LI MAN WAI, the trustee of the bankrupt LEUNG KWOK CHUN also known as LIANG GUO JIN also known as LEUNG KWOKCHUN also known as LIANG GUOJIN also known as DANIEL LIANG also known as DANIEL LEUNG also known as LEUNG KWOK CHUN, DANIEL also known as LIANG GUO JIN, DANIEL also known as LEUNG, KWOK CHUN DANIEL also known as LIANG, GUO JIN DANIEL also known as LEUNG, KWOKCHUN DANIEL also known as LAING, GUOJIN, DANIEL (the “Bankrupt”) v. NGAN SUET FONG BONNIE

HCA 1333/2018

[2021] HKCFI 931

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1333 OF 2018

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JUDGMENT

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1.  These proceedings concern a property known as Unit B on 19^th Floor of Block 2 and Car Parking Space No. B62 on First Lower Ground Floor, Flora Garden, No. 7 Chun Fai Road, Hong Kong (“the Subject Property”).

THE AGREED FACTS

2.  The plaintiff (“Li”) is the trustee-in-bankruptcy of Leung Kwok Chun (“Daniel”).  The defendant (“Bonnie”) is now the sole registered owner of the Subject Property.  The agreed facts are as follows:

(1)  Daniel was adjudicated bankrupt on 29 March 2017.

(2)  Li was appointed as the trustee-in-bankruptcy of Daniel at the general meeting of creditors on 20 December 2017.

(3)  Daniel and Bonnie are husband and wife, and had been the registered owners and joint tenants of the Subject Property from 15 August 1997 to 23 January 2016.

(4)  On 23 January 2016, Daniel and Bonnie as vendors executed an assignment (“the 2016 Assignment”) in favour of Bonnie as purchaser in respect of the Subject Property.

(5)  The consideration stated on the 2016 Assignment is HK$25,000,000, but no actual payment had been made from Bonnie to Daniel.

THE PARTIES’ RESPECTIVE CASES

Li’s case

3.  Li is seeking a declaration that the disposition of the Subject Property by the 2016 Assignment is void and of no effect and an order for sale with respect to the Subject Property.  Alternatively, Li seeks damages in the sum of HK$12,500,000, being half of the purchase price as set out in the 2016 Assignment.  It is necessary to mention that Li’s case is based upon ss.49, 50 and 51 of the Bankruptcy Ordinance (“BO”) and s.60 of the Conveyancing and Property Ordinance (“CPO”).  Apart from these statutory provisions, Li does not rely upon any other cause of action in support of his claim against Bonnie.

4.  For the reasons set out in a latter part of this judgment, it is pertinent to note in what way Li’s case is pleaded in his Statement of Claim.  Li’s case as pleaded in the Statement of Claim is as follows:

“4. Both [Daniel] and [Bonnie] declared themselves and signed as beneficial owners of [the Subject Property] in the legal charge(s) created firstly with GE Capital Finance Limited and/or subsequently with DBS Bank (Hong Kong) Limited.

5. On 23^rd January 2016, less than 15 months before his bankruptcy, [Daniel] assigned his half share of [the Subject Property] to [Bonnie] by [the 2016 Assignment].

6. The consideration stated on [the 2016 Assignment] is HKD25,000,000 but no actual payment has ever been made from [Bonnie] to [Daniel], ie nil consideration.

7. In such circumstance, by virtue of sections 49, 50 and 51 of the Bankruptcy Ordinance, Cap. 6 (the “BO”) and section 60 of the Conveyancing and Property Ordinance, Cap. 219 (the “CPO”), the transfer of [the Subject Property] by [Daniel] was at an undervalue, constituted an unfair preference of creditors and was with intent to defraud creditors.

……

AND THE PLAINTIFF CLAIMS AGAINST THE DEFENDANT:

(1) A declaration that the disposition of [the Subject Property] is void and of no effect and an order for sale with respect to [the Subject Property];

(2) Alternatively, HKD12,500,000 damages, being half of the alleged purchase price of [the Subject Property] described in paragraph 6 above;

 ……”

5.  In the Reply and Defence to Counterclaim filed by Li, Li merely stated that he did not admit the matters pleaded by Bonnie in her Defence and Counterclaim and required Bonnie to prove her case.  Li did not expressly state in his Reply and Defence to Counterclaim that any factual matter pleaded by Bonnie in her pleadings was untrue.

Bonnie’s case

6.  Bonnie’s primary case is that she was the sole beneficial owner of the Property at all material times, whereas Daniel was merely a trustee of the legal title holding it upon trust based upon an express common intention between them.  Daniel has never had and did not dispose of any beneficial interest in the Property by the 2016 Assignment.

7.  Bonnie’s alternative case is that if the court finds that Daniel had a 50% beneficial interest in the Subject Property before the 2016 Assignment and there is a debt of HK$12,500,000 due from Bonnie to Daniel, Li is not entitled to claim all or part of the HK$12,500,000 from Bonnie by reason of the mandatory account which shall be taken into account the debts due to Bonnie by Daniel under s.35 of the BO.  The alternative case as pleaded by Bonnie in her Re-Amended Defence is as follows:

“9. In the premises, [Bonnie] denies that it is liable to [Li] for any of the relief claimed. Alternatively, if the Court finds that [Daniel] has a 50% beneficial interest in [the Subject Property] and a debt of HK$12,500,000 was due from [Bonnie] to [Daniel] under [the 2016 Assignment], [Bonnie] avers that [Daniel] is not entitled to claim all or part of the HK$12,500,000 from [Bonnie] by reason of the mandatory account which shall be taken of the debts due to [Bonnie] by [Daniel]. In particular, [Bonnie] avers that:

9.1. [Bonnie] has lent a total of HK$3,074,573 and RMB1,699,850 to [Daniel] for his investment into Jiangshan Hongda and his other business ventures in the PRC, as well as for legal fees incurred by [Daniel];

9.2. [Bonnie] has lent a total of HK$9,220,888.51 to [Daniel] for his half-share of the purchase price, stamp duty and mortgage repayments, which [Daniel] promised to repay as his contribution for the acquisition of [the Subject Property]; and

9.3. [Bonnie] has lent a total of HK$352,881.5 to [Daniel] for his half-share of the improvement and renovation works in respect of Flora Garden and repairs and maintenance of [the Subject Property], which [Daniel] promised to repay,

and such sums have been or shall be set off against the debt of HK$12,500,000 by virtue of s.35 of the BO.”

8.  Bonnie counterclaims for an order requiring Li to vacate the registration of the bankruptcy order (“the Bankruptcy Order”)[1] against the Subject Property within 14 days.

THE PRINCIPLES

9.  It is well established that the issues in a trial are defined by pleadings, not by evidence.  One cannot slip in an unpleaded issue by saying that there is evidence on the issue.  As said by Ma CJ in Kwok Chin Wing v 21 Holdings Ltd^[2]:-

“21. It should by now really be quite unnecessary to issue yet another reminder on the rationale behind pleadings. The basic objective is fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case) so that proper preparation is made possible, and to ensure that time and effort are not expended unnecessarily on other issues:- Wing Hang Bank Limited v Crystal Jet International Limited [2005] 2 HKLRD 795, 799 [6(1)]. It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced. As the Court of Appeal remarked in Wing Hang Bank Limited v Crystal Jet International Limited:-

‘(2) In a trial, particularly where evidence is given by witnesses, it becomes extremely important that each side knows exactly what are the live issues. Where issues are sought to be introduced that have not been adequately or properly pleaded, amendments must be sought unless the consent of the other party or parties has been obtained. It will simply not do for unpleaded issues to be “slipped in” when evidence is being given in the hope that the other side is not sufficiently alert to object.’

22. …… one does not sift through the evidence adduced in a trial in the hope that something was said that can conceivably found a cause of action. Issues, I would reiterate, must be properly pleaded unless for some reason the pleadings have assumed a less significant role in the proceedings.” (Emphasis added)

10.  Estoppel must be specifically pleaded, unless there is no opportunity to do so[3].

11.  Bonnie’s case is a case of express trust.  In considering whether the express trust pleaded by Bonnie is true, the court is entitled to take into account the events occurred prior to the establishment of the alleged trust, as well as conducts after the establishment of the alleged trust.  In Leung Wing Yi Asther v Kwok Yu Wah^[4], Stock NPJ said:

“55. A question canvassed in the course of argument before this Court was whether those earlier and later events were admissible as evidence of intention at the time of transfers. It seems to me that they were and that the issue was one of weight. In the context of a question whether evidence of conduct subsequent to the registration of shares in the names of the children was admissible to rebut the presumption of advancement, it was held in Shephard v Cartwight that whereas acts and declarations of the parties before or at the time of the transaction or so immediately after it as to render it a part of that transaction are admissible ‘either for or against the party who did the act or made the declaration … subsequent declarations are admissible as evidence only against the party who made them, not in his favour.’ The modern approach is less rigid in relation to evidence of subsequent conduct:

… it does not follow that subsequent conduct is necessarily irrelevant.  Where the existence of an equitable interest depends upon a rebuttable presumption or inference of the transferor’s intention, evidence may be given of the subsequent conduct in order to rebut the presumption or inference which would otherwise be drawn. [Tribe v Tribe [1996] Ch 107, 129 (Millett LJ), as he then was.  See also Lavelle v Lavelle]”

“56. As a matter of common experience, contemporaneous conduct is inherently more likely to be a reliable indicator of intention, to be given greater weight, than are words and conduct after the event, especially in the case of ‘self-serving statements or conduct of the transferor, who may long after the transaction be regretting earlier generosity.’ That rationale is not restricted to evidence in rebuttal of presumptions but embraces any evidence from which an inference of the transferor’s intention may properly be drawn.” (Emphasis added)

12.  In respect of evaluating the evidence given by witnesses, a valuable summary of the relevant principles can be found in Hui Cheung Fai and another v Daiwa Development Limited^[5], in which DHCJ Eugene Fung SC said:

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce) ……

78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: e.g. Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011) §39 (Chu J).

79. In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA)).”

13.  Similar guidance can also be found in Lee Fu Wing v Yau Po Ting Paul^[6], in which DHCJ Au (as he then was) said:

“53. In assessing the credibility of a party’s case on a particular issue, I accept the submissions of [counsel] that the Court should take into considerations the following: -

(1) Whether the party’s case is inherently plausible or implausible.

(2) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable.

(3) Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility.

(4) The demeanour of the witnesses.”

14.  The rule in Browne v Dunn[7] has a bearing in these proceedings.

(1)  The rule in Browne v Dunn is a rule of practice or procedures designated to achieve fairness to witness and a fair trial between the parties^[8].

(2)  The applicability of the rule has been explained by DHCJ Reyes (as he then was) in Kaifull Investments Ltd v The Commissioner of Inland Revenue^[9]:

“(1) The general principle is that, where an attack on a witness’ evidence is to be made, notice should normally be given to the witness in cross-examination of the nature of the attack if such is not otherwise obvious.

