LEE TUNG KIN MANDA v. CHAN YAN WING VIVIEN AND ANOTHER

DCCJ 2302/2019

[2024] HKDC 554

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2302 OF 2019

---------------------------------------

---------------------------------------

------------------------

JUDGMENT

------------------------

INTRODUCTION

1.  The present case concerns a dispute over the beneficial ownership of a property known as Flat A, 6^th Floor of Tower 2, Fanling Town Centre, No 18 Fanling Station Road, Fanling, New Territories, Hong Kong (“Property”).

2.  The plaintiff (“Lee”) and the 2^nd defendant (“Ivy”) were ex-lovers.  The 1^st defendant (“Vivien”) is Ivy’s daughter.

3.  The Property is registered solely in the name of Vivien.  Lee’s case is essentially that Vivien has held the legal title in the Property on constructive trust (or alternatively on resulting trust) for Lee and Ivy in equal shares since the purchase of it and that Vivien has never had any beneficial interest in the Property.

4.  In the present action, Lee seeks, in gist, : (1) a declaration of his beneficial interest in the Property; (2) a consequential order that the Property be sold pursuant to the Partition Ordinance, Cap 352; (3) an order that Vivien do account for the rental income generated from the Property since its purchase net of the proportion used to discharge the monthly mortgage repayments and expenses in respect of the Property; and (4) an order that Vivien and Ivy do pay occupation rent to him.

5.  The positions of Vivien and Ivy are aligned.  They dispute Lee’s claim and assert that Vivien is the sole legal and beneficial owner of the Property.  Vivien also counterclaims for loss and damages suffered by her for not being able to rent out the Property as a result of Lee’s wrongful registration of the Writ of Summons (“Writ”) of the present action at the Land Registry on 10 May 2019.

BACKGROUND

6.  The following background facts are undisputed or indisputable.

7.  In or around August 2015, Lee entered into a romantic relationship with Ivy.  He moved and lived together with Ivy and Vivien at Ivy’s home in Fanling, New Territories (“Ivy’s Premises”) from around 30 November 2015 to around mid-November 2017. 

8.  In early October 2015, Ivy paid a site-visit at the Property by the introduction of an estate agent. A provisional sale and purchase agreement (“Provisional Agreement”) was signed on 4 October 2015 for the purchase of the Property with HK$100,000 deposit paid[1] .

9.  On 14 October 2015, a formal sale and purchase agreement was signed between the vendor and Vivien for the purchase of the Property at the purchase price of HK$3,600,000 (the “Purchase Price”).  The further deposit in the sum of HK$120,000 was paid with Lee’s bank cheque.

10.  On 4 January 2016, the purchase of the Property was completed with Vivien being named as the sole owner of the Property.

11.  According to the pleadings of all parties, it is undisputed that the Purchase Price was funded by:

(1)  the downpayment amounted to HK$1,440,000 (40% of the Purchase Price) (“Downpayment”) was funded equally by Lee and Ivy, with each of them contributing a sum of HK$720,000;

(2)  the remaining HK$2,160,000 (60% of the Purchase Price) was financed through a mortgage loan (“BOC Mortgage”) obtained by Vivien from the Bank of Communication (“BOC”).  The monthly mortgage   installment was approximately HK$8,000 throughout the years.

12.  According to the Agreed Schedule of Agreed/Disputed Payments jointly prepared by the parties, the expenses incidental to the purchase of the Property (“Incidental Expenses”) included:-

(1)  Stamp Duty HK$81,000 (by a cheque of Ivy’s son);

(2)  Estate Agent Fee HK$28,800 (by a cheque of Lee);

(3)  Legal Fees (mortgage) HK$5,050 (by Ivy).

13.  At the time of the acquisition of the Property:-

(1)  Lee was 59 years old. He was a truck driver.  He had no experience in investing landed property in Hong Kong.

(2)  Ivy was an insurance agent.  She had been going through contested divorce proceedings (“Divorce Proceedings”) against her ex-husband since 2006.  The decree absolute was pronounced in 2017.  Both of them were the registered owners of Ivy’s Premises.  Two children were borne to their marriage.  Their son studied aboard.  Their daughter, Vivien, had all along been living with Ivy at Ivy’s Premises.

(3)  Vivien was 18 years old.  In the year of 2015, she took the Hong Kong Diploma of Secondary Education Examination and graduated from secondary school. From 2015 to 2016, she studied the Diploma of Foundation Studies in the Hong Kong Institute of Vocational Education on full-time basis.

14.  In or around mid-November 2017, the relationship between Lee and Ivy broke down.  Lee moved out from Ivy’s Premises. 

15.  On or around May/June 2018, Vivien refinanced the Property with the Bank of East Asia securing a mortgage loan of HK$3,212,775 (“BEA Mortgage”), with the monthly mortgage installment of around HK$12,000.  Of this mortgage loan, HK$2,036,151.84 was utilized to settle the BOC Mortgage on 3 July 2018.  The balance of around HK$1,176,623.16 was pocketed and/or used by Ivy and/ or Vivien.

16.  On 9 May 2019, the Writ was issued.  On 10 May 2019, the Writ was registered at the Lands Registry.

17.  The Property was rented out as follows:

(1)  From 15 January 2016 to 14 January 2017, the Property was rented out at a monthly rent of HK$9,000. 

(2)  From 1 February 2017 to 31 January 2018, the Property was rented out at a monthly rent of HK$11,000.

(3)  From 15 July 2018 to 14 July 2019, the Property was rented out at a monthly rent of HK$13,000.

(4)  From April 2021 to August 2022, the Property was rented out at a monthly rent of HK$9,800.

(5)  Since October 2022, the Property has been rented out at a monthly rent of HK$11,300.

18.  The agreed value of the Property is HK$4,430,000.

LEE’S CASE

19.  The gist of  Lee’s case can be summarized as follows:-

(1)  Lee and Ivy purchased the Property as lovers with the common intention that they would share the beneficial interest of it equally with an expectation to eventually move into it and live together there as a couple.

(2)  The common intention was formed by two oral conversations between Lee and Ivy in early October 2015, and could be inferred by the conduct of the parties.

