LYL v. KKP

FCMC 15800 / 2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 15800 OF 2012

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JUDGMENT
(Avoidance of Transactions)

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The Applications

1.  I have two applications before me, both taken out by the petitioner wife to have certain transactions in landed properties made by the respondent husband during the marriage to be set aside pursuant to Section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192.

2.  For convenience, I shall refer the petitioner wife as “P”, the respondent husband as “R” and the intervener as “PT”.

The 1^st Application

3.  The 1^st Application, taken out on 24 January 2013, is to have a Deed of Gift made by R in favour of his elder sister PT on 1 December 2009 (“the 1^st Deed”) be set aside. The 1^st Deed covers two tranches of properties which I shall refer them as:

(1) the House (this is a 3-storey village house and the matrimonial home of the parties during the marriage); and

(2) 4 pieces of bare sites.  They are Lot nos 956, 960, 1364 and 13 and are collectively referred to as “the 2^nd Lots”.

4.  Prior to the 1^st Deed, R was the registered sole owner of the House and 1/6^th owner of the 2^nd Lots.  By the 1^st Deed, R assigned these properties to PT as trustee who shall hold the properties for their nephew Yung (“Yung”) and shall assign the properties to Yung when he attains the age of 18 years.  At the time of the 1^st Deed, Yung was merely 3 years old and he is now 9.  

5.  Consequently, PT was joined as the intervener on 10 April 2013.

The 2^nd Application

6.  The trial was originally in respect of the 1^st Application only.  However, on the third day of trial when R was at the end of his cross-examination, he leaked that in fact he had also transferred another piece of land, being Lot no 99, to PT on trust for Yung, by way of another Deed of Gift.  

7.  Counsel were not aware of this transaction.  Due to this new development, upon the application of Ms Tsui who appeared for P (with no objection from Mr Chow, counsel for R), the case was adjourned for P to carry out further investigations and if necessary, further discovery and to consider amending her Section 17 application.

8.  It transpired that apart from the House and the 2^nd Lots, R also transferred, by way of another Deed of Gift on 2 July 2010 (“the 2^nd Deed”), his interest of and in further 4 pieces of land (being ½ share), inclusive of the said Lot no 99.  This led to the 2^nd Application taken out on 20 March 2015 for the setting aside of this transaction.

9.  It also transpired that R is the manager of 4 Tsos (祖堂) and certain lands are registered in his name by virtue of such capacity.  P accepts that R is not the beneficial owner of these lands.

The Divorce

10.  This is a childless marriage.  The parties married in Hong Kong in December 2002.  Prior to the marriage, the parties started to cohabit as husband and wife in September 1994.  

11.  Unfortunately, the marriage did not work out and the parties separated on 21 May 2011, with P living on the top floor and R living on the ground floor of the matrimonial home.  R eventually moved out in about March 2012.  On 25 October 2012, P petitioned for divorce on the ground of R’s unreasonable behaviour.  At the same time, P also sought ancillary relief against R.  The main suit was uncontested and decree nisi was granted on 2 May 2013.  It was subsequently made absolute on 21 June 2013.

12.  P is now 61 years old and is living on CSSA.  As for R, he is some years younger and is nearly 53.  He is now working as a security guard.   He used to be a maxi-cab driver.

Some Factual Background

13.  There are two special features as regards R’s personal status.  The first is that R is an indigenous villager of a village in the New Territories and the lands in questions, all in the vicinity of R’s village, are either inherited by him from his father or from his ancestors by virtue of such position.  The second is that he is not the natural son of his father; he was adopted when he was very young. 

14.  R has 9 siblings.  He is the 7^th child.  The 1^st to the 6^th and the 8^th and 9^th children are daughters and the youngest one (ie the 10^th) is a son, referred to in this Judgment as KM.  The intervener PT is the 5^th child.  Yung, the beneficiary under the Deeds of Gift, is the son of KM.

15.  While R has always been living in Hong Kong, it was not the case for KM.  KM left Hong Kong to work in the Netherlands and Germany in his early years and he returned to Hong Kong for good in about 1995.  R described KM as a heavy gambler.  It appears to have been accepted by all parties that he is not a trust worthy person.

16.  R, KM and Yung are the only male descendants in the family.  Since the traditions and customs are that only male descendants are entitled to inherit estate and certain traditional rights in an indigenous village, in trial there are aspects of evidence touching upon the relevant rules and practice.  

17.  I now turn to how the lands came into R’s hands.

The Lands under the 1^st Application

The House

18.  The House was originally owned by R’s late father.  This is the ancestral house (祖屋) of the family.  By a Deed of Gift dated 8 January 1991, the father assigned the House to him.  As said, as from September 1994, the parties started to cohabit as husband and wife in the House.  Also living in the House was R’s mother.  As of now, the whole of the House is being held by PT on trust for Yung.  

The 2^nd Lots (Lot nos 956, 960, 1364 and 13)

19.  R’s father had 1/3^rd interest in these 4 pieces of lands.  After the father’s death in July 1993, approval was given by the relevant District Office on 23 February 1998 pursuant to the provisions of the New Territories Ordinance for R and KM to succeed the father’s estate as tenants-in-common in equal shares.  As a result, each of R and KM became the owner of 1/6^th part or share of the 2^nd Lots, the other 4/6^th parts were owned by their cousin or uncle.  Thus, it is R’s 1/6^th share that P now seeks to rescind.

20.  The letter of approval in fact referred to 5 pieces of land.  Apart from the 4 pieces of bare sites in the 2^nd Lots, there was another piece of land referred to in this judgment as Lot no 67.  What happened was, much earlier on, by a Deed of Gift dated 23 July 1998, R had already transferred his 1/6^th share, and at the same time his uncle KK transferred his own 1/3^rd share in Lot no 67 to KM.  Consequently, together with the original 1/6^th share inherited from his father, KM owns 2/3^rd share in the lot.  The remaining 1/3^rd share is being held by the administratrix of the estate of another person in the same surname of R, presumably the brother of R’s father.

