WYM v. LYW AND ANOTHER

FCMC 14114/2015

[2022] HKFC 95

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 14114 OF 2015

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D E C I S I O N

(Preliminary Issue: Beneficial Ownership)

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Introduction

1.  This is the trial of the Intervener’s claim for beneficial interest over a landed property situated at Flat 11 on 5^th Floor & Corresponding Roof of xxxx Building, Nos. xxxx Sha Tsui Road, Tsuen Wan, New Territories, Hong Kong (“the Property”). The Petitioner wife (“W”) opposed the application and put in a counterclaim also for beneficial interest over the Property under different grounds. The Respondent husband (“H”) took a neutral stance in this matter.

2.  At the time of this trial, the Property was registered under the sole name of H. The Property was purchased back in March 1971 under the name of H and H’s mother (“Madam Leung”) as joint tenants. W had never appeared on the title of the Property as the owner whether solely or jointly with others. There is no dispute that the Property was used as the parties’ matrimonial home for nearly half a century since their marriage in May 1971, which is 2 months after the Property was purchased.

3.  There are 2 children of the family who are at the age of 46 and 49 at the time of this trial. H was aged 77 and W at the age of 75.

4.  Given the application is to determine the beneficial interest (if any) of the Intervener vis-a vis W over the Property, parties were directed to file and exchange pleadings for the purpose of this trial in line with the often cited decision of deputy High Court Judge Mr Mostyn Q.C. (as he then was) in the case of TL v ML [2006] 1 FLR 1263 where it was said:

“[34] It is to be emphasized, however, that the task of the judge determining a dispute as to ownership between a spouse and a third party is of course completely different in nature to the familiar discretionary exercise between spouses. A dispute with a third party must be approached on exactly the same legal basis as if it were being determined in the Chancery Division.

…..

[36] In my opinion, it is essential in every instance where a dispute arises about the ownership of property in ancillary relief proceedings between a spouse and a third party, that the following things should ordinarily happen:

(i) The third party should be joined to the proceedings at the earliest opportunity;

(ii) Directions should be given for the issue to be fully pleaded by points of claim and points of defence;

(iii) Separate witness statements should be directed in relation to the dispute; and

(iv) The dispute should be directed to be heard separately as a preliminary issue, before the financial dispute resolution (FDR).”

The Pleadings

5.  The Intervener filed the Points of Claim[1] seeking, inter alia :-

(1)  A declaration that the Respondent is the sole legal and beneficial owner of the Property;

(2)  An Order for sale of the Property pursuant to the said Deed of Mortgage for satisfaction of the Judgment Sum;

(3)  Alternative to the aforesaid,

(a)  an Order for sale of the Property under the Partition Ordinance Cap.352 and;

(b)  an Order that the part of the resulting proceeds attributable to the Respondent’s beneficial interest be paid to the Intervener in satisfaction or partial satisfaction of the Judgment Sum;……….”

6.  At the commencement of trial, Counsel for the Intervener confirmed in writing that for determination of the preliminary issue, they would only pursue the declaration under (1) and not pursuing (2) and (3).

7.  W filed her Points of Defence and Counterclaim[2] seeking, inter alia :-

(1)  A declaration that the Petitioner is a beneficial owner of the Property;

(2)  Alternatively, a declaration that the Petitioner is entitled to half of the beneficial interest in the Property, or is the beneficial owner of the Property at such ratio as proportionate to her said contributions to the Property, or at such ratio as this Honourable Court shall think just and equitable;

(3)  A declaration that the Intervener as the legal charge had actual or constructive notice of the interest of the Petitioner as the wife of the Respondent in the Property;

(4)  A declaration that the Intervener’s interest in the property is subject to and rank after the Petitioner’s interest in the Property;

(5)  An order that the relevant provision(s) under the Deed of Mortgage concerning with the property is unenforceable as far as those affect the shares and interests of the Property and/or the beneficial rights and interests the Petitioner in the Property;

(6)  Further and/or in the alternative, a declaration that the Petitioner and her family be entitled to exclusive occupation of the Property during their lifetime.

8.  As said, H adopted a neutral stance and had not filed any Points of Defence. Further, H had not filed any Affirmation in opposition or witness statement for this trial.

9.  All parties were legally represented. Both the Intervener and W engaged Counsel for the trial. H was granted legal aid without assignment of Counsel.

Background of the Case

10.  On 28/8/2019, this Court handed down its Decision in respect of the Intervener’s application for setting aside various case management directions granted on the Joinder application and to stay these proceedings pending determination of another set of proceedings in the Court of First Instance under HCMP No.499/2016. The background of this case had been set out in that Decision which I do not intend to repeat here[3].

The Main Issues for this Trial

11.  Counsel for the Intervener in his Closing Submissions had succinctly set out the 2 main issues before the Court, which I fully agree, are :-

(1)  Whether W has any, and if so how much, beneficial interest in the Property by way of :-

(a)  a common intention constructive trust;

(b)  a resulting trust; or

(c)  proprietary estoppel; and

(2)  whether the Intervener was a bona fide mortgagee for value without notice, so that the Intervener’s interest prevails over that of the Petitioner.

Intervener’s Case and their Evidence

12.  The Intervener’s case is those typical run of the mill situation and straightforward.

13.  By a Loan Agreement dated 11/6/2015[4] between the Intervener as lender and H as borrower, a sum of HK$1,800,000 was advanced as loan to H. By a Deed of Mortgage[5] on the same date, H as the legal and beneficial owner of the Property created a legal charge over the Property in favour of the Intervener for securing all sums of money and interest due from H to the Intervener.

