XTRNX NG YIM LUNG v. CHIN KA KUI and Others

[English Translation - 英譯本]

IN THE HIGH COURT OF HONG KONG

MISCELLANEOUS PROCEEDING NO. 3440 OF 1995

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JUDGEMENT

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Introduction

1. The property involved in this action is Flat D, 9th Floor, No.59 Broadway, Mei Foo Sun Chuen, Kowloon ("the Property").

2. The Plaintiff, Ng Yim Lung ("Madam Ng"), is the registered owner of the Property. The 1st Defendant, Chin Ka Kui, and his family lived in the Property in the period in question. Mr. Chin was an adjudged bankrupt under a Receiving Order dated 17th March 1993. The Official Receiver indicated to the solicitor representing Madam Ng that Section 12 of the Bankruptcy Ordinance did not have the effect of freezing the Plaintiff's application for recovering the possession of the Property, and that the Official Receiver, as the trustee in bankruptcy, did not request to be present in the proceedings.

3. The 3rd Defendant Tang Kang Man ("Mr. Tang"), trading as Fortune Knitting Factory, is the brother-in-law of Mr. Chin.

4. On 14.9.95, Madam Ng, through her solicitor of Messrs Howell & Co., required Mr. Chin to move out and return the Property.

5. On 20th September, Mr. Tang pointed out in a letter sent by his solicitor of Messrs Lau, Wong and Chan to Howell & Co. that he and Madam Ng had had an agreement to let Mr. Chin live in the Property for an indefinite period of time and that he himself should have an interest in the Property as he had paid the estate agent's fee and a total of 13 mortgage instalments.

6. Madam Ng applied for repossession of the Property by way of an 'Originating Summons' for Possession under Order 113 of the Rules of the High Court on 16.11.1995.

7. As the case involved tremendous dispute of facts, it was ordered by the Master on 14.12.1995 that the application be filed in the form of a 'writ of summons'.

Basis of Plaintiff's Claim

8. According to Madam Ng, Mr. Chin expressed to her in early 1993 that he was declared bankrupt because he was in great financial difficulties. Thus, he and his family could no longer live in the flat under his name. He asked for the assistance of the Plaintiff in providing temporary accommodation for him and his family.

9. One of the purposes Madam Ng purchased the Property was to help Mr. Chin. On or about 24.3.1993, Madam Ng signed the Provisional Agreement for the purchase of the Property. Upon signing, she took vacant possession of it. Madam Ng and Mr. Chin later had a verbal agreement to let Mr. Chin and his family live in the Property under a licence. The licence period was from 1.4.1993 to 31.3.1994. According to the licence, Mr. Chin promised to pay Madam Ng a sum of money each month which was roughly equal to the monthly mortgage instalment Madam Ng had to pay for the Property, that is, 12,000 odd dollars. Madam Ng alleged that during the licence period, i.e. from 1.4.1993 to 31.3.1994, Mr. Chin had only paid a total of HK$134,918.30 as the licence fee and he even stopped paying any licence fee whatsoever after 31.8.1994.

10. When the licence period was about to expire in March, 1994, Mr. Chin asked Madam Ng to sell the Property to him. He indicated that he believed he had enough money to purchase the Property. Mr. Chin expressed that he would complete the transaction within a reasonable time. Madam Ng agreed to let Mr. Chin continue living in the Property till July, 1994 so that he could raise money to purchase the Property. The licence period was therefore extended to July, 1994. However, Mr. Chin failed to turn up at the solicitors' firm to sign the formal Purchase Agreement as agreed. After discussion, both parties signed an agreement which was written in Chinese on 24.9.1994. The agreement shows that Madam Ng would allow Mr. Chin to continue living in the Property till 26.10.1994 under a licence, while Mr. Chin promised to move out of the Property before 26.10.1994 unless he could sign all the agreements relating to the purchase of the Property on or before 26.10.1994.

11. On 26th October 1994, as Mr. Chin was still undischarged. He could not go through the formalities for the purchase of the Property as agreed. However, notwithstanding that, Mr. Chin still refused to move out of the Property. Besides, from 31.8.1994 onwards, Mr. Chin had stopped paying any further licence fee. Since Mr. Chin still occupied the Property with other unknown persons and refused to move out, Madam Ng applied to the court for an Order of Possession in order to repossess the Property and to exercise her rights as an owner again.

