SHUM WAH MING v. THE ESTATE OF CHEN KING NGO, DECEASED and Another

1996, No.21
(Civil)

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H E A D N O T E

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The Plaintiff applied by originating summons for declaration that he was the beneficial owner of a property registered in the name of another person. Judgment was given in his favour. The Defendant appealed.

HELD : Allowing the appeal. There were factual issues which could not be determined by affidavit evidence.

Observation on originating summons procedure.

1996, No.21
(Civil)

IN THE COURT OF APPEAL
(on appeal from M.P. No.213 of 1995)

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J U D G M E N T

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Cheung, J :

The appeal

1. This is an appeal by the 2nd Defendant against the decision of Mr Justice Patrick Chan who affirmed the declaratory judgment made by the Master that firstly, the Plaintiff is the sole beneficial owner of a property situated at Flat F, 12 Floor, Winning Heights, No.7 Fu Wah Street, Tsuen Wan, Hong Kong; ("the property") secondly Madam Chen King Ngo ("Madam Chen"), now deceased, held the property on trust for him and thirdly, the Plaintiff may have the legal title of property being conveyed to him.

The Plaintiff's case

2. The Plaintiff sought relief by way of originating summons. His case was that Madam Chen bought the property in her name in 1973 with money belonging to him. He is the nephew of Madam Chen. He came to Hong Kong from China when he was 15 years of age and lived with Madam Chen as her adopted son. Between 1969 and 1975 the Plaintiff was working in Nigeria, Africa. His wages were paid into the account of Madam Chen in the Shanghai Commercial Bank in Hong Kong. In early 1973 Madam Chen suggested to the Plaintiff that he should consider buying a property with his savings as an investment, so that when he got married he did not have to rent premises. The Plaintiff agreed. The property was bought by Madam Chen. Madam Chen told him that the property would be registered in her name and the property was his both before and after the acquisition.

3. In January 1975 the Plaintiff came back to Hong Kong and was married in March of the same year. He then left for Africa again and only returned to Hong Kong permanently in 1975. He lived in the property together with Madam Chen, the granddaughter of Madam Chen, who was being looked after by her, the Plaintiff's wife and his two sons.

4. In 1983, the Plaintiff moved out because Madam Chen could not get along with his wife. Madam Chen continued to live in the property and rented part of it to tenants. In April 1994, Madam Chen died without leaving a will.

The 2nd Defendant's challenge

5. The Plaintiff's application was challenged by the 2nd Defendant, the daughter of Madam Chen, who claimed that Madam Chen had told her that she had never used any money belonging to the Plaintiff. The money which was kept for the Plaintiff had been used for the Plaintiff's family in China. The money was also spent on his wedding. In 1972 Madam Chen further borrowed $15,000 from her in order to buy the property. The money came from the 2nd Defendant's husband and her aunt. She believed the purchase money of the property came from the $15,000 which she lent to Madam Chen, Madam Chen's own savings, contribution from a Mr Yip who was cohabitating with Madam Chen and the proceeds of sale of a property which Madam Chen had earlier bought and then sold.

The steps

6. Voluminous affidavit evidence was filed. On the first hearing of the Originating Summons, the Master gave judgment to the Plaintiff. The 2nd Defendant appealed to the learned judge who dismissed the appeal. She

now appeals against his decision. The estate of Madam Chen, i.e. the 1st Defendant, is represented by the Official Solicitor who is not present in this appeal.

Originating summons application

7. Mr McCoy, Counsel for the 2nd Defendant, submitted that the application by Originating Summons is misconceived as there are issues of fact which can only be dealt with at the trial.

8. Application by originating summons is one of originating process. On the hearing of the originating summons, the Court may under Order 28, Rule 4 either grant the relief in favour of the Plaintiff, if the liability of the Defendant to the Plaintiff is established or give further directions for the conduct of the case. The court may treat the proceedings had begun by writ and order exchange of pleadings and discovery, or it may order the cross examination of the deponents of the affidavits.

9. It is clear from his judgment that these principles were in the forefront of the mind of the learned judge. After reviewing, the evidence, the learned judge came to the view that the reasonable inference from the evidence was that the Plaintiff had financed the purchase. There was no evidence that the Plaintiff had intended to make a gift to Madam Chen, and there was nothing to contradict the Plaintiff's evidence that he had an intention to purchase the property through Madam Chen. No triable issue was raised by the 2nd Defendant.

