TANG WING HUNG ALBERT formerly known as TANG SHUN TAI v. LAW CHAU FAT

HCA 929/2015

[2020] HKCFI 2419

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FI`RST INSTANCE

ACTION NO 929 OF 2015

______________________

______________________

________________

J U D G M E N T

________________

I. INTRODUCTION

1.  The plaintiff (“P”) was an indigenous villager of Tsz Tin Tsuen, Tuen Mun, New Territories (“Village”). D lived in the Village, but he was not an indigenous villager.

2.  On 13 June 1980, by New Grant No 2356 (“New Grant”) the Hong Kong government (“Government”) granted to P Lot No 2057 in Demarcation District 132 (“Lot”) with an area of 65.04 sq m at a reduced/concessionary premium of $3,000 with conditions imposed for the development of the Lot by the erection of a small village house thereon[1] to be completed and fit for occupation before the expiration of 30 months from the date thereof.

3.  Special Condition 5 of the New Grant restricted alienation of the Lot and/or any small village house erected thereon (“Restrictions”):

“5. The grantee, having obtained this grant by way of private treaty at a concessionary premium, notwithstanding that these Conditions have been certified as complied with to the satisfaction of the said District Officer [“DO”] shall not, except with the prior written consent of the said DO and on such conditions as may be imposed by him (including the payment of such fee as may be required by him) assign, mortgage, charge, underlet (other than at a rack rent without taking a fine and for a term not exceeding five years without any option for renewal), part with the possession of the lot or any part thereof or any building or buildings thereon or any interest therein or enter into any agreement so to do and then only in favour of :

(a) any person who at the sole discretion of the said [DO] would be entitled to a private treaty grant on concessionary terms as at the date of the application for such consent or,

(b) any person other than a person referred to in (a) above subject always to the payment by the grantee to the [Government] of an additional premium equivalent to the difference between the amount of premium (if any) paid by the grantee to the Government at the date of this grant and the full market value of the lot as at the date of the application to the said [DO] for consent such value to be determined by the said [DO] whose decision shall be final and binding upon the grantee; provided that this Special Condition – 5(b) shall apply only to the first assignment, mortgage, charge, under-letting or parting with possession or any agreement so to do in favour of such a person at any time after these Conditions have been certified as complied with to the satisfaction of the said [DO] and on payment of such additional premium this Special Condition – 5(b) shall no longer apply.”

Thus, no alienation of the Lot was permitted unless the DO consented to such alienation and the Restrictions were removed by way of a modification letter upon the grantee’s payment of additional land premium (“Premium”) in a sum determined by the Government with reference to the market value at the material time.

4.  P erected a 3-storey small village house or t’ing house on the Lot (“House”) that was subject to the Restrictions. By a letter of compliance dated 21 June 1983, the District Lands Office (“DLO”), Tuen Mun confirmed the House was in compliance with all general and special conditions of the New Grant. The House was known as No 95 Tsz Tin Tsuen, Tuen Mun, New Territories. For convenience, the House and/or the Lot are referred to below as the “Property”.

5.  On 9 August 1990, the DLO, Tuen Mun confirmed the Government had no objection for P to mortgage the Property to any licensed bank to secure banking facilities. By an all-monies mortgage dated 19 November 1980, P mortgaged the Property to The Hong Kong Chinese Bank Limited (“HKCB”) (“HKCB Mortgage”). Subsequently, as evidenced by a receipt on discharge of a charge dated 25 October 1994, the HKCB Mortgage was redeemed.

6.  By a letter dated 12 April 1995, the DLO, Tuen Mun again confirmed that the Government was prepared to issue a no-objection letter for P to mortgage the Property. But no further mortgage was registered against the Property at the Land Registry.

7.  There was no dispute that P was and still is the registered owner of the Property. P by his pleadings claimed he was the legal and beneficial owner of the Property, and D remained in wrongful occupation thereof  despite expiry of a 10-year licence that P granted to D by way of an oral licence agreement on 1 June 1995. But D denied P’s claim, and contended that on 1 June 1995 P sold the Property to him for which he paid the full purchase consideration of $950,000, so P remained as bare trustee of the legal title and registered owner of the Property without any beneficial interest.

8.  On 25 May 2010, P was adjudged bankrupt.  The List of Assets (“LoA”) at C1 of P’s Statement of Affairs dated 16 April 2010 (“SoA”) made no mention of the Property and/or any chose in action such as any right by P to recover possession of the Property upon expiry of any alleged licence term as part of P’s assets.  D claimed neither the Official Receiver nor P’s trustee-in-bankruptcy made any claim against the Property and/or contacted him even though he resided at the Property. On 25 May 2014, P was discharged from bankruptcy.

9.  On 28 April 2015 (ie after P’s discharge from bankruptcy), P commenced the present action against D (a) to recover vacant possession of the Property, (b) to vacate from registration against the Property at the Land Registry a Chinese agreement for sale and purchase of the Property dated 1 June 1995 between P and D (“CASP”),[2] and (c) to claim for damages (collectively, “P’s Claim”).

10.  At the 2^nd pre-trial review (“PTR”) on 31 August 2018, I raised with the parties (both of whom were then legally represented) the question of P’s right to sue, ie P’s right to bring P’s Claim, by reason of his bankruptcy, and adjourned the PTR for P to show cause why P’s Claim ought not to be struck out. On 3 September 2018, P filed Notice to Act in Person. At the adjourned PTR on 11 September 2018, I struck out P’s Claim for want of locus standi. Detailed reasons for such decision can be seen in my written Reasons for Decision and Decision on Costs handed down on 21 September 2018 (“Reasons”).

11.  Consequently, the trial only concerned D’s counterclaim. But since P adopted his pleas for P’s Claim as defence to D’s counterclaim, it was still necessary to canvass the factual allegations that underlied P’s Claim.

II.  D’s COUNTERCLAIM

12.  D averred P, his siblings and their families used to live at the Village. D was a car mechanic who for some years before his marriage in 1993 was a lodger of P’s elder brother Tang Cho Sang (“CSTang”) at No 168 (formerly No 55) of the Village.  Thus, P and D used to live near each other at the Village.  After his marriage in 1993, D and his wife moved to live with the parents of D’s wife.  As for the Property, D claimed that after the House was built, P and his family lived there and occupied the Government land at the front/back of the Property that formed its front and back yards (“Front Yard” and “Back Yard”).  P and his family moved out of the House/Property in June 1995.

13.  D claimed that in/about 1995 CSTang as P’s agent orally told him that (a) P (then heavily indebted to his creditor who would have seized the Property pledged by P if P failed to settle his debt) wanted to sell the Property, and (b) CSTang helped P to look (but in vain) for a buyer.  D averred that at that time CSTang knew he might be interested in buying a property of his own because he and his wife were then staying with the in-laws, so CSTang asked him if he would be interested in buying the Property for $950,000.  D further averred that P through CSTang knew[3] he did not have the financial resources to pay the additional Premium for lifting the Restrictions, so before he entered into any agreement to purchase the Property from P, he and CSTang on behalf of P, upon their common intention, understanding and agreement, agreed that notwithstanding D’s purchase of the Property, the Restrictions would not be removed until D had enough money to pay the additional Premium (“Collateral Agreement”).

14.  D claimed it was P’s agent (ie the wife of P’s 2^nd elder brother Tang Lin Sang, “LSTang”) who prepared/drafted the CASP. On 1 June 1995, P and D entered into and signed the CASP, which provided that P sold and D purchased the Property with the right to use/occupy the Front/Back Yards for a consideration of $950,000 together with provisions to the effect that (a) upon D’s request P would unconditionally assist in effecting/ perfecting formal transfer of ownership to vest the Property in the name of D, who would be responsible for all costs for such procedure including payment of the additional Premium for lifting the Restrictions (“Undertaking”) (clause 2), and (b) D shall have the right to use/occupy the open areas at the Front/Back Yards (clause 3):

“立契約人賣方([P])買方([D])以下簡稱甲方乙方玆經雙方同意訂立契約於后:

(一) 現甲方以港幣玖拾伍萬圓正轉讓座落於屯門紫田村第132約2057地段之整幢丁屋與乙方。

(二) 日後乙方要辦理有關該丁屋之轉名手續時, 甲方需無條件協助乙方, 唯一切有關之費用一概由乙方自行負責。

(三) 該丁屋前後之空地均有使用權。

恐口無憑, 立此據為証。

甲方: [P] [signature] Gxxxxxx(x)

乙方: [D] [signature] Cxxxxxx(x)

見證人: 鄧灶生 [signature] Cxxxxxx(x)

              鄧連新 [signature]

一九九五年六月一日”

15.  D claimed Dickie Tsang & Co (“DTC”) was engaged to act for P and D in relation to the Property.  On 7 June 1995, D, on P’s request, bought a cashier order in the sum of $950,000 in favour of DTC, and delivered the same to DTC who received the same on behalf of P.[4]  D alleged that upon such payment  the beneficial interest in the Property passed to him.

16.  D further claimed P gave written instructions to DTC to make split cheque payments for disbursement of the purchase consideration of $950,000 that he paid (“Split Proceeds Instructions”) as follows:

“本人羅就發 [D]現指示律師 [DTC], 將下述銀碼付於指示的人

$664,682.19付與陳業蘇律師行用以償還鄧穎鴻 [P] 之欠數。

‚ $237,317.81付與鄧穎雄(Tang Wing Hung Albert) [P]。

ƒ $18,000 作為律師費雜費。

„ $30,000 付給羅就發[D]。

本人鄧穎鴻 [P] 現授權律師 [DTC] 將所有文件包括 Lot 2057 in DD 132 Tuen Mun [Lot] 的屋契[“Title Deeds”], 交與羅就發[D]。[5] [“Title Deeds Direction”]

[D’s signature] [ P’s signature]”

17.  D claimed that as security/assurance for the performance and due discharge of the Undertaking in clause 2 of the CASP, P arranged for DTC to prepare the following instruments in favour of D, which were then executed and delivered to D on 8 June 1995:

(a)	a general power of attorney dated 8 June 1995 (“GPoA”) whereby P appointed D “to be [P’s] lawful attorney in accordance with Section 7 of the Powers of Attorney Ordinance Cap 31 of the Laws of Hong Kong”;
(b)	P’s last will and testament dated 8 June 1995 (“Will”) which (i) revoked previous wills and testamentary dispositions, (ii) declared this to be P’s last will and testament, (iii) appointed D to be the executor and trustee of the Will, and (iv) specifically devised and bequeathed all his share and interest of and in the Property to D for his own use and benefit absolutely.
(c)	a promissory note dated 8 June 1995 (“PNote”) whereby P promised to pay D the sum of $3,500,000 for value received by the following instalments: (i) 1st instalment of $1,000,000 payable on/before 6 June 1996, (ii) 2nd instalment of $1,000,000 payable on/before 6 June 1998, and (iii) 3rd instalment of $1,500,000 payable on/before 6 June 2000, provided that if any of such instalments or any part thereof shall be unpaid at the time and in the manner aforesaid, all outstanding payments then remaining unpaid irrespective of whether the time(s) for payment of such outstanding instalment(s) had arrived or not shall immediately become due and payable.

18.  On their face, P executed (a) the GPoA and the PNote in the presence of DTC’s solicitor Tsang Kwok Fun Dickie (“Tsang”) and under Tsang’s interpretation of the contents thereof to P, and (b) the Will under Tsang’s interpretation of the contents thereof to P who “…… appeared thoroughly to understand this Will and to approve the contents thereof in the presence of both the undersigned who in his presence at his request and in the presence of each other have thereunto subscribed their names as witnesses”, ie Tsang and a clerk of DTC Winnie M L Li.

19.  D claimed that on/about 15 June 1995, notwithstanding the non-removal of the Restrictions, vacant possession of the Property together with its Front/Back Yards was delivered to D, and since then D occupied, possessed and controlled the Property and its Front/Back Yards to the exclusion of P. Immediately after moving into the Property, D applied for and was accepted to be named as the payee of Government rents/rates for the Property, and thereafter D paid such rents/rates.[6]

20.  On 8 December 1999, the DLO, Tuen Mun by letter dated 3 March 1999 to P c/o DTC enclosed duplicate copies of a modification letter and a demand note for $2,000,090 as additional Premium, and asked for the return of such modification letter upon due execution by P (as grantee of the New Grant) to be witnessed by DTC. This suggested the DLO was prepared to accept payment of an additional Premium of $2,000,900 for lifting the Restrictions. But D claimed he still did not have sufficient financial resources to pay such additional Premium, and in the last 20 years P never requested/demanded him to pay any additional Premium for lifting the Restrictions pursuant to the Collateral Agreement.

21.  D claimed that on/about 8 February 2001 he received the full set of the Title Deeds for which he signed an acknowledgment of receipt.

22.  On 26 April 2010, solicitors Hagon Wai & Partners delivered the following documents (collectively, “Loan Documents”) under memorial no 100042602970081 for registration against the Property at the Lands Registry, but such registration was stopped on 15 May 2010 and the Loan Documents remained as deeds pending registration:

(a)	a copy loan letter dated 19 January 2010 signed by P (with copy of his identity card) and witnessed by a person (with specified identity card number) stating “本人[P]現借(郭偉明先生) [“Kwok”] 港幣柒拾萬元正, 現以屯門紫田村164號三樓連天臺作為永久使用權, 直至清還柒拾萬元。才取消[Kwok]永久使用權。每月還款伍萬不能斷! 供款期14個月不能斷供”;
(b)	a copy loan acknowledgment letter dated 2 October 2009 signed by P (with copy of his identity card) stating “本人[P]現借[Kwok]港幣$陸拾萬元正。定於兩年內, 全數清還。本人[P]如有意外, 本人家人及老婆代還。特立此字”;
(c)	a copy cheque dated 28 February 2020 drawn by Kwok in favour of P in the sum of $180,000 with acknowledgment of receipt signed by P (with his identity card number) thereon;
(d)	a copy cheque dated 3 March 2020 drawn by Kwok in favour P in the sum of $300,000 with acknowledgment of receipt signed by P (with his identity card number) thereon.

The Loan Documents appeared to concern 2 debts P owed to a third party (ie Kwok).  D claimed it was P who caused the purported registration of the Loan Documents at the Land Registry even though they did not appear to affect any property interest in the Property.

23.  The CASP was stamped on 9 June 2010 with payment of stamp duty in the sum of $7,125 and penalty payment for late stamping in the sum of $14,800.  D claimed the CASP (which had been executed/performed save for the Undertaking that was still executory in nature) was binding on P, so D was entitled to and did arrange for registration of the CASP (which affected/ concerned the Property) under memorial no 10061701600018 against the Property at the Land Registry on 17 June 2010.

24.  D complained that:

(a)	since about May 2014, without any justification whatsoever, P suddenly and wrongfully demanded D to move out of the House;
(b)	in/about mid-2014, P through his agent (ie his younger sister Tang Kwai Ho, “KHTang”), in wrongful breach of the CASP and without the consent of D as occupier of the Property, placed a large container at the Back Yard for operating a food catering business there, and deprived D of the use of the Back Yard, thereby causing loss and damage (which loss and damage were continuing) to D;
(c)	between May and October 2014, P through his agent LSTang, in wrongful breach of the CASP, sent threatening WhatsApp messages to D to the effect that unless he vacated the Property otherwise “後果自付” (ie D would be responsible for the consequences), so D made a report to the police.

25.  D claimed that since 7 June 1995 P no longer had any beneficial interest in the Property, and was only a bare trustee holding the legal title and  registered ownership for him. But on/about 27 October 2014, P purportedly entered into a written sale and purchase agreement (that was stamped on 22 November 2014, “SPA”) to sell the Property to one Leung Fung Hei (“Leung”) for a consideration of $1,000,000 (of which a deposit of $400,000 was paid upon signing the SPA and for which P acknowledged receipt) with completion and payment of the balance consideration to take place on 27 October 2015. The SPA dated 27 October 2014 also contained the following terms:

“1. The Vendor agreed to sell and the Purchaser agreed to purchase subject to the terms and conditions herein contained all that LOT NO 2057 in DEMARCATION DISTRICT NO 132 (No 92 Tsz Tin Tsuen, Tuen Mun, New Territories) together with the messuages erections and building thereon) (hereinafter called “the said Premises”).

2. The purchase price of the said Premises shall be HK$1,900,000.00 which shall be paid upon the signing of this agreement in the sum of HK$400,000.00. Balance of purchase price shall be paid upon completion on or before 27 October 2015 at the Vendor’s solicitors in the sum of $1,500,000.00.

3. The said Premises is to be sold to the Purchaser or its nominee(s), sub-purchaser(s) free from encumbrances.

4. Upon completion, the Vendor shall deliver vacant possession of the said Premises to the Purchaser.

……

Remarks:

(1) 買賣雙方確認此買賣合約為必買必賣合約, 即買賣雙方必須依約成交, 不得悔約。

(2) 賣方負責辦理補地價手續及簽授權書給買方代為辦理向政府補地價手續, 補地價由買方支付。

(3) 簽此合約後, 賣方不得以該物業抵押或擔保向他人借錢, 或向他人簽任何形式文件或書信對該物業之業權造成影響, 如有的話, 該等文件或書信也將不會被承認有效的。

(4) 賣方聲明和保證現於土地註冊處註冊之Agreement for Sale and Purchase即買賣合約(日期: 1995年6月1日及該冊編號: 10061701800018) 及 Loan Letter 即貸款信件(日期:2010年1月19目及註冊編號: 10042602970081) 均是無效和不會影響該物業的業權的。賣方承諾會最遲於成交日一個月前正式取消買賣合約及貸款信件在土地註冊處之註冊, 令其可有法理依據合法成為絕對無效的, 並在法庭取得收樓令向該物業現有的佔用人(如有的話)正式合法收回該物累, 使賣方可在免除所有負擔或債項之情況下將該物業交吉的業權於成交日轉予買方合法成交(以下簡稱“該等手續”) 。為確保賣方會盡快完成該等手續, 賣方於簽此合約後, 須立即委託律師進行該等手續的所有法律程序。

(5) 如賣方未能於最遲成交日一個月前的限期內, 完成辦理該等手續, 而需要多些時間辦理該等手續, 則買方有權取消交易再取回訂金或延期成交直至該等手續完成為止。

(6)《物業轉易及財產條例》即香港法例第219章的條文在此適用。”

26.  On 24 November 2014, the SPA was registered against the Property at the Land Registry under memorial no 14112401620457 prepared by solicitors Wong Fung & Co (“WFC”).[7]

27.  D claimed (a) P fabricated his allegations as to the Licence Agreement referred to in paragraph 31 below, which contradicted all contemporaneous documents that P signed/executed, (b) P continued to be the registered owner of the Property because D still had not paid the additional Premium for lifting  the Restrictions, (c) P’s sale of the Property to D was subject to P’s Undertaking in clause 2 of the CASP, and (d) D was still in occupation of the Property by reason of P’s sale of such property to him in 1995.

