothers but not to her.

41. According to the Defendant, she was not receptive to the Plaintiff’s offer initially as that would mean that she would have to terminate her CSSA, which gave her some $8,000 per month.  The Plaintiff then persuaded her to accept the Properties by offering to let her take the benefit of the rental income of the Properties, subject to deducting $1,000 per month for the Plaintiff’s use.  The Plaintiff told the Defendant that together with her Old Age Allowance of $700 per month, she would have a total of $1,700 a month, sufficient for her own use.

42. The Defendant then agreed to accept the offer of the Plaintiff. The Defendant then arranged for GYCM, the firm of solicitors that had previously assisted her in her divorce proceedings, to handle the legal matters concerning the proposed transfer.

43. According to the Defendant’s testimony in Court, she and the Plaintiff had gone to the offices of GYCM in Mongkok on 3 occasions without any prior appointment.  On the first occasion, they were merely attended by a receptionist and did not see any lawyers.  On the second occasion, they met a solicitor called Ms Lau who gave them some advice.  On the third occasion, they attended Ms Lau again and the legal documents effecting the transfer of the Properties were executed.

44. After the Properties were transferred to her, the Defendant’s CSSA was terminated.  Thereafter she received all the rentals from the Properties, and after deducting $1,000 to give to the Plaintiff, she would keep the rest of the rentals.  The rental for the Shop was $3,000, and for the Flat, $2,700.  The Defendant supplemented the rental income that she received by working part-time as a cleaner, from which she earned about $2,700 a month.

45. The Defendant’s case is that in transferring the Properties to her, the Plaintiff intended to make a gift of the Properties to her.  She says that as she had to give up her CSSA in accepting the gift, she had acted to her detriment and it is unconscionable for the Plaintiff to recall the gift.

46. The Defendant denies the allegations of undue influence and misrepresentation. She also denies that she had made the alleged Promises to the Plaintiff to procure the transfer of the Properties to her.’

Basis of the Recorder’s decision

5.1   The Recorder found the plaintiff to be a truthful witness.  He did not find the defendant to be a credible witness.  He accepted that the plaintiff’s intention when she transferred the properties to the defendant was not to make a gift to the defendant but solely to avoid Mr Tam recovering the properties from her and giving them to Lou Nui.  The defendant accordingly held the properties on resulting trust for the plaintiff as she had not paid any consideration for the transfer.  His reasoning is as follows :

‘ 80. The Plaintiff never worked in Hong Kong and did not have any income other than the rental income from the Properties, which she relied upon for her living. After Tam had gifted the Properties to her, Tam had ceased to support the Plaintiff in her living. The Properties were the Plaintiff’s only valuable assets and she was dependent on them. The Plaintiff had all along been using the Flat as her home (while renting part of the premises out), which was her only residence in Hong Kong. In 1999, the Plaintiff was enjoying good health and the Defendant did not suggest that health reasons played any part at all in the Plaintiff’s alleged gift to her.

81. So there does not appear to be any reason at all why the Plaintiff would wish to suddenly give everything away to the Defendant.  The Plaintiff has 4 children, and there is nothing to suggest that if the Plaintiff was to think about dividing her properties between her children, she would prefer the Defendant to such extent as to give everything to her.  This is so even though the Defendant was the only child living in Hong Kong.  In 1999, the Plaintiff’s relationship with her sons was good, and as I pointed out before, from time to time the Plaintiff would go to Huidong to live with her sons (which continued until some ten years later).  The Plaintiff would not have any reason to prefer the Defendant in such a way.

82. It was suggested by the Defendant that the Plaintiff wanted to benefit her with the Properties as she considered that her brothers had been well provided for by Tam, who had financially assisted them in setting up factories in China.  I do not accept this allegation, which is a rather bare one without the support of any convincing evidence.  Indeed the evidence suggests that Tam was not particularly well off to be in a position to provide any significant financial assistance to his sons.  By 1994, Tam had already suffered a stroke and his health had gone downhill.

83. The Plaintiff’s conduct after making the transfers was consistent with her still treating the Properties as hers.  She continued to pay the rates of the Properties and the phone bills of the Flat.  In this connection, I firmly reject the Defendant’s evidence that it was she who paid the rates (the Defendant accepted that it was the Plaintiff who paid the phone bills of the Flat).  It was the Plaintiff, not the Defendant, who was able to produce the relevant rates demands and receipts.  The Defendant’s claim that the Plaintiff was able to produce the rates demands/receipts only because, every time after the Defendant had paid the rates, she would bring the rates demands/receipts back to the Flat and put them on the dinner table, seems to me to be quite incredible.  Why would the Defendant do so if she was the person who paid the rates (and did so because she considered herself to be the owner)?  Why did she not keep the demands/receipts herself?  No satisfactory explanation has been given by the Defendant in this regard.

