WONG YUK TUNG v. WONG PO LING AND ANOTHER

HCMP 620/2017

[2018] HKCA 109

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 620 OF 2017

(ON AN INTENDED APPEAL FROM HCA NO. 899 OF 2012)

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J U D G M E N T

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Hon Yuen JA (giving the Judgment of the Court):

1.  This is the defendants’ application for (1) an extension of time to appeal the Judgment of Recorder Lisa Wong SC (now Lisa Wong J) given on 30 September 2016 in HCA899/2012 (“the Judgment”), and (2) a stay of execution of the Judgment.

Background

2.  The following is a brief summary of the background facts.

3.1  The plaintiff is the father of the 1^st defendant.  The plaintiff was referred to as “Father” in the Judgment and will be referred to in the same way in this judgment.  The 1^st defendant was referred to as “Clara”.  The 2^nd defendant is a company in Clara’s sole control.

3.2   It was common ground that in 1976, Father and his then wife[1] (referred to as “Mother”) became the registered owners (as joint tenants) of a flat in MacDonnell Road and a car park in the same development (“the Kam Fai Properties”).  They had six children.  The flat was used as the family home[2].

3.3   It was also common ground that in 1997, Father’s business suffered a setback and he was indebted to various creditors.

3.4  In June 1997, the Kam Fai Properties were transferred from Father and Mother as “vendors” to Mother, Clara[3] and Agnes[4] as “purchasers” (as equal tenants in common).  It was common ground that:

-    there was an agreement for sale and purchase which bore an earlier date, but it was in fact signed on the same day as the assignment;

-    notwithstanding a receipt clause in the assignment for HKD4.95 million, no money changed hands between the “vendors” and the “purchasers”; and

-    the “purchasers” took out a mortgage loan[5] for HKD2 million, of which roughly half was paid 2 days after drawdown to a bank account of Father’s company to settle an overdraft.

3.5  At about the same time, Father also transferred his interest in an Australian property as “vendor” to another daughter Anna[6].

4.  Father claimed in HCA899/2012 that despite the assignment, the Kam Fai Properties remained throughout his sole property by virtue of a common intention constructive trust.

5.  After the transfer of the Kam Fai Properties, Father also moved to Australia in late 1997.

6.  In 2002, the Kam Fai car park was transferred from Mother, Clara and Agnes as “vendors” to Karen as “purchaser”.  Funds were raised by way of a mortgage, but Karen did not give evidence at trial to verify whether she had paid any part of the stated consideration or to disclose where the raised funds went.

7.  On 10 January 2007, the Kam Fai Properties were assigned (by Mother, Clara and Agnes as registered owners of the flat and by Karen as the registered owner of the car park) to a third party purchaser for a total consideration of HKD8.2 million.  Of the net proceeds of HKD7.2 million, Mother received AUD100,000 (HKD610,000) and Agnes, Karen, Anna and Jenny received between them a total of about HKD1.323 million, leaving approximately HKD5,287,000.

8.  By an agreement made 2 days later, Clara bought a flat in St Louis Mansion (Flat 24A) in her own name.  This flat is not the subject matter of a claim in these proceeding.

9.  Less than 2 weeks later, on 23 and 25 January 2007, Clara’s company the 2^nd defendant bought two other flats in St Louis Mansion (Flat 1D and Flat 25C) at HKD2.63 million and HKD3.25 million respectively.  Clara paid a 35% down payment on each of the three flats in St Louis Mansion with the use of the Kam Fai Properties proceeds.

10.  Father claimed in HCA899/2012 that as Flats 1D and 25C were bought by Clara at his direction and in any event as they were bought with the proceeds of the Kam Fai Properties, he owned those two flats by way of tracing.

11.  In January 2011, the 2^nd defendant disposed of Flat 1D for HKD4.38 million.

12.  By 2011, the relationships between the parties had deteriorated and Father commenced proceedings in 2012 against Clara and her company.  The defendants’ pleadings and witness statements were prepared by legal advisers, but by the time of trial, Clara acted in person and represented the 2^nd defendant.

The Recorder’s Judgment

13.  At trial, the Recorder determined that the real issue was whether there was a common intention constructive trust as asserted by Father[7], and that since both parties relied on an express unambiguous agreement reached between them before the assignment of the Kam Fai Properties, the question for determination was whose version was true, which was essentially an issue of fact[8].

14.  For reasons which have been set out in detail in the Judgment, particularly at §§78‑83, the Recorder found the existence of an express common intention between Father and Clara that Father should remain the beneficial owner of the Kam Fai Properties which Clara held on constructive trust for him[9].  It followed that the proceeds of the Kam Fai Properties and Flat 1D of St Louis Mansion, together with Flat 25C of St Louis Mansion, to which the proceeds of the Kam Fai Properties could be traced, were likewise held by Clara and her company on constructive trust for Father[10].

15.  The Judgment was handed down on 30 September 2016.  The time fixed by the Rules of Court for appealing it expired on 28 October 2016.

