YIP LAI NGOR v. CHAU KAM SIU

HCA 1716/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1716 OF 2012

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J U D G M E N T

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A. Introduction

1.  This is not a contest between wife and husband but between daughter-in-law (plaintiff) and father-in-law (defendant) respectively.  The subject property is held in the sole name of the defendant. The purchase price came partly from the plaintiff and partly from the defendant.  Part of the source of both parties’ money was the plaintiff’s husband (ie the defendant’s son).  The issues are the purposes of that money; and whether the plaintiff is a beneficial owner of the property under the principles of constructive trust and resulting trust.

B.  Undisputed facts

2.  The plaintiff (“Madam Yip”) was married to Mr Chau Hin Keung (“Mr Chau” and collectively “the couple”) in 1996.  The defendant (“Chau senior”) is her father-in-law.

3.  Since February 1998, the husband had lived and worked in Canada.  He remitted money to Hong Kong from time to time to his wife and his father. Madam Yip lived and worked in Hong Kong in between September 1997 and 2002 until she joined Mr Chau in Canada.  Thereafter, she has been a full time housewife, two children were born in 2004 and 2005 respectively.  She returned to Hong Kong in October 2006 and initially lived at Tin Ping Estate, a public housing unit purchased by Mr Chau senior as his home (“the Tin Ping unit”).

4.  The subject property at Flat C on 16^th Floor, Tower 3, Banyan Garden, 863 Lai Chi Kok Road, Kowloon (“the Property”) was purchased in the name of Chau senior.  The purchase price was $2,580,000.  The initial deposit was paid on 27 April 2007.  Completion took place on 15 June 2007.  The price was paid in such manner:

(i) $472,411.10 by Madam Yip for the initial and further deposits, stamp duty, legal costs, and part of the purchase price;

(ii) $1,000,000 by Chau senior;

(iii) $1,180,000 by a mortgage taken out in the names of Madam Yip and Chau senior; the monthly repayment was about $7,000.

5.  All the arrangements and legal formalities leading up to the purchase were handled by Madam Yip.  Chau senior only played a passive role of signing documents. 

6.  Two days before completion, Chau senior signed a declaration (“the 2007 declaration”) typed up by Madam Yip.  It stated that Chau senior was the owner of the Property; that he would pass it to Mr Chau and no one could raise objection.

7.  Madam Yip and the children resided at the Property for 9 months between June 2007 and March 2008.  From about 8 March 2008, the Property has been leased out.  It was Madam Yip who arranged for all the leases.  She applied the rental income in repaying the mortgage and living expenses for herself and the children.  Chau senior has never taken part in the leasing; nor has he ever demanded for the rental income from Madam Yip until filing of his counterclaim.

8.  Madam Yip has petitioned for divorce.  She instituted the present action on 17 September 2012.  The ancillary relief proceedings have been adjourned pending this trial.

9.  Mr Chau returned to Hong Kong for good in mid-May 2013.

10.  On 17 September 2013, Chau senior redeemed the mortgage for $940,000.

C.  The parties’ respective case

11.  According to Madam Yip, money from Mr Chau was for her and the children’s maintenance.  She was told that she could keep the balance of what was not spent as her own money.  That, together with her own savings from work, amounted to about $600,000 to $700,000.  The $472,411.10 came out of those savings.

12.  Since 2001, Mr Chau had remitted money (amounting to about $1,000,000) to his father for the purpose of buying a property in Hong Kong for Mr Chau but the father failed to do so.  For fear that Chau Senior would swallow his money, Mr Chau requested Madam Yip to bring the children back to Hong Kong.  He hoped that it would cause Chau Senior to disgorge the $1,000,000.  To ensure that Chau Senior would do so, Mr Chau told Madam Yip that the property should be held in his father’s name.

13.  Madam Yip’s pleaded case (§3 soc) is based on an express agreement or common understanding between her and Mr Chau that:

(a) They would purchase a property for the use of Madam Yip and the children or for investment purpose. 

(b) Mr Chau would pay $1,000,000 as part of the purchase price.  The balance of the down payment and other expenses would be borne by Madam Yip;

(c) If Madam Yip and the children were to reside at the property, Madam Yip would bear all the monthly mortgage and miscellaneous expenses; if the property were rented out, the rental income would be used to offset the mortgage and miscellaneous expenses;

(d) Mr Chau and Madam Yip would own the property according to their respective contribution towards the down payment and other expenses for the purchase;

(e) The property would be held in the name of the defendant.