21.  Though Lot no 67 is not included in the applications, I need to return to it in later part of this judgment.

The Lands under the 2^nd Application

22.  This covers 4 pieces of land, ie Lot nos 68, 99, 100 and 3080. 

Lot no. 68

23.  R acquired this piece of land from his father on 9 April 1990.  He assigned his interest to Yung by way of the 2^nd Deed.

Lot nos 99, 100 and 3080

24.  Lot no 99 and Lot no 100 are adjoining to each other.  Each has a village house built on it.  Lot no 99 House is being occupied by R’s 3^rd elder sister YT and her family and Lot no 100 House is being occupied by another sister and her family. 

25.  As for Lot no 3080 it is a bare site.

26.  These pieces of land were originally held by R and KM as joint tenants on 6 January 1987, presumably inherited from their earlier generation.  The joint tenancy was severed by a Notice of Severance on 1 December 2009, the very same date when R executed the 1^st Deed in favour of Yung.  

27.  Thus, pursuant to the 2^nd Deed, Yung beneficially owns the whole of Lot no 68 and ½ share in the other pieces of lands under the 2^nd Application, with the remaining ½ share owned by his father KM.

The House and House 15

28.  Two houses featured in this trial.

29.  The first is the House.  It was the parties’ home even after their separation in May 2011 up until 25 March 2012 when R moved out.  It is not in dispute that throughout the period, the parties had carried out several renovations to the House so that some of the floors could be rented out for incomes.

30.  The second is what is referred to as House 15.  This house stands on Lot nos 67 and 68.  Initially, it was a derelict house.  In about 1995, R re-developed it; and upon its completion in around 1996 or 1997, R’s mother moved to live in it until her death on 8 March 2012. As will be seen, the costs for the renovations of the House and the redevelopment of House 15 attracted extensive cross-examination on R in the witness box.

P’s Case

31.  All along R is the beneficial owner of the House.  R and KM had already divided the inheritance from their father with R keeping the House and KM to have House 15.  She knew it because she was so told by R during the relationship.  

32.  She never had knowledge during the marriage that all the lands belonging to R had been transferred to Yung as gifts.  She never heard of the requirement that R had to leave everything to Yung.  She only found these out after the commencement of her divorce proceedings. 

33.  Her relationship with R had been bad.  R always physically and verbally abused her.  In around early November 2009, in response to R’s repeated suggestion of divorce, she asked R to repay her the aggregate sum of $300,000 that she had previously lent him in 1996, 1999 and 2002.  The monies were advanced to R for renovation and repair of the House so as to generate rental income for repayment of his debt owed to PT.  She also asked R to pay maintenance to her as she was unable to work by reason of her venereal disease inflected by R, to which R bluntly rejected.

34.  She believes it was when she demanded repayment of the loan upon discussion of divorce that triggered R’s dispositions of the landed properties.

R’s Case

35.  R’s case is that there is a tradition or rule that landed properties owned in the name of K (R’s family name) should be passed on through the male line of descendants within the family.   This was also the wishes of his parents.  Though his father assigned the House to him in 1991, he was in fact only holding it on behalf of himself and KM.  The House never belonged to him entirely.  As he has no child of his own, all his lands must go to Yung. 

36.  R denies any intention to divorce P. Though the marital relationship was never a sweet one, he had never contemplated a divorce.  He also denies being aggressive and abusive to P. Instead, he was abused by P who would always point a knife at him.  That said, he admitted he always asked P to leave during quarrels.

PT’s Case

37.  PT’s case is simple.  She claims to be illiterate.  Her mother was determined that the lands were from ancestors and so had to pass onto the male descendants.  She only acts as the trustee for Yung upon her mother’s request.  Her only duty is to hold the lands until the nephew attains the age of 18.

The Law and Legal Principles

38.  The applications are made pursuant to Section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192.  The relevant provisions are:

17. Avoidance of transactions intended to defeat certain claims

(1) Where proceedings for relief under any of the relevant provisions of this Ordinance (hereafter in this section referred to as "financial provision") are brought by a person (hereafter in this section referred to as "the applicant") against any other person (hereafter in this section referred to as "the other party"), the court may, on an application by the applicant-

(a) if it is satisfied that the other party is, with the intention of defeating the claim for financial provision, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim;

(b) if it is satisfied that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies and that if the disposition were set aside financial provision or different financial provision would be granted to the applicant, make an order setting aside the disposition and give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property);

(c) if it is satisfied, in a case where an order under the relevant provisions of this Ordinance has been obtained by the applicant against the other party, that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies, make such an order and give such directions as are mentioned in paragraph (b);

and an application for the purposes of paragraph (b) shall be made in the proceedings for the financial provision in question.

(2) Paragraphs (b) and (c) of subsection (1) apply respectively to any disposition made by the other party (whether before or after the commencement of the proceedings for financial provision), not being a disposition made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any such intention as aforesaid on the part of the other party.

(3) Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application or to a disposition or other dealing with property which is about to take place and the court is satisfied-

(a) in a case falling within subsection (1)(a) or (b), that the disposition or other dealing would (apart from this section) have the consequence, or

(b) in a case falling within subsection (1)(c), that the disposition has had the consequence,

of defeating the applicant's claim for financial provision, it shall be presumed, unless the contrary is shown, that the other party disposed of the property with the intention aforesaid or, as the case may be, is, with that intention, about to dispose of or deal with the property.

(4) ...

(5) ...

39.  It is not in dispute that the dispositions in question were not for valuable consideration.  It is also not in dispute that apart from the landed properties in question, the parties do not have any meaningful assets that require division upon divorce.  As a matter of fact, R stated in his Form E of 21 February 2013 that he is insolvent.  He owes debts in the region of $750,000 to banks and various family members, relatives and friends.  Clearly, if the dispositions were set aside financial provision or different financial provision would be granted to P.