Defendants’ application for extension of time to appeal

16.  On 17 March 2017 (more than 4½ months after expiry of the time to lodge an appeal), the defendants filed a summons for extension of time and a stay of the Judgment.  I shall deal with the application for extension of time first.

Principles to be applied

17.  It is well-established that in deciding whether to exercise its discretion to grant an extension of time, the court would consider the following factors:

(1) the length of delay;

(2) the reasons for delay;

(3) the chances of success of the proposed appeal; and

(4) prejudice to the potential respondent.

Length of delay

18.1  First, I shall consider the length of delay.  It was submitted by Mr Alan MS Ng, the defendants’ counsel, in his written submissions that the period of delay was not 4½ months but 3 months because Father had applied for legal aid on 8 November 2016[11], so that an automatic 42-day stay was triggered under the Legal Aid Ordinance Cap.91.  He cited s.15(3) and Brook v The Law Society of Hong Kong [1998] 1 HKLRD 113.  Mr Paul HM Leung, counsel for the plaintiff, did not address this particular point in his written submissions.

18.2  However I have reservations about the correctness of Mr Ng’s contention. Section 15(3) provides that:

“where any party to an action ... makes an application for legal aid to prosecute an appeal or proceedings in the nature of an appeal, the Director shall ... notify the ... other parties, and file in the court ... against whose judgment ... it is intended to appeal, a memorandum of such notification”. (Emphasis added).

Section 15(4) then provides that:

“where any memorandum is filed, then ... all proceedings in the action ... shall ... be stayed for the period ... as may be prescribed, and during such period ... time fixed by or under any law ... for the doing of any act or the taking of any step in the proceedings shall not run”.

18.3  It is clear from the language of s.15(3) that it applies only to a situation where a party has applied for legal aid “to prosecute an appeal”.  The papers before me do not disclose what Father was applying for legal aid for, but it could not have been to prosecute an appeal from the Judgment, because he had succeeded in his claims in the action.  As none of the parties had applied for legal aid to prosecute an appeal, s.15(3) was not engaged and it follows that s.15(4) did not apply.

18.4  Brook does not support Mr Ng’s contention because in that case, Brook was unsuccessful in the action and had applied (within the period for appealing) for legal aid to prosecute an appeal.  This court therefore held that s.15(3) was engaged and s.15(4) applied.

18.5  As there was no s.15(3) application in our case, I take the view that the period of delay was 4½ months and not 3 months.  In any event however this is not crucial because whether the period of delay was 4½ months or 3 months, it was still a substantial delay.

Reasons for delay

19.1  Clara has made 2 affirmations[12] seeking to explain the delay.

19.2  She said she received the Judgment in the first week of October 2016 and went to several solicitors to seek legal advice.

19.3  On 14 October 2016 she had a conference with solicitors and was advised to seek counsel’s opinion.  It turned out that counsel previously instructed was unable to act.  Clara did not disclose in her affirmation when she was so informed.

19.4  Be that as it may, on 24 October 2016, her solicitors wrote to the court requesting a transcript.  That was 4 days before the expiry of the appeal period.  Insofar as it was thought that a transcript would assist in the consideration of the merits of an appeal, it was completely unrealistic to expect the court to be able to provide a transcript of a 5-day trial within such a short period.  In any event, the request was denied on 8 November 2016.

19.5  Clara alleges in her affirmation that on 13 November 2016, she “was referred to Counsel Mr Alan Ng”.  It is not stated that Mr Ng was instructed then, and apparently no action was taken for 2½ months thereafter.

19.6  She then said that “in late January 2017” her solicitors instructed Mr Ng to advise on the merits of an intended appeal.

19.7  In “early February 2017” Clara saw Mr Ng in conference and in “late February 2017” she gave instructions to her solicitors to prepare the necessary documents to apply for an extension of time and a stay of execution.

19.8  Clara sought to explain her delay as follows:

“Although the 2^nd Defendant and I have been about 4½ months out of time, we have not lied [sic] idle for any moment after the Judgment. In fact, amidst major public holidays in between, and my year-end tasks to finalize accounting reports, to make annual sales/budget forecasts, and to arrange for a warehouse relocation (for my company) in the last week of December 2016, I have never stopped engaging myself and my legal representatives in looking into the merits of my intended appeal and preparing for my intended appeal”.

20.1  In my view, the defendants have failed to disclose any good reasons for the substantial delay.  They had instructed solicitors 2 weeks before the appeal period expired, and they must have been advised of the deadline for appealing. And yet time was allowed to pass with such steps as were taken being taken in a dilatory manner.

20.2  The matters set out in Clara’s affirmations do not provide an excuse.  The immediate task at hand was examination of the Judgment to see if there were any merits in an appeal.  This was essentially a matter for counsel whose main task would be to consider the Judgment with some reference to the papers before the Recorder.  By this stage, the input required from the lay client would be relatively less, unlike say in the discovery process, or preparation of witness statements before trial, where more time would be required from a lay client.

20.3  In conclusion, I find the substantial delay in this case was inexcusable.

Chances of success of the proposed appeal

21.  Notwithstanding this, the court will consider all the circumstances to see if the overall justice of the case requires the exercise of discretion to extend time.

