MOK TIM CHEONG v. MOK TIM MING AND ANOTHER

DCCJ 2036/2018

[2020] HKDC 1043

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2036 OF 2018

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JUDGMENT

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1.  The plaintiff, Mok Tim Cheong, is the sole registered owner of Lot No. 3539 in Demarcation District No. 129 on which a 3-storey village house (“the House”) was erected. Tim Cheong claims against his younger brother Mok Tim Ming, the 1^st defendant, for, amongst others, delivery of vacant possession of the Ground Floor and the 2^nd Floor of the House.

2.  The 1^st defendant’s case in defence and counterclaim are based on 3 grounds:

a.     by a Common Intention and thus creating a beneficial interest by a Constructive Trust / Resulting Trust,

b.     by way of Proprietary Estoppel  

c.     by way of Adverse Possession.

Background

3.  The late Mr. Mok Chik Hung (“MCH”) and Madam Tang Kwan (“TK”) were farmers of crops and fish at Sha Kong Wai and had 7 children (6 surviving: 5 sons and 1 daughter), including Tim Cheong and Tim Ming being the 6^th and 7^th children.

4.  Over the years, the sons travelled and stayed to work in Holland (the plaintiff did so in 1975) with the exception of Tim Ming, who went to the United Kingdom to study in 1979 and returned to Hong Kong in 1986.

5.  Although the parents had limited financial means, they had always wished to make sure that there was a place of residence for each of the 5 sons. MCH had already secured a place of residence for each of his eldest 3 sons: Mr. Mok Wai Cheung (“MWC”), the eldest son, would inherit the parents’ existing house (a two-storey house); Mr. Mok Kam Sung (“MKS”), the second eldest son, would inherit another existing house belonging to the extended family (a single-storey house) and Mr. Mok Tim Sau (“MTS”), the third son, would inherit his adopted grand uncle’s existing house (a two-storey house).

6.  The plaintiff, being a male indigenous villager entitled to “ding rights”, applied under the Small House Policy and he obtained a New Grant dated 11 November 1981 to build a three-storey (700 square feet for each floor) village house.

7.  However, MCH only received HK$146,000 as the government’s compensation of for resumption of a fish pond. This was insufficient to build the House. Multiple extensions of the building covenant under the New Grant was applauded for. MCH passed away in 1987 without the House being built.

8.  A final extension was granted by the government in 1989 such that if the construction was not completed by the deadline, the government would re-enter the Lot.

9.  It was not disputed that the 1^st defendant entered into a written agreement on 18 November 1989 with a contractor, Man Kam, for the construction of the House for HK$460,000. The House was finally built and a Certificate of Compliance was given on 20 January 1992.

10.  It was also not disputed that the estate of MCH and TK contributed about HK$200,000 (including the compensation MCH had received from the government as mentioned above) to the construction of the House. The issues in dispute are the contribution of the remaining funding, the roles played by the plaintiff and the 1^st defendant in the construction, and whether there was any Common Intention for the House to be shared between the two brothers.

11.  After completion, TK occupied the 1st Floor (until she moved to an elderly home in 1996) and the 1^st defendant occupied the 2nd Floor with his wife, whom he married in November 1992 (until they moved out around June 1994). The ground floor was used as a kitchen / living / dining room with an alter for ancestral worship.

12.  After TK left the House, both the 1^st and 2^nd Floors were renovated into two flats and both were rented out. It was disputed how and to whom the rents were paid out.

13.  In around 2009, the plaintiff returned to Hong Kong and asked for all the deeds and documents relating to the House and its construction from the 1^st defendant. He then asked the 1^st defendant to deliver vacant possession of the House.

Constructive Trust / Resulting Trust

14.  The legal principle is trite: there need to be a Common Intention between the parties that the beneficial title and interest of the property would be shared in the agreed share. In ascertaining whether there was a Common Intention:

15.  The finding of a Common Intention can be based on express discussions between the parties (however imperfectly remembered and however imprecise their terms may be) or based on conduct of the party (Mo Ying v Brillex Development Ltd [2015] 2 HKLD 985, Lloyd’s Bank Plc v Rossetti [1991] 1 AC 107)

a.     The modern approach is to go beyond direct financial contribution but to assess the common intention of the parties by a holistic approach having regard to the context and in the light of the parties’ whole course of conduct in relation to it (Stack v Dowden [2007] 2 AC 432). A number of non-exhaustive factors relevant in the domestic context include: the advice and discussions at the time of transfer which cast light upon the parties’ intentions at the time of acquisition, the reason why the property was registered in a sole name, the purpose of acquiring the home, the nature of the parties’ relationship, how the purchase was financed, how the outgoings on the property and other household expenses were discharged etc.

