SUN CRYSTAL LTD v. The personal representatives of the estate of CHENG CHOW YEE aka YAN CHOW YEE, deceased

HCMP 438/2023

[2023] HKCFI 2945

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 438 OF 2023

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BETWEEN

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REASONS FOR DECISION

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1.   Introduction

1.1.  The Plaintiff is currently redeveloping a piece of land on Elgin Street, Central, Hong Kong. As the title of these proceedings states, the present application is concerned with Subsection 3 of Section A of Inland Lot No. 121 and Subsection 4 of Section A of Inland Lot No. 121 (“Land”). Prior to it being demolished, Nos. 45 and 47 Elgin Street (“Old Building”) was erected on the Land.

1.2.  For the purpose of redeveloping the Land and its adjoining lots (collectively “Lands”), in June 2019, the Plaintiff and Jumbo Honest Limited (“JHL”) made an application pursuant to the Land (Compulsory Sale for Redevelopment) Ordinance Cap 545 (LDCS 17000/2019) for an order for sale of all undivided shares of and in the Lands.

1.3.  The LDCS application was discontinued in 2021, on the basis that the Plaintiff and JHL had successfully acquired all the undivided shares of and in the Lands. The demolition of the Old Building commenced in June and was completed in October 2022. The redevelopment works are presently ongoing.

1.4.  In August 2022, in the course of reviewing the title deeds and documents in preparation for the intended sale of the undivided shares in the Lands after redevelopment, the Plaintiff discovered that there was a title blot in respect of one of the units in the Old Building, namely Flat B on the 7^th Floor (“Property”). The purpose of the present application is to cure that defect.

1.5.  The Plaintiff seeks relief on three alternative grounds:-

(1) common intention constructive trust, and consequently, a vesting order pursuant to section 45 of the Trustee Ordinance Cap 29 (“TO”) (Originating Summons §1),

(2) adverse possession (Originating Summons §2), or

(3) section 6 of the Partition Ordinance Cap 352 (“PO”) (Originating Summons §3).

1.6.  At the hearing, the Plaintiff was represented by Mr Jonathan Chang SC (leading Mr Jonathan Ng).

1.7.  At the end of the hearing, I acceded to the Plaintiff’s primary case based on constructing trust and made an order in terms of §§1(a)[1], 1(b) and 4[2] of the Originating Summons and indicated I would provide my reasons.

1.8.  These are my reasons.

2.   Devolution of the title of the Property

2.1.  On 1 August 1967, the Property was assigned to Cheng Chow Yee (“Cheng”) and Yan Lin Ying alias Josephine Rose (“LY Yan”) as joint tenants.

2.2.  On 12 July 1973, LY Yan alone purportedly assigned the Property (“1973 Assignment”) to Yan Bing Wah (“BW Yan”), “to the intent that the entirety of [the Property] shall thenceforth be vested in [BW Yan] and [Cheng] as Joint Tenants”. Cheng, the other joint tenant, did not execute the 1973 Assignment.

2.3.  On 30 July 1980, Cheng executed a Power of Attorney (“1980 POA”) to appoint BW Yan as the attorney to manage the Property on her behalf. In the Recital, Cheng was described as “one of the registered Joint Tenants entitled to the [Property]”.

2.4.  On 23 February 1981, BW Yan in his own name and on behalf for Cheng executed a mortgage of the Property (“1981 Mortgage”) in favour of a bank for banking facilities. In the Schedule, Cheng and BW Yan were described as “Joint Tenants” of the Property.

2.5.  On 26 January 2007, Cheng passed away in the United States. The Plaintiff’s search reveals that no personal representative has been appointed in respect of Cheng’s estate.

2.6.  On 5 November 2010, in the course of acquiring all the undivided shares in the Land, the Plaintiff as the purchaser and BW Yan as the vendor entered into a provisional sale and purchase agreement of the Property (“PSPA”).

2.7.  It was thought that by operation of the right of survivorship, BW Yan had become the sole beneficial owner of the Property after the demise of his joint tenant, Cheng. On 24 February 2011, BW Yan assigned the Property to the Plaintiff (“2011 Assignment”).

2.8.  By virtue of the PSPA and the 2011 Assignment, it was the Plaintiff’s belief that it has become the sole legal and beneficial owner of the Property.

3.   The title blot

3.1.  As pointed out by Mr Chang, contrary to the Plaintiff’s belief, it has only acquired a 50% interest of the Property. This is because LY Yan was the only assignor in the 1973 Assignment.

3.2.  In law, if a joint tenant (LY Yan) alienates his interest inter vivos, his joint tenancy is severed. The person to whom the interest is assigned (BW Yan) takes it as a tenant-in-common with the other joint tenant (Cheng), because he has no unity of title with her.

