YEUNG KIT LAM and Another v. LAU YIU SHING

1994, M.P. No. 3392

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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The Summons

1. I have before me a vendor and purchaser summons in which the plaintiffs seek on order under section 12 of the Conveyancing and Property Ordinance (Cap. 219) on a question arising out of a contract dated 20 October 1994 for the sale of Flat B4 on the second floor of the Ming Fai Building (the property).

2. The question arising is best understood by looking at the recent history of events concerning the property.

The History of the Property

3. On 1 September 1981, Mr Leung Wing Yu and Madam Lau Fung Sin entered into an agreement to purchase the property. It appears from the last page of this agreement that "the Purchaser" paid the sum of $21,882, being 5% of the purchase price, on the same day. This money was said to be "the above mentioned deposit and part payment of the purchase money to be paid by the Purchaser to the Vendor". In terms of the agreement, a further sum of $21,882 was to be paid on or before 31 December 1981, $43,764 within 7 days of the occupation permit being granted, and the balance was to be paid by instalments. The agreement makes it clear that the property had not, at the date of the agreement, been erected. The building was to be erected within 600 "weather working days" after completion of the foundation work.

4. On 2 March 1983, Mr Leung and Madam Lau signed a document in which they said -

"We hereby direct that the Assignment of the said premises [the property] be made in the name of LAU FUNG SIN and CHENG PUI MEI SEPHINA both of [the address of the property] Married Women as Tenants in Common in equal shares."

5. On 18 May 1983, the property was assigned to Mesdames Lau and Cheng. It appears from the assignment that, by this date, the building had been completed. The assignment records that, on this date, the vendor received $437,640 "being the consideration money hereinbefore mentioned to be paid by the Purchaser to the Vendor", which is odd, because, as I have said, the vendor acknowledged receiving $21,882 on 1 September 1981.

6. On 24 September 1986, Mesdames Lau and Cheng assigned the property to Mr Lau Kwan and Madam Lau Tang Sau.

7. On 3 August 1994, Mr Yeung Pak Lung, a senior conveyancing clerk who witnessed the signatures of Mr Leung and Madam Lau on the agreement of 1 September 1981 and on the document of 2 March 1983, subscribed to a solemn declaration saying -

"I remember that in the end of February 1982, the Purchasers Leung Wing Yu and Lau Fung Sin instructed our Firm to engross a document to transfer the interest of Leung Wing Yu in [the property] to Cheng Pui Mei Sephina. Accordingly I engrossed a nomination Agreement for his execution on 2 March, 1983. It is and has always been my practice that when interpreting a Nomination Agreement I will explain to the nominator that his/her interest in the property shall cease upon execution. In this particular instance, I told Leung Wing Yu that his interest would pass to Cheng Pui Mei Sephina and he would have no interest in [the property] upon execution of the Nomination Agreement. He confirmed he knew the legal effect and agreed with it. Subsequently he signed the Nomination Agreement dated 2nd March, 1983 which was later registered in the Land Registry by Memorial No. 2435592."

8. On 12 August 1994, the property was assigned to the defendant.

9. On 20 October 1994, the defendant entered into an agreement of sale of the property to the plaintiffs.

The Requisition and the Answer

10. On 21 October 1994, the conveyancing solicitors for the plaintiffs wrote to the solicitors for the defendant. They said -

"It is not clear from the Nomination Memorial No. 2435592 (i) as to whether Leung Wing Yu, one of the Nominators therein intended by the said Nomination to dispose of and part with his rights title benefits and interests of and in the said property and (ii) as to whether the deposit or deposits were in fact paid by Lau Fung Sin and Cheng Pui Mei Sephina, the Nominees. In the premises, a resulting trust in favour of the said Leung Wing Yu may arise, please clarify the same accordingly."

11. On 22 October 1994, the defendant's solicitors replied, referring the plaintiffs' solicitors to the solemn declaration of Mr Yeung of 3 August 1994.

12. In another letter, dated 3 November 1994, the defendant's solicitors suggested that any claim by Mr Leung Wing Yu would be in respect of the proceeds of sale rather than the property, and would be statute barred.

The Intention of Mr Leung

13. Where property is conveyed to a person other than the purchaser, a resulting trust will be presumed in favour of the person who is proved to have paid the purchase money as a purchaser (as opposed to a donor or lender). This presumption is rebuttable by evidence showing that the purchaser did not intend to retain any interest in the property.

14. There is evidence from Mr Yeung Pak Lung, the senior conveyancing clerk, that Mr Leung had no intention of retaining any interest in the property. I must say that this evidence does not surprise me in the least. It is, in my view, strongly supported by the probabilities.

15. In this case, it can be said that it is proved that Mr Leung Wing Yu paid no more than an equal share of $21,882; that is, $10,941, in respect of a purchase price of $437,640. Any resulting trust in favour of Mr Leung can be, on the evidence before me, no more than in respect a one-fortieth undivided share of the property. The assignment of the property to Mr Lau and Madam Cheng was, it must be presumed, in equal shares. In the assignment, they were described as "the Purchaser", and it was said that the vendor had agreed to sell the property to them. In these circumstances, is there any reasonable possibility that, when Mr Leung signed the nomination in favour of Madam Cheng, he intended anything other than to transfer to her all his interest in the property absolutely, in law and equity? I think not. I believe that Mr Leung would be astonished to hear that the law might say, at this time, that he had a one-fortieth undivided share in the property. That he had no intention of retaining any interest in the property is supported further by the fact that he has taken no steps to exercise any rights. If he had intended to retain an interest, one would have expected him to wonder, from time to time, what was happening to the property in which he had such an interest. If he had taken the most elementary of steps, he would have found out that his "trustee" sold the property in September 1986. If he had done so, we would have heard about it if he remained unsatisfied.

16. I am satisfied, on the evidence and the probabilities, that, when Mr Leung signed the nomination form 2 March 1983, he had no intention whatsoever of retaining any kind of interest in the property.

Limitation

17. Mr Wong, who appears for the defendant, suggests that, in any event, any possible action by Mr Leung would be statute barred under section 20 of the Limitation Ordinance (Cap. 347). This section says -

No period of limitation prescribed by this Ordinance shall apply to an action by a beneficiary under a trust, being action -

(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; . . .

18. If a resulting trust existed in this case, Mesdames Lau and Cheng were the trustees for Mr Leung, and the fraud or fraudulent breach of trust upon which Mr Leung would need to found an action would have been the assignment of the property by them to Mr Lau and Madam Lau on 24 September 1986. The fact that any possibility of such an action exists cannot affect the ability of the defendant to give good title to the plaintiffs. Mr Leung cannot take action against the defendant or the plaintiffs. As Lord Davey said in Thorne v. Heard and Marsh [1985] A.C. 495, at 506, ". . . if fraud, or non-discovery of fraud, is to be relief upon to take a case out of the Statute of Limitations, it must be the fraud of or in some way imputable to a person who invokes the aid of the Statute . . ." This, of course, makes complete sense. The purpose of the exception in the statute is to prevent a trustee taking advantage of his own fraud. If this exception were invocable against innocent parties acquiring property, there would be little value in the statute in this respect. Accordingly, six years having elapsed since any possible breach of trust, any action that might disturb the holding of the property by the defendant or the plaintiffs is statute barred.

The Result

19. Accordingly, I dismiss the action. The effect of this is that I determine the question raised by declaring that the defendant has shown good title in far as the matter raised in the requisition is concerned.

The Costs

20. The parties have agreed that there should be no order as to costs.