14.  Further, Madam Yip pleaded in her reply that she had been requested by Mr Chau to purchase a property at Sheung Shui with his mother as residence.  Mr Chau asked Madam Yip to move out of the Property and live at the Sheung Shui property, in consideration of which Mr Chau agreed that Madam Yip would be entitled to all the balance of rental income after deduction of all mortgage payment and expenses of the Property (“the net rental”).  Madam Yip acceded to the request.  She moved into the Sheung Shui property and dealt with the rental income accordingly.  Commencing from the year 2010, Mr Chau had been paying insufficient maintenance for her and the children.

15.  The defence was that Mr Chau’s remittances to Chau senior was for the maintenance of Mr Chau’s parents.  Chau senior and Mr Chau intended to purchase the Property.  Part of the purchase price $472,411.10 was paid by Mr Chau through Madam Yip (§6.2 dcc).  Documentation for the purchase would be handled by Madam Yip (§6.2 dcc).  The $1,000,000 was paid by Mr Chau senior himself.  He also paid for all the expenses for installation of the window fencing, alternation of the internal structure of the toilet and furniture.  He gave $8,000 to Madam Yip for paying for expenses of the Property.

16.  The defendant counterclaims for the rental received in respect of the Property, the quantum of which is agreed to be $190,000.

17.  The issues have been set out in paragraph 1 above.

D.  Legal principles on resulting trust

18.  If two or more people contribute to the purchase price, and title is registered in only one of them, their beneficial interest in the property will be proportional to their contribution and the title holder is presumed to hold another contributing party’s share on resulting trust for that party: Equity and Trust Law in Hong Kong (3^rd ed) §17-2.

19.  The court must ascertain the true intention of the parties as to the beneficial interest in the property.  Where there is admissible evidence of the actual express intention of the parties, the court will act on such intention accordingly. But where the intention is not expressed, the court must ascertain the intention of the parties objectively.  In so doing, the court will resort to 2 tools: the presumption of resulting trust, or the presumption of advancement.  See Equity and Trust Law in Hong Kong (3^rd ed) §§17-8 to 17-10.

E.  Legal principles on constructive trust

20.  The principles have recently been stated by the Court of Appeal.  In respect of sole name family homes, the first issue is whether it was intended that the other party have any beneficial interest in the property at all.  If it was, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But their common intention has once again to be deduced objectively from their conduct.  If the evidence shows a common intention to share beneficial ownership but does not show what shares were intended, each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property. The whole course of dealing in relation to the property should be given a broad meaning, enabling a range of factors to be taken into account as may be relevant to ascertaining the parties’ actual intentions.  Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended or fair: Mo Ying v Brillex Development Limited, CACV 120/2014, 15 April 2015,Cheung JA, following Jones v Kernott [2012] 1 AC 776 and adopting Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343, Johnson Lam J (as he then was).

21.  The claimant has to show detrimental reliance on the common intention and the unconscionability of the property owner in departing from it: Luo Xing Juan v. Estate of Hui Shui See (2009) 12 HKCFAR 1 at 38.

F.  The approach of the court

22.  As a starting point, equity follows the law and so beneficial interest follows the legal title.  Accordingly the burden of proof rests on Madam Yip who wants to depart from this starting point: Lewin on Trusts (19^th ed): §9-07; Snell’s Equity (33^rd  ed): §24-049.

23.  Whether resulting trust or constructive trust is relied on, the court will first ascertain the true intention of the parties as to beneficial ownership and the share of it.

24.  The outcome of the present case depends much on resolution of disputed facts, which I shall analyze under the following topics:

(1) Whether there was an agreement or common understanding between Madam Yip and Chau senior;

(2) Whether there was an agreement or common understanding between Madam Yip and Mr Chau;

(3) Whether Chau senior had intention to buy a property;

(4) Nature of the $472,411.10;

(5) Nature of the $1,000,000;

(6) Events shortly before completion;

(7) Why the Mortgage was in joint names;

(8) Occupation of the Property and repayment of the mortgage;

(9) Leasing of the Property;

(10) Moving out of the Property;

(11) Redemption of the Property.

The findings of facts will be found in Section R below.

25.  Madam Yip is the only witness on her side.  On the defendant’s side, there are Chau senior and Mr Chau. Each of them has reason not to tell the whole truth as the outcome will affect the ancillary relief proceedings. As will be demonstrated below, each witness is not entirely credible.  Neither party has a watertight case.