b.     The relevant intention of each party is the objective 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 (Gissing v Gissing [1971] AC 886)

c.     In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family are not that common, the court has to pay more regard to the circumstantial matters (the case of Mo Ying, Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327)

16.  Further, the party seeking the beneficial title and interest must show that he has altered his position in detrimental reliance of the Common Intention. There must be “sufficient connection” between the promise and the detrimental conduct, the act has to be something “substantial” and something that the party “could not reasonably have done unless he has an interest in the property”. (Cheung Ping Sum v Wong Chi Hang [2019] HKCFI 2244)

17.  The key difference between a resulting trust and a common intention constructive trust is that a resulting trust, whether based on presumption or evidence, is established by reference only to the intention of the transferor. There is no requirement for the transferee to share that intention (Au Yuk Lin v Wong Wang Hin Eddy [2013] 4 HKLRD 373).

18.  Obviously, if the transferor’s case was that there was an “expressly agreed common intention” between the transferor and the transferee regarding the transferee’s beneficial interest, then there is little scope for the presumption of a resulting trust to operate (Cheung Ngar Ping Everine v Cheung Yik Ming Emil [2019] HKCFI 1467, Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd [2015] 18 HKCFAR 364)

Proprietary estoppel

19.  There are two types of proprietary estoppel: the first type, proprietary estoppel by representation, overlaps with common intention constructive trust, the relevant alternative claim here is under the second type, namely proprietary estoppel by silence.

20.  The legal principle is trite and needs not to be repeated here.

Adverse possession

21.  The legal principle of adverse possession is also trite and needs not to be repeated here.

The parties’ cases

22.  In summary, the plaintiff’s case is that his father, MCH, had provided individual houses for his 3 elder brothers and had arranged for him to apply for the New Grant in 1981. He also claimed that MCH had orally promised him that he would bear the majority of the building costs (paragraph 20 of Mok Tim Cheong’s Witness Statement, Trial Bundle page 78). MCH had originally thought that the sale proceeds from his share on a fish pond would be sufficient. However, the fish pond was eventually resumed by the Government and the compensation (HK$146,000) was found to be insufficient.

23.  The plaintiff claimed that all these showed that MCH had all along wished to build the House for him, just like the individual houses that he had arranged for his three elder brothers.

24.  The 1^st defendant and the brothers MWC and MTS (who adduce evidence as the 1^st defendant’s witnesses) did not dispute that the parents’ wish was to provide a property for each son. The 1^st defendant’s case is that, in reality, the parents had limited means and had not managed to raise sufficient funds to build even the one house provided by the New Grant, let alone starting a new project to build another for the 1^st defendant. Thus, the Common Intention was that the plaintiff and the 1^st defendant were to have one floor each in the House, with the ground floor used for ancestral worships, family gatherings etc.

My findings

25.  I would accept the 1^st defendant’s case regarding the Common Intention.

26.  Firstly, MCH was an old man at the time and it was clear that he had difficulties in raising enough funds to build the House: the New Grant was dated 1981 and yet, by the time of the passing away of MCH in 1987, some 6 years later, the construction has not even started.

27.  Even if one accepts the plaintiff’s claim that MCH had orally promised him to pay for the majority of the building costs of the House, that would not necessarily mean that MCH had intended for the House to be for the plaintiff alone. And even if this could be interpreted as such, it would be against common sense that MCH would not have changed his mind to face the reality that he would never be able to pay for building another house for the 1^st defendant.

28.  Secondly, the Common Intention to share the House was supported by MWC and MTS. I find the brothers to be credible witnesses. There is no reason to doubt their credibility as they have no financial interest in the outcome of this dispute.

29.  The plaintiff claimed that he had quarrels with MWC and MTS, but these were incidents many years ago. There is no evidence to suggest that the two brothers are conspiring against him now.

30.  Thirdly, the plaintiff claimed that all the siblings were aware of MCH’s intention that the House was for him alone, and even if he claimed that his relationship with MWC and MTS was not good, he has not called any of the remaining siblings to testify.

31.  In cross-examination, Ms. Pok Chau Ping, the plaintiff’s wife, admitted that she knew the sister Mok Lai Mui (“MLM”), and that MLM was in Hong Kong. She also claimed that if MLM were to testify, she would be supportive of the plaintiff’s case.

32.  Ms. Pok was then asked why, knowing that MWC and MTS were giving evidence against the plaintiff, she did not seek MLM to give evidence. Ms. Pok answered that (as I translate):

“She (MLM) is timid, probably because she is a “village girl”…”

“I know that even if I called her, she will for sure not agree to come out, she is very timid.”