12. On 20th September 1995, the 3rd Defendant Tang Kang Man (Trading as Fortune Knitting Factory) sent a letter through his solicitors' firm to the solicitor of Madam Ng claiming beneficial interest in the Property. Because of such claim, Madam Ng had to include Tang Kang Man (Trading as Fortune Knitting Factory) as the 3rd Defendant in this case. The purpose was to ask the Court to dismiss his claim of beneficial interest.

Reasons for Defence and Basis of Counterclaim

13. Mr. Chin admitted that in order to help him to tide over the financial crisis, Madam Ng reached a certain kind of agreement with him. The contents of the agreement, however, were different from what Madam Ng alleged. He averred that Madam Ng's name was used in the purchase of the Property. The down payment was also paid by Madam Ng while the rest was paid by instalments. The name of Madam Ng was merely used for carrying out the formalities relating to the transaction. As for the mortgage instalments, Mr. Chin had sought a relative's help in paying them on his behalf so that Mr. Chin and his family could live in the Property. It was also agreed that when Mr. Chin's son reached the age of 18, Madam Ng would assign the Property to his son, or to Mr. Chin if the bankruptcy had been discharged by then, or to his relative who repaid the mortgage for him. The Property was purchased in the name of Madam Ng as a security for the down payment she had paid. Under the agreement between both parties, after the Property was purchased the 3rd Defendant paid a total of 13 mortgage instalments. Mr. Chin alleged that he signed the document dated 24.10.94 purely to facilitate the selling of the Property with vacant possession by Madam Ng because Madam Ng had said that her business was not doing well, and she therefore planned to emigrate to Canada and the Property had to be sold so that she could get the down payment back. The original intention of both parties was to sell the Property to the 3rd Defendant, but since the 3rd Defendant was not able to raise any mortgage loan, the proposal fell through. Mr. Chin alleged that he had exclusive possession and right of use of the said Property. Hence, Madam Ng had no right to ask him to return the Property to her. The 3rd Defendant alleged that although Madam Ng was the registered owner of the Property, she merely held the Property on trust in accordance with the agreement between both parties and the 3rd Defendant was in fact the beneficiary of the Property. The 3rd Defendant also alleged that he had paid 13 mortgage instalments in total and he stopped paying it at the end of 1994 when Madam Ng did not ask him for further payment of the instalments. He also alleged that Mr. Chin signed the Agreement dated 26.10.1994 purely to facilitate the selling of the Property by Madam Ng so that she could get back the down payment she had paid for the Property.

14. Because of the above arrangement, the 3rd Defendant counterclaims against Madam Ng. He asks the Court to make an order declaring that Madam Ng is holding the Property on trust and he himself is the beneficiary of the Property. The alternative counterclaim of the 3rd Defendant comprises a request that the court make an order for an appropriate equitable apportionment of the interests basing on what each party is entitled to get, in light of the fact that the 3rd Defendant had made contribution towards the mortgage repayment, or an order that Madam Ng should repay him his contribution towards the mortgage repayment with interest.

Evidence of the Plaintiff

15. Madam Ng pointed out in her evidence that she had known Mr. Chin for over 10 years. As for Mr. Tang, she had only seen him at Mr. Chin's factory; he was not introduced to her.

16. Madam Ng had been the sole proprietress of Fuda Textiles Trading Co. but had retired. She emigrated to Canada in early November, 94.

17. In early 93, Mr. Chin told her that he was homeless because he was bankrupt and his residence was taken away from him. He therefore asked for the assistance of Madam Ng. Madam Ng sympathized with Mr. Chin, especially with his pair of young children. So, she gave Mr. Chin a helping hand.

18. Mr. Chin did ask for a loan direct but since the company of Mr. Chin had owed her company 800 thousand odd dollars which could not be repaid owing to the bankruptcy, Madam Ng therefore did not agree to a further loan.

19. However, she was of the view that the price of real property was low at that time and so she wanted to purchase a flat for investment purpose. The investment period would be about one year as she had to go to Canada to report landing before 5.11.94 as an immigrant.

20. Madam Ng later purchased the Property at 2.3 million odd dollars. In order to let Mr. Chin and his family move in as early as possible, the Property with vacant possession was handed over to Madam Ng before the transaction was completed. Mr. Chin moved into the Property in April, 93.

