XCHRX CHAN CHUN HA v. LAM MO TSE and Another

1993, No. A5087

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The Plaintiff asserts three claims. First, against the 1st Defendant for a declaration that the 1st Defendant together with one Chan Hok and one IU Luen-chu holds certain property on trust for the Plaintiff. Second, against the 1st Defendant for HK$600,000 lent to the 1st Defendant. Third, against the 1st and 2nd Defendants for the sum of HK$500,000 lent to the two Defendants. The Plaintiff applied for summary judgment under Order 14 in relation to all three claims. On 19th November 1993 Master Woolley ordered that judgment be entered against the 1st and 2nd Defendants for HK$500,000. He gave leave to the 1st Defendant to defend in relation to the other claims and gave directions for the further conduct of the action. The 1st and 2nd Defendants gave Notice of Appeal against that Order seeking unconditional leave to defend the claim for HK$500,000. On 29th November the Plaintiff gave Notice of Cross Appeal against the Order of Master Woolley seeking a declaration in relation to the property and the consequential order that the 1st Defendant should execute an assignment to the Plaintiff.

2. There is no provision for a cross appeal under Order 58. Upon an appeal against a Master's decision, the original application before the Master is dealt with by way of rehearing before a Judge. It is at least in theory possible for a party to that appeal to seek relief that was not granted to him by the Master although he has not formally appealed against the Master's decision. The better practice, however, is for that party formally to appeal so that there can be no doubt about his intention. Accordingly, I treat the Plaintiff's Cross Appeal as an appeal and give leave for the appeal to be lodged out of time. As to the latter aspect, the Defendants had no real objection.

3. The property, a residential flat in Caine Road, was transferred into the names of Chan Hok and the 1st Defendant on 3rd January 1990. It is the Plaintiff's case that he purchased the property for his own residence. He was about 80 years old and not in good health. He decided to purchase the property in the name of his only son, Chan Hok, who is crippled and not very intelligent. Shortly before the purchase of the property was to be completed, he was approached by the 1st Defendant who asked him to include her name as owner of the property to enable her to be in a better position to apply for a visa to go to the U.S.A. The 1st Defendant assured the Plaintiff that she would transfer the property back to the Plaintiff according to his wishes at a later date. The Plaintiff agreed to do this.

4. The explanation for this apparent act of generosity is that the Plaintiff's and 1st Defendant's families have been acquainted for many years. The Plaintiff and the 1st Defendant's father used to work together in Shanghai and later in Hong Kong. So there has been a relationship, even if the nature and closeness of that relationship is in dispute, between the Plaintiff and the 1st Defendant for a considerable period of time.

5. The 1st Defendant denies that there was any form of trust involved when the property was put in her name. It is her case that the Plaintiff was worried about his son Chan Hok should anything happen to the Plaintiff and his wife. The Plaintiff suggested making his son and the 1st Defendant beneficial owners of the property as joint tenants so that the 1st Defendant could look after Chan Hok for the rest of his life. This, the 1st Defendant willingly agreed to do. For the time being, however, while the Plaintiff and his family occupied the property there was no question of her residing there.

6. In June 1991 the 1st Defendant's home was declared unsafe and demolished. The 1st Defendant was rendered homeless. The Plaintiff provided the 1st Defendant with HK$600,000 to enable her to purchase a new flat. The Plaintiff asserts that the sum was a loan. The 1st Defendant says it was a gift. Plainly that is an issue that will have to be resolved at trial. For the Plaintiff, however, Mr. Lam relied upon it as the first of 8 pieces of evidence which, he said, demonstrate that the 1st Defendant's case is wholly incredible to the extent that she fails to show that there is a triable issue in relation to the property. Mr. Lam asked why, if the Plaintiff had already made a gift to the 1st Defendant of a half share in the property in January 1990, would he give her another HK$600,000 the following year in order to buy another flat. He also pointed out that the 1st Defendant, at this time, made no suggestion that she should live in her own property which the Plaintiff had already given to her.