10. Mr Fung, Leading Counsel for the Plaintiff, submitted that the learned judge had carefully analysed the evidence and was entitled to this view. This appeal turns on the narrow issue whether the learned judge was correct in arriving at this view.

The law

11. The law in this area is well established :

(1) When real or personal property is conveyed to a purchaser jointly with others, or to one or more persons other than the purchaser, a resulting trust will be presumed in favour of the person who is proved (by parol or other evidence) to have paid the purchase-money in the character of purchaser (as opposed to that of donor or lender).

(2) This presumption may be rebutted :

(a) by parol or other evidence that the purchaser intended to benefit the others

(b) ...

Underhill & Hayton Law relating to Trusts and Trustees (15th Edition) page 317 to 318.

Apart from the presumption of resulting trust, there is no other presumption such as the presumption of advancement that is of relevance to the present case.

Payment to Madam Chen's account

12. The Plaintiff said that his salary when he took up employment in Africa, was $1,100 per month plus performance bonus, two months' double pay and overtime. Instruction, which was exhibited, was given to credit the wages to Madam Chen's bank account in the Shanghai Commercial Bank. The overtime payments were issued in Nigeria and he brought it back to Hong Kong when he was on leave. The overtime payment he handed to Madam Chen in Hong Kong was about $11,000, $13,000 and $15,000 respectively. The learned judge concluded that the money handed to Madam Chen would be about $120,000 which was much larger than the $60,000 required to purchase the property.

13. On the other hand the evidence show that in the 1950's Madam Chen was earning a meagre income of $1.6 per day. In 1971 to 1972, she was earning $300 to $400 per month and by 1972, she had ceased work.

No evidence on application of fund

14. Although the bank statements showed that regular sums were credited to Madam Chen's account, it was not shown that there was withdrawal of the various amounts paid for the purchase of the property. In other words, it was not shown how the salary was applied towards the purchase.

15. The documents revealed that Madam Chen bought the property in April 1972 as evidenced by a Sales Confirmation dated 1st April 1972. A deposit of $1,000 was paid. The Sale and Purchase Agreement was signed on 24th April 1972, a further sum of $18,900 was paid. Completion was on 13th October 1973 when $39,000 was paid. The total purchase price was $58,900.

16. The Plaintiff submitted that the accounts showed regular monthly withdrawal of funds and the affidavits showed that Madam Chen had another bank account, namely the Hong Kong Bank account. We were asked to draw the inference that there were regular movement of funds in the bank accounts and the purchase money came from the other account.

Plaintiff's case required to be tested in cross-examination

17. I find it difficult to make such an inference on affidavit evidence without knowing more about the Hong Kong Bank account, e.g. the duration of this account and why were the statements of the Shanghai Commercial Bank discovered and not that of this account. It is clear that no steps had been made by the solicitors to obtain the statements of the Hongkong Bank account. The only enquiry was by the Plaintiff himself.

18. If documentary evidence is lacking on the actual application of the funds, then the Plaintiff's case on the resulting trust, based on the discussion he had with Madam Chen on the property and the granddaughter's evidence of the money coming from the Hongkong Bank account, must be tested in cross-examination and cannot be resolved on affidavits. The burden remains on the Plaintiff irrespective of the contention of the 2nd Defendant. After all, he asserted that, notwithstanding the property was registered in the name of Madam Chen, he was in fact the true beneficial owner.

Loan

19. In regard to the source of the purchase money, the 2nd Defendant said that Madam Chen had borrowed money from her to pay for the purchase.

20. Mr Fung submitted that this allegation of the loan was a bald one not supported by documentary evidence; Madam Chen had her own money and there was no reason for her to borrow money.

21. Based on the affidavit evidence only, I cannot say that the matter is so incredible that one can dismiss it outright. The deposit for the Agreement for Sale and Purchase was $18,900. The Shanghai Commercial Bank account showed at the end of March 1972, the balance was at about $3,900.00. The completion was in October 1973; at the end of September, the balance in that account was about $7,800.00. The circumstances of the loan is a factual issue that must be tried.

Madam Chen's savings

22. Madam Chen may have earned very little salary, but it cannot be suggested that she had no money of her own. The evidence showed that she had acquired some jewellery. It appeared that the Plaintiff was prepared to let Madam Chen keep some money as her own. Hence the contention that Madam Chen bought the property with her savings and other resources could not be ruled out.