14.  In default of repayment, the Intervener commenced a mortgagee action in the Court of First Instance under HCMP No.499/2016[6] for full payment of the outstanding loan with interest and seeking possession of the Property.

15.  On 14/10/2016, an Order was granted by Master Lai[7] in HCMP No.499/2016 in favour of the Intervener against H for recovery of the sum of HK$1,989,829.68 with interest on the sum of HK$1,764,719.20 due under the said Loan Agreement as secured by the Deed of Mortgage from 23/7/2016 until payment.

16.  Hence, the Intervener’s case was based upon their status as the legal chargee under the terms of the Deed of Mortgage entered by H as the sole legal and beneficial owner of the Property.

17.  The Intervener arranged their Account Manager Miss Yeung to testify at this trial. Miss Yeung made a witness statement dated 26/3/2020 which she “adopted” the contents of it as her evidence in chief. However, it was noticed that such witness statement had not been filed with the Court but, for reasons unknown, included in the Trial Bundle[8]. Neither H nor W took issue on the non-filing of such witness statement, for it to be included in the Trial Bundle and “adopted” as Miss Yeung’s evidence in chief in this trial. This was uncommon and extraordinary. In any event, as parties did not take on such technicality flaw, I decided to “let-go” the witness statement in order not to delay the trial since it caused no prejudice to any party.

18.  Further, there was produced in the Trial Bundle the Loan Application Form and related documents for the 1^st loan[9] but not the 2^nd loan. Same again, nowhere could be seen that these documents were produced or filed as exhibits in these proceedings and neither H nor W took issue on this technicality flaw.

19.  In any event, Counsel for W raised several questions with Miss Yeung during his cross examination over her witness statement and the Loan Application Form since she was the person who attended H on 15/5/2015 for signing the said Loan Application Form and related documents. There was no issue that Miss Yeung also attended H for the 2^nd loan application.

W’s Case and her Evidence

  (a)   Common Intention Constructive Trust

20.  W alleged that it was the common intention of H, H’s mother Madam Leung and her that the Property was purchased for H and her as their matrimonial home after their marriage. As a matter of fact, they then registered their marriage 2 months later in May 1971 and started to live in the Property for nearly half a century since 1971. The 2 children of the family were also born whilst they were living there.

21.  The evidence in support of the contention of common intention came from W’s own testimony.

  (b)  Resulting Trust

22.  W said whilst she was pregnant with the younger child around mid 1974, H’s mother Madam Leung came to her and raised the idea of redeeming the then outstanding mortgage of the Property so that W could be relieved from financial stress arising from the birth of the younger child. She was happy with the idea and gave Madam Leung a sum of HK$8,000 for the purpose of redeeming the then outstanding mortgage. It was W’s case that Madam Leung told her the amount needed for redemption was HK$8,000. W referred to a debit entry of $8,000 on the date of 2/7/1974 which appeared in her bank passbook record as supporting evidence[10].

23.  It is common ground that the Property had 3 rooms where 2 of them were leased out for about 3 years in return for receiving a total rental income of around $270 per month. The rental income was used for repayment of the mortgage of the Property. There was a shortfall of around $20 to $30 a month for the mortgage repayments which W said she would pay from her salary income[11]. The mortgage term was for 60 months at the flat rate of HK$294 per mortgage repayment, starting from 10/3/1971 and thereafter on the 10^th day of each calendar month[12].

24.  W said she was a registered nurse since around 1964 until her retirement in 2001. She started with a net income of around $520 a month which gradually increased to $37,500 a month before her retirement. In addition, she had overtime work or shift duties at hospitals. Over the years, she had accumulated savings from her salary income[13].

25.  W said all over the years it was her who paid the mortgage repayments of the Property before the mortgage was redeemed. Whenever the rental income was insufficient, she would make up the deficit from her savings. Her case was that H had not paid any of the mortgage repayments.

  (c)   Proprietary Estoppel

26.  W alleged that over the years, apart from making all the mortgage repayments, she also paid for refurbishment, maintenance and utilities of the Property which include :-

-  Liaison with other owners of the Property to arrange cleaner lady to collect and dispose of household waste and that she paid for those costs;

-  Replacement of wallpaper in 1975 for $4,000 and also in 1996 for another $4,000 which were all paid by her;

-  Making payment of $17,000 for building maintenance of the Property in 1997;

-  Making payment of $500 for maintenance of a public electricity counter of the Property in 1997;

-  Making payments of water and electricity bills for the Property;

-  Making payment of $5,000 for a litigation trust of the Incorporated Owners of the Property in 2013;

-  Making payment of $3,000 for the change of security lock of the main door of the Property in 2013;

-  Appointing and making payment of $4,700 to a contractor to repair and rectify water supplies equipment or pipes at the Property in 2014;

-  Making payment of $14,300 for refurbishment of windows of the property in 2014;

-  Purchasing a 40-in TV and 2 air-conditioners in the Property in May 2014;

-  Making payment of $63,711 for the building refurbishment in 2014.

27.  W produced the receipts[14] for the above payments as documentary proof of evidence.

H’s Case and his Evidence

28.  H did not file any pleadings or affirmations in opposition. He only filed his Financial Statements (Form E)[15].

29.  Nonetheless, H was cross examined by Counsel for the Intervener and Counsel for W on his income disclosed in his Form E. He was also asked about his personal information which appeared in his Loan Application Form signed with the Intervener.