21. The Property was worth 2.3 million odd dollars. Madam Ng paid 1.3 million odd dollars in total. The remaining sum of 1 million dollars was raised in the form of a mortgage loan. The monthly repayment was 12,000 odd dollars.

22. Mr. Chin originally expressed that he would stay there for only 2 to 3 months as his younger brother would purchase a flat in Shatin and would let him live there to help him. So, Madam Ng decided to let Mr. Chin use the Property free of charge except that he was responsible for the monthly management fee and rates only.

23. Three months later, Mr. Chin expressed that he had to stay in the Property for 2 or 3 more months. Madam Ng expressed at that time that the interest on the bank mortgage had to be paid. Mr. Chin said he was willing to pay the monthly mortgage repayment. To avoid bothering Madam Ng, he would deposit the sum into the bank each month. Madam Ng then faxed to Mr. Chin a copy of the bank payment voucher for repayment so that he could make deposits according to the amount and the time.

24. Madam Ng alleged that she was responsible for all the expenses for the purchase of the Property. The service fee of 20,000 odd dollars paid to the estate agent was handed over by her to Mr. Chin in cash and he gave it to the agent for her.

25. Towards the end of 94, Mr. Chin still failed to move out of the Property as agreed. Madam Ng then became anxious as the date for landing was approaching. She hoped to sell the Property as soon as possible. Nevertheless, Mr. Chin prevaricated time and again. In the course of negotiation, Mr. Chin once indicated that the father-in-law of his younger brother had money and could purchase the Property in the name of K. K. Chin Co. Ltd. However, although an agreement had been made through the solicitors' firm, K. K. Chin Co. Ltd. did not complete the transaction. In order to show his sincerity, Mr. Chin gave a cheque for 60,000 odd dollars to Madam Ng in June, 94. Mr. Chin later indicated that he had no money to carry out the transaction. At that time, Mr. Chin expressed that he would definitely move out before September, 94. Madam Ng had lost much confidence in Mr. Chin considering his past performance and so she requested Mr. Chin to sign an agreement. The agreement dated 24th September, says that Mr. Chin guaranteed that he and his family would move out of the Property on 26.10.94 and would return the title and the right of occupation. The agreement also says that if Mr. Chin wished to purchase the Property, he had to complete all the formalities for the purchase of it on 26th October. Otherwise, his wish would not be entertained after that date.

26. Madam Ng expressed that since she had to report landing in Canada in early November, the Property had to be sold by the end of October at the latest.

27. After that, Mr. Chin still refused to move out, and he even refused to pay any mortgage repayment after August. Therefore, Madam Ng instructed a solicitor to take legal action to repossess the Property and to claim against Mr. Chin for the mesne profits payable by him for occupying the Property. She expressed that the amount of mortgage repayment each month would be taken as the mesne profits despite the fact that the market rent of the Property was higher than the mortgage repayment.

28. Madam Ng indicated clearly that she had never agreed to hold the Property on trust upon purchase till the son of Mr. Chin reached the age of 18 when the title would be transferred to his son or anyone. She also indicated clearly that she had never entered into any agreement with Mr. Chin directly or indirectly.

29. Madam Ng alleged that she was being kind-hearted throughout to do what was mentioned in the above to take Mr. Chin through his difficulties. And she did not agree to the saying that Mr. Chin had introduced business to her company.

30. She expressed that she was willing to sell the property at a loss as she was going to emigrate soon and she was eager to have the cash back.

Evidence of the Defendant

31. Mr. Chin said in his evidence that though he was declared bankrupt around the end of 92 to the beginning of 93, he still had many customers. Madam Ng asked him to find customers for Chun Chin (Translit.) Company, which she newly set up, so he transferred the customers of Chi Cheung (Translit.) Company, a company in which he had shares, to Chun Chin (Translit.) Company. Mr. Chin also pointed out that although Chi Cheung (Translit.) Company was in debt and its creditors had applied for a winding up order, the creditors had made arrangements for reorganization of liabilities. Therefore, the arrangement for the winding up of Chi Cheung (Translit.) Company had not been completed.

32. Mr. Chin pointed out that Madam Ng promised to purchase a flat to help him and his family settle down so that he could have a place to live first and then work in contentment in assisting Chun Chin (Translit.) Company.