28.  Consequently, D counterclaimed against P for (a) a declaration that P was a constructive trustee holding the Property on trust for D (on the basis that since 7 June 2005 D became the beneficial owner of the Property and P became a trustee holding the legal title for D’s benefit), so P was estopped from denying D’s interest in the Property, (b) an order that P shall assist D to finalise the sale and purchase of the Property and to comply with all procedures/formalities for perfecting change of ownership and formal transfer/vesting of the Property to/in D, (c) an order that P shall remove the container from the Back Yard, and (d) an order in favour of D for damages to be assessed.

29.  In the written opening submissions of Mrs Chan, counsel for D, it was said D would seek “specific performance” of the CASP under the prayer for “further and other relief” because in all likelihood P would not co-operate and/or perform the Undertaking in clause 2 of the CASP.

III. P’s DEFENCE

30.  P claimed in 1995 LSTang (a) told D that P was suffering from temporary financial difficulty, and (b) asked D if D would become a licensee of the House for a term of 10 years upon payment of a lump sum licence fee of $950,000 in order to ease P’s financial difficulty, and D (who was  married and required accommodation for himself and his family) accepted such offer.

31.  P claimed possession of the Property was given to D as licensee under an oral licence agreement made on 1 June 1995 between P as licensor and D as licensee (“Licence Agreement”) for a term of 10 years (“Licence Term”) and a lump sum licence fee of $950,000 (“Licence Fee”), and it was further agreed that if at any time during the Licence Term P paid to D the due proportion of the Licence Fee for the remaining balance of the Licence Term, D would have to deliver up vacant possession of the Property to P even though the Licence Term had not yet expired.

32.  P further claimed that “on the same date [as] the said Licence Agreement in respect of the said House” (ie 1 June 1995), upon D’s request to further secure P’s repayment of the balance of the Licence Fee to D upon any early termination of the Licence Agreement but not for any other purpose, P signed the CASP, which P and D agreed shall have no effect upon expiry of the Licence Term. P denied the CASP was prepared by him, and further denied there was any valid agreement for sale and purchase of the House/Property between him (or any person on his behalf) and D upon any term/condition whether by way of the CASP or otherwise, which, P claimed, was why the CASP did not mention any date of completion.  P contended it was quite unbelievable for D to be able to pay the entire alleged purchase consideration of $950,000, but chose not to remove the Restrictions by paying the additional Premium or by applying for any mortgage loan to pay the same.

33.  Further, P agreed he did sign the GPoA, the PNote and the Will on 8 June 1995, and averred he did (a) instruct DTC to deliver the Title Deeds to D, and (b) retain DTC to apply part of the Licence Fee to repay the debt he owed to his creditor. But P claimed the GPoA, the PNote and the Will were so signed by him and the Title Deeds were so delivered to D upon D’s request “to secure the repayment by [P] to [D] for early termination of the [Licence Agreement] but not for any other purpose ……”

34.  P further pleaded the Licence Term expired on 31 May 2005, but despite P’s repeated requests/demands, D in breach of the Licence Agreement remained in wrongful occupation of the Property, and failed/ refused to vacate and deliver up vacant possession of the same to P.  P claimed that on/about 17 June 2010 D wrongfully registered or caused to be registered the CASP against the Property at the Land Registry when under the agreement between P and D it ought not to have been so registered.

35.  P denied he caused the Loan Documents to be purportedly registered against the Property at the Land Registry, but he agreed that on 27 October 2014 he entered into the SPA to sell the Property to Leung upon the terms/conditions contained therein, and such SPA was duly registered against the Property at the Land Registry.

36.  P denied D’s counterclaim, and averred the CASP was void or voidable for illegality. P claimed that any enforcement of the CASP would be contrary to public policy as its execution would be against the Restrictions, and D knew no prior consent of the DO had been obtained and no additional Premium had been paid when he signed the CASP.

IV. PRELIMINARY MATTERS

(a)  P’s legal title to the Property

37.  D raised his counterclaim on the premise that he was the beneficial owner of the Property, and that P held the legal title and registered ownership of the Property for his benefit. In seeking the reliefs under the counterclaim set out in paragraph 28 above, including the declaratory relief in paragraph 28(a) above, D necessarily asserted that P (as vendor) was a constructive trustee who held the legal title of the Property on trust for D (as purchaser).[8] There was no practical dispute that D did pay P the entire sum of $950,000, which D claimed to be “purchase price”,[9] so it was D’s case that P was merely a trustee who should in due course transfer the bare legal estate in the Property to him as beneficial owner.

38.  It has been said a bare legal estate (in contra-distinction to beneficial interest) in real property is a right in rem. Megarry & Wade, The Law of Real Property states that “…… legal ownership confers rights in rem, rights of property in the land itself, which can be enforced against anyone. Equitable ownership conferred at first only a right in personam, a right to compel the trustee personally to perform his trust ……”[10] This was echoed in Cheshire and Burn’s Modern Law of Real Property, which states that “…… the fundamental distinction [between the legal and equitable estate] is this: a legal estate is a right in rem, and equitable estate is a right in personam, that is to say, the former confers a right enforceable against the whole world, the latter one that can be enforced only against a limited number of persons”.[11]

39.  In the present action, D asked inter alia for a declaration that P held the bare legal estate of the Property on trust for him, and for an order that P was to transfer the bare legal estate of the Property to him.  Since (on D’s case) such bare legal estate in the Property was vested in P before his bankruptcy, question arose as to whether such bare legal estate (being a right in rem) was vested in P, and thus fell into his bankruptcy estate and became vested in the Official Receiver and/or his trustee-in-bankruptcy (see section 58 of the Bankruptcy Ordinance Cap 6 (“BO”), the guidance that fell from the Court of Appeal in Cheung Wing Kwan Tommy v Hong Kong Export Credit Insurance Corp[12] and Wan Po Jun Mary Pauline v Au Yeung Yee Man,[13] and paragraphs 21-22 of the Reasons).

40.  Mrs Chan drew my attention to section 43(1) and (3) of the BO which provides as follows:

“(1) Subject to this section and sections 43A to 43E, a bankrupt’s estate comprises –

(a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy; and

(b) any property which by virtue of any of the provisions of [the BO] is comprised in that estate or is treated as falling within paragraph (a).

……

(3) Subsection (1) does not apply to property held by the bankrupt on trust for any other person.”

The English equivalent of section 43 of the BO is section 283 of the Insolvency Act 1986 c 45. Section 283(1) describes the bankrupt’s estate, and section 283(3) provides that “[subsection] (1) does not apply to – (a) property held by the bankrupt on trust for any other person; ……” In Floyd, Brumby & Knight, Personal Insolvency A Practical Guide, it is said that “[whilst] the point may be academic in most bankruptcies, there is also excluded from the estate, by s.283(3), property held by the bankrupt on trust for any other person ……”[14]

41.  Mrs Chan further referred to section 42 of the BO which restricts disposition of property during the relevant period by a person who is adjudged bankrupt, but pointed out section 42(6) of the BO provides inter alia that “…… nothing in this section affects any disposition made by a person of property held by him on trust for any other person”.

42.  In The Governors of St Thomas’s Hospital v Richardson,[15] the freeholders granted leases of 5 houses for terms of years. Subsequently, the leases became vested in the defendant for the residue of the terms. He mortgaged the leases to a building society for loans that were repayable by instalments, and later entered into agreements to sell these leases to his wife subject to the mortgage thereon for consideration paid by the wife from her separate property. The transaction between the defendant and his wife was held to be genuine. “She was to accept the defendant’s title, and by clause 4 the defendant was on demand to execute, provided the lessors’ consent was previously obtained by his wife, a proper assignment of the property to her or her nominee or nominees”.  But no assignment was made, and there was no application to the lessors for a licence to assign.  By clause 5 of the agreement, the defendant’s wife covenanted (a) to pay the rent and perform the covenants contained in the leases, (b) to discharge the mortgage debt, and (c) to keep the defendant, his estate and effects indemnified against all claims in respect thereof.

43.  Subsequently, the defendant was adjudged bankrupt, and half a year’s rent was in arrears.  Still later, the trustee-in-bankruptcy sold to the defendant’s wife all the defendant’s property (including the leaseholds), and assigned the same to the defendant as trustee for his wife. The lessors had no notice of the agreement for sale, the bankruptcy of the defendant or the assignment by the trustee-in-bankruptcy. Subsequently, the defendant obtained discharge from his bankruptcy.  Several years later, the lessors commenced legal action against the defendant for recovery of (a) damages for breaches of the covenants to repair and to yield up to repair/insure, and (b) arrears of rent.  The defendant pleaded the bankruptcy proceedings as a defence.

44.  The English Court of Appeal held that the defendant by his agreement with his wife altered his beneficial interest in the property, and by clause 5 of the agreement his interest became a right to indemnify himself against liabilities under the leases. Thus, as at the date of the defendant’s bankruptcy, he held the legal estate in the leaseholds on trust for his own benefit (ie his right to indemnity against the property so far as the cestui que trust did not keep him safeguarded from the liabilities), and such legal estate was vested in the trustee-in-bankruptcy by virtue of his bankuptcy. But such legal estate passed back to the defendant under the assignment, so by virtue thereof he stood in the same position as the trustee-in-bankruptcy with regard to the same. Consequently, the defendant’s bankruptcy was no defence to the action, and he was liable as assignee.

45.  Cozens-Hardy MR said at pages 276-277 as follows:

“……. the question for decision turns solely upon the true meaning of that part of s. 44 of the Bankruptcy Act, 1883, which excludes from property vesting in the trustee “property held by the bankrupt in trust for any other person,” and we are not left without guidance in construing those words, which are merely a re-enactment of prior legislation. There is a dictum by Sir George Jessel in Morgan v. Swansea Urban Sanitary Authority,[16] where he says, “under the Bankruptcy Act where a trustee has no beneficial interest, the legal estate does not pass, but where he has it does pass,” and he points out that where a person has a lien on the estate he is not bound to convey until the lien is satisfied. There is in accordance with the considered judgment of the Court of King’s Bench delivered by Littledale J in Carvalho v, Burn[17]: “It is quite clear that the assignment vested in the assignees all the personal estate and effects in which the bankrupt was, at the time of the act of bankruptcy, beneficially interested (with the statutory exceptions, 6 Geo. 4, c. 16, ss. 81, 82, 86, 112); but as the object of the assignment of the bankrupt’s property is, that it may be applied to the payment of his debts, it is equally clear that nothing passed by it which the bankrupt then held in trust for others, or in which he had only a mere legal interest.” ……” (my emphasis)

46.  Fletcher Moulton LJ at pages 278-279 and Farwell LJ at pages 283-284 explained the position as follows:

“…… As a general rule when bankruptcy occurs, the property of the bankrupt vests in his trustee for division among his creditors. But by s. 44 the property so divisible does not include “property held by the bankrupt on trust for any other person.” This follows from the principle that the Court of Bankruptcy is a Court of Equity, and was the law long before it was specifically provided by statute. The meaning of the provision is therefore evident; it is that property by the bankrupt does not go to form part of his divisible estate, if and so far as he holds it in trust for another person. But as far as the bankrupt has a beneficial interest in property it passes to his trustees to form of his divisible estate, and this none the less because the balance of the property is held by the bankrupt in trust for others. The trustee in bankruptcy will take the same position in respect of the property as the bankrupt; he will hold it on the same trusts and be entitled to the same beneficial interest and no more.” (my emphasis) (pages 278-279)

“The plaintiffs now sue him on the covenants in the lease, and he pleads (1.) that these were liabilities provable in bankruptcy and that his discharge released him therefrom, and (2.) that the terms of years were held by him as a trustee and therefore did not pass to his trustee in bankruptcy. I agree with the first point. I think it plain that these were liabilities provable in the bankruptcy; but this very fact defeats the second point. The liabilities arise out of and are incident to the very property which the defendant alleges did not pass to his trustee but the possession of and legal estate in each property are necessary to give effect to the indemnity to which the trustees is entitled. It is impossible, while giving effect to the first contention, to shut one’s eyes to the result ensuing in equity from that state of things. It is said that s. 44, sub-s. 1, shews that this cannot be so, because the property of the bankrupt does not include property held by the bankrupt on trust for any other person. But it does include property held by the bankrupt on any trust for his own benefit, and when, as here, he holds property to secure his own right of indemnity in priority to all claims of any cestui que trust, and the retention of such property is necessary to give full effect to such right, it follows that the property, i.e., the legal estate, and right to possession vest in the trustee in bankruptcy to the extent to which they were vested in the bankrupt. ……” (my emphasis) (pages 283-284)

47.  In my view, the general principle in relation to the English equivalent of section 43 of the BO[18] elicited from Richardson is this: property held by the bankrupt in trust for “any other person” will not fall into his bankruptcy estate, but if the bankrupt has any beneficial interest in such property, it forms part of his bankruptcy estate.  In Richardson, the defendant/bankrupt retained the legal estate of the leaseholds for his own benefit to secure/enjoy the wife’s covenant under clause 5 of the agreement to indemnify him in respect of all claims in relation to the properties.  Since the retention of the legal estate was to give effect to such right of the defendant/bankrupt, his legal estate fell into his bankruptcy estate.  But here, on D’s case, P’s retention of the legal estate was for the benefit of D (ie “any other person” under section 43(3) of the BO) and not for P himself as a result of a combination of factors, including (a) D’s payment of the full purchase consideration of $950,000 (which made D the beneficial owner of the Property), and (b) the Restrictions in the New Grant and D’s inability to pay the additional Premium at the time of purchase of the Property (which caused P to remain as the registered owner and holder of the legal title of the Property), which (c) led to the Collateral Agreement and the Undertaking that were for the benefit of D rather than P.  On such basis, I find that on D’s case P’s retention of the legal estate in the Property was not for himself but for D (ie “any other person”), so (i) P’s legal estate in the Property did not fall into his bankruptcy estate, and (ii) no concern arose over P’s locus standi in relation to D’s counterclaim against him.

(b) Abandonment of certain reliefs

48.  At trial, Mrs Chan confirmed D would not seek any order in his favour (a) to require P to remove the container from the Back Yard, and/or (b) for damages to be assessed (see paragraph 28(c)-(d) above).

(c) Illegality

49.  As seen in paragraph 36 above, P averred the CASP was void or voidable for illegality, and any enforcement thereof would be contrary to public policy as being against the Restrictions in the absence of any consent by the DO and/or any payment of the additional Premium (whether at the time of signing the CASP or thereafter).

50.  P in his witness statement dated 30 July 2016 (“P’s WS”) stated that even if the transaction described on the face of the CASP were true, he believed when D signed the CASP he fully understood it was illegal as the building licence issued by the Government “已明確規定在得到[DLO]的書面批准及完全履行該書面批准所訂明的條件前, [the Property]是不可以轉讓或抵押與任何其他人或與任何其他人達成以轉讓或抵押為目的的協議。即使得到[DLO]的書面批准, 將[the Property]轉讓予非原居民, 亦要補足當時土地的市價計算的[Premium]才可以進行該已經批堆的買賣。在[CASP]簽署時侯, [D]清楚明白[DLO]並未發出任何的書面批准”. Whilst there was no evidence that D was privy to any building licence granted by the Government to P in the 1980s for the erection of the House, it was not disputed that D was aware of the Restrictions.  This was also evident from clause 2 the CASP, and D’s evidence as to the Collateral Agreement / Undertaking.

51.  But Mrs Chan submitted no illegality was involved in a situation when the vendor and the purchaser merely “jumped the gun” by entering into a sale and purchase of property subject to restrictions against alienation prior to approval by the DO and/or payment of the additional Premium.

52.  In Li Pui Wan v Wong Mei Yin[19], a defence of illegality was similarly raised in relation to an agreement for sale and purchase of a small house in the New Territories made in breach of restrictions against alienation under a Government grant.  In that case, the Government granted certain land in Sai Kung for T to build a small house or t’ing house on the land. Thereafter, T and the grantees of 6 other neighbouring lots sold their interests and development rights to TF, who later reached an agreement with MF to jointly develop the land and build 7 small houses. Still later, MF, R and H reached another agreement to develop 4 of the lots. Thereafter, A and R entered into an oral agreement whereby R agreed to sell the 3^rd floor and the roof of one of the small houses to A for $500,000. In the course of the next 2 months and by way of 4 instalments,  A paid to R a total sum of $400,000 as deposit.   R then demanded an additional premium of $700,000 which A refused. Even though their dispute was not yet resolved, A and R signed a provisional agreement. Almost a year later, the additional premium still had not been paid. As a result, MF paid the additional premium and withdrew R’s rights over the small house.