3.3.  Accordingly, BW Yan only acquired LY Yan’s 50% interest in the Property as a tenant-in-common at law pursuant to the 1973 Assignment, which was in turn assigned to the Plaintiff pursuant to the 2011 Assignment, whereas the remaining half share (“Cheng’s 50% Share”) remained vested in Cheng at law as the other tenant-in-common.

3.4.  The Plaintiff’s attempts to locate Cheng or her surviving issues, BW Yan and LY Yan, were all in vain.

3.5.  On 13 July 2023, Master Matthew Leung ordered that the Official Solicitor be appointed to represent Cheng’s estate for the limited purpose of accepting service of the OS.

3.6.  On 30 August 2023, Master Dick Ho ordered that the present proceedings be proceeded in the absence of a person representing Cheng’s estate, pursuant to RHC O.15 r.15.

3.7.  Having considered the evidence and submissions, I decided to accede to the Plaintiff’s primary position.

4.   Plaintiff’s primary position

4.1.  Section 45 of the TO provides:-

“In any of the following cases, namely –

…

(e) where there is no personal representative of a deceased trustee who was entitled to or possessed of any interest in land, or where it is uncertain who is the personal representative of a deceased trustee who was entitled to or possessed of any interest in land;

…

the court may make an order (in this Ordinance called a vesting order) vesting the land or interest therein in any such person in any such manner and for any such estate or interest as the court may direct, or releasing or disposing of the contingent right to such person as the court may direct…”

4.2.  Under section 2 of the TO, “trustee” extends to implied and constructive trusts.

4.3.  I was reminded by Mr Chang that the Court should accede to the application only if there is clear evidence justifying the making of such order. The Court should proceed cautiously, examining the evidence presented by the applicant critically and, where there are gaps in the applicant’s evidence, requiring the applicant to fill such gaps by satisfactory evidence, or provide proper explanations as to why, despite the exercise of reasonable diligence, the applicant cannot adduce further evidence to deal with the evidential deficiencies. The applicant also owes the duty of full and frank disclosure: Re Ng Tsun Wei (unrep. HCMP 1428/2016, 4 October 2016) at §4.

4.4.  Having considered the evidence and submissions, I agreed with Mr Chang that the evidence showed a common intention between Cheng and BW Yan that the Property was held as joint tenants for themselves, for the following reasons.

4.5.  In terms of the documentary evidence:-

(1) The 1973 Assignment stated that the Property “shall thenceforth be vested in [BW Yan] and [Cheng] as Joint Tenants”;

(2) the Recital of the 1980 POA stated that Cheng was “one of the registered Joint Tenants entitled to the [Property]”;^[3]

(3) the 1981 Mortgage described Cheng and BW Yan as “Joint Tenants” of the Property.^[4]

4.6.  This is consistent with the fact that BW Yan purported to rely on Cheng’s death certificate (to show that Cheng’s interest had been transferred to BW Yan, being the surviving joint tenant) and assign the Property as sole beneficial owner to the Plaintiff under the 2011 Assignment.

4.7.  It may be inferred from the above that BW Yan executed the 1973 Assignment on the common intention with Cheng that he would hold the Property as joint tenants rather than tenants-in-common, such that Cheng’s interest would be passed to him by the right to survivorship upon Cheng’s demise. It would be unconscionable for Cheng (or her estate) to assert her ownership in the Property in reliance of her legal title as tenants-in-common.

4.8.  I therefore accepted Mr Chang’s submissions that:-

(1) I should, and I did, find that Cheng and BW Yan at all material times held the Property on constructive trust for themselves as joint tenants.

(2) Whilst Cheng (and upon her demise, her estate) continued to hold the legal title in the Property as a tenant-in-common, her beneficial interest in the Property would pass to BW Yan upon her demise in 2007 by the right of survivorship. In other words, Cheng’s estate would hold Cheng’s 50% Share on trust for BW Yan.

(3) Therefore, pursuant to the 2011 Assignment, BW Yan would have assigned all his interest in the Property to the Plaintiff, comprising the entire beneficial interest in the Property. As a result, Cheng’s estate would in turn hold Cheng’s 50% Share on trust for the Plaintiff.

4.9.  The requirement for granting a vesting order under section 45(e) of the TO is satisfied as no personal representative of Cheng’s estate has been appointed.

4.10.  The Plaintiff’s solicitors had previously written to the Department of Justice on 20 July 2023 seeking their view as to whether the Government had any intention to participate in these proceedings to claim interest in the estate of Cheng. On 26 July 2023, the Department of Justice confirmed that they have no intention of doing so.

4.11.  Although the order which I made was not pursuant to the PO, service on the Director of Lands had been effected, as required by section 3(2) of the PO.

5.   Conclusion

5.1.  It is for the above reasons that I made the Order set out at §1.7 above.

5.2.  I thank counsel for their assistance.