TSUNG LUNG CHAI v. TSANG LIN ON

DCCJ 3062/2023

[2026] HKDC 419

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3062 OF 2023

(Transferred from High Court Action No 75 of 2021)

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BETWEEN

(by Original Action)

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AND BETWEEN

(by Counterclaim)

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JUDGMENT

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1.  This is a dispute involving two brothers over the rights relating to the ownership of certain floors of a house in the New Territories.

2.  Mr Stony Chan, counsel for the plaintiff and Ms Van Ma (and Ms Beatrix Lee), counsel for the defendant, were of significant assistance to this Court. However, outside of counsel’s control on how the proceedings progressed, several difficulties arose, particularly because two key (if not critical) witnesses failed to appear at trial which has led to this Court’s particular findings.

Pleadings and background

3.  The plaintiff, defendant and Tsang Nang Kwai (“NK Tsang”) are brothers (collectively the “Brothers”), in descending order of seniority, who are indigenous villagers of the New Territories. It is crucial to note that NK Tsang had previously filed witness statements in this case but apparently due to serious health issues was unable to appear at trial and give evidence.

4.  The plaintiff claims against the defendant based upon an oral agreement in 1996 amongst the plaintiff, defendant and NK Tsang, whereby the defendant and NK Tsang would apply to the District Lands Office for building licenses to have two small houses built (collectively the “Two Houses”) in the area of Shui Tsiu Lo Wai.

5.  Pursuant to the foregoing matters, the Brothers would share the costs of building the Two Houses equally and each of the Brothers would then be legally and beneficially entitled to 2 floors given that there would be a total of 6 floors from the Two Houses since the houses would each have 3 stories as is usual in the New Territories. The Brothers would then decide the allocation of the floors to be agreed amongst themselves after the construction of the Two Houses (the “Oral Agreement”).

6.  In order for the Oral Agreement to be carried out, two pieces of land located at Lot 3715A in DD 116 and Lot 3715RP in DD116 respectively (“Land #1” and “Land #2”, collectively the “NT Land”) were bought respectively in NK Tsang’s and the defendant’s name. In accordance with the Oral Agreement, the Two Houses were built in which accordingly then became House #1 (which was designated and known as House 149H) (“House #1”) on Land #1 and House #2 (which was designated and known as House 149G) (“House #2”) on Land #2.

7.  Following the terms of the Oral Agreement, the Brothers would share the costs of building the Two Houses equally, then the Brothers would also agree amongst themselves as to the ownership of the floors of each of the Two Houses.

8.  It was also a feature in the pleadings that shortly before the Two Houses were completed, the Brothers agreed amongst themselves and orally agreed to the allocation of the ownership of the floors. At trial it was more narrowly accepted that the foregoing oral agreement took place through various face-to-face meetings and phone conversations where the agreed allocation of ownership of the floors of the Two Houses was decided that:

(a) The plaintiff shall own (i) the first floor of House #1 and (ii) the second floor with roof of House #2 (the latter being the “Disputed Residence”);

(b) The defendant shall own (i) the ground floor with garden of House #2 and (ii) the first floor of House #2; and

(c) NK Tsang shall own (i) the ground floor with garden of House #1 and (ii) the second floor with roof of House #1 (the “Ownership Agreement”).

9.  Ms Ma for the defendants (by the original action), also reminded this Court that the plaintiff’s pleaded position was that the total costs of constructing the Two Houses was HK$2,309,210 and this was to be shared equally among the Brothers in equal thirds (namely and notably, HK$769,736). Furthermore, it was emphasized that the plaintiff’s pleaded case was that allocation of the ownership of the floors of the Two Houses was agreed via face-to-face meetings and phone conversations and which later features in this judgment since the same was tested under cross-examination.

10.  The position of the plaintiff was that NK Tsang had all along been willing and prepared to transfer, and as according to the plaintiff, his legal title of a floor in House #1 pursuant to what had been agreed amongst the Brothers pursuant to the Oral Agreement. In any event, the defendant has refused to transfer the legal title of the Disputed Residence to the plaintiff in breach of the Oral Agreement whereby the plaintiff sues the defendant for inter alia (1) a declaration that the defendant holds the Disputed Residence on trust for the plaintiff; (2) orders that the defendant shall execute an assignment and a deed of mutual covenants in respect of House #2.

11.  Ms Ma for the defendant puts her client’s case as being the rightful legal and beneficial owner and holder of the title of House #2, particularly the Disputed Residence. Ms Ma pointed out that the defendant is the sole legal owner of the Disputed Residence “on the papers” to which Mr Chan fairly did not dispute.

12.  In relation to the defendant’s apposite case, some further background was considered, namely that in about 1971, the defendant migrated to England and has ordinarily resided there. It was not until 1999 that the plaintiff called the defendant in England to request rent-free residence in House #2 (the “First Call”) but no agreement was reached. Shortly afterwards, the plaintiff called again (the “Second Call”), during which the defendant rejected the request and offered to rent House #2 instead. However, the plaintiff did not indicate his acceptance of this offer.

13.  Upon the plaintiff later calling the defendant (the “Third Call”) (collectively the “Three Calls”) between late September and early October 2007 (which is a notable gap of time since the Second Call) to inquire about matters related to House #2, including the rent and payment process for residing in House #2 knowing that the plaintiff was looking for land to build his own small house that was estimated to be completed in about 8 – 10 years, the defendant proposed terms of residence to the plaintiff, namely:

(a) the plaintiff could have residence on one of the floors of House #2 by paying a lump sum rent up-front but the specific floor was to be agreed upon by the defendant and the plaintiff;

(b) the plaintiff’s paid rented residence would only last until the plaintiff’s own small house was built and ready for occupation, a process expected by the defendant to take no more than 10 years;

(c) upon completion of the plaintiff’s own small house, the plaintiff had to leave and return to the defendant the vacant possession of the floor he was to occupy in House #2;

(d) the lump sum rent was to be calculated at one-third of the building costs of House #2 which was quoted at HK$1,080,000 under the construction agreement between the Defendant and the builder which was Honesty (HK) Construction Limited (全信(香港)建築有限公司) (the “Builder”, more particularly via a person named 曾馬全 / Tsang Ma Chun “TMC”, whose role will be discussed later in this judgment but he also did not appear as a witness in this case) (the “Construction Agreement for House 2”), with minor additions to include additional work, if any (the “Agreed Rent”); and

(e) for the sake of convenience, to avoid tax implications in England and losses due to foreign exchange rates, the Agreed Rent was to be paid directly to the Builder by the plaintiff in Hong Kong. This would be part of the defendant’s settlement for the building works under the Construction Agreement for House #2 (the defendant pleaded this as the “Terms of Residence”).