33.  When asked whether this meant that she did not even try to ask MLM, Ms. Pok immediately changed her story and claimed:

“I did try, I asked her…”

34.  Ms. Pok then, without hesitation, launched into a completely different story:

“I told her (MLM) that the eldest brother (MWC) and third brother (MTS) were coming out as witnesses. She said “What for? I have asked them not to get involved.”… I have gently asked her but she said “手掌係肉手背又係肉””

35.  Ms. Pok claimed that since MLM had “hinted” this way, she did not ask her further.

36.  I find Ms. Pok a dishonest witness: not only had she changed the story on whether or not she had actually asked MLM to testify, she also changed the explanation of why MLM would not testify from “her being a timid village girl” to “手掌係肉手背又係肉” (which can be taken as “a concern for family relationship”).

37.  I found both explanations incredible. The second explanation directly contradicts the first explanation: I cannot see how MLM could be considered “timid” if she was strong enough to ask her brothers “not to get involved” in the case. Further, if the plaintiff and his wife really believed that evidence from MLM (and the remaining brother) would be so supportive of his case, one would reasonably expect that they would try much harder than merely “gently asking” and giving up when there was a “hint” from MLM.

38.  The only logical inference to be drawn here is that the real reason that the remaining siblings are not called is that the plaintiff is aware that they all agree on the Common Intention and therefore do not support his case.

39.  One can logically extrapolate this: if all the other siblings appear to agree on the Common Intention, it is strange and unlikely that only the plaintiff, out of all the siblings, is unaware of this. The logical conclusion is that the plaintiff must be aware of this Common Intention, but has been denying it for the sake of his own self-interest, perhaps, as I can only speculate, after he has checked the title deed (that he obtained from the 1^st defendant around 2009) and found that he was the sole registered owner.

40.  Further, the fact that MCH applied for the grant under the name of the plaintiff and not the 1^st defendant would not be conclusive evidence that the House was intended for the plaintiff alone. The 1^st  defendant and MTS both gave evidence that the plaintiff was 23 years old but the 1^st defendant was only 20 so only the plaintiff was eligible to apply at that time (1981) according to the prevailing legal position. The age of majority was only lowered from 21 to 18 in 1990. (Age of Majority (Related Provisions) Ordinance, s.2).

41.  With regard to the contribution to the costs of construction of the House, the plaintiff’s pleaded case was that the entire building cost only HK$460,000 and that the 1^st defendant did not make any contribution at all.

42.  However, the construction agreement signed with Man Kam clearly showed that certain items (floorings, tiles, lightings etc.) were not included in the quoted construction cost of HK$460,000. These items were obviously installed in the House and someone must have paid for them.

43.  As stated above, it was not disputed that a sum of about HK$200,000 came from the savings of TK and the estate of MCH. This would leave a balance of HK$260,000 owed to Man Kam.

44.  In addition to the undisputed sum of HK$100,000 that the plaintiff contributed, the plaintiff also claimed that he had obtained an additional HK$160,000 as a loan from his father-in-law (which later became a gift).

45.  However, I find that this is only a bare assertion. The evidence from the plaintiff’s witness, Ms. Law Sai Fong, would not help this claim: she only heard that Ms. Pok had borrowed money from her father but she did not know the amount of the loan. It might well be that the loan was partly or entirely the sum of the plaintiff’s undisputed contribution of HK$100,000.

46.  On the other hand, the 1^st defendant had produced his sole-named bank passbook which showed his savings and income at the time. This also showed that he had taken out two loans from HSBC: HK$55,000 drawdown from 6 November 1989 and repaid fully by 17 February 1992, and a loan of HK$70,000 drawdown on 11 March 1992 and repaid by 2 March 1995.

47.  More importantly, the 1^st defendant has produced a copy of his letter to MWC dated 24 September 1991 (“the Letter”, Trial bundle page 227-229) which explained the breakdown of the funding for the House and the additional HK$30,000 paid by him for the tiles which were excluded in Man Kam’s quote.

48.  The Letter is significant because it was written just after the construction of the House. At that time, there was no dispute between the plaintiff and the 1^st defendant (even on the plaintiff’s own case). So logically, it would be highly unlikely that the 1^st defendant was aware of the legal principles of common intention constructive trust / resulting trust or proprietary estoppel etc. and thus was “priming” himself for a dispute which eventually happened some 20-30 years later.

