LAU KWOK YING v. LAU KWOK CHOI

DCCJ 71/2015

[2019] HKDC 1048

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 71 OF 2015

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J U D G M E N T

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Background

1.  This is a dispute between two brothers about the ownership of a property known as Flat No 3 on 16^th Floor of Block A of Sun Sing Centre, No 8 Sun Sing Street, Shaukiwan, Hong Kong (“the Property”).

2.  The plaintiff and the defendant were the sons of the late Madam Yeung Luen Fong (“the Mother”) who passed away in 2010.  The Mother had 6 sons altogether.  The plaintiff was the 4^th son and the defendant was the 6^th and the youngest son.  The other sons were Lau Kwok Kwong (“the 1^st Brother”), Lau Kwok Hung (“the 2^nd Brother”), Lau Kwok Shing (“the 3^rd Brother”) and Lau Kwok On (“the 5^th Brother”) respectively.

3.  The Property is registered in the joint names of the plaintiff and the defendant, but the plaintiff contends that he has the sole beneficial interest in the Property and the defendant has no interest in the Property whatsoever.

4.  By this action, the plaintiff claims for a declaration that he was and is at all material times the sole legal and beneficial owner of the Property by reason of constructive and/or resulting trust; alternatively, a declaration that he was and is the beneficial owner of the Property by way of resulting trust in accordance with the amount he has paid in regard to the Property.  The plaintiff also claims for an order to require the defendant to assign his title of the Property to the plaintiff.

5.  On the other hand, the defendant contends that the Property was purchased on mortgage which was paid off by the Mother with the monthly maintenance payments contributed by the 1^st Brother, the 2^nd Brother, the 3^rd Brother, the 5^th Brother and the defendant, and hence the plaintiff’s share of interest in the Property is held on trust for the 1^st Brother, the 2^nd Brother, the 3^rd Brother, the 5^th Brother and the defendant in such shares as the court shall determine.

6.  Thus, the defendant counterclaims for an account or inquiry as to the beneficial ownership of the Property and a declaration that the plaintiff holds the Property on trust for the defendant in shares which are proportionate to his respective contributions to the purchase price or alternatively in such shares as the court shall determine.

7.  At the trial, the plaintiff gave evidence on his own without calling any witness; whereas the defendant gave evidence himself and called the 3^rd Brother to give evidence on his behalf.  Originally, the defendant intended to call the 1^st Brother as his witness as well, but decided not to call him at the trial.   

The plaintiff’s case

8.  According to the plaintiff’s case, he signed a sale and purchase agreement with one Tsang Mui Fong Wanny (“Madam Tsang”) on 21 March 1984 to purchase the Property at the consideration of $330,000.

9.  The initial deposit of $5,000 for the purchase was paid by the Mother on behalf of the plaintiff.  The plaintiff avers that this sum of $5,000 was a gift from the Mother to him, as the Mother wanted to ensure that the plaintiff would have a place to stay when he gets old.

10.  The plaintiff paid a further deposit of $28,000 out of his own savings in HSBC bank (“HSBC”), and he intended to borrow a mortgage loan from HSBC to finance the purchase.

11.  When the plaintiff approached HSBC, he was told orally by a staff of HSBC that if there could be one more mortgagor of the Property (in addition to the plaintiff), he would have a better chance to obtain a mortgage loan from HSBC.

12.  The plaintiff therefore discussed this matter with the family and the defendant. During a discussion with the defendant in March 1984, in the presence of the Mother and at the residence of the Mother, the 1^st Brother and the plaintiff, ie Block A, 16^th Floor, Golden Mansion, Shau Kei Wan Road, Hong Kong (“the Golden Mansion flat”), it was agreed between the plaintiff and the defendant and/or mutually understood and/or intended by them that:-

(a)   The plaintiff and the defendant would hold the Property as joint tenants to enable the plaintiff to obtain a mortgage loan from HSBC, and hence the defendant would become one of the mortgages of the Property;

(b)   The plaintiff would be responsible for all the repayments of the mortgage loan, including interest and other miscellaneous expenses;

(c)   The plaintiff would be responsible for all the expenses for the purchase of the Property, and the defendant would not be required to pay any expenses;

(d)   The Property would be used by the plaintiff and the Mother jointly, as the Mother was old and the plaintiff could take care of and accompany the Mother; and

(e)   Although the Property would be in the joint names of the plaintiff and the defendant, the defendant would have no interest in the Property whatsoever.