(2) There is no breach of the principle if the witness knew or ought to have known that his version of events was being challenged or that adverse inferences might be drawn against him.

(3) Even if the procedural rule is transgressed, it does not inexorably follow that matters which have not been put to a witness in cross-examination cannot be relied on. It may be a question of the weight to be given to a witness' testimony taking into account all the available evidence. Thus, for example, a witness' evidence may be so incredible as to be incapable of belief or his evidence may be unsupported or contradicted by known facts and contemporaneous documents.

(4) The principle does not inflexibly require every point which might be used against the witness to be put to him. There can no hard-and-fast rule. The paramount consideration is fairness to the witness. In essence, the principle is breached if in all the circumstances an omission to cross-examine on a specific point is unfair to a witness.” (Emphasis added)

15.  The court would approach the self-serving statements made by a witness with circumspection, but would give considerable weight to the statements made by him which are against his interest.  See Wong Tak Yue v Kung Kwok Wai & Another (No 2)^[10]:

Per Li CJ^[11]:

“Where the occupier has made self-serving statements as to what was his intention, whether during the period of occupation or when challenged in legal proceedings, the courts should approach them with some scepticism. The courts would scrutinize the circumstances in which they were made and would give them such weight if any as they may deserve. Conversely, where the occupier has made statements as to what was his intention and such statements are against his interest, the courts would usually accord to them considerable weight.” (Emphasis added)

Per Litton PJ^[12]:

“Here, the appellant has come nowhere near establishing adverse possession. He unequivocally declared that at all times he was ready willing and able to pay rent to the owners, and did not do so only because no one came along on behalf of the landlords to collect rent. Whether his acts and declarations in the course of the 1980 court proceedings amounted to an acknowledgment of the owners’ title in terms of s.23(1), or fell short of that, the fact remains that he had no intention to exclude the owners.” (Emphasis added)

Per Ching PJ^[13]:

“I need only add that there can be no better evidence of the intention of an occupier of land than his express declaration against his own interest.” (Emphasis added)

16.  The aforesaid principle is not limited to adverse possession cases but has a general application. See 章晶歷 v 吳聯模 and Another^[14].

17.  With all these principles in mind, I turn to analyse the evidence in this case.

THE EVIDENCE

18.  In accordance with the direction given by me in the pre-trial review held on 15 October 2020, Bonnie opened her case and adduced evidence in support of her case first in the trial.  So I would discuss the evidence given by Bonnie and Daniel first, and then I would discuss the evidence given by Li.

Bonnie

19.  Bonnie is an honest and forthcoming witness. Her evidence is cogent and supported by contemporaneous documentary evidence. Her evidence is also supported by an important admission made by Li under cross examination (see [22] below).  I accept Bonnie’s evidence in its entirety without any reservation.

20.  Bonnie mentioned the following in her evidence:

(1)  She obtained a bachelor’s degree in commerce and business administration from a university in the USA in 1981.  Thereafter, she returned to Hong Kong and started developing her career in the field of banking and real estate industries.  Over the years, she has held senior positions in corporate communications, marketing, retail banking and e-business.

(2)  She married Daniel in 1985.  At first, they rented a flat in North Point.

(3)  In March 1989, Bonnie began her employment as Assistant Vice President, Advertising & Public Relations of Marketing & Planning Division at First Pacific Bank Limited (“FPB”).

(4)  On 13 February 1990, Bonnie and Daniel purchased a property known as Unit C on 7/F of Block 2 and Car Parking Space No. B31 on the 1^st Lower Ground Floor, Flora Garden, No.7 Chun Fai Road, Hong Kong (“the 7C Property”) at the consideration of HK$2,450,000.  The purchase of the 7C Property was financed by an employee mortgage loan of HK$2,205,000 granted to Bonnie by FPB.  The loan and interest thereon was to be repaid by equal monthly instalments of HK$11,638.80. Since the 7C Property was their matrimonial home, Bonnie and Daniel intended to share the beneficial interest of the property equally.  Both of them had made contributions to the down payment. After purchasing the 7C Property, they moved into the Property and lived therein.

(5)  On 22 March 1993, Bonnie and Daniel purchased a property in Kingswood Villas, No. 8 Tin Shui Wai Road, Tin Shui Wai, Yuen Long, New Territories (“the Kingswood Property”) at HK$1,455,000, and a carpark in Kingswood (“the Kingswood Carpark”) at HK$300,000.  Bonnie and Daniel intended to share the beneficial interests of these properties equally.  Both of them have made contributions to the down payment.

(6)  Bonnie and Daniel maintained a joint account with Dah Sing Bank (“the Joint Dah Sing Bank A/C”) to facilitate the repayments of the mortgage instalments concerning the 7C Property, the Kingswood Property, and the Kingswood Carpark.  The joint account would also be used for their joint investments in stocks, shares and fixed deposits.

(7)  Apart from the Joint Dah Sing Bank A/C, Bonnie and Daniel kept and arranged their finances separately.

(8)  In 1994, Bonnie gave birth to their daughter, who is the only child of the family.

(9)  After the birth of their daughter, Bonnie suggested to Daniel that they would need a larger flat in the near future, for a more spacious home would be conducive to their daughter’s growth and development.  However, Daniel was not very fond of the suggestion.  Daniel had concerns that they might not be able to afford purchasing another property.

(10)  In June 1996, Bonnie joined GE Capital Finance Limited (“GE Capital”) as the Vice President – Marketing & Public Relations.

(11)  GE Capital offered Bonnie a staff housing loan with a maximum amount of HK$10,000,000.  In May 1996, Bonnie took out a loan of HK$1,850,000 with GE Capital as a replacement mortgage for the 7C Property when she left FPB.