G.  Whether there was an agreement or common understanding between Madam Yip and Chau senior

26.  Madam Yip pleaded an agreement or common understanding between her and Mr Chau, not Chau senior.  She never pleaded that Chau senior knew about it. This supported §4 of the defence.  Her plea contained its own seed of destruction.  There was no plea that Mr Chau was either party’s agent.  Madam Yip also agreed under cross-examination that Chau senior was not informed of the “agreement” between the couple as he “was just holding on trust”.  Hence, even if I were to accept that the couple had an agreement, that could not bind Mr Chau senior.  To him, he was purchasing a property for himself.

27.  In addition, the 2007 declaration was a contemporaneous document which, on its face, discredited any suggestion of agreement or common understanding as to Madam Yip’s beneficial ownership in the Property.  I will discuss more of it in Section L2 below.

28.  Madam Yip’s case on constructive trust must fail for lack of agreement or common intention with Chau senior.

H.  Whether there was an agreement or common understanding between the couple

29.  The couple was in good relationship until about 2010 (according to Madam Yip).  Madam Yip already held a property (“Sky Tower”) registered in her name. She claims that the purchase money had come from her mother.  As it was not the subject matter of this case and the evidence was not complete as to source of the purchase money, I refrain from expressing an opinion on its ownership. What is undisputed is that Madam Yip had never resided in it; and Mr Chau knew that she did not like to live there.  She continued to live at the Tin Ping unit which the couple understood would not be her permanent home.  Mr Chau admits in the witness box that he and Madam Yip had no resident status or property in Canada.  I am satisfied that the couple had talked about purchase of a property in Hong Kong as residence for the family.

30.  That being the background, I am not satisfied that investment or application of the net rental (ie rental less payment of mortgage and outgoings of the Property) was discussed between the couple at or before the time of the purchase.  Any such discussion would have arisen only when Madam Yip was about to move out of the Property.

31.  As to proportion of ownership, at one time, Madam Yip said in the witness box that she had told her previous solicitors that ownership should be in accordance with the proportion of contribution; that was why she signed the statement of truth in her statement of claim.  However, she also frankly admitted several times under cross-examination that, being casual chats between husband and wife, there was no need to and they did not talk about ownership proportion. The admission was credible because the couple was of good relationship at that time.  I am not satisfied that there was an agreement or common understanding as to share of beneficial ownership.

I.  Whether Chau senior had intention to buy a property

32.  According to Chau senior, for a long time, his wife has been putting pressure on him to buy a property but he had done nothing.  He was content with living at the Tin Ping unit.  He could not give a reason for his sudden interest in investment.  He could not explain why his wife was not named as a co-owner.  As a first-timer investor, he was incredibly indifferent about his “long-term investment”.  He knew nothing about any facet of the purchase or lease.  He allowed Madam Yip to reside at the Property and was never interested in the rental income. 

33.  However Chau senior saw Madam Yip invest in Sky Tower.  He was prompted by his son to invest, which was corroborated by Mr Chau.  I do not find the evidence as conclusive against showing Chau senior’s intention to invest.

J.  Nature of the $472,411.10

34.  Madam Yip has been a housewife for at least 3 years before the purchase.  Mr Chau had been the sole bread-winner.  Madam Yip does not deny receiving the money remitted or cash given to her in §§7, 8 and 10 of Mr Chau’s witness statement and I accept the same to be true.

35.  In his answer to Madam Yip’s interrogatories, Mr Chau stated that, after deducting his personal expenses, he had given all that he had earned over the years to Madam Yip, who agreed to invest his wealth for the family benefit and to hold the saving on trust for him for the maintenance or benefit of his parents.

36.  Whilst I accept that Madam Yip had been a secretary and had accumulated some savings on her own, I find that by the time the Property was purchased in 2006, such savings and those from Mr Chau’s remittance was indistinguishable.

37.  I also find that being in good relationship, Mr Chau had trusted his wife to hold his money, which should be regarded as joint savings.  It was not his intention to let Madam Yip hold all the savings to her exclusive use.  I therefore find that the $472,411.10 came from the joint savings.

38.  Both Chau senior and his son claim that the $472,411.10 was a “gift” from Mr Chau.  Mr Chau allegedly directed Madam Yip over the phone to make use of part of the joint savings to pay off the purchase price.  He told his father that Madam Yip would assist him in the legal formalities for the purchase.  He said that he would ask Madam Yip to pay for him first. Eventually, he did not seek reimbursement from his father.

