LEE YIEW HUN v. MADAM DAISY HUNG

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. In November 1973, Daisy Hung, the Defendant, and her husband, Peter bought shop premises (the shop) at Ground Floor, 238 Reclamation Street, Kowloon. The Defendant and Peter were registered in the Land Registry as owners of the shop but they did not take possession of it. The Defendant's nephew (the Plaintiff) moved in with his mother and started up an electrical retail business there.

2. For the past 22 years, the Plaintiff has lived in the shop with his mother and carried on his business uninterrupted. The documents of title were in his possession for most of that period apart from a time when it was mortgaged to raise money for a loan to a cousin of his and he has the documents of title now.

3. In about August 1982, by virtue of a Deed of Gift executed by Peter, the Defendant became the sole registered owner. Peter died in 1984.

4. For many years the Defendant and Peter were residents of New Zealand but they visited Hong Kong from time to time. In February 1994, whilst she was on a visit to relatives in China, the Defendant, who is 73 years old, suffered a stroke. She was brought back to Hong Kong and is now resident in St. Teresa's Hospital, Kowloon City. Her expenses there, according to her evidence, are about $10,000.00.00 per month and she needs money for her maintenance.

5. The Defendant claims that she is the sole beneficial owner of the shop. She wants to retrieve the title documents and sell it in order to raise the funds which she needs to provide for her living. She is confined to a wheelchair and has suffered adverse physical effects from her stroke. According to her unchallenged evidence, she needs constant attention. I saw her giving evidence in Court from her wheelchair and she was accompanied by someone who was looking after her.

6. It is the Plaintiff's case that he is the beneficial owner of the shop or at least that he has some beneficial interest in it.

7. It is common ground that during World War II the Defendant and Peter who was a New Zealand Chinese found themselves stranded in China and unable to get back to New Zealand. The Plaintiff's mother supported them for a period of some three years and eight months, according to the evidence, until the war ended and they were able to move to Hong Kong and eventually to New Zealand. Their gratitude for the kindness of the Defendant's elder sister, who is the Plaintiff's mother, led to the arrangements made for the Plaintiff and his mother to occupy the shop, rent free, during the past 22 years.

8. The main factual issue is whether the Plaintiff is a licensee or whether he is a beneficial owner.

9. I have heard evidence from the Plaintiff that he had to sell a shop he then ran when his mother became ill in 1968 and needed his attention. After the sale, he had some $10,000.00 cash as well as some trade debts which were due to him and he earned money by doing electrical jobs.

10. In 1973, the Defendant and Peter visited the Plaintiff and his mother in their rented room in Shaukeiwan and seeing the poor living conditions which they were experiencing, they expressed sympathy and asked the Plaintiff to find a place which could be purchased so that he could live in it with his mother and run a business there.

11. According to the Plaintiff, the Defendant and Peter said that they would pay the downpayment plus bank loan instalments during the first and third year of the 5 year period loan whereas the Plaintiff was to pay for years 2, 4 and 5. They told him that after full repayment of the loan the ownership of the premises to be purchased would be his. This was, according to the Plaintiff, to be regarded as payment to the Plaintiff's mother for taking care of them during the war in China.

12. The Plaintiff found a suitable shop and it was purchased for a net sum of $366,000.00. The Defendant and Peter paid the deposit of $216,000.00 and a loan of $150,000.00 was obtained from the Far East Bank to which the property was mortgaged. Repayment was to be by monthly instalments over a period of five years. The Defendant and Peter were registered as the owners. According to the Plaintiff, he spent $20,000.00 of his savings in decorating the shop and started a business of retailing electrical appliances.

13. In February 1975, he started paying the mortgage repayments and according to him he paid three years of instalments, although the evidence is that he paid 33 monthly instalments at $3,431.34 per month. There was a break between January 1976 and February 1977 and payments stopped in October 1978 when the loan was paid off. The Plaintiff said in evidence that whenever he received a demand he paid an instalment and not otherwise.

14. Upon the repayment of the bank loan, the bank reassigned the property to the Defendant and Peter and they left the title documents in his possession. As I have said they spent most of their time in New Zealand.