40.  The only crucial question is whether the dispositions were made with the intention of defeating the claim for financial provision on the part of P.  The term “defeating the claim” is given a wide meaning.  Sub-section (4) of the same section provides, inter alia, that “any reference to defeating an applicant's claim for financial provision is a reference to preventing financial provision from being granted to the applicant, or to the applicant for the benefit of a child of the family, or reducing the amount of any financial provision which might be so granted, or frustrating or impeding the enforcement of any order which might be or has been made at the instance of the applicant under the relevant provisions of this Ordinance”.

41.  At the time of the 1^st Application, it was slightly more than 3 years after the 1^st Deed though it was within 3 years of the date of the petition for divorce.  As for the 2^nd Deed, if P had known of this at the time of the 1^st Application, it should have been within the 3 year period.  In any event, Ms Tsui accepted that the presumption under sub-section (3) does not arise and that P has the burden to prove that R disposed of the landed properties with the intention of defeating P’s claim. 

42.  Counsel have no argument over what an “intention” is for the purpose of the said section 17.  In Kemmis v Kemmis (Welland and Others, Interveners) [1988] 1 WLR 1307, referring to the English equivalence section 37 of the Matrimonial Causes Act 1973, Lloyd LJ said (at 1326 C-H):

“…What is the meaning of “intention” in section 37(2) of the Act of 1973? Upon this question we had little if any assistance from counsel, although I understood Mr. Trace to concede that a disposition might be reviewable even though not made with the sole intention of defeating the wife's claim for financial relief. But how far does that concession go? Does the husband's intention to defeat the wife's claim have to be the dominant intention? Or is it sufficient that it was part of his intention? Is “intention” divisible at all? A man may act from mixed motives. But can he have mixed intentions? I do not find these questions easy. As in other branches of the law, the more one seeks to analyse the meaning of the word “intention” the harder it becomes.

In the present context three things are, I think, plain. First, we are concerned with the husband's intention in a subjective sense. It is his state of mind which we have to investigate, not the consequence of his acts. This much at least is clear from section 37(5) of the Act, whereby the relevant intention is presumed if the disposition has the relevant consequence, but only if the disposition is less than three years before the date of the application, and then only unless the contrary is shown. Secondly, as in every case where we are called on to investigate a person's intentions, the court is necessarily thrown back on inference. It will be a rare case where the spouse declares his state of mind in advance, and even then his declaration would not be conclusive, or even very persuasive, unless it is against interest. Thirdly, in determining whether a spouse has the requisite state of mind, a court may have regard to the natural consequences of his act. It is true that there is no presumption, unless section 37(5) applies. Nor, generally, would the natural consequence of the disposition be enough by itself to support an inference of intention. But the natural consequence of the disposition would certainly be a factor to be taken into account in deciding whether or not to draw the inference of intention in any given case.”

43.  In the same judgment, Nourse LJ said in 1330 H – 1331 B:

“I agree with Purchas and Lloyd LJJ that what the judge had to find was a subjective intention on the part of the husband. Moreover, I think it clear that it did not have to be his sole or even his dominant intention. It was enough if it played a substantial part in his intentions as a whole. If it were otherwise, section 37(2) would fail to catch the case where a husband makes a disposition with the dominant intention of gratifying his mistress and only the subsidiary intention of defeating his wife's claim for financial relief. I feel sure that that was not the intention of Parliament…”

44.  Therefore, I need to look at the actual intention of the disponor at the time when the dispositions were made.   It must be clear that there was an intention to defeat P’s claim for ancillary relief, although it may not be the only or even the dominant intention of R. It would be sufficient if it played a substantial part of his intentions. 

45.  As for the standard of proof, Rayden & Jackson on Divorce and Family Matters (18^th Edn) said:

Standard of proof

27.15   As to the standard of proof, the question to be asked by the judge after reviewing the evidence is: ‘Am I satisfied that the disposition was made with the intention of defeating the wife’s claim for ancillary relief?  The standard of proof remains the balance of probabilities, although it has been said that since what has to be proved is not merely a dishonourable intention but a dishonest and fraudulent one, the evidence which is required to tip the balance, has to be correspondingly more convincing. ‘Satisfied’ in this context means no more than that the judge has to make up his mind.

46.  Thus, I need to be “satisfied” in that I must have made up my mind that R transferred the lands to PT with the intent of defeating P’s claim for ancillary relief.

General Observations

47.  By way of general observations, R was evasive when giving evidence and failed to give his answers to some straightforward or simple questions.  He is not a credible witness.  As for P, as can be seen below, her evidence regarding certain aspects of their marital relationship is also equally unreliable.  That undermines the overall credibility of her evidence.  Finally, PT’s evidence is inconsistent with that of R. 

48.  There is also another witness Mr K, who is R’s cousin and who also lives in the village.  His evidence, which is on the customs of his village, is immaterial in the determination of the issues before the court. 

49.  With these preliminary observations, I now turn to the factual issues.

The Factual Issues

50.  The intention of R at the time when the dispositions were made can be approached by looking at the following factual issues, namely, (1) those concerning the redevelopment of House 15, (2) the House, (3) the marital relationship of the parties and (4) the facts leading to the execution of the 2 Deeds of Gifts.

(1)  The Redevelopment of House15

51.  Not long after the parties had started cohabitation in the House in 1994, R re-developed House 15.  R claimed it was the idea of the mother because the mother was not happy living with P.  That was 2 years into his cohabitation with P. The construction started in 1996.  At that time, KM had already returned to Hong Kong and was living on 1/F of the House.  The construction was completed about a year later.  It was and still is a 3-storey house with about 850 ft² each floor. The mother moved in to live on the ground floor; the other floors were rented out for a brief period of time in 1999.  Initially, he claimed that KM lived in the house from time to time but eventually confessed that KM in fact never lived there.  He agreed that he was responsible for the construction cost without any contribution from KM.

52.  P accepted that due to R’s status as the elder son of the family, he had to be responsible for all the construction costs and KM did not need to pay a cent.  The construction cost for House 15 was about $930,000 to $940,000 of which $110,000 was from the money left from the father and $700,000 from a loan advanced by PT.