(3)  During the first oral conversation between Ivy and Lee, Ivy explained to Lee that she and her husband jointly owned Ivy’s Premises, which would be eventually given to their two children.  She therefore suggested to Lee that they should jointly invest into the Property,  with an aim to eventually live there together.  She proposed to arrange Vivien to hold the Property for both of them because it would be more beneficial for Vivien, due to her young age and better background, to obtain a mortgage.  

(4)  On the contrary, Lee was in a less favorable position due to his senior age and unstable income.  The arrangement was also influenced by the fact that Ivy was reluctant to purchase the Property in her name in light of the contested Divorce Proceedings and in order to avoid double stamp duty.  It was agreed that each of them would contribute 10% of the Purchase Price, in a sum of HK$360,000, making a total of HK$720,000 (20% of the Purchase Price)  with the balance of HK$2,880,000 (80% of the Purchase Price) to be funded by a mortgage loan.  The mortgage installments would be covered by rental incomes.

(5)  Subsequently, Ivy and Lee had a second oral conversation in that Ivy told Lee that the bank would only offer a mortgage loan of HK$2,160,000, which only covered 60% of the Purchase Price and each of them would have to contribute HK$720,000 (20% of the Purchase Price) instead of HK$360,000 for the down payment as originally planned.

(6)  In the circumstances, it was the common intention (the “Common Intention”) of the parties before and at the time of the purchase of the Property that, inter alia:-

(a)  Vivien would be named as the sole legal owner of the Property.  She however would have no beneficial interest in it and would merely be a trustee holding the legal title in the Property on trust for Lee and Ivy, who would each have 50% of the beneficial interest.

(b)  Lee and Ivy would equally contribute towards all the Purchase Price and Incidental Expenses.

(c)  Lee and Ivy would pay the 40% Downpayment of HK$1,440,000 together with the Incidental Expenses equally.  The balance of the 60% of the Purchase Price would be financed by the mortgage loan to be obtained by Vivien for and on behalf of Lee and Ivy.

(d)  In the short term, the Property would be rented out and the rental income would be used to settle the monthly mortgage installments and the expenditures as management fees, government rates and rents relating to the Property (“Property Expenditures”).

(7)  Pursuant to and in reliance on the Common Intention,

Lee paid HK$720,000 towards the Downpayment together with half of the Incidental Expenses.

(8)  On 29 June 2018, in breach of trust, Vivien, at the instigation and assistance of Ivy and without the consent or knowledge of Lee, remortgaged the Property by obtaining the BEA Mortgage with the purpose of enabling Ivy to purchase a car parking space (“Car Parking Space”) of approximately HK$720,000 and pocketing the net remaining amount for their own use and benefits.

(9)  Lee has therefore altered his position in detrimental reliance upon the Common Intention, and it would be wholly unconscionable for Vivien to assert her legal title to the Property against Lee especially in light of Lee’s contribution and Vivien’s total lack of contribution.  Vivian was aware and involved in the trust arrangement mainly through Ivy.

20.  By reason of the matters set out above, Lee invites this court to find a constructive trust in his favour based on constructive trust by way of their express intentions, communications and arrangements.  Alternatively, he asks to infer the constructive trust or find a resulting trust based on his financial contributions and the other circumstances concerning the purchase and the use of the Property.  In the further alternative, he requests a finding that Vivien has been unjustly enriched at his expense. 

21.  Given the breakdown of the relationship among the parties and the deprivation of his benefits and control of the Property since 2017, Lee further seeks an order for sale of the Property and for net rental income and/or occupation rent from the defendants.  That said, Lee confirmed at trial that his claim would be confined and limited to the net rental income and/or occupation rent and would not extend further to cover any other interest and benefits generated from the BEA Mortgage, if any. 

DEFENCE CASE

22.  The defence case at trial can be succinctly set out as follows:-

(1)  It had always been the wish and intention of Ivy and Vivien that Vivien should own a property of her own and that she could move out of Ivy’s Premises to live there (“Alleged Wish”).

(2)  Ivy and Vivien found it the right time to realize the Alleged Wish in early October 2015.  Lee was supportive of such idea and agreed to lend a sum of HK$720,000 to Ivy to pay for half of the down payment for the Purchase Price for Vivien (“Alleged Loan”).

(3)  Other than the Alleged Loan, Ivy would be responsible for the balance of the Downpayment and the Incidental Expenses.

(4)  Vivien would obtain a mortgage loan in settlement of the balance of the Purchase Price.  The said mortgage loan would then be repaid by the rental income from leasing out the Property.

(5)  Vivien would be the sole legal and beneficial owner.

(6)  Ivy had already returned a total sum of HK$121,714 to Lee on 28 December 2016.

23.  Essentially, the defence case denies the existence of the Common Intention.  Vivien, claiming to be the sole legal and beneficial owner of the Property,  seeks damages allegedly arising from Lee’s wrongful registration of the Writ with the Lands Register.  It is said that due to the registration, she was not able to lease out the Property for the period between July 2019 and March 2021 (“Idle Period”), and thereafter, she had to lease it out at a discounted rent.  On such basis, she counterclaims against Lee for HK$344,440, being the potential rental income of the Property as per the Agreed Schedule jointly prepared by the parties.

ISSUES IN DISPUTE

24.  The key factual issues which fall for  determination are:-

(1)  Whether the money paid by Lee was a direct contribution to the Purchase Price (as contended by Lee) or for the Alleged Loan to Ivy (as alleged by Ivy and Vivien)?

(2)  Whether the Incidental Expenses were paid by Lee and Ivy equally, or by Ivy only as alleged?

(3)  Whether there existed the common intention constructive trust or the resulting trust?

(4)  If yes, whether an order of sale of the Property should be ordered?

(5)  If yes, how the sale proceeds should be distributed?

25.  In resolving these questions, the court should consider all the relevant evidence in the round and weigh the rival factual contentions having regard to the inherent probabilities, and where appropriate draw inferences in light of common knowledge and experience.

LEGAL PRINCIPLES

CONSTRUCTIVE TRUST AND RESULTING TRUST

26.  The legal requirements for establishing resulting and constructive trusts have been summarized in Chin Nai Man v Chin Yat Keung Alex HCA 1197/ 2014, unreported, 12 March 2020 at §§10-13 as follows:-

(1)  Legal ownership of a property is normally consistent with the beneficial entitlement.  The burden of proof rests on any party seeking to establish that equity should not follow the law to demonstrate that the beneficial interests to be different from the legal interest and in what way.