39.  For the following reasons, I reject the evidence of Chau senior:

(a) The gift was never pleaded in the defence. 

(b) There was no evidence of Chau senior indicating to his son that he did not have enough money to pay for the purchase price.  Chau senior did not even know the price.  Rather, Madam Yip had Chau senior’s deposit statements showing a deposit of about $500,000.  He did not need the gift.

(c) In his witness statement, Chau senior said that Madam Yip was “well aware that Mr Chau assisted me in the acquisition of the Property by paying the sums [of $472,411.10] on a complimentary basis.”  Chau senior had not explained why Madam Yip was so aware.

(d) When asked why he would accept the gift from Madam Yip, Chau senior did not really answer the question.  He said that it was Mr Chau who told him not to be bothered; that he would ask Madam Yip to find a property for him and “complete everything” (攪掂). Mr Chau paid through Madam Yip.  Whatever money his son gave him, Chau senior accepted.  In my view, to “complete everything” could not reasonably be taken to be making a gift of such a big sum.

(e) It was on the 2^nd day of his evidence that Chau senior said that his son told him that Madam Yip would deal with the downpayment, solicitors’ fees, and anything trivial (濕碎).  I find that to be a recent invention, and “to deal with” did not necessarily include making the gift.

40.  I also reject the evidence of Mr Chau.  I hardly see why he wanted to make the gift of (initially) an unknown amount.  There was no evidence of his knowledge of the amount of joint savings.  I fail to see why he put the interest of his father (who never said he did not have enough money) over his own family’s.

41.  I am not satisfied that Mr Chau had intended the $472,411.10 to be a gift to his father.

42.  Even if I am wrong in this finding, there was no evidence that Mr Chau conveyed his intention to make the gift to Madam Yip. 

K.  Nature of the $1,000,000

43.  Documents D267 and E378 showed consistently remittances by Mr Chau to his father, both before and after purchase of the Property.

44.  Madam Yip claims that such remittance was for the father to buy a property for the couple in Hong Kong.  Remittance to the father stopped from 27 October 2006 to February 2008, but Mr Chau continued to send Madam Yip money.  That state of affairs coincided with the time when Madam Yip returned from Canada until she moved out of the Property and relied on the net rental.  Reading E378 and D267 together, Mr Chau had not sent money to his father between 2007 and 2008. 

45.  Madam Yip’s version on the purpose of the remittance is illogical in the following aspects:

(a) Mr Chau had been giving money to his father for 5 years since 2001.  In fact, Madam Yip was in Hong Kong in 2001 up to at least October 2002.  There was simply no need to trouble Mr Chau senior to keep the money and look for a property.

(b) If Chau senior had not done anything to look for a property, there was no reason why Mr Chau should continue to send him money for 5 years.

(c) For all the time she resided at Chau senior’s home, there was no evidence that she or Mr Chau had ever asked Chau senior to disgorge the $1,000,000 to them. 

(d) The end result of registering the Property in Chau senior’s name meant that he had given no part of the $1,000,000 back as his son had allegedly wanted.

46.  On balance, I find it to be more probable that the money Mr Chau gave to his father was out of his affection as a son and for his parents’ maintenance. He did not intend to retain beneficial interest in the money.  The $1,000,000 belonged beneficially to the father.  I reject Madam Yip’s version. 

L.  Events shortly before completion

47.  Chau senior had to work and was not conversant with English.  The procedure for buying Tin Ping unit was a lot less cumbersome.  So he left the formalities for the purchase of the Property to Madam Yip.  Mr Chau also asked Madam Yip to assist.  There was trust among the three of them at that time.  I accept such version.

48.  Two documents appearing before completion are important:

(a) A note in Chau senior’s hand at page E378;

(b) The 2007 declaration.

L1.  E378

49.  Madam Yip says that the solicitor wanted to know how much of the balance price would be paid on completion and Mr Chau listed out E378 in Madam Yip’s presence.  E378 was produced from Madam Yip’s custody.

50.  Chau senior claims that E378 listed out monies which Mr Chau gave to him over the years, totalling $992,560, except that one sum of $69,250 “肥華沃門轉來” was from a different source.  Chau senior allegedly copied the figures from his HSBC passbook but he had not produced the passbook for verification.  Chau senior claims that each time when Mr Chau phoned him to say that he had remitted money to his father, Chau senior would write down the details on a piece of paper and kept it in the drawer of his bedroom.  However, such handwritten record disappeared years ago from his drawer.  When asked to identify from E378 which sums came from his son and which from others, Chau senior was unable to do so. 