7. In November 1991, the property was transferred into the joint names of Chan Hok, the 1st Defendant and IU Luen-chu. Madam Iu is the Plaintiff's elderly retainer. According to the Plaintiff, he had asked the 1st Defendant about her application for a visa. He discovered she had not yet made the application so enquired whether she would transfer the property back to him. The 1st Defendant was evasive. The Plaintiff thought the 1st Defendant was not being honest and demanded that Madam Iu's name be added as registered co-owner of the property. The 1st Defendant agreed to this. Mr. Lam asked why the 1st Defendant would agree to such a proposal if she was already beneficial owner of the property. The answer, according to the 1st Defendant, was that the Plaintiff was concerned that Madam Iu should be looked after in the same way as Chan Hok. As the property had been given to her on the basis of looking after Chan Hok, she felt that Madam Iu should get the same treatment.

8. I have to say that I find it curious that the Plaintiff, if he was concerned about the 1st Defendant's behaviour, should add yet another name to the list of owners of the property rather than seek to recover the property from the 1st Defendant.

9. In the middle of 1992, Madam Iu had to go into hospital. For about three or four months the 1st Defendant came to assist the Plaintiff and his family at the property. When Madam Iu recovered and returned from hospital the 1st Defendant was "fired" by the Plaintiff. Of this, Mr. Lam made two points. First, it was the only time and a very brief period during which the 1st Defendant lived in the property. Second, the relationship between the Plaintiff and 1st Defendant appears to have been that of employer and employee. Neither of these points, he said, suggested ownership of the property.

10. Prima facie, that is true. But the submission overlooks two things. First, the relationship between the parties and their families. Second, that the 1st Defendant has made it clear throughout that she did not expect to be able to reside in the property while the Plaintiff and his wife were still alive and living there.

11. In July 1992 the 1st Defendant wrote a long letter to the Plaintiff. In that letter in a reference to the house she spoke of being "nominal" owner and never having thought of moving to live in it. She referred to her application for a visa. That passage, said Mr. Lam, is consistent with the Plaintiff's case and not with the 1st Defendant's.

12. Again, Mr. Lam's point seems powerful. The passage on which he relies, however, has to be looked at in the overall context of the letter and in particular to the passage immediately preceding. In the preceding passage, the 1st Defendant is complaining about the Plaintiff's daughter and says that the daughter's next step will be to "ask for cancellation of my right to reside in the house". There, the 1st Defendant plainly is of the view that residence is something that is available to her although it is not a right which she yet sought to assert.

13. In December 1992 the 1st Defendant wrote another letter to the Plaintiff. In that letter is a passage in which she refers to "your house" registered in her name, in which she points out that she applied for the utilities "on your behalf", that she had no intention of taking possession and registered her name to make it easier to apply for a visa. Again, Mr. Lam says that passage is wholly contrary to the 1st Defendant's case and conspicuous by its absence is any reference to the 1st Defendant becoming owner of the property in order to look after Chan Hok. Again, however, I observe that this short passage has to be looked at in context of a long letter.

14. On 20th May 1993 the Plaintiff's solicitors wrote to the 1st Defendant and the other two owners of the property. It is a very formal letter setting out the manner in which the Plaintiff said the property had come into the names of the three owners. It required the owners to acknowledge that they held the property in trust and that they agreed to assign it back to the Plaintiff. Chan Hok and Madam Iu both signed a form of acknowledgment, although neither of these forms mentioned the word trust. The 1st Defendant did not respond. Mr. Lam commented that the 1st Defendant might have been expected to respond protesting that the property had been given to her by way of gift and that there was no question of it being returned to the Plaintiff. The silence is perhaps surprising. Equally surprising, however, is the formal manner in which the Plaintiff chose to approach his son and retainer and the alacrity with which they responded. I attach little importance to this aspect of the evidence.

15. Finally, Mr. Lam pointed out that it was not until her first affirmation made on 1st September 1993 in response to the summons for judgment that the 1st Defendant for the first time asserted that the property had been given to her by way of gift.