The Law

30.  In the case of Mo Ying v. Brillex development Ltd [16], Deputy Judge Eugene Fung S.C. set out the legal principles on common intention constructive trust which I find them useful and informative. The learned deputy judge said :

“F2. The relevant legal principles

33. Where a property is vested only in one person’s name (A), the other party (B), in order to establish a beneficial interest, may be able to establish a constructive trust by showing that it would be inequitable or unconscionable for A to claim the entirety of the beneficial ownership. This requires two matters to be proved:

(1) that there was a common intention that both should have a beneficial interest; and

(2) that B has acted to his/her detriment on the basis of that common intention.

See Grant v. Edwards [1986] Ch 638 at 654D-E (Sir Nicolas Browne- Wilkinson V-C); Luo Xing Juan v. Estate of Hui Shui See (2009) 12

HKCFAR 1 at [38] (Riberio PJ). This type of constructive trust is generally known as a “common intention constructive trust”.

34.  The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. Therefore, in sole ownership cases, it is upon the non-owner to show that he/she has any interest at all. See Stack v. Dowden [2007] 2 AC 432 at [56] and [68] (Baroness Hale); Jones v. Kernott [2012] 1 AC 776 at [17] (Lord Walker & Baroness Hale).

F2a. Common intention to share the property beneficially

35.  The party alleging the common intention constructive trust must first prove that there was, at any time prior to acquisition or exceptionally at some later date, an agreement, arrangement or understanding reached between the parties that the property is to be shared beneficially: see Lloyds Bank Plc v. Rosset [1991] 1 AC 107 at 132E-F (Lord Bridge).

36.  The question of whether there was a common intention that each party should have a beneficial interest in the property has been described as the primary or threshold question: see Oxley v. Hiscock [2005] Fam 211 at [47] and [68] (Chadwick LJ); Chan Chui Mee v. Mak Chi Choi [2009] 1 HKLRD 343 at [24] (Johnson Lam J).

37.  The common intention, or the agreement, arrangement or understanding, between the partries may be based on express discussion between them or inferred from their conduct: see Lloyds Bank Plc v. Rosset at 132E-133B (Lord Bridg) and Oxley v. Hiscock at [36] and [40] (Chadwick LJ).

38.  Express common intention:

(1)  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: see Lloyds Bank Plc v. Rosset at 132F-G (Lord Bridge).

(2)  Express discussions should be pleaded in the greater detail, both as to language and as to circumstances: Hammond v. Mitchell [1991] 1 WLR 1127 at 1139E-F (Waite J).

39.  Inferred common intention:

(1)  Where the parties have not used words to communicate their intention, the court may infer from their conduct as intention that both are to have beneficial interest in the property: see Lloyds Bank Plc v. Rosset at 132H.

(2)  The search is to ascertain the parties’ actual shared intentions to be deducted objectively from their words and their actions: see Jones v. Kernott at [31], [46], [51] (Lord Walker & Baroness Hale), [64] (Lord Collins).

(3)  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 Stack v. Dowden at [60] (Baroness Hale), Abbott v. Abbott [2008] 1 FLR 1451 at [19] (Baroness Hale).

(4)  Examples of the sort of evidence which mght be relevant to drawing inferences from the parties’ conduct were given by Baroness Hale in Stack v. Dowden at [69]:

Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties’ true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties’ relationship; whether they had children for whom they both had responsibility to provide a home; 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 discharge the outgoings on the property and their other household expenses…..

(5)  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 Lloyds Bank Plc v. Rosset at 133A-B (Lord Bridge).

40.  In Lloyds Bank Plc v. Rosset, Lord Bridge at 132D-E referred to the distinction between:

(1)  cases in which there is evidence of express discussions to support an agreement, arrangement or understanding reached between the parties that each is to have a beneficial interest in the property (ie cases of express common intention); and

(2)  cases in which there is no evidence to support such a finding the court must rely entirely on the conduct of the parties (ie cases of inferred common intention).

Lord Bridge said that “any judge required to resolve a dispute between former partners as to the beneficial interest in the home they formerly shared should always have [such a distinction] in the forefront of his mind”.

F2b. Detriment

41.  Once a finding of express discussions is made, the party asserting a claim to a beneficial interest must show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement, arrangement or understanding in order to give to a constructive trust: see Lloyds Bank Plc v. Rosset at 133G (Lord Bridge).

42.  There must be some connection between the plaintiff’s conduct and his/her belief that he/she has an interest in the property. To constitute conduct amounting to an acting upon the common intention, 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 Grant v. Edwards at 648G-H (Nourse LJ).”

31.  This Mo Ying case went on appeal but was dismissed. In the Court of Appeal, Hon Cheung JA at paragraph 7.14 of the Judgment said :

“7.14 On reflection, whilst it is tempting to do so, in my view, it is wrong in principle to elide the matrimonial regime with the constructive trust approach. The matrimonial regime is based on statute and supplemented by the common law which has been developed incrementally over decades before it reached the present status of using equal shares as the starting point. In the constructive trust approach, the matrimonial relationship is no more than one of the factors to be considered in the inference exercise. This factor should no doubt be given more weight because it is in the context of this relationship that the inference should be drawn but what one must not do is to too readily infer the existence of the common intention of a claimant’s beneficial interest simply because of this relationship. Even in the light of Stack and Jones it is difficult to refute in principle what Lord Bridge said in Rosset at 130D:

I pause to observe that neither a common intention by spouses that a house is to be renovated as a ‘joint venture’ nor a common intention that the house is to be shared by parents and children as the family home throws any light on their intentions with respect to the beneficial ownership of the property.”