22.  The defendants’ main contention on the proposed appeal is that the Recorder “had lost sight of and failed to make a finding” on the issue of the extent of Father’s beneficial interest in the Kam Fai Properties before the 1997 assignment, as Mother was a joint tenant and the presumption of advancement applied by reason of their relationship.

23.1  Although the presumption of advancement was not argued at trial, I do not think it can be said that the Recorder had “lost sight of” Clara’s challenge on the extent of Father’s beneficial interest before the 1997 assignment.

23.2  In §6 of the Judgment, the Recorder set out Mother’s allegation that she regarded herself as having a half share in the Kam Fai Properties.

23.3  In §37 of the Judgment, the Recorder set out in detail the parties’ respective cases on the disputed issue of Mother’s interest.  The Recorder first noted that it was common ground that Mother was given AUD100,000 (HKD610,000) from the proceeds of sale of the Kam Fai Properties.  She then set out the three individuals’ respective assertions regarding Mother’s interest in the properties[13].

-    Clara’s case was that the AUD100,000 was in full settlement of Mother’s interest.

-    Father’s case was that Mother had not contributed to the purchase price and throughout held the interest under her name merely as his trustee.

-    Mother’s final position at trial was that “she would give up her further claim to the proceeds”.  In fact Mother had not applied to join in the action as a party to assert any extant interest of her own in the proceeds.

24.1  Then, as to findings of fact on the issue (whether, before the 1997 assignment, Mother had a joint beneficial interest in the Kam Fai Properties, and hence Father’s beneficial interest was limited to half), the Recorder made the following important findings.

24.2  First, Mother received no part of the sum of HKD2 million which Clara and Agnes alleged they had paid for the 1997 assignment[14]

24.3  The significance is this: if Mother did have a 50% interest before or at[15] the time of the 1997 assignment, and ended up with only a 33.33% interest after the assignment, she should have received a sum representing her disposed interest (16.66%), which at the price of HKD4.95 million, would have amounted to HKD824,670, a sizeable sum.  However she did not receive anything.  There was no evidence that Mother wished to make a gift of any monies to Clara and Agnes.

24.4  Second, the Recorder disbelieved Mother’s evidence that the sum of AUD100,000 was accepted by her as partial settlement only[16].

24.5  The significance is this: if Mother did own 33.33% of the Kam Fai Properties, she would have been entitled to HKD2.4 million out of the net proceeds of HKD7.2 million.  Even if the car park (sold at $300,000) is hived off, the Mak Fai flat was sold at HKD7.9 million, and net proceeds were at least HKD6.9 million.  A one-third interest would amount to HKD2.3 million. And yet she only received the equivalent of HKD610,000[17].

24.6  There was no evidence that Mother wished to make a gift of the balance of her share in the proceeds (approximately HKD1.7 million) to Clara and Agnes or any of the other children.

24.7  At trial Mother alleged that the AUD100,000 was only a partial settlement, but she was disbelieved by the Recorder, who had the advantage of seeing and hearing her testify in court.  In fact Mother admitted[18] that she had never asked Clara for the HKD1.7 million balance, or even checked with Clara what had been done with that sum.

25.1  Clearly the receipt by Mother of only AUD100,000 (at the same time as other payments to other members of the family with no interest in the properties) contradicts Clara’s case that Mother beneficially owned at first 50% and then 33.33% of the Kam Fai Properties, and supports Father’s case that Mother never had a beneficial interest of her own.

25.2  Those facts militate against the defendants’ contention that the evidence “at its highest” showed that Father only held a 50% interest in the Kam Fai Properties before the 1997 assignment.  The Recorder’s rejection of Mother’s evidence that the AUD100,000 was only a partial settlement is significant but was not addressed in the defendants’ submissions.

26.  As for the defendants’ contention that Father had not asserted in the divorce proceedings in Australia that he was the beneficial owner of the interest in Mother’s name, there are no materials before this court showing that he was cross-examined on this topic, and if so, his answer.

27.  As for the proposed grounds of appeal based on mortgage repayments, the Recorder held in §90 that the evidence did not enable her to resolve the dispute as to the source of funds or to quantify anyone’s contribution.  The weighing of evidence is a matter for the trial judge.  An appellate court would not normally intervene in that regard.  In any event, it was not a case where the court was asked to infer common intention as to beneficial interests from financial contributions.

28.  For the above reasons, I am not persuaded that the chances of success of the proposed appeal are such that this court would exercise its discretion in the defendants’ favour to extend time even when there has been a substantial and inexcusable delay.

Prejudice to potential respondent

29.  Accordingly it is not necessary to consider this issue.

Order

30.  I would dismiss the defendants’ application for extension of time to appeal.  It follows that their summons for a stay of execution should also be dismissed. Having considered the statement of costs, I would assess costs at $150,000 which I order the defendants to pay the plaintiff.  The plaintiff’s own costs are to be taxed in accordance with Legal Aid Regulations.

Hon Poon JA:

31.  I agree with the judgment of Yuen JA.