HO CHAN YUET LAN v. HO KAI HUNG and Another

IN THE COURT OF APPEAL

1995, No. 34
(Civil)

- Headnote -

Section 17(1)(b) Matrimonial Proceedings and Property Ordinance - Power of Court to set aside dispositions under which beneficial ownership is transferred - where husband made no contribution to purchase price of property or mortgage repayments as resulting trust arises.

Held (Court of Appeal): Appeal allowed. Judge's order setting aside disposition quashed. Lloyds Bank v. Rosset [1991]1 AC 107 applied.

IN THE COURT OF APPEAL

1995, No. 34
(Civil)

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J U D G M E N T

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Litton, V.-P.:

1. There are three parties involved in this appeal: Madam Ho Chan Yuet-lan (the wife), Mr Ho Kai-hung (the husband) and Madam Yuen Tam-wan (madam Yuen). It concerns an undivided half-share in a property at Cheung Chau known as the G/F, 22 Tai San Street, Cheung Chau New Territories purchased in May 1983 in the names of the husband and madam Yuen as joint owners. By a deed of gift dated 11 February 1989, and registered in March 1989, the husband transferred that undivided half-share to madam Yuen, making her the sole registered owner.

2. By an order dated 19 August 1994 His Honour Judge Surman, in exercise of his powers under section 17(1)(b) of the Matrimonial Proceedings and Property Ordinance, set aside that the disposition on the ground that the transaction was intended to defeat the claims of the wife against the husband for financial provisions in matrimonial proceedings brought by her. Madam Yuen, being aggrieved with that order, now appeals.

Background

3. The husband and wife were married in China in 1950. In early 1962 the husband came alone to Hong Kong, leaving the wife in China. From 1969 onwards he cohabited with madam Yuen and they have three children. In May 1983 the property was purchased in the joint names of the husband and madam Yuen. The husband carried on a small business there making quilts and it seems selling straw hats, mats and things of that kind, until March 1992. The family lived in the premises until the husband left in March 1992.

4. Things began to go wrong for the family when, in December 1988, the wife came to Hong Kong and made contact with the husband. A few months later the disposition of the undivided half-share registered in the husband's name occurred. In July 1990 the wife filed divorce proceedings and sought financial provisions from the husband. In October 1993 the wife made her present application under section 17(1)(b) of the Matrimonial Proceedings and Property Ordinance leading to the order now under appeal.

The issue on appeal

5. There is only one point arising on this appeal. Was the husband the beneficial owner of the half-share conveyed to madam Yuen in February 1989? Obviously if the husband held the legal title merely as a trustee and not as beneficial owner the "disposition" of that half-share could not be a disposition coming within section 17(1)(b). This court said as much in previous proceedings between the same parties: see Mr Justice Nazareth's judgment in CA No. 41 of 1993, 15 July 1993, at p5G.

6. The half-share, before the disposition in February 1989, was in the husband's name. There was, as the judge said, no "documentation to support the contention that the property (meaning obviously the half-share) was to be held in trust"; prima facie what the husband disposed of by the deed of gift was his entire interest, including beneficial interest if that existed in the property. But there is clear law to the effect that, presumptions of advancement apart, where property is purchased in the name of A and the purchase price is provided by B, and nothing more is said, A holds the property upon a resulting trust for B: see Snell's Equity (29th Edition) p177-178.

7. It was always madam Yuen's case that the husband contributed nothing towards either the purchase of the property or the discharge of the bank mortgage and that, consequently, he held his undivided half-share in trust for her; not of course on an express trust but on a resulting trust, one created by the operation of law.

8. To examine the validity of madam Yuen's claim it is necessary to look closely at what was said and done in 1983 when the property was first acquired, and also to see how the bank mortgage was subsequently discharged. Unfortunately, the judge did not do that: at least, it is not apparent from his judgment that he did so. To do justice between the parties we in this court have now the unenviable task of examining the evidence which was before the judge, best we can, to see what might properly be inferred as regards the parties' intentions at the relevant time. We do so bearing in mind what Miss Longmore, counsel for the wife, has submitted: that the judge viewed the testimony of madam Yuen and the husband with the utmost suspicion, given that they had a natural tendency to "gang up" on the wife from China.