(2)  The court would ascertain the common intention of the parties first and only in the absence of such intention that the court would resort to resulting trust.

(3)  In ascertaining the common intention, the plaintiff must prove (i) there was a common intention between the parties that the plaintiff was to be the beneficial owner of the property despite that it was acquired in the defendant’s name; (ii) the plaintiff altered his position in detrimental reliance upon such common intention; and (iii) it is unconscionable for the defendant to assert ownership in reliance on his legal title to the property.

(4)  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.

(5)  The common intention can be found from any agreement, arrangement or understanding. In the absence of such evidence, the court may seek to infer from the conduct of the parties.

(6)  The modern approach is to adopt a holistic approach having regard to the context which is even described as a fundamental consideration.

27.  In the case of Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327, the Court of Appeal identified two situations where a common intention constructive trust may be found:-

“2.3 The first situation where common intention constructive trust may arise is where at any time prior to acquisition, or exceptionally at some later date, there is an agreement, arrangement or understanding reached between the parties on how the property is to be held beneficially.

2.4 The second situation is where there is no evidence to support a finding of an agreement or arrangement on the beneficial ownership of the property and the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention on the beneficial ownership of the property and as the conduct relied on to give rise to a constructive trust.  In this situation, direct contributions to the purchase price by the party who is not the legal owner, whether initially or by payment of mortgage installments, will readily justify the inference necessary to the creation of a constructive trust…”

OCCUPATION RENT

28.  The legal principles concerning occupation rent are succinctly distilled in the case of Cheung Lai Mui v Cheung Wai Shing & Ors (No 2) [2021] 24 HKCFAR 116 at §104 as follows:

“… Claims by one co-owner against a co-owner in occupation for payment of occupation rent or for an account of rent can only arise in accordance with the principles laid down in the established authorities. Unity of possession precludes such claims otherwise than in cases of ouster (including ‘constructive exclusion’ as in domestic violence cases); or where an operative agreement renders the co-owner in occupation an agent or bailiff so as to come under a duty to account to the other. Where partition or analogous proceedings have been instituted, apart from cases of ouster, equity may recognise a defensive equity in favour of one of the co-owners regarding expenditure appropriately incurred and may, in the process of equitable accounting, require the other, viewed as a seeker of equity required to do equity, to be debited with an occupation rent to set off the expenditure incurred, thus reciprocally balancing the parties’ interests in the distribution of the realised proceeds of the co-owned property.”

PARTITION ORDINANCE

29.  Under sections 2 and 6 of the Partition Ordinance, Cap 352, a co-owner is entitled to apply for an order for sale.

30.  In Wong Chun Kei Johnny & Ors v Poon Vai Ching & Ors [2007] 1 HKLRD 825,  the relevant principles are concisely stated at §§18-19, which are set out as follows:

(1)  A co-owner has a basic right to rid himself of the shackles of co-ownership and, if he has no other remedy, ask for an order for partition of sale;

(2)  When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner) that such an order will not be beneficial to all the co-owners; and

(3)  Whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial. It has to be determined by the court objectively.

DISCUSSION

31.  The Property is a domestic property, which has been held by Vivien as the sole legal owner.  Given Lee’s claim is premised on equity does not follow the law, the burden of proof rests on Lee to show that the beneficial interest of the Property does not follow the legal title.

32.  Despite the parties’ respective assertions that there has been a written declaration of trust signed by Vivien (as contended by Lee) and a document acknowledging the advance of loan (as contended by Ivy), no such documents were produced at trial. 

33.  All three parties gave evidence in court.  Lee also arranged a common friend of Lee and Ivy, Mr Kam Hing Sang (“Kam”), to give evidence for him.  In accessing the witness’s credibility, I remind myself of the test as summarized in Hu Lan v David Golden [2023] HKCFI 873.

ON THE DAY OF THE FIRST VISIT

34.  It is noteworthy that Vivien’s witness statements substantially mirrored Ivy’s witness statements.  They even made the same unexplainable mistakes in their respective witness statements.  During cross-examination of Vivien, it became clear that she in fact had minimal involvement in and flimsy knowledge about the events leading to the purchase of the Property, and many allegations contained in her witness statements were plainly a repetition of her mother’s untrue allegations.

35.  In Ivy’s witness statement, she alleged that (a) on the very day of her first visit to the Property, “after looking around the Property” herself, she telephoned Vivien, who immediately confirmed her interest and decision in buying the Property for herself (even without sight of the Property); (b) Ivy therefore there and then confirmed with the estate agent that Vivien would purchase the Property; and (c) on the same day, Ivy asked Lee for the Alleged Loan for the purpose of helping Vivien to buy the Property, which Lee agreed. Vivien repeated the same allegations in her witness statement.

36.  During cross-examination, both Ivy and Vivien confessed that they made a mistake as to the date of Ivy’s first visit to the Property.  It should have taken place before the signing of the Provisional Agreement on 4 October 2015 instead of “6 October 2015” as incorrectly stated in their witness statements. 

37.  Besides, Ivy said in cross-examination that her request for the Alleged Loan and Lee’s agreement to it took place when they had dinner at Ivy’s Premises on the same day of her first visit to the Property.  During that conversation, Lee also declined Ivy’s invitation to invest in the Property together for fear of losing money. Further, when Ivy asked Lee if the Property should be registered in Vivien’s sole name or in joint names of Ivy and Vivien, Lee suggested the former (the whole conversation as, “Alleged Dinner Event”).

38.  However, in their respective supplemental witness statements, both Ivy and Vivien alleged that in mid-October, Ivy, accompanied by Lee, went to the frozen meat shop of a Ms Wang (transliteration) (“Ms Wang”), who was Ivy’s friend, to ask Ms Wang to lend Ivy HK$720,000 for purchasing the Property.  Ms Wang refused due to lack of cash. She also criticized Lee to be a “useless man” for not helping Ivy out, which made Lee very upset (“Alleged Meat Shop Event”).

39.  Undoubtedly, the Alleged Dinner Event and the Alleged Meat Shop Event are contradictory to each other.  Given Lee had already agreed to lend the HK$720,000 to Ivy during the Alleged Dinner Event, which took place during the dinner on the day of her first visit to the Property before 4 October 2016, the Alleged Meat Shop Event in mid-October could not have happened. 