Admission

23. It is said that the 2nd Defendant had never denied that she had acknowledged that she would return the property to the Plaintiff as it was purchased with his money. One may ask what is the legal effect of this so-called admission. If it is used as an estoppel then it is not the function of affidavit to plead law. If it is merely used to cast doubt on the 2nd Defendant's case, then one just could not have a trial on affidavits. In any event, the establishment of a resulting trust goes beyond the dealing between the Plaintiff and the 2nd Defendant.

Counsel's omission

24. It is also submitted that the 2nd Defendant's former counsel at the hearing before the learned judge had not applied for cross-examination of the Plaintiff. The intention of the 2nd Defendant to seek cross-examination of the Plaintiff and have the case tried is clearly stated in her affidavits. A trial of the issues must necessarily involve the cross-examination of the Plaintiff. I cannot see how it would assist the Plaintiff by the omission of counsel, if ever there was an omission, to specifically seek the cross-examination of the Plaintiff.

Conclusion

25. Practitioners are reminded that the originating summons procedure is not and is never intended to be a short-cut to resolve disputes which can only be properly dealt with in a writ action. The approach adopted by the learned judge is understandable but in this case there are substantial factual issues which cannot be resolved by affidavits. I have only highlighted some of the more important ones. In the circumstances, the appeal must be allowed and the judgments below are to be set aside. I understand my Lord, the Vice President, will later give directions for the further conduct of this case.

Mayo, J.A. :

26. This is an appeal from a decision of P Chan J who dismissed an appeal from Master Jennings. The issue which was before the judge was whether he should make a declaration that the respondent was entitled to the beneficial interest in a flat known as Flat F, 12/F Winning Heights in Tsuen Wan.

27. The respondent claimed that he was the adopted son of Madam Chen. She died on the 2 April 1994. Her estate is the 1st Defendant in these proceedings.

28. The respondent gave affirmation evidence to the effect that he had provided the purchase moneys when the said flat was bought in 1973.

29. The respondent had resided with his family in Shanghai. Madam Chen who was his aunt had arranged for him to come to Hong Kong where she was residing. She was a divorcee who had a daughter. He had come to Hong Kong in 1962 and it had been agreed that she would adopt him.

30. He had worked in Hong Kong after his arrival in a humble capacity. In order to improve his financial position he had gone to Nigeria where he worked as an expatriate. He had remitted moneys to Madam Chen in Hong Kong.

31. In 1973 Madam Chen had suggested that the respondent should purchase a flat in Hong Kong so that he would have some where to live after he returned to Hong Kong. He agreed to this. It was his understanding that the moneys he had been remitting to Madam Chen would be applied towards the purchase of a flat.

32. Madam Chen bought the said flat in her name. According to the respondent the flat belonged to him.

33. This was notwithstanding the fact that Madam Chen lived in the flat and indeed received rent from a sub-tenant of part of the flat.

34. After Madam Chen's death the respondent wanted to have the flat formally assigned to him.

35. Madam Lau the appellant, who is Madam Chen's daughter did not accept that the said flat was beneficially owned by the respondent. She declined his request.

36. The respondent issued the proceedings in this case. He did so by issuing an originating summons.

37. Voluminous affirmation evidence was placed before Master Jennings who heard the applicant's originating summons which sought a declaration that the respondent was the beneficial owner of the said flat. Master Jennings acceded to the application and granted the relief sought.

38. This decision was the subject of the appeal which was heard by P Chan J.

39. In a reserved judgment P Chan J gave his reasons why he accepted the evidence adduced by the respondent. He concluded that the declaration should be made as he was satisfied that there was no triable issue.

40. At the commencement of the appeal before us Mr McCoy for the appellant submitted that as there were clearly factual issues in dispute the proceedings should not have been commenced by way of originating summons. In the alternative P Chan J should have ordered that the case should proceed as an action and he should have given necessary directions to achieve this. His authority for this was Order 28 r4 of the Rules of the Supreme Court.

41. He based his submission on the fact that there were clearly factual issues in dispute between the parties.

42. Although Mr McCoy accepted that there was evidence that remittances were sent by the respondent from Nigeria to Madam Chen it had certainly not been established with any satisfactory degree of clarity that these moneys had been applied towards the purchase of the said flat.

