CHAN LEUNG KEE DANNY v. CHAN LEUNG KEUNG

1995 No. A2781

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. In this action the Plaintiff seeks in effect the return of a flat namely Flat D 22^nd Floor, King's Centre, King's Road. What is sought is the transfer of the property into the Plaintiff's name and a declaration. The Writ also seeks vacant possession of the premises but Miss Chan, who appeared for the Plaintiff, made clear that in the event of the Court granting the Plaintiff the primary relief sought, the Plaintiff was content with an Order that would permit the Defendant to remain in possession until the 30^th April 1998.

THE FACTS

2. The Plaintiff and the Defendant are brother. The Plaintiff is about 10 years older than his brother, although he himself was only the 4^th brother. The history of the matter arises in this way.

3. In about 1967, the Plaintiff emigrated to Canada to study. After graduation, he settled there. He went into business and opened optical shops. By all accounts he has been successful.

4. Some time in 1977, the Plaintiff decided to buy a flat in Hong Kong for his mother to live in. At that time, his sister Chan Lai Yung agreed to stay with the mother in order to look after her. So that a favourable mortgage might be obtained for the purchase of the flat and to facilitate the transaction generally, it was arranged to have the flat purchased in the sister's name. Apparently the Plaintiff was responsible for the whole of the purchase price of the flat and all necessary outgoings.

5. The sale and purchase agreement for Flat D, 22^nd Floor, King's Centre, No. 193-209 King's Road, Hong Kong was signed by the sister on 1^st March 1978 and thereafter she became the registered owner of the Property. The Property was mortgaged to Hang Seng Bank Limited to finance the purchase of the Property.

6. During the period the sister was the registered owner of the flat, the Plaintiff reimbursed her the initial payment, the legal fees, all the expenses and the subsequent monthly mortgage payments which were paid.

7. In about 1980, the sister ceased to live in the flat and she transferred the title of the property to the Plaintiff by way of a deed of gift dated 25^th July 1980 which was registered in the Land Registry by Memorial No. 1946810.

8. It would seem that at one stage the Mother applied to immigrate to Canada but before she did so the Defendant came to Hong Kong from the PRC. He lived with his mother in the flat and later was joined there by his wife and children.

9. Up to this stage there is little or no dispute between the parties. Thereafter their versions of events differ, in some respects more greatly than others. As a general matter where the evidence of the Plaintiff and the Defendant differ, I prefer that of the Plaintiff. He appeared to me to be giving evidence in a straightforward manner. At times he was concerned to argue his case, in the sense that he would answer what he felt was the conclusion to be drawn from a line of questioning rather than the question itself. Despite that I consider he answered the questions honestly without any suspicion of dissemblence. On the other hand I did not feel any degree of confidence in the accuracy of the Defendant's answers. His manner in the witness box was not straight forward. At times he became evasive. For example when questioned about his financial status in 1987 he appeared to be saying what would suit his position in respect of the matter about he which he was being cross-examined. In another instance, in respect of his evidence about having borrowed sums from his wife's maternal aunt, the evidence was given in what seemed a patently unreliable way and seemed to me to become embellished as it went on. I will deal in more detail later in this Judgment with the evidence about the events in the solicitor's office in April 1992. Suffice it to say at present that I found his evidence unreliable whereas I accept what was said by the Plaintiff, Mr. Joe To and Mr. Quan which was consistent, clear and accords with such documentary records as exist, apart from the date of one of the documents.

10. At some stage, and it matters not precisely when, the Mother went to Canada although as it will emerge she did not stay there indefinitely.

11. In 1984 an application was made for the Defendant to immigrate into Canada as an entrepreneur. That application was refused and the refusal was notified to the Defendant by letter dated the 18th October 1984.