13.  Thereafter, the plaintiff and the defendant applied to HSBC for a mortgage loan which was approved on 10 April 1984 with a loan amount of $200,000 repayable in 15 years.

14.  On 12 April 1984, the plaintiff and the defendant executed a Nomination at the office of Messrs T L Ip & Co, solicitors, to add the defendant’s name as a joint tenant with the plaintiff in the purchase of the Property.

15.  On 6 June 1984, an Assignment of the Property was executed in favour of the plaintiff and the defendant as joint tenants, and on the same day, a Mortgage was executed in favour of HSBC with the plaintiff and the defendant as the joint borrowers.

16.  The plaintiff further paid the balance of the purchase price, estate agent’s commission, stamp duty, legal costs and miscellaneous expenses in respect of the purchase of the Property totalling $108,015 with money from his own personal account at HSBC.

17.  On 20 August 1993, the defendant wrote and signed a document which stated and/or was understood by the parties to mean that the defendant would surrender his ownership of the Property to the plaintiff under no condition.

18.  The monthly repayments of the mortgage loan (including principal and interest) were paid solely by the plaintiff from about June 1984 onwards until 26 October 1994.

19.  At all material times from June 1984 onwards, the Property was and still is occupied solely by the plaintiff and the defendant had never resided at the Property.

20.  On 26 October 1994, the sum owed to HSBC was $91,114.61 (being principal amount and accrued interest).  In October 1994, the plaintiff paid this outstanding sum as well as the legal and miscellaneous costs for the release of the mortgage. HSBC executed a release of mortgage dated 7 December 1994 and the Property was then free from mortgage.

21.  The plaintiff therefore contends that he is the sole legal and beneficial owner of the Property by way of resulting trust since the entire purchase price (including the repayment of the mortgage loan) together with all other purchase monies and miscellaneous expenses were solely paid by him.

22.  Alternatively, the plaintiff contends that his share of the beneficial interest in the Property is determined by reference to the amount he has paid in regard to the Property (including the mortgage loan), together with all purchase monies by way of resulting trust.

23.  In the further alternative, the defendant is a constructive trustee holding part of the legal title of the Property for and on behalf of the plaintiff.

24.  The plaintiff also contends that the defendant is estopped from claiming interest in the Property because it would be unconscionable for the defendant to do so as he has made a promise, representation and/or assurance which the plaintiff has relied on and has acted to a detriment as a consequence.

The defendant’s case

25.  The defendant contends that the plaintiff suffered brain damage in a traffic accident in 1966 which caused him to have a mental illness, namely schizophrenia, and thereafter the plaintiff had to stay at various medical institutions including Castle Peak Hospital, Siu Lam Psychiatric Centre and Kwai Chung Hospital for treatments.  The plaintiff is now on medication and undergoing long term treatment at medical institutions including Youde Nethersole Eastern Hospital to cure his mental illness.

26.  In 1993, the plaintiff was charged with arson, convicted and detained in Siu Lam Psychiatric Centre for treatment for a few months.

27.  The plaintiff was at all material time engaged in intermittent low-income employments such as office boy, care-taker and junior clerk etc.

28.  At all material time, the Mother was a housewife and dependent on the maintenance provided by the 1^st Brother, the 2^nd Brother, the 3^rd Brother, the 5^th Brother and the defendant; and the plaintiff was residing with the Mother and the 1^st Brother’s family at the Golden Mansion flat which was a rented premises.