40.  When asked to explain the inconsistency, Ivy changed her evidence to say that the Alleged Meat Shop Event occurred on the same day of her first visit to the Property and before the Alleged Dinner Event.  Such sudden change of material evidence is without justification.

41.  When pressed for an explanation for her silence of the Alleged Meat Shop Event while describing what had happened during the day of her first visit to the Property in her witness statement, Ivy said that it was because she had not yet been made a party to these proceedings when giving that witness statement.  Such explanation is apparently devoid of logic.  When confronted with the fact that she was assisted by solicitors when compiling the witness statement and she must have known that she needed to account for all the relevant events in her witness statement, she could not give a reasonable explanation.

42.  When Vivien was asked if she knew whether Ivy had ever asked anyone other than Lee to lend her money for purchasing the Property, her initial answer was that she did not know.  It was only after she was taken through her own supplemental witness statement where she mentioned about the Alleged Meat Shop Event that she changed to say that Ivy had told her about it.

43.  Further, in Vivien’s witness statement at §13, she also purported to recount in detail a conversation between Lee and Ivy at some point before the Provisional Agreement was signed:

‘… As informed by my mother, she had discussed with the Plaintiff whether the Property should be under 1) joint names of both myself and my mother or 2) my sole name. After the discussion, the Plaintiff said to my mother, “you make the decision then” [你決定囉] in reply to my and my mother's idea of buying the Property; and in response to whether the Property should be under 1) joint names of both myself and my mother or 2) my sole name, he replied to my mother, “use your daughter's name then” [咁咪用你嗰囡名囉]’

44.  Such alleged conversation (“Alleged Ownership Conversation”) was also mentioned in Ivy’s witness statement.  However, Ivy gave another version of such event during cross-examination, being the Alleged Dinner Event as set out above.

45.  During cross-examination, Vivien admitted that the Alleged Ownership Conversation was a complete fabrication. At any rate, such alleged conversation actually undermines the defence case. Given the Property was allegedly purchased for the sole ownership and benefit of Vivien, there was plainly no reason that Ivy would have thought of adding her own name to the ownership, still less of asking for Lee’s suggestion and decision.

A GIFT OR A LOAN

46.  I accept the submissions of Mr Lam, Counsel for Lee, that the forgoing incidents are just some of the many examples of the untrue allegations of Ivy and Vivien.  Apart from their general lack of credibility, there are also many other reasons why this Court should reject their evidence.

47.  Firstly, the development of the defence pleadings demonstrates that the present defence case is an opportunistic afterthought. According to the first version of Vivien’s defence dated 8 October 2019, Vivien’s original case was that:-

(a)  Ivy paid for the down payment of the Property as a gift to Vivien.

(b)  Lee defrayed the relevant payments for Ivy by cheques, and Ivy then reimbursed Lee by way of both cash and cheques.

(c)  Lee issued the cheques for Ivy unconditionally (“呈請人以沒有任何條件的情況代媽媽開出支票”).

48.  Vivien said that she had discussed all such matters with Ivy before compiling the first version of her defence. There was no mention of any loan arrangement, whether between Lee and Ivy, or between Ivy and Vivien.  It was only in the Amended Defence dated 18 December 2019 that Vivien alleged for the first time that:

(a)  Lee agreed to lend the Alleged Loan of HK$720,000 to Ivy and for Ivy to lend it to Vivien for paying the down payment and initial deposit; and

(b)  Ivy also lent an additional sum of HK$720,000 to Vivien for paying the remaining down payment and initial deposit.

49.  Obviously, the case as pleaded in the Amended Defence (and in the subsequent versions of the Defence) is radically different from the original Defence.   During cross-examination, Vivien attempted to explain the change of her case by suggesting that what she actually meant by “呈請人以沒有任何條件的情況代媽媽開出支票” was that Lee agreed to make the payments by cheques for Ivy as a loan to Ivy without interest (“好似係話借嗰陣唔使利息咁嘅意思”).

50.  Undoubtedly, such suggestion is not supported by the wordings of the pleadings.  There is no sensible reason why Vivien would not have accounted for such important but simple and straightforward facts, which would give rise to a valid defence in her original defence.   

51.  In any event, Vivien’s original Defence is in direct contradiction with her final pleaded case in another fundamental aspect.  She changed her case of Ivy paying the down payment of the Property for her as a gift to a loan to her, which was funded by the money lent by Ivy, who herself borrowed half of the amount of the down payment from Lee.

52.  When questioned about this, Vivien put forward another version.  She said, for the first time, that the actual arrangement between Ivy and her was that she would only require repaying Ivy when she has spare money. She however could not explain why such arrangement was not mentioned in her pleadings or witness statements, and, why two different versions were pleaded at different times instead.

53.  Secondly, Vivien’s pleaded case on how the alleged agreement regarding the Alleged Loan between Lee and Ivy was formed is fundamentally different from that of Ivy.  In the Answer to Request for Further and Better Particulars of the Amended Defence and Counterclaim, Vivien alleged that Lee agreed to lend HK$720,000 to Ivy “orally”.  

54.  On the contrary, Ivy, in her Answer to Request for Further and Better Particulars of the 2^nd defendant’s Defence, alleged that Lee agreed to lend HK$720,000 to her “by way of writing”. At trial, Vivien said that she had never been aware of there being any written agreement.

55.  By reason of the many irreconcilable inconsistencies between the allegations of Vivien and Ivy, the defence of the “Alleged Loan” is incapable of belief.

VIVIEN’S FINANCIAL POSITION AND CONDUCT

56.  I now turn to examine the parties’ financial positions and conducts.

57.  It is the defence case that Ivy and Vivien were very keen to purchase the Property to realize their Alleged Wish that Vivien was to own her own property and that she would live there. However, such allegation does not sit well with the background facts.  It was actually disproved by Vivien’s own evidence.

58.  Upon the acquisition of the Property, Vivien was only aged 18.  She had just completed the secondary school education for just a few months.  She was still a full-time student, studying a diploma course.

59.  Vivien admitted that she barely had any savings by that time.  She even had to rely on her parents to pay for her school fees for the diploma course.  Although it is said that she worked briefly at Ms Wang’s meat shop to perform some “accounting tasks”, earning a monthly salary of HK$30,000, from July 2015 to May or June 2016, such allegation is unsupported with solid evidence and is unlikely to be true.