53.  PT gave a different account regarding the contribution of the construction costs.  The total cost was $800,000, of which $380,000 was from the money left from the father.  The mother contributed $20,000 and she contributed the balance of $400,000.  She did that so as to enable the mother to move away from the House in order to avoid further confrontation with P.  At one stage she said she already had the construction costs repaid.

54.  When it came to how the construction was financed, R gave 3 versions in the witness box.  It is not an exaggeration to say that not only that R proved to be a confusing witness, his evidence actually crumbled entirely during cross-examination. 

55.  Initially, his version was that the construction cost was $900,000 odd, of which $100,000 odd was from the father’s estate, $300,000 odd from the compensation of the government (“the 1^st compensation”), $20,000 from the mother and the remaining sum of about $400,000 was a loan from PT.  KM did not make any contribution because he had lost all his money in gambling.  Of the $400,000 loan he managed to repay PT $180,000.  That was from the government’s compensation (“the 2^nd compensation”) payable to the male descendants of which $90,000 odd belonged to him and the other $90,000 belonged to KM.  He has not repaid a single cent since then as he had no ability to do so.  Thus, he still owes PT about $220,000.  

56.  Then, at a later stage, he changed to say that the 1^st compensation was not in the region of $300,000 but should be $180,000 only and there was no contribution from the mother, so in fact he borrowed around $600,000 from PT, and he repaid $180,000 out of the 2^nd compensation.  This is the 2^nd version.  

57.  On the top of the construction cost, R said he also borrowed $200,000 from PT for the purchase of electrical appliances. In other words, the total costs were well over $1,000,000.  This $200,000 has not been repaid yet.

58.  Then the next day he gave a 3^rd version.  The correct amount of the construction cost should be $820,000.  There was $380,000 left from the father’s estate and the mother contributed $20,000.  The balance of $420,000 was provided by PT as a loan.  Subsequently, a sum of $180,000 was repaid from the compensation, and therefore as of now, the outstanding balance is $200,000 odd.

59.  It is to be noted that this latest version is closer to that disclosed by PT.  In any event, whatever version it is, R maintained he still owes his sister the construction cost. 

60.  There is also some ambiguity as to who was responsible for the redevelopment.  P said it was R’s responsibly and seemingly R also took the same stance but as for PT, when she was cross-examining P, she said the house was built by her so that the mother could have some rental incomes (那間屋係我起比我阿媽收租概).

61.  At any case, PT maintained that the construction costs have been repaid in full but R insisted that he still owes her $200,000 odd.  At the end, he accepted that he is wrong.  The construction costs had been repaid but he insisted that he still owes PT the money that he used on electrical appliances.

62.  What strikes me is if R was telling the truth, there is no reason why he had come up with 3 versions; in particular this latest version was given on the next day albeit he denied having discussed with PT.  I have come to the view that R’s evidence is utterly unreliable.

63.  On the basis of the evidence before me, the conclusion that I can come to is R does not owes PT any money.  The next question is how the loan was repaid to her.  This will be dealt with in the next section.

(2)  The House

64.  According to P, way back in 1994 R had already mentioned to her that he owned the House and 1/6^th interest in the 2^nd Lots.  That said, she also agreed that R too had mentioned that the lands are family assets and for the descendants of their family.

65.  After the mother had moved to House 15, the couple caused the House to be renovated so that they could have 2 of the floors rented out for income in order to repay the construction costs to PT.  Over the course of the years, she lent R about $300,000 on renovations.  They did manage to rent it out according to plan for about 5 years.  Each floor was able to fetch a monthly rental of $4,500; hence totalling $9,000.  She knew the amount because at times the tenants handed over the rents to her.  For 5 years, R was able to repay $9,000 each month.  In 2002, they had another renovation to the House and after that, they ceased to have the House rented out and all the floors were used by them.  

66.  Around 1998 to 2000, from what she heard from R, upon the return of KM to Hong Kong for good the 2 brothers had divided up the father’s estate.  The arrangement was that each would have one house:  R was the elder brother so he was to have the father’s house ie the House and KM was to have House 15.  As far as the user or the occupation of the House is concerned, nothing has changed since the 1^st Deed.

67.  As said, R claimed that before the transfer of the House from the father to him, there was an understanding that he was to hold the house for himself and KM.  In other words, KM owns half of the beneficial interest of and in the House.  The Assignment of 8 January 1994 in respect of the House did not include KM because KM was not in Hong Kong at that time.  It was not until in about 1995 that he returned.

68.  As for PT, she categorically denied any contribution from P and R by way of rental incomes of the House.  She however admitted that she did not know whether the House was rented out at some point in time.

69.  R initially said there were 3 renovations to the House.  The first was in 1995, the second in 2000 and the third in 2001.  As for the 1995 renovation, it was on the replacement of the windows and doors and that cost him about $130,000.  The second renovation was on the relocation of the sand-pit and that cost him about $60,000; and the third renovation cost him $80,000.  Therefore, the total costs were about $270,000. 

70.  He admitted having borrowed $300,000 from P over the course of the years but was adamant that he had already repaid in full.  In his affirmation dated 14 June 2013 R claimed he had repaid the money well before November 2009, so there is no such thing of P asking him to repay her the money in November 2009 that triggered the dispositions.

71.  Again, when it came to the use of the rental income, his evidence is confusing and incomprehensible.  It proves nothing but that R was merely improvising along the way.

72.  R insisted that up to the 1^st Deed, he and KM each had half of the interest in the House but he admitted that for 5 years from 1999 when two floors of the House were rented out, he did not pay half of the rentals to KM but in fact, he pocketed all for his own use, seemingly also for the renovations of the House.  That is his 1^st version as to how the rental incomes were used.

73.  In cross-examination, he agreed he had borrowed $300,000 from P for renovations - and so not from the rental incomes - but he denied having used the incomes to repay his indebtedness owed to PT as asserted by P.

