LEE YEE WAN EVA v. LEE TAK GATE RICHARD

HCA 417/2015

[2018] HKCFI 1137

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 417 OF 2015

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J U D G M E N T

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I.  Introduction

1.  The Plaintiff is the elder sister of the Defendant. They are the registered owners of the property situated at Flat RC, 43^rd Floor of Tower 3, Le Prestige of Lohas Park, No. 1 Lohas Park Road, Tseung Kwan O, New Territories, Hong Kong (“Property”). The purchase price of the Property was HK$4.83 million. It is common ground that the estimated current value of the Property is just under HK$9 million.

2.  In this action, the Plaintiff claims against the Defendant principally for:

(1) “A Declaration that the Plaintiff is the sole beneficial owner of the Property and that the Defendant holds the same upon trust for the Plaintiff all such estate right title benefit and interest of and in the Property.”

(2) “An Order that the Defendant do transfer and/or convey the Property to the Plaintiff within 14 days of the Order, failing which the Registrar of the High Court shall execute all necessary conveyance from the Defendant to the Plaintiff.”

II.  The Facts

3.  The primary facts of this case are largely not in dispute and/or amply supported by contemporaneous documents.

4.  The Plaintiff is and since about 1969 has been an ordinary resident of Canada. She was a chartered accountant[1] in Canada and has been practising on a self‑employed basis. She is now 60 years old and is working part‑time, or, in her own words, semi‑retired.

5.  The Defendant is 56 years old. He was also ordinarily resident in Canada until 2012 when he moved to Hong Kong. He was an accountant by training and has worked in the Plaintiff’s office in Canada as a staff accountant until he resigned and retired in 2010. Ever since the purchase of the Property in 2012, he has been living in it and still does.

6.  In May 2012, the Plaintiff came to Hong Kong with the intention of purchasing a suitable property as a personal investment and for use by her family members. She had previously visited Hong Kong in December 2011 to look for a property to purchase. She found one at Lohas Park but eventually decided not to proceed with it. At this second time, the Plaintiff found the Property with the assistance of a local estate agency and decided to purchase it.

7.  On 29 May 2012, the Plaintiff entered into a provisional sale and purchase agreement (“Provisional Agreement”) of the Property. She put down her name and the Defendant’s name as purchasers. She also signed the Provisional Agreement on her behalf as well as on behalf of the Defendant. She told this court she had informed the Defendant beforehand that she would put his name down as a purchaser. She had also told the Defendant that he could live in the Property.

8.  At that time, the Plaintiff’s husband was awaiting test results of his cancer diagnosis and she was unable to stay in Hong Kong until the completion of the purchase. Further, because of her concerns over her husband’s health, the Plaintiff anticipated she would not return to Hong Kong within the next year or two. Her husband eventually died of cancer in October 2013.

9.  As is commonly the case, the Plaintiff had not consulted a lawyer prior to signing the Provisional Agreement. After she had signed it, the estate agency recommended a firm of solicitors, Messrs Tony Kan & Co (“TK & Co”), to her. On 31 May 2012, on the advice of TK & Co, the Plaintiff executed a power of attorney prepared by the firm appointing the Defendant as her lawful attorney. This was to enable the Defendant to handle the formalities relating to the purchase of the Property on her behalf while she was away. After executing the power of attorney, the Plaintiff returned to Canada on the same day.

10.  On 11 June 2012, the Defendant signed the formal sale and purchase agreement (“SPA”) of the Property in his name and as the lawful attorney of the Plaintiff.

11.  By an Assignment dated 6 August 2012 (“Assignment”), the Property was assigned to the Plaintiff and the Defendant as joint tenants. The Assignment was signed by the Defendant in his name and as the lawful attorney of the Plaintiff.

12.  It is undisputed that the entire purchase price was paid by the Plaintiff:

(1)  HK$3,000 as initial deposit upon signing the Provisional Agreement.

(2)  HK$141,900 as further deposit prior to the signing of the SPA.

(3)  HK$338,100 as further deposit upon signing of the SPA.

(4)  The balance in the sum of HK$4,347,000 upon completion on 6 August 2012.