32.  Counsel for the Intervener has helpfully cited the case of Luo Xing Juan v. Estate of Hui Shui See (2009) 12 HKCFAR 1, where Riberio PJ said :

“38. Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom.”

33.  The need and importance of proving expenses that was referable to the acquisition of a property under a common intention constructive trust was illustrated by the case of Burns v. Burns [1984] Ch. 317 in the words of Fox L.J. at 328H to 329C :

“None of this expenditure, in my opinion, indicates the existence of the common intention which the plaintiff has to prove. What is needed, I think, is evidence of a payment or payments by the plaintiff which it can be inferred was referable to the acquisition of the house. Lord Denning M.R. in Hazell v. Hazell [1972] 1 WLR 301, 304 thought that expression, which appears in the speech of Lord Diplock in Gissing v. Gissing [1971] A.C. 886, 909 was being over-used. He said quoting from Falconer v. Falconer [1970] 1 WLR 1333, 1336, that if there was a substantial financial contribution towards the family expenses that would raise an inference of a trust. I do not think that formulation alters the essence of the matter for present purposes. If there is a substantive contribution by the woman to family expenses, and the house was purchased on a mortgage, her contribution is, indirectly, referable to the acquisition of the house since, in one way or another, it enables the family to pay the mortgage instalments. Thus, a payment could be said to be referable to the acquisition of the house if, for example, the payer either (a) pays part of the purchase price or (b) contributes regularly to the mortgage instalments or (c) pays off part of the mortgage or (d) makes a substantial financial contribution to the family expenses so as to enable the mortgage instalments to be paid.”

34.  Guided by these cases and authorities, I will now proceed with analysis of the parties’ evidence.

35.  I must emphasize that whatever conclusion arrived at or decision made in this trial would be restrictively confined to beneficial ownership (if any) of the Intervener over the Property. It should not be taken as the Court’s finding or indication of W’s beneficial interests (if any) over the Property within the matrimonial regime (emphasis added) which must be resolved in due course through the substantive trial of the parties’ ancillary reliefs.

The Court’s Views

36.  There was no issue over the validity of the Loan Agreement(s) and the Deed(s) of Mortgage signed by H in favour of the Intervener. H, as the sole legal owner on title of the Property, was entitled to enter into those instruments assigning his interests to the Intervener, subject of course to any prior encumbrances on title. For the Intervener’s case, H assigned both his legal and beneficial interests[17] by virtue of the instruments he entered into with the Intervener. The starting point is that beneficial interest goes hand-in-hand with the legal interest unless it could be proved that there existed any other contrary intention or some form of trust arrangement. The party who asserts bears the burden of proof.

37.  In the words of Baroness Hale of Richmond in the often cited UK Court of Appeal case of Stack v. Dowden [2007] 2 AC at 454 A :

“56. Just as the starting point where there is sole legal ownership is sole beneficial ownership, the starting point where there is joint legal ownership is joint beneficial ownership. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. So in sole ownership cases it is upon the non-owner to show that he has any interest at all. In joint ownership cases, it is upon the joint owner who claims to have other than a joint beneficial interest.”

38.  W’s first contention of common intention constructive trust lacks evidence in support. As rightly submitted by Counsel for the Intervener, it was not pleaded anywhere in W’s pleadings as to any express discussion of the alleged “common intention” raised as her defence. Any express agreement, arrangement or understanding between all 3 parties (emphasis added), namely, H, H’s mother and W, must be pleaded however imperfectly remembered and however imprecise on the terms both as to language and as to circumstances. This had not been done by W.

39.  As a matter of fact, even taking W’s evidence to the highest, it only covered the idea of H’s mother about redeeming the then outstanding mortgage of the Property made to W who vehemently accepted. Had H been informed about such idea ? And if so, had H conceded to the alleged idea of his mother or what was H’s response ? In the absence of H’s evidence in consonance, how could W say that there existed a “common intention” between all 3 of them (emphasis added) that she would have beneficial interest in the Property either alone or together with H and H’s mother ? W was completely silent, both in her pleadings and oral testimonies, on this matter. In the absence of H’s mother’s evidence, H as the other joint legal owner, whose evidence was important. However, such evidence from H was wanting. H in the witness box had, however, refuted W’s case.

40.  W’s second contention of resulting trust rests upon the withdrawal of $8,000 made on 2/7/1974 allegedly for redeeming the then outstanding mortgage of the Property and also upon her alleged mortgage repayments of the Property over the years. However, there are a number of fallacies on such contention.

41.  W in her evidence admitted that her Hang Seng Bank account, although it was under her sole name, was used by her and her mother. She went further to say that her mother was a traditional Chinese woman who did not wish her personal finances to be known by her husband (that is, W’s father). Her mother entrusted her as the elder daughter and that her mother would place her own moneys into W’s bank account. W gave such evidence when she was cross examined upon several other entries of thousands of dollars (which was quite a lot of money in the 70s) which appeared in her bank passbook records. In particular, there was a specific withdrawal of $20,000 on 24/8/1973[18]. Her evidence was that that sum of money belonged to her mother who withdrew it for buying a 14-seater mini bus.

42.  W’s evidence of withdrawing $8,000 by cash was not supported by her bank passbook records since there was a reference “TRW” against that debit entry which, according to the abbreviations provided in the passbook, mean “transfer withdrawal”. When confronted with such discrepancies, W then said she had mistakenly thought (攪錯咗) that the $8,000 was withdrawn by her in cash.