60.  It is difficult to believe that a frozen meat shop would pay this relatively high level of salary to a part-time worker, who was just a fresh secondary school graduate with no professional qualification in accounting, in her first job.  The alleged employment period is inconsistent with the MPF documents.  Even though Vivien alleged that she only stopped working in May/June 2016, the MPF documents (without showing her salary payments with Ms. Wang’ shop in details) show that her employment was indeed terminated before 8 April 2016. 

61.  In further consideration of the fact that thereafter, Vivien was only very briefly employed as a non-licensed estate agent and later, as a cake shop assistant, at a monthly salary of approximately ten odd thousand dollars, for just a few months, and since then, unemployed for a long period of time, she could hardly have accumulated sufficient savings for the purchase of the Property at the time of the purchase, not to mention for keeping up with the mortgage repayment of her own property in the long run. 

62.  Significantly, there is in fact no evidence to indicate that she had the real intention, still less of actual plan, to repay the Down Payment and Incidental Expenses to Ivy or Lee, or to shoulder up the repayment of the mortgage loan.   Vivien also conceded that her limited financial resources in fact did not afford her to realize the Alleged Wish at that time, and, contrary to her pleaded case and witness statements, that was not the right time to do that. 

63.  Under cross-examination, Vivien admitted that, at the time of the purchase of the Property, she was single with no contemplation of starting any cohabitation relationship.  She indeed enjoyed living comfortably in Ivy’s Premises, which was jointly owned by her parents.  The fact that she had not taken any step to move out of Ivy’s Premises to live at the Property is another concrete fact that defeats the alleged purpose of the acquisition of the Property was to realize the Alleged Wish.

64.  It is also unconvincing that Ivy would have proceeded to purchase the Property without first arranging Vivien to view the Property or discussing with her the actual financial arrangement for the Property, if Vivien was to be the sole beneficial owner and the Property was purchased for her home. 

65.  Absent any solid evidence that Vivien had ever made any actual financial contributions to the Property, other than obtaining mortgage loans as a registered owner, her involvement in the purchase of the Property was minimal and was obviously limited to a nominal paper owner of the Property, which will be elaborated further below, the allegation that the Property was purchased for both Ivy and Vivien considered that was the right time to realize the Alleged Wish cannot be true.  Strictly, there is no solid evidence that indicates Vivien was willing, ready and able to commit herself to the funding of the purchase of the Property and to discharge the mortgage loan.

LEE’S FINANCIAL POSITION AND CONDUCT

66.  On balance, Lee’s case that Vivien was named as the sole legal owner was based on Ivy’s suggestion that it would be easier for Vivien to obtain a mortgage loan is more logical and convincing. His case sits well with the background facts.  Vivien was much younger with better education, whereas Lee was almost 60 years old with unstable income as a truck driver by that time.   He had no experience in landed property investment in Hong Kong and was apparently tended to be more receptive to Ivy’s suggestion and advice.

67.  Likewise, Lee’s case that Ivy chose not to register herself as a legal owner to avoid any undesirable impact on the contested Divorce Proceedings and the liability of double stamp duty is consistent with her engagement in the then ongoing Divorcee Proceedings and her ownership in the Ivy’s Premises by that time.

SOLE OWNER OR JOINT OWNERS

68.  I do not lose sight of the fact that Ivy’s evidence indeed tends to support Lee’s case and undermines the defence case.  As mentioned above, Ivy’s own confession that she had initially considered naming herself as a joint owner of the Property, but eventually decided not to do that to avoid paying double stamp duty is a clear indication that the purchase of the Property was not to realize the Alleged Wish.

69.  Similarly, Ivy’s allegations regarding the Alleged Dinner Event in court further damaged the allegation that the purchase of the Property was to realize the Alleged Wish.  Not only that Ivy should not have considered adding herself as an owner for no purpose, she simply would not have asked Lee about the arrangements regarding ownership if he had no interest in the Property.

THE ALLEGED LOAN

70.  Another fragility of the defence case is that there had been no discussion about any repayment terms of the Alleged Loan at all.  According to the background facts and the bank statements disclosed by the parties, HK$720,000 was a substantial sum to the parties.  It is undisputed fact, which is supported by the bank statements, which Lee actually had to ask for a loan of HK$250,000 from his brother to make up HK$720,000 for his contribution to the Downpayment.  It is an affront to commonsense that Lee, Ivy and Vivien would have considered it the “right time” for Vivien to purchase the Property with a substantial loan from her mother, who in turn asked for a substantial loan from Lee, who further asked for a substantial loan from his brother to fund such arrangement, but extraordinarily, with no discussion about any terms of repayment as dates and schedules of repayment at all.

71.  Other than Ivy’s allegation that she had “returned” a total sum of HK$121,714 to Lee on 28 December 2016 (“Alleged Repayment”), there has been no concrete evidence of any repayments of the Alleged Loan to Lee throughout the years, despite the breakdown of the relationship among the parties in November 2017 and Ivy’s allegation that the Alleged Loan was obtained for short-term liquidity purpose only.

72.  Ivy’s explanation during cross-examination that she did not have spare money for repayments because of the poor economy caused by the Covid-19 pandemic is unconvincing.  The pandemic did not cover the whole period. I also do not ignore the fact that she had obtained a loan of HK$3,212,775 from the BEA Mortgage through Vivien with a considerable amount of spare cash for their own use.

73.  As to the allegation of the Alleged Repayment, I am not persuaded that the two cheques deposited into Lee’s bank account, being HK$85,180  and HK$36,534, in the total amount of HK$121,714 on 28 December 2016 were repayments of the Alleged Loan.  Having reviewed the relevant bank documents and the background facts, it is obvious that those two cheques were issued by To Fuk Shan Limited to pay commissions to Ivy for her service as its agent.  Most probably that she had requested the two cheques to be made payable to Lee to conceal her additional income with such company from her financial records in light of her Divorce Proceedings as Lee suggested. 

74.  The bank documents show that shortly after receiving the two cheque payments, Lee then made 8 outgoing transactions (transfers/cash withdrawals) totaling HK$122,040 from his bank account between 29 December 2016 and 5 January 2017.  There is no reason why he had to withdraw such considerable amount (which was close to the amount of the Alleged Repayment) from his bank account shortly after the deposit of them. 