84. I further reject the Defendant’s evidence concerning the CSSA.  Indeed I find it difficult to understand why, if the Defendant’s understanding at the time was that her mother was offering to gift the Properties to her, why she would have been non-receptive of the offer allegedly because she would lose her CSSA.  The value of the Properties gifted to her would have far outweighed the benefit of the CSSA that she might stand to lose.  I find that the Defendant did initially hesitate on the idea of having the Properties transferred to her name, precisely because she knew that the intention was her mother was to let her hold the Properties in her name only and not to make a gift to her.  She was not under any misconception that the proposed arrangement was to benefit her with the ownership of the Properties – she knew that the whole exercise was to create an appearance that the Properties had been transferred out of her mother’s name, as an attempt to avoid Tam’s intended action.  The Defendant hesitated because she had to weigh the consequence to herself if she would lose CSSA.  No doubt the Defendant had hesitated long and hard.  I find that eventually she agreed to the proposal when the Plaintiff agreed that she could keep the rental income of the Shop, and subject to the deduction of $1,000, also keep the rental income of the Flat as well to support her living.  In this particular regard, I prefer the Defendant’s evidence to the Plaintiff’s.  I find that the Defendant eventually agreed to the proposal because she considered that she would be able to support her living by finding a part-time job to supplement the rental income that the Plaintiff agreed that she could keep.  The Defendant may well have other reasons for agreeing to help out her mother – the two were in good terms and the Defendant might consider Tam’s proposed action to be unfair to her mother.  It is not necessary for me to make any finding on these matters.  It is sufficient for me to find that at the time of the transfers, the Defendant was well aware of the fact that the Plaintiff was not making a gift of the Properties to her, which was why she was not initially receptive to the proposal.’

5.2   He further found that the evidence of the lawyers who handled the transfer did not shed light on the plaintiff’s intention.

The defendant’s arguments

6.  While the Notice of Appeal challenged

1) the Recorder’s finding on the plaintiff’s intention when she transferred the properties to the defendant,

2) his decision on resulting trust because it was not pleaded and it was inconsistent with the plaintiff’s other claims and the evidence did not support such a finding, and

3) delay in bringing the action,

the grounds now relied upon by Counsel for the defendant (Mr Chow Lap San, Edward, Ms Zoe Ning and Mr Lee Sai Kit) in their skeleton submission included challenges not covered by the Notice of Appeal.  Their arguments can be summarised as follows :

(1) In the case of sole legal ownership, the onus is on the plaintiff to show that she has a beneficial interest in the properties.

(2) The express provisions in the assignments as to the vesting of the legal and beneficial title are conclusive.

(3) An instrument is always to be construed according to the strict, plain, common meaning of the words themselves. Evidence that dehors the instrument is inadmissible.

(4) If the consideration expressed was one agreed upon though it was in fact unpaid or unsatisfied, the consequence is not a resulting trust but a lien in favour of the grantor.

(5) By reason of the expression of a substantial consideration there was no resulting trust.

(6) A long time has elapsed before the alleged resulting trust is asserted. This may rebut the presumption of resulting trust.

(7) The presumption of advancement should apply to the relationship of mother and child.  The Bennet v Bennet (1878-79) L. R. 10 Ch. D. 474 line of cases is outmoded and not followed in other common law jurisdictions.

The new grounds

1)  Burden of proof

7.1   That the plaintiff carries the burden of establishing her true intention when she assigned the properties to the defendant can hardly be challenged.  However, arguments relating to the conclusive nature of the deed of assignment, the acknowledgment of consideration clause and the operation of the Conveyancing and Property Ordinance (‘CPO’) Cap 219 were not relied upon by the defendant in the Court below.  We do not have the benefit of the Recorder’s decision on this point.

2)  Statutory provisions

7.2   However, I do not consider that these arguments have any material effect on the outcome of this appeal.  I will address the provisions of the CPO first.

7.3   Both assignments contained an identical clause that in consideration of the stated amount paid by the defendant to the plaintiff, receipt of which was expressly acknowledged, the plaintiff as beneficial owner assigned the property to the defendant.  Section 17 of the CPO provides that :

̒  Unless the contrary intention is expressed in the assignment, an assignment shall operate to assign all the estate, right and interest in the land assigned which the assignor has in that land and which he has the power to assign.’

