LAU WAI KEI v. YIU SZE WAN

DCCJ 3190/2021

[2023] HKDC 637

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3190 OF 2021

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DECISION

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BACKGROUND

1.  By summons of 11 January 2023 (“the Summons”), the plaintiff sought a declaration that the defendant holds the property known as flat 1, 6^th floor of block E, Kwong Ming Court, 108 Po Hong Road, Tseung Kwan O, Sai Kung, New Territories, Hong Kong (“the Property”) on trust for the plaintiff in the sole beneficial interest for the plaintiff and the defendant does execute an assignment to assign or transfer all her legal title in the property to the plaintiff at nil consideration.

2.  The writ was served by substituted service effected by advertising once in the Oriental Daily News, pursuant to the order by Master B Mak dated 1 March 2022. The defendant has not filed any acknowledgement of service giving notice for intention to defend. The plaintiff is now applying for default judgment pursuant to Order 13 and Order 19, rule 7 of the Rules of the District Court.

THE LEGAL PRINCIPLES

Applications for Default Judgment

3.  For an application for default judgment under Order 19, rule 7, the court will give such judgment as the plaintiff appears entitled to on the statement of claim without consideration of any evidence.

4.  It is not the normal practice of the court to make a declaration without a trial. However, this is only a rule of practice which should not be followed when the plaintiff has a genuine need for the declaratory relief and justice would not be done if such relief were denied. The court will scrutinise the application carefully and will not hastily grant the relief sought. The declaratory relief should not be in terms wider than the plaintiffs are entitled to and what is necessary to do justice to them, Hong Kong Civil Procedure 2023, paragraph 19/7/20.

Common Intention Constructive Trust

5.  Where a common intention constructive trust has arisen, ownership in the property is split into legal ownership and beneficial ownership. The trustee holds the legal title on trust for the beneficiary.

6.  Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters.

7.  The trust is constituted by 3 elements: (1) the common intention; (2) the claimant’s detrimental reliance on the common intention; and (3) the unconscionability of the property owner departing from it, Luo Xing Juan Angela v The Estate of Hui Shui See Willy, Deceased (2009) 12 HKCFAR 1 at paragraph 38.

8.  The burden of proving each element of common intention, detrimental reliance, and unconscionability is on the person seeking to show that beneficial ownership is different from the legal ownership.

9.  Common intention can be expressed or implied, it can be deduced or inferred objectively from the parties’ conduct.

Resulting Trust

10.  The rebuttable presumption is that the provider of the funds of the purchase of the property has a beneficial interest in the property by virtue of a resulting trust. According to Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 per Lord Browne‑Wilkinson, at 708 A-D:

“Under existing law a resulting trust arises in two sets of circumstances:

(A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A's intention to make an outright transfer: see Underhill and Hayton, Law of Trusts and Trustees, pp. 317 et seq.; Vandervell v. Inland Revenue Commissioners [1967] 2 A.C. 291, 312 et seq.; In re Vandervell's Trusts (No. 2) [1974] Ch. 269, 288 et seq.

(B) Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest: ibid. and Quistclose Investments Ltd. v. Rolls Razor Ltd (In Liquidation) [1970] A.C. 567.

Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust) but gives effect to his presumed intention.”

11.  The presumption of resulting trust can be rebutted by proof that A did in fact intend B to take property as beneficial owner. Ordinarily, B bears the burden to rebut the presumption.

THE PLAINTIFF’S PLEADED CASE

12.  According to the statement of claim, the plaintiff and the defendant got married on 9 June 1993 in Hong Kong and they have no children born within the wedlock.

13.  The property was purchased on 21 April 1998 with the down payment of HK$121,980 funded by the plaintiff together with the mortgage loan of HK$1,097,820. The plaintiff and the defendant have been the registered owners of the property as joint tenants.

14.  The mortgage repayment instalments and all outgoings, including the management fees, government rates, rents and maintenance expenses for the property were paid by the plaintiff before and after the divorce of the parties.

15.  When the parties separated in 1999, the plaintiff moved in and has been residing at the property up to present. The plaintiff petitioned divorce and decree absolute was granted on 4 November 2006 in FCMC 5603/2006.

