CHAN KWAN YIN SHIRLEY AND ANOTHER v. WU WING AND ANOTHER

HCA 7718/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7718 OF 2000

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BETWEEN

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J U D G M E N T

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1.   This action first came on for trial on 18 August 2004. The Plaintiffs claimed for possession of the property known as Lot No. 1830 RP in Demarcation District 106, Yuen Long, New Territories [“the Property”]. The 1^st Defendant resisted the claim and challenged the title of the Plaintiffs. He said he and the 1^st Plaintiff were co-owners of the Property and title was procured to be transferred to the mother of the 1^st Plaintiff in 1989 [“the 1^st Assignment”] by fraudulent misrepresentation practiced by a solicitor clerk. He also relied on the doctrine of non est factum. He counterclaimed for a declaration that the 1^st Assignment was null and void.

2.   Given the nature of the defence, the 1^st Defendant bears the burden of proof in establishing the alleged fraudulent misrepresentation and/or non est factum. This court accordingly directed the defence to open the trial.

3.   In the midst of the evidence in chief of the 1^st Defendant, the trial was adjourned. The circumstances leading to the adjournment are set out in my Reasons for Rulings on 27 August 2004. The purpose of the adjournment was to allow the 1st Defendant to make an application for ancillary relief in the family proceedings.

4.   Since the adjournment, there were attempts by the 1^st Defendant to claim ancillary relief in the family proceedings. However, in the end, his claim was dismissed by Saunders J on 16 April 2008 in HCMC 2 of 2005. There is no appeal against that decision.

5.   The Plaintiffs applied for the resumption of trial on 7 April 2009. On 29 April 2009, in the absence of the 1^st Defendant, this court directed the trial to be resumed on 8 May 2009 on the basis that he had apparently lost interest in the case. This court also gave directions regarding notice of trial to be affixed to some conspicuous part of the Property on 4, 5 and 6 May 2009.

6.   The 1^st Defendant attended the hearing on 8 May 2009. The court explained to him that the trial would proceed on 3 August irrespective of whether he got legal representation and he could seek information from the Resource Centre for Unrepresented Litigants regarding the procedures for securing the attendance of his witnesses at the resumed trial. The trial resumed accordingly. The parties continued to call their respective witnesses and the evidence was completed on 3 August 2009. This court heard final submissions on 4 August 2009.

7.   As I ruled in August 2004, the only issues before the court, as far as the defence case is concerned, are whether the 1^st Assignment was executed under the inducement of fraudulent misrepresentation or under circumstances where the principle of non est factum applies. If the 1^st Defendant fails in setting aside the 1^st Assignment, he does not have any interest to support any claim on his part vis-à-vis the 2^nd Assignment.

8.   Where a man signed a deed without knowing or inquiring as to its nature or effect and did so because of his trust placed on others, he is taken to have every intention to execute the document put to him. He cannot rely on a plea of non est factum, see Saunders v Anglia Building Society [1971] AC 1004 at p.1016B to F, 1025D to F, 1026C to 1027F and 1036A to H. I only need to cite a short passage from the judgment of Lord Reid at p.1016,

“So there must be a heavy burden of proof on the person who seeks to invoke this remedy. He must prove all the circumstances necessary to justify its being granted to him, and that necessarily involves his proving that he took all reasonable precautions in the circumstances. I do not say that the remedy can never be available to a man of full capacity. But that could only be in very exceptional circumstances: certainly not where his reason for not scrutinizing the document before signing it was that he was too busy or too lazy. In general I do not think he can be heard to say that he signed in reliance on someone he trusted. But, particularly when he was led to believe that the document which he signed was not one which affected his legal rights, there may be cases where this plea can properly be applied in favour of a man of full capacity.

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

9.   Further the plea of non est factum is not available to someone who was aware of the nature of the document he executed though he did not bother to find out the precise terms contained in it.