74.  R then gave a 2^nd version on the use of the rental income.  He disagreed that the rental was $4,500 each floor but said it was $3,500, so totalling $7,000 per month from 2004 to 2009.  He made use of the incomes to repay part of the loan owed to P.  The first payment was $160,000 in 2003.  That was the money P paid for the construction materials by way of her credit card and this $160,000 was part of the $300,000 loan.  He borrowed it from his 3^rd elder sister YT for repayment to P.  He explained that since P’s credit card liabilities carried high interest, it would be prudent for him to have them repaid.  As for the balance of $140,000, he repaid P in $4,000 per month out of the rental incomes.  That lasted for 5 years from 2004 to 2009.  When it was pointed out to him that this would amount to $240,000, which together with the earlier $160,000, would make a total of $400,000, this would have been $100,000 more than the loan.  R then shifted to say that this monthly sum also included family expenses (家用).

75.  On when the $160,000 construction materials were incurred, R said they were purchased for the 2^nd renovation, ie 2000 but shortly before then, he testified that the cost of the 2^nd renovation was merely about $60,000.  When being cross-examined regarding this inconsistency, R was driven to say that $160,000 in fact included some of P’s own personal liabilities.  This is clearly contrary to his earlier evidence that the said $160,000 was for construction materials.

76.  Worse still, on how he had used the rental incomes totalling $420,000 ($7,000 X 5 years) he changed to say that the majority of the incomes were used in payment of renovation workers (工人費) over the years.  I am sure he was telling lie. First, R started to get rental income as from 2004 only.  According to him, by then the renovations had long been completed.  Secondly, with this extra item, it means the total renovation costs far exceeded the sum of $270,000 that he testified earlier on.  He was then compelled to agree that the total costs were in fact about $700,000.

77.  That is not the end of his story-telling.

78.  R stated in his Form E dated 21 February 2013 that he borrowed a sum of $180,000 from his 3^rd sister YT.  It was for renovation and was borrowed before 2002 or around 2000 to 2002 and it is the sum that he referred to above for settling P’s credit card liabilities. He further added that he had since repaid $20,000 and therefore the outstanding amount should be $160,000 and not $180,000 as stated on the Form E.  This version is in clear contradiction with what he said earlier in the morning that he had borrowed $160,000.  In any event, whatever version it is, this again is in further contradiction with an undated loan agreement that he said he entered with his sister YT in around 2000 to 2002.  According to the agreement, he borrowed $200,000 from this sister.  He accepted that $160,000 or $180,000 as stated on the Form E is part of this $200,000 and that when he borrowed from YT the renovations had already been completed.  When being asked in that event why he would still have the need to borrow the money, he then tried to explain that he used the money for repaying P’s credit card liabilities.  His evidence suggested that these credit card liabilities arose from P’s own spending and were unrelated to the purchase of construction materials.  This is in stark contradiction with his earlier version that $160,000 was for construction materials.  When his back was against the wall, he was driven to say that out of this $200,000, $160,000 was used for credit card liabilities and the balance of $40,000 was for renovation.  However, this again contradicts with his earlier version that the last renovation was completed in 2001.  He was then driven to say that apart from the renovations that he mentioned, there were 3 other renovations at smaller scale after 2001, each cost him several ten thousand dollars. I do not think he has any plausible explanation on all these contradictions and discrepancies.

79.  In short, R’s evidence regarding his debt to YT and the use of it shifts from one version to another.  Clearly, his evidence is inconsistent and self-contradictory and one cannot make any sense out of it.  I am convinced that he was merely improvising along the way.

80.  For the above reasons, R’s evidence has to be rejected.  I find that he failed to prove he has repaid $300,000 to P.  R’s initial version of $270,000 being the renovation costs is closer to P’s figure of $300,000.  I accept P’s evidence in this respect.  I find that at the time of the breakdown of the marriage, R still owed P $300,000.  Of course, this sum has not been repaid up to this day.

81.  I reject R’s version that he still owes PT $200,000 on the purchase of electrical appliances.  On the evidence before me, I accept that R used the rental incomes of the House for repayment of the construction costs of House 15.  In due course, PT’s loan was repaid.  I find that R does not owe PT the money as stated on his Form E. 

82.  The loan agreement with YT contained a provision that R used Lot no 99 as security such that in the event of his failure to repay, YT may sell the lot by auction.  R accepted there is a possibility that the property would fall into the hands of outsider and this is contrary to the wishes of his parents.  It clearly shows nothing but that he knew he had the right to dispose of the property. 

83.  PT claimed all her siblings were fully aware of her parents’ wishes that landed properties must stay within the K family.  By entering into the loan agreement, both R and YT were in clear defiance of the wishes of their parents.  If what PT said is true, there is no reason for this loan agreement to have been framed in the way it is.  Further, YT and her family were and are still residing in the house that stands on Lot no 99.  If the lot is to be sold by auction, this would have adverse impact on her:  she and her family might have to move.  It is difficult to understand why YT would have put in such a provision.  For this reason, though this point has not been raised by counsel, I have some doubts over the authenticity of the loan agreement.

84.  R’s testimony was that the father expressly told him that the House would be divided into 2 shares and he was to hold the whole of the House in the meantime but there was no mention by the father for how long this situation should last.  He also stated that the father used the term ‘trustee’ (信託人).  Later on, he changed to say the father mentioned that the situation was to up to when there was a male descendant so that the property can pass onto the next generation.  I have no doubt he was improvising his evidence along the way.

85.  Notwithstanding R’s assertion that KM got ½ of the share of the House, he admitted he did not ask KM for any contributions to renovations.  Likewise, R did not share the rental incomes with his brother.  R said KM did not care at all.  The way in which R conducted the affairs in relation to the House is entirely inconsistent with his assertion. If what R said is true, he could have long returned ½ of the share in the House to KM as well when he assigned Lot no 67 in July 1998.

86.  The transfer of R’s interest, together with his uncle’s interest in Lot no 67 in July 1998 (see para 20 above) lends supports to P’s version that since the 2 brothers were married, they had already divided the inheritance between them after the death of the father, notably R was to have the House and KM was to have House 15.  