14.  It is not disputed that in 2009 the defendant returned from England to take possession of House #2. The defendant alleges that he discovered that the plaintiff paid a sum of HK$384,848 to the Builder (such sum or similar amount which is later considered in this judgment) for the construction costs for House #2 and that the plaintiff and/or other occupiers who obtained permission for occupation from the plaintiff, moved into, inter alia, the Disputed Residence of plaintiff’s own accord without the defendant’s knowledge and/or consent.

15.  The defendant’s position is that despite the plaintiff not indicating his acceptance or rejection of the Terms of Residence during the Third Call, the plaintiff had through his conduct and actions entered into a rental agreement with the defendant in accordance with the Terms of Residence save for the specific floor he could and eventually did occupy (the “Rental Agreement by Conduct”)[1].

16.  At the very least, it is not in dispute that the plaintiff was an occupier of the Disputed Residence, whether by virtue of the Rental Agreement by Conduct and the Terms of Residence is another matter. In any event, Mr Chan for the plaintiff also highlights the fact that the plaintiff has been paying for the related utilities, rates and government rent in an ongoing manner. In fact, as relating to House #1, NK Tsang executed a Deed of Gift in favour of the plaintiff in relation to the first floor for House #1 on 24 June 2021 (the “Deed of Gift”) where Mr Chan for the plaintiff has submitted that this was done in accordance with and in performance of the Oral Agreement.

17.  The defendant counterclaims against the plaintiff under the Terms of Residence and the Rental Agreement by Conduct which the plaintiff has allegedly breached given also that he continued to stay in the Disputed Residence even after the plaintiff’s own small house was completed in 2015 as explained later in this judgment. The defendant also counterclaims against the ‘Occupiers of the Premises situated at Land #2’, under the Terms of Residence and Rental Agreement by Conduct for vacant possession and damages.

18.  For the avoidance of doubt, the plaintiff’s position on the counterclaim is that the Three Calls never took place, nor did the Terms of Residence or the Rental Agreement by Conduct arise in fact or in law.

Undisputed events and matters

19.  At the commencement of trial, Mr Chan and Ms Ma proposed to this Court that various uncontroversial events took place, many of which were documented via various government and third party sources, including land searches relating to the NT Land and the Two Houses that showed, inter alia, the following:

(a) the defendant, NK Tsang and four others executed an assignment to acquire 3/4 parts or shares in Lot 3715 in DD116 as Tenants in Common in equal shares for a total consideration of HK$1,202,256 on 2 January 1996;

(b) the defendant, NK Tsang and the same said four others executed an assignment to acquire the remaining 1/4 parts or shares in Lot 3715 in DD116 as Tenants in Common in equal shares for a total consideration of HK$400,752 on 7 December 1996;

(c) NK Tsang became the registered owner of Land #1 on 1 August 1997;

(d) the defendant became the registered owner of Land #2 on 1 August 1997;

(e) Building License No 6922 was granted to NK Tsang on 18 May 2001;

(f) Building License No 7012 was granted to the defendant on 21 September 2001;

(g) Standard Certificate of Compliance for the Two Houses was issued on 16 June 2009;

(h) apparently Houses #1 and #2 were built in between the relevant Building Licenses being granted to NK Tsang and the defendant with the Standard Certificate of Compliance being issued, as per the following documents:-

(1) as previously mentioned, sometime in 2008, the Builder entered into a building contract with NK Tsang and the defendant respectively for the construction of House #1 and House #2 at a consideration of HK$1,080,000 for each house;

(2) several groups of invoices and receipts for the Two Houses from 28 August 2008 to 3 February 2009 (to be later discussed in this judgment);

(3) the construction of the Two Houses were completed in around 2009 and as already stated, the Standard Certificate of Compliance for the Two Houses dated 16 June 2009 registered in the Land Registry under memorial No 09062600040013 (the “Certificate of Compliance for House #2”) was issued to the Defendant for House #2;

(4) a document dated 27 July 2009 stating that HK$700,000 was already paid by each of the Brothers in relation to the construction of the Two Houses (later referred to in this judgment as the “D6 Document”); and

(5) as previously mentioned, NK Tsang executed the Deed of Gift in favour of P in relation to the First Floor of House #1 on 24 June 2021.

20.  It is also notable that the following ancillary documents were undisputed, namely:

(a) the plaintiff acquired Section B of Lot 912 in Demarcation District 118 (“Lot 912B in DD118”) by way of assignment on 10 March 2008;

(b) the plaintiff obtained a building licence for his small house on 2 April 2012;

(c) the Certificate of Compliance for the plaintiff’s small house was issued on 2 September 2015 which presumably also means that the plaintiff’s small house was completed sometime before that said time (the “Plaintiff’s Small House”); and

(d) the Plaintiff’s Small House was sold to an individual named Shek Yin Ping Dobe at a consideration of HK$10,000,000 by way of an agreement and assignment on 16 April 2021.

Issues for trial

21.  Mr Chan for the plaintiff reminded this Court that the parties have signed an Agreed Statement of Issues where he aptly paraphrased them as being:

(a) Was there an Oral Agreement as alleged by P?;

(b) Was / were there Terms of Residence and/or Rental Agreement by Conduct as alleged by D?