13.  In addition to the purchase price, the Plaintiff also paid for all the fees and expenses incidental to the purchase ie stamp duty, agency fees and legal costs.

III.  The Parties’ cases and witnesses

14.  At trial, each side called 1 witness viz the Plaintiff and the Defendant.

15.  The Plaintiff’s pleaded case and testimony is that it was never her intention to make a gift of any part of the Property to the Defendant. Nor was there any agreement between the Plaintiff and the Defendant that the latter should have any beneficial interest in the Property. The Property was her personal investment and the Defendant was merely her nominee. The Defendant understood his position as a mere nominee and agreed with it.

16.  The Plaintiff’s explanation for adding the Defendant’s name as a purchaser in the Provisional Agreement was that, because of her husband’s medical condition, she could not stay in Hong Kong for long. The Plaintiff thought it would be more convenient for someone she trusted in Hong Kong ie the Defendant to follow up on the purchase of the Property if he was included as a joint purchaser. She said she did it purely for practical convenience. In return, the Defendant was allowed to live in the Property rent free — all he had to pay for were the recurrent outgoings such as management fees, rates, utilities etc which added up to a few thousand dollars a month.

17.  Sometime after the Plaintiff had retained TK & Co but before completion, she once harboured the idea of changing the purchaser to her sole name or to a company owned by her. She was however advised by TK & Co that once the Defendant’s name appeared in the Provisional Agreement and the SPA, any subsequent change would trigger liability for Special Stamp Duty (“SSD”). The Plaintiff therefore dropped the idea for the time being until such time when SSD was no longer payable.

18.  Subsequently, by letters and email dated 12 & 18 November and 9 December 2014, the Plaintiff’s solicitors Messrs SY Wong & Co demanded the Defendant to transfer his legal title of the Property to her. The Defendant did not respond to them. The Plaintiff therefore issued the Writ of Summons on 26 February 2015.

19.  The Defendant’s pleaded case and testimony is neatly summarized in paragraph 3 of his Defence and Counterclaim and substantially repeated in paragraph 2 of his witness statement. For the sake of simplicity of presentation, only the relevant part of paragraph 2 of his witness statement is set out below:

“ …Later on, Plaintiff put in another offer for another property at Lohas Park (the property which is now in issue). Plaintiff again asked me to make the purchase together…Prior to the purchase, Plaintiff made it clear to me that it was a joint purchase and that she would take care of the financing. I would be responsible for paying government rates, management fees, all utilities, and take care of the property while living in the flat. Plaintiff wanted a co‑owner who would look out for the interest of the owners and do the work of taking care of the flat. Plaintiff had repeatedly asked me to make the co‑purchase together. I relied on the terms proposed by Plaintiff in co‑purchasing the property. I would otherwise not have made the purchase together with the Plaintiff.” (emphasis added)

20.  In other words, it is the Defendant’s case that the Plaintiff’s intention was that the two of them would “co‑purchase” the Property. Under this “co‑purchase” arrangement, the Plaintiff’s obligation was to finance the purchase while the Defendant’s obligation was to look after it as an owner/occupier and pay for the outgoings.

21.  In paragraph 4 of the Defence and Counterclaim and his witness statement, the Defendant claims the reason for the co‑purchase was because the Plaintiff wanted the benefit of having a co‑owner who would look after the best interest of the Property. At paragraph 7 of the Defence and Counterclaim and his witness statement, he strongly denies he is a mere nominee of the Plaintiff.

IV.  Deliberation

22.  Mr Lam, for the Plaintiff, submits that his client’s claim is a straightforward one premised on the operation of what is commonly known as “purchase money resulting trust”. He submits that since the Plaintiff has paid for the entire purchase price, she is the sole beneficial owner of the Property and the Defendant merely holds the Property on trust for her.

23.  In Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 708A‑B, Lord Browne‑Wilkinson set out the law in these terms:

“ Under existing law a resulting trust arises in two sets of circumstances: (A) where A … pays (wholly or in part) for the purchase of property which is vested … in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the … property is held on trust for A (if he is the sole provider of the money) … 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.”