FINANCIAL ARRANGEMENT BETWEEN THE PLAINTIFF AND THE DEFENDANT

12. Whatever other employment the Defendant had, and it seems, that from time to time he worked as a decorator, or master carpenter as he put it in his evidence, and as a waiter, it seems that the Defendant performed a function of purchasing goods to be used in the Plaintiff's optical business in Canada. For that purpose the Defendant had at the Plaintiff's request set up a business under the name Yee Hing Company. I understand this was a firm rather than a limited company. The financial arrangements appear to have been rather loose. From time to time the Defendant would send memos, which it seems on some occasions, at least, consisted of little more than esoteric notes on scraps of paper. The Plaintiff would then remit money to the Defendant which was paid into the Yee Hing account.

13. The schedule of payments to Yee Hing which had been produced by the accountant in Canada and which the Plaintiff referred to in the witness box, showed that in many years there were substantial payments to Yee Hing over and above any invoice which had been issued by Yee Hing. For the Defendant it was said that he had not had a chance to deal with the matter, but as I see it he could have done his own calculations from his own records, had he or his advisors so wished. The Plaintiff's evidence was that in addition to going to pay the business expenses, those payments were also to satisfy the cost of keeping the flat and the mortgage payments and the cost of looking after the Mother.

14. This arrangement ceased temporarily in 1985 and 1986. Whereas prior to that time there would seem to have been substantial overpayments, in those years the payments suddenly dried up. The Plaintiff explained that in those years he was under investigation by the Canadian tax authorities and that he dared not carry on making the payments. He felt however, that the overpayments in previous years were sufficient to keep things going in the interim.

THE PLAINTIFF'S ASSISTANCE IN THE IMMIGRATION APPLICATION

15. It is the Plaintiff's case that the Defendant approached him for assistance in immigrating into Canada and that in 1987, whilst the Defendant was in Canada visiting their father who was on his deathbed, professional advisers were consulted and the initial steps were taken to put in hand the next application which was finally made, it seems, in 1989.

16. There is no dispute between the parties about this aspect, the Defendant had scarcely any capital at all in 1987 and the application had to be made by making it look on paper as if the Defendant had sufficient assets. It is the Plaintiff's case that it was the Defendant who turned to him for assistance in respect of the immigration to Canada. Despite the fact that paragraph 19(a) of his witness statement would give the impression that the Defendant wanted to emigrate and was seeking his brother's assistance, the Defendant when in the witness box tried to give the impression that it was really the Plaintiff who wanted the Defendant to immigrate to Canada and that whilst he was prepared to allow that to happen he was not really very concerned about it.

17. My view of the matter having heard the witnesses is that in the 1980's the Defendant did wish to immigrate to Canada but that due to his own circumstances he was entirely dependant on his brother's assistance. Clearly the Plaintiff took upon himself the task of arranging for professional assistance in Canada in respect of the immigration application. It also seems that the Plaintiff made all the enquiries and arrangements to try and bring about a successful application. The first steps towards this second application by the Defendant were taken in January 1987. On the 16^th January, shortly before the Father's death, a letter was written to the Immigration Section of the Commission for Canada notifying them of the Defendant's intention to immigrate.

THE TRANSFER OF THE FLAT TO THE DEFENDANT

18. Crucial to this case is the transfer of the flat which was effected by means of a Deed of Gift executed by the Plaintiff on the 29^th May 1987. The Plaintiff was in Canada at the time and Deed was sent to him to execute there. He maintains that the purpose of the transfer was simply to make it look as though his brother had assets which would facilitate his application to the Canadian immigration authorities. The Defendant on the other hand maintains that the transfer was simply a gift by his elder brother in order to enable him to become wealthy. Despite saying in paragraph 19(a) of his witness statement that his wife telephoned the Plaintiff and suggested that either the Defendant should buy out the Plaintiff's shares in the flat or else the flat should be sold and the proceeds divided between he and his brother, seemingly in order to boost the Defendant's assets for the purposes of the immigration application, he maintained under cross-examination that the flat was primarily an outright gift from his brother, with only a secondary intention of assisting the immigration application.