(c) Consequential upon (1) and (2), what relief should the Court grant?

22.  Ms Ma was in general agreement with the framing of the issues to be determined at trial and both counsel agreed that the present case would hinge on the assessment of the evidential aspects of the case with particular emphasis on this Court needing to assess the credibility of the witnesses involved.

23.  Ms Ma agreed fairly with Mr Chan that guidance on the evaluation of witnesses and its related guidance were helpfully considered in Hui Cheung Fai and another v Daiwa Development Limited (unreported, HCA 1734/2009, 8 April 2014), at paras 77-80, in which DHCJ Eugene Fung SC held:-

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce) ……

78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: e.g. Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011) §39 (Chu J).

79. In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36 - 37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA)).”

24.  Given the foregoing, from the outset of the trial it became apparent that a crucial witness to this case for both parties would have been NK Tsang as already mentioned since he would have given evidence to explain, inter alia, the circumstances and details relating to the Oral Agreement that is the foundation for the original action, as well as the relationship between the Brothers and certain related events involving their family. Furthermore, TMC would also have been a crucial witness to this case for both parties since he would have given evidence to explain, inter alia, the circumstances and details relating to who paid what amounts, for what purpose, matters relating to the Two Houses and their occupation thereafter, but again his evidence does not feature in this case at all. Of lesser import was the Defendant’s wife, namely 溫玉華, who also filed a witness statement in this case but she also did not give evidence at trial.

25.  Compounding the difficulties in this case as will become apparent later in this judgment, in varying degrees and on discrete issues, neither the plaintiff nor the defendant were particularly believable or consistent as witnesses under cross-examination.

“Unpleaded issues”

26.  An ancillary issue raised by Mr Chan was by referring to the Court of Final Appeal in Kwok Chin Wing v 21 Holdings Ltd & Anor (2013) 16 HKCFAR 663 at §§21-22 where it was held that pleaded issues define the scope of the evidence and not the other way round. Mr Chan’s point is that it would not be acceptable for unpleaded issues to be raised out of evidence such as in the present case where he asserts that, inter alia, the defendant’s witness statements contain some complaints alleging that the plaintiff has interfered with the defendant’s tenant’s rights to a car park and that the plaintiff was an occupier of the Disputed Residence by virtue of the Rental Agreement by Conduct and the Terms of Residence entered into with the defendant.

27.  Ms Ma accepted that such matters in the defendant’s witness statements may not be directly relevant to the disputed issues but they serve to provide context and supplement the background in support of the defendant’s case.

28.  This was ultimately not a part of the evidence which affected this Court’s decisions on the most material issues to be determined as will be seen in this judgment but the point was noted.

(1) Was there an Oral Agreement as alleged by the plaintiff?

29.  Mr Chan fairly submitted that there was a departure from the pleadings which emerged after evidence had closed, namely that pursuant to the Oral Agreement the allocation of floors for living in the Two Houses was to be done after the Oral Agreement. This was because the plaintiff after being cross-examined answered that by the time of completion of the Two Houses the parties had already agreed to their selection of their floor allocations in relation to the Two Houses. This part of the evidence does not in itself cause there to be a material difference per se to the plaintiff’s case.

30.  In any event, the plaintiff’s case was that if this Court finds for the existence of the Oral Agreement, it would mean that the Brothers have, prior to the completion of Houses #1 and #2, agreed on the allocation of legal and beneficial ownership of the floors of the Two Houses. The result would be that the Brothers had agreed that the plaintiff was legally and beneficially entitled to the Second Floor and Roof of House #2, namely the Disputed Residence.

31.  At trial, this Court queried counsel as to why the choices by the Brothers on the allocation of floors were not in grouped in such a way that would be found together at the same respective house instead of it being at times with different floors spread across the two different houses. The explanation was that different floors have different values, namely certain floors are more valuable than others, especially as according to persons living in the New Territories. As such, since NK Tsang did more work and put in more effort than either the plaintiff or defendant, ultimately he got to choose first which floors from the Two Houses would be his.

32.  The plaintiff referred to the case of a common intention constructive trust as per Chen Kam Nga v Lee Ho Yin (unreported, HCA 553/2016, [2021] HKCFI 1352, Au-Yeung J, 12 May 2021) at §§49-50 summarizing the relevant principles and where it was held by Au-Yeung J that:

“D1. Common intention constructive trust

49. The relevant principles were summarized by DHCJ Eugene Fung SC in Mo Ying v Brillex Development Ltd [2014] 3 HKLRD 224 at §§33-46:

(1) A common intention constructive trust requires (a) a common intention that the plaintiff (i) should have a beneficial interest in the property (where there was sole legal ownership) or (ii) was the sole beneficial owner (where there was joint legal ownership) and (b) the plaintiff has acted to his/her detriment on the basis of that common intention (see §33).

(2) The onus is upon the person (in this case, Ms Chen) seeking to show that the beneficial ownership is different from the legal ownership (see §34).

(3) The common intention, or the agreement, arrangement or understanding, between the parties may be based on express discussions between them or inferred from their conduct (see §37).

(4) To found any express agreement, arrangement or understanding between the parties, there must have been some actual discussions between them, however imperfectly remembered and however imprecise their terms may have been.

(5) When inferring common intention, the search is to ascertain the parties’ actual shared intentions to be deducted objectively from their words and their actions. The parties’ whole course of conduct in relation to the property must be taken into account in determining their shared intentions as to its ownership (see §39(2)-(3)).

(6) Factors which may be relevant to divining the parties’ intentions include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the property was acquired in joint names (or sole name); the purpose for which the property was acquired; the nature of the parties’ relationship; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses (see §39(4)).

(7) Direct contributions to the purchase price by one party who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference (see §39(5)).