53.  The trial judge held R was in breach of the agreement for sale and purchase, and had to return the deposit of $400,000 to A with interest and costs.  The trial judge also dismissed R’s counterclaim.  Both parties appealed against the judgment.  On appeal, R argued that the parties were in breach of the conditions of grant by entering into the transaction prior to obtaining Government approval and paying the additional premium, and that the transaction was not in accordance with public policy, so the court should deem it illegal and not enforceable.

54.  The Court of Appeal said at page 89 as follows:

“According to the law of contract, if a contract upon its formation or performance contains elements of illegality and is in certain circumstances against public policy the court would not enforce it. What public policy in fact means is that there are certain principles which in the opinion of the court must persist in a civilized society. The question as to whether the court would refuse to enforce a contract depends on the seriousness and turpitude of the illegality. Generally, the court will consider whether the contract is in breach of common law of statute by its formation or performance; or injurious to good government either in the field of domestic or foreign affairs; or interferes with the proper working of the machinery of justice; or injurious to marriage or morality or economically against the public interest ……

The purpose of granting of land by the government in accordance with Chinese customary law with additional terms and conditions to New Territories male indigenous villagers is to provide some of the New Territories residents with special care. This situation differs greatly from the principles in the law of contract where the court refuses to make orders to enforce certain contracts because they are against public policy upon formation or performance. The granting of land by the government to indigenous villagers who are male descendants is a measure made under special circumstances. It has nothing to do with the principle under which by virtue of public policy, certain contracts are found illegal by the court. In our view, such measure adopted by the government in the granting of land should not be regarded as a public policy, and is quite different from the principle in common law which requires the court of law to uphold public policy.

In this case, there was insufficient evidence to show that the granting of land by the government to male indigenous villagers was a public policy. The respondent failed to produce any evidence to prove or cite any authorities to show what was the difference, if any, between the grant issued by the government to male indigenous villagers and the contract between the government and private organisations or citizens in general. A breached contract cannot be categorised as against public policy and declined attention by the court by reason of it being a contract made with the government. In our opinion, there is no difference between the granting of land by the government to male indigenous villagers and a landlord leasing his property to a tenant in the eyes of law.

Even if it was illegal for the parties to agree to proceed with a sale and purchase or completion at a later date without government approval or before paying the premium, this, in our view, does not constitute a breach of public policy. In fact, the sale and purchase or assignment of title and development entitlement of small houses similar to that in this case is also good for the public as the payment of premium brings revenue to the government. It also helps to solve the housing problem because people other than male indigenous villagers can also live in this sort of houses. However, if a male indigenous villager cannot afford to build a small house due to financial constraints but is not allowed to assign his title to somebody else, he will not be able to benefit from the policy and consequently it will not do any good to the general public. Over the years, the government has been considerably indulgent towards this sort of sale and purchase and in effect has amended the formerly so-called land grant policy. From the practical point of view, this measure has done more good than harm to the public.

As can be seen from the contract and agreement produced, the parties did not intend to breach the conditions of grant. It can only be regarded as technically “jumping the gun”. In the agreement between [MF] and [R] and [H], cl 3 set out clearly that [MF] should be responsible for assisting the individual male descendants to complete the necessary procedures in relation to the construction sites, such as application for a occupation permit, assignment, payment of premium and to liaise in matters relating to the village’s local conditions and customs, etc. Further, in the provisional agreement for sale and purchase between [A] and [R], Cl 4 also set out clearly that the transaction should be completed within 14 days from the time payment of premium was approved by the government. The agreement also mentioned the application to the government for assignment, and stipulated that the purchaser should pay the premium. Obviously, the contractual parties agreed that the sale and purchase would not be completed until formalities of application to the government for assignment were complete and the premium paid. The parties had no intention of completing the transaction prior to obtaining approval for assignment or payment of premium from the government. In our view, even if government approval had not been given and the amount of premium not settled at the time of formation of the contract, the parties did have the intention to complete the sale and purchase in accordance with the terms and conditions set down by the government. In the circumstances, this transaction of sale and purchase is not against public policy.

…… likewise, there is no evidence to show that the government would still object to the sale and purchase and assignment of such small houses once the grantee undertakes to pay the premium. In this case, there is evidence to show that the government had already issued a Letter of Compliance for the small house on 16.11.1992 and asked the grantee to pay a premium of $2,100,000. If the government had no intention to give approval to the grantee ([T]) of the Lot on assigning his title, there was no reason to request that he should pay the premium. Obviously, the position of the government was to approve the application and allow the sale and purchase and assignment so long as the applicant was willing to pay the premium.” (my emphasis)

55.  The subsequent case of Lau Kwai Kiu v Bian Xintian & anor[20] was another case of “jumping the gun”.  In that case, in 1985, X applied for a grant of a lot in the New Territories under private treaty subject to restrictions against alienation or dealing with the property unless X paid an additional Premium to the Government.  In March 1989, X was granted the subject lot. The plaintiff (X’s first cousin) gave X $100,000, part of which X used to pay the concessionary premium to the Government.  A house was then built on the lot, and the plaintiff paid for its construction costs.  A certificate of compliance was issued in 1994, and the plaintiff and her family moved in and resided at the small house on the lot ever since.  X never lived there, and died in 2006.

56.  The plaintiff produced 2 “letters of confirmation” dated 10 May 1989 and 4 March 1992 signed by X in which (a) he transferred the lot to her by way of “gift”, and (b) he agreed after 5 years he would unconditionally apply to the Government within 6 months to “formally” transfer the lot to her name. The 1989 “letter of confirmation” was signed by the plaintiff as “beneficiary” and witnessed by 2 persons, and the 1992 “letter of confirmation” was in the same terms but was not signed by witnesses.  The plaintiff could not afford to pay the additional Premium, so she did not ask X to apply to the Government to “formally” transfer the lot into her name. After X died, disputes arose between the plaintiff and the defendant (X’s 2^nd wife), and the plaintiff sued for a declaration that she had beneficial interest in the house/lot.

57.  The trial judge found the plaintiff held the house/lot under a constructive/resulting trust upon her payment of the concessionary premium and the construction costs, and rejected the defendant’s defence that the agreement was (a) illegal, (b) in breach of the restrictions against alienation in the grant, and/or (c) contrary to public policy.  Such judgment was upheld on appeal by the Court of Appeal.

58.  On the issue of whether or not the arrangement was illegal, the Court of Appeal noted it was not argued before the trial judge that the plaintiff procured/induced X’s breach of the non-alienation condition in the grant. It was held no contract was in existence at the time when the arrangement was made, but in any event there was no evidence of market values to show the Government suffered loss/damage (page 966).  As for the argument that X and/or the plaintiff made false representations or misrepresentations as to the beneficial ownership of the property by reason of dealings with the Government in X’s name, it was held that the declaration X made prior to the private treaty grant contained statements which were all true, and the documents signed after the private treaty grant did not contain any statement by X and/or the plaintiff as to who was the beneficial owner (page 966).

59.  But even if there had been some illegality (eg a conspiracy between the plaintiff and X to injure the Government by X prematurely alienating the property to the plaintiff for which the Government could have charged additional Premium), the key issue was the effect such illegality had on the establishment of the plaintiff’s equitable proprietary interests.  Yuen JA at page 967 referred to Tinsley v Milligan[21] in which the House of Lords held it was not necessarily fatal to a claim of equitable proprietary interest that illegality was involved in its acquisition.  Whether illegality would affect the success of a party’s assertion of proprietary interest in any individual case depends on whether he needs to plead or rely on an illegality to establish such interest, so the effect of illegality is not substantive but only procedural.  If a party does not need to rely on an illegal arrangement to establish proprietary interest, it matters not that the equitable interest has been acquired in the course of carrying out an illegal transaction.[22]

60.  In this respect, Yuen JA at pages 967-968 found it useful to contrast Best Sheen Development Ltd v Official Receiver[23] with Chung Mui Teck v Hang Tak Buddhist Hall Association Ltd:[24]

(a)

In the former case, an indigenous male villager signed a declaration that he was the owner of a lot to apply for a concessionary building licence, which assertion was untrue as the lot had been assigned to him by the developer under a sham agreement for which he gave no consideration, so the Government upon discovery withheld execution of the licence, and the developer was entitled to a declaration that it was the beneficial owner of the lot (which ownership had not passed to the villager under the sham agreement) as it did not have to rely on any explanation as to  why it conveyed the lot without payment.

(b)

In the latter case, the directors of a Buddhist organisation opposed the organisation’s plans to enter into a joint development scheme with a developer whereby the organisation was to assign various lots to indigenous villagers who as “owners” of the lots would then apply for building licences from the Government on concessionary terms, and the developer would build houses on the lots partly for disposal by the organisation and the rest by the developer. The villagers would not have any interest in the houses, and no Premium would be paid to the government. The villagers signed declarations to the effect that they had not made private arrangements for their rights under the Small House Policy to be sold to others, and those who signed previous versions of such declarations had to sign fresh declarations as to intent and user before their applications would be approved. On such basis, it was found the scheme could not be performed without the commission of an illegal act (ie the villagers making false declarations or misrepresentations in the declarations), so the directors were entitled to a declaration that the scheme was unlawful/unenforceable with no proprietary interests acquired or divested.

61.  In Lau Kwai Kiu, Yuen JA (with whom Yeung VP and Chu JA agreed) at page 968 held that even assuming there was any illegality, P could establish equitable proprietary interests (under a resulting trust or common intention constructive trust) by reason of her payment of the concessionary premium for the grant and the construction costs for the small house (even though those interests were acquired in the course of carrying through an illegal transaction) because P did not have to establish her cause of action by reference to the illegal transaction.     

62.  As for the argument on breach of public policy, Yuen JA at page 969 noted X was required to sign only 1 declaration which did not contain any misstatement, and he was not required to declare he had not made a prior arrangement to transfer the property to, or to hold it on trust for, someone else.  Although the parties had intended to apply to the Government for the lot to be transferred to the plaintiff, this had not been done prior to X’s death due to the plaintiff’s lack of funds for the additional Premium.  Further, there was no evidence that the Government would not have removed the restriction against alienation in the plaintiff’s favour upon payment of the additional Premium, and indeed the Government had not taken any steps in relation to the lot even though she had been aware of this case for at least nearly 2½ years. Thus, all the evidence suggested this was a “jumping the gun” situation, which, according to Li Pui Wan, would not amount to a breach of public policy.

63.  Wilson Chan J adopted the above principles in Leong Wing Sum v Ng Kai Man[25] in a similar factual scenario, and rejected the argument that the act of indigenous villagers selling and the plaintiff purchasing the properties (subject to restrictions against alienation) without the consent of the DLO and the payment of the additional Premium was illegal such that any enforcement of such agreements would be contrary to public policy.  The learned judge cited the guidance in Li Pui Wan and Lau Kwai Kiu. He noted these 2 cases were distinguished in Chan Yau v Chan Calvin & anor,[26] which was not a “jumping the gun” situation as that case involved a statutory declaration by the applicant, who was a mere nominee, that he was the “sole owner” of the land, and the court held the agreement was unenforceable on the ground of illegality as it necessarily involved making false declaration to the Government without honest belief in its truth.  But Leong Wing Sum did not involve any false declaration to the Government.

64.  Although I need not rely on Mui So Bing v Wan Chi Sing & ors,[27] it is useful to just round off the discussion on the relevant legal principles with this recent authority which is also in line with the earlier authorities. In that case, the plaintiff claimed that in 2010 2 indigenous villagers sold and she purchased 2 plots of land for which she paid the full purchase price as well as the costs for the construction of the small houses thereon. The building licences were subject to non-alienation restrictions. In 2017, the indigenous villagers applied for the DLO’s consent to remove the restrictions, and upon payment of the additional Premium to the Government the DLO’s consent was deemed to have been given.  The indigenous villagers then sold the 2 plots of land to third parties.  When the plaintiff found out, she sued to assert she was the prior purchaser and equitable owner of the 2 plots of land and the houses thereon.

65.  Ng J cited Li Pui Wan and Lau Kwai Kiu, and rejected the argument that the act of selling the 2 plots of land in 2010 pursuant to the oral agreement between the plaintiff and the 2 indigenous villagers without then paying the additional Premium and/or obtaining the DLO’s consent was illegal (paragraphs 57-62). The learned judge considered the facts before him were akin to the “jumping the gun” situation in Li Pu Wan and Lau Kwai Kiu as there was no evidence that P intended to cheat the Government by not paying the additional Premium eventually, so the aforesaid oral agreement was not illegal.

66.  In the circumstances, I agree with Mrs Chan that on D’s case the CASP entered into in 1995 was a sale and purchase of the Property without the consent of the DO and before the payment of the additional Premium was merely “jumping the gun” with no evidence of (a) any involvement of false declaration made to the Government and/or (b) the Government losing out on the additional Premium that would have to be paid eventually.  Under the CASP, although vacant possession of the Property was delivered to D in June 1995, the Undertaking in clause 2 thereof provided D would be responsible for all costs and expenses for the transfer of P’s legal title and registered ownership of the Property to him, which meant the sale and purchase of the Property was not formalised in 1995 and would only be so formalised when future application would be made to Government for approval of the “formal transfer” of the Property to D upon payment of the additional Premium (to be borne by D) to the Government for such purpose. Thus, on D’s case, P and D did have the intention to finalise the sale and purchase of the Property in accordance with the terms and conditions set down in the New Grant (ie the Restrictions) rather than to cheat the Government of the additional Premium.  Further, on D’s case, this was reinforced by the Collateral Agreement and the Undertaking which alluded to intended eventual payment of the additional Premium to the Government. Still further, the letter dated 8 December 1999 by the DLO, Tuen Mun confirming the amount of the additional Premium valued at that time (see paragraph 20 above) also indicated that the DO was not against alienation of the Property subject to compliance with the requirements in the New Grant for lifting the Restrictions.  In my view, P failed to make out a case of illegality and/or breach of public policy on D’s case.  On the point of breach of public policy, I also bear in mind that in line with the Government’s Small House Policy, P and his family actually resided at the House/Property for more than 10 years before (on D’s case) he decided to sell the same to D.  In light of the explanation in Li Pui Wan, I find there was no breach of public policy in respect of the sale and purchase of the Property pursuant to the CASP on D’s case.

V. ISSUES

67.  D’s counterclaim raised a number of issues, including the following:

(a)	whether the transaction between P and D on 1 June 1995 was a sale and purchase whereby P as vendor sold and D as purchaser purchased the Property, or whether such transaction was a licence agreement whereby P as licensee granted a licence of the Property to D as licensor;
(b)	whether the CASP was an agreement between P and D for sale and purchase of the Property, or whether it was a document to secure/ protect D for recovery of the balance of the Licence Fee if there was early termination of the Licence Agreement by P before expiry of the Licence Term;
(c)	whether the CASP was prepared and drafted by LSTang’s wife as P’s agent (according to D) or by D (according to P’s pleadings);
(d)	whether or not P held the legal estate and/or registered ownership of the Property for the benefit of D, or in other words, whether or not D held the beneficial interest in the Property;
(e)	what were the purpose and effect of the GPoA, the PNote and the Will that P signed;
(f)	who gave the Split Proceeds Instructions to DTC, and whether the Title Deeds Direction was already written on the Split Proceeds Instructions when P signed the same;
(g)	whether, and if so, (i) when P and/or his agent(s) demanded D to deliver up vacant possession of the Property, and (ii) whether P was entitled to make such demand;
(h)	if D was successful on his counterclaim, what reliefs should be granted in his favour.

VI. WITNESSES

68.  Various aspects of this case fell to be decided on the facts, so the question of witnesses’ credibility/reliability became relevant.  In assessing witnesses’ credibility, I bear in mind not only their demeanour in court but also the intrinsic value of their evidence upon considering the totality of their evidence against the pleadings, chronology of events, documentary evidence and inferences based on inherent probabilities and/or undisputed facts.[28] I am also comforted that L Chan J adopted similar principles in Loandepot.com, LLC v Yingcai Tech Ltd & ors,[29] which authority was cited by Mrs Chan.

69.  D was 62 years old and unemployed at the time of the trial. He received primary education and had been a car mechanic for 42 years. D gave evidence at trial, and adopted his witness statement and supplemental witness statement dated 21 July 2016 and 9 February 2018 respectively (“D’s WS” and “D’s SWS”) as his evidence-in-chief. D impressed me as a straightforward and reliable witness. He was clear and consistent in his evidence. The events canvassed at trial spanned decades, so it was of importance to have regard to (a) the contemporary documents and (b) the overall probabilities of the explanations given about them, especially in light of the conflicts in evidence.  But save for a few matters in D’s evidence which I do not accept, the core matters of his evidence did not give rise to concern over his veracity, and unless otherwise stated, I prefer his evidence where it conflicted with P’s.

70.  On the other hand, P was 60 years old by the time of the trial. He received education up to Form 3, so his English language skill was up to Form 3 level. He spoke punti, and could read and write Chinese. P gave evidence at trial, and adopted P’s WS dated 30 July 2016. P’s cross- examination was notable for his flippant and mocking attitude towards Mrs Chan’s questions, which he tried to sidestep by saying they were repetitive and clumsy. Cross-examination did not reveal P in a good light as he displayed an elevated degree of shrewdness in avoiding matters that he perceived might not be to his advantage. My confidence in his testimony was also undermined by the alteration of his account from that in his pleadings and P’s WS (including, eg, the Licence Agreement in respect of the Property) as verified by statements of truth to an account in his oral evidence at trial based on a loan agreement (instead of the Licence Agreement over the Property) that had not been raised previously.  As seen in the analysis below, there were clear indicia that P’s evidence was unreliable and self-interested.  Some of his evidence defied belief, and he had no or no credible explanation on other matters.  The explanations that P saw fit to give were improbable and/or embroidered, and I am unconvinced the inconsistences/lapses in his evidence were due to faded memory.  I find P had not been truthful over important matters.  Quite plainly, he had convinced himself that he was right, and was reinterpreting some events from that perspective. On balance I reject P’s evidence on the core matters. In coming to this view, I have made every allowance for the strain of giving evidence in court, and P’s agitation at times which he explained away as “我有情緒病”.