51.  I can see no reason why Madam Yip would have the foresight of removing (to use the mildest word) E378 from Chau senior’s possession to cater for this action.  I accept her version that this was given to her by Chau senior for reasons that she gave.  

52.  E378 primarily set out the amount in Canadian dollars received from Mr Chau. The equivalent in HK dollars showed the exchange rates to vary from CAD1:HK$5.065 in 2002 to CAD1:HK$6.96 in 2006.  I do not think Mr Chau had the sophistication to make up these figures.  I find the contents of E378 to be genuine even though the underlying bank documents were not produced.

53.  If all that the solicitor wanted to know was the amount, Chau senior could have simply stated a lump sum by looking at his passbook instead of listing out the amount received year by year.  When one remembers his pleaded case that “he and Mr Chau” intended to buy the Property, which I accept to be true, one can understand why Chau senior made the list.  He only wanted to invest money received from his son into the Property in which his son had interest.  This also backs my finding that Mr Chau had intended the $472,411.10 as a gift.

54.  Madam Yip relies on E378 to show that Chau senior clearly knew and accepted the oral agreement and that he just held the Property as nominee.  I reject this as contradicting her own evidence that Chau senior did not know about the agreement.

L2.  The 2007 declaration

55.  Two days before completion, the solicitor, the agent (“Fung”, the nephew of Chau senior) and a bank officer went to the Tin Ping unit.

56.  There is no dispute that Madam Yip took the 2007 declaration to the Tin Ping unit.  Chau senior sign in duplicate.  Both Madam Yip and Fung signed as witnesses. The terms of the declaration were as follows:

“I CHAU, KAM Siu (Chau Kam Siu) hereby declare, I own the title of the property: Flat C, 16/F, Tower 3, Banyan Gardenm Kowloon, its title will at last transfer to my son: CHAU, HIN KEUNG (Chau Hin Keung), anyone shall not raise differences.”

57.  According to Madam Yip, she typed up the 2007 declaration at Mr Chau’s dictation.  She explained that Mr Chau did not have peace of mind as under no circumstances would Chau senior add the couple’s name to the Property.  Mr Chau had informed Chau senior over the phone before the completion about the 2007 declaration.  If this version were true, it would assist Madam Yip’s case.  For why would Madam Yip be so daring as to suggest to her father-in-law on how to dispose of his property when the bulk of the money had come from him?

58.  Mr Chau denies ever instructing Madam Yip to prepare the 2007 declaration.  He was told by Madam Yip that when his father died, the Property would go to Mr Chau.  However, he had never seen the 2007 declaration and he had no idea that it was signed.  I find this to be strange.  He would at least have inquired with Madam Yip why she said so.  Moreover, the 2007 declaration was the best thing to ease his mind and there was no reason why Madam Yip would not let him see it.

59.  Chau senior denied that Mr Chau had ever discussed the contents of the 2007 declaration with him before he was asked to sign.  He gave the Property to Mr Chau because the latter had contributed several hundred thousand dollars whereas his siblings had not.  He would not have signed it if Madam Yip’s name were there.

60.  The 2007 declaration was belatedly produced by Chau senior in his 1^st supplemental witness statement in 2014 and Madam Yip never disclosed it in her list of documents.  Despite leave granted by Registrar Lung for her to file a supplemental witness statement, her explanations only emerged for the first time under cross-examination.

61.  Madam Yip claims that she had given her copy of the 2007 declaration to her solicitors who asked her to disclose it in the divorce proceedings but not in this action.  She said her solicitors advised her that it was not necessary to respond to the 2007 declaration. 

62.  I find these explanations to be far-fetched.  Even if the contents of the 2007 declaration were the idea of Mr Chau, Madam Yip has never raised objection with Mr Chau or suggested changing the wording.  The 2007 declaration explicitly mentioned the Property.  How she or her solicitors could have thought that the 2007 declaration was only relevant to the divorce proceedings is beyond me.  The inference is that Madam Yip was aware that the 2007 declaration told the truth against her.  It was tantamount to an admission of facts in a contemporaneous document against her own interest.

63.  Madam Yip agrees during re-examination that she had not sought legal advice when making the 2007 declaration.  Hence, one must interpret that document from a layman’s point of view. 

64.  It was clear from the terms of the 2007 declaration that Chau senior had ownership and was free to dispose of it.  He had acknowledged that his son had given him a lot of money.  I do not find it strange that he had wanted to leave the Property to his son, knowing that he could still change his mind. 