33. It was agreed at that time that Madam Ng was to pay the down-payment to purchase the Property and Mr. Chin would get a relative to pay the monthly instalments in repayment of the mortgage loan. When Mr. Chin's son, who was 12 years old then, reached 18, Madam Ng was to assign the Property to Mr. Chin's son at the original price. If by that time, the bankruptcy order had been discharged, the Property could then be assigned to Mr. Chin or to the relative who had been repaying the mortgage loan for the Property.

34. Mr. Chin alleged that his wife had had a busy time looking for a flat and had viewed the Property together with Madam Ng before the transaction. They moved into the Property on 1.4.93.

35. Mr. Chin emphasized that the reason why Madam Ng was willing to help him was that he was able to introduce customers to Madam Ng's company. The turnover of the business he introduced to Madam Ng's company amounted to 20 million dollars.

It was in June or July, 94 that Madam Ng expressed to him for the first time that she was going to emigrate. In order to recover the down payment she had paid for the Property, she requested to have the Property sold. Later, Mr. Chin let his younger brother deal with the selling of the Property because his brother had business dealings with Madam Ng and there were accounts to be settled between the two of them. At that time, as far as Mr. Chin understood, Madam Ng would sell the Property to his younger brother at the original price to recover the down payment. Nevertheless, the transaction between Madam Ng and his brother fell through.

36. Madam Ng later asked for the assistance of Mr. Chin again because she had to sell the Property to get the down payment back. Mr. Chin then signed the agreement dated 24th October so that Madam Ng could sell the Property with vacant possession. The agreement says that Mr. Chin promised to hand the Property back to Madam Ng before 26th October.

37. Mr. Chin alleged that Madam Ng had promised that if the Property could be successfully sold at a high price, she would pay him compensation. The mortgage instalments his relative had paid would also be offset from the compensation. Both parties, however, did not have a common understanding regarding the amount of compensation.

38. He indicated that the relationship between both parties was good. He trusted Madam Ng and she also expressed that Mr. Chin could still live in the Property for a few more months after the Property was sold.

39. Mr. Chin explained that the cheque on page 27 of the document bundle was used to meet part of the expenses in the purchase of the Property. That included 1,000 dollars being the application fee for the loan, 64,395 dollars being the stamp duty and 18,650 dollars being the solicitor's fee. Mr. Chin said that since Madam Ng was worried that he might refuse to return the money, he borrowed money from the company of his wife's elder sister to repay Madam Ng. However, it was stated clearly that Madam Ng could deposit the cheque only after the transaction for the sale by Madam Ng of her Property to his younger brother had completed. As the transaction fell through, the cheque was not made payable.

40. Mr. Chin alleged that his brother-in-law, i.e. Mr. Tang, had paid a total of 13 monthly instalments and had stopped paying it since July, 94. He said the reason why payment was stopped was that at that time Madam Ng and his younger brother were having a transaction for the sale of the Property, so Madam Ng informed him that he did not have to pay any further instalment.

41. Mr. Chin also pointed out that after the transaction with his brother fell through, Madam Ng once agreed to sell the Property to a Mr. Tsang Lai Man at 2.2 million dollars. Mr. Tang also agreed to pay Mr. Chin 300 thousand dollars as compensation for his moving out. This agreement was in written form, that is Defence Exhibit No. 1.

42. Mr. Chin alleged that a mortgage of only 50% to 60% of the value of the Property could be raised. He did not know why Madam Ng was able to raise such a big loan as 2 million dollars on the Property. He pointed out that when he discussed with Mr. Tang about the repayment of the mortgage to be made by him, he only indicated to him that the amount of monthly payment would be 12,000 to 13,000 dollars. He pointed out that the Property was registered in the name of Madam Ng as a security for the down payment of over one million dollars she had paid.

43. He pointed out that all payments in relation to the purchase of the Property were made by Madam Ng with the only exception of the estate agent's service charge of 20 odd thousand dollars. This sum was paid in cash which he took from Mr. Tang.

44. Mr. Chin stressed that before he signed the agreement on page 27 of the document bundle, he was not fully aware of the contents of it. As Madam Ng was in a hurry, she did not give him time to read the contents carefully and at that time he trusted Madam Ng.

45. Mr. Chin indicated that although the (monthly) instalment was stopped after July 94, his younger brother was able to clear off the loan for him.

