NANYANG COMMERCIAL BANK TRUSTEE LTD. v. Madam LAI FOR KWAN

1996 No. MP 3090

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is an application by the Plaintiff for an order of the sale of the property situated at Flat 4 on 10th Floor of Man Fai Building, Nos. 26-48 Man Ying Street and Nos. 25-47 Man Yuen Street, Kowloon, Hong Kong. (hereinafter called the said property)

2. The Plaintiff is the Administrator of the Estate of Lai Kam, deceased who died intestate on 1st January 1994, letter of administration of the estate of the deceased having been granted to the Plaintiff on 27th of June 1995 as the lawful attorney of Yip King Yuet, the 2nd wife and widow of the said deceased.

3. The Defendant is the natural and lawful daughter of the said deceased by his first wife. At all material time, the said property was used by the Defendant and her family as their residence.

4. The said property was first registered in the name of the deceased by an assignment dated 8th of November 1985. In August 1986, the deceased assigned the said property to himself and the Defendant as tenants-in-common in equal shares and by another assignment dated 9th of September 1996, the deceased assigned his one half share in the said property to the Defendant by way of gift, thus making the Defendant the sole registered owner of the said property.

5. On 16th of November 1987, the Defendant assigned one equal undivided share of the said property back to the deceased and at the time of his death, the deceased and the Defendant again held the said property as tenants-in-common in equal shares.

6. Apart from the widow Yip King Yuet, the deceased also left eight children, including the Defendant as beneficiaries who are entitled to share in his estate.

7. It appeared that in the presenting proceedings, the Defendant did not challenge the Plaintiff's contention that an order for sale is an appropriate order to make in order to enable all beneficiaries to enjoy the proceeds of the said property if the entitlement over the said property by the estate of the deceased can be established.

8. The Defendant and the other lawful and natural children of the deceased had taken proceedings to challenge the validity of the marriage between the deceased and the widow. A decision in favour of the widow had been made by the court and for the purpose of the present proceedings, the court proceeded on the basis that the widow had been properly married to the deceased and hence the letter of administration of the estate of the deceased had been properly granted to the Plaintiff as the attorney of the widow.

9. In opposition to the present application, the Defendant raised the following matters:-

1. That the entire purchase price of the said property came from her mother who had expressed a view that a property should be bought for her to live for the rest of her life. The Defendant was included as a tenant-in-common with the deceased soon after she arrived in Hong Kong in 1986 because the deceased also wanted to live in the said property. The said property was assigned to the sole name of the Defendant later in order to facilitate the application for the Defendant's husband to come to Hong Kong. In November 1987 when the application for the Defendant's husband to come to Hong Kong was unsuccessful, the said property was again assigned back to the deceased and the Defendant as tenants-in-common. The Defendant claimed that she did not have independent legal advice at that time.

2. In reliance of the promise by the deceased and her mother that she could live in the said property for the rest of her life, the Defendant assigned to the deceased one half share of the said property to the deceased in November 1987 and had incurred expenses in the decoration and refurbishment of the said property.

3. In reliance on the continuous and expressed representation by the deceased that the Defendant could live in the said property for the rest of her life, the Defendant had been paying all outgoing in respect of the said property. The Defendant and her husband had also incurred various expenses in repairing and decorating the said property. They had also put in their own effort in the refurbishment of the said property in order to save money.

10. Put it in simple term, the Defendant was saying that she had been encouraged to act to her detriment by the representation or encouragement of the deceased so that it would be unconscionable for the deceased or his estate to insist on his strict legal rights. The Defendant's plea was one of proprietary estoppel.

11. In so far as the representation allegedly made by the deceased prior to November 1987 when the Defendant assigned back one half share of the said property to the deceased was concerned, it was suggested by Mr. Miu that the Defendant was estopped from making assertion of any interest in the one half share when the assignment was by way of a deed and the consideration was stated to be "natural love and affection."

12. It was suggested that the Defendant could not be allowed to lead evidence to show that she did not in fact intend to give up the half share of the said property. The suggestion was that the Defendant was bound by the doctrine of Estoppel by Deed when she had by the assignment in November 1987 assigned the half share in the said property to the deceased and therefore could not claim to retain any interest over such half share.

13. Mr. Miu, on behalf of the Plaintiff relied on the following paragraph in Halsbury's laws of England, 4th Edit. Vol 16, para. 1018:-

"Estoppel by deed is based on the principle that, when a person has entered into a solemn engagement by deed as to certain facts, he will not be permitted to deny any matter which he has so asserted. It is a rule of evidence according to which certain evidence is taken to be of so high and conclusive a nature as to admit of no contrary proof."

14. The deed of gift in question by which the Defendant conferred the half share in the said property to the deceased stated that the consideration was for love and affection. It made no mention of the Defendant giving up any equitable interest arising out of a constructive trust or proprietary estoppel.

15. In Pink v. Lawrence (1977) 36 P & CR 98 Buckley L. J. stated at P. 101,

"Where there is an express declaration of trust, the doctrine of constructive trusts cannot be referred to contradict the expressly declared trust. The doctrine of constructive trusts is one which applies in circumstances in which there is no declared trust."