(8) In terms of detrimental reliance, there must be some connection between the plaintiff’s conduct and his/her belief that he/she has an interest in the property. It must be conduct on which the plaintiff could not reasonably have been expected to embark unless he/she was to have an interest in the property (see §42).

(9) The last question is to find out the extent of the parties’ respective beneficial interests in the property. Where the defined shares have been agreed by the parties, the Court will give effect to that agreement. 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 §§43-46).

50. The modern approach to constructive trust is to assess the common intention of the parties by a holistic approach having regard to the context: Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at §1.6 (Lam VP), recently applied in Ho Kwok Wing v Chan Mei Mui [2020] 3 HKLRD 548 at §8.9 (Cheung JA).”

33.  Neither this Court nor Ms Ma had any serious dispute that if the plaintiff was able to establish that the Oral Agreement did take place as pleaded (and/or as subsequently modified), that judgment would be entered on behalf of the plaintiff as stated in its relief. This Court also agrees that if the plaintiff was successful on establishing liability as aforementioned, there was no serious dispute that a declaration of beneficial ownership would be necessary to reflect this Court’s finding of the Oral Agreement which would reflect the beneficial interest of the Disputed Residence would be that of the plaintiff.

34.  Ms Ma referred this Court to the fact that the plaintiff’s case relies on constructive trust as confirmed by Mr Chan and therefore Ms Ma cited Cheung Lai Mui v Cheung Wai Shing [2020] 2 HKLRD 15 at §5.2 for the trite proposition that the onus lies squarely on the plaintiff to show that beneficial ownership differs from legal ownership.

35.  A factor which affects this Court’s judgment in this particular case is where both sides’ evidence is unsatisfactory, where G Lam J in Lun Kwai Har v Hung Ying Yi (unreported, HCA 1164/2013, 22 March 2016) sets out the following approach at §55:

“In these circumstances, where I find both sides’ oral assertions about beneficial entitlement to be suspect, I have to rely on the undisputed or incontrovertible evidence. I conclude that neither the plaintiff nor the defendant has succeeded in establishing her case as regards beneficial ownership of the Property upon the transfer in 2005. In these circumstances it seems to me that one goes back to the starting point which is that beneficial ownership follows the legal title: Snell’s Equity (32^nd ed), §24-049.”

36.  Mr Chan did point out two factors as affecting the evidence given by both witnesses, the only witnesses at trial, namely that the Two Houses were constructed some 16 - 17 years ago and that the witnesses themselves were approaching a more advanced age, no less than 66 years old since NK Tsang was born on 9 September 1958 who is the youngest of the Brothers. To assist this Court, Mr Chan cited Kong Fung RMB Remittance Exchange Limited v Chan Kam Hoi and Others (unreported, HCA 276/2016, [2022] HKCFI 736, 14 March 2022) where Mimmie Chan J held:-

“21. As to the credibility of a witness, the Courts have issued many reminders, that the question of whether a witness is truthful or untruthful has to be approached with caution, with particular regard being given to the fallibility and potential unreliability of human memory. A witness’s recollection of events as recounted is often affected and altered by unconscious bias. One recent reminder is contained in the decision of Coleman J in Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923. In summary, His Lordship pointed out that “memories are fluid and malleable, being constantly rewritten whenever they are retrieved”, and that what is subsequently retrieved from a witness’s memory is determined by a multitude of factors and by what drives the recollection of the event. Litigation is recognized as being a strong factor either in the active or subconscious manipulation or reconstruction of any information retained in memory. As emphasized in Yu v Chiau and in other cases, the inherent probabilities and likelihoods of an event or account may often be of greater assistance in deciding what actually happened, on a balance of probabilities.”

37.  A more discrete reframing of the position on evidence would be to consider the inherent probability of the witnesses’ evidence and contemporaneous records over unreliable memory in longlapse cases as cited above per Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923 at §§53-62. Ms Ma invited this Court to place due weight on inherent probabilities and contemporaneous documents whereas reliance on human memory arises only as appropriate.

38.  Despite Mr Chan characterizing the plaintiff’s evidence given under cross-examination as being generally consistent and was inherently improbable, this Court does not agree on several key instances. Mr Chan also submitted that the plaintiff should be forgiven for not being able to recall certain details and he tried his best to give straightforward answers but again this Court does not agree and this was not merely a matter of time which might have marred his memory.

39.  It was agreed between the parties that the plaintiff has no contemporaneous documentary evidence of the Oral Agreement and the plaintiff relies on his recollection of the collective discussions among the Brothers in or around 1996, as well as various documents, to be referred to later in this judgment. As such, in order for the plaintiff to be successful on his claim to the Disputed Residence, it would be for him to prove on a balance of probabilities that the defendant agreed and entered into the Oral Agreement on the terms as explained by the plaintiff.

What and how was the Oral Agreement actually discussed

40.  The plaintiff admitted under cross-examination that the Oral Agreement was not reached at a single discussion amongst the Brothers but rather over different occasions in 1996. After further cross-examination, the plaintiff admitted that he never spoke to the defendant directly but rather it was NK Tsang who independently contacted the plaintiff and defendant separately and according to the plaintiff that NK Tsang told him that the defendant agreed to the plaintiff’s terms but it was unclear under cross-examination what the full details were of what the defendant agreed to with any precision. This Court finds such evidence to be of an unsatisfactory nature in light of the plaintiff’s case on the Oral Agreement given also that NK Tsang did not give evidence at trial.

41.  Again, not helping the plaintiff’s position, further cross-examination of the plaintiff then elicited from him confirmed that the Brothers never had any joint discussions regarding the Oral Agreement, particularly the Brothers were never together in the same location having such conversations.[2]

42.  For the avoidance of doubt, the foregoing aspects of the viva voce evidence given by the plaintiff was critical to establishing the Oral Agreement to which this Court has grave and serious doubts about.

43.  Giving further illustration to the circumstances surrounding the Oral Agreement which took place in 1996, the plaintiff under cross-examination admitted that in 1996 the Brothers had not discussed or agreed to the particulars relating to the Two Houses such as the construction schedule or when there would be a transfer of title but only agreed to the fact that the plaintiff would bear future expenses for the transfer.