46. It was alleged by Mr. Chin that he had had an experience of selling a flat to a relative but as the formalities regarding the transfer of property were not performed, the bank later took possession of the flat when he was bankrupt. This incident had not caused him to maintain vigilance when dealing with Madam Ng, and he did not ask her to give him any written proof.

47. He was of the view that there was no need to reach an agreement beforehand as to whom the Property would be assigned to as his son and Mr. Tang were of one family anyway, and there would be no argument arising from it.

48. He also pointed out that although all payments for the purchase of the Property were made by Madam Ng, the estate agent's fee was paid by Mr. Tang because the amount was a small one.

49. He alleged that the mortgage repayment was stopped after August, 94 because Madam Ng and his younger brother had once reached an agreement on the selling of the Property and so he was instructed that there was no need to pay any more instalment. Later, as there was a dispute over the accounts, the instalments should be debited from the accounts of both parties.

50. He agreed to let Madam Ng sell the Property on condition that Madam Ng would make compensation for the rise in the value of the Property and the mortgage instalments and decoration charges Mr. Tang had paid. However, he admitted that the amount of compensation had yet to be agreed on but he was satisfied with the compensation of 300,000 dollars that Mr. Tsang, the prospective buyer of the Property, had agreed. He also indicated that if Madam Ng was willing to compensate him with 300,000 dollars, he would move out.

51. He emphasized that he was entitled to buy the Property back from Madam Ng at the original price and he expressed that since Mr. Tang had paid the mortgage instalments, he had (a share in) the ownership of the Property.

52. Mr. Chin also called his wife to give evidence to point out that she had viewed flats with Madam Ng on numerous occasions. Mrs. Chin alleged that Madam Ng had once expressed that in order that Mr. Chin could keep his mind on his work, she would help them. She also alleged that it was she herself who obtained the keys of the Property from the estate agent. She admitted that when Mr. Chin and Madam Ng entered into the agreement, she was not there. However, she had heard Madam Ng promise to pay the down payment for them for the purchase of the Property. Mrs. Chin also alleged that Mr. Chin had introduced many customers to Madam Ng's Chun Chin (Translit.) Company.

53. Mr. Tang stated clearly in his evidence that in relation to the transaction of the Property, he had never discussed or reached any agreement directly with Madam Ng himself. Everything was related to him by Mr. Chin.

54. Mr. Tang said that in 1992 or 1993, when Mr. Chin was in financial difficulties, he helped him financially. That included paying the monthly instalments for him.

55. He alleged that the estate agent's fee of 20 odd thousand dollars in relation to the purchase of the Property was paid by him in cash to Mr. Chin in two payments with a lapse of a few days in between. When asked why he had not demanded written document to prove that he had an interest in the Property, he said it was because they were elegant. He also expressed that it was not a problem whether the Property would be assigned to Mr. Chin or Mr. Chin's son or himself because they were one family. When asked why he had stopped paying the mortgage instalment, he said because there were accounts to be settled with Madam Ng.

Analysis of the Facts

56. I have carefully considered and analyzed the discrepancies between the evidence of both parties. I have to state clearly that Mr. Chin's allegations that he had the title of the Property and that he had had an agreement with Madam Ng were highly unlikely and unbelievable.

57. Madam Ng had planned to retire and had completed the procedures for emigration. She had to report landing in Canada in November 94. There was no reason for her to freeze a large sum of money for a period as long as six years. She and Mr. Chin were just business friends; they were not relatives or anything. She did not have to sacrifice so much for Mr. Chin, not to mention it was at the time when Mr. Chin's Chi Cheung Company was indebted to Madam Ng's Company for 800 odd thousand dollars. Besides, if Madam Ng were really so generous as to make the promise as Mr. Chin alleged, then why would she suddenly change her mind? Mr. Chin failed to give a reasonable and believable cause for the change.

58. In explaining the special treatment that Madam Ng gave to him, Mr. Chin alleged that he introduced many customers to Madam Ng's Chun Chin (Translit.) company. I cannot ignore the fact that at that time Mr. Chin had been personally declared bankrupt because of indebtedness. His company was also in debt, and so the creditors applied for a winding-up thus resulting in an arrangement for reorganization of liabilities. Under these circumstances, the saying that he still had many customers who could be transferred to another company is not credible.