29.  In 1983, the 1^st Brother purchased his own flat and moved out of the Golden Mansion flat with his family.

30.  Several months later, the Mother, then aged 73, and the 1^st Brother, the 2^nd Brother, the 3^rd Brother, the 5^th Brother and the defendant considered it appropriate to purchase a flat on mortgage to be paid off from the monthly maintenance payments contributed by the 1^st Brother, the 2^nd Brother, the 3^rd Brother, the 5^th Brother and the defendant for residence of the Mother and the plaintiff who was not capable of self-dependent and the flat should be regarded as an ancestral home.

31.  However, as the Mother was old and it would be difficult for her to obtain mortgage, it was decided that someone from the brothers should be elected to hold the flat for the Mother.  As the defendant was the youngest among the brothers and was not yet married, he was elected to be the one to hold the flat.  Later, it was decided that the plaintiff should also be added as another owner to jointly hold the flat for the Mother, so that the plaintiff could continue to live there after the Mother passed away.

32.  A provisional agreement for sale and purchase dated 20 March 1984 in Chinese in respect of the Property was entered into between Madam Tsang as vendor and the Mother as purchaser whereby an initial deposit of $5,000 was paid by the Mother to Madam Tsang.

33.  According to the said provisional agreement, the Mother and Madam Tsang had to attend the office of Messrs T L Ip, solicitors, on 21 March 1984 for signing the formal sale and purchase agreement, and a further deposit of $28,000 had to be paid. However, the defendant was busy at work and could not attend the solicitors’ office on 21 March 1984.  After the Mother had made enquiry with the solicitors’ firm, it was found out that one of the purchasers could sign the formal sale and purchase agreement first and the other purchaser’s name (ie the defendant’s name) could be added later.

34.  The defendant contends that it was under the aforesaid circumstances that the plaintiff executed the formal sale and purchase agreement in his sole name first and the defendant’s name was added later on.

35.  The defendant also contends that all the monthly repayments of the mortgage loan were paid out of the joint account of the plaintiff and the defendant at HSBC and the monies were deposited by the Mother into this joint account monthly.  All the other monies including the down payment and the balance sum for early redemption of the mortgage were also paid by the Mother.

36.  After the purchase of the Property, the Mother and the plaintiff started living at the Property.  The brothers provided monthly maintenance for the Mother to cover the mortgage repayment and her living expenses.  There was no agreement as to how much the brothers would give to the Mother as her living expenses, but each one would contribute such an amount in accordance with his own ability.  From 1984 to 1994, the defendant contributed about $600 to $800 per month to the Mother.  The Mother would distribute the monies received from the brothers towards her monthly expenses on her own.

37.  In 1993, when the defendant was still living in Canada, the Mother and the plaintiff went to Canada to visit the defendant.  At that time, the plaintiff suddenly became abnormal mentally and in his speech, and claimed that the Property belonged to him.  The plaintiff wanted the defendant to sign a document to give up the defendant’s ownership in the Property.  In order to calm down the plaintiff, the defendant drafted and signed a Power of Attorney for the plaintiff, but the defendant did not agree to give up his interest in the Property.  At the request of the plaintiff, the Power of Attorney was to be witnessed by the 1^st Brother.  However, the 1^st Brother denied the signature of the witness on the Power of Attorney was his, as he does not recall signing such a document.

38.  The plaintiff had wanted to sell the Property to get money on many occasions, but the Mother refused to sell because the Property was for long term holding as ancestral home.

39.  In 1994, as the interest rate for the mortgage had risen substantially, the Mother decided to redeem the mortgage with the money she saved from the contributions of the brothers over the years.  When she repaid the mortgage loan fully in October 1994, she handed over the title deeds to the 1^st Brother for him to keep them in a safe deposit box with Hang Seng Bank which was under the joint name of the Mother and the 1^st Brother.  When the Mother passed away in 2010, the 1^st Brother gave the title deeds to the defendant for him to keep.