15. It was not long before the property was mortgaged again, this time to the Heng Seng Bank for $420,000.00. This was a loan in order to provide cash for another nephew of the Defendant, Mr. Ng Hau Kee, for business purposes. It is common ground that the Defendant and Peter asked the Plaintiff to deliver up the title documents so that the loan might be obtained and the Plaintiff says that he agreed to that because all the parties were relatives. It is undisputed that by 3rd October 1981, the loan had been repaid by Mr. Ng Hau Kee and the property was reassigned to the Defendant and Peter who again gave the documents to the Plaintiff to keep.

16. The Plaintiff's view is that he was given the documents because he was regarded as the beneficial owner of the shop. The Defendant says that the documents were simply given to him as a matter of convenience for his safe keeping.

17. It seems to me that the fact that there was the mortgage to raise the sum of $420,000.00 for a loan to Mr. Ng Hau Kee and that it was done without any opposition from the Plaintiff indicates that the Defendant is correct and that she and her husband were always regarded as persons having the right to deal with the property.

18. According to the Plaintiff, he asked for a transfer of the property to him when the Deed of Gift was executed by Peter in favour of the Defendant in 1982 but Peter put him off, saying that it could be done by the Defendant later. When he was asked in the witness box why he accepted that, the Plaintiff said that Peter and the Defendant were his seniors and so he did not argue. The Plaintiff says that he paid all the legal costs of the Deed of Gift. That Deed was given to him and he has it with the other documents of title. He also says that he paid the legal fees for the reassignment by the Far East Bank and he has produced documentary evidence that he paid property tax on the shop for 1982 and from 1982 he also paid the rates. Prior to 1982, it is common ground that demands for rates and property tax went to Ng Hau Kee.

19. The Plaintiff says that he paid the legal fees for the administration of Peter's estate and when the administration was being dealt with, again he asked the Defendant to transfer the property to him but she said she would do it later because she felt unwell and wanted to return quickly to New Zealand.

20. According to the Plaintiff, he asked for a transfer a year or so later and the Defendant then said that she was old and needed a financial reserve. She asked him for a million dollars if she were to transfer the property. He agreed but said she would have to transfer the property first so that he could raise money to pay her. She was agreeable to that but it was never done and she went off to New Zealand.

21. Upon her return in 1993, she said she would do it this time and they agreed on a payment by him of a million dollars which the Plaintiff agreed to pay because of her poor health and because he realised that she needed some cash in reserve. The Defendant then went off to pay a visit in China but she then suffered the stroke.

22. When she was in hospital in Hong Kong later, according to the Plaintiff, she asked him for three to four million dollars and he offered two. She first indicated that she was willing but declined to sign a written agreement and next came a solicitor's letter requiring him to quit the premises within seven days and to deliver up the title documents.

23. According to him, he paid medical fees of a hundred thousand dollars in relation to the Defendant's illness. So far as the valuation of the property is concerned, the Plaintiff says that it is worth about $3,000,000.00.

24. Now the Defendant's case is that the only reason that the Plaintiff paid any of the mortgage instalments is that she had lent him $100,000.00 as start up capital for a new business which he was going to establish when he went into the shop. The Plaintiff denies that she lent him any money and says that with his savings, he was able to pay $20,000.00 for decoration and he obtained all his stock-in-trade, which consisted of electrical appliances, on credit.

25. The Plaintiff's mother is 95 years old. She gave evidence and her version of the original agreement was that the Defendant and Peter asked the Plaintiff to find a place to buy. They said that they would pay the downpayment and two years' instalments : the Plaintiff would pay three years' instalments and the outgoings, and then the property would belong to the Plaintiff and his mother. She said that the Plaintiff suggested that the property be transferred into his name and the Defendant said that there was no hurry and they would do it later.

26. I am bound to say that when I saw the Plaintiff giving evidence, I was not impressed by his demeanour. He tended to be evasive and I did not find him a reliable witness.

27. So far as his mother was concerned, she is 95 years old. She was purporting to recall a conversation which took place 22 years ago and she had to seek assistance from someone in Court at one stage when she was asked a question about her address. She said that she had a poor memory. I did not feel that it would be right to put much weight on her evidence in all the circumstances.