7.4    Reliance on this provision to show that the plaintiff intended to convey the beneficial interest to the defendant is misplaced because this provision only describes the effect of the assignment, namely, ‘all the estate, right and interest in the land’ will be assigned to the purchaser.  This clause cannot override the question of intention of the plaintiff at the time of the transfer and also the operation of resulting trust.  It is worth repeating what Snell’s Equity 32^nd Ed para 25—001 said about resulting trust :

̒ Express trusts are created by the actual intention of the settlor that the person holding the legal interest in the property should take it subject to the beneficial entitlement of another.  It may happen, however, that a transferor of property causes the legal interest to vest in another person in circumstances where it is unclear whom the transferor intends to have the beneficial interest in it.  Here, by operation of law, a resulting trust may arise for the benefit of the transferor.  It gives effect to a default presumption about the intention of a person in making a gratuitous transfer of property: although he has transferred the legal interest, he would generally not intend the transferee to take the property beneficially.  The name “resulting” describes the effect of the trust in causing the beneficial entitlement to the property to spring back to the person who transferred it.  Since it arises by operation of law it may take effect informally.

  There are two main situations where resulting trusts may arise: where there is a gratuitous transfer of property and where an express trust of property fails to dispose of the beneficial interest in property….’

7.5   Section 18(1) of the CPO provides that :

̒  A receipt for consideration in the body of an instrument shall be a sufficient discharge to the person paying the consideration and, in favour of any other person acting on the faith of the receipt, shall be sufficient evidence of payment.’

7.6   Despite the acknowledgment of receipt, the defendant expressly pleaded and recognized at the trial below that she did not pay any consideration for the transfer.  Her case was that the plaintiff transferred the properties to her by way of gift.  She called the lawyer and legal executive who prepared the assignments to show that the assignments were not what they represented.  The defendant can hardly rely on section 18 or the receipt clause in the assignment.

3)  Intention to be ascertained from the Assignments only?

7.7   The defendant relies on passages in Lewin on Trust 18^th Ed which contrasts the following situations :

̒  9—02 If a gratuitous lifetime instrument of transfer contains express or inferred provisions determining the beneficial ownership of the property transferred, effect will be given to those express or inferred provisions, and, as is the case generally with the construction of written documents, only limited extraneous evidence is admissible in aid of the construction of the document.

 9—03  Where there is a gratuitous transfer containing no express or inferred provisions determining beneficial ownership, then the starting point is that there is a rebuttable presumption of resulting trust, that is that the transferor did not intend to make a gift.’

7.8   In support of the first situation, the following authorities are relied upon.  First, Vandervell v IRC [1967] 2 AC 291, per Lord Upjohn at 312:

̒ Where A transfers, or directs a trustee for him to transfer, the legal estate in property to B otherwise than for valuable consideration it is a question of the intention of A in making the transfer whether B was to take beneficially or on trust and, if the latter, on what trust.  If, as a matter of construction of the document transferring the legal estate, it is possible to discern A’s intentions, that is an end of the matter and no extraneous evidence is admissible to correct and qualify his intentions so ascertained.’

7.9   Further in Pettitt v Pettitt [1970] AC 777, per Lord Upjohn at 813:

̒  In the first place, the beneficial ownership of the property in question must depend upon the agreement of the parties determined at the time of its acquisition.  If the property in question is land there must be some lease or conveyance which shows how it was acquired. If that document declares not merely in whom the legal title is to vest but in whom the beneficial title is to vest that necessarily concludes the question of title as between the spouses for all time, and in the absence of fraud or mistake at the time of the transaction the parties cannot go behind it at any time thereafter even on death or the break-up of the marriage.’

7.10   Vandervell and Pettitt are well-established authorities and I accept what is said there.  However, in my view, it is important to consider the context of this case.  As pointed out earlier, notwithstanding the plaintiff’s acknowledgment of payment by the defendant, the defendant expressly disavowed that she had paid or was required to pay for the transfer of the two properties.  This being the case, the defendant cannot selectively say that the assignments had clearly provided that the plaintiff, as the beneficial owner, had assigned the properties to her and that the Court should not look beyond this provision.  This is not a case where only the terms of the instrument should be looked at in order to determine the intention of the plaintiff.  Put it in another way, this is not a case where the assignments can be said to have contained express or inferred provisions determining the beneficial ownership of the property transferred.

4) The Receipt clause

7.11   The defendant relied on Tsang Chuen v. Li Po Kwai [1932] AC 715 per Lord Blanesburgh at 727-729 and Mascall v Mascall (1985) 50 P&CR 119 per Browne Wilkinson LJ at 126 to the effect that one cannot adduce evidence to contradict the terms of the receipt clause.  I have already commented that it was the defendant herself who accepted at the trial that no consideration was ever intended to be paid by her.  I cannot see how she can now change her position and seek refuge in the receipt clause.  In any event as this Court, held in Tsui Hoi Pan v. Wong Chun Ling and others (CACV 150 of 1999), per Godfrey JA at page 3 :

̒  First, it is said that the assignments made by the plaintiff in favour of the 1^st defendant were on the face of them assignments for value, and in these circumstances the plaintiff is estopped from now asserting contrary to their terms that the assignments were not made for value. 