(12)  In early 1997, Bonnie found that the Subject Property was on sale.  She was interested in purchasing the same and discussed this with Daniel.  Bonnie told Daniel that since GE Capital would offer her a staff housing loan, it would be financially feasible to purchase the Subject Property.  However, Daniel did not agree.  At that time, Daniel was prepared to leave his employment to explore long-term business opportunities in Mainland China.  Given his business plan, Daniel worried that there might be financial uncertainties in future.

(13)  It was the first time that Bonnie heard about Daniel’s plan to develop a business in Mainland China.  As a wife, Bonnie supported Daniel to find business opportunities in the Mainland.  However, at the same time, Bonnie thought that it would be necessary to seize the opportunity to purchase the Subject Property for the benefit of their daughter.

(14)  After considering the matter for a while, Bonnie was of the view that with the staff housing loan provided by GE Capital, she would be able to purchase the Subject Property by her own resources.  The only problem was that GE Capital would only approve the application for a staff housing loan if Bonnie’s husband, ie Daniel, acted as a joint borrower.  Bonnie therefore discussed the matter with Daniel.  Bonnie assured Daniel that Daniel’s name was put forward for the purpose of applying for the staff housing loan only.  Daniel would have no need to make any financial contribution concerning the purchase of the Subject Property.  Everything would be taken care by Bonnie.  Daniel agreed to these arrangements.

(15)  Based upon this express common intention and understanding, the Subject Property was purchased.  Although Daniel was one of the registered owners of the Subject Property, Daniel has never made any contribution relating to the purchase and the mortgage repayments of the Subject Property.

(16)  In respect of the purchase of the Subject Property, the initial deposit and the further deposit were paid by Bonnie from her own funds.  All the legal fees and the stamp duty were also paid by Bonnie by using her own resources.

(17)  In order to make best use of the staff housing loan offered by GE Capital, Bonnie proposed to Daniel that the 7C Property should be re-mortgaged to another banking institution.  Daniel agreed.

(18)  On 4 August 1997, the 7C Property was re-mortgaged to the Bank of America (Asia) Limited (“BOA”) as security for the loan of HK$4,000,000 (“the BOA Mortgage”).  The BOA Mortgage was granted to Bonnie and Daniel as co-borrowers.  With the BOA Mortgage in place, the previous mortgage executed in favour of GE Capital was discharged.  On 10 July 2003, the BOA Mortgage was paid off and discharged.

(19)  On 15 August 1997, the Subject Property was assigned to Bonnie and Daniel as joint tenants.  On the same date, it was also charged to GE Capital (“the GE Capital Mortgage”) as security for a staff housing loan of HK$10,000,000.

(20)  After purchasing the Subject Property, the whole family moved into the Subject Property and lived therein.  The 7C Property was rented out, and the rental income was used to repay the BOA Mortgage.

(21)  The GE Capital Mortgage was repaid by Bonnie. Each month, the mortgage repayment was directly deducted from Bonnie’s salary.

(22)  In 2001, Bonnie left GE Capital and joined DBS Bank.  On 23 August 2001, the Subject Property was re-mortgaged to DBS Bank (“the DBS Mortgage”) and the GE Capital Mortgage was discharged.  In view of the monthly salary of Bonnie and the fact that the mortgage concerning the Kingswood Property had already been discharged, Bonnie was the sole borrower of the staff loan provided by DBS Bank.

(23)  In late 2001, Bonnie left DBS Bank and joined the Hong Kong Tourism Board and Henderson Real Estate Agency Limited.  Although she could no longer enjoy any staff housing benefits after leaving DBS Bank, with the salaries paid to her by her new employer, she had no difficulty in continuing to repay the DBS Mortgage.  The DBS Mortgage was eventually discharged on 24 November 2011.

(24)  Over the years, Bonnie also paid substantial fees for the renovation of the Subject Property.  The total of the renovation fees paid by her would be about HK$705,763.

(25)  Bonnie also provided financial assistance to Daniel from time to time since 1999 to support his business development.

(26)  In February 2005, the 7C Property was sold at HK$8,700,000.  All the sale proceeds were deposited into the Joint Dah Sing A/C.  Bonnie used HK$3,000,000 out of her half share to pay off part of the DBS Mortgage in May 2006.  She did not receive the remaining balance of HK$1,350,000 that she was entitled to.

(27)  In March and April 2006, the Kingswood Carpark and the Kingswood Property were sold.  Part of the sale proceeds were deposited into the Joint Dah Sing A/C, and part was used by Daniel for purposes relating to his business.

(28)  In May 2006, Daniel withdrew HK$4,120,931 from the Joint Dah Sing A/C without Bonnie’s consent.  Bonnie complained to Daniel about these withdrawals.

(29)  In 2016, Daniel was embroiled in a series of litigation.  Bonnie has provided support to Daniel by lending some money to Daniel to enable Daniel to pay the legal fees.

21.  Bonnie’s evidence is supported by the contemporaneous documents produced by her.  Counsel for Bonnie have helpful set out those documents in the schedule to Bonnie’s written opening submissions dated 3 March 2021 (“the Schedule”).  With the support of these documents, Bonnie’s case cannot be doubted.

22.  Li, under cross-examination, admitted that since he had been in the office of the trustee-in-bankruptcy of Daniel for more than 3 years, he had never seen any document showing that Daniel had ever made any contribution concerning the Subject Property.  In my view, this is a clear admission made by Li against his own case and in support of Bonnie’s case.