16. It is fair to say, I think, that Mr. Lam has presented a powerful case. I cannot, however, overlook that there is a direct conflict between the Plaintiff and the 1st Defendant as to the circumstances in which the 1st Defendant's name was registered as owner of the property. That conflict can primarily only be resolved by oral evidence in order to glean the true intention of the Plaintiff. I accept that the documentary evidence and other pieces of evidence to which I have referred support the Plaintiff's rather than the 1st Defendant's case. Some of these pieces of evidence are, however, explicable. The 1st Defendant has never expressly conceded, as perhaps might have been expected, that the property belonged to the Plaintiff. On the contrary, she has spoken in one letter of a right of residence. There is also the long relationship between the families which may explain the Plaintiff's apparent generosity towards the 1st Defendant.

17. In all the circumstances, I am unable to say that no triable issue has been shown. Accordingly, the Plaintiff's appeal must be dismissed. I make an order nisi that the 1st Defendant should have the costs of the appeal in any event.

18. The Plaintiff's claim against the 1st and 2nd Defendants is for recovery of a loan of HK$500,000 which the Defendants admit they have received. The issue is whether or not the loan is yet repayable. It is the Plaintiff's case that at the request of the Defendants in March 1993 he lent them the money to finance a restaurant business in China being set up by the 2nd Defendant. The Defendants told him that if the business was successful, and they were confident that it would be, they would be in a position to repay all the money in one go. The 2nd Defendant gave him a loan receipt as proof of their intention to repay. The 2nd Defendant made out the receipt but the Plaintiff paid no attention to it. It was only later that he understood from his legal adviser that the loan was to be repayable within three years from the profits of the restaurant. As far as the Plaintiff was concerned, he understood that the loan was to be repaid as soon as possible. At no time have the Defendants accounted to him for the development of the business and whether any profit had been made.

19. The Defendants assert that the Plaintiff agreed to loan the money and, although he was told that it would take a long time to repay, the Plaintiff said it did not matter and that the loan could be repaid when the restaurant started to make money. Although the Defendants suggested giving the Plaintiff a receipt the Plaintiff said it was not necessary. The following day, however, the Plaintiff said that his daughter insisted on getting a receipt. It was then that the 2nd Defendant wrote out the receipt.

20. The proper translation of the receipt is still an issue between the parties but, for the purpose of these proceedings, Mr. Lam was prepared to accept the certified translation provided by the 1st Defendant. The translation reads :-

"This is to obtain a loan of HK$500,000 only from Uncle Chan Chun Ha as capital for the joint venture with a Chinese party for setting up a restaurant. It is planned that the loan shall be gradually repayable to Uncle Chan himself within three years from the profit from the restaurant.

This is made as proof.

(Signed) LAM Mo-tse (Signed) LAM Sau-man 18th March 1993"

21. Mr. Lam argued that the terms which the Defendants say were negotiated and which appear in the receipt are too vague and such that no court would enforce. What, he asked, would be the position if the restaurant makes no profit? Would the loan become repayable at the end of three years or would the time for repayment be extended? He pointed out that there is no requirement that the Defendants pay interest. He said that the transaction is very one-sided and the only proper construction that can be put upon it is that the loan is immediately repayable when the Plaintiff chooses.

22. Plainly, the manner and time in which the loan was to be repaid is in dispute. It seems to me to be readily arguable that the Defendants were given up to three years within which to repay, depending upon profits to be made by the restaurant. Failing any profit being made within that time the court might well imply a term that the loan be repayable after three years in any event in order to give business efficacy to the agreement between the parties. The 2nd Defendant has now exhibited a copy of the joint venture agreement, to which he is a party, for a restaurant in China. Plainly, the restaurant is not simply a figment of the Defendants' imagination concocted in order to obtain money from the Plaintiff. Equally clearly, if the money has been expended on setting up the restaurant as the 2nd Defendant asserts, until the restaurant begins to make a profit, which might take some time, the Defendants will not be in a position to repay. Their proposal for repayment, therefore, appears to be a matter of common sense and sound business thinking.

23. I am quite satisfied that this matter must go to trial. I do not think it necessary to deal with the question of promissory estoppel which the Defendants suggest is available against the Plaintiff. Accordingly, I allow the appeal. I make an order nisi that the Defendants should have the cost of the appeal in any event.

24. The directions given by Master Woolley for the conduct of the trial are to apply equally to all three claims. Time for the directions is to run from the date of handing down of this judgment.