LAW FUNG YIN v. THE OFFICIAL RECEIVER

DCCJ 3900/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3900 OF 2015

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DECISION

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1.  This is the plaintiff’s application for default judgment.

2.  The Statement of Claim filed on 24 August 2015 seeks, inter alia, the following relief:-

(1) A declaration that the Deceased was the sole beneficial owner of the Property and is now the beneficial owner of the half share of the legal interest in the Property vested in the defendant; (“Head 1”)

(2) A declaration that the defendant holds the half share of the legal interest in the Property on trust for the plaintiff; (“Head 2”) and

(3) An order that the defendant do transfer the half share of the legal interest in the Property to the plaintiff free from incumbrances. (“Head 3”)

3.  The defendant has not filed a defence in these proceedings, even after time was extended by consent.  The plaintiff accordingly applies for judgment in default of defence under order 19, rule 7 RDC.

The defendant’s role

4.  The defendant does not formally appear as a party in this application.  By letter to the court dated 20 November 2015, the defendant stated that it would not be taking part in the application for the reason that it did not wish to incur legal costs[1].  As a result, attendance of the defendant was excused.

5.  By a further letter dated 30 December 2015, however, the defendant stated that, on review, it maintained that it still would not be defending the action but was prepared to attend the hearing as an amicus.

6.  At the hearing Ms Lok, for the defendant, confirmed that she was not asking to be heard formally as an amicus[2] but that she only wished to offer assistance, as an officer of the court, on aspects involving the Official Receiver’s practices.  Also that the defendant would not be making any submission on the substance of the application.  There was no objection from Mr Ho, counsel for the plaintiff, that the defendant could offer assistance in this way during the hearing.

The application and principles

7.  The plaintiff applies for judgment in terms of all the relief pleaded (see paragraph 2 above).

8.  As was accepted by the plaintiff, in order to dispose of this application, the court does not receive evidence but must give judgment on the pleadings alone: see HK Civil Procedure 2016 Vol 1 at Note 19/7/11.

9.  It was not disputed that it is not the normal practice of the court to make a declaration without trial: ibid at Note 19/7/20.  See also Patten v Burke Publishing Co Ltd [1991] 2 All ER 82 and Lai Wai Kuen v Wong Shau Kwong, unrep, HCA 3424/2003, 12.11.2004.  In Lai Wai Kuen, Lam J (as he then was), said the following:-

“6. Although it is not the normal practice of the court to make a declaration without a trial, it is not an inflexible rule (see Hong Kong Civil Procedure 2004 Para.19/7/20). In the present circumstances, I am satisfied that the Plaintiff has a genuine need for the declaratory relief and the court could properly grant her such relief based on the merits of the case.”

10.  There are, of course, exceptions to this rule but the primary focus is whether the court is in a position, without evidence having been presented, to properly grant the relief sought by the plaintiff at this relatively early stage of the proceedings although the matter is not being formally contested by the defendant.  

11.  The plaintiff’s application is largely premised on the “genuine need” factor (Lai Wai Kuen and HK Civil Procedure 2016 Vol 1 at Note 19/7/20).  Apart from the genuine need for the issue of the beneficial interest in the Property to be resolved for the benefit of the Deceased’s estate, Mr Ho argued that if the court did not grant the relief sought that the plaintiff would be unable to proceed further in these proceedings since there was no joinder of issue in relation to the plaintiff’s case.  

12.  I do not agree with Mr Ho that the plaintiff’s only way to proceed further would be by issuing fresh proceedings by way of originating summons.  Indeed, he referred me to HK Civil Procedure 2016 Vol 1 at Note 19/7/7 which indicates that the court has the power to give directions for trial notwithstanding there having been a default in filing a defence.  The court was not informed why the plaintiff could not proceed in this way.

13.  In any event, I am required to consider the application on its own strengths.  What the plaintiff needs to do to further progress this matter, if not justified on the merits at this stage, should not affect the court’s usual consideration of the application before it.

Common intention constructive trust

14.  The action concerns the beneficial ownership of Flat 8, 32^nd Floor, Block B, Yu Tung Court, No 33 Tat Tung Road, Tung Chung, New Territories (the “Property”) which was assigned to Madam Wong Siu Mui (the “Deceased”) and her son (“LCW”) in 1997 as joint tenants.

15.  On 11 June 2002, a bankruptcy order was made against LCW.  As a matter of law, upon LCW being adjudged bankrupt:-

(1) A severance of the joint tenancy in relation to the Property took place whereby the joint tenancy was converted into a tenancy in common in equal half shares; and

(2) By operation of s 58 of the Bankruptcy Ordinance, Cap 6, LCW’s half share vested in the defendant as trustee.

16.  The mortgage executed by both the Deceased and LCW in relation to the Property was repaid and the legal charge was discharged on 13 June 2005.

17.  The Deceased passed away on 25 August 2014 and probate was granted on 12 December 2014.  The plaintiff, being one of the Deceased’s children, was named the executrix of the Deceased’s estate.  The other child of the Deceased, apart from LCW, is Law Fung Yi.

18.  On behalf of the Deceased’s estate, the plaintiff issued and served its Writ of Summons on the defendant.  The defendant indicated its intention to defend these proceedings at the time but, as stated above, no defence has been filed.

Analysis

19.  As is clear from the pleaded case, the crux of the action is the issue of beneficial ownership of the Property.

20.  The plaintiff asserts that it was orally agreed or, alternatively, there was a common intention between LCW and the Deceased, to be inferred from their conduct, that LCW’s name be added as a co-purchaser to the title of the Property in order to facilitate the process of the Deceased obtaining a mortgage loan.  Accordingly the entire beneficial ownership of the Property would belong to the Deceased and that the pair held the Property on a constructive trust for the Deceased alone.