75.  Further, as regards those eight transactions, Ivy admitted under cross-examination that at least HK$81,300 was repaid to her as the documents showed.  She however argued that the total sum of HK$81,300 was not to return the commission payments to her, but to reimburse her for the insurance fee, which she had paid for Lee in December 2016.  She referred to her bank statement, which showed 3 transactions totaling HK$73,845, HK$16,500, HK$7,345 and HK$50,000, to “Web-Prudential Hong Kong Limited” on 14 December 2016, 15 December 2016 and 22 December 2016 respectively for proof.

76.  I am not persuaded.  Ivy was unable to produce any direct documentary evidence for proof of Lee’s liability to pay her such alleged insurance fees.  Further, she gave no sensible explanation as to why she would only pay  HK$73,845 to settle the insurance fee purportedly payable by Lee in 2016, which was HK$78,536.54, and how the balance of HK$4,691.54 was paid (i.e. HK$78,536.54 – HK$73,845 = HK$4,691.54).  She also failed to explain why she would pay the alleged insurance fee for Lee by three separate transactions of varying odd amounts, instead of paying it in one single sum.  It is also illogical that she would not have just set off the sum against the Alleged Loan.  Needless to say, she gave no explanation as to why Lee would have paid her HK$81,300 instead of HK$78,536.54 or HK$73,845.

77.  Looking at all the relevant matters in the round, I do not believe the existence of the Alleged Loan.

INCIDENTAL EXPENSES

78.  According to the pleadings of all parties, it is agreed fact that Lee had contributed HK$720,000 as half of the down payment of the purchase price of the Property.  In addition, Lee also produced documents evidencing his payments of part of the Incidental Expenses, including a cheque in the sum of HK$28,800 dated 5 January 2016 for payment of estate agent fee.

79.  It is noteworthy that before trial, both Ivy and Vivien had been complete silent on Lee’s settlement of the estate agent fee.  At trial, Vivien untruly alleged that she was the one who issued the cheque to pay for the estate agent fee.  She finally accepted that the cheque payment was indeed made by Lee when she was shown the documentary evidence.  When asked to explain why Lee was responsible for such payment, she said she could not offer any explanation. 

80.  When pressed on, Vivien confessed that Lee and Ivy contributed to the Incidental Expenses in equal shares.  Although she sought to retract her admissions during re-examination and reverted to an allegation of the estate agent fee was paid by her, such bare allegation was simply disproved by the bank documents.  Her ever-changing evidence discloses that she is not a credible witness.

81.  Inconsistent with Vivien’s assertion, Ivy put forward another allegation on this matter.  She ventured to allege that the reason why Lee had issued the cheque for the agent fee was that she had used up her chequebook at that time and so she asked Lee to issue the cheque for her.  I am slow to accept such belated explanation.  At any rate, she failed to account for how she had repaid such payment to Lee, still less of any solid supporting evidence.

82.  Lee is criticized to have failed to prove his half payment of the legal costs and the stamp duty.  In view of the fact that he had no reason to pay the estate agent fees for Vivien if not the owner of the Property, of the long lapse of time, of the many transactions between Lee, Ivy, Vivien and other third parties and of the overall credibility of the parties, I believe, on balance, that Lee must have contributed to such payments as he did for the estate agents fees.

THE INVOLVEMENT AND THE MANAGEMENT

83.  Further, there are also other matters, which strongly militate against the finding of Vivien’s sole legal and beneficial owner of the Property or of the existence of the Alleged Loan. 

84.  The fact is Vivien’s involvement in the purchase of the Property was flimsy.  She confessed that she was not involved in the selection of the Property or negotiation with the estate agent or vendor.  She was not even arranged to view the Property and no financial arrangement was discussed with her prior to the signing of the Provisional Agreement.

85.  She did not even know that Lee had made direct payments for the estate agent fee as well as the three payments totaling HK$454,000 to the conveyancing solicitors.  Nor did she know that Ivy had settled the payment for the deposit and stamp duty using a cheque pre-signed by her brother.  The selection of the Property, the sourcing and negotiation for the purpose of making application for the mortgage loans, the leasing of the Property as well as the payments of the relevant mortgage installments and the Property Expenditures were mainly managed by Ivy.

86.  When Vivien was asked who had paid for an alleged renovation fee of HK$13,000 in January 2016, she first claimed that she had paid for it.  She subsequently changed to say that Ivy paid it when she found that her answer ran counter to her own witness statements.  In any event, neither Vivien nor Ivy was able to explain sensibly, why the receipt for the alleged renovation fees illustrates that the renovation works were completed and paid for before the completion of the purchase of the Property.  Further, the items and descriptions of the renovation works as set out in the receipts did not match with the background facts or allegations of Ivy and Vivien.  I do not believe that they have made such payments for the Property.

87.  The aforesaid matters further demonstrate that Vivian does not have much of a clue about any matter concerning the Property.  Her aloofness from the purchase and management of the Property as well as her lack of knowledge of the matters concerning the Property wholly undermines the allegation of her being the sole true owner of the Property.

88.  In view of Vivien’s young age, her flimsy financial resources, her lack of intention to finance the purchase and to manage the Property, her disinterest to move to the Property and her zero financial contribution to the Property, I do not believe that Vivien is the beneficial owner of the Property.  The Property was not purchased to realize the Alleged Wish.  Not only that she had not funded the acquisition of the Property at the start, she actually had no intention to take up the responsibility of discharging the mortgage loans.  Both Ivy and Vivien are not credible witnesses.

IVY’S ORIGINAL PLAN

89.  On the other hand, the following matters lends further support to Lee’s case that he contributed to the purchase of the Property as a joint beneficial owner with Ivy:-

(1)  Vivien agreed during cross-examination that Lee was involved in the purchase process of the Property.  Ivy also gave evidence that Lee had visited the Property in various occasions and met the vendor for discussion concerning the Property.

(2)  It is Lee’s evidence that at the start, Ivy originally told him that 80% of the  purchase price would be funded by a mortgage and that Lee and Ivy would each contribute HK$360,000 (representing 10% of the purchase price) for the joint investment only.  It was only after the signing of the Provisional Agreement Ivy then informed him that the bank would merely provide a mortgage loan that covered 60% of the Purchase Price, and that they would each have to double their contribution to HK$720,000 in order to pay for 40% of the Purchase Price.  He was then under much pressure due to his lack of funds.  In order to save the initial deposit and the deal, he had to ask his younger brother to advance him a loan of HK$250,000 to make up his share of contribution.  His allegations were well supported by his bank documents.