43.  Although I accept that this was a withdrawal made around half a century ago back in 1971 and also given W’s age is now 75, I am not convinced that the mode of withdrawal for such a large sum of money (which was substantial in the 70s) as a single event in her life time for redeeming the mortgage of the only piece of landed property would be easily mistaken. As W was able to recall clearly that the $8,000 was H’s mother’s idea to her for redeeming the mortgage, I believe that on all probabilities it could hardly escape her memory as to how she paid H’s mother the substantial sum of $8,000 for the particular purpose.

44.  Further, it seems odd that W was able to remember details of another earlier withdrawal of $20,000 in 1973 (which was 1 year earlier than the $8,000 withdrawal) where there was the abbreviation of “TRW”, which was same as the aforesaid withdrawal of $8,000 appeared in her bank passbook, but mistaken as to the mode of payment of $8,000. Given the co-incidence of “TRW” of the 2 sums where W could recall the earlier one of $20,000 was her mother’s moneys but mistaken as to the later sum, I find that W’s own words that the later sum of $8,000 was her own moneys paid for redeeming the then outstanding mortgage of the Property was, on balance of probabilities, self-serving in the absence of other corroborative evidence. W’s own testimonies was not sufficient to tip the balance in her favour on this critical issue. I do not believe W.

45.  Besides, I noticed that there was a deposit $1,100 on the same day of 2/7/1974 into W’s bank account before W had enough money for the transfer of $8,000 on the same day. Upon inquiry, W told the Court that she did not have enough money to pay to H’s mother and that sum of $1,100 was borrowed from her mother.

46.  W’s answer of borrowing $1,100 from her mother was not supported or verified by any other evidence except her own words. The bank passbook records did not show how this sum of $1,100 was deposited, whether it was by transfer from other bank or cash deposit over the bank counter, and where did it come from. However, since it was W’s case that her mother entrusted her and would place her own moneys in W’s bank account, it would require further evidence to prove that her mother had other bank account(s) wherefrom to withdraw this sum of $1,100 and put into W’s account to make up the sum of $8,000. If that was the case, why would W’s mother need to use W’s account to put her own moneys when her mother had other bank account(s) ? In the absence of such further evidence, I find on balance of probabilities that W’s answer that the sum of $1,100 was borrowed from her mother was not the truth.

47.  Pausing here, it is worth to note that W did not produce her bank records soon after the record of the debit entry of $8,000 on 2/7/1974. The next period of bank records which she produced start to run from 9/6/1976 onwards. When W was asked by Counsel for the Intervener for the reason and put to her that the “missing period” might show the $8,000 was actually her mother’s money, W just answered that she could produce those bank records if needed. Thus, W had not provided any explanation for the absence of such period of bank records.

48.  In my decision, this is odd and extraordinary. Counsel for W in his Closing Submissions[19] tried to salvage the position by taking the ‘tricky’ point that these proceedings are a chancery practice and that there was no application for further or specific discovery by the Intervener for those “missing period” of bank records.

49.  With respect, I do not accept such submission. W as the opposing party to the Intervener’s claim, should ensure her case of defence was well supported by evidence. As a matter of fact, I noticed that W in her List of Documents under Schedule I Part 1 Item 2[20] stated “Copies of Hong Kong bank passbook between January 1971 to December 1979 (emphasis added)” without single out the missing period. This is unsatisfactory, if not misleading, especially when W was legally represented who must have advised W the importance and need for complete disclosure with precision even in chancery practice litigation.

50.  There is no dispute that the Property was purchased for the consideration of $25,830[21] with the aid of mortgage with The Hong Nin Savings Bank Limited for the mortgage sum of $12,830 repayable by 60 equal monthly instalments of $294 per instalment[22]. The payment date for each instalment was the 10^th day of each month with the first instalment to be paid on 10/3/1971. According to the official records, the said mortgage was redeemed and reassignment took place on 24/3/1975[23].

51.  The instalment due on 10/6/1974 would be the 40^th instalment. That said, after payment of the 40^th instalment, there only remain 20 outstanding instalments and the amount of outstanding mortgage sum would then be $5,880 ($294 x 20 months). To recap, W’s case was that she paid $8,000 to H’s mother on 2/7/1974. This was the month after the 40^th instalment.

52.  The instalment due on 10/2/1975 would be the 48^th instalment. That said, after payment of the 48^th instalment, there only remain 12 outstanding instalments and the outstanding mortgage sum would then be further reduced down to $3,528 ($294 x 12 months).

53.  Having said, the sum of $8,000 could hardly match either of the above figures, even taking the amount of $5,880, there was an excess of $2,120 (that is, $8,000 - $5,880 = $2,120). This was a substantial sum of money in the 70s as could be reflected by the price of the whole Property was only $25,830.

54.  Even though there might be related fees and expenses for redemption, I do not believe it could amount to $2,120 in those days. The unaccountability of such sharp difference casts doubt on the veracity of W’s evidence that the sum of $8,000 was for redeeming the then outstanding mortgage of the Property. If taking the amount of outstanding mortgage in February 1975, the difference was even bigger at $4,472 (that is, $8,000 - $3528 = $4,472).

55.  Taking full account of all the above with careful consideration given, I do not accept W’s evidence that the sum of $8,000 on 2/5/1974 recorded as debit entry in her bank passbook was her payment to H’s mother for redeeming the then outstanding mortgage of the Property. I find against W on this topic.