24.  A resulting trust of type (A) described by Lord Browne‑Wilkinson is generally known as a “purchase money resulting trust”. It is important to bear in mind that this type of resulting trust arises by operation of law to give effect to the presumption that A did not intend B to take the property beneficially. This presumption of resulting trust can be rebutted either by direct evidence that A intended to benefit B, or by a counter‑presumption of advancement. The latter can, in turn, be rebutted by evidence: Hui Cheung Fai & another v Daiwa Development Ltd & others unrep, HCA 1734/2009, 8 April 2014, DHCJ Eugene Fung SC at [60] and [61].

25.  In Lam So Yuk Hang Minnie & others v Superyield Holdings Limited & others unrep, HCMP 6440/1998, 18 February 2000 at pp 24‑25, Mr Recorder Kotewall SC observed that the doctrine of “purchase money resulting trust” is a rebuttable presumption of law in that (i) it applies as soon as the fact of contribution to the purchase price is proved, and (ii) in the absence of other evidence, it is conclusive for the party in whose favour it operates and for the purpose for which it operates. Further, and importantly, the material intention for the present purpose is that of the provider of the purchase money ie the Plaintiff: Calverley v Green (1984) 155 CLR 242, per Gibbs CJ at 251 and per Mason & Brennan JJ at 261.

26.  As explained by Lord Browne‑Wilkinson and DHCJ Eugene Fung SC above, the presumption of resulting trust can be rebutted by a counter‑presumption of advancement. The presumption of advancement used to apply most strongly among family members where B was legally dependent upon A so that A had a moral duty to support or advance B. This explains the formal categories where the presumption of advancement has applied ie from father to child or husband to wife: Snell’s Equity 33^rd Ed para 25‑007. The learned editors of Snell’s Equity go on to suggest that nowadays, it is recognized that the rationale of the presumption of advancement is broader and the court may be prepared to draw an inference of A’s intention to make a gift to B in situations outside the formal categories where the presumption previously applied.

27.  Despite the very impressive research conducted by Mr Lam, no authorities can be found where the presumption of advancement has been applied between siblings. Instead, Mr Lam has referred this court to two authorities which ruled that such a presumption has no application between brothers and sisters: Chan Gek Yong v Chan Gek Lan [2008]SGHC 167 at [17][2] ; Gorog v Kiss [1977] 78 DLR (3d) 690, 694[3].

28.  This court agrees the presumption of advancement has no application in the present case. Both the Plaintiff and the Defendant are mature adults. The Plaintiff is semi‑retired while the Defendant has retired years ago. It is difficult to see why the Plaintiff would consider herself under any duty, moral or otherwise, to provide for or advance to the Defendant. While in a suitable case, the court may draw the inference that a sister intends to make a gift to her younger brother, there must be some evidential basis before a court can do so. In the present case, this court can find none and none has been suggested by the Defendant.

29.  Instead, this court accepts the Plaintiff’s testimony and finds as a fact that she did not intend to make a gift (or an outright transfer) to the Defendant by adding him as a purchaser.

30.  The reasons are these.

31.  First, the Plaintiff is categorical that she intended to purchase the Property as a personal investment. This is in fact not disputed by the Defendant as he never claimed that the Property was a joint investment between the Plaintiff and himself as such. Nor can this court see how the Defendant can honestly claim the Property was a joint investment, given he did not pay a cent towards the purchase price or other incidental expenses. The recurrent outgoings that the Defendant has been paying are referable only to his occupation of the Property after the completion of the purchase.

32.  There is nothing out of the ordinary concerning the Plaintiff’s intention to purchase the Property as her personal investment rather than as a joint investment with the Defendant. She obviously had the means to do so while the Defendant did not. The Plaintiff was not resident in Hong Kong at the time of the purchase and there is no suggestion that she intended to move back to Hong Kong any time soon, so the Property would not have been for self‑use. While it is common for property investors to rent out properties not required for self‑use in order to earn some rental income, there is also nothing extraordinary for the Plaintiff to be generous enough to her brother by allowing him to live in it rent free.