(1)  After Li making this admission, Mr Michael Yin (together with Mr Roger Phang), counsel for Bonnie, fairly referred Li to [19(c)] of his witness statement dated 27 June 2019, in which Li said:

“[Daniel] had in fact made contribution to the purchase of [the Subject Property] by acting as a borrower under [the GE Capital Mortgage].”

(2)  Li was given an opportunity to clarify the true meaning of that paragraph.  Li said what he meant in that paragraph was that he saw the GE Capital Mortgage, and Daniel was a borrower in that document.

(3)  Accordingly, it is clear that having been the trustee-in-bankruptcy for more than 3 years (who would have the authority to access to all the bank statements and all the financial documents of Daniel), Li has not seen any bank statement or any financial document showing any contribution relating to the Subject Property has been made by Daniel.

(4)  If Daniel has ever made any contribution relating to the Subject Property, the contribution would be paid by a cheque, by a deposit into a bank account, or by a bank transfer.  If any contribution has ever been made by Daniel, it is inherently improbable that there would be no trace in any financial document.

(5)  Mr Foster Yim (together with Mr Jasper Wong), counsel for Li, submitted that Li had qualified his answer.  Having checked the record, I am sure that I have not misunderstood Li’s evidence in any way.

(6)  In my view, the admission made by Li is an important admission, which provides support to Bonnie’s case and is detrimental to Li’s case.  I attach full weight to this admission. 

23.  In his final submissions, Mr Yim submitted that:

(1)  The express common intention as alleged by Bonnie cannot be believed.  No particular has been given as to the time, place, and the actual words used.

(2)  The allegation that Bonnie and Daniel had separate financial arrangements cannot be true.

(3)  Bonnie did not contribute to the entirety of the mortgage repayments of the Subject Property.

(a)  Daniel paid BOA HK$2,000,000 on 8 January 1999 in satisfaction of the BOA Mortgage.  This contradicted Bonnie’s evidence.

(b)  On 5 occasions, Daniel had transferred monies of over HK$2,000,000 to Bonnie’s sole name HSBC Account (see Table A in [9(iv)] of Li’s written final submissions dated 25 March 2021).

(c)  In the Schedule, there were multiple cash deposits totalling HK$603,000 in Bonnie’s sole name DBS account (see Table B in [73] of Li’s written final submissions dated 25 March 2021). There is no evidence on who made such cash deposits, further undermining Bonnie’s case that the funds came from her only.

(d)  There were also a large number of unexplained deposits into Bonnie’s sole name HSBC account at the relevant times.  All these substantial and unexplained deposits could have gone towards the mortgage repayment and/or maintenance of the Property.

(e)  The alleged loans from Bonnie to Daniel could not be true.

24.  With respect, I am of the view that Mr Yim would not be entitled to take these points in his final submissions, for he had not put these points to Bonnie and offered Bonnie an opportunity to give explanations on those matters.  The only matters put to Bonnie during cross-examination are (1) Daniel did make contributions relating to the purchase of the Subject Property; and (2) the trust alleged by Bonnie was made up by her after the occurrence of the bankruptcy of Daniel. Bonnie denied. None of the points as set out in [23] above, including the matters in Table A and Table B in Li’s written final submissions dated 25 March 2021, has been put to Bonnie.

25.  In my judgment, the criticisms made by Mr Yim in his final submissions have not been sufficiently put to Bonnie, and no opportunity has been offered to Bonnie to give explanations on those points taken by Mr Yim.  In these circumstances, it would not be fair to Bonnie if Mr Yim is allowed to advance those points in his final submissions.

26.  Further, I do not see any ambiguity in the express common intention mentioned by Bonnie in her evidence.  The express common intention was formed in early 1997, in the course of the discussion between herself and Daniel concerning the purchase of the Subject Property.

27.  As to Daniel’s contribution to the repayment of the BOA Mortgage by a payment of HK$2,000,000 on 8 January 1999, there is no surprise in this matter.  After all, the BOA Mortgage was relating to the 7C Property, which were beneficially owned by Bonnie and Daniel in equal shares. In any event, both Bonnie and Daniel has not been asked any question concerning this payment.

28.  I note that on 4 August 1997, as a result of the BOA Mortgage, a loan of HK$4,000,000 was granted by BOA to Bonnie and Daniel (“the BOA Loan”).  At that time, the outstanding principal of the mortgage loan owed to GE Capital concerning the 7C Property would be less than HK$1,850,000. That means after repaying the mortgage loan owed to GE Capital, there would be a balance of more than HK$2,000,000 in the BOA Loan, and this sum would be available to Bonnie and Daniel for their own use.  No question concerning the use of the balance of the BOA Loan has been put to Bonnie and Daniel. Accordingly, there should not be any speculation concerning the use of the balance of the BOA Loan.

29.  Bonnie has also been asked whether the matters set out in [9.2] and [9.3] of her Re-Amended Defence are true.  Bonnie said that these matters would only arise if the court refused to accept her primary case and reached the conclusion that Daniel was a 50% beneficial owner of the Subject Property.  Historically, the matters mentioned in [9.2] and [9.3] of the Re-Amended Defence were not the truth.  I have no difficulty in understanding Bonnie’s evidence.  I make no comment on whether the alternative case can be pleaded in a better way.  However, one matter is clear, ie Bonnie’s case has never changed, ie she was the sole beneficial owner of the Subject Property at all times, and all the payments relating to the Property were made by her personally from her own funds. 

Daniel

30.  Daniel is not a very articulated person. However, after seeing and hearing his evidence, I regard him as a truthful and reliable witness.  I accept his evidence.