40.  Thus, the defendant denied the purchase money of the Property including the mortgage repayments were paid by the plaintiff, or that the plaintiff is the sole legal and beneficial owner of the Property, and the defendant counterclaims against the plaintiff as aforesaid.

The issues

41.  There is no dispute that the Property is registered in the joint names of the plaintiff and the defendant, and there is a presumption that equity follows the law.  In other words, the beneficial ownership of the Property would be presumed to be the same as the legal ownership.

42.  However, this presumption can be rebutted, and a party seeking to show that the beneficial ownership differs from the legal ownership has a heavy burden to discharge (see Stack v Dowden [2007] 2 AC 432, Lo Kau Kun v Cheung Yuk Yun, HCA 152/2013 and Hsu Kim Ming v Chui Yuk Fei, DCMP 230/2015).

43.  In the present case, the plaintiff seeks to rebut the presumption by relying on a common intention constructive trust and/or a resulting trust.  The common intention constructive trust is based on the discussion between the plaintiff and the defendant in the presence of the Mother at the Golden Mansion flat in March 1984 as aforesaid.  So the first issue is whether there was such a discussion in March 1984.

44.  As to the resulting trust, the plaintiff relies on the fact that all the payments towards the Property were made by the plaintiff.  The second issue is therefore whether the payments were all made by the plaintiff.

45.  If not all the payments were made by the plaintiff, the plaintiff contends that his share of the beneficial interest of the Property should be determined by reference to the amount he has paid.  This will be the third issue.

46.  The fourth issue is whether the defendant is a constructive trustee holding part of the legal title of the Property in the defendant’s name for and on behalf of the plaintiff.  The plaintiff did not elaborate this in the Amended Statement of Claim, nor in the closing submission.  Presumably this is in relation to the common intention constructive trust, and hence it will be discussed together with the first issue.

47.  The plaintiff also contends that the defendant is estopped from claiming interest in the Property because it would be unconscionable for the defendant to do so as: (a) the defendant had expressly informed and/or allowed the plaintiff to believe and/or continue to believe that the plaintiff had sole beneficial interest in the Property; (b) the plaintiff has made payments for the Property; and (c) the plaintiff has suffered detriment by virtue of such payments.  This will be the fifth issue.  However, it is trite that estoppel only operates as a shield, not a sword.  The plaintiff cannot rely on this as a cause of action, but only as a defence to the defendant’s counterclaim.

48.  As to the defendant’s counterclaim, the issue is whether the defendant has any beneficial interest in the Property and whether the plaintiff holds the Property on trust for the defendant in shares which are proportionate to his contributions to the purchase price.

Issues under the counterclaim

49.  For the sake of convenience, I shall discuss the issues under the counterclaim first.

50.  The defendant’s case is that the Mother was actually the sole beneficial owner, because all the monies were paid by her.  The defendant was only elected to hold the Property for the Mother.  If that was the case, the defendant has no beneficial interest in the Property at all.  The defendant should be holding the Property on trust for the Mother or her estate when she passed away.  As the defendant is not acting for the Mother’s estate in this action, he cannot claim any beneficial interest on behalf of the Mother’s estate.

51.  Although the defendant is trying to say that he and the other brothers (apart from the plaintiff) contributed various sums for the Mother’s maintenance which includes the mortgage repayments and living expenses, such contributions became the Mother’s own monies once given to her and the defendant cannot really say that his contributions could become his payments for the mortgage.

52.  The defendant’s evidence is clearly that there was no agreement as to how much the brothers would contribute but it was up to each brother to pay in accordance with his own ability, and the defendant’s own contributions were also not fixed. The Mother would distribute the monies received from the brothers on her own. In other words, the Mother had absolute discretion to spend the monies as she liked.  It is clear to me that the defendant was merely making contributions to support the Mother’s maintenance, and not paying his shares towards the mortgage repayments.