19. I do not accept what the Defendant says as regards the intention of the Plaintiff being to give the flat to his younger brother so he should become a wealthy. I accept what the Plaintiff says that the flat was transferred to the Defendant as part of an arrangement discussed by the Plaintiff and the Defendant. The flat was only put into the Defendant's name to facilitate his immigration application, the intent of the parties being that in reality it would at all times remain the elder brother's property.

THE EXPENSES OF THE MORTGAGE FROM FEBRUARY 1985

20. One feature of the case was the evidence in relation to the discharge of the mortgage which the Plaintiff had taken out over the flat. That was discharged in early 1988. The Defendant maintains that he did that from his own funds and was not reimbursed by the Plaintiff. The Defendant admits that he gave the Plaintiff the original receipts and a summary from the solicitors of the payments made in respect of the mortgage from 25^th January 1985 until 1987. He says however that he sent them to the Plaintiff in Canada.

21. The Plaintiff on the other hand says that these things were given to him by the Defendant when the Plaintiff was back in Hong Kong with his wife in the summer of 1988. In this respect I distinctly preferred the evidence of the Plaintiff. I consider the Plaintiff was correct when he said that he had requested these documents. He says that the Defendant gave them to him in person and when he was doing so the Defendant wrote what is on the back of the blue sheet (exhibit P. 1) from the solicitors detailing the expenses. That is vehemently denied by the Defendant, but the writing does seem to be a calculation by somebody of an addition of the Hong Kong dollar equivalent of C$10,000 and C$4,000 and a subtraction of that total from the total amount of the expenses. The Plaintiff says that when he came to Hong Kong he had a series of money orders in denominations of C$5,000, that he gave the Defendant 2 of these, which accounts for the C$10,000, and a cheque for $4,000 made payable to Yee Hing Company. That was a company which the Defendant ran in Hong Kong for the purpose of purchasing items for the Plaintiff's optical business in Canada.

22. Again, this cheque for $4,000 was challenged by the Defendant as not having been paid for reimbursing the expenses of the mortgage discharge but for payment of the Mother's expenses in an old people's home. What is quite clear is that neither party suggested that the cheque was given for expenses of Yee Hing's business and in that regard it is noteworthy that it does not appear to feature in the list of payments made for business purposes which the Plaintiff produced which had been prepared by the accountant in Canada.

23. It is in respect of this aspect that the Plaintiff's wife was called to give evidence. She was a straightforward witness who seemingly had a good memory. She remembered that although there had been some previous mention of the Plaintiff's mother going into an old people's home it was only at the very last moment before she left for Canada that she looked for a suitable home and made the necessary arrangements for her mother-in-law to be admitted. She could identify the day she had left for Canada because leave of absence had been obtained from their child's school there. In those circumstances the cheque would not have been given for the Mother-in Law's expenses since up until the last minute there was no arrangement for her to go into a home. Furthermore the amount of C$4,000 considerably exceeded any amount that was necessary to pay her expenses; the monthly fees were only HK$6,000 per month and the person in charge of the home had only asked for one month's fees and a month's fees in advance. The Plaintiff's wife was quite clear that when the cheque had been issued no home had been approached. I accept Mrs. Chan Yee Moi Nok's evidence.

24. In the reply speech it was pointed out that the Plaintiff had last year made an affirmation saying that he had had 2 money orders one for C$10,000 and one for C$4,000. That, however, was not put to the Plaintiff in cross-examination. The disclosure of this slightly conflicting version does not alter my confidence in the accuracy of the Plaintiff's case. It was clear that the Plaintiff had recently come across the cheque for C$4,000 which was produced at the hearing and it does happen that the details of events sometimes are easier to recall when documents are available. The way the matter is put in the affirmation is not so different from the evidence which emerged that I would not have confidence in the accuracy of what I have been told.

