SIT LAI YUK v. TSE HAU TANG

DCCJ 6440/2019

[2021] HKDC 1511

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6440 OF 2019

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BETWEEN

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JUDGMENT

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BACKGROUND

1.  In this action, the plaintiff sues her son for a declaration and a vesting order in relation to a property known as Flat G on 3^rd Floor, Lung Wah Building, Nos. 50 & 58 Chuen Lung Street, Tsuen Wan, New Territories, Hong Kong (“the Property”) held in their joint names, in reliance of the principles of “common intention constructive trust” or alternatively “resulting trust”.

2.  The defendant has not entered appearance in the present action. Be that as it may, the notice of hearing of the trial has been posted to his last known address. In these circumstances, I am satisfied that the trial may be proceeded with in his absence.

THE LEGAL PRINCIPLES

3.  In Luo Xing Juan v. Estate of Hui Shui See [2009] 12 HKCFAR 1, Ribeiro PJ held in paragraph 38 that:

“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.”

4.  In Liu Wai Keung v. Liu Wai Man [2013] 5 HKLRD 9, G Lam J (as his Lordship then was) also had the following to say:

“44. The principles of trust law applicable to the present case are not in dispute. The Property being registered in the defendant’s name, the plaintiff bears the burden of showing, on the balance of probabilities, that the defendant held the Property on trust for him absolutely.

45. The plaintiff seeks to achieve that by pleading both a resulting trust and a constructive trust. However, given that both parties allege there was express discussion and actual intention as to where the beneficial interest in the Property should lie, there is little scope for the operation of resulting trust: Re Superyield Holdings Ltd [2000] 2 HKC 90, 111. At the commencement of the trial, indeed, counsel agreed that constructive trust is the real issue, and that resulting trust is not relevant except perhaps if I should decide to reject both parties’ evidence on intention.

46. The focus of the inquiry is therefore on the elements that the plaintiff has to prove in order to establish a constructive trust in his favour. In the context of this case, this means that the plaintiff must prove (i) there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the Property despite that it was acquired in the defendant’s name; (ii) the plaintiff altered his position in detrimental reliance upon such common intention; and (iii) it is unconscionable for the defendant to assert ownership in reliance on her legal title to the Property.

47. In ascertaining whether there was a common intention, it is the objective intention of each party ‘which was reasonably understood by the other party to be manifested by that party’s words and conduct’ that one must examine: Gissing v Gissing [1971] AC 886, 906; Jones v Kernott [2012] 1 AC 776, 794 at para. 51.

48. In the present case it is the parties’ common intention at the time of the acquisition of the Property that is relevant, there being no suggestion from anyone that the intention had changed.

49. Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions. It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention: Lloyds Bank v Rosset [1991] 1 AC 107, 132-133.

50. Even where, as in this case, reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.”

THE PLAINTIFF’S EVIDENCE

5.  By virtue of her witness statement (which she had adopted at the trial) and further explanation given by her in the witness box, the plaintiff asserted that:

(1) On around 22 July 2011, she and the defendant verbally discussed and came to the agreement that:

(a) They would purchase the Property for investment purpose and for the defendant to reside therein;

(b) The plaintiff would pay for the purchase price of the Property and retain the entire beneficial ownership thereof;

(c) The defendant’s name would be added as a legal owner of the Property for (i) estate planning purpose so that the Property could be easily transferred to him upon the plaintiff’s demise, if the plaintiff still maintained such desire at the material time; and (ii) the purpose of application for mortgage since the plaintiff had already retired;

(d) If the Property were to be let, the defendant might keep $6,000 from the monthly rental for his own use but the remaining sum would have to be applied towards the monthly mortgage repayments; and

(e) The defendant would not have any beneficial interest in the Property.

(collectively, the “Common Intention”)

(2) Pursuant to the Common Intention, the plaintiff and the defendant entered into a Provisional Sale and Purchase Agreement dated 22 July 2011 (“the Provisional Agreement”) with the original owner of the Property, and purchased the Property at the price of $1.7 million.

(3) Under the Provisional Agreement, the plaintiff and the defendant had to pay as purchasers:

(a) an initial deposit of $50,000 (“the Initial Deposit”) upon the execution of the Provisional Agreement;

(b) a further deposit of $120,000 (“the Further Deposit”) by 3 August 2011; and

(c) the balance of the purchase price ($1.53 million) (“the Balance”) on completion on or before 16 September 2011.

(4) In detrimental reliance upon the Common Intention, the plaintiff had paid:

(a) the Initial Deposit in the total sum of $50,000. The said amount was paid partly in cash and partly by cheque issued by her husband;

(b) The Further Deposit of $120,000 by cheque issued by her husband upon the execution of the formal sale and purchase agreement on 3 August 2011;

(c) The Balance of $1.53 million on 15 September 2011 from her own account;

(d) The legal fees of $2,000 on around 1 August 2011 by her own cash; and

(e) The estate agency fees of $13,600 on around 25 September 2011 by her own cash.

(5) The defendant had not contributed anything to the purchase price of the Property.

(6) At the end of the day, the defendant was unable to obtain any mortgage loan as initially planned due to his credit rating and lack of savings.

(7) As the plaintiff was in need of cash, she had obtained a mortgage loan for the principal sum of $620,000 in around December 2011 in her sole name (“the Mortgage Loan”).

(8) In detrimental reliance upon the Common Intention, the plaintiff had paid the monthly instalments of the Mortgage Loan by herself.

6.  The plaintiff’s case on the payment of the purchase price and mortgage instalments is well supported by documentary evidence. Such evidence is consistent with the plaintiff’s allegation that she had reached an expressed agreement with the defendant that she would be entitled to the entire beneficial interest in the Property despite the fact that the defendant was also registered as one of the two legal owners of the Property.

7.  I accept the plaintiff’s evidence and hold that, by reason of the common intention of the parties, the defendant has been holding the Property for and on behalf of the plaintiff.

ORDER

8.  I therefore make the following orders:

(1) A declaration that the Property registered in the names of the plaintiff and the defendant as joint tenants is jointly held by the plaintiff and the defendant on trust for the plaintiff absolutely and for her sole benefit;

(2) The defendant do vest unto the plaintiff the rights and title to his share of the Property.

COSTS

9.  I make a costs order nisi that the defendant shall bear the plaintiff’s costs of the action (including all costs reserved), with certificate for counsel, to be taxed if not agreed.

10.  The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.