(3)  In fact, Lee’s evidence in this regard was echoed by Ivy’s evidence.  She also said similarly during cross-examination that the original plan was that a mortgage would be obtained to cover 80% of the Purchase Price, yet it later transpired that only 60% of the Purchase Price would be covered. 

(4)  The fact that Lee had obtained a loan of HK$250,000 from his brother remained unchallenged.  Given the loan advanced by Lee’s brother was only received by Lee in late December 2016 as documented in the bank documents, such fact renders the defence case that Lee had agreed to advance the Alleged Loan to Ivy without hesitation as early as at  her first request during the Alleged Dinner Event completely unbelievable.

(5)  Ivy’s allegation that Lee agreed to lend her the Alleged Loan during the Alleged Dinner Event is also self-contradictory.  As Ivy herself all along had HK$720,000 and her original plan before the signing of the Provisional Agreement was that only a sum of HK$720,000 would be required for the down payment, she actually had no reason to ask for a loan of HK$720,000 from Lee by that time.  It would only be after the signing of the Provisional Agreement and after she found out that, a down payment of HK$1,440,000 was in fact needed that she would have to think of borrowing money from Lee.  The allegation of the Alleged Loan is clearly untrue.

(6)  It is also telling that Ivy agreed during cross-examination that Lee had demanded her to sell the Property after their break-up. If Lee and Ivy were not joint beneficial owners of the Property, Lee would not have asked her to sell the Property.

(7)  The fact that Lee had not contributed anything to the mortgage repayments or Property Expenditures does not in any way detract from the force of Lee’s case.  It is Lee’s pleaded case that the common intention between Lee, Ivy and Vivien was that the Property would be rented out in the short term and the mortgage repayments and Property Expenditures would be covered by the rental income.  Such allegations sit comfortably with the agreed facts that the Property was rented out immediately after the purchase of it and the mortgage repayments together with the Property Expenditures were covered by the rental incomes.

(8)  Ivy also agreed during cross-examination that Lee had specifically asked her before and she had told him that the rental income generated from the Property was sufficient to cover the mortgage repayments and the Property Expenditures.  Therefore, there was no need for Lee to make further contribution.  It was only after their breakup, the Property was not rented out from time to time, and in particular, for the Idle Period. 

90.  On the evidence before me, Lee impresses me as a credible witness.  Although he (and Mr Kam) have mixed up some of the dates and insignificant events, the material aspects of his evidence remained unshaken under cross-examination.  Most of his evidence is consistent with the background facts and well supported by documentary proof. On the contrary, I find Ivy and Vivien are not honest witnesses.  The totality of the circumstances in this case points overwhelmingly to the conclusion that there was no loan arrangement between Lee and Ivy and that the purchase of the Property was their joint investment.

COMMON INTENTION CONSTRUCTIVE TRUST

91.  Due to matters set out above, I accept Lee’s case.  I find that before and at the time of the purchase of the Property, there were two express discussions on the beneficial ownership of the Property between Lee and Ivy resulting in an agreement, arrangement and understanding that Vivien would be named the legal owner of the Property and that she would have no beneficial interest of it.  She holds the Property on trust for Lee and Ivy.  Lee and Ivy are the only two beneficial owners who share the beneficial interest of the Property equally. Such arrangement was communicated mainly through Ivy to Vivien, who agreed and acted upon it.

92.  Further, such common intention can also be inferred from the conduct of the three parties since the day of the first visit of the Property as elaborated in the facts and circumstances as to the dealings between the parties above.  I accept Mr Lam’s submission that even without relying on the express discussions, Lee’s overall conduct and in particular his direct contributions to half of the Downpayment by contributing the sum of HK$720,000 and the other expenses incidental to the purchase of the Property, also readily justify the inference necessary to the creation of a common intention constructive trust.  There is therefore no need for Lee to resort to resulting trust.

BREACH OF TRUST

93.  It is agreed fact that in May 2018, without Lee’s consent and knowledge, Vivien obtained the BEA Mortgage at Ivy’s instigation and assistance.  The loan of HK$3,212,775 was used to discharge the BOC Mortgage of HK$2,036,151.84 in July 2018.  Part of the balance of the BEA Mortgage of HK$720,000 was used by Ivy to purchase the Car Parking Space for her own benefit with the remaining balance of approximately HK$450,000 odd was used by Ivy and/ or Vivien for their own use and benefits.

94.  It is agreed between the parties as set out in the Agreed Schedule of Incomes, Mortgage and Expenses, (“Agreed Income Expenses Schedule”) as helpfully prepared by both counsel, that from the time when the BOC Mortgage was obtained until its discharge, the monthly installment remained consistently at around HK$8,000 odd per month.  In comparison, the monthly installment payable for the BEA Mortgage was in the range of HK10,000 to HK12,000 odd (except for the months of July 2020 to December 2020).  Accordingly, Ivy and Vivien have encumbered the Property with a more extensive liability.

95.  Thus analyzed, by obtaining the BEA Mortgage, Vivien has been in breach of trust and Ivy has been dishonestly instigating, procuring and assisting in the breach for her own benefits. Accordingly, they are jointly and severally liable to restore Lee (as the beneficiary) to the position as if the breach had not occurred, that is, as if the BEA Mortgage has never been obtained.

96.  Mr Lam seeks support from the case of Lam Hong Ching Andy (The executor of the Estate of Sung Man Po) v Wong Kam Tong HCA  1144/2006 & HCA 2320/2007, unreported case, 12 October 2009 and invites this court to make an order to the same effect.  In essence, Ivy and Vivien should be required to discharge all outstanding indebtedness secured by the BEA Mortgage and procure the release of it.  Alternatively, if Lee has to redeem the BEA Mortgage himself, Ivy and Vivien should pay by way of damages the sum which Lee has reasonably expended on the redemption. 