The beneficial interest in the half-share

9. It is necessary first to examine how the husband came to acquire the half-share in his name. The evidence put before the district judge, unchallenged, was to this effect. Of the purchase price of $200,000, $140,000 was provided by madam Yuen's mother and the balance of $60,000 was raised on a bank mortgage. The mortgagors, it would appear, were the husband and madam Yuen: not surprising, since they were the joint registered owners.

10. The documentary evidence before the judge shows conclusively that the $140,000 came from madam Yuen's mother's account with The China and South Sea Bank. The sum of $140,000 was transferred into a loan account No. 026-707-4-000026 opened by the bank in madam Yuen's sole name. The balance of the loan advanced by the bank was debited to that loan account, to be discharged by monthly instalments over a period of 60 months. The husband made no contribution to the purchase price. Nothing before the judge suggests that in providing the sum of $140,000 madam Yuen's mother intended that any part of that sum should be a gift to the husband.

11. In her affirmation of her 20/7/92 madam Yuen said this:

"22. Before the property in dispute was purchased in 1983, the whole family lived in rented accommodation. The premises were in such a dilapidated stage of repair that water came into the house through the cracks. All the beds and beddings became wet when raining, and the whole family could not go to bed at all. This stimulated me to work even harder to save up money to purchase a property of our own. My mother took pity on me and her grand children and she let me HK$140,000.00. I then paid off the mortgage through my savings and the remittances from my brothers. My brothers have been looking after me well by supporting me financially though they live far away in Holland. There is now shown to me marked and exhibited "YTW-15" foreign currency exchange notes and foreign currency cheque deposit form issued by The Hang Lung Bank Limited, The Dao Heng Bank and The Hongkong and Shanghai Banking Corporation dated from September 1985 to January 1990, being some of the sample foreign currency cheque deposit forms.

23. Although the purchase money of the property in dispute was provided by my mother, my brothers and by me out of my own savings, I decided to allow the name of the 1st Respondent (the husband) to be added in as one of the Joint Tenants under the belief at that time that he was my lawful husband and that he was someone who I could trust and be relied on."

12. In cross-examination madam Yuen said this, p.47 and p48:

"Q. Your mother lent you $140,000?

A. Yes.

Q. Did you repay it?

A. No.

Q. Who did?

A. No one.

Q. It was a loan?

A. She said take the money for the purchase of the flat, if you get the money just repay it. If you haven't just forget it."

Judge's approach

13. His Honour Judge Surman, in his judgment, dealt with this aspect of the case under three points. None of them amount to findings of fact of any kind. I will deal with points 1 and 2 later. In relation to point 3 the judge said this:

"There is no documentation to support the contention that the Property be held in Trust for the 2nd Respondent and her Mother (compared with the specific entry in The Lands Register, which lists it as a Joint Tenancy (Husband & 2nd Respondent)) I have considered the submission that the 2nd Respondent paid the Mortgage on the Property, and that the 2nd Respondent's Mother made a contribution to the purchase price by way of a loan. Even if those submissions are valid ... and I do not necessarily accept that they are ... the Husband too will have made an indirect contribution as an 'Income Earner' and as the 'Husband' of the 2nd Respondent thereby allowing the latter to make (if she did) the Mortgage repayments.

I am satisfied that the Husband and the 2nd Respondent were Joint Beneficial Owners of the Cheung Chau Property until 1989."

14. I have difficulty in understanding what the judge meant by the "submission" that madam Yuen paid the mortgage on the property and the "submission" that her mother made a "contribution to the purchase price by way of a loan". What was adduced in court was evidence, and it was the function of the judge to find the facts on the basis of the evidence.

15. The undisputed evidence was that the husband's business, such as it was, yielded very little profit. From at least the time of the purchase of the property until the children were grown-up all he contributed towards the family was as follows: $200-300 per month for food and clothing plus the rates, electricity, water and telephone charges and insurance on the property. The children were aged 14, 11 and 8 years at the time of the purchase.

16. Madam Yuen's evidence was that it was she who discharged the mortgage loan by monthly payments. This was not controverted by other evidence. However unfavourably the judge might have regarded her as a witness, this was not inherently improbable and there was simply no basis for rejecting that piece of evidence. When the judge said "The husband too would have made an indirect contribution as an income earner", this was based on surmise, unsupported by any evidence.