56.  For the other mortgage repayments, there was no solid or cogent evidence to show that W had paid for them except her bare assertion. It is also my finding that such assertion was self-serving which carried little or no evidential value. They are insufficient to prove the existence of resulting trust in her favour.

57.  On W’s other contention of proprietary estoppel, she referred to a list of expenses paid by her over the years either for the benefit of the Property or for her and the family’s use during occupation in the Property. W produced various receipts of payment as documentary proof.

58.  For proprietary estoppel to be successfully established, either through payment of expenses by W or detriment caused to W, it must be referable to the time of acquisition of the Property[24]. Further, financial contribution towards the family expenses must be substantial in that it could raise an inference of a trust.

59.  It must not be overlooked that the Property was acquired in March 1971 (that is, 2 months prior to the marriage) with the then outstanding mortgage redeemed in March 1975 as per official records. That said, W’s contention of proprietary estoppel through any one or all of those enlisted payments must took place either before March 1971 or at the latest March 1975. Payments made after acquisition of the Property or redemption of the mortgage would not be considered or accepted as they would not be taken as “referable” to acquisition. Within the context of the law of contract, post-acquisition or post-redemption payments could only be taken as past consideration.

60.  With the exception of payments for the cleaner lady and water and electricity bills, all other payments were made after (emphasis added) the acquisition of the Property in 1971 and after (emphasis added) redemption of the mortgage in 1974 (as per W’s case) or 1975 (as per official records). Hence, those post-acquisition or post-redemption payments could not be taken as referable to the acquisition of the Property. In my decision, all those payments were made for W’s and the family’s use and occupation of the Property as opposed to any common intention for acquisition by W.

61.  For the cleaner lady expenses, water and electricity bills, although they were paid before and after acquisition, my finding was that those payment(s) from any perspective were only day to day general expenses spent for the benefit of W’s and the family’s use and occupation of the Property rather than paid in anticipation of any common intention for acquisition by W.

62.  I find against W on her contention of proprietary estoppel and/or detriment.

63.  Neither was there any other solid or cogent evidence as to the whole course of conduct of the parties giving rise to any inferred common intention for constructive trust in anyone’s favour.

64.  Concluding the 1^st main issue, I find W does not have any legitimate defence of beneficial interest to the Intervener’s claim over the Property by way of (a) common intention constructive trust; (b) resulting trust; and (c) proprietary estoppel. There was no detriment caused to W for any beneficial interest over the Property that could be established or inferred by way of defence.

65.  It is important for me to re-iterate that such finding was not determinative or indicative of W’s claim for beneficial interest (if any) over the Property within the matrimonial regime (emphasis added) nor would such finding prejudice W’s position in her subsequent ancillary reliefs claim, which has yet to begin. As said, such claim would have to be decided upon the matrimonial framework which was different from the present proceedings.

66.  Now I will deal with the 2^nd main issue as to whether the Intervener was a bona fide mortgagee for value without notice. It is useful to start with some important cases and authorities.

67.  In the case of Sun Sek Haw v. Au So Kum, CACV No.215/1998, where it was said by Godfrey JA :-

“As Vinelott J. said in Eagle Trust plc v. S.B.C. Securities Limited [1993] 1 WLR 484 in the field of conveyancing the law has historically set a very high standard. He quoted Maitland’s Equity, 2^nd Edn. Page 119

“In reading some of the cases about constructive notice we may be inclined to say that equity demanded not the care of the most prudent father of a family but the care of the most prudent solicitor of a family aided by the skill of the most expert conveyancer.”

……….

In my view, the standard of knowledge which is relevant is encapsulated in Vinelott J’s statement at page 494 of the Eagle Trust Plc case :-

“It is often said that man has constructive notice of matters which he would have discovered if he had made those enquiries which he ought reasonably to have made. But as Lindley L.J. pointed out in Bailey v. Barnes [1894] 1 Ch.25, 35 :

‘ “Ought” here does not import a duty or obligation; for a purchaser need make no enquiry. The expression “ought reasonably” must mean ought as a matter of prudence, having regard to what is usually done by men of business under similar circumstances.’”

68.  In the recent case of Far East Consortium Ltd and Another v. The Trustees of the Property of Margaret Chiu, a bankrupt and others [2021] HKCFI 3707 which was the trial of a mortgagee action and determination of preliminary issues (heard together), the learned Madam Recorder Sit, S.C. meticulously analysed the issues involved and set out in great detail the relevant law and legal principles involved. I find the judgment extremely useful and informative which represents the legal position in terms of constructive notice at common law.

69.  At paragraphs 46 to 52 of the Judgment, the learned Madam Recorder said :-

“ISSUE 2- BONA FIDE PURCHASER DEFENCE AGAINST TAN

A. The Law

46.  It is common ground between CS Credit, Tan, and Far east and CIE that a bona fide purchaser of a legal estate for value without notice of the equitable interest can take the legal estate free of such equitable interest: Megarry & Wade, The Law of Real Property (9^th edn) §5-005; Gray & Gray, Elements of Land Law (5^th edn), §8.3.19.

47.  It is also not in dispute that the burden is on the person raising this defence to plead and prove all its elements; it is said to be a “single defence”: Barclays Bank plc v. Boulter [1998] 1 WLR 1, 8G.

48.  This defence has 4 basic elements: (i) bona fides; (ii) purchase of a legal estate; (iii) for value; and (iv) absence of notice. Elements (ii) and (iv) are in dispute in this case.