The judge below accepted this.  Subject as already mentioned, he dismissed the plaintiff’s action on this ground (and on this ground alone).  In this court, the defendants have not seriously sought to support the judge’s judgment on this ground, quite rightly, because as between immediate parties who know all the circumstances, there can be no estoppel by deed.  If the facts are as the plaintiff has pleaded, there is no objection to his asserting the existence of an implied, constructive or resulting trust, merely because of the fact that the assignment to the 1^st defendant, on the face of it, appears to be an assignment for value.  The law does not allow an instrument such as the assignments here to be used as an instrument of fraud: see, e.g. Booth v. Turle (1873) LR 16 Eq. 182.  If the plaintiff is able to establish a case on an implied trust, the doctrine of estoppel by deed will not assist the 1^st defendant.  It is well-settled (see, e.g., Halsbury’s Laws of England, 4^th edition, 1992, vol. 16, title “Estoppel”, paragraph 1020) that there is no estoppel by deed in favour of a person knowing all the circumstances.’  (emphasis added)

7.12   Further the statement of Dixon CJ of the High Court of Australia in Wirth v Wirth [1956] 98 C.L.R. 228 clearly contradicts the argument of the defendant :

̒ But is it compatible with the expression of the consideration of ₤100 to treat the conveyance as raising a presumption of a resulting trust?  This also is a question discussed by Cussen J. in House v Caffyn.  The conclusion to which his Honour was disposed was that by reason of the expression of a substantial consideration there was no resulting trust.  Perhaps what was said in Coultwas v Swan by Stuart V.C. and by Lord Hatherly tends to the contrary.  But it must be remembered that if the consideration expressed was one agreed upon though it was in fact unpaid or unsatisfied, the consequence is not a resulting trust but a lien in favour of the grantor.  If on the other hand it is a false consideration, the reason for inserting it will bear directly upon the true character of the transaction and from that it will appear whether or not it was intended to transfer the beneficial interest as well as the legal estate.  The present is not a case in which one can be sure that the consideration expressed was a mere sham.  It is at least clear that before a presumption of a resulting trust can arise upon a transfer expressing a consideration, it must be shown that the expression of the consideration was false and the transfer was intended as a voluntary assurance. I am not prepared to say that the meagre evidence on the subject satisfactorily establishes so much.’  (emphasis added)

7.13   The plaintiff had abandoned the allegation of fraud at the trial but it does not mean that the consideration as stated in the assignment is not a false one.

Intention of the plaintiff

8.1   The defendant challenged the Recorder’s finding on the intention of the plaintiff.  She relied on the following acts which implemented the plaintiff’s intention of gift to her :

1) The plaintiff’s instruction to the firm of solicitors to transfer the flat to the defendant by way of deed of gifts.  Upon legal advice by the handling lawyer, the plaintiff entered into two deeds of assignments to assign the properties as beneficial owner to the defendant;

2) The plaintiff acknowledged receipt of the consideration of the flat;

3) The solicitors received from the plaintiff the title deeds of the flat;

4) After the assignments, the solicitors released the title deeds to the defendant and they have been in the defendant’s custody since;

5) The defendant has been in possession of the flat;

6) The defendant received the rental from the flat and paid $1,000 to the plaintiff;

7) The defendant advertised to let the flat;

8) The defendant sold the flat to developer for re-development;

9) The provisional agreement for the sale was registered in the Land Registry;

10) The only evidence of rates payment by the plaintiff was up to 2004.  Thereafter, there was no evidence that the plaintiff paid the rates;

11) The plaintiff did not seek to claim for return of the flat for 11 years prior to this action.

8.2   In respect of the shop, the defendant relied on the same acts.  The difference being that the shop is not sold but only let out.

8.3   The defendant is challenging the Recorder’s finding of fact.  The principle is clear that the appellate court will not disturb a finding of fact by the trial judge who had the benefit of hearing and observing the evidence at first hand, unless the finding is plainly wrong.  In our view the defendant has failed to overcome this high threshold.  As the Recorder had made it plain, he decided the issue without reliance on presumptions.  His express finding is that the plaintiff did not intend to benefit the defendant when she transferred the properties to her and it was solely done to avoid the properties coming into the hands of Lou Nui.  He observed that there really was no reason why the plaintiff should suddenly give the properties to the defendant in 1999 when they were her only valuable assets and she was dependent on them.  He also found that the defendant was aware of the plaintiff’s intention at that time. 