31.  Daniel was prepared to leave his employment to explore for business opportunities in Mainland China in 1997.  He began to work in the Mainland in 1999.  For many years, he tried to have the shares of the companies in which he had interest to be listed for trading in various stock markets.  However, with respect, his business may not be regarded as successful.  Eventually, he was declared bankrupt on 29 March 2017 as a result of a bankruptcy petition presented by a creditor (“the Creditor”).

32.  Daniel said that he received the court documents issued by the Creditor on 8 January 2016 (“the litigation”).  He and Bonnie signed a provisional sale and purchase agreement (“the PSPA”) transferring the Subject Property to Bonnie at the price of HK$25,000,000 on 18 January 2016. Under cross-examination, Daniel was asked whether there was any relationship between the litigation and the PSPA.  Daniel said that there was no relationship between the litigation and the PSPA.  He went on and gave the following explanation:

(1)  In December 2015, he and Bonnie went to Canada from Hong Kong.  Their daughter went to Canada from the USA.  The whole family had a holiday in Canada.

(2)  During that holiday, Bonnie and him had a chat. Bonnie told Daniel that their daughter would graduate from the university in mid-2016, and this would be an important event in the daughter’s life.  Daniel should arrange time to attend the graduation ceremony of the daughter.

(3)  Bonnie also asked Daniel the prospect of his business.  Daniel said that the prospect was not good, and it would be very difficult to have a change.  Bonnie then said to Daniel that in view of the difficulties in his business, Daniel should transfer the Subject Property back to Bonnie.  Daniel agreed.

(4)  As a result of this discussion, the PSPA was signed on 18 January 2016.

33.  Taking all the evidence before the court into account, including the matters and the analysis set out in [19] to [29] above, I accept Daniel’s explanation.

34.  Daniel was asked questions concerning some answers given by him on 8 December 2017 in the Preliminary Examination (“PE”) conducted by the Official Receiver.

(1)  Question 17 of the PE is “Do you hold any property in trust for any person?”  Daniel’s answer to the question is “No”.

(2)  Question 20(i) of the PE is “Within 5 years prior to the presentation of the petition, did you enter into any transaction in the following manner – make a gift or entered into a transaction for no value?”  Daniel’s answer to the question is “No”.

35.  In my view, none of these answers would undermine the credibility and reliability of Daniel’s evidence.

36.  As to Question 17, the Chinese version of the question is “你有否為其他人士託管財產”.  Daniel explained that no one had ever given any property to him and asked him to manage the same on his or her behalf (冇人俾野我代管), and hence he answered the question in the negative.  In my view, taking the Chinese version of the question into account, I would not say that Daniel’s answer is unreasonable.

37.  Further, bearing in mind that at the time of the PE, the 2016 Assignment has been executed.  On 8 December 2017, Daniel was not a registered owner of the Property and could not hold the Subject Property or any beneficial interest therein on trust for Bonnie.  Accordingly, Daniel’s answer to the question cannot be said as incorrect.

38.  As to Question 20(i), Daniel’s answer is not untrue if Bonnie’s primary case is true.  For the reasons given in this judgment, I am of the view that Bonnie’s primary case is indeed true.

39.  The only matters put to Daniel during cross-examination are the matters set out in [24] above.  In my judgment, the “lack of puttage” point as set out in [24] to [25] above is also applicable in respect of the criticisms made by Mr Yim against Daniel’s evidence.

Li

40.  Li is an accountant by profession.  He does not have any personal knowledge in respect of the matters between Bonnie and Daniel.  All he can know are matters derived from the documents.

41.  With respect, I am of the view that Li cannot be treated as a reliable witness.  The unreliability of his evidence is shown by the following instances:

(1)  Under cross-examination, Li was asked whether he had seen any document showing that Bonnie had made contribution relating to the Subject Property.  Li said that he had not seen any document of that kind.  Mr Yin then took Li to some documents, which clearly showed that Bonnie did make financial contributions relating to the Subject Property.  Li then said that the true meaning of his previous answer was up to the date of his witness statement, ie 27 June 2019, he did not see any document showing Bonnie’s contributions relating to the Subject Property.  Mr Yin then pointed out to Li that the documents just shown to him were disclosed by Bonnie on 22 February 2019.  Li insisted that he did not see the documents at any time before 27 June 2019.  With respect, if there is any truth in what Li has said, that can only mean that Li had not carefully gone through the documents in this case when he made in his witness statement.

(2)  In [6] of his supplemental witness statement dated 27 September 2019 (confirmed by Li during his evidence-in-chief), Li said that during the interview held on 19 July 2019, he handed over a list of enquiries to Daniel and asked Daniel to provide information on those matters.  Daniel told him that due to lapse of time, he had no recollection at all as to all the matters set out in the list.  However, under cross-examination, Li accepted that Daniel had in fact provided him answers on some matters orally during the interview.  Daniel said that as to the remaining matters, he needed further time and would provide Li answers in writing at a later time.  Daniel did provide him a written reply on 7 August 2019.  This is another example showing that Li’s evidence may not be reliable upon closer examination.

42.  Save and except the admission made by him as set out in [22] above, I would not rely upon his evidence to make any finding.

MY FACTUAL FINDINGS

43.  Based upon the evidence accepted by this court, I find that Bonnie’s primary case is true.  After the purchase of the Subject Property in 1997 and before the 2016 Assignment, although both Bonnie and Daniel were the registered owners of the Subject Property, Bonnie was the sole beneficial owner.  After the 2016 Assignment, Bonnie is the sole registered owner and the sole beneficial owner of the Property.