16.  Upon the joint application of the plaintiff as petitioner and the defendant as respondent in the matrimonial causes proceedings, the court made the following order:

(1)  Subject to the consent of the Hong Kong Housing Authority and/or the consent of Hang Seng Finance Limited, the defendant shall transfer at nil consideration all her legal and beneficial interests in the property upon the granting of decree absolute to the intent that the plaintiff shall become the sole owner of the property and the plaintiff do bear all legal costs and expenses for the transfer.

(2)  The plaintiff do pay the defendant a lump sum of HK$50,000 by way of direct payment into the defendant’s bank account in 12 monthly instalments.

17.  By 4 September 2007, paragraph 2 of the order was complied with by the plaintiff.

18.  It has been the common intention of the plaintiff and the defendant that the plaintiff shall become the sole owner of the property. In reliance of the said common intention, after the divorce of the parties, the plaintiff continued to settle the monthly mortgage repayment for the property. On 30 July 2018, the plaintiff paid off the last instalment of the mortgaged loan owed to the Hang Seng Finance Limited and discharged the legal charge with memorial no.SK323812 with receipt on discharge of a charge with memorial no.18080100350017.

19.  As the property is under the Home Ownership Scheme, an application for the approval by the Hong Kong Housing Authority requires signatures of both parties for the transfer to be effective. After the discharge of the mortgage, the plaintiff has tried numerous attempts to call the defendant, but the defendant could not be reached.

20.  The plaintiff’s solicitors, Messrs Christopher Li & Co issued letters dated 25 June 2018 and 22 November 2018 to the defendant’s address as stated in the proceedings of FCMC 5603/2006 for the purported transfer of the property. However, the plaintiff and his solicitors did not get any reply from the defendant. The plaintiff’s solicitors also issued a letter dated 10 September 2018 to the defendant’s then solicitors, Messrs Y L Yeung & Co, which replied on 19 September 2018 stating that they had been unable to contact the defendant despite their efforts and repeated telephone calls.

21.  On 21 June 2019, the plaintiff’s solicitors attempted to serve a copy of the summons to vacate the registration of the order with supporting affirmation and summons for variation of the order with supporting affirmation (“the Documents”) by ordinary post to the defendant’s address as stated in the proceedings of FCMC 5603/2006 but the same was returned undelivered on 10 July 2019.

22.  The plaintiff has sent messages together with copies of documents for transfer of the property and the Documents to the defendant’s last known mobile phone numbers via WhatsApps, but the plaintiff received no reply from the defendant. The plaintiff and his solicitors have failed to contact and locate the defendant.

DISCUSSION

23.  By reason of the matters aforesaid, I am satisfied that the plaintiff has set out common intention of the parties that the defendant holds the Property on trust for the plaintiff. On such basis, the plaintiff has continuously settled the monthly mortgage repayment for the property. Therefore, it is unconscionable on the part of the defendant to depart from the parties’ common intention.

24.  I find that there is an agreement, arrangement or understanding reached between the parties on how the Property is held beneficially where the common intention constructive trust arises.

25.  I am also satisfied that all the purchase price and costs for the purchase of the Property were provided by the plaintiff who has the sole beneficial interest in the Property. Since the Property was purchased in 1998, it has been occupied and enjoyed by the plaintiff uninterruptedly and exclusively.

26.  As all reasonable efforts made by the plaintiff to locate or contact the defendant are in vain, the plaintiff has a genuine need for the declaratory relief and justice would not be done if such relief were denied.

DISPOSITION

27.  In the circumstances, I make an order in terms of the Summons as follows:

(1)  A declaration that the defendant holds the Property on trust for the plaintiff;

(2)  An order that the defendant do execute an assignment to assign/transfer all her legal title in the Property to the plaintiff at nil consideration within 21 days, failing which Mr Lim Chi Yu Alvin, principal of Messrs Lims Solicitors, solicitors for the plaintiff, may execute all necessary conveyance, contracts or other documents for and on behalf of the defendant to effect the transfer of her legal title in the property to the plaintiff;

(3)  There be no order as to the costs of these proceedings.