17. The evidence before the judge was that the husband made no contribution towards mortgage repayment and there was no evidence pointing in the opposite way. If by "indirect contribution" the judge meant to indicate nothing more than the sums the husband paid for family maintenance and that these sums made it easier for madam Yuen to discharge the mortgage payments, that would not, in law, have given the husband a proprietary interest in the property, as I will endeavour to explain later on.

18. As to the "contribution" made by madam Yuen's mother, to which the judge referred, the evidence of the transfer of the $140,000 into madam Yuen's account is well-documented and wholly uncontroverted. It matters not whether it was a loan or a gift to madam Yuen: either way she was using money to which she was entitled, to pay for the property. The fact that she might have incurred a personal debt to her mother does not make her any less an owner of the property.

19. As to the other two points under which the judge dealt with this issue of beneficial ownership they were as follows:

(1) The fact of the disposition of the half-share shortly after the wife's arrival from China in Hong Kong; and

(2) The fact that in 1986 madam Yuen purchased another property in her sole name.

20. As to (1) it seems to me that the gift of the half-share in February 1989 is not a true test of the beneficial ownership. Clearly, the judge was right to infer that the transaction was triggered by the wife's arrival from China. But the matter does not end there. Assuming the true position were that the husband was a bare trustee: would the disposition not, just as probably, have taken place? Why should he not have been asked to convey the legal interest back to madam Yuen? What inference can be drawn from that fact alone? It seems to me that the disposition itself in February 1989 was evidentially neutral. It is not evidence that madam Yuen had intended back in 1983 that the husband should have a beneficial interest in the half-share.

21. As to point (2), I cannot understand how madam Yuen's purchase of a property in her own name in 1986 is evidence of her intentions in 1983. The significance of the 1986 purchase, in my judgment, is this. It shows that madam Yuen, in 1986, had the financial capability to purchase property and this reinforces the evidence that she alone discharged the mortgage repayments in the meanwhile.

First principles

22. In the absence of relevant findings of facts by the trial judge, and the application of the law to such findings, we in this court are driven to approaching this case from first principles. In cases of this kind there are broadly-speaking two categories of cases: (1) Those cases, perhaps rare, where there was some agreement, arrangement, understanding between the spouses that the proprietary interest in property should be shared in a particular way; and (2) those cases, perhaps more common, where there is no evidence to support a finding of an agreement or arrangement, and the court is driven to infer the common intention from conduct. See Lord Bridge in Lloyds Bank v. Rosset [1991]1 AC 107 at 132E to 133F. In my judgment, this case cannot possibly fall into the first category. The judge never so found. There is no evidence capable of supporting a finding of an agreement, arrangement or understanding. What then is the court left with?

23. $140,000 out of the purchase price of $200,000 was provided by the mother. She transferred the money to her daughter's account; with the money in her loan account with The China and South Sea Bank madam Yuen bought the property. It was registered in joint names. The husband contributed nothing. The mortgage repayments amounting to about $1,400 a month were on the evidence before the court discharged by madam Yuen; possibly the husband and madam Yuen had their own interests to serve by asserting that it was madam Yuen who had made the mortgage repayments, but there was no evidence pointing any other way.

24. From these facts the court infers the common intention of the parties. The inevitable conclusion is that the husband held his half-share in trust for madam Yuen from the time of acquisition. It follows that when the disposition of the undivided half-share was made on 11 February 1989 it was the assignment of a bare legal estate. No beneficial interest was in fact transferred. This was not a disposition falling within s17(1)(b) of the Matrimonial Proceedings Ordinance. In my judgment the judge's order setting aside the disposition must be quashed.

Bokhary, J.A.:

25. This case is of great importance to each of these two unfortunate women. Whoever loses will be hard hit by the loss. But all that we can do - and what we must do - is justice between them according to the law and upon the evidence. I have listened with care to everything which my Lord has said in the course of the judgment which he has just delivered. And having done that, I find myself in agreement with every word which he has said. For the reasons which he has given, I too would allow this appeal.

Sears, J.:

26. The task of this court would have been considerably assisted had the judge below set out in easily readable paragraphs the facts he found, having listened to the evidence. There was a considerable body of evidence called both in the form of lengthy affidavits and substantial cross-examination. Unfortunately, the judge recorded what are said to be "submissions by the parties", but made no specific findings as to any of the facts which he had to find. This, as my Lord, the Vice-President has already stated, necessitated this court itself examining the evidence and making its own conclusions as to that evidence. For the reasons he has given I would also allow this appeal.