44.  I am aware that Li has placed reliance upon the GE Capital Mortgage and the DBS Mortgage in support of his case.  In my view, these documents cannot provide any support to Li’s case.

(1)  In the GE Capital Mortgage, it is true that both Bonnie and Daniel are the “Borrower”.  It is also true that “the Borrower as beneficial owner” charges the Subject Property to GE Capital[15].

(2)  However, Clause 1.03 of the GE Capital Mortgage provides:

“Words importing the singular number shall include the plural number and vice versa ……”

(3)  Accordingly, there is no provision in the GE Capital Mortgage clearly saying that Bonnie and Daniel are the beneficial owners of the Subject Property, and each of them is having a 50% beneficial interest.  The expression “the Borrower as beneficial owner” charges the Property to GE Capital only means that Bonnie and Daniel together charge all the beneficial interest in the Property to GE Capital.  This expression is still true and correct even if Bonnie in fact is the sole beneficial owner of the Subject Property.

(4)  The same analysis would also apply to the DBS Mortgage[16].

(5)  In any event, no question concerning the GE Capital Mortgage and the DBS Mortgage has been put to Bonnie and Daniel. Without offering any opportunity to them to give an explanation, Li cannot say that Bonnie’s case is contradicted by these documents.

45.  Li is also trying to rely upon the 2016 Assignment to support his case.  In the 2016 Assignment, there is an expression that Bonnie and Daniel (the Vendor) executed the assignment as beneficial owners.  In my judgment, this point is not open to Li.

(1)  The fact that Bonnie and Daniel executed the 2016 Assignment as beneficial owners has not been pleaded by Li.  If Li relies upon this matter as a material fact in support of his case and/or to use it to contradict Bonnie’s case, the matter must be pleaded.  Further, if Li relies upon this as an estoppel operating against Bonnie, this must also be pleaded. However, the matter is an unpleaded matter.

(2)  As to why Bonnie and Daniel executed the 2016 Assignment as the beneficial owners, no question was put to them.  Accordingly, Li would not be entitled to make any submission based upon this matter.

46.  Both Mr Yim and Mr Yin have agreed that if I find that Bonnie was and is the sole beneficial owner of the Subject Property at all material times, that would be the end of the matter.  Given the conclusion reached by me as set out in the above, it would not be necessary for me to express any view on Bonnie’s alternative case.

DEFICIENCIES IN LI’S PLEADED CASE

47.  Before leaving this judgment, I would make a few comments on the case pleaded by Li.  In my view, there are several deficiencies in Li’s pleaded case.

48.  First, as correctly conceded by Mr Yim during the final submissions stage, since Li has never raised the Partition Ordinance (“PO”) in the Statement of Claim and has not served the documents relating to these proceedings on the Director of Lands[17], it would not be possible for Li to obtain an order for sale in these proceedings in any event.  No order for sale can be granted under ss.49, 50 or 51 of the BO, or s.60 of the CPO.

49.  Second, Mr Yim told me that Li was relying upon s.49(3)(a) and (c) of the BO.  These statutory provisions are as follows:

“49(3) For the purposes of this section and sections 51 and 51A, a debtor enters into a transaction with a person at an undervalue if—

(a) he makes a gift to that person or he otherwise enters into a transaction with that person on terms that provide for him to receive no consideration;

……

or

(c) he enters into a transaction with that person for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by the debtor.”

50.  With respect, none of these provisions would be applicable.

(1)  As rightly pointed by Mr Yin, in order to be a gift, there must be an intention to make a gift.  The point has been made clear by DHCJ William Wong SC in Ho Man Kit v Sure Lead Ltd[18], in which the learned judge said:

“36. …… Where it is asserted that the transaction in question is a gift, it must be shown that the debtor intended to make a gift and, in the absence of such intention, it does not suffice that no consideration was received such that the transaction was effectively a gift. (See Re Hampton Capital Ltd[2016] 1 BCLC 374 at §36 per Deputy High Court Judge George Bompas QC) and Transaction Avoidance in Insolvencies (3^rd ed) at §4.15.)

37. In order to constitute a gift:

(1) There must have been an intention by the donor to make an immediate present gift; and the gift must be perfected either by delivery of possession or by deed. (See The Law of Personal Property (2^nd ed) at §17-001.)

(2) In other words, there must be a voluntary transfer from the donor to the donee with the full intention that the property would not return to the donor.  The key element is the intention to gift.  It must be shown that the donor intends there and then to give the property to the donee.  (See Young Tin Kin Kenneth v Lau Lan Fong Nancy HCA 1545/2004, unreported, 6 September 2006 at §§52 – 54, per Deputy High Court Judge Muttrie and Wu Wing Ching v Ding Yufang HCMP 2471/2012, unreported, 16 July 2014 at §24 per Recorder Pow SC)”

(2)  Mr Yim has fairly accepted that “ie nil consideration” in [6] of the Statement of Claim is referring to and same as “no actual payment has ever been made from [Bonnie] to [Daniel]”in the same paragraph.

(3)  It has never been pleaded that by executing the 2016 Assignment, Daniel had an intention to make a gift to Bonnie.  For this reason alone, s.49(3)(a) would not be applicable.

(4)  Further, no actual payment from Bonnie does not necessarily mean that the assignment was free of charge.  The consideration in return can be a debt owed by Bonnie to Daniel.

(5)  Mr Yim has conceded that it has not been set out in the Statement of Claim that the 2016 Assignment is “a transaction with [Bonnie] for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by [Daniel].”  That being the case, s.49(3)(c) would not be applicable.

51.  Third, s.50 of the BO would not be applicable, for it has not been pleaded that Bonnie was Daniel’s creditor or a surety or guarantor for any of Daniel’s debts or other liabilities before the 2016 Assignment[19].