44.  The plaintiff was cross-examined on why there was no written record of the Oral Agreement when significant costs would be involved, particularly when it was undisputed that in 1996 the plaintiff did not own any property in Hong Kong. The plaintiff admitted he was careless in not recording the Oral Agreement in the circumstances and that was basically his reply.

45.  Mr Chan in closing submissions mentioned that the way in which NK Tsang communicated to the plaintiff and defendant was never directly but rather it was “vicariously” which this Court understood as being simply indirectly and NK Tsang acting as a go-between the plaintiff and defendant.

46.  The result is that the plaintiff under cross-examination gave answers that were not just fallible but were inconsistent, unlikely and on the whole untruthful, particularly regarding the circumstances under which the Oral Agreement allegedly took place, its terms and conditions thereof. The aforesaid finding of this Court on this issue regarding the Oral Agreement and its formation, terms and conditions is not assisted in the absence of NK Tsang who could have given evidence at trial to assist this Court but did not.

47.  Despite the serious and grave doubts on the viva voce evidence given by the plaintiff under cross-examination, this Court still considers all other relevant related evidence as pertaining to the Oral Agreement.

Building and land purchase costs by NK Tsang and the defendant

48.  The plaintiff pleaded that the building costs of the Two Houses would be shared equally by the Brothers yet there was no plea that the land acquisition costs would be divided equally as well, ie one-third each[3]. This is an odd and lacking, if not naturally inconsistent, feature of how the Oral Agreement would have operated since land acquisition is a matter that necessarily had to happen for the Two Houses to be built and the obvious costs involved[4]. For the sake of completeness, the plaintiff has not relied on nor pleaded that land acquisition costs are necessary for liability to be made out on his case.

49.  It is noted that a series of undisputed documents referred to at paragraph 19(a) to (d) of this judgment shows ownership by NK Tsang and the defendant. As Ms Ma pointed out correctly, in the plaintiff’s first witness statement dated 24 February 2023, over two years after the filing of his Statement of Claim, the plaintiff asserted for the first time that he had contributed one-third of the land purchase price, without providing the amount or details of payment. But it was only when such an omission regarding the Statement of Claim was raised under cross-examination that the plaintiff sought to excuse it by asserting the land had been purchased earlier than the houses.

50.  It is also notable that the Re-amended Reply and Defence to Counterclaim was filed on 4 January 2024 but after the exchange of witness statements, with the defendant indicating in his witness statement that he paid around HK$400,000 for the acquisition of the lands in question that the plaintiff only thereafter quantified the total purchase price of acquiring the land as HK$600,000 with each brother paying HK$200,000 but there remains no explanation or evidence to show how or when he paid this sum.

51.  The plaintiff under cross-examination for the first time claimed HK$200,000 was paid to NK Tsang before 1996 but he could not produce any documentary proof of the same[5]. As such, it is surprising that the plaintiff did not mention his alleged contribution to the land purchase since if the Brothers had agreed to the terms of Oral Agreement, the plaintiff’s monetary contribution to the overall scheme would have been mentioned in the proceedings via pleadings and discovery, but which never happened.

52.  Furthermore, if the plaintiff did make such a monetary contribution towards the land purchase, he would have been at least aware of the land purchase process and presumably would have asked for his name to also be reflected in the land’s ownership documents to show some form of beneficial ownership[6], but again this was not the case. The plaintiff’s explanations were unconvincing and erratic, inter alia, that:

(a) the letter of his solicitors, Messrs TK Tsui & Co, stated that the plaintiff was working and residing in Mainland China, so it was NK Tsang and the defendant who handled the purchase and building licence applications;

(b) it was a feature of evidence that arose under cross-examination that the plaintiff testified that originally the Brothers intended to build three houses on the land in question but when it turned out that only two houses could be built, he proposed to NK Tsang over the phone to purchase the land in the names of NK Tsang and the defendant only; and

(c) in any event, the plaintiff admitted under cross-examination that he in fact did not know about some of the main details relating to the land in question such as, inter alia, there were other purchasers besides NK Tsang and the defendant (see paragraph 19 (a) and (b) hereinabove[7]) and the plaintiff’s further remark under cross-examination was merely a blanket statement that he thought NK Tsang took care of all the details.

53.  The result is that the plaintiff under cross-examination gave answers that were inconsistent, unlikely and on the whole untruthful, regarding the circumstances under which the land purchase took place. The aforesaid finding of this Court on this issue regarding the purchase of the land relating to the Two Houses, the conditions under which the said land was purchased, is again not assisted in the absence of NK Tsang who could have given evidence at trial to assist this Court but did not.

54.  In relation to the building of the Two Houses, the situation is less clear between the parties. Paragraph 19(h) hereinabove is repeated and it should be noted that each of the houses were built at a consideration of HK$1,080,000 each. It is a feature of this case that apparently neither the plaintiff nor the defendant saw these building contracts at the time they were entered into (or in fact for a long time thereafter) since it was NK Tsang who apparently signed for both said building contracts.

55.  It is a feature of this case that only NK Tsang and the defendant were named as parties in the relevant building licences, construction contracts, and compliance certificates, with no reference whatsoever to the plaintiff’s alleged participation, interest, or liability in the construction process.

56.  Payments by NK Tsang for House #1 from dates of 4 September 2008[8] until 16 January 2009 also amounted to HK$810,000 for various works done at different stages (ie in order of 工程訂金, 完成地下地台石矢工程, 完成二樓樓面石矢工程, 完成天台欄河石矢工程, 完成屋內間牆結構及內外牆英, 泥沙批盪工程).

