SO CHUI WAH v. QU XUANBAI

HCA 1337/2019

[2022] HKCFI 1750

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1337 OF 2019

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J U D G M E N T

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BACKGROUND

1.  In this action, the plaintiff claims against the defendant for, among other things, declarations in relation to the beneficial interest in a property in a development in Tseung Kwan O which is particularised in paragraph 2 of the Amended Statement of Claim (“the Property”).

2.  The defendant was legally represented by Messrs. Anthony Siu & Co until 28 December 2020 when, pursuant to the order of Master Dick Ho, the said solicitors firm ceased to act for the defendant. Since then, the defendant had not participated in these proceedings.

3.  Pursuant to the Unless Orders made by the learned Master on 13 July 2021, the defendant had been debarred to adduce any documentary evidence nor to call any factual witness at the trial.

4.  As the defendant failed to appear at the Case Management Conference which took place on 23 November 2021, the learned Master ordered, pursuant to Order 25 rule 1C of the Rules of the High Court (Cap.4A, Laws of Hong Kong)  (“RHC”), that the defendant’s Counterclaim filed in these proceedings be provisionally struck out.  No application for restoration of the said Counterclaim had ever been made by the defendant.

5.  Although the defendant failed to appear today, I have ordered that this trial may be proceeded with as scheduled upon my satisfaction that he had been properly given notice of the trial date.

THE PLAINTIFF’S CASE

6.  It is the plaintiff’s case that:

(1)  The plaintiff and the defendant were colleagues.

(2)  By an Assignment dated 23 July 2011, the Property was purchased under the joint names of the plaintiff and the defendant as tenants-in-common in equal shares.

(3)  At the time of the acquisition of the Property, it was the common intention of the parties that:

(i)  The purchase of the Property was for investment purpose;

(ii)  The financial contribution to the purchase of the Property (including the purchase price and incidental costs of the sale and purchase transaction)  shall be made by the plaintiff and the defendant;

(iii)  Each party would hold their respective shares in the Property in accordance with the proportion of financial contributions made;

(iv)  The net proceeds of the sale of the Property shall be divided in accordance with the proportion of financial contributions made.

(4)  It was only upon the defendant’s agreement to contribute to the purchase price and the costs of purchase that the plaintiff agreed to add the defendant’s name as one of the purchasers of the Property.

(5)  The plaintiff had fully paid for the initial deposit, further deposit and all costs incidental to the purchase of the Property.

(6)  Despite the defendant’s assurances that he would pay half of the said deposit and the costs of purchase within a few days, he had never made any contribution thereto.

(7)  The purchase of the Property was partly funded by a mortgage loan granted by HSBC.  Despite the defendant’s agreement to do so, he had failed to make any financial contribution to the mortgage instalments.

(8)  As the defendant alleged that the tenancy agreement of his then residence was terminated by his landlord, he requested the plaintiff to allow him in staying in the Property temporarily, so that he could look for an alternative flat for rental.  The plaintiff agreed, and as a result the defendant had moved into the Property.

(9)  However, the defendant had never moved out of the Property since then.

(10)  The plaintiff therefore proposed that they should sell the Property.  However, the defendant refused to move out.  The defendant told the plaintiff that he would only be willing to move out of the Property on various conditions.  However, despite the plaintiff’s agreement to those requests, the defendant still failed to move away from the Property.

THE LAW

7.  The principles concerning common intention constructive trusts are well established.

8.  In Luo Xing Juan v. Estate of Hui Shui See (2009)  12 HKCFAR 1, Ribeiro PJ held in paragraph 38 that:

“Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom.”

9.  In Liu Wai Keung v. Liu Wai Man [2013] 5 HKLRD 9, G Lam J (as his Lordship then was)  also had the following to say:

“44. The principles of trust law applicable to the present case are not in dispute. The Property being registered in the defendant’s name, the plaintiff bears the burden of showing, on the balance of probabilities, that the defendant held the Property on trust for him absolutely.

45. The plaintiff seeks to achieve that by pleading both a resulting trust and a constructive trust. However, given that both parties allege there was express discussion and actual intention as to where the beneficial interest in the Property should lie, there is little scope for the operation of resulting trust: Re Superyield Holdings Ltd [2000] 2 HKC 90, 111. At the commencement of the trial, indeed, counsel agreed that constructive trust is the real issue, and that resulting trust is not relevant except perhaps if I should decide to reject both parties’ evidence on intention.

46. The focus of the inquiry is therefore on the elements that the plaintiff has to prove in order to establish a constructive trust in his favour. In the context of this case, this means that the plaintiff must prove (i)  there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the Property despite that it was acquired in the defendant’s name; (ii)  the plaintiff altered his position in detrimental reliance upon such common intention; and (iii)  it is unconscionable for the defendant to assert ownership in reliance on her legal title to the Property.

47. In ascertaining whether there was a common intention, it is the objective intention of each party ‘which was reasonably understood by the other party to be manifested by that party’s words and conduct’ that one must examine: Gissing v Gissing [1971] AC 886, 906; Jones v Kernott [2012] 1 AC 776, 794 at para. 51.

48. In the present case it is the parties’ common intention at the time of the acquisition of the Property that is relevant, there being no suggestion from anyone that the intention had changed.

49. Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions. It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention: Lloyds Bank v Rosset [1991] 1 AC 107, 132-133.

50. Even where, as in this case, reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.”

DISCUSSION

10.  In the light of the plaintiff’s evidence (which I accept), I am satisfied that all the essential elements of a common intention constructive trust have been established.  

11.  The plaintiff’s case on the payment of the purchase price, the incidental costs of the purchase and mortgage instalments is well supported by documentary evidence.

12.  I have also taken into account the defendant’s pleaded case.  Apart from the fact that such a case is totally unsupported by documentary or oral evidence, I find that the defendant’s allegation that the plaintiff had allowed him to defer his payment towards the purchase price and the mortgage instalments of the Property until the sale thereof is inherently improbable.

13.  I therefore hold that, by reason of the common intention of the parties, the defendant has been holding the Property for and on behalf of the plaintiff.

ORDER

14.  By reasons of the aforesaid, I make the following orders:

(1)  A declaration that the plaintiff is and was at all material times, solely entitled to the beneficial ownership, title and interest in the Property;

(2)  A declaration that the defendant holds the legal title and interest in the Property on trust for the plaintiff;

(3)  An order that the defendant do take all necessary steps for the transfer of his share in the Property to the plaintiff within 42 days of the date hereof;

(4)  Liberty to the plaintiff to apply for further directions for the purpose of carrying the above order into effect.

COSTS

15.  There is no reason why costs should not follow the event.  I therefore order that the defendant shall pay the plaintiff’s costs of this action, including all costs reserved, to be taxed if not agreed.