53.  Thus, even based on the defendant’s own case, he has no beneficial interest in the Property.

54.  It follows that the plaintiff would not be holding the Property on trust for the defendant at all.  Based on the defendant’s case (but subject to the plaintiff’s case which will be discussed below), the plaintiff is holding the Property on trust for the Mother’s estate at most.

55.  In the circumstances, the defendant has absolutely no legal basis to make the counterclaim at all and the counterclaim must be dismissed accordingly.

Estoppel

56.  Since the counterclaim has to be dismissed, there is no need for me to discuss the estoppel raised by the plaintiff.  As aforesaid, estoppel cannot be used by the plaintiff as a cause of action to make a claim against the defendant.

Common intention constructive trust

57.  As held in Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9, in ascertaining whether there was a common intention, it is the objective intention of each party which was reasonably understood by the other party to be manifested by that party’s words and conduct that one must examine, and such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions.  It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention.

58.  The plaintiff’s case on common intention constructive trust turns on whether I accept that the discussion between the plaintiff and the defendant in March 1984 as alleged by the plaintiff is true or not, as this was the agreement, arrangement or understanding with respect to the beneficial ownership of the Property.

59.  Having considered all the evidence and submissions, I have no hesitation in accepting that the plaintiff’s evidence in this regard is true.  I accept that there was such an agreement, arrangement or understanding as contended by the plaintiff and that the defendant’s name was added as a joint tenant solely for the purpose of enabling the plaintiff to obtain a loan from HSBC and the defendant has no beneficial interest in the Property.

60.  First of all, it is not disputed that the purchaser’s name was changed from the Mother to the plaintiff’s and then the defendant’s name was added.  There must be some reasons for such changes and there must be some discussions between the parties before the changes were effected.  The plaintiff’s explanation in this regard is more reasonable and logical to me than the defendant’s.  It is not uncommon that a bank would require an additional mortgagor especially when the plaintiff was of low income.  On the other hand, it is not credible at all for the defendant to allege that he was too busy to go to the solicitors’ firm to effect the purchase when he was elected to be the one to hold the Property for the Mother.  There is also no logic in adding the plaintiff’s name just for him to stay in the Property especially when the defendant thinks that he is a mental patient and when he has absolutely no beneficial interest in it.

61.  Secondly, the Power of Attorney signed by the defendant is a clear indication that the defendant had no interest in the Property.  If not, there is no reason at all for the defendant to draft and sign such a document at the request of the plaintiff.  The defendant’s explanation that it was for calming the plaintiff down is totally unbelievable.  I do not think that the defendant would give up his interest in the Property for the sake of calming the plaintiff down. 

62.  The Power of Attorney was drafted in a rather formal way with ID numbers included and a space for the signature of a witness, even though it was hand-written and with a wrongly spelt word “surround”.  I think this word “surround” was just a mistake made by the defendant when it should be written as “surrender”.  The 1^st Brother was the signatory for the witness.  It is strange that the 1^st Brother was not called as a witness at the last minute.  In any event, the 1^st Brother’s signature is on the face of it there, and without any rebutting evidence, I have no reason to believe that this signature was not the 1^st Brother’s especially when his ID number was also there.

63.  Thus, this Power of Attorney also supports the plaintiff’s version of the events.

64.  Thirdly, after the defendant’s name was added by way of a Nomination dated 12 April 1984, the receipt issued by the solicitors’ firm for the payment of $108,015 dated 10 May 1984 shows that the payment was from the plaintiff, not from the defendant or both of them.  There is no reason why the defendant would not have raised an objection if the money was not coming from the plaintiff.

65.  It is not disputed that the monthly mortgage repayments came from the plaintiff’s own account and not the joint account of the plaintiff and the defendant or the defendant’s own account.  Again it is very strange that if the plaintiff had no beneficial interest in the Property, the parties would make such a payment arrangement.