49.  On element (ii) (purchase of a legal estate), there are 2 separate constituents.

50.  The first constituent is “legal estate”. In this case one is concerned with legal charges. A charge by deed expressed to be a legal charge is a mortgage of the legal estate, see section 44 of the Conveyancing and Property Ordinance (Cap.219) (“CPO”) which provides (inter alia):-

“(1) After commencement of this section, a mortgage of a legal estate, including any second or subsequent mortgage of that legal estate, may be affected at law only by a charge by deed expressed to be a legal charge.

(2) Under a mortgage effected by a legal charge, the mortgagor and the mortgagee shall, subject to this Ordinance, have the same protection, power and remedies (including but not limited to those relating to foreclosure and the equity of redemption but excluding the power of the mortgagee to enter into possession before any default by the mortgagor) as if the mortgage had been effected by way of assignment of the legal estate before commencement of this section.

….”

By the above statutory fiction, a lender who takes a charge by way of legal mortgage is regarded as having obtained a legal estate, in that it is deemed to have the same protection as if a term of years had been created in its favour by the mortgagor: Gray & Gray §8.3.21. See also section 2 of the CPO, which defines “legal estate” as including a “legal charge”.

51.  The second constituent is “purchase”. This arises for consideration because Mr But contends that for the purpose of the bona fide purchaser defence, the purchaser is confined to an owner and does not cover a mortgagee.

(1)  For the reasons below, I reject Mr But’s argument, and hold that a mortgagee is a purchaser for the purpose of the bona fide purchaser defence.

(2)  “Purchase” in the context of real property law is a term of art, and refers to a person who takes property by grant and not by mere operation of law (eg descent): Snell’s Equity (34^th edn) §4-022; Commissioners of Inland Revenue v. Gribble [1913] 3 KB 212, 216, 218; Nurdin & Peacock plc v. DB Ramsden & Co Ltd [1999] 1 EGLR 119, 122L-M; Re Trigg; Ex parte Trigg & Official Receiver (1978) 25 ALR 207, 215.7-13. Thus, even a donee is a purchaser (albeit not for value). It has long been recognized that a mortgagee is a purchaser: Megarry & Wade §5-008; Cheshire and Burn’s Modern Law of Real Property (18^th edn), p.84; Fisher and Lightwood’s Law of Mortgage (15^th edn), §42.3.

(3)  Mr But advances a number of arguments, none of which is sustainable.

(4)  First, Mr But refers to the literal meaning of “purchaser” and says that it only refers to a buyer who acquires a property as an owner. He also refers to section 3(2) of the Land Registration Ordinance (Cap.128) which refers to “bona fide purchaser or mortgagee for valuable consideration” to show that there is a difference between the 2 words. However, this wholly ignores the established authorities that while “purchaser” may have different meanings depending on context (in IRC v. Gribble the English Court of Appeal identified 4 different meanings, including the one relied on by Mr But), in the context of real property law it carries the meaning identified in (2) above. I also do not see how the mere presence of words used in a statute without more would have the effect of changing the well-established meaning of the word “purchaser” at common law.

(5)   Second, Mr But relies on the statements of Kwan JA (as Kwan VP then was) in Ng Luk Mui v. Shiu Tsun Wai Vincent [2011] 5 HKLRD 707, §40, that purchaser “is a term of art; it is not confined to the situation of a sale and purchase”, and “the important thing is whether any consideration in money or money’s worth, including the satisfaction of an existing debt, was provided for the transfer of property”. He argues that these statements show purchaser is confined to a situation where there is a transfer of property. I cannot see how this assists Mr But at all. What the learned judge is saying is that an expansive meaning should be given to “purchaser”, and it can apply to situation where there is a transfer of property other than by sale and purchase. This is the antithesis of the restrictive meaning Mr But seeks to impose on “purchaser”.

(6)  Third, building on his (mis-)reading of Ng Luk Mui that there can only be a purchase if there is a transfer of property, Mr But argues that section 44 of the LPO has rendered it impossible thereafter for a mortgagee to be a “purchaser”, since this section removes the need for there to be a conveyance of the property for the purpose of a legal mortgagee. This argument must fail since Mr But’s premise is wrong. In any event it is well known that section 44 was not introduced to change the nature of the mortgage; its purpose was to excise various unwelcomed consequences attaching to legal mortgage by assignment without in any way altering the fundamental nature of legal mortgage, hence the deeming provision: Conveyancing and Property Ordinance (Cap.219). The Annotated Ordinances of Hong Kong (2020 Reissue), §44.02.

(7)  In any event, Mr But’s construction is internally flawed, since he accepts that a mortgage is a legal estate for the purpose of this defence, which begs the question as to who could be a “purchaser” where a mortgage is concerned. Mr But has not been able to provide an answer to this question when raised.

52.  On element (iv) (absence of notice):-

(1)  The doctrine of notice is relevant because one is dealing with a situation where there are 2 innocent parties, each enjoying rights. The earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice): Barclays Bank plc v. O’Brien [1994] 1 AC 180, 195G-H.

(2)  Specifically with respect to constructive notice, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it: 195H op.cit.

(3)  The standard required of the purchaser, where constructive notice is in issue, is to make all usual and proper inquiries: Megarry & Wade §5-017. One asks what enquiries would have been made as a matter of prudence (“ought reasonably”), having regard to what is usually done by men of business under similar circumstances: Sun Sek Haw v. Au So Kum [1999] 3 HKLRD 12, 22B-E. This is said to be a high standard: Sun Sek Haw 21E.

(4)  The inquiry as to whether a purchaser has made all usual and proper inquiries is a fact-sensitive one and depends on all the circumstances of the case: Sun Sek Haw 21H.