59. Regarding the so-called transfer of business, it was mainly related to Yue On Company, Kai Wan (Translit.) Company and Mun Lei (Translit.) Company. Yue On Company belonged to Mr. Chin's younger brother, Kai Wan (Translit.) belonged to Mr. Tang and Mun Lei (Translit.) belonged to Mrs. Chin's elder sister. Considering the relationship between Mr. Chin and the above companies, I should attach no weight to the allegation that the special treatment from Madam Ng was something given in return for the transfer of business to Chun Chin (Translit.) Company.

60. Mr. Chin was a businessman. I observed his demeanour when he was giving evidence. I found him to be a shrewd person who attached much importance to his own interest. If Madam Ng had promised to sell the Property to him, he would surely have asked Madam Ng to guarantee it in writing and Madam Ng would have no reason to refuse. If he was of the view that since he was a bankrupt, it was not appropriate to enter into any written agreement with Madam Ng in his own capacity, he could have used the name of Mr. Tang or someone else. According to Mr. Chin, he had once sold a flat of his own to a relative and had received payment from the relative. However, because the official formalities for the transfer of property were not carried out, when he became bankrupt, the bank took possession of the flat. As a result, the relative suffered a great loss. The importance of having written proof and completing formalities should have left a deep impression on Mr. Chin.

61. In relation to the above issue, Mr. Chin did not give any reasonable explanation. Mr. Tang's allegation that it was out of elegance that they did not ask Madam Ng to provide a written guarantee is ridiculous.

62. The written agreement of both parties on Pg. 27 of the document bundle clearly indicates that Mr. Chin had promised to move out of the Property before 26.10.94 and should he wish to purchase it, all the formalities would have to be completed before that date. The contents in the above are obviously contradictory to the agreement that he alleged he had reached with Madam Ng. He alleged that he signed in a hurry without reading the contents carefully. This is just an excuse which is not credible.

63. Mr. Chin stoped paying the mortgage instalment after August, 1994. He alleged that it was because Madam Ng was indebted to his younger brother's company and the mortgage repayment should be deducted from the loan.

64. It should be noted that the agreement concerning the mortgage repayment was made between Mr. Chin and Madam Ng, and that it had nothing to do with his brother.

65. The allegation about Madam Ng being indebted to his brother's company was not mentioned in his petition, nor was it mentioned in the statements of the defence witnesses submitted in court. The nature and the amount of the debt was not clearly indicated. This allegation is nothing more than an excuse. In any event, even if Madam Ng did really owe Mr. Chin's brother any debt, that would be something between Madam Ng and his brother. Mr. Chin did not have to worry about it nor could he use it as an excuse for refusing to pay the mortgage instalment as agreed.

66. Having considered the evidence as a whole, I am sure that what the defence witnesses said in their evidence in relation to the issues in this case are all lies fabricated to deceive the court to achieve their aim of seizing the property. I totally reject those evidence.

67. Their allegation of having paid the estate agent's fee in the sum of 20 thousand odd dollars is also a concoction. Making use of the situation that the payment was made in cash, they falsely claimed that it was paid by them. Considering the background and the circumstances under which the Property was purchased, I find that there was no reason at all for Mr. Chin or Mr. Tang to pay the agent's fee instead of Madam Ng.

68. I am sure that Madam Ng is a generous and honest person of noble character. She had told the court the background of the purchase of the Property and the course of reaching an agreement with Mr. Chin. I also accept from her that she had only received 11 instalments instead of 13. Out of kindness, Madam Ng, at the beginning, let Mr. Chin and his family live in the Property as a temporary accommodation free of charge for a short period of time. Not only did Mr. Chin not return her kindness, but he also tried to occupy the Property permanently when he had the chance. Later, he was blinded by greed. He even made up stories in this case to try to seize the Property. His behaviour is despicable.

69. In the course of this incident, Mr. Tang paid the mortgage repayment as the license fee for Mr. Chin simply because he was his relative. He had never had any agreement with Madam Ng and there was no basis at all to support his allegation of having an interest in the Property. However, he fished in troubled waters, trying to get some advantages. His behaviour should also be condemned.

70. Judging from the arguments on the facts, I have no hesitation in allowing the claim of the Plaintiff, Madam Ng, against the Defendant and dismissing the counterclaim of Mr. Tang.