49.  In the Letter 1^st defendant clearly stated (as I translate):

“It was his (MCH’s) dying wish to complete the house that the plaintiff got granted from the government 10 years ago, but at the time, he only had the compensation from the fish pond of HK$130,000, which would only cover half of the cost of construction of a 2-storey “ting house”. He had also written to you all to discuss this matter.”

“He had wished that every one of us could form a family and live in a property, so after obtaining a grant, the house would need to be built...”

“A month after father passed away, I found my first job...one year later I changed to be a secondary school teacher, and had a night job as a lecturer in an industrial school, work was heavy but my wages are better than before...”

“As such after 1 year (2 years after father’s death), mother was constantly worried about when the “ting house” can be built, so she asked for quotes from a few builders, and she finally chose Man Kam...the quote for a 3-storey Spanish style house with toilet is HK$460,000, all the interior tiles are not included...I went everywhere to buy these and costs around HK$30,000 or more, so it would cost a total of HK$500,000 to complete.”

“I have carefully calculated, father had HK$130,000. I had never used this sum which was his entire life savings for any investment. So I would apologize here. I have never sought my brothers’ consent but have utilized this sum...Using my savings, brother Tim Cheong’s savings and mother’s savings, plus the money I borrowed from the bank, the total should be not far from HK$500,000. It was decided to commence the construction in November 1989, and completed in October 1990.”

50.  Although the Letter was addressed to MWC, it clearly touched on the interests of all the brothers given that the 1^st defendant was explaining how their father’s estate was spent on building the House. It also contained an apology to all the brothers. Further, the plaintiff had a personal interest in the House. Therefore, it was reasonable to expect that MWC would have likely discussed the content with all the brothers, including the plaintiff, to seek their views.

51.  There was no evidence that the plaintiff had raised any objections regarding the contents of the Letter at the time. He claimed that he was not aware of the Letter. I find that unlikely since out of all the siblings in Holland, this matter concerned him most due to his interest and involvement in the House.

52.  Even if MWC had not revealed the Letter to the plaintiff (or any other brothers), I still cannot see why the 1^st defendant would, for no obvious reason (because there was no dispute at the time), decided to lie about his contributions in writing. A part of the Letter concerned with him seeking to apologise to all his brothers (for utilizing the father’s estate) so he must be aware that MWC would very likely discuss the Letter with the plaintiff (and the other siblings), and he would have risked incriminating himself and at the same time have alerted the plaintiff (and the other siblings) if he was telling a lie.

53.  Of course, TK was still alive at the time so, should a dispute broke out, she would have served as a witness as to whether the 1^st defendant had actually contributed or not.

54.  I cannot see why any reasonable person would do that unless he believed that he was stating the truth.

55.  Further, in the Letter, the 1^st defendant stated the father’s wish that “every one of us” would own a property and talked about constructing the House. He did not mention that the father had a further dying wish to build another house for his youngest son. The only way that the father could fulfill his wish that “every son owns a property” must be for the plaintiff and the 1^st defendant to share the House. This was consistent with the 1^st defendant’s case regarding the Common Intention.

56.  I also note a subtle point made in the Letter: the 1^st defendant mentioned that MCH’s money was not enough to build a two-storey house (which would be, of course, cheaper) but then talked about building this three-storey house. Why would they plan to build a more expensive house if money was so tight? This rather ties in the Common Intention as explained by MWC during cross-examination: the elder brothers only got single or two-storey houses, but now that they could build a three-storey house, this meant that the House could be shared between the plaintiff and the 1^st defendant.

57.  During the trial, a lot of time was spent on trying to ascertain exactly how much the 1^st defendant had contributed.

58.  Firstly, although the Letter did not specify how much of the 1^st defendant’s savings he had put in, he did mention a bank loan which was consistent with the record in his passbook.

59.  Secondly, I am not convinced that the plaintiff had contributed more than HK$100,000 to the construction. As stated above, the alleged HK$160,000 loan / gift from the father-in-law was a bare assertion by the plaintiff.

60.  Further, I also note that the 1^st defendant did not mention that such loan / gift from the plaintiff’s contribution had made up the entire building cost.

61.  Instead, the 1^st defendant was explaining how the House did not get built but then, how his work circumstances had changed and his income became steady, and how he could put in his own savings and the bank loan he took out, and how his contributions (together with other savings from the plaintiff, TK and MCH’s estate etc.) had made it possible to build the House. There would have been no need for such detailed explanations if the plaintiff had actually footed the entire balance of the building costs as he now alleged.

62.  In any case, I think that the exact amount of contribution from the 1^st defendant was not important, suffice to say that I find it likely that he must have contributed a significant amount of money.