8.4   In my view this finding on the intention of the plaintiff is not weakened by the matters relied upon by the defendant.  The mode of the transfer clearly was not something that an elderly woman would comprehend.  The collection of rent (by the defendant) must be considered against her promise to maintain the plaintiff.  The defendant relied heavily on the defendant keeping the title deed as an objective fact pointing at the plaintiff’s intention of gift : see Halsbury’s Laws of Hong Kong Vol 35, paragraph 230.051 and Warren v Gurney [1944] 2 All ER 472, CA, per Morton LJ at 473.  But there was evidence that even before the transfer the defendant had been keeping the title deeds for the plaintiff.  Hence her keeping of the title deeds afterwards is really not such a significant factor as to cast doubts on the Recorder’s finding.  The Recorder expressly rejected the defendant’s contention that she had paid for the rates and telephone bills for the flat.  The fact that the receipts of rates paid by the plaintiff was only up to 2004 does not begin to show that the finding was plainly wrong.  As to the plaintiff’s delay in seeking to recover the properties, again the matter must be considered in its context.  For many years, the plaintiff’s occupation of the flat was undisturbed even after the transfer of the flat to the defendant.  She continued to live there as her home.  After 2003 whenever she came back to Hong Kong from the Mainland she continued to live in the flat.  But when she was locked out from her own property she took action.  I do not accept that lapse of time had any significant role to play on the issue of the plaintiff’s intention.

8.5   Much has been said by Mr Chow about the evidence of the handling lawyer and legal executive who prepared the transfer. He submitted that they were independent witnesses with no interest in the outcome of the dispute between the parties and the Recorder ought to have accepted their evidence.  It is said that the handling lawyer’s attendance note showed that the plaintiff intended to transfer the properties as gift to the defendant.  I disagree.  As I said earlier, the point of the transfer was not something that an elderly lady would comprehend.  The Recorder clearly was not impressed by the evidence of the handling lawyer and the legal executive. Assuming the instruction was a gift, they had actually asked the plaintiff to sign on documents that totally misrepresented the true nature of the transaction.  The Recorder had fully considered their evidence in paragraphs 89-95 of his judgment before he rejected them.  I cannot see how he can be faulted.  The defendant’s argument on unpaid vendor’s lien is misconceived.  It has never been the plaintiff’s case that she was to receive consideration for the transfer.

8.6   In my view the Recorder had not been shown to be plainly wrong in his finding of fact.  Nor can I see any justification for us to come to a different view in terms of the inference to be drawn from the facts found by him.

Presumption of resulting trust

1)  Legal consequence

9.1   It has to be emphasised that resulting trust only comes into play after the Recorder had found that the plaintiff did not intend to benefit the defendant by way of gift when she transferred the properties.  The legal consequence of this finding is that the defendant is holding the properties on resulting trust for the plaintiff.  The Recorder did not simply rely on the presumption of resulting trust because of the gratuitous transfer.

2)  Pleading

9.2   The defendant argued that the plaintiff had not pleaded that the defendant is holding the properties on resulting trust and the Recorder should not have allowed the matter to be raised.  The plaintiff pleaded in the prayer for a declaration that the defendant held the property as constructive trustee.  In my view this is a revisit of the same argument raised by the defendant’s then counsel in her closing submission.  The reliance on constructive trust is of course wrong but in my view the Recorder had fully addressed this issue :

‘ 103. There is no substance to Ms Chan’s complaint. The Defendant’s case, as pleaded in the Defence and Counterclaim, is that the transfers were intended to be “outright gifts so as to benefit the Defendant…” (see, paragraph 8(a) of the Defence and Counterclaim). It must be clear to the Defendant that if the Court rejects her contention that the transfers were outright gifts, she would be held to be holding the Properties as resulting trustee as she had not paid any consideration for the transfers. Resulting trust as a possible legal consequence arising from the material facts pleaded in the pleadings should be well known to the Defendant or her legal advisers.’

9.3   The Recorder relied on Lord Denning’s view in Re Vandervell’s Trust (No 2) [1974] Ch 269 at 321-322 that :

‘ It is sufficient for the pleader to state the material facts. He need not state the legal result.’

9.4   The extent of the pleading, which serves to identify the issues, must depend on the context of an individual case.  In my view, the parties in this case could not have been unable to focus on the issues that required consideration at the trial.

Presumption of advancement

1)  The traditional view

10.1   A succinct summary of the presumption of gift (or advancement) is found in the judgment of Jessel MR in Bennet v. Bennet at page 476 :

‘ The doctrine of equity as regards presumption of gifts is this, that where one person stands in such a relation to another that there is an obligation on that person to make a provision for the other, and we find either a purchase or investment in the name of the other, or in the joint names of the person and the other, of an amount which would constitute a provision for the other, the presumption arises of an intention on the part of the person to discharge the obligation to the other; and therefore, in the absence of evidence to the contrary, that purchase or investment is held to be in itself evidence of a gift.

In other words, the presumption of gift arises from the moral obligation to give.’

10.2   An interesting question arises as to whether the presumption of advancement applies between mother and child.  The traditional view has been that this presumption does not apply between mother and child.  It was held there that there is no moral legal obligation on a mother to provide for child : Bennet v Bennet at page 478.  This was decided in 1879.  This view was followed by Godfrey JA of this Court in Watson v Smith [1998] 3 HKC 461 at 464. 