71.  D served a subpoena dues tecum on Tsang for him to testify at trial, but in the end Mrs Chan decided not to call Tsang to give evidence on behalf of D. On the other hand, P did not call CSTsang and/or LSTang to give evidence on his behalf even though they witnessed P’s and D’s signing/ execution of the CASP, and they featured in both parties’ accounts of the relevant events.

72.  In DBS Bank (Hong Kong) Limited v Sit Pan Jit,[30] I have set out the relevant legal principles for drawing adverse inference from the absence of a witness who may be expected to have material evidence to give on an issue in an action. I reiterate and rely on those principles, and will not repeat them here.[31]

73.  Given my findings of fact below and my rejection of P’s evidence for its inherent unreliability and lack of veracity, there is no need to rely on any adverse inference against P for failing to call CSTang and LSTang as witnesses even though (a) both of them were personally involved in the arrangements for the transaction between P and D over the Property in 1995 and were the very persons who signed as witnesses on the CASP (see paragraph 14 above), (b) P claimed CSTang and LSTang were present when he went to DTC’s offices (see paragraph 106 below), and (c) as evident from a series of telephone messages in October 2014, LSTang acted as a point of liaison between P and D in relation to their dispute over the Property (see paragraph 159 below). Had CSTang and LSTang given evidence, the nature of the transaction between P and D over the Property as P alleged (eg the issues in paragraph 67(a)-(c) above) being a core matter of dispute could have been further explored. As they were not so called (and P did not give any good reason for not calling them – see paragraph 110 below), there was no opportunity to do so.  In my view, had it been necessary, adverse inference could have been drawn against P.

74.  On the other hand, D decided not call Tsang to give evidence. DTC had ceased practice before the trial, but D liaised with their agent Leung & Lien (“L&L”).  L&L by their letters dated 30 September, 15 October, 12 December and 23 December 2016 provided information about the matter in relation to the Properity handled by DTC, saying that:

“Given the length of time that has elapsed, you would no doubt appreciate whatever information or response we are able to provide would be based on a review of the file records and the recollection of the events by [Tsang] to the best of his ability.” (letter dated 15 October 2016)

“This is the preliminary information that we can assist so far, bearing in mind the long lapse of time. If additional information or documents are made available that may assist our [Tsang] to aid his memory and be able to clarify and recall the event with more details and accuracy.” (letter dated 12 December 2016)

“Bearing in mind the long lapse of time, we would be grateful if you would provide more information to us when raising any question and/or to elaborate your questions with more details or with documents so as to aid us to better assist you. ……” (letter dated 23 December 2016)

75.  Unlike the situation of CSTang and LSTang who did not give any account/statement, Tsang gave an account of his recollection drawn upon review of the available documents by way of L&L’s letters. The tenor of L&L’s letters was that due to the lapse of time and in the absence of further documents to aid memory, Tsang could only recall what was stated in the account given in L&L letters. I bear in mind that DTC’s account was independently given through L&L and not through D, and that DTC acknowledged they acted for both P and D in 1995 over the Property.  Further, since L&L’s letters were disclosed in the course of discovery in the present action, P must have been aware of Tsang’s account well before the trial and could have approached Tsang (whether through L&L or otherwise) as there was no property in witnesses.  In such circumstances, I am not persuaded I should draw adverse inference against D for not calling Tsang to give evidence at trial, but I have exercised caution in assessing D’s evidence where it did not sit with Tsang’s account and, as explained below, there were some aspects of D’s evidence that I do not accept although this did not affect his veracity on the core matters.

VII.  PROPERTY

76.  The matters set out in paragraphs 1-6 above in relation to the Property were not in dispute.  P said that in/about 1978 when he was about 21 years old, he as an indigenous villager applied for a piece of Government land (which transpired to be the Lot) to build a 3-storey small house or t’ing house for self-occupation.  On 13 June 1980, the Government issued the New Grant and granted the Lot to P, who was thereby aware of the Restrictions, ie the Lot and any small house erected thereon could not be sold/alienated unless he received the consent of the DO and paid the additional Premium assessed by the Government according to market price.

77.  The Government granted a building licence for P to erect a small house or t’ing house on the Lot. In/about 1982, P spent about $400,000 to erect the House according to the specifications in the New Grant. P claimed (and on balance I accept) his mother (“Mother”) paid the construction costs from her savings as she wished P to have a permanent home, and since then and up until June 1995 P lived with the Mother at the House.

78.  P claimed that by reason of the Mother’s contribution to the construction costs of the House, he promised the Mother not to sell the Property during her lifetime. In my view, even if P had given such promise to the Mother (which was probable as he lived with the Mother at the House for more than 10 years before they left in June 1995), P left such promise to the wayside when he fell into grave financial difficulties in/about 1987 and 1994, and notwithstanding such promise, P was constrained to mortgage and later to sell the Property. This will be further discussed below, but suffice to say here I do not accept P merely granted a licence of the Property to D in 1994. In my view, the evidence before the court pointed towards P’s financial desperation at being dunned by his creditor, and he was anxious to find relief for his financial troubles. Indeed, P confessed he was prepared to sign whatever document asked of him in order to obtain monies to pay his debt and to stave off his creditor, eg P said under cross-examination that “當時[P]係畀財務公司逼緊倉, 就算妳話[P]簽爭妳一千萬, [P]都簽畀妳喇 ……” and “…… 妳話[P]爭妳一千萬, [P]都簽落去㗎喇, 借錢吖嘛, ……” In any event, the Mother must have known P could not have lived up to her wish to have the House as his permanent home as it was common ground that in June 1995 P and the Mother moved out of the House, and D (whom P claimed was well-known to the Mother – see paragraphs 80 and 87(c) below) and his wife moved into the Property.

79.  I find on balance CSTang had explained to D that P and his brothers being indigenous villagers had the right to build their own small houses in the Village, but D (who was not an indigenous villager although he lived at the Village) did not have such special right.  I also find D was aware of the Restrictions over the small houses built by indigenous villagers in the Village (including the House that P built), and D knew P and his family lived at the Property until June 1995.

VIII. PARTIES’ RELATIONSHIP

80.  D said (and on balance I accept) P’s brothers CSTang and LSTang were his childhood friends and they grew up together.  Indeed, even P confirmed he and D were childhood friends, ie “係由細玩到大嘅朋友 ……”, and the Mother treated D like a godson.

81.  There was no dispute that for a number of years D was a lodger at CSTang’s home at No 168 (formerly No 55) of the Village. But due to lapse of time, D could not remember exactly when he lodged with CSTang. D explained (and on balance I accept) he became CSTang’s lodger because he had no place of his own, he only earned $10,000/month as a car mechanic, and he did not have much savings.  D further explained that CSTang learned from casual conversations with him that he only had a modest income. There was also no dispute that after his marriage in 1993 D and his wife went to live with the in-laws.

IX.  P’s FINANCIAL AFFAIRS

82.  P claimed (and on balance I accept) he suffered severe financial problems/loss from his investments during the financial crisis in/about 1987, so he was in serious financial difficulties. In/about 1990, P (without telling the Mother) mortgaged the Property to HKCB by way of the HKCB Mortgage for a mortgage loan of $600,000 to enable him to reduce/settle his debts. As seen in paragraph 5 above, P secured a no-objection confirmation from the Government for entering into the HKCB Mortgage. But P had to confess to the Mother about the HKCB Mortgage when he was unable to repay the mortgage loan. Since the Mother did not want HKCB to take possession of the Property, she asked LSTang to repay the outstanding mortgage loan to HKCB on P’s behalf.  So the HKCB Mortgage was redeemed as evidenced by a receipt on discharge of a charge dated 25 October 1994 (see paragraph 5 above).

83.  2 matters were of note in respect of the findings in the above paragraph. First, the above clearly showed that when faced severe financial difficulties, P had no qualms about encumbering the Property to obtain cash to reduce/settle his pressing debt despite real risk of losing the House/ Property if he failed to make timely repayment, which ran against the rationale if not the letter of the Mother’s wish for the House to be his permanent home, and his promise to the Mother not to have the Property alienated during her lifetime. Secondly, P’s inability to repay the mortgage loan under the HKCB Mortgage which led to redemption of such mortgage by LSTang in/about 1994 tied in with P falling again into financial trouble again in/about 1994 as explained in the paragraph below.

84.  There was no dispute that in/about 1994 P’s investments again failed and he was heavily in debt. As seen in paragraph 6 above, in April 1995 the Government was prepared to grant a no-objection letter for P to again mortgage the Property to raise a mortgage loan. But in the end P did not enter into any fresh mortgage over the Property.[32] Instead, P borrowed a personal loan in the sum of $600,000 from a moneylender or finance company Best Profit Investment Limited (“FinCo”),[33] and pledged the Property as security to the FinCo by deposit of the Title Deeds.  But P claimed no loan document in respect of such personal loan was in his possession.

85.  P confessed that by about 1995 he was unable to make repayments of the personal loan granted by the FinCo, which repeatedly threatened to take legal action to recover possession of the Property. So P discussed with LSTang and CSTang to seek their help to make repayment of such personal loan due to the FinCo.

X. TRANSACTION OVER THE PROPERTY IN 1995

86.  According to paragraph 10 of P’s WS (and consistent with P’s pleadings), CSTang told D about P’s circumstances, and “[D]當時因為結婚要找房子”, so CSTang suggested to D that if D was willing to pay a lump sum Licence Fee of $950,000, then on the basis of, say, a monthly licence fee of about $8,000/month, “[P]就可以將[Property]讓給[D]暫住10年”. It was said that such proposal would relieve P’s financial difficulties on the one hand and would also resolve D’s accommodation issue on the other hand.

87.  P’s WS (which P adopted as his evidence-in-chief) went on to say that both P and D agreed to such proposal by CSTang. P claimed he agreed to such proposal because he trusted D not to cheat him: (a) P was familiar with D as D had borrowed use of the open area of the Front Yard from him during the period from 1982 to 1985 for carrying out car repairs, (b) D would stay overnight at P’s home now and then, and (c) the Mother treated D like a godson and took care of him.

88.  Still further, P’s WS (consistent with P’s pleadings and adopted as part of his evidence) stated that (a) D requested him to sign a written sale and purchase agreement (that would not have legal effect) to assure D he would not recover possession of and/or sell the Property within the 10-year Licence Term, (b) D assured him (and he believed) that so long as he would not recover possession of and/or sell the Property, D would not use such sale and purchase agreement for any purpose, and (c) he agreed to sign such agreement for sale and purchase of the Property at D’s request so as to quickly receive the lump sum Licence Fee for reducing/settling his pressing debt due to the FinCo.

89.  But under cross-examination, P testified he did not know that in 1995 CSTang told D (a) P was heavily indebted to a finance company, and/or (b) P wanted to urgently sell the Property on the basis that he was worried the FinCo might seize possession of the Property.  More importantly, P claimed under cross-examination the transaction over the Property as between him and D “…… 根本就係借錢, ……”, ie D granted a loan of $950,000 to him in return for the right to occupy the Property,[34] but “…… [D]就應承咗, 「如果你有錢嘅話, 我就可以搬走, 你還咗$950,000畀我」”. When pressed on whether there was any fixed term for D’s right to occupy the Property or whether such right to occupy would terminate upon P’s repayment of the alleged loan to D, P said “…… 係講咗十年內,「總之你可以住喺度十年內, 但係我還咗錢畀你, 咁你就要走」……”, ie D could reside at the Property for 10 years but would have to leave if the loan was repaid before expiry of such period or, to put in other words, “…… 係還錢畀[D] …… 還咗錢咪要走喇”. But when questioned as to whether D had to vacate the Property after 10 years if P failed to repay the alleged loan of $950,000 within the 10-year period, P shied away from a direct answer as to what was originally agreed between the parties, and merely asserted that subsequently “[P]同[D]講過, [P]嗌[D]走” (see Part XIX below). P went on to disagree under cross-examination that (a) the CASP was a genuine sale and purchase transaction, (b) CSTang told P that D did not have sufficient money to pay the additional Premium, (c) CSTang told D that P would assist in future procedures to arrange payment of the additional Premium, and (d) P via CSTang undertook to so assist D.

90.  When Mrs Chan put to P that his testimony under cross- examination in the above paragraph (eg the alleged loan agreement between P and D whereby D lent $950,000 to P on the understanding that D could reside at the Property for 10 years but subject to early repayment) was not found in P’s WS at all and did not sit well with the Licence Agreement between P and D as referred to in P’s WS (and indeed P claimed under cross-examination that he never said D’s payment of $950,000 was the lump sum Licence Fee for D’s licence of the Property), all P said was “[P]唔記得咗喇, 漏低咗” to insert in P’s WS the loan agreement that he alluded to under cross-examination.  

91.  In my view, the diametrically different accounts put forward  by P as to the nature of the transaction over the Property (ie an oral licence agreement versus an oral loan agreement with permission for D to reside at the Property) severely undermined P’s veracity, and I find myself unable to place weight on either account.  In my view, P could not have any misunderstanding that the 2 accounts were fundamentally different.  If the nature of the transaction was a loan agreement, the loan of $950,000 would have to be repaid in full; but if the transaction was by nature a licence agreement, there would have been no repayment[35] because the payment of $950,000 would be lump sum advance payment of the Licence Fee for D’s licence of the Property during the Licence Term. Further, if the transaction was a licence agreement, then D would have no right to remain at the Property after expiry of the Licence Term and exhaustion of the Licence Fee, but as explained in paragraph 89 above, P did not give any straight answer as to whether D could remain at the Property if he failed to repay the alleged loan after 10 years.

92.  Moreover, if the transaction over the Property was by nature a loan agreement without D acquiring any ownership and/or equitable interests in the Property, there would not have been any need for the CASP to be worded as an agreement for sale and purchase. After all, P had previous experience of borrowing personal loan from the FinCo upon pledging the Property by way of deposit of the Title Deeds, and there was no evidence that he had signed any agreement for sale and purchase for such purpose.  P had not explained why a similar arrangement would not be good enough “protection” for D as lender.  Further, given the Government was prepared in April 1995 to issue a no-objection confirmation, P also had not explained why he did not seek to re-mortgage the Property and use any re-mortgage loan to settle the debt due to the FinCo if the transaction he had in mind was merely a loan agreement.

93.  I note both P’s pleadings and P’s WS were verified by P’s statements of truth, and they were prepared/filed when P had the benefit of legal representation, but they made no reference to any loan agreement at all.  On balance, I do not believe P merely forgot or missed reference to any loan agreement in his pleadings and P’s WS because (a) he actually gave a different account in his pleadings and P’s WS, (b) he was the one who commenced the present action and rested his claim on the alleged Licence Agreement, (c) he could have “corrected” himself by seeking leave to amend his pleadings and/or to serve a supplemental witness statement. I note also that P’s WS was in Chinese, which P could read himself.

94.  The above analysis pointed inexorably to the conclusion that neither account put forward by P was true. I find P’s evidence in this respect unreliable, and I reject such evidence. In my view, it was quite plain P was prepared to say whatever he thought would advance his intention to recover possession of the Property from D, and he was quite unconcerned with telling the court the truth. This was also illustrated by P’s answer under cross-examination that D only “lent” a modest sum and not $950,000 to him on the basis that a significant portion of the sum of $950,000 paid by D was ultilised as payment to the FinCo and as settlement of expenses (eg legal fees and disbursements).  But in the end P was constrained to accept the payment to the FinCo out of the sum of $950,000 paid by D was equivalent to payment to him as it served to reduce/settle his debt due to the FinCo.

95.  On balance, I prefer the case of D who denied (a) P’s stance that “根本上就請[D]返嚟住, [D]係借錢畀[P] ……” and that “…… 由頭到尾[P]都係請[D]返嚟住, 問[D]借錢, 從來冇意識係賣畀[D]”, or alternatively (b) P’s stance that the transaction was the Licence Agreement whereby D paid the Licence Fee for his licence of the Property during the Licence Term.

96.  D said (and on balance I accept) when he visited LSTang’s home on a day in 1995,[36] CSTang told him (a) P was heavily in debt, (b) P needed to urgently sell the Property in order to use the sale proceeds to repay his debt otherwise his creditor could seize the Property from him, and (c) CSTang and/or LSTang[37] told him they had tried to help P by looking for a buyer of the Property but their efforts were in vain.  I find on balance that CSTang and/or LSTang knew D and his wife were then living with D’s mother-in-law, so CSTang asked D whether he would like to purchase the Property for a consideration of $950,000. I also accept CSTang knew D could not afford to pay the additional Premium (which was estimated to be about $1,000,000 in 1995) given his modest income of $10,000/month as a car mechanic, so CSTang (who had spoken to P for his views) “提議雙方就[the Property]的買賣無需簽署任何文件, [P]會承諾若[D]日後有能力支付[the additional Premium]時, [P]定當全力協助完成相關的轉名文件及手續” (ie the Undertaking), and “…… [CSTang]為[P]作出該承諾 ……”  P in his closing submissions queried why the estimated additional Premium was $1,000,000 when the purchase consideration was merely $950,000. I note the concessionary premium was only $3,000.  But notwithstanding P’s query, P did not place evidence of the then market price before this court.  However, for stamp duty purpose, in 2011 the Stamp Duty Office valued the Property as at 1 June 1995 at $1,800,000, and in 2013 the Stamp Duty Office re-valued the Property as at 1 June 1995 at $1,350,000 (see paragraph 158 below).  These valuations took place in 2011 and 2013, but in 1995 (a) P was anxious for a quick sale of the Property to obtain early funds to reduce/settle his debt due to the FinCo, and (b) P’s siblings(s) were unable to find a willing purchaser for the Property despite his/their efforts, which matters might serve to have adverse effect on the purchase price of the Property.[38] But in any event, on D’s case, it was D rather than P who would have to bear/pay the additional Premium, so it would not have been a matter that would have worried P.