63.  Besides the contributions to the costs of construction, I also accept the 1^st defendant’s evidence that he paid for the renovation (including the installation of air conditions and water heaters) before the 1^st and 2^nd floor flats were leased out in around 1997. He had indicated that in an account dated 2012 (Trial Bundle page 193).

64.  The plaintiff’s case was that he needed not pay for the renovation because the decorator agreed not be paid upfront but to take 3 months’ rent (after the flats had been rented out) as the costs for renovation. This claim was not supported by any documents and further, I would find it unlikely that any decorator would agree to such an unusual arrangement.

65.  It is not disputed that the 1^st defendant had paid the rental income of the 1^st floor flat to the plaintiff via the joint account held by Ms. Pok and her mother. There were deposit receipts to show this.

66.  The plaintiff claimed that he had also received rent from “his” 2^nd floor flat “sometimes” but the 1^st defendant had on many occasions failed to pay him. He claimed that Ms. Pok was in charge of “money matters” but when Ms. Pok was crossed-examined, she claimed that she would leave it to the plaintiff to deal with “brother matters”.

67.  In any case, the plaintiff failed to produce any evidence of rental income he ever received from the 2^nd floor flat. Under cross-examination, Ms. Pok claimed that her late mother kept the bank passbook but had lost it. She admitted that she never taken any steps to ascertain the “unpaid” rents.

68.  When it was pointed out that she, being one of the joint owner of the bank account, could have applied to the bank for a copy of the passbook, Ms. Pok then claimed that it was too late for her to apply to produce it for the trial.

69.  I have made my observation on the credibility of Ms. Pok before. Here again, I cannot believe that the plaintiff and Ms. Pok have never bothered to ascertain how much the claimed “unpaid” rent that the 1st defendant had owed them since 1997, and further that, despite having legal representation all along in an action that has been ongoing for more than 2 years, did not have enough time to seek the bank to produce a copy of the joint account.

70.  Further, the plaintiff also failed to produce any evidence as to what complaints, if any, was raised to the 1^st defendant regarding the alleged failure to account for such rents all through the years. This would be hard to believe if the plaintiff had truthfully believed that the House was his.

71.  As such, I find it more likely that the plaintiff has all along only received rent from the 1^st floor flat and the 1^st defendant has all along kept the rent from the 2^nd floor flat for himself. Such conduct of the parties would be entirely consistent with the 1^st defendant’s case of the Common Intention.

72.  I would also accept that the 1^st defendant has been involved in the design and construction of the House. His efforts were supported by contemporaneous documents. I am not convinced that either the plaintiff nor Ms. Pok was involved in any significant way in the design and construction. It was the plaintiff’s case that he arranged for Ms. Pok to follow-up on the construction and he was in close contact with her over the phone during the process. However, under cross-examination, it was clear that both the plaintiff and Ms. Pok knew very little about the design and construction process of the House.

73.  In conclusion, taking into account all the evidence and in light of the conduct of various parties, I am satisfied that there was a Common Intention that the House was to be shared between the plaintiff and the 1^st defendant, and the 1^st defendant, in reliance of that Common Intention, has contributed significantly to the construction costs and various renovation costs, and he has actively involved with various aspects of design, construction and rental management etc. These clearly were conducts which the 1^st defendant could not reasonably have been expected to embark upon unless he was to have an interest in the House.

74.  Having found that constructive trust is established by the Common Intention, I need not consider the alternative claim on proprietary estoppel. However, even if my finding is wrong regarding the Common Intention, I find that the plaintiff has clearly turned a blind eye to the 1^st defendant’s conduct all through the years: his monetary contribution in construction and renovation, his involvement in the design, his taking of rent from the 2^nd floor flat etc.

75.  As such, I find that the alternative case of proprietary estoppel by silence can also be established.

76.  Having found for the defendants on the two grounds above-mentioned, there is no need to proceed to discuss the further alternative claim for adverse possession.

Order

77.  The court will accordingly grant the following reliefs:

a.     A declaration that the plaintiff do hold one equal undivided 3^rd share in the Lot together with the right of exclusive possession of the 2^nd floor and the roof of the House on trust for the 1^st defendant;

b.     A declaration that the 1^st defendant is entitled to a lifetime irrevocable license to use the ground floor of the House for ancestral worshipping and family gathering for free;

c.     An order that the plaintiff do take all necessary steps to effect a transfer of the legal title of one equal undivided 3^rd share in the Lot together with the right of exclusive possession of the 2^nd floor and the roof to the 1^st defendant; and

d.     There be liberty to apply.

78.  The costs of the action be to the 1^st and 2^nd defendants to be taxed if not agreed with Certificate for Counsel.