10.   What is the evidence of the 1^st Defendant regarding his execution of the 1^st Assignment? The 1^st Assignment was executed together with a Deed of Separation containing provisions as regards the arrangement for separation between him and the 1^st Plaintiff as husband and wife. In his examination-in-chief (p.10, 17 to 19, 32-33 of the transcript of his evidence on 17 and 18 August 2004), he said the solicitor clerk took the documents to Taiwan for his execution. The clerk told him they were documents the 1^st Plaintiff (who was then his wife) asked him to sign. He did not discuss with the 1^st Plaintiff about the execution of these documents beforehand. He also said nobody had explained the contents of the documents to him before he signed. He could not read English but because he trusted the clerk and the 1^st Plaintiff he executed them even though the clerk did not tell him at that stage what were the nature and effect of the documents. He said the clerk did not tell him the purpose of the documents when he asked him to sign. It was only an hour or so after he had already executed the documents that he was told that the documents were to confer authority on his mother-in-law to collect rent in respect of the Property.

11.   In my judgment, the evidence of the 1^st Defendant, even taken on its face value, does not support any plea of non est factum. It falls squarely and fairly within the situation where it was held by the House of Lords in Saunders v Anglia Building Society [1971] AC 1004 that the plea is not available.

12.   Nor does the evidence support any claim of misrepresentation, let alone fraudulent misrepresentation. His pleaded case of fraudulent misrepresentation was based on misrepresentation made by the solicitor clerk that they were documents for resolving tax problems as requested by the 1^st Plaintiff. The alleged fraud was that he was not told the documents were deed of separation and assignment. When he testified, the 1^st Defendant only said he was told by the clerk that these were documents that the 1^st Plaintiff told him to sign. There was no misrepresentation in that regard. His evidence was that no representation had been made as to the purpose of the documents, hence there cannot be any misrepresentation as to the purpose. The 1^st Defendant did not testify that the 1^st Plaintiff had misrepresented to him the effect and purpose of the documents. He said categorically that the 1^st Plaintiff had not discussed the matter with him before he executed the documents.

13.   Hence, even on the 1^st Defendant’s own evidence, his counterclaim must fail.

14.   Further, I do not find the 1^st Defendant to be credible. If he had not discussed the matter with the 1^st Plaintiff beforehand, why would he sign the documents when the clerk told him that these were documents his wife asked him to sign?

15.   His story is contradicted by his own witness Mr KK Yeung, the clerk in question. Mr Yeung said he told the 1^st Defendant that the documents were a deed of separation and an assignment. The 1^st Defendant thereupon said he knew what they were since he had discussion with the 1^st Plaintiff beforehand. Thus the clerk did not interpret the documents at length. Mr Yeung denied he had told the 1^st Defendant that the documents were authorization to his mother-in-law to deal with the property on his behalf. The 1^st Defendant did not suggest Mr Yeung committed any fraud against him when he called him to give evidence.

16.   Mr Yeung said that the purpose of the documents was a sham to deal with tax problems. He did not quite explain how these documents could resolve the so-called tax problems. His evidence is contradicted by the evidence of the 1^st Plaintiff.

17.   In this respect, I prefer the evidence of the 1^st Plaintiff and the Mr Willis on the genesis of the 1^st Assignment and the Deed of Separation and how they came to be executed. I reject Mr Yeung’s evidence that these documents were prepared and executed for the purpose of evading tax liabilities. As pointed out by Mr Wong, the evidence shows that the sum claimed by the Inland Revenue around that time was only $139,349.51 and it is implausible that the 1^st Plaintiff would devise a sham transaction at the cost of $40,840 (by way of stamp duty and legal costs) to evade such a liability. Further, again as submitted by counsel, the marriage was actually dissolved after the separation.