65.  I find that the 2007 declaration was prepared on Madam Yip’s own volition.  She did not believe that the Property was beneficially owned wholly by her and/or Mr Chau; or that Chau senior had no interest in the Property.  On the other hand, Chau senior recognized that his son had some interest in the Property which should place him above potential beneficiaries to Chau senior’s estate.

M.  Why the mortgage was in joint names

66.  There is no dispute that the mortgagee required a person younger than Chau senior (then aged 60) to become a co-borrower.

67.  Chau senior and Mr Chau claim that the former could shoulder the monthly repayment of $5,000 to $6,000 as he was a nightclub supervisor up to 2005, with a salary between $17,000 and $20,000 over the years.  However, there was no income proof of Chau senior.  His claim that his children (including Mr Chau) used to give him maintenance money for 1998 and 2005 was likewise without documentary proof.

68.  Chau senior’s passbook with the Bank of Communications showed the following even after the $1,000,000 was paid out:

Date	Sum HK$
17.07.2007	240,000 .00 (In)
10.8.2007	645,726.70 (In)
11.08.2007	890,000.00 (Out)
11.10.2007	894,908.40 (In)
11.10.2007	900,000.00 (Out)
11.12.2008	908,620.30 (In)

69.  I find that Chau senior did not need a mortgage.  Anyhow, he had the means to repay although he was retired.  There was some truth in his belief that he would not put Madam Yip at financial risk.

70.  On the other hand, Madam Yip could not have afforded the monthly mortgage herself but clearly Mr Chau would have continued his financial support of her. How the mortgagee would accept a young housewife as co-borrower is beyond me.  However, the fact that Madam Yip was willing to be a mortgagor showed that she believed that she had interest in the Property.  This reinforced my view that she did not know that the $472,411.10 was a gift to Chau senior.

71.  According to Madam Yip, Chau senior told the solicitor and bank officer that if there were any mortgage repayment or miscellaneous expenses, Madam Yip would be responsible.  This was new evidence about the mortgage that appeared when Madam Yip was under cross-examination and I reject it as recent fabrication.

N.  Occupation of the Property and repayment of the mortgage

72.  It was strange at first sight that with an intention to use the Property as investment, Chau senior would have let Madam Yip occupy the Property.  However, given the good relationship then, I do not find it surprising, particularly since Chau senior said it was on his son’s request, which I accept to be the case.

73.  Both Chau senior and Mr Chau described Madam Yip’s occupation of the Property as under a license of Chau senior, subject to the condition that Mr Chau paid the mortgage whilst Madam Yip was in occupation.  The license was never pleaded.  However, it appears that between October 2006 and 2008, Mr Chau had not remitted money to his father.  Chau senior did not claim to have paid the mortgage instalments.  The irresistible inference is that Mr Chau had paid them. 

O.  Leasing of the Property

74.  In March 2008, the Property was leased out.  Chau senior alleges that it was because Madam Yip complained that it was difficult for her to shuttle her children between 2 kindergartens.  The documentary evidence, which I accept, showed that at that time, the 2 children attended the same kindergarten.  This error in his evidence tended to show that leasing out was not his idea.

75.  I place little weight on the fact that Madam Yip described herself as “agent” on the tenancy agreements whereas Chau senior was described as “the landlord”. She was merely reflecting the position on the face of legal documents to third parties.  It was not any admission as to her lack of beneficial interest in the Property in any way.

76.  The rental was deposited by the tenant directly into Madam Yip’s bank account for over 5 years from March 2008 to September 2013. The net rental was several thousand dollars each month.

77.  Chau senior claims to have trusted Madam Yip in the leasing.  He believed that his son would handle the return of the net rental for him.  I do not find such ideas to be surprising.  What was telling was Chau senior’s evidence that it was Mr Chau who suggested leasing out of the Property.  For 4 years between 2008 and 2012, Mr Chau had not sought the net rental from Madam Yip.

78.  I find that Mr Chau and Chau senior knew that Madam Yip had interest in the Property and the net rental.

P.  Moving out of the Property into the Sheung Shui Property

79.  According to Chau senior, due to domestic conflicts between Madam Yip and Chau senior, Madam Yip decided to move out.

80.  Mr Chau said in evidence that it was he who decided that Madam Yip should move out.  His father decided to lease the Property after discussing with him.