57.  Payments by the defendant for House #2 from dates of 4 September 2008 until 3 February 2009 amounted to HK$810,000[9] for various works done at different stages (ie in order of 工程訂金, 完成地下地台石矢工程, 完成二樓樓面石矢工程, 完成天台欄河石矢工程, 完成天台欄河石矢工程). Under cross-examination, the defendant stated that he paid via cheques to TMC when a request for payment was made and it would appear to be supported by the receipts issued by the Builder to the defendant.

58.  It is also notable that because the plaintiff gave no input on important design or allocation decisions for the Two Houses and admitting that he did not care about the details which were left to NK Tsang to decide[10], Ms Ma argues this strongly suggests no Oral Agreement ever existed.

59.  It would appear that by 3 February 2009, NK Tsang and the defendant had already paid around 75% of the total contract costs, namely more than the alleged one-third contribution that was expected under the Oral Agreement, but this is subject to this Court’s findings on the plaintiff’s own payment which is discussed hereinbelow.

Payment by the plaintiff

60.  The plaintiff cannot be said to not have contributed to the building of the Two Houses. The defendant’s pleaded case is that the plaintiff did pay a total of HK$769,736 to the Builder which HK$384,868 is attributable to House #2. As such payment was made by the plaintiff and thereafter there was the plaintiff’s occupation, the plaintiff entered into the Rental Agreement by Conduct with the defendant.

61.  That HK$384,868 was paid by the plaintiff to the Builder is equivalent to one-third of the construction costs of one of the Two Houses is also reflected in the defendant’s witness statement and confirmed by Ms Ma at trial.

62.  The defendant under cross-examination stated that many of the documents related to the Two Houses issued by the Builder were not seen by him prior to the commence of this action. The defendant also admitted that save for a document, in fact a series of related receipts relating to “LOT 3715RP & 3715S.A IN DD116”, “Lot 3715” which were referred to as “D6 Document”[11] was admitted by the defendant to have been received by him, the other receipts were not received by him, such documents including, inter alia, a payment schedule.

63.  Notably in the “D6 Document” which is dated 27 July 2009, on one of the pages therein[12] shows, inter alia, the cost of each house being HK$1,080,000, the collective cost of the Two Houses being HK$2,160,000, the names of the Brothers each having already paid and received by the Builder the amount of HK$700,000 for 工程費用 / “construction fees”.

64.  When including receipts from other related documents[13], it appears that HK$2,309,210 was the total amount paid to the Builder which is not disputed, nor is the fact that the plaintiff did pay HK$769,736 to the Builder, which is exactly one-third of HK$2,309,210 (rounded off).

65.  Mr Chan submitted that given the plaintiff did by all accounts and indisputably paid for one-third of the costs of the Two Houses, it therefore means that the Oral Agreement existed, otherwise there would have been no reason to pay such a large amount of money to the Builder.

66.  This Court does find, nor is it disputed in any serious way, that the plaintiff did pay HK$769,736 to the Builder, which is exactly one-third of HK$2,309,210. With respect, after trial, this appeared to be the high point of the plaintiff’s case.

67.  It would be further noted that the defendant under cross-examination initially stated that he was unsure what the HK$769,736 that the Builder received from the plaintiff in terms of monetary funds was for, to which he then later answered in fact the Builder received HK$380,000 odd as “rent” from the plaintiff, then the later answer became just a sum of HK$380,000 odd without any specific purpose, which then finally the defendant answered was a sum for TMC to “hold” for the defendant[14], then later again asked and answered that the said sum was for construction costs. The eventual answer from the defendant under cross-examination was that the Builder received money from the plaintiff on the defendant’s behalf and that such money would go towards construction fees[15].

68.  There was never a conclusive answer what exactly became of the monies given by the plaintiff to the Builder and more importantly for what reasons the monies were given by the plaintiff to the Builder. The state of the evidence on this issue tends to suggest the monies given by the plaintiff went towards construction costs of the Two Houses (ergo towards House #2) and not towards being held by the Builder to eventually be given back to the defendant for “rent”.

(b) Was / were there Terms of Residence and/or Rental Agreement by Conduct as alleged by D?

69.  Ms Ma has essentially two positions in explaining the plaintiff’s payment of HK$769,736 to the Builder. The first position of the defendant is by virtue of the Rental Agreement by Conduct and the second position arises out of events which took place at trial.

70.  Paragraphs 12 – 15 of this judgment are repeated as it relates to the Rental Agreement by Conduct. On the defendant’s own case, the plaintiff did pay, inter alia, HK$348,868 to the Builder whereby that is attributable as one-third the construction costs of House #2 where the Disputed Residence is located to which Ms Ma agreed. Thereafter the plaintiff’s occupation of the Disputed Residence renders his conduct as entering into the Rental Agreement by Conduct.

71.  This Court agrees with the plaintiff that there are challenges on construing how the plaintiff through moving into the Disputed Residence is proof of his “conduct” of agreeing to the Rental Agreement by Conduct.

72.  Mr Chan cited Tobrix BV (a company incorporated in the Netherlands) v Hongkong Tripod Limited (unreported, DCCJ 291/2021, [2024] HKDC 2124, DDJ YH Hew, 31 December 2024) where Mr Chan makes particular reference to the learned judge’s findings at §60(5) and (6), namely:

“(5) The significan[ce] of an acceptance is that it immediately binds both parties to the contract, and thereafter neither party can vary its terms without making a new contract. The court hence looks at the entire course of negotiations to decide whether an apparently unqualified acceptance did in fact conclude the agreement: see Chitty §4-036.

(6) Acceptance by conduct is possible provided that the conduct comes to the attention of the offeror. However it is an exceptional mode of communication and must be unambiguous, such that the conduct relied upon must be “referable… only to the contract” that has been offered. Conduct will only amount to an acceptance if it is clear that the offeree’s alleged act of acceptance was done with the intention, ascertained in accordance with the objective principle, of accepting the offer: See Chitty §4-036, Ho & Hall’s Hong Kong Contract Law, 6^th Edition (2022) §§2-88 to 2-89. In Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, which is cited in support in Ho & Hall, there was no contract as D’s conduct was not consistent only with an intention to accept an offer to buy goods, but could be reasonably explicable in accordance with a common practice by which a financier seeks to progress a transaction for the benefit of another party.”