87.  For these reasons, I reject his version that R was holding ½ share of the House for KM.  I find that the father gave an inter vivos gift of the House to R in 1991.  I accept P’s version that R and KM have already divided their father’s estate.  I am conscious of the fact that what P knows about the ownership of the lands are from R who told her in bit and pieces from time to time but it does not mean that the court is not entitled to accept her version. 

(3)  Parties’ Marital Relationship

88.  P accepted that throughout even before they got married, R was always hot-tempered and they did not stop quarrelling with each other.  Despite this, they still chose to get married in 2002.

89.  R started to abuse her physically in 2004. The abuse intensified as time went by especially from 2008 to 2010.  Starting from January 2006, from time to time R even demanded her to move away if she could not bear the situation. Yet she tolerated all along because of her religious belief. 

90.  P was in gainful employment in various fields up until 2008 when she discovered that she had contracted venereal disease, transmitted by R.  Both she and R had to seek medical treatment in the Mainland.  P also learned from the doctor in the Baptist Hospital that the sleeping pills R had been giving her for a few years were in fact soft dangerous drugs and R also habitually consumed the same.

91.  P said in around late 2008 she made it clear to R that she would divorce him if R continued to assault her.  In around early November 2009, she asked R to repay her the $300,000 loan and this triggered the dispositions.

92.  R offered a different story.  All along he did not intend to have a divorce, especially at the time of the Deeds of Gift. He did not realize P was planning to have a divorce, though he admitted that since 2006, he asked her to leave the House from time to time when they quarrelled.

93.  He denied having physically abused P or infected her with venereal disease as alleged.  The truth was, in about 2008 for about 9 months, he was physically tortured as he was woke up by P in the middle of the night at least twice to 5 times a week asking him to put hands on her to cure her pain and read Bible to her for several hours.  For this, R was not able to concentrate on his work as a maxi-cab driver.  He had to rely on sleeping pills.

94.  Since about 2009 P was mentally ill so he accompanied her to receive treatment in Hong Kong and in the Mainland.  He admitted that when he accompanied P to see the doctor on her alleged bodily pain, the doctor formed the view that both required treatment on their substance abuse and thus referred them to the Substance Abuse Clinic of the Castle Peak Hospital. 

Discussion

95.  P’s evidence on her marital relationship in various aspects is full of exaggeration and shaped by her imagination. 

96.  She said their cohabitation only began after she had been raped and false imprisoned by R for 7 days.  That is the reason why R’s mother disliked her.  However, there was no mention whatsoever of this incident in any of her affirmations nor was there any report to the police.

97.  P produced a letter by the Police dated 22 February 2013 that recorded the disputes or incidents she had with R or at the House (18 in total) over the course of years from October 2004 to September 2012.  She complained not only that the police did not give an accurate account of her complaints or the true nature of the disputes, but the police also failed to mention some of the incidents; for instance, on 18 April 2011, R assaulted her by grapping her neck but the letter did not record this.

98.  She said that as early as one year before the separation in May 2011, R started to poison her in her drinking water and arranged a number of people to gang-rape her.  Despite the mentioning of various follow-up treatments in various public clinics in her medical report, there were only 3 times when she ‘actually’ attended the hospital for follow-up treatments, all the rest of the follow-up treatments were done when she was not in sober mind because she suspected that she was laced with poison and was taken to hospital by R.  In evidence, she specifically referred to the consultation that she had on 22 November 2010 at the Castle Peak Hospital. It was one of those when she was so arranged by R.  However, the medical report dated 25 February 2013 by the attending psychiatrist of the Castle Peak Hospital recorded that P was last seen on that date (ie 22 November 2010).  It reported that she appeared calm and cooperative, that her mood was not depressed or elated, that her affect was congruent and that she also asked to stop to be seen at the clinic as her mood improved.  No further follow up appointment was thus arranged.  There was nothing in the report suggesting that she was not sober.

99.  P also testified that as late as 13 February 2013, R returned to the House, found someone to rape her, and injected hazardous materials into her colon and vagina causing ulcer.  She however did not report to the police because R knelled down and pleaded her for mercy.  She also did not go to the hospital because from her experience in the past, the doctors would just ignore her.  She however claimed that for this she went to the Mainland and was treated in a hospital there for 16 days.

100.  At about the same time, her home at Ngau Tau Kok and the House were constantly subject to theft.  Many of her documents and properties including 2 catties of bird-nests were missing.  She asserted that these were done by R who got the key from her. 

101.  She accepted that she was being diagnosed with Depressive Episode in moderate severity but that was the state only after she was raped and poisoned.

102.  On the evidence before me, it is hard to believe that all these allegations are things that actually happened.

103.  Meanwhile, again in his usual fashion, R was evasive and equally unreliable. 

104.  He denied having assault P.  On the contrary it was P who assaulted him.  On each and every occasion P was the attacker and he just dodged to escape.  He mentioned that in 2008 P threatened him with a knife and he had to dodge from being hurt.  However, I note it has not been recorded in any of his affirmation.  R was evasive when being confronted with the medical records that suggested that P suffered fracture to her 5^th to 8^th ribs as a result of an assault.  He was also evasive when being cross-examined on whether he and P had medical treatment on their sexually transmitted disease in the Mainland and that he got inflected from prostitutes and further transmitted the disease to P.  To me, it is rather ridiculous for him to say that it was just a dermatological condition.   He was also evasive when being asked why he was referred to treatment of substance abuse. 

105.  On the evidence before me, it is clear that R had substance abuse problem and for this reason, he and together with P were referred to the Castle Peak Hospital.  It is common ground that it was on 21 June 2010 that both of them were referred by the doctor in the Department of Anaesthesia of the Tuen Mun Hospital to the Substance Abuse Clinic of the Castle Peak Hospital. 

106.  On P’ evidence, supported by the said letter from the police, it is clear that P and R did not have a congenial relationship.  There were quarrels and disputes from time to time.