81.  According to Mr Chau, after discussion, he, his mother and Madam Yip agreed to jointly purchase a property.  It should be the home of Mr Chau and Madam Yip, and the long term investment of the mother.  It was registered in the joint names of Madam Yip and the mother.  Madam Yip moved out of the Property to the Sheung Shui property.  Madam Yip herself liked the Sheung Shui property and the schools of the children are in the vicinity.  They are still residing there.  However, because of distrust of Madam Yip, the mother has severed the joint tenancy by notice dated 6 October 2012.

82.  If she had genuinely thought that the Property was purchased with her and/or Mr Chau’s own money, Madam Yip would not have acceded to Mr Chau’s request for her to move out.  This is particularly so because she knew it was troublesome to move to Sheung Shui and apply for change of schools.  It is even more unbelievable that she would have agreed to a move when Mr Chau expressly told her that he would reduce the maintenance for her in return for her keeping the net rental and he did so.

83.  I find that the moving out of the Property tended to show that Madam Yip and Mr Chau recognized that the Property was not hers alone.

Q.  Redemption of the Property

84.  According to Madam Yip, Mr Chau allegedly told her that in the years 2009-2012, he had remitted about $520,000 to his father.  In August 2012, he remitted a further sum to his father which, together with the $520,000, would have made about $1,000,000.  Mr Chau allegedly told Madam Yip that he would ask his father to redeem the Property.

85.  On the other hand, both father and son deny that Mr Chau had provided the redemption money.  Chau senior claims that he had used money from his fixed deposits to redeem the mortgage.

86.  D267 (similar to E378) was a list produced by Chau senior setting out a total of HK$570,204 which he had received from his son between 2009 and 2012.  The amounts were in odd figures from item to item.  For 2009 to 2011, he received more than one payment per year.  Chau senior had not produced documentary proof in support of the figures in D267.  I see no reason why he had to make up all these figures.  On balance of probabilities, I find the contents of D267 to be genuine.

87.  There was no independent proof from Madam Yip that the balance to make up $940,000 came from the son.

88.  Madam Yip was well settled in Hong Kong in 2009-2012.  The relationship between Mr Chau and Madam Yip had not yet broken down in 2009-2010 on either party’s case.  Madam Yip used to handle all the mortgage repayments.  There was no reason why Mr Chau sent money to his father year by year when the redemption only took place a year after the last remittance in August 2012.  The irresistible inference is that the money continued to be for his parents’ maintenance which they could freely use.  This reinforces my view that the $1,000,000 for purchase was of the same nature.

89.  In addition, Madam Yip has instituted this action against Chau senior in September 2012.  Her mother-in-law severed the joint tenancy with Madam Yip in 2012. Chau senior explained that because Madam Yip sued for the Property claiming that he did not have money to buy it, so he decided to redeem the Property.  His bank account at Chong Hing Bank showed that he still had about $550,000 after the redemption.  Having regard to the timing of the litigation, I find his explanation to be credible.

90.  On balance, I find that the mortgage was redeemed with monies belonging to Chau senior.  I reject Madam Yip’s version.

R.  Findings

91.  I find that there was no agreement or common understanding between Madam Yip and Mr Chau senior as to beneficial ownership over the Property.  The agreement or common understanding between the couple was that a property in Hong Kong would be purchased as residence for their family.  There was no discussion as to ownership proportion.  Discussion as to investment or how to apply the net rental arose only when Madam Yip was about to move out of the Property.

92.  The $472,411.10 came from the joint savings of the couple.  Mr Chau asked Madam Yip to assist his father in finding a property and dealing with the formalities, but did not intend to make a gift of the $472,411.10 to his father. Even if he had, he had not conveyed that intention to Madam Yip.  Mr Chau remitted money to his father for his parents’ maintenance and he had not retained beneficial interest in it.  The $1,000,000 was Chau senior’s own money.

93.  Chau senior wrote out E378 in the presence of Madam Yip, the contents of which were genuine.  The 2007 declaration was prepared by Madam Yip on her own volition.  Chau senior intended to buy the Property with Mr Chau.  Both documents showed that he acknowledged that his son had interest in the Property.  Madam Yip agreed to become a co-borrower because she believed she had interest in the Property.  

94.  Mr Chau requested Chau senior to let Madam Yip occupy the Property.  Whilst Madam Yip was in occupation, Mr Chau repaid the mortgage.  He had not remitted money to Chau senior in 2007 and 2008.  It was Mr Chau who suggested leasing out the Property.  Chau senior left the leasing and rental to Madam Yip because he trusted her.  He believed that Mr Chau would take care of the return of the net rental to him.  Mr Chau did not do so because he and his father knew that Madam Yip had interest in the Property and the net rental.