25. Finally I would add that although there was no handwriting expert called and although I would not attempt to suggest that my own assessment of a few written numbers would be sufficient for positive identification of handwriting, I have to say that the shape and formation of some of the numbers at least on the rear of the blue sheet (exhibit P. 1) are at least consistent with known handwriting of the Defendant, in particular that on exhibits P.6 A&B

26. In summary I have no hesitation in holding that the Plaintiff did reimburse the Defendant the cost of discharging outstanding liabilities under the mortgage. When looked at in the scheme of things the discharge of those liabilities was necessary if there was to be hope of success in the immigration application.

THE OUTCOME OF THE IMMIGRATION APPLICATION

27. Further steps in the immigration application appear to have been taken towards the end of 1988. On the 22^nd December the Plaintiff caused a bank account to be opened at the Bank of Montreal in the name of his brother, the Defendant. A sum of C$192,540.50 was deposited into that account. The Defendant did not apparently know the details of that account and indeed there is no dispute that eventually the money was removed from the account on the Plaintiff's instructions and the Plaintiff had the benefit of that again.

28. Around the same time the Plaintiff seems to have made arrangements with the proprietor of a Chinese restaurant in Toronto to take over his failing business. The rescue of that business by the Defendant was to be the basis of the immigration application.

29. The Defendant's second application to immigrate to Canada also met with failure. By letter dated the 19^th December. 1989 the Commission for Canada informed the Defendant that they were not satisfied that he was suitable for immigration as an entrepreneur. It was said in the letter inter alia:-

" We are not satisfied that you have the ability to actively manage a business in Canada. You operate a small optical business as well as a decorating business out of your home. Neither of these businesses is very active, and neither has ever reported a profit. You have not paid business or personal tax in the past ten years. You have also been employed both part-time, full-time and now on an occasional basis as a waiter at the Oi Man Restaurant....

Furthermore, we are concerned that of your declared net worth of C$$378,689, only a small portion originates from your own earnings. You were unable to document the growth of your assets from a declared net worth of C$20,000 at the time of your previous application in 1984 to your present declared net worth of C$$378,689."

30. The letter concludes on a slightly more optimistic note by suggesting consideration could be given to the Defendant seeking to immigrate on the basis of a family job offer. That option seems to have been explored by the Plaintiff but found no favour with the Defendant who found that approach unacceptable. Thereafter all attempts to secure the Defendant's immigration appear to have been abandoned.

31. The reference in the letter to the Defendant's declared net worth of C$$378,689 would appear, on the documentation produced, to be a combination of the value of the flat, the bank deposit of C$192,540.50 and some shares which the Defendant held. As I have already indicated the bank deposit was retrieved by the Plaintiff.

TRANSFER OF THE FLAT BACK TO THE PLAINTIFF

32. According to the Plaintiff he requested the Defendant to transfer the flat back to the Plaintiff's name but the requests did not achieve the desired result.

33. Ultimately he considered that he would enlist the help of a friend of his, Mr. To Sai Yiu (Joe To), to help him recover ownership of the flat back into his name.

34. The Plaintiff wrote to the Defendant in Chinese on the 17th February 1992 and said that he had no intention of forcing the Defendant to move out of the premises, without actually naming them, but that he needed them back to raise money urgently by means of a mortgage. In cross-examination the Plaintiff readily agreed that he did not need any money because he was quite well off, but that he had made that up as an excuse because when one pursues a debt one has to use the pretext of being poor and requiring the money. Whilst he agreed that he was not pursuing a debt, nevertheless in my view there is a parallel. It seems to me that it is human nature that when somebody is being asked to return something, it might make it easier to give as an excuse an indication that whatever is being asked to be returned is needed, even if it is not actually needed at the time. It seems to me that it is not altogether surprising that Mr. To, quite independently, as I accept, of the Plaintiff's notion, for that same reason used precisely the same pretext when he spoke to the Defendant and told him that the Plaintiff needed his flat back.