10.3   In Sekhon v Alissa [1989] 2 FLR 94, there was a dispute between mother and daughter over a house purchased in the name of the daughter.  The mother had made substantial contribution towards the purchase price.  Hoffmann J (as he then was) at page 99 held :

̒ In my judgment the law presumed a resulting trust in her [i.e. the mother] favour and that presumption has to be rebutted by evidence that she intended a personal loan without acquiring any interest in the property.’

10.4   Although Hoffmann J did not discuss the presumption of advancement between mother and child, this case was interpreted by subsequent cases as impliedly confirming that the presumption of advancement does not apply to mother and child.  I myself do not subscribe to this interpretation.

10.5   In the first instance decision of Lee Tso Fong v. Kwok Wai Sun & Another [2008] 4 HKLRD 270, Deputy Judge To (now To J) declined to follow Godfrey JA’s view on the ground that the decision was made without the benefit of counsel’s arguments and reference to developments of this area of the law.  The Recorder in this case followed Godfrey JA’s view.

10.6   This Court in Au Yuk Lin v. Wong Wang Hin Eddy [2013] 4 HKLRD 373 assumed but without deciding that the presumption applies to mother and child.

2)  The new approach

10.7   Other jurisdictions have recently moved away from the traditional view that the presumption does not apply to gift from mother to child.  In New Zealand, in Re Brownlee [1990] 3 NZLR 243, Tompkins J at 246 held that :

̒ Mr Monagan submitted that there was no presumption at law of a gift as to one half of the bank account arising from the creation of the joint account by the deceased.  In the context of a mother/daughter relationship he submitted that there must be evidence of an intention by the deceased to make a gift to the daughter of one half of the account before it can be contended that on her death the whole of the account belonged to the daughter.  He cited in support Bennet v Bennet (1879) 10 Ch D 474.  I do not consider that that authority assists.  It was not a case of a joint account.  The question was whether an advancement made by a mother to her child carried with it a presumption of a gift.  Jessel MR referred to the obligation of a father to provide for his child, but held consistent with the attitudes of those times, that there was no like obligation on a mother to provide for her child.  Therefore, he concluded, that when a mother makes an advancement to her child, that is not of itself sufficient to afford the presumption in law that it is a gift, because equity does not presume an obligation which does not exist.  The change in social attitudes that has occurred since that case makes the Master of the Roll’s approach no longer applicable: Honeyfield v Honeyfield [1933] NZLR s 183, Ostler J at s 184.  (emphasis added)

……

  As between a mother and a daughter, I consider that the equitable presumption of advancement applies, so that a resulting trust should not, in the absence of evidence to the contrary, be presumed.’ (page 248)

10.8   In Australia, Nelson v Nelson [1995] 184 CLR 538 Dawson J of High Court of Australia held at page 576 that :

̒ In my view, whether the basis for the presumption is a moral obligation to provide for a child or the reflection of actual probabilities, there is no longer any justification for maintaining the distinction between a father and a mother.  In the United States the presumption of advancement applies alike to a mother as well as a father, and that should now be the situation in this country.’

10.9   In Singapore, the presumption of advancement is applied between a mother and child in Re Estate of Chong Siew Kum, deceased [2005] 2 SLR (R) 324, per Andrew Ang JC, paragraph 20.

10.10   In Close Invoice Finance Limited v Close Invoice Finance Limited [2010] EWHC 1920, Simon Picken QC, Deputy High Court Judge said in paragraph 94 :

̒ As I see it…the distinction between a father and a mother in relation to the presumption of advancement cannot stand today.’     

See also Musson v Bonner [2010] WTLR 1369, The Chancery Division District Registry (Birmingham), decision of Judge David Grant.

10.11   In Canada, in Pecore v. Pecore [2007] 1 SCR 795, the Supreme Court of Canada held that the presumption advancement, applies equally to fathers and mothers in respect of a dependent child.  Rothstein J who delivered the judgment of McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish, Charron JJ and himself held :

31  While historically the relationship between father and child gave rise to the presumption of advancement, courts in Canada have been divided as to whether the relationship between mother and child does as well.  Some have concluded that it does not: see e.g. Lattimer v. Lattimer (1978), 18 O.R. (2d) 375 (H.C.J.), relying on Cartwright J.’s concurring judgment in Edwards v. Bradley, [1957] S.C.R. 599.  Others have found that it does: see e.g. Rupar v. Rupar (1964), 49 W.W.R. 226 (B.C.S.C.); Dagle v. Dagle Estate (1990), 38 E.T.R. 164 (P.E.I.S.C., App. Div.); Re Wilson (1999), 27 E.T.R. (2d) 97 (Ont. Ct. (Gen. Div.)).  In concluding that the presumption applies to mothers and children in Re Wilson, Fedak J., at para. 50, took into consideration “the natural affection between a mother and child, legislative changes requiring mothers to support their children, the economic independence of women and the equality provisions of the Charter”.