16. It was at least highly arguable that the doctrine of estoppel by deed cannot operate against the Defendant when the expressly declared trust had made no mention of the alleged equitable interest arising out of the representation made by the deceased in favour of the Defendant. Further it was also highly arguable that the deceased could not rely on the estoppel by deed to defeat the Defendant's equitable interest when the deceased, on the allegation by the Defendant must have full knowledge of the representation he had allegedly made to the Defendant.

17. In any event, according to the Defendant, after the half share in the said property was assigned to the deceased in November 1987, the deceased continued to represent to her that she would be allowed to live at the said premises during her life time and in reliance upon such representation, the Defendant and her husband had incurred expenses in the decoration and refurbishment of the said property in addition to putting in their own effort for such purposes. Such assertion, prima facie gave rise to a situation whereby it might not be conscionable for the deceased or his estate to insist on his strict legal right. As Oliver L.J. stated in Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd. (Note) [1981]2 W.L.R. 576 at p. 593,

"Furthermore the more recent cases indicate, in my judgment, that the application of the Ramsden v. Dyson, L.R. 1 H.L. 129 principle - whether you call it proprietary estoppel, estoppel by acquiescence or estoppel by encouragement is really immaterial - requires a very much broader approach which is directed rather at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly, or unknowingly, he has allowed or encouraged another to assume to his detriment than to inquiring whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour."

18. In Crabb v. Arun D.C. [1976] Ch. 179, Lord Denning said at p. 188,

"What then are the dealings which will preclude him from insisting on his strict legal rights? If he makes a binding contract that he will not insist on the strict legal position, a court of equity will hold him to his contract. Short of a binding contract, if he makes a promise that he will not insist upon his strict legal rights - then, even though that promise may be unenforceable in point of law for want of consideration or want of writing - then, if he makes the promise knowing or intending that the other will act upon it and he does act upon it, then again a court of equity will not allow him to go back on that promise."

19. I accept that the Defendant was simply making a bare assertion of the representation made by the deceased. I accept that the Defendant is in fact one of the co-owner of the property in question as tenant-in-common with the deceased and that at all material time, she has been living there with her family and that for the past few years, the deceased had seldom been living there although he did refer to the said property as his place of residence in Hong Kong.

20. In so far as the alleged expenses are concerned, most of the decoration or refurbishment were just minor improvement works with a view to make the property more comfortable to live. At this stage of the proceedings, I need only decide if an equity in favour of the Defendant had been created and not the extent of such equity nor how it can be satisfied.

21. Bearing in mind the relationship between the Defendant and the deceased and the circumstances in which the said property was referred and subsequently assigned, I am of the view that the Defendant has established an arguable case that a proprietary estoppel had been established and that it would not be conscionable for the deceased or his estate to regain his half share interest in the said property in a summary way and thereby depriving the Defendant the equity of being allowed to occupy the said property for the rest of her life.

22. On the other hand, having taken into consideration that the claim for equity by the Defendant consisted of a bare assertion on her part and that she was at the material time also a half share owner of the said property as tenant-in-common with the deceased, it was a proper case that further inquiry should be made at the trial to determine the veracity of the Defendant's claim.

23. In any event, the court must also consider the issue, on the assumption that an equity in favour of the Defendant had been established, how such equity could be satisfied.

24. I need only recite a paragraph at p. 577 of the leading text book Snell's Equity 29th Edition,

"Thus the courts are reluctant to compel two persons to live together when they have fallen out, and even after O has died, the due administration of his estate and the rights of those taking under it are factors to be considered. In its search for "the minimum equity to do justice" to A, and shaping it to the facts of the case, "equity is displayed at its most flexible."

25. Again Lord Denning at p. 189 of the case Crabb v. Arun (supra) stated,

"Here equity is displayed at its most flexible,..............If the matter had been finally settled in 1967, I should have thought that, although nothing was said at the meeting in July 1967, nevertheless it would be quite reasonable for the defendants to ask plaintiff to pay something for the access at point B, perhaps - and I am guessing - some hundreds of pounds. But, as Mr. Millett pointed out in the course of the argument, because of the defendants' conduct, the back land has been landlocked. It has been sterile and rendered useless for five or six years:

and the plaintiff has been unable to deal with it during that time. This loss to him can be taken into account. And at the present time, it seems to me that, in

order to satisfy the equity, the plaintiff should have the right of access at point B without paying anything for it."

26. Even if the Defendant were able to establish at the trial the equity as she alleged, the court still have to consider what was the best way to satisfy such equity. Should she be allowed to stay at the said property for the rest of her life as she claims? Should the equity be satisfied by paying her some money to cover the expenses she had incurred in redecorating the said property? Even if she was allowed to stay at the said property, should she be required to pay anything for it and if so how much?

27. All such matter could and should only be resolved properly at the trial.

28. In so far as the Plaintiff seek to enforce the right of the deceased over the said property by way of an order of sale under the Partition Ordinance summarily, the application is refused.

29. I order that the case is to proceed to trial to resolve the issues that I have outlined above and for such purposes, I grant the parties liberty to apply.

30. I also make an order nisi that the costs of the application to be in the cause and the order nisi on costs will be made absolute 14 days after the handing down of this judgment.