THE VISIT TO THE SOLICITOR'S OFFICE

35. The upshot was that the 3 persons, the Plaintiff, the Defendant and Mr. To went to the offices of Mr. Derek Quan. Mr. Quan was a solicitor who had been involved with Mr. To's divorce. Although Mr. Quan has no record of the date it would seem that the attendance at his office was on the 22nd April 1992. Mr. To and the Plaintiff both recollect that when they all arrived at the office they were told that Mr. Quan was not free to see them but they were asked to see a Mr. Wong first. According to the Plaintiff and Mr. To, Mr. Wong produced the draft Deed of Gift. This was a document which Mr. Quan says he prepared according to the instructions which he had been given previously. The Defendant apparently wished to have a document in Chinese which he could read. Furthermore although he was content to acknowledge the Plaintiff's right to the flat he was concerned that he and his family should be allowed to live in the flat for some 5 years. He asked for that from the Plaintiff and that was agreed to. In order to provide the Defendant with a document in Chinese, Mr. To wrote a document which is dated the 22nd April 1992 and is headed "Declaration of Trust". Nobody is sure where the original of that document is or what happened to it on the 22nd April, although according to the evidence which I accept, everybody had a copy.

36. The Defendant denies ever seeing this document and denies ever signing it. He even points out that the number given as his identity card number is not that. Both Mr. To and the Plaintiff are adamant that the Defendant did sign the document. I accept that he did sign it. Taking the point about the identity card number, when the Defendant's identity card was produced it was clear that the number on the document was the commercial code number for the characters of Defendant's name. It will be noted that by the side of Mr. To's signature there is also what would appear to be the commercial code equivalent of the characters for his name.

37. The signature said to be of the Defendant is, again, at least consistent with another known signature of the Defendant namely that on a letter written by the Defendant to Mr. Quan on the 18^th October 1992.

38. Finally, Mr. Quan whose evidence I unreservedly accept, says that when the parties were eventually shown in to see him he was given a copy of the Declaration of Trust.

39. Mr. Quan confirms the evidence of Mr. To and the Plaintiff that when the parties were in his presence the Defendant signed the Deed which is now dated the 9^th June 1992. Mr. Quan says that he cannot now explain the date of the Deed, it seems to me that it would have been quite easy for the date to be filled in later.

40. In one of his witness statements, the Defendant had said that he had never seen Mr. Quan. The cross-examination of Mr. Quan was not directed to that. Indeed, if anything, it had been put to Mr. Quan that he had been present when the parties first arrived but he had asked them to see Mr. Wong instead. However, the absence of cross-examination in this regard seems to be of no consequence. Mr. Quan was quite adamant that he had properly explained the Deed to the Defendant as he would not have allowed him to sign the Deed had he not done so.

41. Mr. Quan said that when he was shown the Declaration of Trust he saw that there was a further instruction namely that the Defendant was to live in the flat for a further period. He says that at the time he saw the parties the Defendant asked for the period to be 6 years instead of 5 and the Plaintiff agreed. Mr. Quan said that in view of the Plaintiff's planned departure the next day he told them that it would be unlikely that he would be able to prepare the necessary Deed for the Plaintiff to sign in time but would do so and forward it to the Plaintiff in Canada where he could execute it. That suggestion was agreed to and then the Deed which he had prepared was signed. Mr. Quan's signature appears on the document as witness.

42. On the 30^th June 1992 the Plaintiff signed a Deed in Canada declaring that the Defendant could live in the flat for 6 years commencing from the 1^st May 1992 and ending on the 30^th April 1998. It is noteworthy that where this Deed makes reference to the Deed signed by the Defendant at Mr. Quan's office the date has been left blank. Thus perhaps reinforcing the suggestion that the date of the 9^th June was not filled in until later.