66.  The defendant suggests that the plaintiff could not have sufficient money to pay for all these purchase monies because the plaintiff had only low-income jobs, a lot of debts and did not work constantly.  However, the defendant was not aware of how much money the plaintiff actually had as he did not see the amounts in the plaintiff’s account.  Thus, it is merely guess work for the defendant to make the allegation.  Although I accept that the plaintiff might not have a lot of income because of his job nature, it does not mean that he could not save enough money for making these payments.  He lived with the Mother all along and it seems clear that the Mother took care of him all the time.  When he did not have much expenses to pay, he could have saved the money for the Property.  In any event, the plaintiff has already explained clearly how he started working young and hence he could have the savings to do the purchase and I accept his evidence in this regard.  Even assuming that the defendant is right in saying that the plaintiff had incurred a lot of debts, but it is also the defendant’s evidence that the Mother had helped the plaintiff to repay the debts.  If the Mother could help the plaintiff to clear the debts, it is possible that the plaintiff could still have his own savings or the Mother could have helped him with all these monies for the Property.

67.  There is no evidence that in helping the plaintiff, the Mother was retaining any beneficial interest in the Property.  The Mother gave up her name as purchaser right from the start after signing the preliminary sale and purchase agreement and it is not suggested by either party that she had retained the beneficial interest in the Property or that the plaintiff was holding the Property on trust for the Mother.  Thus, I do not find that the Mother had any beneficial interest in the Property.

68.  In the premises, I find that there was this common intention between the parties as contended by the plaintiff and that the defendant was holding the Property as a joint tenant just to enable the plaintiff to obtain a mortgage only.  In other words, the defendant is holding his interest in the Property as a constructive trustee for the plaintiff.

Resulting trust

69.  Since I find that there is this common intention constructive trust for the plaintiff, it is not necessary for me to go on to discuss about resulting trust.  However, for the sake of completeness, I will also discuss the same.

70.  Apart from the initial deposit of $5,000 which was paid by the Mother, the evidence shows clearly that all the monies were paid by the plaintiff or through the plaintiff’s account.  The defendant is not saying that he had made any of such payments himself.  He only says that he paid contributions to the Mother and the Mother made such payments for the Property.

71.  It is clear to me that the initial deposit must be a gift to the plaintiff when the Mother permitted the change of purchaser’s name to the plaintiff’s name and did not ask the plaintiff for the money back.  There could be such a presumption of gift in view of their relationship as mother and son, and in fact there could be no other explanation if it was not a gift.

72.  The defendant relies on the facts that the plaintiff was a mental patient and he had low-income jobs to say that he could not afford to pay the purchase money or the monthly mortgage repayments.  However, as discussed above, I think it is possible for him to save up for the monies.

73.  In any event, even assuming some of these monies were paid by the Mother, just like the initial deposit of $5,000, these other monies could also be gifts from the Mother to the plaintiff.  As aforesaid, these monies could not be regarded as the defendant’s or the other brothers’ once they were given to the Mother.

74.  Thus, I have no doubt that the plaintiff could have all the beneficial interest in the Property by way of resulting trust as all the monies regarding the Property were paid by him either with his own monies or with gifts from the Mother.  The defendant could not have any beneficial interest in the Property at all as his contributions for the Mother’s maintenance cannot be regarded as contributions for the purchase price or mortgage repayments of the Property.

75.  With this finding, it is not necessary for me to discuss the third issue.

Conclusion

76.  By reasons aforesaid, I find that the plaintiff was at all material times and is the sole beneficial owner of the Property and is entitled to a declaration to that effect.  He is also entitled to have the defendant’s legal interest of the Property transferred back to him.

77.  I therefore order as follows:-

(1)   A declaration that the plaintiff was at all material times and still is the sole beneficial owner of the Property;

(2)   An order that the defendant do forthwith assign his legal interest of the Property to the plaintiff;

(3)   The defendant’s counterclaim be dismissed; and

(4)   An order nisi that the defendant do pay the plaintiff costs of the action including the costs of the counterclaim with certificate for counsel and the plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.