73.  In order for the Rental Agreement by Conduct to be found by this Court, as a precursor there would be a need for a finding that the Three Calls took place (and as described by the defendant).

74.  This Court would add that it seems there was very little or next to no communication between the Brothers, particularly the plaintiff and defendant, between the time the defendant left for England in 1971 and apparently with only sporadic communications with the plaintiff until his return in 2009 after the Two Houses were completed. As such, the defendant’s recollection and claims to making the First Call and Second Call are open to challenge to begin with.

75.  Again referring to the terms of the Rental Agreement by Conduct, this Court would agree with some of the highlights submitted by the plaintiff and note some additional matters on its own accord that:

(a) there is a need to be careful about the accuracy (and veracity) of the defendant recalling the details of the First Call and the Second Call which both took place in 1999 being quite a long time ago and thus possibly subject to mistake as to what was said;

(b) when the First Call and Second Call were made, the defendant never stated when he would return to Hong Kong which might well have been a material fact that should have been disclosed by the defendant to the plaintiff but was not;

(c) the First Call and Second Call pre-dated the issue of the building licences for the Two Houses in 2001 making it unlikely the said calls were made since it would have been premature;

(d) as aforementioned at paragraphs 19(e) and (f), the First Call and Second Call came some 10 years before the completion of the Two Houses which is highly unlikely for reason(s) similar to sub-paragraph (c) hereinabove; and

(e) the Third Call was allegedly made between late September and early October 2007 after such a long period of time since the First Call and Second Call, was apparently made without any particular reason why it would happen since no particular events happened at about that time. Given there was also a relative lack of communication between the plaintiff and defendant between that period of time of the First Call and Second Call in 1999 and then the Third Call in 2007, the Third Call calls into suspicion why the defendant would have made the call in 2007 or perhaps to question whether the Third Call was indeed made at all.

76.  As such, there would have been no need for the Three Call to be made to allow the plaintiff to live in the Disputed Residence, as the plaintiff already had living accommodations sorted out with their mother. Even if the Three Calls were made, with the Third Call being made in 2007, there was no need for the plaintiff to agree or even acknowledge the defendant’s offer.

77. This Court would also note that the terms of the Rental Agreement by Conduct lack commercial certainty since if a lump sum rent of one-third of HK$1,080,000 would last until completion of the Plaintiff’s Small House but there being no indication when such completion would take place other than an assumption by the defendant it would be completed within 10 years as at October 2007 which was when the Third Call was made. That would leave the period of rent and the plaintiff’s duration of stay at the Disputed Residence relatively undefined and thus making it less likely for either the plaintiff or defendant to agree to such terms. It is notable that the plaintiff did not obtain Lot 912B in DD118 until 10 March 2008.

78.  Paragraphs 49 – 51 of this judgment hereinabove are repeated. This Court would add that since payment in the amount of HK$769,736 was likely made by the plaintiff towards the construction costs of the Two Houses as supported by the “D6 Document” dated 27 July 2009 which marked payment already made by the plaintiff for the amount of HK$700,000 for 工程費用 / “construction fees”. As such, if the Third Call did take place in October 2007 and the plaintiff allegedly agreed to the Terms of Agreement and Rental Agreement by Conduct, the “D6 Document” would more likely mark the HK$700,000 payment already made by the plaintiff by 27 July 2009 as something other than 工程費用 / “construction fees” and more akin to “rent” or words to that effect.

79.  In relation to the second position of the defendant in explaining the plaintiff’s payment of HK$769,736 to the Builder, Ms Ma submitted that the plaintiff may have unintentionally or intentionally led TMC to believe he was contributing one-third of the construction costs, which explains why TMC listed him as such in the “D6 Document” despite inconsistent contemporaneous records. Ms Ma also submitted that what the defendant told TMC was to hold any money from the plaintiff on his behalf but without mentioning it was rent because the plaintiff had not yet accepted the proposed Rental Agreement by Conduct.

80.  The second position of the defendant is outright rejected by this Court. It is a very serious allegation for the plaintiff to have led TMC to believe he was contributing one-third of the construction costs for the Two Houses without proper evidence. As much as this Court may have had adverse observations and findings on the quality of the plaintiff’s evidence given at trial, on this discrete issue, it certainly has not gone to such a low standard as suggested against him.

Ownership Agreement and other ancillary matters

81.  There is another remaining aspect of this case relating to the plaintiff that requires resolution, namely the Ownership Agreement found at paragraph 8 hereinabove of this judgment.

82.  When the defendant returned to Hong Kong in September 2009 to take possession of House #2, the plaintiff had already moved into the Disputed Residence.

83.  It is undisputed that the plaintiff did not inform the defendant that he would (and actually did) move into the Disputed Residence. The reason for the plaintiff’s lack of notice given to the defendant was because the plaintiff testified that he was moving into “his residence” and found no need to notify the defendant. As such, this is inconsistent with the plaintiff’s position previously on pleadings and in his witness statement that the Brothers had a discussion between themselves as already described above as the Ownership Agreement.

84.  In any event, a factual issue which arises from the foregoing is how did the plaintiff actually achieve access to the Disputed Residence. The defendant under cross-examination explained that when he came to Hong Kong and realized the plaintiff was residing at the Disputed Residence he suggested that it was possible the plaintiff misled the Builder to give him the keys but then ultimately answered that the defendant did not ask the Builder at the handover of House #2 why the plaintiff had those keys to the Disputed Residence[16] and at one stage under cross-examination gave no reply on how he knew the plaintiff was living at the Disputed Residence[17]. The defendant’s initial answer under cross-examination was explained by Ms Ma in closing submissions that the plaintiff residing in the Disputed Residence was consistent with the Rental Agreement by Conduct and therefore the plaintiff was permitted to stay in the Disputed Residence.