21.  In considering such issues, the court is normally minded to take a broad and holistic approach in considering the nature of the beneficial interests.  In Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, the Court of Appeal recently restated the main principles in this respect (per Cheung JA at para 5.16):-

“In Jones, Lord Walker and Baroness Hale in their joint judgment further elaborated on the applicable principles on disputes in respect of family homes in joint names and family homes in sole name. In respect of joint name homes, the principles are as follows. For ease of reading, I have arranged each of the five principles in separate paragraphs:

‘51 In summary, therefore, the following are the principles applicable in a case such as this, where a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests.

(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.

(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.

(3) Their common intention is to be deduced objectively from their conduct:

“the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party”: Lord Diplock in Gissing v Gissing [1971] AC 886, 906.

Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden [2007] 2 AC 432, para 69.

(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the Property, “the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the Property”: Chadwick LJ in Oxley v Hiscock [2005] Fam 211, para 69. In our judgment, “the whole course of dealing … in relation to the Property” should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties’ actual intentions.

(5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).”

22.  Whilst I am aware that the nature of the mother/ son relationship in this case is different to that in Mo Ying, I am of the view that the same factors set out by Cheung JA above are pertinent.

23.  I have scrutinised the application carefully and in spite of Mr Ho’s able submissions, I am unable at this stageto grant a declaration under Head 1.

24.  Although I was taken through the Statement of Claim in detail, it is clear to me that evidence is needed for the court to be satisfied that the Property was held on sole beneficial trust for the Deceased as alleged.  Whilst I am prepared to accept that the legal title and mortgage were executed, the underlying intention cannot, in my view, be implied or ascertained without proper consideration of the evidence (as indicated in the authorities cited above).

25.  For example, I cannot simply accept that LCW had an arrangement with the Deceased (paragraphs 9 to 11 of the Statement of Claim) without evidence being tendered, including by LCW, and that evidence being properly presented and tested by the court.  At the moment the court has nothing in respect of which it can make such an assessment.

26.  More particularly, although financial contributions are relevant as stated by Cheung JA in Mo Ying, it is also relevant that both the Deceased and LCW executed the mortgage as borrower, with personal liability to repay the mortgage loan (see paragraph 10.4 of the Statement of Claim).  As a matter of law, both LCW and the Deceased are taken to have contributed half the sum for the purchase of the Property: see Re Superyield Holdings [2000] 2 HKC 90, 107 (Recorder Robert Kotewall SC):-

“(10) Where some or all of the purchase price is borrowed, the acceptance of a personal liability as against the lender to repay, for instance, by the execution of a mortgage containing a personal covenant to repay, constitutes a contribution to the purchase. Where the covenant to repay the lender is joint and several, each party to the covenant to repay is taken to have contributed half of the sum raised for the purchase ……”

27.  This position seems to be at odds with that which the plaintiff seeks the court to declare, such that this issue cannot be decided without more.

28.  Based on the above, I decline to make a declaration under Head 1.

Head 2 and Head 3

29.  Since I make no order under Head 1, it follows that I cannot also make orders in relation to either Head 2 or Head 3.

30.  Given that I cannot declare at this stage that the Deceased was the sole beneficial owner of the Property, I am unable to make any declaration in relation to LCW’s half share interest in the Property (vested in the defendant) that such interest is being held on trust for the Deceased’s estate (Head 2).

31.  Nor can I order (even though this is not declaratory relief) such interest to be transferred to the Deceased’s estate either free from encumbrances, to the best of the defendant’s knowledge, as claimed or at all (Head 3).

Genuine need and justice

32.  I am mindful that there is a genuine need for the matter to be resolved and there is no dispute about this. But I do not accept that it is proper to grant the relief sought at this stage.

33.  The plaintiff can progress these proceedings and my decision does not prevent this.  At the same time, it is necessary for the issue of beneficial interest to be resolved either in favour of the Deceased or in favour of the status quo.  The concept of “justice” referred to at Hong Kong Civil Procedure 2016, Vol 1 at Note 19/7/20 must be to both parties not simply the party that appears to need it most.  It would not be just, in my view, if the matter were decided at this stage without the court being able to consider the relevant evidence.

34.  I am reminded of the dicta of Fok J (as he then was) in Top One International (China) Property Group Co Ltd and Another v Top One Property Group Ltd and Others [2011] 1 HKLRD 606 [83] which is apposite:-

“In the absence of a judgment reached after hearing evidence, a declaration could be based only on unproved allegations and the court ought not to declare as fact that which might not have proved to be such, had the facts been investigated: Wallersteiner v Moir [1974] 1 WLR 991 per Buckley LJ at p.1029 and Patten v Burke Publishing Co. Ltd [1991] 1 WLR 541 per Millett J (as he then was) at p.544A.”

35.  In declining to grant the declarations sought by the plaintiff in this application, I agree that “it does not mean that the (plaintiff) cannot obtain the declarations, it merely means that (it) will have to prove (its) entitlement to them after adducing evidence in the usual way.” ibid at [85].

Conclusion

36.  The plaintiff’s summons is dismissed.

Costs

37.  I heard the parties on costs.  It seems to me, given that the defendant did not formally appear in this application, that there should be no order as to costs of the Summons and I so order.

38.  It remains for me to thank both Mr Ho and Ms Lok for their assistance to the court.