CHAN KAN FUK v. CHAN LAI KUEN

DCCJ14044/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 14044 OF 2000

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Judgment

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1. This is a claim by the Plaintiff against the Defendant for vacant possession, arrears of license fee of the suit premises in the sum of HK$405,000, namely in the sum of $5,000 per month from December 1993 to end of August 2000, mesne profit of the suit premises at the rate of HK$5,000 per month until date of delivery up of vacant possession and other items of claims.

Undisputed Facts

2. The Plaintiff is an indigenous male villager entitled to the grant of land by the Government to build a small house "丁屋" (hereinafter referred to as "small house") in the New Territories. The Government granted the Plaintiff by private treaty the lease of the land known as Lot 2573 in Demarcation District No. 76 also known as 30 Leng Pei Tsuen, Fanling, New Territories (hereinafter referred to as "the Land"). Under the scheme, the Plaintiff would be entitled to build on the Land a small house of 3 storeys of 700 sq. ft. each storey. However the special conditions of the Grant required that the building be completed and made fit for occupation before the expiration of 36 months from the date of grant which was 23rd November 1992.

3. The Defendant is the elder sister of the Plaintiff.

4. In or about January 1993, the Plaintiff contracted a builder Kong Kai Chow to lay foundation works for the small house and the ground floor of the small house in the sum of $300,000. In about June 1993, the foundation works and ground floor of the small house were completed. The Plaintiff did not have sufficient money to build on top of the ground floor of the small house.

5. In or about June 1993, the date being approximate, the Defendant approached the Plaintiff and suggested to him that he should build the 1st floor of the small house. The Plaintiff agreed to build the 1st floor of the small house on funding by the Defendant.

6. Pursuant to the aforesaid arrangement, the building of the 1st floor of the small house was completed in about November or December 1993. Upon completion of the construction of the small house, the Defendant and her family moved in to reside in the 1st floor of the small house.

Disputed Facts

The Plaintiff's Case

7. The Plaintiff stated that the Defendant agreed to lend the Plaintiff the cost of building the 1st floor of the small house during a conversation between them wherein the Defendant suggested to him that he should build the 1st floor of the small house with a loan from her. During the conversation only he and the Defendant were present. Their mother was not there. He agreed to her suggestion. Pursuant to the agreement the Defendant lent him $100,000 in total.

8. He stated that when the Defendant suggested that he built the 1st floor of the small house, she merely wanted to help him because she was his elder sister. He did not need the 1st floor for his residence. She did not ask to live in the 1st floor upon completion of its small house. She did not ask for any return on the loan. The building of the 1st floor was for his own use. There was no discussion as to when the loan would be re paid. There was no discussion about payment of interest. After the building works of the 1st floor was completed the Defendant told him that she did not have a placed to live in. He let her use the 1st floor temporarily. There was initially no discussion as to rent. Subsequently it was discussed she should continue to live upon payment of rent at market rate. There was never any agreement by the Defendant that she should pay rent or license fee at $5,000 per month. At the later stage when he asked her to vacate the premises she asked him to pay her $1 million. He disagreed. She then asked him to pay her $500,000.00. He disagreed. At an even later stage, he asked her to pay him $5,000 per month as a form of rent but she disagreed. He confirmed under cross-examination that she had never quite agreed to pay rent of $5,000 per month. However, he stated that even when she never quite agreed, it does not mean she does not agree.

The Defendant's Case

9. The Defendant and her mother both stated that on a certain day on about June 1993, time being approximate, the Plaintiff, the Defendant and their mother were at the construction site of the ground floor of the building when the Plaintiff stated that he did not have sufficient money to build the 1st floor of the said building. He stated that he only had $300,000 for the ground floor and the foundation work. The builder said the costs of building the 1st floor of the small house would be $200,000. The Plaintiff asked the Defendant to build the 1st floor. The Defendant stated that she would contribute $200,000 for the building of the 1st floor. However upon completion of the 1st floor it was to be used as a residence for herself for life. The Plaintiff agreed to let the Defendant live in the 1st floor of the small house during her lifetime. The Defendant disagreed to the Plaintiff's version of facts that she only loaned the money to the Plaintiff to build the 1st floor. She said the agreement between herself and the Plaintiff was made before the 13th May 2002 which was the date of the withdrawal of the sum of $100,000 from her bank account and subsequent deposit of this sum into the builder's account.