Dispute on Law

71. Although the case as a whole could be disposed of merely by the findings on the facts, there are a few legal principles arising from this case, which I should deal with in passing.

72. Mr. Chin alleged that he had had an agreement with Madam Ng which was that over 6 years later, that is, when his son reached the age of 18, Madam Ng would sell the Property to him at the original price. The Property would be assigned to Mr. Chin, his son or Mr. Tang depending on the situation.

73. The alleged agreement is in fact an agreement to sell a flat. It involves the sale or disposition of land. This kind of agreement has to be made out in the form of a written memorandum or a note. Otherwise the agreement cannot constitute the basis of an action.

74. Section 3(1) of the Conveyancing and Property Ordinance, Cap 219, reads:

75. The agreement on the sale of the Property Mr. Chin alleged he had made with Madam Ng was not made out in any memorandum or note in writing; therefore, no action can be brought upon the agreement.

76. Mr. Chin alleged that it was because Madam Ng made certain representations to him that he paid the monthly instalments. Although Madam Ng was the registered owner of the Property, according to the revelant principle in the law of equity, Mr. Chin has some equitable interest over the Property because of those instalments (he paid).

77. Nevertheless, there is a well-known motto in the law of equity and that is: "He who comes into equity must come with clean hands." "He who has committed inequity shall not have equity."

78. Being a bankrupt, Mr. Chin has to discover to his trustee the disposition of any property, real and personal. Otherwise, he is guilty of an offence.

79. It is clearly stipulated in Section 129(1) of the Bankruptcy Ordinance, Cap 6:

80. It was not denied by Mr. Chin that he had not discovered to the trustee the agreement on the purchase of the Property he alleged he had made with Madam Ng. This was in breach of Section 129 of the Bankruptcy Ordinance. He should be reproached for his behaviour and according to the law of equity, he cannot have equity.

81. As a result, even if what Mr. Chin said was true and he did reach an agreement with Madam Ng on the purchase of the Property, the Court could not enforce the agreement because he himself did not act in equity, he could not he protected by the law of equity.

Conclusion

82. No matter whether it is based on the facts or on points of law, there are sufficient grounds to support the claim of the Plaintiff against the Defendant. The Defendant has no basis in his defence. The counterclaim of Mr. Tang is purely a fabrication.

83. All defendants shall deliver the Property back to the Plaintiff with vacant possession.

84. Mr. Chin has been occupying the Property and has stopped paying the mortgage instalment since August 94. He, therefore, has to pay the mesne profits for the unlawful occupation of the Property. Madam Ng did not provide the market rent of the Property. Her Counsel, Mr. Hui, indicates to the Court that she is willing to take the monthly mortgage repayment, that is 12265.30 dollars, as the basis for calculating the mesne profits. Although the market rent is higher than the mortgage repayment, basing on the fact that Madam Ng makes a concession on this issue, I also take 12,265.30 dollars as the basis for calculating the monthly mesne profits.

85. Mr. Hui said in his final submission that Mr. Tang also had to be responsible for the mesne profits during Mr. Chin's occupation of the Property. He pointed out that the contents of Mr. Tang's Statement of Defence and Counterclaim indicate that he participated in assisting, abetting or inciting Mr. Chin in the act of encroaching upon the Property, so he is also liable to Madam Ng for the mesne profits payable during the occupation of the Property.

86. There is no such allegation in the Statement of Claim filed by Madam Ng. It was after the licence period agreed on by both parties that Mr. Chin refused to move out. There is no independant evidence in this case showing a direct link between Mr. Tang and the occupation of the Property by Mr. Chin after the licence period. As there is no explicit allegation about Mr. Tang's participating in the act of 'trespassing' in Madam Ng's Statement of Claim and there is insufficient evidence to support the allegation, I cannot allow the application.

87. It is mentioned in Madam Ng's Statement of Claim that since the property was occupied, it could not be sold with vacant possession. As a result, the price of the Property dropped causing loss to her. Madam Ng did not provide any evidence to show that the market rate of the Property then was lower than that in 1994. Because this allegation is not proved, the claim for loss basing on this allegation has to be dismissed.

Order

88. I make the following order in respect of the dispute between the parties in this case:

Hon. Yeung, J.

Court of First Instance
High Court of H.K.