32  The question of whether the presumption applies between mother and child is not raised in these appeals, as the transfers in question occurred between a father and daughter, but I shall deal with it briefly.  Unlike when the presumption of advancement was first developed, women today have their own financial resources.  They also have a statutory obligation to financially support their children in the same way that fathers do.  Section 26.1(2) of the Divorce Act, R.S.C. 1985, c. 3 (2^nd Supp.), for instance, refers to the “principle” that spouses have a “joint financial obligation to maintain the children”, and s. 31(1) of the Family Law Act, R.S.O. 1990, c. F.3, provides that “[e]very parent has an obligation to provide support for his or her unmarried child who is a minor or is enrolled in a full time program of education, to the extent that the parent is capable of doing so.”  Oosterhoff et al. have also commented on this issue in Oosterhoff on Trusts, saying at p. 575, “Mothers and fathers are now under equal duties to care for their children and are equally likely to intend to make gifts to them…. In Canada, it is now accepted that mothers and fathers should be treated equally.”

33  I agree.  As women now have both the means as well as obligations to support their children, they are no less likely to intend to make gifts to their children than fathers. The presumption of advancement should thus apply equally to fathers and mothers.’ (emphasis added)

3)  Academic view

10.12   Snell’s Equity, 32^th edition, at page 757, paragraph 25-009 states :

̒  Traditionally, it was held that the formal presumption of advancement did not apply to a transaction from mother to child since mothers were not under an obligation to provide for their children.  This is unlikely to be followed nowadays.’

10.13   Parker and Mellows : The Modern Law of Trusts, 9^th Ed, at page 304, paragraph 9-028 states :

̒ The traditional position is, frankly, unsatisfactory.  It is particularly difficult to see why a mother, especially if she has money, is not under the same moral obligation to maintain her children as their father is said to be.’

10.14   In an article in The Conveyancer [1996] 274 entitled ‘The Presumption of Advancement between Mother and Child’, Mr Alan Dowling argued at 282 :

̒  A more acceptable approach to getting round Bennet v. Bennet may be to recognise that social attitudes have changed since the decision and that the distinction between father and mother in relation to their children should be abandoned.’

4)  My view

10.15   I will follow the modern approach.  I think the restriction in the Bennet line of cases has served its purpose.  Those cases were decided at an era where the social structure was different and where gender equality was not a prominent feature in everyday life.  By contrast, the role of a modern woman has become increasing independent both socially and financially. Her obligation to provide for her child is equal to that of a man.

10.16   In my view the presumption of advancement applies equally to a woman and her child.  However, that is not the end of the matter.  An equally important question is what about the mother giving to an adult independent child?  Does the presumption still apply?  I would leave this question open.  It is of note that the Supreme Court of Canada’s view is that the presumption of advancement does not apply to an independent adult child.  Rothstein J continued :

̒ 36 I am inclined to agree.  First, given that a principal justification for the presumption of advancement is parental obligation to support their dependent children, it seems to me that the presumption should not apply in respect of independent adult children.  As Heeney J. noted in McLear, at para. 36, parental support obligations under provincial and federal statutes normally end when the child is no longer considered by law to be a minor: see e.g. Family Law Act, s. 31.  Indeed, not only do child support obligations end when a child is no longer dependent, but often the reverse is true: an obligation may be imposed on independent adult children to support their parents in accordance with need and ability to pay: see e.g. Family Law Act, s. 32. Second, I agree with Heeney J. that it is common nowadays for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs. There should therefore be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of that parent’s affairs.

37 Some commentators and courts have argued that while an adult, independent child is no longer financially dependent, the presumption of advancement should apply on the basis of parental affection for their children: see e.g. Madsen Estate, at para. 21; Dagle; Christmas Estate v. Tuck (1995), 10 E.T.R. (2d) 47 (Ont. Ct. (Gen. Div.)); and Cho Ki Yau Trust (Trustees of) v. Yau Estate (1999), 29 E.T.R. (2d) 204 (Ont. S.C.J.).  I do not agree that affection is a basis upon which to apply the presumption of advancement to the transfer.   Indeed, the factor of affection applies in other relationships as well, such as between siblings, yet the presumption of advancement would not apply in those circumstances.  However, I see no reason why courts cannot consider evidence relating to the quality of the relationship between the transferor and transferee in order to determine whether the presumption of a resulting trust has been rebutted.’  (emphasis added)