52.  Fourth, s.60 of the CPO would not be applicable, for it has not been pleaded that at the time of the 2016 Assignment, Daniel was aware that he was insolvent or would soon become insolvent.  Bearing in mind that fraud must be pleaded distinctly with utmost particularity[20], I would regard the presence of this plea as essential, and the absence of which would be fatal to Li’s case based upon s.60 of the CPO.

COSTS

53.  Costs should follow the event.  Mr Yim submitted that no adverse costs order should be made against Li, even if Li failed in these proceedings.  Mr Yim said that Daniel had not revealed the truth in the PE and Bonnie had never made her case clear at the beginning.  For these reasons, Bonnie should not be awarded any costs even if she succeeded in these proceedings.

54.  With respect, I am unable to agree.  As set out in [34] to [38] above, in my judgment, Daniel has not given any misleading answer in the PE.  Further, as pointed out by Mr Yin, as early as 30 October 2017, Bonnie has through her solicitors written to the Official Receiver, stating that she was the one who contributed to the purchase price (both the down payment and the mortgage repayments) of the Subject Property, and Daniel should be considered as holding the Subject Property on trust for her.  Further, on 22 February 2019, nearly all the documents in Bonnie’s possession were disclosed by Bonnie[21]. Since Li is an accountant by profession, by perusing these documents, Li would be able to appreciate the strength of Bonnie’s case.  However, notwithstanding all these, Li chose to commence these proceedings and continue the proceedings until the very end.  I do not see why Li should not pay a price for his unwise decision.

55.  Although the trial only lasted for 3 days, the documents in these proceedings are voluminous.  Further, at all times, each side is represented by 2 counsel.  In my view, it would be appropriate to grant a certificate for 2 counsel in this case.

56.  Mr Yin submitted that costs should be taxed on an indemnity basis.  The rules concerning indemnity costs have been summarized by HH Judge Winnie Tsui in Wong Yung Tai v Top Eagle Security Management Ltd & Another ^[22], which are as follows:

(1)  The court has a broad discretion to determine the taxation basis.  In order to obtain an order for costs on an indemnity basis, it is necessary to have some “special or unusual feature” in the case^[23].

(2)  Indemnity costs are not confined to cases where the paying party’s conduct lacks moral probity or deserves moral condemnation for which the court wishes to express disapproval.  Conduct which falls short of that can be so unreasonable as to justify an order for indemnity costs.  But such conduct would need to be unreasonable to a high degree. Unreasonable in this context does not mean merely wrong or misguided in hindsight ^[24].

(3)  Usually, merely pursuing a weak claim would not justify indemnity costs.  On the other hand, to maintain a claim that one knows, or ought to know, is doomed to fail on the facts and on the law, is conduct that is so unreasonable as to justify indemnity costs ^[25].

(4)  Ultimately what the receiving party must demonstrate is something in the conduct of the action or other circumstances of the case that “takes it out of the norm” which warrants an order for indemnity costs ^[26].

57.  Although Li’s decision to commence and to continue these proceedings until the very end is unwise, I cannot say that Li’s conduct is so unreasonable so that it should be visited upon by an indemnity costs order.  I can see that the proximity in time between the litigation and the PSPA may cause Li to have some legitimate concern as to the propriety of the 2016 Assignment.  In my view, there is no sufficient reason to order indemnity costs in this case.

58.  As a matter of principle, an unsuccessful plaintiff liquidator would have to bear the costs of the litigation personally, and those costs should not be borne by the company in liquidation.  In Osman Mohammed Arab and Wong Kwok Keung, the Joint and Several Liquidators or Kam Toys & Novelty Manufacturing Ltd (In Creditors’ Voluntary Liquidation) v Cashbox Credit Services Ltd[27], Yuen JA said:

“45.      It seems to me that approaching the issue of liability for costs on first principles, liquidators who fail in proceedings they have instituted should be liable for the costs.  Whatever may be the position of liquidators as defendants, a holding that unsuccessful plaintiff liquidators would not, as a general rule, be responsible for costs would be unfair to the other party.  The unfairness is obvious as the other party would not receive costs if he were successful but would have to pay costs if he were unsuccessful.  A holding that liquidators who institute proceedings should pay the costs personally in the first instance if they lose would not hamper liquidators in the execution of their task to get in the assets of the company.  They could of course protect themselves (if there is a risk that the company’s assets are insufficient) by obtaining financial support, prior to the start of proceedings, from the general body of creditors who would benefit from the proposed litigation.”

59.  In my view, the same principle should be applied to an unsuccessful plaintiff trustee-in-bankruptcy.  Mr Yim did not dispute this.  Accordingly, costs of these proceedings should be paid by Li personally to Bonnie.

60.  For the reasons above, I am of the view that costs of these proceedings (including all costs reserved, if any) should be paid by Li personally to Bonnie, with a certificate for 2 counsel, to be taxed on party and party basis if not agreed.  There should be a costs order nisi reflecting these.  The costs order is made on nisi basis, so that any party may make an application to vary the costs order nisi within 14 days, if he or she wishes.  However, the parties are reminded that any unmeritorious application may well be met by an adverse costs order.

DISPOSITION

61.  I dismiss Li’s claim and allow Bonnie’s counterclaim.  There be an order that Li do vacate the registration of the Bankruptcy Order against the Subject Property within 14 days.  There be liberty to apply.   I also make the costs order nisi as set out in [60] above.

62.  Lastly, it remains for me to thank counsel for the assistance rendered to the court.