97.  P disagreed CSTang confirmed with him and on his behalf gave the Undertaking to D that P would assist D in future with the formal procedures for paying the additional Premium and for vesting the legal title and registered ownership of the Property in D.  But I find on balance CSTang gave such Undertaking to D on P’s behalf, and had CSTang not given such Undertaking on P’s behalf, D would not have agreed to (and indeed would not be able to) purchase the Property given his then financial inability to pay the additional Premium. D explained (and I accept) the consideration of $950,000 for the purchase of the Property used up his savings over the years, and with his modest monthly income he could not have afforded to (a) pay the additional lump sum Premium (then estimated to be about $1,000,000) at the same time as he paid the purchase price, and/or (b) repay any loan instalments under any mortgage loan to be secured by charge over the Property that might have been taken out (if at all) for payment of the additional Premium.

98.  P suggested D’s assertion (ie that he did not have enough money to pay the additional Premium for finalising the formal procedures for the sale and purchase of the Property to vest legal title and registered ownership in D) was not credible. P claimed that if there was a genuine sale and purchase of the Property, “…… [D]絕對可以向銀行申請按揭以清付當時的港幣1,000,000元的地價。[D]有能力一次過支付港幣950,000元除地價外的樓款, 卻選擇不去申請銀行接揭以補清地價完成[Property]的買賣手續, 完全不合情理”. Under cross-examination, P further said D “…… 拎咗$950,000出嚟嘅話, 點會拎唔到$1,000,000出嚟補地價? 如果[D]話[P]真係賣畀[D]嘅話 ……”, “…… 咁[D]拎咗$950,000出嚟, 如果[P]係買樓,  …… 如果[P]要補地價, [P]問銀行借$1,000,000去補地價, 係冇問題嘅, 有咩嘢問題呢? 可以即刻可以補地價, 根本上[Mrs Chan]講嘅嘢, 講到九碼遠, 根本上都唔合情、唔合理嘅, 全部, 搞到根本上好簡單嘅問題, 搞到好複雜 ……”

99.  I disagree, and can deal with this shortly. First, there was simply no evidential basis for P to say that because D was able to pay the purchase price of $950,000 he would necessarily have been able to afford another $1,000,000 to pay the additional Premium at the same time.  The fact D was a car mechanic with modest income, and the further fact D had no place of his own and was a lodger with CSTang for some years before he and his wife lived with the in-laws suggested otherwise.  Secondly, P and not D was the registered owner of the Property, and hence D was not in a position to obtain a legal charge over the Property to secure any mortgage loan. Indeed, when pressed on this point under cross-examination, P agreed D was not the registered owner of the Property, and “…… 一個唔係登記業主嘅人，係唔可以拎間屋去做按揭嘅 ……” In any event, P had already pledged the Title Deeds with the FinCo for a personal loan of $600,000. There was no merit to P’s contentions.

100.  On balance, I accept D’s evidence that with his financial limitations, it was the common intention, understanding and agreement between him and P there would not be any immediate application to lift the Restrictions, and such application would only be made in future when D was able to pay the additional Premium whereupon the procedures for formal transfer of the legal title and the registered ownership of the Property from P to D would be finalised (ie the Collateral Agreement was binding on P and D as the contracting parties).

101.  In my view, the sum of $950,000 to be paid by D to P was the purchase consideration for D’s purchase of the Property from P, and not any lump sum Licence Fee payable by D to P for the Property or any loan by D to P. I reject P’s insistence under cross-examination that “…… 根本上呢, [P]就借咗[D] …… 九十幾萬 ……” and/or that “根本上由頭到尾 …… 都係去借錢, …… 何來 …… 講到補地價, …… 點會講到補地價呢”.  I also reject any suggestion that CSTang on P’s behalf asked D for a loan of $950,000 instead of a sale and purchase of the Property. In my view, D agreed to the Collateral Agreement because he believed CSTang and his younger brother P would not cheat him as they were childhood friends, and as seen below, D consequently asked P to sign an agreement for sale and purchase of the Property with him, ie the eventual CASP.

102.  I do not accept P’s claim that he would not have sold the Property because “…… 呢間屋係[the Mother]畀[P]嘅, [P]由頭到尾, 如果我[P]賣嘅話, [P]唔需要賣畀[D], [D]就係畀個條件[P], 就係借錢畀[P]嘅啫”. First, as explained in paragraph 78 above, in 1995 D was desperate for money to repay his debt to the FinCo, and whatever promise he gave to the Mother in respect of the Property (if any) would have fallen to the wayside.  Secondly, I have explained why P’s suggestion that the nature of the transaction was a loan by D to P was not credible.  Thirdly, I have also found that P’s siblings had tried in vain to sell the Property. There were no other willing buyers in respect of the Property in May/June 1995.

XI. CASP

103.  There was no dispute that on 1 June 1995 P and D signed the CASP as witnessed by CSTang and LSTang. The CASP on its face stated P sold the Property to D for a consideration of $950,000 (clause 1), and P gave the Undertaking to unconditionally assist D to handle and finalise the procedures for formal “change of name” of registered owner from P to D to vest the Property in D, who would be responsible for all fees/expenses in respect of such procedures including the additional Premium. Indeed, clause 2 of the CASP reflected the Undertaking.

104.  It is important to note P acknowledged he voluntarily signed the CASP in the presence of his 2 brothers. As I have found above, there was no convincing explanation why P would have signed the CASP in terms of a sale and purchase of the Property if the transaction between P and D was a loan agreement. There was also no persuasive reason why P’s brothers would have allowed P to sign the CASP and witnessed P’s signature thereto if to their knowledge the transaction was not a genuine sale and purchase of the Property.  In my view, the fact CSTang and LSTang were willing witnesses to the CASP went a long way to give credence to their roles as go-between to help put together the sale and purchase transaction where P sold and D purchased the Property for the consideration of $950,000.

105.  When pressed under cross-examination that the transaction between P and D, if it were a loan agreement, could have been recorded as such in the CASP, P claimed (a) he did not know who wrote the CASP, and (b) D would not have agreed to have the CASP worded as a loan agreement. In respect of (b) above, in my view and as explained above, the fact P knew D would not have agreed to have the CASP worded as a loan agreement was because the transaction was not a loan agreement.  P’s understanding in this respect served to bolster D’s case that it was a sale and purchase of the Property. As for (a) above, P’s evidence was inconsistent. In paragraph 12 of P’s WS, P claimed it was D who drafted the CASP. But under cross- examination P said he was not the one who prepared/wrote the CASP and he did not know who did so, but he offered no explanation as to why he stated in P’s WS that it was D who drafted the CASP.  On balance, I accept D’s evidence that it was P’s sister-in-law (ie LSTang’s wife) who drafted/wrote the CASP for P’s and D’s signature on 1 June 1995, ie before P signed the Will, the GPoA and the PNote at DTC’s offices.

106.  But P claimed under cross-examination that he saw the then as yet unsigned CASP for the 1^st time at DTC’s offices, with D, CSTang, LSTang and Tsang present.  P said when he 1^st attended D’s offices, “[P]一個人上去, 但係好多人喺度等緊[P]”, then everything happened quickly, “…… 全部啲嘢都係口頭上嘅協議嚟 ……” P testified under cross-examination that DTC/Tsang told him “借錢就要保障, 即係 …… [P]必須要簽呢份嘢[ie CASP], 如果唔係[P]係借唔到錢還畀[FinCo] ……”, “[Tsang]係解釋畀[P]聽, 同埋喺度呢咁多個人解釋畀[P]聽 ……” P said he knew from reading the CASP that it expressly referred to a sale of the Property by P to D, but he claimed Tsang told him “...... 因為係保障[D]拎咗錢出嚟嘅, 就咁解釋畀[P]聽啫”, and “…… 由頭到尾都係話, 呢個就因為保障[D]吖嘛, …… [Tsang]話畀[P]聽係保障[D]嘅”. P further claimed that “…… 寫咗[CASP]出嚟之後，解釋畀[P]嗰個聽[D]話,「因為係保障對方，而先至要寫呢個嘢落去，但係你哋口頭上嘅嘢，你哋已經知道㗎喇」, 大家都知--即係有默許嘅, 咁但係口頭上嘅嘢就冇寫落去 ……” But then P also claimed under cross-examination “但係[P]同[D]口頭上嘅嘢已經保障咗喇” (ie P’s oral understanding with D already served to protect his interests) as P and D were childhood friends, “係由細玩到大嘅朋友, [D]以前唔係咁㗎”,  but “…… [D]娶咗老婆，而家先變成咁之嘛”.

107.  On balance, I reject P’s account of how the CASP came about set out in the above paragraph. Paragraphs 10-13 of P’s WS stated inter alia that:

“後來[P’s]哥哥[CSTang]將[P]的情況告訴[D], [D]當時因為結婚需要找房子, 因此[P’s]哥哥[CSTang]向[D]提出如果[D]可以一次性向[P] 支付港幣950,000元(以大約月租港幣8,000元計算), [P]就可以將[House/Property] 讓給[D] 暫住10年。 …… [P] 和[D] 都同意[P’s] 哥哥[CSTang]的建議。 …… [D]為了保證[P]不會在10年內將[House/ Property]收回或賣出, [D]要求[P]簽署一份沒有法律約束力的買賣協議書 …… [P]接受[D]的要求, 在1995年6月1日,在[P’s]哥哥[CSTang]和[LSTang]見證下,簽署了該份由[D]起草只用作保證[P]不會在10年內將[House/Property]收回或賣出的買賣協議書[ie the CASP] …… 但在[P]簽署了[CASP]後, [D]竟然說為了進一步保障[D] 的權益, [D]要求[P]到[D]委託的律師行再簽署若干文件, 待該等文件簽署後, [D]會指示律師為[P]請還財務公司的欠款, 然後才將尾數給[P] 。……”

Plainly, P’s account in P’s WS was this: (a) it was on 1 June 1995 that P (as witnessed by CSTang and LSTang) signed the CASP drafted by D (in contra-distinction to P’s oral evidence that he did not know who drafted the CASP – see paragraph 105(a) above), and (b) it was only after P signed the CASP that D mentioned the need for P to sign more documents to be prepared by DTC to protect D’s interests. Thus, according to P’s WS, P signed the CASP before he was even aware of DTC let alone his attendance at DTC’s offices. Thus, P’s WS contradicted P’s testimony under cross- examination that he only saw the CASP (then as yet unsigned) at DTC’s offices. This undermined P’s veracity as to his allegations as to how the CASP came into being.

108.  Next, according to the letter dated 15 October 2016 by L&L as agent of DTC (which had ceased practice), DTC confirmed they had no involvement in the preparation and/or the execution of the CASP.  But when P was shown such letter by L&L, he still insisted he signed the CASP at DTC’s offices, and claimed (a) “[P]有冇記錯咗？…… 點會記錯？…… 唔好無理取鬧喇”, and (b) DTC’s stance set out in L&L’s letters was not his business and he could not answer for L&L.  Obviously DTC’s confirmation did not sit well with P’s assertion that he only sighted the CASP at DTC’s offices, but was consistent with D’s case that the CASP was prepared by LSTang’s wife, signed by P and D, and witnessed by CSTang and LSTang on 1 September 1995 before P’s attendance at DTC’s offices.

109.  I find on balance DTC had no involvement in the preparation and/or execution of the CASP, which written agreement was already signed on 1 September 1995 before P attended DTC’s offices. In my view, this was consistent with D’s case and L&L’s letter dated 15 October 2016.  I find that in the course of his cross-examination, P embroidered his case and made up the assertion that the CASP was sighted and signed at DTC’s offices, and I reject his testimony as to how the CASP came about and was signed.

110.  As Mrs Chan submitted, since (a) there was no dispute P and D willingly and voluntarily signed the CASP, (b) it was common ground that P did not draft/write the CASP, and (c) there was difference or conflict between P’s WS and P’s testimony at trial as to who drafted/wrote the CASP and where it was signed/executed (see paragraphs 104-107 above), CSTang and LSTang as witnesses to the CASP would have been able to give material evidence on the circumstances as to how the CASP came about. But P did not offer any good reason for not calling either of them as witness, and merely alleged there was no need to do so as he spoke the truth. When pressed he said “唔叫咪唔叫囉, 答咗妳喇”. In paragraphs 104-109 above, I have rejected P’s evidence about the CASP by reason of its inherent unreliability and in light of other evidence, but had it been necessary, adverse inference against P could have been drawn for not calling CSTang and/or LSTang to give evidence.

111.  More importantly, P had no or no credible explanation as to why he himself was content to sign and/or his brothers were content to allow him to sign the CASP which stated that P sold the Property to D if the transaction was in fact a loan agreement or a licence agreement.  I am not persuaded by P’s suggestion that he himself was so financially desperate that he would have signed anything so as to receive monies to repay the debt due to the FinCo, especially when an appropriately worded licence agreement or loan agreement would have served such purpose. In any event, P’s such assertion would not have explained why CSTang and LSTang (ie P’s brothers and D’s close friends) would have went along with the CASP by endorsing a “sham” sale of the Property by P to D instead of a licence agreement or loan agreement. When pressed on this by Mrs Chan, P had no answer and tried to brush aside her questions as being clumsy and repetitive. But in my view, the logical and persuasive conclusion on the balance of probabilities was that the true nature of the transaction was P’s sale of the Property to D for the consideration of $950,000, and as the terms of the CASP correctly reflected this, P and his brothers willingly signed or witnessed the same.

112.  P next claimed that if the sale and purchase of the Property referred to in the CASP was genuine, D would have registered the CASP against the Property at the Land Registry to protect his lawful rights, ie “如果係賣間屋畀[D], [D]即刻去打釐印、補地價喇, 咁就唔會犯法, 根本上如果咁樣做買賣, 冇補地價係犯法㗎嘛 ……” In my view, such argument ignored the reality (as I have found) that D did not have sufficient financial resources to pay both the purchase consideration ($950,000) and the additional Premium (estimated to be $1,000,000) at the same time, which in my view explained why the additional Premium was not paid then. On balance, I further find that since (a) there would not have been any formal transfer of the legal title and/or the registered ownership of the Property from P to D in June 1995, which formal transfer would only occur in future when D was ready and able to pay the additional Premium (see the Collateral Agreement and the Undertaking), and (b) P’s beneficial interests in the Property would be protected by other documents to be signed by P (eg the Will, the GPoA and the PNote) and the deposit of the Title Deeds with D, D’s purchase of the Property in 1995 clearly “jumped the gun” in that it was (as D accepted) made in breach of the Restrictions, ie sale and purchase of the Property before obtaining the consent of the DO and before paying the additional Premium, but the transaction was nonetheless a sale of P’s interests in the Property to D but for the formal transfer of legal title and registered ownership, which in turn explained why D did not stamp the CASP or register it with the Land Registry pending future payment of the additional Premium and future formal transfer of the legal title and registered ownership to him. Indeed, D did not register the CASP with the Land Registry until he was alarmed by the registration of the Loan Documents which registration he discovered in 2010 (see paragraphs 153-154 below).  I see nothing sinister in D’s complaints in this respect.

113.  In light of the above analysis, D (upon payment of the purchase consideration of $950,000) became the beneficial owner of the Property, leaving P as the bare trustee holding the legal title and registered ownership on trust for D.

XII. DTC

114.  According to P’s WS, after P signed the CASP, D told him D needed further protection, and “…… 要求[P]到[D]委託的律師行再簽署若干份文件, 待該等文件簽署後, [D]會指示律師為[P]清還[FinCo]的欠款, 然後才將尾數給[P]。同樣地, [D]保證只要[P]不在10年內收回或賣出[Property], [D]絕對不會取出這些文件作任何用途。[D]說[D]會委託律師代[P]向[FinCo]核實欠款的數目並取回及保存所有[Title Deeds]直至10年期滿為止”. P claimed that at that time, he was anxious to settle the debt he owed to the FinCo, so he agreed to D’s request to attend the offices of D’s solicitors (who turned out to be DTC) to sign documents and to hand over the Title Deeds for their custody.

115.  But D claimed it was P who recommended DTC for handling the sale and purchase of the Property, and eventually P and D instructed DTC to act for both of them in respect of such transaction.  The letters dated 30 September and 15 October 2016 by L&L set out DTC’s account that in/about June 1995 DTC was initially retained by D to act for him in an intended purchase of the Property, but a few days later the sale and purchase was not proceeded, and DTC was retained to act for both P and D in a loan transaction with preparation and execution of the GPoA, the PNote and the Will.

116.  When it was put to P under cross-examination that DTC was told the subject transaction was a sale and purchase of the Property, P said “由頭到尾都冇話賣屋喇, 係借錢之嘛, [D]都知㗎喇, 扭橫折曲”, “…… [P]由頭到底呢, …… [P]係確認, [P]根本上如果[P]要賣, [P]唔需要賣畀[D], 就係因為 …… [D]係可以借錢畀[P], [P]可以畀[D]入嚟住, 就係咁簡單之嘛 ……” But for reasons I have already explained above, I reject P’s claim that the transaction over the Property was a loan agreement, and find that it was a sale and purchase of the Property by P to D (as there were no other willing purchasers at the time).