95.  Madam Yip moved out of the Property at the instigation of Mr Chau.  She recognized that the Property was not hers alone.  She applied the net rental for her and the children’s maintenance.

96.  Mr Chau resumed remitting money to his father from 2009.  As before, it was maintenance money for his parents and he retained no beneficial interest in such money.  The contents of D267 were genuine.  Chau senior, not Mr Chau, provided $940,000 to redeem the Property.

97.  There was circumstantial evidence like purchase of some furniture, alteration of the toilet and installation of window grilles.  They were incurred subsequent to the purchase and the amounts incurred were minimal.  I give little weight to them in deciding ownership.

98.  I find that there was no agreement or common understanding between Madam Yip and Chau senior as to beneficial ownership in the Property. Equally, each party did not intend to make a gift of what she/he paid to the other party.  I am satisfied that this is a case of resulting trust. 

S.  Relief

99.  As for extent of the parties’ beneficial interest, E Fung DHCJ summarized the principle succinctly in Mo Ying v Brillex Development Ltd HCA 111/2011, 5 May 2014, at §§44-46:-

“44. Where the defined shares have been agreed by the parties, the court will give effect to that agreement.

45. The Court cannot impute an intention that is contrary to the evidence: Stack v Dowden at §61 (Baroness Hale).

46. When the evidence does not support an inference as to the shares they intended to take, the court can impute an intention to them. The parties are taken to have intended whatever share was fair having regard to the whole course of dealing between them.” See Jones v Kernott at §§31 and 51(Lord Walker & Baroness Hale) and §64 (Lord Collins).”

100.  In his opening submission, Mr Chan, counsel for Madam Yip, seeks a declaration that the defendant has no interest in the Property.  He accepts, though, that as between Madam Yip and Mr Chau, their interests in the Property can be dealt with in the ancillary relief proceedings. 

101.  Without disrespect, full ownership was never Madam Yip’s pleaded case: §§10(b) and 11 and prayers (1) and (2) of the soc.  She never claimed to have the authority of Mr Chau to claim for his share from Chau senior in this action.

102.  There was no agreement between the parties as to the proportion of ownership.  Having regard to their course of dealing, it is fair that beneficial ownership should be according to each party’s money contribution towards the purchase.

103.  Mr Chau paid for 9 months’ mortgage (about $63,000).  That should be credited to Madam Yip’s portion.  Unfortunately, there was no evidence of the split between capital and interest but that should not affect the big picture. Chau senior paid $940,000 for redemption.  The rest of the mortgage was paid out of rental.

104.  Accordingly, Madam Yip shall be entitled to 22% of the ownership (ie ($472,411.10 + $63,000) ÷ ($472,411.10 + $1,000,000 + $63,000 + $940,000)); and Chau senior 78% (ie $1,940,000 ÷ $2,475,411.10).  I make a declaration accordingly.

105.  On the counterclaim, there should be apportionment of the agreed rental of $190,000 in accordance with the same proportion.

T.  Costs

106.  The plaintiff has to come to court to be able to succeed as to part, although she has failed on some issues.  I make an order nisi that she should have costs of the action, to be taxed if not agreed.

107.  There are lots of duplicated materials in Bundles E to G.  There was no effort to consolidate the parties’ documents and screen out duplicated materials, or to arrange them in chronological order.  The taxing master will certainly take this into account when it comes to taxation.

U.  Conclusion

108.  I declare that:

(1) The plaintiff and the defendant were/are beneficial owners of the Property in the proportion of 22% and 78% respectively;

(2) The defendant, as registered owner of the Property, was and is holding the Property on trust for the plaintiff to the extent of 22%;

I order that:

(3) The defendant is to execute all necessary instruments and do all other acts as may be necessary to transfer to the plaintiff 22% of the legal and beneficial interest in the Property;

(4) The plaintiff do pay 78% of $190,000 to the defendant, being net rental collected in relation to the Property since 8 March 2008 until redemption of the Property on 17 September 2013;

(5) On a nisi basis, the plaintiff do pay interest on item (4) at judgment rate from the date of judgment to the date of payment;

(6) On a nisi basis, the defendant do pay the plaintiff costs of this action.

109.  I thank Mr Sunny Chan and Mr Paul Wong for their assistance.