85.  This Court rejects the Rental Agreement by Conduct and the foregoing answers given in cross-examination by the defendant as contrasted against Ms Ma’s aforesaid explanation at closing are inconsistent with one another.

86.  The plaintiff under cross-examination explained that the Ownership Agreement was discussed in 2003 at their grandmother’s funeral but this is neither pleaded, mentioned in witness statements[18], stands in contrast to the F&BP of the Statement of Claim where it was explained the Ownership Agreement took place shortly before the Two Houses were completed, which is a considerable difference from 2009 when the Two Houses were actually completed. The plaintiff then corrected himself to say the Ownership Agreement took place in or about 2007 or 2008[19] but through NK Tsang who allegedly told the defendant. Again, NK Tsang does not feature in this case at all given his absence at trial.

87.  Ms Ma submitted, to which this Court agrees, that the plaintiff was unable to identify any occasion on which the Brothers jointly agreed on the allocation of units between the Two Houses and this inability aligns with the defendant’s case that no such Ownership Agreement was ever discussed or concluded.

88.  For the avoidance of doubt, after considering the documentary evidence (or lack thereof) and the viva voce evidence in the context of all of the surrounding circumstances, this Court comes to the finding that on a balance of probabilities that there was not an Ownership Agreement.

Conclusion

89.  This Court finds that the plaintiff has failed to establish there was an Oral Agreement on a balance of probabilities. For the sake of completeness, this Court also finds that the plaintiff has failed to establish the Ownership Agreement on a balance of probabilities.

90.  This Court notes that the plaintiff bears the burden of proving both the Oral Agreement (and the Ownership Agreement), but the plaintiff’s evidence was inconsistent, unsupported by documents and often contradictory. The plaintiff cannot identify any occasion when the defendant agreed to the alleged terms of the Oral Agreement, the plaintiff was not directly involved in the construction payments as claimed, and gave shifting or unreliable explanations regarding the related land purchases.

91.  Despite the fact that this Court would find on the discrete issues of the plaintiff having paid HK$769,736 to the Builder at paragraphs 60 – 68 of this judgment, nonetheless the Oral Agreement on the whole and the need to prove the constituent elements as highlighted in the case of, inter alia, Chen Kam Nga v Lee Ho Yin (supra) is incomplete and unsatisfactory, particularly in the context of the facts of this case which has already been thoroughly reviewed and considered. The plaintiff has failed to establish on a balance of probabilities the Oral Agreement and the plaintiff’s claim is dismissed.

92.  In addition to the foregoing paragraph, this Court also notes that throughout the Statement of Claim, nowhere is there a plea of a common intention constructive trust or even the words “trust” themselves save for in the relief at paragraph (1) which states “A declaration the Defendant held and still holds the Second Floor with Roof of House #2 on trust for the Plaintiff;” but nothing in the body of the Statement of Claim says otherwise about the details of any “trust”.

93.  For the avoidance of doubt, it has all along been the plaintiff’s case that the cause of action was pursued on the basis of a common intention constructive trust and this Court has reviewed the plaintiff’s verbal and written opening submissions, as well as the verbal and written closing submissions to confirm the same. In fact, it was confirmed at the very beginning of trial during opening submissions of the plaintiff that Mr Chan fairly and clearly declared a resulting trust was not being pursued[20] and again this Court confirms a resulting trust never arises in the plaintiff’s verbal and written opening submissions, nor the verbal and written closing submissions.

94.  The present case is not like the scenario found in another recent case of Tse Man Yiu & Ors. v Tse Man Wai & Ors., (unreported, [2025] HKCFI 6485, 31 December 2025, Au-Yeung J.) where the court there was faced with a somewhat similar scenario of members of a family disputing ownership over a property. The way in which Au-Yeung J had notably dealt with a situation where neither parties’ pleaded primary position was accepted by the court, ultimately it was found that the plaintiff failed to discharge the burden of proving a common intention constructive trust and the court “resorted” to a conclusion of the defendant successfully counterclaimed by pleading in the alternative there was a resulting trust which was supported on the evidence and pursued throughout those proceedings.

95.  There was some argument over an ancillary matter, namely, that the plaintiff argued that the defendant refusing to transfer legal title of the Disputed Residence to the plaintiff was in breach of the Oral Agreement and this was partially evidenced by NK Tsang’s Deed of Gift made to the plaintiff[21]. This was an unrelated and unsubstantiated aspect of the case that barely had any time or actual impact on the case.

96.  This Court finds that the Rental Agreement by Conduct as alleged by the defendant has not been established on a balance of probabilities.

97.  This Court notes that despite the Plaintiff’s Small House was completed and sold on or before 2 September 2015 for HK$10,000,000, given that the Rental Agreement by Conduct (inclusive of the Terms of Residence) has failed on the other required elements and this Court has difficulty in accepting there was acceptance by the plaintiff when also considering the guidance per Tobrix BV (a company incorporated in the Netherlands) v Hongkong Tripod Limited (supra), the counterclaim cannot stand.

98.  The defendant has failed to establish on a balance of probabilities the Rental Agreement by Conduct and the defendant’s counterclaim is dismissed.

99.  Notable guidance given per Lun Kwai Har v Hung Ying Yi and Tse Man Yiu & Ors. (supra) on both treatment of evidence and outcomes when there is a situation as in the present case, where both parties have failed to establish their respective cases, to which this Court dismisses both the original action of the plaintiff and the counterclaim of the defendant.

100.  It is ordered on a nisi basis that there be no order as to costs for both the original action and the action by counterclaim including all reserved costs. This Court also finds that, where necessary to state, but for the dismissal of both the original action of the plaintiff and the counterclaim of the defendant, an order for Certificate for Counsel would definitely have been awarded to the successful party. This order nisi will become absolute unless any party applies to vary by summons within the next 14 days.

101.  It remains for me to thank both counsel for their able assistance.