10.17   In any event it has to be borne in mind that the presumption of advancement is a rather weak concept these days.  In Laskar v Laskar [2008] 1 WLR 2695 at 2700, CA, paragraph 20, Lord Neuberger of Abbotsbury referred to the presumption of joint ownership of a property held in joint names by a man and his long term partner.  He then held :

̒ 20. It is right to mention that there is another presumption, rather longer established than that in Stack case, which could be said to apply here, namely the presumption of advancement as between parent and child.  As the property was purchased in the joint names of mother and daughter, it seems to me that, in so far as the defendant’s contribution was greater and would have led to her having in excess of a 50% share of the beneficial interest, there is a presumption that she intended a gift of that excess to her daughter.  The presumption of advancement still exists, although it was said as long ago as 1970 to be a relatively weak presumption which can be rebutted on comparatively slight evidence : see per Lord Upjohn in Pettit v Pettit [1970] 1 AC 777, 814.  I would add that it is even weaker where, as here, the child was over 18 years of age and managed her own affairs at the time of the transaction.  Mr Thrower, for the claimant, made it clear that he accepted that the presumption was not applicable and was not pressing it here.  In my judgment that was realistic.’  (emphasis added)

10.18   Litton NPJ in Cheung Pui Yuen v Worldcup Investments Inc (2009) 12 HKCFAR 31 has unequivocally stated that :

̒ The presumption of advancement is nothing more than an evidential tool; its weight varies with the circumstances of the case.’

10.19   Litton NPJ also referred to Re Mak Woon Shui [1992] 2 HKC 144 and held that unlike English case of Falconer v. Falconer [1970] 1 WLR 1333 which held that the presumption had very little place in the law today in England, the presumption in the local context is not so easily displaced.  The comment by Cons VP in Re Mak Woon Shui was, in the context of that case, directed towards the argument that the presumption was no longer applicable in Hong Kong.  His comment was on the social situation in Hong Kong between the thirties and fifties where the radical social changes that swept through England had not reached Hong Kong.  Cons VP recognized that the presumption no longer carries the weight that it once did.  Hence Re Mak Woon Shui does not contradict (and in fact supports) the commonly accepted proposition that the presumption although still exists, is a relatively weak presumption which can be rebutted on comparatively slight evidence.  This is a point accepted by Mr Chow.  Cheung Pui Yuen is also a case which has also traditional elements unique to Hong Kong of an earlier era : a man had a concubine for 40 years to whom he had given gifts.

10.20   In this case the defendant was an adult at the time of the transfer.  She was not dependent on the plaintiff.  Even if the presumption of advancement applies, the circumstances of this case as identified by the Recorder clearly had displaced it.

New evidence

11.1   The defendant at the beginning of the hearing before us applied for discovery against the plaintiff and a firm of solicitors who had prepared a will for the plaintiff.  It was said that the plaintiff had concealed the will made by her in 1997 naming the defendant as the beneficiary and sole executive.  Consistent with the will the plaintiff had transferred the properties to the defendant.  It was submitted that the will supports the defendant’s case of a gift and destroys the plaintiff’s case that she had no intention of making a gift to the defendant.  The disclosure of the will also will contradict the Recorder’s view that since the plaintiff has four children, there is nothing to suggest that she would prefer the defendant to the extent of giving everything to her.  It will also contradict his view that the defendant initially hesitated on the proposed transfer because she knew that her mother’s intention was merely to let her hold the properties in her name only and not to make a gift to her and this would affect her entitlement to the social assistance she was then receiving.

11.2   We rejected the application because it fails the Ladd v Marshall threshold.  First, the plaintiff was questioned by the Recorder whether she regarded the properties to be hers during her life time and after her death and she answered yes.  The Recorder did not ask the plaintiff about any will.  In any event the defendant was aware of the existence of the wills before the trial.  She accompanied her parents to make their wills.  The plaintiff’s will could, with reasonable diligence, be obtained at the trial.  The matter could have been raised there and then by the defendant in the light of the plaintiff’s answer.  Further, the will could not have a material bearing on the outcome of the case.  Mr Chow could only say that this may affect the plaintiff’s credibility.  I do not consider that it would have an important influence on the outcome of the case having considered all the circumstances relating to the transfer.

Conclusion

12.  Accordingly the appeal is dismissed with costs to the plaintiff.  The plaintiff’s own costs are to be taxed according to Legal Aid Regulations.

Hon Chu JA :

13.  I agree for the reasons given by Cheung JA that the appeal should be dismissed with costs.

Hon Chan J :

14.  I agree with the decision of Cheung JA, for the reasons given by His Lordship.

15.  In these modern times when women are financially independent and play an equal role in the family, it is antiquated to suggest that a mother has no obligation to support and maintain her children.  I agree however that presumptions play a fading role in litigation these days, that their weight varies according to the facts, and that even if applicable, a presumption can be easily displaced, and was clearly displaced on the evidence in this case.