10. The Defendant stated that pursuant to the agreement she paid $200,000 to the builder and she produced substantiating evidence of such.

11. She stated that she never agreed to pay to the Plaintiff rent or license fee in the sum of $5,000 per month at any time.

Assessment of Credibility

12. The Plaintiff's version of facts is unbelievable for the following reasons:-

(1) The Plaintiff did not need the 1st floor as a residence at the time. It was only for his future use. The Defendant gave evidence that at the time she was living in rented accommodation with her husband and family paying $1,000 odd per month. She was not wealthy but had savings from her small earnings of about $1,000 per month and savings from house-keeping money given her by her husband. In fact the $200,000 she had was her life savings. It is not credible that in the circumstances aforesaid she would offer to lend her life-savings to the Plaintiff to enable him to build the 1st floor without seeking any benefit for herself. It is not credible that she would do so out of her love and affection for him when she herself was in need of accommodation.

(2) The Plaintiff stated that the offer of the loan contained no term as regards the date of repayment nor any term related to payment of interest. This further renders the Plaintiff's version unbelievable.

(3) The Plaintiff in evidence turned from his pleaded case wherein he pleaded an agreement by the Defendant to pay license fee in the sum of $5,000 per month to reside in the 1st floor of the building from December 1993. This version of facts as pleaded is incredible in view of the fact that the Defendant had loaned him money for the building of the premises which he never repaid. Further the license fee of $5,000 per month would be well above any market rent at the time. The expert evidence of the surveyor who gave evidence of rental of comparable premises in Fanling in her report for January 2002 makes this clear.

(4) The Defendant's version of evidence related to an agreement between herself and the Plaintiff that she would pay the construction price of $200,000 for the building of the 1st floor of the building upon a promise by the Plaintiff that she could reside there for her life is credible in view of the fact that he did not have the money to build the 1st floor. Further there is a time limit for such construction being 36 months and it is far better for the 1st floor to be constructed by the builder immediately upon completion of construction of the ground floor rather than wait a period of time.

(5) Further, it is quite credible that the mother being concerned for her daughter to have a home for herself and her family would enter into the discussions between brother and sister.

13. I therefore accept the Defendant's version of facts.

Defendant's Equity

14. I am satisfied that the Plaintiff has made an irrevocable promise to the Defendant that upon her payment of the costs of building the 1st floor of the small house, she could reside in the 1st floor of the small house with her family during her life. She acted and relied on this to her detriment by paying the sum of $200,000 to the builder. The sum of $200,000 is the total cost for the building of the 1st floor. It was arising from the promise that the money was paid for the construction of the 1st floor and the Defendant and her family moved in to the 1st floor of the building and has resided there since December 1993. By virtue of the aforesaid, it would be unconscionable for the Plaintiff to rely on his strict legal rights.

15. The Defendant has established a right or an equity over the 1st floor of the building arising from the Plaintiff's promise and her acting on it to her detriment, Snell's on Equity 13th Edition, paragraph 39-19 state, "If the equity is established, effect will have to be given to it in whatever is the most appropriate way taking into account all relevant circumstances including the conduct of the parties".

16. The Defendant's Counsel Mr. Chan stated that the range of possible remedies that can be granted to satisfy the equity has been wide and varied, depending on the circumstances, as can be seen from the paragraph in Snell's on Equity referred to. The alternative remedies applied for by the Defendant in her counterclaim are various and I set them out hereunder:-

(1) A declaration that the Defendant and her family are beneficially entitled to an estate for their joint lives of the Premises together with right of way etc . . .

(2) A declaration that the Plaintiff is a trustee of the Defendant's and her family's right to exclusively occupy the whole of the Premises together with right of way etc . . .