28. The Defendant, notwithstanding her incapacity, gave evidence. She is 73 years old and as I have said she suffers physical disabilities as a result of her stroke. Her mental faculties, however, appeared to be fully present. She was alert and able to understand and answer questions clearly and directly. She was a forceful witness and I was impressed by her demeanour. I found her for the most part to be a truthful and reliable witness.

29. She confirmed that she had received kindness from her elder sister in China during the war. She said that although she and her husband had lived in New Zealand, they did have it in mind to retire to Hong Kong. She had other properties in Hong Kong but they have all been sold to raise money and now she needs to sell the shop because the money she had before has been expended in her living expenses.

30. By 1973, she and her husband had saved up enough to buy the Reclamation Street premises. She had $330,000.00 in a savings account and the price of the property was $380,000.00. I take it that she was including not only the purchase price, but also the incidental costs and disbursements. Therefore, she only needed to borrow $50,000.00 to complete the purchase but she in fact borrowed $150,000.00 in order to provide start up capital for the Plaintiff.

31. Her nephew, Ng Hau Kee, had borrowed $50,000.00 from her in 1968, again, to start up a business and she had agreed with him, when she was buying the shop, that he would pay the first 15 repayment instalments in order to pay off the loan which had been made five years before. It is clear that at the time the loan was made, there were no specific arrangements as to repayment and there was no discussion of interest.

32. I have heard evidence from Mr. Ng Hau Kee and it is not challenged that he did make the first 15 repayments. They came to a total of a little over $50,000.00 but it is clear that there was no nice calculation of interest. He was just happy to pay 15 instalments in consideration of the loan which he had been given.

33. The reason given by the Defendant for letting the Plaintiff and his mother occupy the shop premises is because of the kindness she had received during the war and their close relationship. She sought no interest on the loan of $100,000.00 and she left the documents of title with the Plaintiff simply for safe keeping. She very firmly denied that she had ever said that the property would be his when the loan was paid off. The Plaintiff had said to her that when he was in a position to find enough money to purchase his own property, he would leave. According to her, he had never asked her to transfer the title to him and she did not ask for sums of money for the transfer of the property.

34. It seems to me on the balance of probabilities that it is true that once she was looking to obtain the documents of title after her stroke, there was discussion about terms but I believe that when she said that she had not been asking for sums of money, she was referring to the period prior to that.

35. She said that she would have preferred to leave the documents with Ng Hau Kee but he was at Taiwan at one stage and she could not give them to him and in any case, they were bulky and he did not have room for them. She expressed the view that the Plaintiff was an untrustworthy and cunning person, suggesting that given a choice she would not have left the Deeds with him but I think that she was then working on hindsight and was making an assessment of him at the present time when they are clearly in dispute.

36. When she was asked why she did not request the return of the deeds from the Plaintiff before, she said there was no need because she was not going to sell the property.

37. Mr. Ng Hau Kee, the Plaintiff's cousin and the Defendant's nephew gave evidence. He is a man who is proprietor of two electrical shops. He confirmed that in 1968 when he wanted to start his business, he borrowed $50,000.00 from the Defendant in order to provide working capital and that he paid back 15 instalments on the loan on the shop by way of repayment of that loan of $50,000.00. The total he paid came to a little over $51,000.00 over a period from November 1973 to January 1975. He resumed payments on the mortgage loan on the shop from February 1976 to February 1977 at the Defendant's request. He confirmed that there was a further loan by way of mortgage of the shop for his benefit which he paid back.

38. According to him, between 1974 and 1981 he paid rates and property tax. He has produced detailed accounts which shows the extent to which he handled the financial affairs of the Defendant and Peter on their behalf and they have not been challenged except for one item. The accounts show a payment by him in February 1977 whereas it would appear that the entry is mistaken because there is evidence from the Plaintiff's bank account that the Plaintiff made that payment.

39. According to Mr. Ng, there was no specific agreement for interest but it is clear that in this situation with close relatives in a traditional Chinese family, nobody cared very much about the details of the exact amount to be repaid.

40. It is common ground that on 3rd August 1993, the Defendant made a will. Clause 5(d) contains an instruction to the executor of the will to grant an option to the Plaintiff to purchase "the property I may own at Reclamation Street, Kowloon, Hong Kong at 70% of the latest government valuation as at the date of my death". Thus before any dispute arose between the Plaintiff and the Defendant, the Defendant was proceeding on the basis that she was the beneficial owner of the property.