33.  Second, the Plaintiff is also categorical that the Property was not intended to be a gift to the Defendant. During cross‑examination, the Defendant frankly admitted the Plaintiff had never told him the Property (or any part of it) was a gift to him. Taken to its highest, the Defendant’s case is that the Plaintiff asked him to “co‑purchase” the Property with her. But in the present context, what does “co‑purchase” actually mean?

34.  It is a fact that both the Plaintiff and the Defendant were named as purchasers in the Provisional Agreement, the SPA and the Assignment. In that sense, the Plaintiff and the Defendant did “co‑purchase” the Property. But that happens in every case where one person pays the whole of the purchase price of a property which is vested in the joint names of him and another person. That is a paradigm example of the application of the “presumption of purchase money resulting trust”, or, in the words of Lord Browne‑Wilkinson, the “presumption that A did not intend to make a gift to B”.

35.  The Defendant argues that if the Plaintiff merely intended him to be her nominee, it would not have been necessary to add his name to the title since the Plaintiff had executed a power of attorney in his favour which would enable him to follow up on the formalities of completing the purchase on her behalf. But this argument overlooks the Plaintiff’s testimony, which this court accepts, that (i) when the Plaintiff added the Defendant’s name to the Provisional Agreement, she was not under legal advice and there was no power of attorney; (ii) after the execution of the power of attorney prepared by TK & Co and before completion, the Plaintiff had at one stage intended to change the purchaser of the Property to her sole name or to that of a company owned by her but was deterred from doing so because of the potential liability for SSD. It is common human experience that people do things which, upon closer analysis after the event, are not strictly necessary for the intended purpose. But the real issue in this case is not whether it was strictly necessary for the Plaintiff to add the Defendant’s name as a purchaser. The real factual issue is whether the Plaintiff intended to make a gift or an outright transfer to the Defendant by so doing.

36.  At the request of this court, Mr Lam had painstakingly traced the history of the introduction of SSD in his Closing Submissions and concluded at paragraph 39 that any disposal of the Property by the Plaintiff and the Defendant to a company within 24 months from the date of the Provisional Agreement would attract SSD while any change of hand from the Defendant to the Plaintiff would be exempted from it as they are siblings.

37.  In his Closing Submissions, the Defendant seizes upon this and argues that the Plaintiff’s explanation for not transferring the Property to her sole name prior to completion is invalid. This court does not for one moment accept the Defendant’s argument. For the present purpose, it is not necessary for this court to rule on whether Mr Lam’s conclusion at paragraph 39 is correct or not, or whether the advice given by TK & Co to the Plaintiff was sound or not. The important thing is this court finds nothing incredible about the Plaintiff’s explanation and accepts her testimony as truthful ie she did intend to change the purchaser of the Property to her sole name or to that of a company owned by her but was deterred from doing by reason of what she was advised, rightly or wrongly, regarding the potential liability for SSD.

38.  Third, given the Plaintiff's intention of purchasing the Property was to keep it as her personal investment, it is difficult to see how that can be reconciled with the notion of her intending to make a gift of it (or part of it) to the Defendant. In this regard, the Defendant has failed to come up with any cogent reason why the Plaintiff would want to make a gift of her personal investment to the Defendant and this court can find none. The Defendant himself might subjectively assume or even believe that by adding his name as a purchaser and by allowing him to live in the Property, the Plaintiff had intended that he would have a share of the beneficial interest in it. But the Defendant’s subjective belief is irrelevant. It is the Plaintiff’s subjective intention which matters.

39.  To conclude, for all the above reasons, this court finds that a purchase money resulting trust did arise in favour of the Plaintiff by virtue of her contribution to the entire purchase price of the Property and it has not been rebutted by the presumption of advancement or evidence that she intended to benefit the Defendant or make an outright transfer to him.

V.  Disposition and costs order nisi

40.  In the premises, this court finds in favour of the Plaintiff and shall

(1)   enter judgment in terms of paragraph (a) and (b) of the prayer for relief in the Statement of Claim, save that “14 days” in paragraph (b) be replaced by “42 days”, with liberty to apply;

(2)   dismiss the Defendant’s Counterclaim.

41.  At the specific request of the Plaintiff, there be no Order as to costs.