43. The appellant had adduced evidence which suggested that the purchase price came from

(a) Madam Chen's own savings;

(b) a loan of $15,000 she had made to Madam Chen;

(c) the sale proceeds Madam Chen had received from another flat;

(d) contributions which had been given to her by a Mr Yip who she alleged had been a co-habitee of Madam Chen; and

(e) borrowings from a Madam Wu Choi Ling a lady who had given equivocal affirmation evidence.

44. Mr McCoy emphasised in particular the evidence given by the appellant concerning the $15,000 loan she claimed to have made to Madam Chen at the relevant time. He submitted that this at least was a live issue between the parties which had to be judicially determined.

45. Mr McCoy placed reliance upon a passage at p13 of P Chan J's judgment which read as follows:

" Counsel further submitted that there was no evidence of any payment by instalment of the purchase price. The evidence regarding the payment of the purchase price and how the property came to be purchased was also not clear from the plaintiff's evidence or evidence adduced by the plaintiff."

46. It was difficult in these circumstances to see how the judge could be satisfied that the whole of the beneficial interest belonged to the respondent unless there was a trial of the outstanding issues between the parties.

47. Mr Fung QC for the respondent argued that there was overwhelming evidence to support his client's claim to be the beneficial owner of the said flat. Mr Fung placed considerable reliance upon the case of European Asian Bank v. Reicar Investment Ltd. [1988]1 HKLR 45. In that case Deputy Judge Barnett (as he then was) was prepared to apply Order 14 principles to an originating summons. He was prepared to consider whether the defendant had been able to demonstrate that there was a triable issue.

48. Mr Fung submitted that there were no triable issues in the present case. All that the appellant had done in respect of the loan she alleged she had made to Madam Chen was to make a bare assertion. This had not been supported by any documentary evidence. He contended that no useful purpose would be served by ordering a trial of the issues.

49. It had been open to the appellant to cross-examine the respondent had she wished to do so. She had not availed herself of this opportunity.

50. I regret that I do not consider this to be the correct approach to these proceedings. While I accept that there is no hard and fast principle concerning what cases can properly come within the ambit of Order 28 it is nonetheless necessary to consider whether there are significant factual issues requiring determination. If there are it is inappropriate to have resort to the originating summons procedure.

51. What is clear concerning the present case is that there are substantial issues of fact requiring an adjudication. It is not accurate to contend that the respondent has made out a case that all of the purchase moneys for the said flat derived from the remittances he sent to Madam Chen.

52. It is in my view imperative that the issues between the parties are properly framed by pleadings and that an orderly trial procedure be adhered to so that all relevant matters can be satisfactorily canvassed. The observations made by Godfrey J as he then was in Cheney Communications Pte Ltd. v. Christopher Charles Cheney (unreported) MP 2942/92 are germane in this regard.

53. Perhaps even more important than this it is essential that all witnesses giving evidence should do so viva voce rather than reliance being placed upon affirmations.

54. This will be a difficult case to try even with oral testimony. Attempting to determine the issues by comparing conflicting affidavits would be an invidious and impossible task.

55. Having said this I do have considerable sympathy for the approach adopted by Master Jennings and P Chan J. They were no doubt mindful of the disproportionate cost of contested litigation to the present value of the said flat. I am though satisfied that it would be impossible to serve the interests of justice unless there is a trial of the outstanding issues in this case. In my view this appeal should be allowed and directions should be given as to how the cause should proceed.

Nazareth V.-P.:

56. I agree with my Lords. But I have to say that it is plain that there are strong indications and considerations that point to the strength of the plaintiff's case. Against that background and the relatively modest value of the flat, which could well be wiped out by the costs of proceedings of the present sort, the approach of the master and the judge is entirely understandable. I have, therefore, found it rather more difficult to reach my conclusion than my brothers, Mayo JA and Cheung J have done. But in the end, as I have indicated, I am persuaded that for the reasons they have given, the order of the judge cannot be sustained and that the appeal must be allowed.

57. What emerges in the end is the unsuitability of the originating summons procedure to resolve factual issues and disputes of the present sort without the structured approach of proper pleadings and the consequent clarification of issues and their assistance in resolving such factual disputes in a trial.

58. The conclusion we have been driven to cannot be any cause for satisfaction. The parties would be well advised to seek some compromise if that is possible while there still remains some part of the cake that is not entirely eaten up by the costs.

59. That said, the appeal is allowed, the order of the judge set aside and the matter remitted to the High Court to be re-tried.

60. As to the precise nature of the directions and any other matters outstanding, we will now hear counsel.