18.   The 1^st Plaintiff’s evidence is that the marriage between her and the 1^st Defendant broke down in 1984 when she discovered that he had an affair with a woman in Taiwan. Thereafter, the parties reached an oral agreement to separate. When she proceeded to obtain a divorce in 1989, she reached agreement with the 1^st Defendant that the Property was to be sold with the proceeds (after deducting $400,000 as her share of beneficial interest) given to her for maintenance of herself and the 3 children of the marriage. The agreement was implemented with documents prepared by Messrs. Ip & Willis, a solicitors firm trusted by both parties. After the documents were prepared in accordance with the joint instructions of the parties, they were brought to Taiwan for execution in the presence of Mr Willis, a partner of the firm and the solicitor clerk Mr Yeung.

19.   The evidence of the 1^st Plaintiff is corroborated by the evidence of Mr Willis, set out in a letter dated 27 March 2001 from that firm to Messrs. Dickie Tsang & Co. (then acting for the 1^st Defendant). He also confirmed it in the witness box on 3 August 2009. Mr Willis further said when he attended the execution of the documents in Taiwan, he had personally confirmed the instructions on the arrangement for separation with the 1^st Defendant. Though he left it to Mr Yeung to interpret the two documents to the 1^st Defendant, he personally explained to the 1^st Defendant the general nature of the documents. Thus, the evidence of Mr Willis proves the 1^st Defendant’s knowledge that the documents were for the implementation of the separation arrangement.

20.   As between Mr Willis and Mr Yeung, I found Mr Willis to be a more reliable witness. Perhaps by way of a Freudian slip, Mr Yeung commented that there was no interpretation clause in the 1^st Assignment and he said he had asked Mr Willis to add it back. In other words, he was prepared to sign an interpretation clause on the assignment as he did for the Deed of Separation. He could only properly certify under an interpretation clause if he had actually interpreted the contents of the documents to the 1^st Defendant. I do not see any reason why Mr Willis, a solicitor who was qualified in 1972 and mindful of his duty as an officer of the court, would lie for the Plaintiffs in the witness box. On the other hand, Mr Yeung had been working in the solicitors firm formerly representing the 1^st Defendant in this action (until he chose to act in person). Mr Yeung also confirmed that he had been a friend of the 1^st Defendant for a long time.

21.   As regards the use of the Property by the 1^st Defendant after the execution of the 1^st Assignment, the 1^st Plaintiff said it was based on a bare licence granted to him after she had discussed the matters with the children of the family. The licence was determinable by notice and it was determined in April 2000.

22.   Some other issues like the source of the funding for the $1.4 million consideration stated in the 1^st Assignment and the ownership of the sauna business had been raised in the witness statements and affirmations. They are only of marginal relevance. There is clear evidence supporting that the $1.4 million was actually paid. Insofar as the issues are said to be relevant for the purpose of credibility, I have taken them into account when I said I prefer the evidence of the 1^st Plaintiff. The witnesses called by the 1^st Defendant could not testify as to the financial arrangement within the family of the 1^st Defendant. All they can say was that to the outside world, the 1^st Defendant appeared to be well off. They could not rebut the evidence of the 1^st Plaintiff that she provided the 1^st Defendant the capital for the business. The 1^st Plaintiff gave a credible account as to the source of her finance for capital contribution to the sauna. It has nothing to do with the Jordan Road property the land search of which the 1^st Defendant relied upon.

23.   I accept the 1^st Plaintiff to be telling the truth in respect of the genesis of the Deed of Separation and the 1^st Assignment. I find that they were executed by the 1^st Defendant with clear knowledge on his part as regards their nature and effect. The documents were executed pursuant to the agreed arrangement for the separation of the 1^st Plaintiff and the 1^st Defendant as husband and wife. There was no misrepresentation whatsoever. I reject the 1^st Defendant’s evidence insofar he testified otherwise.

24.   That being the case, the Counterclaim must be dismissed.

25.   It also follows that the Plaintiffs are entitled to an order for possession in respect of the Property. As regards damages for trespass and mesne profits, the Plaintiffs are not pursuing the same for practical considerations. I need to say no more about that.

26.   I also make a cost order nisi that the 1^st Defendant shall pay the Plaintiffs’ costs of this action, such costs to be taxed if not agreed. The order nisi will be made absolute unless an application for variation is made within 14 days.