107.  Mr Chow also accepted that the relationship had been bad all along; there were quarrels and even fighting dating back at least from 2004.   Nevertheless, the marriage endured.  Even on P’s own case, the parties were still living together until May 2011 when P decided to live apart to live on another floor within the House.  This shows despite the bad relationship, they were still willing to live together as husband and wife. Such relationship may merely be a normal pattern of the dynamics between them. Even if the relationship had been bad, it does not mean they would contemplate a divorce. 

108.  As I see it, bad as it was the relationship, it does not necessarily mean that it was static throughout and did not take a turn for the worse.

109.  The Police’s letter dated 22 February 2013 recorded that on 19 March 2006 R reported that a quarrel occurred with P on question of ‘divorce’ and that P damaged the door-lock.  Leaving aside whether the police accurately recorded that it was a question of ‘divorce’, this clearly shows that the parties had a furious conflict at that time.

110.  On the evidence before me, I accept P’s version and find that she was infected of venereal disease by R in about 2009; as a result of which both had to seek medical treatment in Hong Kong and the Mainland.  I also accept that the physical abuse on P intensified in the later years of the marriage on the basis of the medical records that suggested that P suffered fractured ribs.  Even on R’s own evidence, he admitted that the couple had a fight in 2010 that ended up seeing counsellor and psychiatrist.

111.  Putting all these pieces together, there is evidence that the relationship turned from bad to worse since 2006.  I find that around late 2008 she made it clear to R that she would divorce him if R continued to assault her and that in around early November 2009, in response to R’s repeated suggestion of a divorce, she asked him for the return of $300,000.  This happened shortly before the execution of the 1^st Deed.

(4)  The Deeds of Gift

112.  Notwithstanding that the 1^st Deed and the 2^nd Deed are 7 months apart they are essentially part and partial of the same transaction.  According to PT, it was separated into 2 Deeds of Gift for the purpose of saving stamp duty only. 

113.  In his affirmation dated 14 June 2013, R explained that he executed the Deeds because he does not have a son of his own and Yung is the only male descendant of his family.  He is not the natural son of his father and he believed it would only be fair to let Yung to have the whole beneficial interest of the properties which were either acquired by his father or succeeded from ancestors. 

114.  He first had the idea of making the gift to the nephew in 2009 when the mother reminded him to pass the family assets back to the K (surname of R) descendant; the nephew was about 3 years old then. That said, he maintained that the mother did clearly assure him that he could continue to stay in the House. 

115.  When being asked why he executed the 1^st Deed in such a rush in December 2009, R explained that in about 2009, P brought him to a finance company and asked him to mortgage the House for a loan of $300,000.  He hesitated and consulted his mother and his elder sister YT.  It was at the suggestion of the mother that he executed the Deed.  His mother feared that the House would fall into the hands of outsiders in the event he was not able to repay the loan or the creation of encumbrances by finance company.  YT then lent money to him for repaying P’s credit card liabilities.

116.  He accepted that he did not expressly state the amount and the purpose of the intended loan in his affirmation and therefore his affirmation is somewhat misleading.  He said in the affirmation that since the mother did not wish the House to be disposed of outside the family or the creation of encumbrances by finance company, his sister then lent him the money to repay P’s credit card liabilities and asked him not to borrow money from finance company.  Clearly, what R meant was that the loan was intended for repayment of P’s debts but in cross-examination, he admitted that the intended loan was for renovation of the House.  In my view, it was so drafted for no purpose but to mislead the court. 

117.  Essentially, PT’s evidence is that it was the mother who orchestrated the transfer exercise because the mother wanted to preserve the lands within the male descendants of their family.  The mother made the request in about 2006 or 2007 when she was apparently without any health issue and when Yung was merely one year old.  PT hesitated and declined at that time.  Then in October 2009 when the mother was in hospital, she raised the request again because she worried that the lands would be taken away by R’s creditors.  The mother asked for her help in keeping the title deeds, in ensuring that the lands would not be sold and be passed from one generation to another. After due consideration, she accepted.  Since R had no money, his only role was to sign the Deeds and it was PT who paid the legal costs and stamp duties.

118.  She maintained it was her mother’s wish that the lands from ancestors should be passed onto the next generation (“姓K的要留翻比下一代”). That said, she was rather ambiguous as to whether it is the rule of the whole village.  She was not clear as to whether the K clan had ever sold any of the lands but she was sure that it never happened in her family.

119.  PT gave a somewhat different story in court as to what triggered the transfer exercise.  She said from what she heard from the mother, R spent lavishly and was heavily in debt; and people from finance company or loan sharks had been to the village looking for R.  The mother worried that the lands would be taken away.  She also heard from her elder sister YT that P and R wanted to have the property mortgaged for loans. She however accepted that R did not mortgage the House and indeed he could not have done so because all the title deeds were kept by the mother.  She does not know whether YT had actually lent the money to them.

Discussion

120.  I have listened with care and considered, equally with care the evidence of R and PT and have come to the conclusion that their evidence cannot stand up to scrutiny.

121.  To start with, it must be right for Ms Tsui to challenge that both R and PT failed to disclose the 2^nd Deed and this could not have been an oversight or ignorance on their part.  It is clear that they adopted a ‘catch me if you can’ attitude.

122.  Secondly, whilst PT may be limited by her education level, she must have known that R had transferred everything under his name to her for the benefit of Yung.  Given her close relationship with the mother it is unbelievable for PT to say that she did not know that the relationship between P and R was bad nor did she hear this from the mother.  Ms Tsui is right to point out that in her affirmation PT said R was brought by P to a finance company but in her oral testimony she tendered a different version that people from finance company went to the village for repayment of loans.  Plainly, this is a material discrepancy.  She is not credible. 

123.  Thirdly, R mentioned that at the end his sister YT lent him $40,000 in order to solve his financial situation and this sum is still outstanding.  It would appear that R has not disclosed this loan in his Form E.  In any event, his Form E stated that he owes YT $180,000 but this sum never tallies with his oral evidence.  More importantly, it is hard to believe that a modest sum of $40,000 would have saved them from mortgaging the House, given that earlier on he testified that their eyes were on a sum of $300,000.