117.  There was no dispute DTC’s handling solicitor was Tsang. I accept on balance D (as he said under cross-examination) told Tsang about the then contemplated sale and purchase of the Property, which was consistent with the letters dated 30 September and 15 October 2016 by L&L that D initially asked DTC to act for him in an intended purchase of the Property.  I also accept on balance that shortly afterwards DTC was not required to handle the agreement for sale and purchase of the Property. After all, P and D were “jumping the gun” in relation to the sale and purchase of the Property by deferring (a) application to the DO for consent and (b) payment of the additional Premium in breach of the Restrictions.  Thus, it was unsurprising that DTC as solicitors were eventually not involved in the CASP which recorded the sale and purchase of the Property, and in my view, it probably explained why the CASP was prepared by LSTang’s wife and signed by P and D on their own (as witnessed by P’s brothers) without DTC’s involvement.  However, I find on balance that D told DTC/Tsang who knew the transaction was essentially a sale and purchase of the Property, even though DTC was not required to deal with that aspect.

118.  But quite irrespective whether it was P who recommended DTC or not, I find it was D and not P who approached DTC to assist in preparing documents to be signed by P for protecting D’s interests as purchaser of the Property against the inherent risks of having the legal title of such property remain with P. In my view, D more than P had the incentive to seek such protection. Indeed, P gave evidence that Tsang told him he had to sign certain documents to afford protection to D, and that he was prepared to attend DTC’s offices to sign such documents and to hand over the Title Deeds. Given D’s request for such protection and P’s willingness to afford such protection, I find on balance P and D instructed DTC to act for them to prepare suitable documents for P’s signature with a view to protect D’s interests in the Property upon the aforesaid sale and purchase and upon the payment of the purchase consideration when the legal title still remained with P (which documents later transpired to be the Will, the GPoA and the PNote). In all the circumstances, I disagree P and D instructed DTC/Tsang about a loan transaction whereby D lent $3,500,000 to P as suggested in L&L’s letters.  Indeed, it was common ground between P and D that there was no such loan of $3,500,000 by D to P, and I have found D told DTC/Tsang that the transaction involved a sale and purchase of the Property (see paragraph 117 above).  This will be discussed further in Part XIV below.

XIII.  PAYMENT OF CONSIDERATION

119.  I find on balance that on 7 June 1995 P requested D to issue a cashier order (payable to DTC) for the purchase consideration of $950,000 pursuant to the CASP, and on the same day D gave DTC a Citibank cashier order in such sum. By a letter dated 30 September 2016, L&L confirmed D paid $950,000 to DTC by way of a cashier order issued by Citibank on 7 June 1995.  This clearly showed DTC/Tsang acted for P to receive the sum of $950,000 from D, and bolstered L&L’s confirmation and my conclusion that DTC/Tsang acted for both P and D.

120.  In my view, upon D’s payment of the purchase consideration of $950,000 to DTC who received the sum on behalf of P, D became the beneficial owner of the Property, and P became the bare trustee who held the legal estate and registered ownership of Property on behalf of D.

XIV. WILL, GPoA AND PNOTE

121.  P in his pleadings averred he signed the GPoA and the Will and delivered the Title Deeds to DTC “to secure the repayment by [P] to [D] for early termination of the Licence Agreement but not for any other purpose ……” According to P’s WS, on 8 June 1995, pursuant to D’s request and accompanied by him, P attended DTC’s offices to sign certain documents, and Tsang produced the GPoA, the PNote and the Will for his signature. P testified under cross-examination that Tsang told him the 3 documents “係保障[D]吖嘛, …… 因為[D]拎咗錢出嚟吖嘛, 因為[D]從來都唔信[P],因為唔信任[P], 只不過就係, 啲錢都唔會過[P]手嘅 …… 律師話保障佢可以收番錢”. P claimed at that time he was only concerned to quickly settle his debt to the FinCo, so he agreed to sign those 3 documents at Tsang’s direction.

122.  On the other hand, D claimed that on 8 June 1985,  in order to assure him that P would perform the Undertaking in future, P arranged for DTC to prepare the GPoA, the PNote and the Will (all dated 8 June 1995) in favour of D, which documents P signed and gave to D. D claimed he was unfamiliar with the procedures for selling/purchasing properties in the New Territories, and the 3 documents “都是由[P]委托的[DTC]安排” and their purpose was to “向[D]保證當[D]要求時, [P]會履行[P’s Undertaking], 協助[D]辦理補地價及轉名等手續”.

123.  I have found (a) it was D who approached DTC/Tsang about the Property and to seek advice on protection of interests in the Property, (b) P was agreeable to sign documents to so assure D as P wanted to quickly utilise the purchase consideration to reduce/settle his debt due to the FinCo, and (c) P and D jointly instructed DTC/Tsang for such purpose. In my view, it was DTC/Tsang who advised/prepared (and both P and D accepted and thereby instructed) that the PNote, the GPoA and the Will be given/signed by P to protect D’s interests in the Property. In my view, D was an unsophisticated layman, and would not have been able to give specific instructions for the preparation of the PNote, the GPoA and the Will, especially when these 3 documents had no immediate or direct relation to the sale and purchase of the Property as evidenced by the CASP signed by P and D on 1 June 1995. This was especially so when both P and D confirmed there was no genuine loan transaction between them whereby D lent $3,500,000 to P.  But as Mrs Chan submitted, it was not uncommon for legal practitioners to adopt similar documents (eg power of attorney and will) with deposit of title deeds for their clients in the context of sale and purchase of small houses or t’ing houses because of various government requirements and restrictions on alienation.[39]

124.  P claimed that if the CASP was a real sale and purchase agreement, D would not need the PNote, the GPoA or the Will, and all D had to do was to pay the additional Premium to the Government, and then request P to finalise the formal procedures for the sale and purchase of the Property according to the CASP. In my view, if D had been able to afford the additional Premium in June 1995, the CASP, the Collateral Agreement and the Undertaking would have been unnecessary, and surely D could have asked for P’s help to obtain the consent by the DO and to arrange payment of the additional Premium. In my view, the developments in June 1995, including the CASP, the Collateral Agreement and the Undertaking, all pointed to (and as I have found) the fact that the sale and purchase could not be formalised as D could not afford to pay the additional Premium then, so consequently there were perceived risks for D who had paid the full purchase consideration but as yet had no legal title or registered ownership of the Property (eg further sale or encumbrance of the Property by P).

125.  In my view, if the transaction in question was the Licence Agreement as P alleged in his pleadings and in P’s WS, there would not have been any need for P to execute the Will to bequeath the Property to D upon P’s death and/or to sign the GPoA to let D act as P’s general attorney during his lifetime.  After all, according to P’s pleadings and P’s WS, D only had an occupation right in respect of the Property for 10 years, and I find it inherently improbable that D and/or DTC/Tsang acting for both parties would have asked P to execute the Will/GPoA, and/or that P would have been prepared to sign the Will/GPoA if the transaction was merely a licence of the Property to D.  In my view and as explained below, the PNote, the GPoA and the Will on balance supported D’s case that the transaction was a sale and purchase of the Property.

126.  As for the PNote (the terms of which were set out in paragraph 17(c) above), P testified under cross-examination that “…… [D]話律師嗰度又要簽過一份嘢就話, ……[P]爭[D]$3,500,000, 簽咗一張[PNote]畀佢，……” The PNote (which P signed) provided that P promised to pay D the sum of $3,500,000 for value received by 3 instalments payable in June 1996, June 1998 and June 2001, but if any instalment or any part thereof was unpaid when due, all outstanding payment then remaining shall immediately become due and payable. P claimed the PNote was a fabrication (even though he was quite prepared to sign the same) as D never lent or paid the sum of $3,500,000 to him as recorded therein. It was common ground that the transaction was not a loan of $3,500,000 from D to P, but P claimed that “[P]係 …… 點解簽咗份$3,500,000嘅合約呢？就係因為[D]驚[P]今日借咗妳$950,000, 聽日就拎番$950,000畀佢, 就要[D]搬走, 所以再簽多份$3,500,000嘅合約, 呢度係事實嘅全部, ……”, and that“…… [P]當時嗰個環境裡面, 人哋話肯借錢畀[P], 簽咩嘢[P]都簽畀佢喇, 如果咁講”.

127.  The GPoA signed by P provided that P appointed D as his attorney under section 7 of the Power of Attorneys Ordinance Cap 31. P also signed the Will (as witnessed by Tsang and DTC’s clerk) whereby he appointed D as his executor and bequeathed his interests in the Property to D. P disagreed such bequest meant the Property would upon his death pass to D without further need to pay the additional Premium as his understanding was that additional Premium would have to be paid in all cases because the Property was subject to the Restrictions.  Although P testified he could have revoked/changed the Will to cut off the bequest of his interests in the Property to D, he had not done so even up to the time of the trial. When pressed on why he signed the Will if the transaction was merely D’s loan of $950,000 to him as he alleged, P said “當時[P]係畀[FinCo]逼緊倉, 就算妳話[P]簽爭妳一千萬, [P]都簽畀妳喇, 妳借錢畀[P], 因為[P and D]係朋友吖嘛”.  But for reasons explained above, I have rejected P’s contention that the transaction was a loan of $950,000 from D to P. 

128.  On balance, I reject P’s attempts to disavow the PNote, the GPoA and the Will which he willingly signed.  In my view, taking into account all the surrounding circumstances, the parties’ execution of the CASP (as prepared by LSTang’s wife and as witnessed by P’s siblings), D’s payment of the full consideration of $950,000, the deferral of payment of the additional Premium thus leaving P as registered owner of the Property, and D’s subsequent occupation of the Property (see Part XVI below), I find on balance that I am unable to take the 3 documents (ie the PNote, the GPoA and the Will) at face value, especially when it was common ground that there was no loan of $3,500,000 by P to D.

129.  But these 3 documents shed light on the nature of the transaction as they indicated P’s acknowledgment that he had no beneficial interest in the Property. That was plainly the purport of the CASP. Within days after that, P signed the GPoA which enabled D to deal with the Property in future should P turn unhelpful, eg he could as P’s attorney apply to the DO for consent to assign the Property as and when he was ready to pay the additional Premium. As seen in paragraph XVII below, this was what D tried to do in 1999 even though the exercise fell through as D could not afford to pay the then value of the additional Premium.  Further, P’s execution of the Will that bequeathed the Property to D meant D would have been able to acquire the legal title of the Property on P’s death. This also supported D’s case that the transaction was a sale and purchase of the Property for which D had paid the full purchase consideration to P.  I agree with Mrs Chan that P’s failure to revoke or change the Will despite his claims that the transaction was a Licence Agreement or a loan of $950,000 by D to him was telling, and lent support to D’s case that P well knew D as purchaser was the beneficial owner of the Property since 7 June 1995. As for the PNote, bearing in mind it was common ground there was no loan of $3,5000,000 by D to P, I find on balance it was a document made/signed to avoid direct reference to the sale and purchase of the Property in June 1995 which “jumped the gun” without payment of the additional Premium at the same time, but to give credence or an on-the-face reason for the GPoA and the Will in favour of D, which documents would have allowed P to take steps during P’s lifetime to vest or after P’s death would have vested the legal title of the Property in D to protect D’s interests as the beneficial purchaser of the Property.  This was also borne out by the fact that in June 1996 D sought legal advice from DTC, and DTC issued a demand letter dated 22 June 1996 to P alleging that P failed to pay the 1^st instalment under the PNote and demanding P to pay D the entire amount of the PNote in the sum of $3,500,000. There was no evidence of (a) any response by P to such demand letter and/or (b) any further demand or legal action after such demand letter.  In my view, this was just a purported acceleration of payment of the entire alleged debt under the PNote in order to give credence to the GPoA and the Will, and both P and D knew there was no loan of $3,500,000 by D to P.

XV. SPLIT PROCEEDS INSTRUCTIONS

130.  P admitted the bulk of the sum of $950,000 that was paid by D would be used to repay his debt due to the FinCo with the balance to be paid to him after settling various expenses. I have no doubt that the Split Proceeds Instructions was made/signed in June 1995 as it dealt with how the sum of $950,000 paid by D on 7 June 1995 was to be disbursed, including paying the bulk of such sum to settle P’s debt due to the FinCo, which P was anxious to achieve as soon as possible. Thus, the Split Proceeds Instructions was a contemporaneous document signed by both P and D.

131.  P claimed that after he signed the PNote, the GPoA and the Will, Tsang told him DTC would act according to D’s instructions to directly (a) pay $664,682.19 to the FinCo’s solicitors J Chan Yip So & Partners (陳葉蘇律師行) to settle P’s debt due to the FinCo, (b) deduct $18,000 as DTC’s legal fees and disbursements, (c) refund $30,000 to D, and (d) pay the remaining balance of $237,317.81 to P.

132.  Paragraph 19 of P’s WS (which P adopted as part of his evidence) stated P recalled that pursuant to DTC’s directions D wrote the Split Proceeds Instructions as to the arrangements for disbursement of the sum $950,000 paid by D, and P was asked to append his signature thereto. But when pressed under cross-examination, P said that due to the lapse of time he did not recall/know (a) who wrote the Split Proceeds Instructions, (b) whether it was written at DTC’s offices, (c) whether he signed it at DTC’s offices, (d) whether D and/or Tsang was present when he signed the Split Proceeds Instructions, and/or (e) whether D had already signed the same before he did. P further said he did not know whether or not D gave instructions to DTC on how to distribute the sum of $950,000, “…… 呢個係[D]嘅事喎, 唔係[P]嘅事喎, 好似, 係咪？” P even testified under cross-examination that since many years had passed after he signed the Split Proceeds Instructions in 1995, it could be said “…… 1995年簽完呢張紙之後, [P]係 …… 已經忘記咗有呢張紙嘅存在 …… 因為嗰陣時已經好模糊喇, 個人 ……” In the circumstances, I am unable to place any weight on P’s assertion in P’s WS that it was D who wrote to the Split Proceeds Instructions pursuant to DTC’s directions. Indeed, as seen in paragraph 137 below, DTC through L&L confirmed it was Tsang who wrote the Split Proceeds Instructions.

133.  In my view, P’s evidence about the Split Proceeds Instructions receded into forgetfulness because, in my view, he tried (in vain) to distance himself from the preparation of such instructions. Earlier in his testimony under cross-examination P tried to say it was D who gave instructions as to the contents of the Split Proceeds Instructions which had nothing to do with him, ie the Split Proceeds Instructions “就寫咗話[D]喇, 而家指示[Tsang]就將下列嘅銀碼就畀一、二、三、四, 呢四個人, 即係呢四個唔同嘅人或者公司”, and “因為[D]睇完呢張--呢份嘢, [D]先至簽吖嘛 …… 即係 …… [D]簽名, [P]就認為[D]知道喇, ……” When pressed on how D would have known who was P’s creditor, the amount of P’s debt due to his creditor, and how interest was calculated on P’s outstanding debt when it was P and not D who borrowed the personal loan from the FinCo, P confessed his creditor (ie the FinCo) told him over the telephone the amount of his outstanding debt and interest, the total amount of which was precisely the sum of $664,682.19 stated on the Split Proceeds Instructions, but P insisted he never told anyone (eg his siblings, Tsang and/or D) he owed the FinCo $664,682.19.

134.  I find it highly improbable for D to be able to give instructions to DTC/Tsang on the disbursements of the sum of $950,000 as set out in the Split Proceeds Instructions without any information from P as P alleged. P confirmed the amount due to the FinCo as stated in the Split Proceeds Instructions was correct, and he learned of this amount from the FinCo. In my view, P must have informed D the amount due to the FinCo as well as the name of the FinCo’s solicitors to enable D to give such instructions to DTC/Tsang.  P’s evidence that D must have known such information merely because he signed the Split Proceeds Instructions begged the question how such information came to be stated in the Split Proceeds Instructions in the first place.  In my view, D countersigned the Split Proceeds Instructions because P gave him information about his indebtedness and D in turn informed DTC/Tsang.

135.  On the other hand, D claimed P gave  instructions for the Split Proceeds Instructions that directed various sums be paid out of the consideration of $950,000 as set out therein. Due to the lapse of time, D could not remember why P gave the instructions for $30,000 to be paid to D, but D recalled “…… 該指示是由[P]安排而[D]曾收取該30,000港元”. D explained he was unfamiliar with the procedures for buying/selling properties in the New Territories, so “…… 其他文書都是由[P]介紹及共同委託的[DTC]安排, 所以[D]不覺得該指示有任何問題而當時亦沒有提出相關的疑問”.

136.  On balance, I find it was D and not P who gave instructions to DTC/Tsang on the manner of disbursement of the consideration of $950,000 although D did not instruct DTC/Tsang to prepare the Split Proceeds Instructions. The Split Proceeds Instructions clearly stated “本人羅就發[D]現指示律師 [DTC], 將下述銀碼付於指示的人”, and L&L in their letter dated 30 September 2016 stated that:

“(2) …… [D] …… instructed to make those payments as mentioned in the [Split Proceeds Instructions], i.e. $664,682.19 to Messrs. J. Chan, Yip, So & Partners for the repayment of a loan owed by [P] to Best Profit Investment Limited which [company] was represented by Messrs. J Chan, Yip, So & Partners; as to $237,317.81 to [P]; as to $18,000.00 for the legal costs for the execution of a Promissory Note for the sum of $3,500,000 by [P] in favour of [D], a Power of Attorney by [D] in favour of P, a Will by [P] making a specific gift to [D] and other related matters including all the incidental advice; and as to $30,000.00 to [P].”

But I find on balance that it was P who told D the names of the FinCo and its solicitors as well as the amount he owed to FinCo, and P obtained such information from FinCo over the telephone. As for the amount of legal costs of $18,000, D must have obtained such information from DTC/Tsang. But there was insufficient evidence before this court to make any finding as to why instructions were given to pay out $30,000 to D. The sum of $237,317.81 was paid over to P because it was the remaining balance of the purchase consideration paid by D.