(3) Further, or in the alternative, a declaration that the Plaintiff is not entitled to claim possession of the Premises from the Defendant, her husband or son for as long as they or any of them live and they are entitled to occupy the Premises together with the aforesaid access exclusively for the rest of their lives;

(4) Further or in the alternative, a declaration that the Plaintiff is not entitled to claim possession of the Premises from the Defendant or her husband or son for as long as they or any of them live, unless the Plaintiff shall have first paid the Defendant the sum of damages as the Honourable Court deems just and to satisfy the equity;

(5) Further or in the alternative, repayment to the Defendant of the sum of HK$200,000.00 for unjust enrichment of the Plaintiff, with interest at such rate and for such period as is just;

(6) Further or in the alternative, repayment to the Defendant of the sum of $200,000.00 for money paid by the Defendant to the use of the Plaintiff, with interest at such rate and for such period as is just;

(7) Further or alternatively, a declaration that the Defendant is entitled to a lien on the Premises for repayment of the said sum of HK$200,000.00 with the aforesaid interest;

(8) Damages in equity or at law as claimed and/or to be assessed.

17. Paragraph 39-18 of Snell's on Equity 13th Edition at page 640 states, "The extent of the equity is to have made good, so far as may fairly be done between the parties, the expectations of A which O has encouraged. A's expectation or belief is the maximum extent of the equity, so that if, for example, A's expectation is that he could stay in a house for the rest of his life, this will not be given effect to in such a way as to confer on him the rights of a tenant for life under the Settled Land Act 1925, for that, with its concomitant right of sale, would give him a greater interest than he was entitled to expect."

18. Plaintiff's Counsel has referred me to Bannister v Bannister [1948] 2 All E.R. 133. The facts of that case were that the Plaintiff gave an oral undertaking to the Defendant that the Defendant could live in her cottage rent free for life if she were to sell the cottage wherein she lived and another cottage to the Plaintiff. In reliance of the oral promise the Defendant sold that cottage and another to the Plaintiff at a price well below their market value. In that case the Defendant's equity in her right to occupy the property for her life was protected by a declaration made by the Court that the Plaintiff held the property on trust during her life to permit her to occupy the same for as long as she desired, and subject thereto in trust for himself, and the Plaintiff was not entitled to an order for possession as claimed by him.

19. The Defendant's Counsel urged on me to grant the relief similar to that given by the Court in Bannister v. Bannister referred to. Relief (2) applied for in the Counterclaim is in these terms. He stated that this would best protect the Defendant's equity and right of occupation of the Premises for her life together with a right of access through the common area, the staircase to the 1st floor of the building and the roof. He stated that remedy (3) and (4) of the Counterclaim referred to above are insufficient to protect the Defendant's equity or right of occupation of the Premises for life as the Plaintiff could easily defeat such by a sale or divesting of his ownership of the premises and the Defendant would have no recourse. He stated that relief (5), (6) and (7) of the Counterclaim referred to above do not fully satisfy the equity as recovery of the sum of $200,000.00 together with interest would not be sufficient to satisfy her equity of her right to occupy the premises for life.

20. I agree with Defence Counsel Mr. Chan's submission and I am of the view that relief in line with that granted in the case of Bannister v. Bannister referred to above and similar to relief (2) applied for by the Defendant in her Counterclaim, but limited to her right of occupation with her family during her own life only, will give effect to the equity of the Defendant over the Premises.

21. I therefore dismiss all the Plaintiff's claims in his Statement of Claim. I give judgment for the Defendant by making a declaration in these terms: A declaration that the Plaintiff is a trustee of the Defendant's right to occupy the Premises, namely, the first floor of the small house in the piece and parcel of land known and registered in the North New Territories Land Registry as Lot No. 2573 in Demarcation District No. 76 also known as 30 Leng Pei Tsuen, North New Territories held under New Grant No. 12589 together with a right of way over the Common Area of the small house and Staircase and roof, such rights to be exercised together with members of her household for as long as the Defendant shall live.

22. I make an order nisi for costs of the Action to be paid by the Plaintiff to the Defendant to be taxed if not agreed together with Certificate for Counsel. I order that the Defendant's own costs be taxed in accordance with the Legal Aid Regulations.