41. As to the term "I may own" the Defendant was clearly recognising the possibility that the property in question might not be part of her estate at the time of her death and there are similar provisions in the will granting options in relation to other properties which she might own at the date of her death which properties, according to the evidence in this case, have already been sold.

42. Mr. Ng Hau Kee was a good witness and an honest man in my judgment. It is clear that the Defendant and Peter saw the repayment of the mortgage instalments as being a way of obtaining repayment of their loan to him. I find on the balance of probabilities that when the Plaintiff was making repayments to the bank on the mortgage loan relating to the shop, he was doing no more than repaying a loan of $100,000.00 and a little bit more in consideration of the loan.

43. I reject the Plaintiff's evidence that there was an agreement as alleged. I find that the Defendant and Peter were buying the shop as an investment and that they did a great favour to the Plaintiff and his mother by permitting them to occupy the premises for so many years, rent free, so that they might have a home and a place of business.

44. It is a sad situation. There is a conflict of needs here. The Defendant needs the money which she can raise by selling or perhaps letting the shop but the Plaintiff and his mother, after 22 years face the prospect of losing their home and the place of business. I think it probable that they had every hope that when the Defendant died the property would become theirs. There is no evidence as to whether they were aware of the contents of the will but clearly if the Defendant had not got into financial difficulties and suffered her illness, in the fullness of time if they had chosen to exercise the option, the property would have been theirs. But I do not think that the provision in the will had anything to do with any agreement made between the parties. It was the product of gratitude and family affection.

45. In view of my findings of fact, the various legal issues which have been canvassed in the trial concerning resulting trusts or constructive trusts do not arise. I am satisfied on the balance of probabilities that the Plaintiff is a licensee. It is not surprising, having regard to the fact that he was occupying the premises rent free, that he was happy to pay the outgoings in relation to them except for the times when Mr. Ng Hau Kee was attending to the outgoings on behalf of the Defendant and Peter. There will, therefore, be judgment for the Defendant on the Plaintiff's claim.

46. The Defendant counterclaims against the Plaintiff for return of the title documents and possession of the property as well as mesne profits at the rate of $45,000.00 per month from 10th May 1994 until possession is delivered up together with interest on the mesne profits and costs. In view of my findings of fact, the Defendant must succeed on her counterclaim for the documents, possession and for mesne profits..

47. Having heard my decision on the facts, counsel after discussion have tendered for approval an agreed order on the basis that it is without prejudice to the Plaintiff's right of appeal. I will make an order in those agreed terms, with minor grammatical amendments as follows :

(i) The Plaintiff to return to the Defendant the title deeds of the premises within 14 days of the date of judgment.

(ii) The Plaintiff to deliver vacant possession of the premises to the Defendant.

(iii) The Plaintiff to pay the Defendant mesne profits at the rate of $20,000.00 per month from 10th May 1994 until the date of judgment and thereafter at the rate of $20,000.00 per month until delivery of vacant possession.

(iv) The Plaintiff to pay to the Defendant $30,000.00 interest on the mesne profits before judgment.

(v) The Plaintiff to pay to the Defendant her costs of the two actions and the consolidated action, to be taxed if not agreed.

(vi) Execution of the order for vacant possession to be stayed for nine months from the date of judgment.

(vii) The Plaintiff to pay the Defendant $100,000.00 of the sum awarded for arrears of mesne profits within one month from the date of judgment.

(viii) The remainder of the arrears of mesne profits and the interest thereon to be paid by monthly instalments of $5,000.00 per month commencing on 15th January 1996.

(ix) The Plaintiff to pay to the Defendant $100,000.00 of her costs within one month from the date when the amount of costs has been agreed or of the date of service of the Allocatur, whichever is the earlier.

(x) The remainder of the Defendant's costs to be paid by monthly instalments of $5,000.00 per month starting one month from the end of the payment of instalments of arrears of mesne profits and the interest thereon.

(xi) The stay of execution shall cease if the Plaintiff is in breach of any of the above terms.

(xii) This order is made on the Plaintiff's undertaking not to part with possession of the premises to anyone other than the Defendant during the period of stay of execution of the order for vacant possession.