137.  I also disagree with P’s allegation in P’s WS that it was D who wrote the Split Proceeds Instructions pursuant to DTC’s directions. This was contradicted not only by D’s evidence (which on balance I accept) that he did not write the Split Proceeds Instructions and P’s oral evidence (see paragraph 137 above), and also by DTC’s account in L&L’s letters as follows:

“(3) We confirm that the [Split Proceeds Instructions] is in our possession …… please be further advised that the handwritings of the [Split Proceeds Instructions] belongs to [Tsang] and the two signatures underneath belongs to [D] and [P] respectively. [Tsang] was the witness to the two signatures. ……” (letter dated 30 September 2016)

“…… it was “[Tsang’s] working habit, when he feels necessary, to jot down the points discussed with and/or instructions by persons appearing before him and/or lay clients’ on a piece of paper and ask such persons or lay clients to confirm those by putting down their signatures for [Tsang’s] own record purpose. If appropriate in the circumstances or being asked, copy of the piece of paper would be provided to the relevant persons who has signed. Here, the [Split Proceeds Instructions] was not prepared at [D’s] instruction. Further, there would not be a standard format for such record and it would usually be rather informal. The [Split Proceeds Instructions] is no exception.” (letter dated 12 December 2016)

“…… We repeat that [D] had not instructed [Tsang] to prepare the [Split Proceeds Instructions].” (letter dated 23 December 2016)

138.  This was also borne out by the account in L&L’s letter dated 12 December 2016 which stated that “[looking] at the [Split Proceeds Instructions], it is apparent that [Tsang] made records of two persons appearing before him. Referring to [Tsang’s] habit and to his best recollection so far, [Tsang] believes that the records of the two persons should have been made at different times i.e. [D’s] record was made first and signed and then [P’s] record and his signature and that both records were jotted down on one paper”. This suggested, and I find on balance, that D gave information to DTC/Tsang about the manner of disbursement of the sum of $950,000 paid by him (based on information provided by P as to P’s indebtedness due to the FinCo), Tsang then prepared the Split Proceeds Instructions (then without the Title Deeds Direction) and D signed the same.

139.  This brings us neatly to the Title Deeds Direction (which on its face was P’s instructions to DTC to deliver the Title Deeds to D), and to the question of how it came about. Under cross-examination, P claimed “…… 由頭到尾都--同埋大家協議, 嗰份契係放喺[DTC]嗰度㗎, 就唔係交畀[D]㗎, ……”, and “…… 大家協議咗嘅, 係擺咗喺律師樓㗎嘛, 點會畀咗[D], [P]問[D]借錢咋, [P]唔係賣間屋畀[D]呀”, and he disagreed that in 1995 or at any other time he instructed DTC to give the Title Deeds to D. Such evidence suggested P disagreed he gave the Title Deeds Direction to Tsang to deliver the Title Deeds to D (ie “本人[P]現授權律師 [DTC/Tsang] 將所有文件包括[Lot]的[Title Deeds], 交[D]”) on the basis that there was no sale of the Property to D. But this did not sit well with paragraph 5 of P’s Amended Reply and Defence to Counterclaim which averred that “…… [P] did instruct [DTC] to deliver the [Title Deeds] to [D] …… and the [Title Deeds] were so delivered to secure repayment by [P] to [D] for early termination of the said Licence Agreement but not for any other purposes upon request of [D]” (my emphasis), and such averment was twice verified by P’s statements of truth on 11 January and 8 June 2016.

140.  When pressed under cross-examination as to whether he agreed D’s possession of the Title Deeds was evidence of ownership/interest in the Property, P disagreed and countered by suggesting “…… 如果係 …… 偷咗張屋契嘅, 我擁有呢張屋契嘅, 咁都係有權益, 妳嘅意思？” But when he was sealed to put aside the possibility of theft and pressed on this point again, P said “[P]都唔知點答妳, 但係[P]唔同意”. In my view, P knew the significance of the delivery of the Title Deeds to D, which was why in P’s WS he tried to resile from the admission in the Amended Reply and Defence to Counterclaim that he did instruct DTC to deliver the Title Deeds to D.  Thus, paragraph 19 of P’s WS stated that when P signed the Split Proceeds Instructions, “…… [P]肯定當時是沒有最後一段”, ie the Title Deeds Direction, and “因為根據當時的協議, [Title Deeds]是由[DTC]保存直至10年期[ie the Licence Term]滿為止。如果當時[P]就授權律師將所有[Title Deeds]交與[D], 律師就不會在2001年才把[Title Deeds]轉交[D] 。明顯地, 這段文字[ie Title Deeds Direction]的字跡與上面相同。如果是在當時就寫上, 為什麼不要求[P]自己親自寫上, 即使為貪方便由[D]代寫, 但為什麼筆芯的粗幼顏色都不同, 明顯是由兩枝不同的原子筆所寫的，[P]相信這段文字是[D]在後來自己擅自加上去, 目的就是為謀奪[P’s] [Property] 做準備”.

141.  P’s aforesaid account in P’s WS (see above paragraph) plainly contradicted P’s pleadings (see paragraph 139 above). On balance, I reject P’s account in P’s WS:

(a)	I have found on balance that P did sell the Property to D, so passing the Title Deeds to D was both natural and logical, especially when formal transfer of legal title was to be deferred. The purpose for the deposit of the Title Deeds with D was to assure D that P would not encumber or re-sell the Property pending finalisation of the formal transfer of the legal title and registered ownership to D on future payment of the additional Premium.
(b)	I am not persuaded by P’s allegation of a plot by D (presumably with DTC/Tsang since DTC kept the original copy of the Split Proceeds Instructions and admitted it was Tsang who wrote the Title Deeds Direction) to insert the Title Deeds Direction after P signed the Split Proceeds Instructions. P’s such allegation flied against his pleadings, and also against DTC’s account given in L&L’s letter dated 12 December 2016 which stated that “[looking] at the [Split Proceeds Instructions], it is apparent that [Tsang] made records of two persons appearing before him. Referring to [Tsang’s] habit and to his best recollection so far, [Tsang] believes that the records of the two persons should have been made at different times i.e. [D’s] record was made first and signed and then [P’s] record and his signature and that both records were jotted down on one paper”. Thus, DTC’s account was that after D signed the Split Proceeds Instructions, Tsang saw P on a separate occasion and he jotted down “[P’s] record” being the Title Deeds Direction on the same Split Proceeds Direction and P signed the same.
(c)	P’s WS claimed that “…… 明顯地, 這段文字[ie Title Deeds Direction]的字跡與上面相同。如果是在當時就寫上, 為什麼不要求[P]自己親自寫上, 即使為貪方便由[D]代寫, 但為什麼筆芯的粗幼顏色都不同, 明顯是由兩枝不同的原子筆所寫的，[P]相信這段文字是[D]在後來自己擅自加上去, 目的就是為謀奪[P’s][Property]做準備”. But under cross-examination, P could not remember whether the writing on the Split Proceeds Instructions were made by 2 different coloured pens (ie whether the Title Deeds Direction was made by a different coloured pen) when he signed.  I note P would have known from discovery of documents in the present action that L&L confirmed DTC kept the original copy of the Split Proceeds Instructions, but there was no evidence that, despite P’s allegation in paragraph 19 of P’s WS, P made any attempt to inspect the original copy of the Split Proceeds Instructions. Under cross-examination, P disputed he had made the allegations in paragraph 19 of P’s WS, and when pressed on why he disagreed, P just said “唔同意就唔同意囉, 冇得解”. I find P’s evidence in this aspect untrue and unreliable.
(d)	Paragraph 19 of P’s WS claimed that “…… [P]相信這段文字[ie Title Deeds Direction]是[D]在後來自己擅自加上去, 目的就是為謀奪[P’s][Property]做準備”, but under cross-examination P testified contrarily that “[P]冇話到係[D]寫嘅, [P]話係冇呢行字嘅 …… 或者[D]第二啲人寫呢 …… [D]點會寫得咁靚嘅字吖”. Such contradictory evidence undermined P’s veracity.
(e)	When pressed on whether or not P did ask/instruct DTC to deliver the Title Deeds to D, P testified under cross-examination that it was too long ago so he could not remember.
(f)	When asked under cross-examination whether the Title Deeds Direction was already written on the Split Proceeds Instructions when he signed the same, P said he could not remember. When pressed on why he stated otherwise in P’s WS (ie that he was sure the Title Deeds Direction was not yet written when he signed the Split Proceeds), P said he could not remember by the time of trial and tried to brush away Mrs Chan’s cross-examination by saying she was asking repetitive questions. I do not believe P. He would not have remembered what happened concerning the Title Deeds Direction since 20 years ago at the time when he made P’s WS in 2016 and then forgotten all at trial in 2018.  I find P was merely trying to retreat into faded memory to avoid searching cross-examination.

142.  In my view, the above analysis showed P to be an unreliable witness who tailored his case as he went along. I am not persuaded he told the truth, and I find myself unable to place weight on his evidence in this respect. I find on balance, P sold the Property to D for $950,000, and since there would not be formal transfer of the legal title and registered ownership of the Property from P to D in June 1995, P instructed DTC to pass the Title Deeds to D as assurance that P would not encumber or re-sell the Property pending formal transfer of legal title and registered ownership to D in future. I also find on balance that Tsang jotted down P’s such instructions (ie the Title Deeds Direction) on the Split Proceeds Instructions, and P countersigned the same after the Title Deeds Direction were written down.

XVI. POSSESSION TO D

143.  According to D (and on balance I accept), P delivered vacant possession of the Property and the Front/Back Yards to him on/about 15 June 1995. Plainly, the Mother moved out of the Property with P. In my view, she must have known P could no longer regard the Property as his permanent home. Since then, D was in possession, occupation and control of the Property, and P was excluded therefrom. After moving to the Property, D applied to the relevant authorities and was accepted by the Government as the payee of Government rent/rates for the Property. Since then, D paid the Government rent/rates for the Property. D still resided at the Property even up to the time of the trial.

144.  The Mother passed away on 7 March 1996. P, his 2^nd wife and son moved to live in Mainland China in/about 2000.

XVII.  ENQUIRY ABOUT ADDITIONAL PREMIUM

145.  D claimed (and on balance I accept) that after the sale and purchase of the Property in June 1995, he was concerned about the additional Premium and asked P many times about the amount.  In fact, D caused DTC (presumably in the name of P as grantee of the Lot) to write to the DLO, Tuen Mun to enquire about the amount of the additional Premium. On/about 8 December 1999, the DLO, Tuen Mun replied to P (being the grantee of the Lot) care of DTC indicating that the Government would accept $2,000,900 as additional Premium for lifting the Restrictions.  Enclosed with such letter were (a) duplicate copies of the modification letter for the Property to be executed by P as grantee and to be duly witnessed by DTC, and (b) demand note for the additional Premium to be settled by P. The DLO, Tuen Mun asked for return of the duly executed modification letter, payment of the additional Premium, and provision of a memorial for registration of the executed modification letter with the Land Registry together with a cheque for the registration fee.

146.  D claimed that in 1999 he did not have sufficient funds to pay the increased additional Premium, so the Restrictions were not removed at that stage. But at the very least, the letter dated 8 December 1999 by the DLO showed that the Government was not against alienation of the Property so long as the additional Premium was paid.  In fact, D did not cause any additional Premium to be paid even up to the time of the trial, and P and D had not completed the procedures for finalising the formal transfer of the legal title and the registered ownership of the Property from P to D.  D claimed (and on balance I accept) that based on P’s and D’s aforesaid common intention, understanding and agreement pursuant to the Collateral Agreement, the Undertaking and the CASP, P never asked D to pay any additional Premium for removal of the Restrictions in the past 20 or more years, and P remained as the registered owner of the Property.

XVIII. TITLE DEEDS

147.  On/about 8 February 2001, D sought legal advice from DTC,[40] and “[D]收到[P]交來的[Property’s]所有及完整的[Title Deeds]”. P queried why the Title Deeds were released to D in 2001 and not in 1995. But in my view, this was neither here nor there in light of the Title Deeds Direction given by P. I note DTC acted for both parties, and in my view, when P passed the Title Deeds to DTC pursuant to the Title Deeds Direction, DTC plainly received those Title Deeds on behalf of D, so DTC’s custody of such Title Deeds was on behalf of D, and it mattered not when they were physically delivered to D.

148.  More importantly, even though P’s WS stated P had tried to retrieve the Title Deeds from DTC who told P the Title Deeds had been delivered to D in/about 2001 and who even suggested P to sue D, there was no evidence that P attempted to ask D for return of the Title Deeds. In my view, this showed P was well aware there was no justifiable basis for demanding their return, and this non-action on P’s part spoke loudly of D’s beneficial ownership of the Property since June 1995.

XIX.  P’s ALLEGED DEMAND

149.  P claimed that in/about 2008 he returned from Mainland China to settle in Hong Kong. According to P’s WS, D by then had occupied the Property for more than 10 years (ie the Licence Term had expired), so P asked D to deliver up possession of the Property to him, but D refused. As referred to in paragraph 148 above, P’s WS stated P  tried to retrieve the Title Deeds from DTC who told him they had been delivered to D in/about 2001 and who suggested P could sue D to recover possession of the Property. P claimed when his younger sister THTang learned of his plight, she let P’s family stay at her home temporarily.

150.  However, the tenor of P’s oral evidence seemed to be that he had to repay $950,000 to D.  When it was suggested to P under cross- examination that if the transaction between P and D in respect of the Property was the Licence Agreement he would not have said “…… [P]就會畀番$950,000畀[D]” (as the Licence Fee was used up by the time of expiry of the Licence Term), P shied away from such contradiction by asserting that instead the transaction over the Property was a loan of $950,000 by D to P, “…… [P]係爭[D]錢吖嘛, [P]係爭人錢會還錢嘅人, 得唔得？”

151.  P went on to say under cross-examination that “[P]畀錢[D], [D]唔收呀, 係。…… [P]而家畀錢[D], [D]唔肯走, …… [D]唔同[P]傾偈, 唔同[P]講嘢呀, 直情, 「唔好再打電話嚟騷擾我, 我報警呀」, …… 呢啲亦都係事實嘅全部, 直情唔同[P]講嘢, [P]係攞番個公道, [P]係希望[P]自己喺有生之年裡面攞番個公道, 係還番 …… 啲錢畀[P]啲親戚, 還番[P]嘅清白, [P]爭人錢[P]就要還”. P went on to say that “[P]同[D]講, [P]借[D]錢畀[D]住 ……,「我畀番啲錢你喎, 你畀番間屋我喎」, [D]話「你畀嗰$3,500,000我囉, 我走」。…… [P]係要求—[P]還錢畀[D], 但係[D]唔同意 …… [P]話「還錢畀你喎」, [D]話「唔得喎, 你畀$3,500,000我喇」”. P further said “…… 其實根本上, [P]同[D]講咗好多次, 話[P]還番錢畀[D]喎, …… [D]話要--「你畀$3,500,000我就搬囉」…… 「你畀$3,500,000我囉，如果唔係你告我囉。」,  即係恰[P]冇錢喇”, and “…… [D]嘅意思即係話,「……你唔係爭我$950,000, 你係爭我$3,500,000, 你畀$3,500,000我咪搬囉。……」”, so P replied “「咩嘢話? 我點會爭你$3,500,000?」” to which D responded by saying “「你告我囉」”.  P claimed he asked D many times to vacate the Property, but he could not remember how many times and when he first asked D to vacate the Property except to say he already made such demand when he was still residing in Mainland China, and it should be “係零幾年嘅” (ie after June 2005 but before 2013).

152.  It appears from P’s oral evidence summarised above that in the 2000s (ie more than 10 years after June 1995) he offered to repay the loan of $950,000 to D and asked D to vacate the Property, but D refused to accept such repayment and insisted that P pay him $3,500,000 otherwise P could sue him. On balance, I reject such evidence:

(a)	P’s case of repayment of a loan of $950,000 by D to him did not sit well with the P’s case of the 10-year Licence Agreement in P’s pleadings and P’s WS. If the sum of $950,000 D paid to P was the lump sum Licence Fee for the 10-year Licence Agreement, P would have to vacate the Property after expiry of the Licence Term without any repayment because the entire sum of $950,000 would have been used up as licence fee. For reasons explained above, I have rejected P’s claim of either the Licence Agreement and/or any loan of $950,000. Rather, I have found the transaction in question was a sale and purchase of the Property for a consideration of $950,000 which D had paid to P. That being the case, there was no basis for P to demand D to vacate the Property.
(b)	I have also found that both P and D well knew there was no loan of $3,500,000 by D to P at all, and the PNote was made with a view give some credence to the Will and the GPoA. That being the case and given that D was the beneficial owner of the Property which was his then/ current residence (with no evidence that he had any other home), there was no persuasive reason for him to counter-offer a sum of $3,500,000 for moving out of the Property.
(c)	P’s evidence under cross-examination was self-contradictory. On the one hand, he claimed he was perplexed by D’s request for $3,500,000 and he even countered such demand by saying “「咩嘢話? 我點會爭你$3,500,000?」”, but at the same time P also claimed under cross- examination that since he signed the PNote, he was misled into believing he still owed D a further sum of $3,500,000 after proposed repayment of $950,000 “…… 咁[P]誤以為—[P]自己以為呢, 就[P]酬夠呢筆$950,000之後, 仲要酬$3,500,000, 先至可以叫[D]搬走囉, 咁就變咗誤導咗[P] ……”, and still later he changed to say “[D]嘅意思即係話,「你唔係--你唔係爭我$950,000, 你係爭我$3,500,000, 你畀$3,500,000我咪搬囉。……」”.  I find such wavering and uncertain evidence unreliable, and I could not place any weight on the same.
(d)	There was no mention at all about D’s demand that P should pay $3,500,000 for him to vacate the Property either in P’s pleadings and P’s WS, and P did not offer any or any credible explanation for such obvious omission, especially when he was able to speak at length about this under cross-examination.
(e)	I reject P’s allegations that “…… [P]係攞番個公道, [P]係希望[P]自己喺有生之年裡面攞番個公道, 係還番 …… 啲錢畀[P]啲親戚, 還番[P]嘅清白, [P]爭人錢[P]就要還”, and that “[P]原意就係, 呢間屋[P]係借錢嘅, [P]係還錢畀[D], 還咗錢畀[D]之後, 就收番呢間屋之後, 就拎去拍賣, 跟住還番畀[P]啲親戚, 啲債仔, [P]原意就係咁, 唔係喎, 間屋唔係[D]㗎喎”. Given that P had sold the Property to D, his beneficial interest therein passed to D and he held the legal title and registered ownership of the Property on trust for D. But even if he had not sold the Property to D (which I disagree), for the reasons set out in the Reasons, the Property had fallen into his bankruptcy estate, so in any event he personally could not have recovered the Property and/or could not have made any distribution to his relatives and creditors from the proceeds of the Property.  In fact, P actually knew this because when pressed under cross-examination he admitted that the Property “都唔係[P]嘅, 而家, 我覺得間屋由[P]破產開始已經唔係[P]㗎喇”.