124.  Fourthly, it is clear that initially R laid emphasis on the fact he was an adopted son of his parents.  However, he confessed that he was always treated as their natural son, with no difference from KM.  In cross-examination, he admitted his understanding was that the father’s estate was to be inherited by him and KM, each was to get half of the estate.  What is more, he confessed that no one in the village has seen him differently.  As a matter of fact, by virtue of his position as the son of his father and the established status in the family and in the village, he was made the manager of some of the Tsos.

125.  Fifthly, R admitted that he was not able to borrow the loan because the title deeds all along had been kept by the mother. The mother also knew that the application was unsuccessful.  If it was the case, there was no reason why the mother needed to worry. 

126.  Sixthly, R never told P of the Deeds of Gift or even the intention of this transaction.  At that time, P was still his wife.  If R was in no time contemplating or expecting a divorce, there is no reason why R did not tell his wife especially when the very house that they were living in was involved.

127.  Seventhly, it is certainly not R’s case that it is the rule of his village or the K clan that landed properties must not fall into the hands of outsiders and should be passed onto the male descendants.  After all, there is no evidence in this respect.  Quite to the contrary, it should be noted that according to the land search record, R’s cousin, who owns 1/3^rd share of Lot no 1364 (part of the 2^nd Lots under the 1^st Deed), had charged his share in the land in favour of a finance company in August 2006; and such charge was only released in January 2008.  Earlier on, there was also an Agreement for Sale and Purchase apparently for the sale of the whole piece of Lot no 1364 for $330,600 on 2 June 2005 but the Agreement was subsequently cancelled on 25 July 2006. 

128.  Finally, the notion of parents’ wishes, especially the mother’s wishes, is faulty in various ways.

129.  R agreed that KM is the owner of House 15, that he is a known heavy gambler and that KM could have the house sold and therefore defeat the mother’s wishes that the assets are to be kept within the family.  The reason why he did not transfer the lands to KM but to Yung was because KM’s financial situation was worse than his.  The mother feared that KM would have sold the lands to outsiders.  In my view, if that is the case, what the mother should have done was to direct both R and KM to effect the Deeds of Gift but not just for R to do so.

130.  Looking at R and PT’s evidence objectively, R did not even have a life-interest in the House because the mother asked him to make the transfer when Yung was about 3 years old; and ultimately, the House, together with all the lands, would go to the next generation.  If that is the truth, there is certainly little justification why R would have spent so much money and efforts in the renovations.

131.  Further, the nephew would be able to sell the House according to his wishes when he comes to the age of majority. Ms Tsui correctly pointed out it is hard to believe that R did not worry about his situation in the event of the sale of his own home.  There is simply no good reason why R had to make the gifts when Yung was just 3 years old.

132.  As for the 2 houses that stand on Lot nos 99 and 100, R admitted that the houses were built by the sisters.  They started to live there in about 1985 and they do not have to pay any rentals.  R said there was no agreement amongst the siblings as to who owns what but if the sisters want to sell the houses, they need to obtain the consent of R and KM.  PT said all the children were fully aware of the parents’ wishes.  If that is the case, the sisters, being female descendants, would not be able to own any interest in the properties.  Further, the 2 sisters were married to outsiders.  Logically, there is room that outsiders would have an interest in the lands.  Eventually, R agreed that the lands could be fallen in the hands of outsiders.

133.  For the above reasons I have to reject R and PT’s evidence.

Conclusion

134.  The final question is what is the conclusion that I can reach regarding R’s intention at the time of the dispositions on the basis on the findings that I have reached?

135.  I have found that the two brothers have already divided their father’s estate; in particular R is to have the House and KM the House 15.  It follows that R was the beneficial owner of the landed properties under his name immediately before the execution of the 2 Deeds of Gift.  I have also found that P was inflected with venereal disease by R and that the parties’ rancour against each other escalated around the time when the dispositions were made.  It has been accepted by all parties that the mother disliked P.  On the evidence before me, the inference that I can draw is that R told his mother and even PT that he and P would likely end up with a divorce and P wanted her loan of $300,000 back.  The family members felt necessary to defend R’s properties from going into P’s hands in the event of divorce. Therefore, they decided to proceed with the 2 Deeds of Gift behind the back of P.  

136.  On the balance of probabilities, I find that P has successfully discharged the burden of proof.  I am satisfied that the intention at the time of making the transfers was to make sure that P would be entitled to nothing, not just the former matrimonial home, ie the House, but nothing at all, bearing in mind that R reported him as insolvent in his Form E.

Discretion

137.  Mr Chow reminded the court that even if there is a reviewable disposition, the court is not bound to set it aside. Section 17 confers discretion upon the court to set aside.  He argued that all the landed properties concerned were acquired by R prior to the marriage by either transfers inter vivos or inheritance from his father.  Most of the landed properties now P seeks to set aside have never been shared and enjoyed by the parties and thus, should be regarded as non-matrimonial properties for the purpose of section 7 under the Matrimonial Proceedings and Property Ordinance, Cap 192.  He asked the court to consider whether to exercise its discretion to have only some but not all of the landed properties set aside.

138.  The submission is neatly made but I am not drawn to it.  First, as I said, the 2 Deeds of Gifts are part and partial of the same transaction.  Secondly, and this is more important, we are now at the stage of identifying the assets of the parties and at this stage, as has been said by Hon Ribeiro PJ, the court needs not attempt to distinguish between matrimonial and non-matrimonial property, that being an exercise best undertaken (if necessary) when considering distribution of the assets:  see LKW v DD, (2010) 13 HKCFAR 537, at para 71.

Orders and Costs

139.  For the above reasons, I give an order that the dispositions made by the respondent by way of the Deeds of Gift dated 1 December 2009 and 2 July 2010 respectively be set aside. 

140.  I see no reason why costs should not follow the event.  I give an order nisi that the respondent and the intervener do pay the petitioner costs of the applications, including all costs reserved, to be taxed if not agreed.  There be no order as to costs between the respondent and the intervener.  The petitioner and the respondent’s own costs to be taxed in accordance with Legal Aid Regulations.