SUBSEQUENT LETTERS

43. The Defendant wrote 2 letters in 1992 which are of significance. The first was one on the 29^th June to the Plaintiff. That commences with reference to business matters. In the final paragraph the Defendant said that he had applied for public housing and that the application was likely to take 4 years. He went on to ask the Plaintiff to send him the "Agreement". By inference from the letter he must have been referring either to the Deed signed at the solicitor's office or to the Deed signed by the Plaintiff on the 30th June because the Defendant said that he needed it to prove that he had reason to apply for public housing. Again, the suggestion in that letter that it would take 4 years for the Defendant to apply for public housing is consistent with his request for an extended period to be allowed to live in the flat. It can be noted however, that at the solicitor's office the discussion apparently turned around the year 1997 and likelihood of being able secure housing then.

44. The other letter was one sent to Mr. Quan in which the Defendant refers to having attended the office and signed an agreement whereby the proprietary rights in the flat would be returned to the Plaintiff but that the Defendant would be allowed to live in the flat for 6 years until the 25^th July 1998.

CONCLUSION

45. I have no hesitation in holding that the Defendant signed both the Declaration of Trust dated the 22^nd April and the Deed dated the 9^th June in the solicitor's office. He did so knowing full well what those documents were and meant. He did so because he knew that the Plaintiff was rightly entitled to the flat which had only been put into the Defendant's name for the purpose of his immigration application.

46. The only point really argued on behalf of the Defendant was that by telling a lie about his financial status and knowing of and having the benefit of a similar lie told by Mr. To, the Plaintiff was debarred from equitable relief because he came to Court with unclean hands. This was a matter raised in an amendment to the Defence for which leave was applied for and given immediately after the conclusion of the Plaintiff's opening and before the evidence was called.

47. To that there seem to me to be 2 answers. In the first place even if the Action based on the Deed dated the 9^th June (and the Declaration of Trust dated the 22^nd April) were to fail it still seems to me that the Plaintiff is entitled to relief. Immediately upon the transfer of the flat to the Defendant in 1987 by Deed of Gift a resulting trust arose in favour of the donor. Both parties knew exactly why the property had been transferred and knew it was only for the purpose of making it look as though the Defendant was a person of means. There was no intent on the part of the Plaintiff to give the flat permanently and beneficially to the Defendant and the Defendant knew that. Miss Chan who appeared for the Plaintiff relied upon the case of Hodgson v Marks [1971] 2 WLR 1263 for the proposition that there would have been a resulting trust which would be unaffected by any lack of enforceability of any subsequent trust, but in my view it is so self evident that it scarcely needs authority.

48. In the second place, although the Plaintiff admits telling a lie about his financial status and, of course, Mr. To also told the Defendant the same thing as is in the letter, in my view that was not a matter which influenced the Defendant at all. The Defendant tried in the course of his evidence to say that he transferred the flat back to help his brother. That in the circumstances is somewhat hard to believe. If the Defendant was as hard up at the time as he said in the witness box he was it is difficult to understand how he would have given away his major if not only asset, indeed one which he said in the witness box he had used to secure a loan of $400,000 from his wife's maternal aunt. There was certainly no corroborating evidence of such a loan. The only thing that might be said to corroborate this is that the Defendant did not have the Title Deeds hence the execution of a Trust Deed rather than a Deed of Gift. Given the manner in which the Defendant gave his evidence I regret I can place no reliance on it at all. In any event the documents which were executed would have hardly gone any way to achieving the purpose of enabling the Plaintiff to raise money. In my view the statements as to impecuniousness of the Plaintiff made by the Plaintiff in his letter and by Mr. To were simply a form of politeness and not something which operated on the Defendant to deceive him into signing a document which he otherwise would not have done.

49. Miss Chan made clear at the hearing that the Plaintiff did not object to the making of an order which would enable the Defendant to live in the flat for the period of 6 years agreed to at the solicitor's office.

50. I will hear the parties as to the relief to be granted and orders to be made.