97.  Out of fairness, Lee agrees to give credit to the money used to discharge the BOC Mortgage as well as the necessary expenses as set out in the Agreed Income Expenses Schedule as if the BEA Mortgage had never been obtained and the BOC Mortgage continued.  Viewed in this light, I take the view that the actual payments and the notional payments for BOC Mortgage as if it had never been discharged should also be taken into account to more accurately reflect the actual common intention of the parties.  I find such claim, after modifications, more justified. 

EQUITABLE ACCOUNTING

98.  This court is invited to apply equitable accounting in order to do justice between Lee and Ivy.   Co-owner in occupation has actually or constructively ousted the other co-owner is no longer a precondition to the operation of the doctrine of equitable accounting where partition or analogous proceedings have been instituted: Cheung Lai Mui v Cheung Wai Shing (supra).

99.  Equity accounting is fact sensitive and depends, to a significant extent, on the common intentions of the parties, and the courts may achieve practical justice and avoid a wasteful inquiry by setting off occupation rent with credit for mortgage payments the continuing occupier pays: Snell’s Equity (34^th edn) at §20-075.

100.  Turning to the present case, the Property was not rented out during the Idle Period, from July 2019 to March 2021, during which Ivy had to pay for the monthly mortgage repayments and the Property Expenditures without the benefit of any rental income.  That said, I accept Mr Lam’s submission that they however have been in sole occupation and/ or control of the Property to the exclusion of Lee. 

101.  They denied Lee’s ownership and rejected his requests to sell it.  They unilaterally remortgaged the Property to the BEA Mortgage and failed to consult Lee for the leasing out of the Property after the breakdown of their relationships.  Thus considered, it is fair that they should be required to give credit to their sole occupation rent and these credits should be offset against each other for the following reasons.

102.  The common intention and agreement of Lee and Ivy, pursuant to which the Property was purchased, was that the Property should be rented out to cover the mortgage repayments and the Property Expenditures, at least until they eventually move into the Property.  They had acted upon such arrangement immediately after the purchase of the Property. Save for the Idle Period, the rental income generally covered the expenditures.

103.  As to the Idle Period, Vivien revealed in cross-examination that the Property was not rented out during that period as Ivy insisted on charging a rent of at least HK$9,800, even though no one was interested in paying that level of rent for the Property. 

104.  Such arbitrary arrangement was contrary to the common intention and agreement between Lee and Ivy and without P’s knowledge, consent or agreement.  It is also Ivy’s evidence that Lee has demanded to sell the Property after the breakdown of their relationship.  To that, she refused. 

105.  Due regard should also be given to the fact that the BEA Mortgage,  which was obtained without the knowledge or consent of Lee, has escalated the monthly mortgage installment from HK$8,000 to HK$12,000, ending up with Ivy’s reluctance to scale down the rent according to the market trend.

106.  In the circumstances, it is unfair to burden Lee with the mortgage repayment and the Property Expenditures flowing from the breach of trust and Ivy’s peremptory decision of not renting out the Property during the Idle Period.  In particular, the minimum rent of HK$9,800 they asked for, was unilaterally decided by Ivy without consulting Lee.

107.  Further, during cross-examination, Vivien was unable to offer any proper explanation as to why the water heater of the Property had to be replaced on 14 February 2020, when the property was not rented out.  When asked about the same matter, Ivy said that she had allowed an unidentified construction worker to stay at the Property and it was that person who used the water heater in the property.

108.  I share the view with Mr Lam that Ivy and Vivien have not been completely forthcoming about whether and how the Property was used during the Idle Period.  There is apparently more to it than what they were prepared to disclose.  In any event, it was Ivy’s own evidence that she had allowed someone to use and occupy the Property during the Idle Period.  Gathered from the history of Ivy’s substantial involvements in the management of the Property and her energetic engagements in income-generating activities[2] in the past, it is difficult to believe that Ivy would just leave the Property idle without using it in any way for such a prolonged period.

109.  All matters considered, I accept Mr Lam’s submission that Ivy should be required to give credit to Lee for a notional occupation rent for the Idle Period, with the result that these credits are to be offset against each other.  Practical justice should be achieved by setting off such occupation rent with credit for the mortgage payments and the Property Expenditures, which Ivy paid during the Idle Period.

ORDER FOR SALE

110.  Premised on my findings aforesaid, I am satisfied that Lee is entitled to the grant of a declaration of trust.

111.  As confirmed in the Defendants’ Opening Submissions, Ivy and Vivien would have no objection to an order for sale if this court finds that there existed a constructive trust in respect of the Property.

112.  In view of the fact that Lee is locked in the co-ownership and the poor relationship between the parties, it is unrealistic for them to continue the co-ownership and the trust arrangement.  Likewise, a partition of the Property would also not be feasible or beneficial to all the owners.  Unless an order for sale is made, Lee would be difficult to enjoy the Property or derive any benefits from his ownership of it.  No evidence was put forward to show that the defendants would suffer hardship. 

113.  The Director of Lands has been notified of the present proceedings, who has raised no objection to the present claim.  In the premises, I form the view that an order for sale would be beneficial to all parties and I so order.

THE COUNTERCLAIM

114.  In light of my finding of the fact that Vivien is not the beneficial owner of the Property, her counterclaim falls away. 

115.  I should add that the counterclaim is in any event bound to fail for lack of solid evidence.  Absent any concrete evidence that the presence of the registration of the lis pendens was a causative factor for potential tenants not to rent the Property, the claim has not come up to proof. 

116.  Even on Vivien’s assertions, only two of the many potential tenants have expressed concerns about the registration of the Writ, and the primary reason why the Property could not be rented out during the Idle Period was that the potential tenants were unwilling to accept the level of rent demanded by Ivy.  I should not lose sight of the fact that the Property has actually been rented out after the Idle Period notwithstanding the presence of the registration. 

CONCLUSION

117.  Having considered all the evidence and the submissions of the parties, I give judgment in favour of Lee and make an order for sale of the Property pursuant to section 6 of the Partition Ordinance in terms of the draft order annexed to the plaintiff’s Closing Submissions with some modifications to reflect my findings as set out above. The counterclaim is hereby dismissed.

COSTS

118.  In this case, costs should follow the event. I make a costs order nisi that Ivy and Vivien do pay Lee the costs of this action, including all costs reserved, to be taxed if not agreed, with certificate for counsel.  This costs order nisi shall become absolute in the absence of an application to vary by way of summons within 14 days.

119.  I thank both counsel for their assistance.