XX.  2009-2010

153.  D claimed (and on balance I accept) in/about April 2010 he learned from his friends that P was again in financial difficulties. D was worried P would use the Property to “吐現”, so D caused a land search to be made on the Property and a bankruptcy search to be made on P. The land search records revealed that on 26 April 2010 P attempted to register the Loan Documents against the Property at the Land Registry, but as such documents did not affect land interests in the Property, the Land Registry stopped registration of such documents (see paragraph 22 above). The bankruptcy search records revealed that on 25 May 2010 P was adjudged bankrupt.

154.  D claimed (and on balance I accept) that given such revelations, on/about 15 June 2010 he caused the CASP to be registered against the Property at the Land Registry to protect his interests. In my view, there was reason for D to be concerned because by the Loan Documents P (who no longer had any beneficial interest or physical possession of the Property) promised his creditor Kwok that pending repayment of the loan of $700,000, Kwok could have use of the 3^rd floor and the roof of the Property (see paragraph 22 above).

XXI. P’s BANKRUPTCY

155.  On 21 May 2010, a bankruptcy order was made against P. Even though P was still the registered owner of the Property before he was discharged from bankruptcy on 25 May 2014, neither the Official Receiver nor the trustee-in-bankruptcy of P’s bankruptcy estate contacted D (who remained in possession, occupation and control of the Property) or raised any claim against D over the Property. Indeed, P’s LoA in his SoA dated 16 April 2010[41] (ie when P was still a bankrupt) never informed the Official Receiver P was still the owner of the Property.  P confirmed he verified the SoA by statutory declaration.  In my view, such evidence went to support the above conclusions that P had sold the Property to D, and hence P no longer retained any beneficial interests in the Property.

156.  As to why the LoA did not include the Property as part of the assets owned by him, P tried to brush aside such omission by saying “…… 係[P] …… 破產嗰段時間裡面, 可以話畀妳聽, 全部腦袋係空白嘅, …… [P]係承認咗自己忘記咗, forgotten, 唔記得咗去申報, 呢樣嘢, [P]係承認”. P, as he was entitled, invoked his right against self-incrimination not to answer further cross-examination questions on this topic. On balance, I do not believe P was confused or had forgotten about his alleged “interests” in the Property.  In any event, there was no evidence of any attempt by P to “correct” the LoA to include the Property throughout the 4 years of his bankruptcy and thereafter.  Further, P’s above explanation about the omission in the LoA in respect of the Property and his alleged legal/beneficial interests in the Property also did not sit well with his evidence that “[P]原意就係, 呢間屋[P]係借錢嘅, [P]係還錢畀[D], 還咗錢畀[D]之後, 就收番呢間屋之後, 就拎去拍賣, 跟住還番畀[P]啲親戚, 啲債仔, [P]原意就係咁, 唔係喎, 間屋唔係[D]㗎喎”, and that he considered the Property “都唔係[P]嘅, 而家, 我覺得間屋由[P]破產開始已經唔係[P]㗎喇”.

XXII.  2013

157.  D claimed (but P disagreed) that on a day in/about 2013 P came looking for him and offered to re-purchase the Property for $3,500,000, but D maintained the Property was his and he had no interest to sell it to anyone. I find on balance that P must have made such demand to D in/about 2013 and thereafter for recovery of possession of the Property, and such demands culminated in P’s Claim in the present action. In my view, P took advantage of the PNote that he signed, and the demand letter in June 1996 by DTC (see paragraph 129 above) to suggest he was prepared to repay $3,500,000 (presumably from further sale of the Property – see the eventual SPA albeit for less consideration) to pressurise D to give up possession of the Property.  When that ruse failed, P made P’s Claim based on the Licence Agreement, which he himself did not even endorse in his oral testimony under cross-examination.  In my view, these were all poor attempts made up to put pressure on D to vacate the Premises.  I find on balance that P made many such requests to D, but they were unsuccessful as D being the beneficial purchaser of the Property refused to leave.

XXIII. STAMP DUTY FOR CASP

158.  As explained in paragraph 23 above, P paid the stamp duty of $7,125 and late payment of $14,800 in 2010. On 28 August 2011, the Stamp Duty Office calculated the stamp duty chargeable was $27,000 (based on valuation of the Property at $1,800,000 on 1 June 1995), so the net amount of stamp duty payable was $27,000 - $7,125 = $19,875.  On 18 November 2011, D made written submissions to the Stamp Duty Office on the stamp duty chargeable. On 28 June 2013, the Stamp Duty Office revalued the Property at $1,350,000 as at 1 June 1995, so the net amount of stamp duty payable was $20,250 - $7,125 = $13,125.  On 5 May 2014, the Stamp Duty Office issued a certificate of payment of stamp duty to certify that stamp duty payable for the CASP in the sum of $13,125 had been paid.

XXIV. P’s DEMANDS FOR POSSESSION

159.  D produced a series of telephone WhatsApp messages from LSTang (also known as “Sunny”) to D (also known as “亞發”) during the period from May to October 2014:

“亞發早晨! 有時間覆我電話, sunny” (9:09am on 8 May 2014)

“亞發你可以吳聽我電話, 如果今早個死仔打電話比我話問屋的問題, 我都唔會煩你, 你唔好以為我囉你著敷, 要囉都唔係你今日, 不過我聽死仔講完呢單野之後, 我有必’ 要提醒你, 逃避吳系最佳解決方法, 最後吃虧系自己, 大家坐下來才可以解決問題, 我今日四點半左右返來找你, 你可以戴同有關想知道上述事件人士到你家。如你不想的話, 日後有可問題發生你吳話我吳幫你, 你要記住我衹系中間人!!” (12:53pm on 8 May 2014) (my emphasis)

“亞發你右聽我電話冇問題, 我剛才問佢黎, 佢話最長拖到月尾, 如未有回覆就會簽比他人, 到時乜野環境我真係幫你吳到, 你祗可收錢走人, 你吳好以為到時有人可以幫到你, 就算件放上枱都系講理由, 你唔信就算!祝你好運!!” (17:06pm on 8 May 2014)

“亞發! 亞仔剛來電話昨晚電聯你沒聽他電話, 我再提醒你, 如你在這星期內再不覆他電話, 他會張屋交給他人辦理交吉該屋事宜, 那就祗有收錢走人, 到時你會自找麻頓冇人可以幫你, 呢次系最後提醒你講話、再不理會後果自付!!” (9:50am on 4 June 2014)

“亞發剛才亞仔找我話、他已打了多次電話給你、但你多次唔聽電話! 他叫我和你傳話、由今日起計10天內你還不與他溝通、他會和其他人接觸關於間屋事宜、到時有任何問題後果自付、我再講一次, 我衹傳話、信不信由你!!!!” (18:34pm on 7 October 2014)

“亞發! 亞仔剛才右叫我再提醒你、如你再唔和佢溝通、限期後會和其他人洽談間屋事宜!!” (19:04pm on 13 October 2014)

“亞發、亞仔叫我話你知明天就系最後限期、如果還沒有聯絡他、佢會和其他人洽談間屋事宜、不會再經我傳話!!” (12:27pm on 16 October 2014)

D claimed that since such telephone Whatsapp messages threatened D to move out of the Property otherwise “後果自付”, he reported the matter to the police and was given a report number for his complaint.

160.  P said he only “草草望下喇” the telephone WhatsApp messages before he gave evidence at trial, and he disagreed LSTang acted on his behalf to persuade D to accept payment of money and then to vacate the Property.  Whilst P agreed the references to “屋” and “佢” in the above messages were references to the House and to him, P claimed under cross- examination that LSTang (who styled himself as “中間人”) was actually not a go-between between P and D, and that “[LSTang]同[D]講嘢，與[P]有乜關係？……” and “…… [P]就係[P], [LSTang]就係[LSTang] …… [LSTang]點可以代表[P]呢 ……” P reiterated under cross-examination that “…… [P]係冇問[D]攞租, [P]係要畀錢[D]，…… 還番錢畀[D], 但係[D]唔收, 唔係[D]畀錢[P], 係[P]畀錢[D]”, “但係根本上, …… [P]話畀錢[D], [D]都話要$3,500,000”, “而家係[P]畀錢[D], 嗌[D]走, [D]唔同[P]接頭, [D]話要收[P]$3,500,000, 由頭到尾都係呢樣嘢, 妳搞到咁複雜, 唔係收$950,000, 係收$3,500,000”.

161.  In my view, LSTang was plainly acting as agent for P in liaising with D with a view to pass on P’s messages to D that offered payment of money for D to vacate the Property, especially as I bear in mind that LSTang was P’s sibling, he and his wife were involved in putting together the sale and purchase between P and D in 1995, and he had no personal interest in the Property. I find P’s denial of knowledge of such telephone messages and LSTang’s actions specious.  On the other hand, I find D’s refusal to leave the Property consistent with his case that he was the purchaser and beneficial owner of the same.

XXV. FURTHER ENCUMBRANCE

162.  It was shortly after LSTang’s telephone WhatsApp messages and D’s persistent refusal to move out of the Property that on/about 27 October 2014 P and Leung signed the SPA whereby P sold the Property to Leung for a consideration of $1,900,000 with completion date scheduled on 27 October 2015.  D discovered such fact from subsequent land search records, but there was no registration of any subsequent assignment in respect of such transaction.

163.  P agreed he did sign the SPA, which appeared on its face to be an agreement for the sale of the Property to Leung. When pressed as to why he entered into such agreement when he knew the additional Premium had to be paid to lift the Restrictions for alienation of the Property, P claimed he did not have to bother about this because there was actually no sale and purchase, ie “賣畀[Leung]? 邊度賣畀[Leung]? …… 呢個借錢咋喎”, and “…… 借錢寫嘅嘢, 講明借錢吖嘛, 問人借錢, 妳話[P]爭妳一千萬, [P]都簽落去㗎喇, 借錢吖嘛, 借錢呀, 係妳話買賣合約啫, [P]唔同意囉, [P]話借錢”. When it was pointed out that the SPA contained specific provision for a date for completion of the sale and purchase, P insisted “借錢吖嘛, 借錢梗有㗎, 幾時畀咗錢[P], 借咗錢畀[P], 都有日期㗎”.

164.  I have no hesitation in rejecting P’s evidence on this respect. It appeared P was still in financial difficulties, and as in 1995 all he did in his financial desperation was to raise money from a sale of the Property even though D had already entered into the CASP with him and registered the same against the Property at the Lands Registry.  That was why P tried to persuade D to accept some money (presumably from the sale proceeds under the SPA upon completion) and then leave the Property (see paragraph 159 above), and why he promised in the SPA to arrange for vacation of the registrations of the CASP and the Loan Agreements at the Land Registry and to procure a court order to evict the occupants of the Property a month before completion of the sale under the SPA (see paragraph 25 above). In my view, this was merely a sign of financial desperation, and not any indication that P had any beneficial interest in the Property. On balance, I reject P’s suggestion that the SPA was a loan agreement (just like I reject the CASP was a loan agreement).  Actually, P pleaded in paragraph 9 of his Amended Reply and Defence to Counterclaim that “…… [P] entered into a written sale and purchase agreement to sell the suit Lot to [Leung] on 27 October 2014 on the terms and conditions therein contained which was duly registered in the Land Registry …….”  I also note that the memorial for the SPA that was submitted the Land Registry was prepared by WFC who were P’s solicitors (see footnote 7 above).  I find it highly improbable that WFC would have submitted a sham agreement (ie a loan agreement disguised as a sale and purchase agreement with a specified completion date) for registration at the Land Registry.  It was unclear whether in the end the sale contemplated by the SPA had fallen through, but the registration of the CASP was not vacated and D did not vacate the Property.   Further, by reason of P’s bankruptcy as explained in the Reasons, P was in any event not entitled to personally sell the Property even if he had any interests therein.

XXVI. UPDATED PREMIUM

165.  On 21 August 2017, D’s solicitors wrote to the DLO, Tuen Mun to enquire about the updated amount of the additional Premium for modification of the New Grant to lift the Restrictions over alienation of the Property, and enclosed a copy CASP with certificate of payment of stamp duty dated 15 May 2014. But the DLO, Tuen Mun replied by telephone to D’s solicitors they would not disclose such information to D as he was not the registered owner. As at the date of D’s SWS (ie 9 February 2018), D still had not received any written reply from the DLO, Tuen Mun.

166.  On 4 July 2018, P’s solicitors (ie WFC) wrote to the DLO, Tuen Mun for confirmation of the amount of additional Premium payable by P for removal of the Restrictions.  On 9 July 2018, the DLO, Tuen Mun replied that such request could not be acceded to, and suggested the “registered lot owner may consider submitting formal application for modification to remove non-assignment clause to this office for consideration”. On the same day, WFC replied to confirm P would make formal application for removal of the Restrictions in the New Grant. On 17 July 2018, the DLO, Tuen Mun replied that the application could not be proceeded for the following reasons:

“1. Unauthorized structure on the roof of the building.

2. Unauthorized metal frame on the ground floor.

3. Projection of overhanging:0.95m, exceeding the upper limit, 0.23m.

The above structure(s) are in breach of the said New Grant. (Please refer to attached photos). Please take steps to rectify the breach as soon as possible and furnish a fresh application and relevant photos to this office for our consideration.”

On 15 August 2018, WFC wrote to the DLO, Tuen Mun to forward the photographs received from D’s solicitors “in order to prove that all the unauthorized structures mentioned in your letter have been removed”, and asked the DLO, Tuen Mun to proceed with P’s application for lifting the Restrictions in the New Grant as soon as possible.

167.  On 6 September 2018, the DLO, Tuen Mun replied to WFC to say that according to the records kept at the Land Registry, the “lot owner” (ie P) had entered into the CASP, the SPA and the Loan Documents which might affect the land title and might breach the conditions of the New Grant, so P’s application could not be proceeded with. The DLO, Tuen Mun by the same letter asked for the following information so it could take legal advice on P’s application: “(a) confirm the up-to-date equitable title and legal title of the subject lot; (b) provide copy of other agreements/deeds which may affect the title of the lot and have not been registered in the Land Register, if any; and (c) provide details if there is any possible/ongoing legal proceeding which may affect the equitable title and/or legal title of the lot”. However, the DLO, Tuen Mun stated in its letter that it would “assume the subject application is self-withdrawn if I do not hear from you within one month from the date of this letter”. There was no evidence of any reply by WFC to the DLO, Tuen Mun, so it should be assumed that P’s application for modification of the New Grant to lift the Restrictions had been withdrawn.

XXVII. RELIEFS

168.  In light of the above, I find and accept that since 7 June 1995 when D paid the full purchase consideration of $950,000, D by way of resulting trust and/or common intention constructive trust became the beneficial owner of the Property subject to the Restrictions. I further find there was no Licence Agreement between P and D concerning the Property, and there was no loan agreement between P and D.

169.  Mrs Chan submitted D was ready and willing to pay the additional Premium to have the Property formally transferred to him. It was suggested that armed with a declaration from the court D as the sole beneficial owner of the Property would be able to arrange payment of the additional Premium.  However, D did not join Kwok and/or Leung as further parties in his counterclaim in the present action to bind them in respect of any reliefs that might be granted in his favour.

170.  In the circumstances, drawing on Yuen JA’s guidance on reliefs at page 969 in Lau Kwai Kiu, I grant judgment in favour of D on his counterclaim as follows:

(a)

subject to the Government’s/lessor’s rights under the New Grant, a declaration be granted in favour of D that by way of paying the purchase consideration of $950,000 for the purchase of the Property on 7 June 1995, D obtained the beneficial interest in the Property by way of resulting trust and/or common intention constructive trust;

(b)

subject to the Government’s/lessor’s rights under the New Grant, and without prejudice to Kwok’s and/or Leung’s rights (if any at all) under the Loan Documents and the SPA respectively, specific performance be granted against P to execute all relevant legal documents for the conveyance or transfer of the legal title in the Property to D subject to the payment of additional Premium and other relevant charges to the Government by D and subject to the consent of the DO.

171.  There is no reason why costs should not follow event. I grant a costs order nisi that P shall pay D costs of and occasioned by D’s counterclaim, including all costs reserved if any, to be taxed if not agreed.

172.  Should P required translation of this Judgment into punti language, he can contact my clerk to arrange an appointment for a court interpreter to verbally translate this Judgment to him at the High Court Building at a mutually convenient time. Further, D must serve on P Chinese translation of the sealed copy of the judgment/order together with the sealed copy judgment/order made herein.