(5)  Given the inquiry is fact-sensitive, it would not be possible to conclusively define the circumstances in which a purchaser will have constructive notice, but generally speaking:-

(a)  If the purchaser (X) in fact appreciates that a proprietary right in the property probably exists, he has actual notice.

(b)  If a reasonable person with the attributes of X should have appreciated based on facts already available that the proprietary right probably existed, X has constructive notice of the existence of the right, and further inquiry would not be necessary.

(c)  If the facts known to X would give a reasonable purchaser in his position serious cause to question the proprietary of the transaction, X must make inquiries which would have revealed the probable existence of a proprietary right.

See Papadimitriou v. Credit Agricole Corpn and Investment Bank [2015] 1 WLR 4265, §§12-20; see also Megarry & Wade §5-018 (adopted in Ho Lai Lei v. Mang Wan Kwan Simon [2020] HKCFI 527, §112).

(6)  In scenarios (b) and (c) in (5) above, it is important that there must be facts already known to the purchaser that would point to the probable existence of a right, or that there is serious cause to question the propriety of the transaction.

(7)  Further, in scenario (c) in (5) above where the purchaser should make inquiries, there must be a causal link between such further inquiries and the revelation of the probable existence of the right. See also Sun Sek Haw 22D-E, where Rogers JA held that “the question which should be asked is would the enquiries which a conveyancing solicitor would have made as a matter of prudence have revealed the fact which would have given the purchasers constructive notice”.

(8)  It is argued by Mr Fung (whose argument is adopted by Mr But) that relying on Asian Oceanic Bank Ltd v. Lambang Maju Sdn Bhd, HCMP 4151/1993 (unrep, 26 May 2000) §25, as a matter of principle the court should assume that any inquiry that ought to have been made by the purchaser would have yielded an honest answer, such that there is no need to consider causation. I do not think Asian Oceanic Bank is in any way inconsistent with the need to establish a causal link. In that case the bank was found to have constructive notice that the shares charged to it were subject to trusts. The trusts were documented in various declarations of trusts, and the bank never made any inquiry. The court found that had the bank inquired into the root of the title, that would have led to the declarations of trust, and the prior interest would have been revealed. Similarly, in Pillgrem v. Pillgrem [1881] 118 ChD 93 (which was cited in Asian Oceanic Bank §25), no inquiry was made at all, and the usual and proper inquiry would have led to the purchaser calling for an abstract of title, which would have revealed the prior trust. In both cases, the court had examined and were satisfied, on the facts, that had inquiries been made, they would have led to revelation of the existence of the prior right. Thus, they in fact support, and not negate, the need for causation.

(9)   While each case turns on its own facts (see (4) above), the fact of possession by someone other than the purchaser’s counterparty is a highly relevant factor: Wong Chim-ying v. Cheng Kam-wing [1991] 2 HKLR 253. That said, whether there is constructive notice ultimately turns on the application of (2) and (3) above to the facts of the case, and the benchmark is what is usually done by men of business under similar circumstances. Thus, it is said that if a purchaser has made a reasonable inspection of the property and cannot discover the residence of the beneficiary, he will not be fixed with constructive notice of the beneficiary’s rights: Goo & Lee, Land Law in Hong Kong (4^th edn) §7.32, and an inspection does not require an in-depth scrutiny of everything present: Cousins on The Law of Mortgages (4^th edn), §9-58.”

70.  With these cases in mind, the answer to the 2^nd main issue turns upon the evidence of the Intervener’s Account Manager Miss Yeung and upon scrutiny of the entire process of H’s loan applications, including any enquiries ought to have been made or due diligence ought to have been carried out in the process of approval by the Intervener as “men of business under similar circumstances”, a term which was used by the learned Recorder in her Judgment when citing the Sun Sek Haw case.

71.  According to Miss Yeung, H made 2 separate loan applications from the Intervener within a month. The 1^st loan was for $500,000 which was advanced to H on 15/5/2015. The 2^nd loan was for $1,800,000, part of which was for settlement of the 1^st loan already withdrawn, and the 2^nd loan was advanced to H on 11/6/2015.

72.  Miss Yeung in the witness box was shown the Loan Application Form for the 1^st Loan[25]. She confirmed that it was signed by H in her presence and then she signed as a witness at the bottom left hand corner. This happened on the date appeared on the form, that is, 15/5/2015. She confirmed that she had gone through the details shown in the form with H before asking H to sign on it. Miss Yeung said her role was to ensure H accepted the details filled out in the form are true and accurate. She also testified that the details recorded in the form were actually not received by her from H there and then on the date of the Loan Application Form but were received a few days earlier. Her colleagues who received the information would check upon their accuracies before inputting the information into the system for print out the Loan Application Form.

73.  For completeness, I have extracted the relevant part of the transcript of Miss Yeung’s evidence in chief and when she was cross examined by Counsel for W and providing answers to questions from the Court. I have bold printed those important questions and answers as follows[26] :-

“問：好喇，咁跟住之後第7段，妳嘅證人陳述書嘅第7段。

答：係。

問：妳就提及到呢一個答辯人做咗一份聲明，就嗰份聲明入面就確認佢係唯一嘅物業嘅實質擁有人，同埋所有嘅付款都係由佢自己付嘅。妳揭去第285頁，文件冊B1，285頁。

答：係。

問：妳睇睇285頁嘅第3段，妳可唔可以確認到呢一份就係，係唔係妳第--證人陳述書第7段所講嗰個declaration？

答：係。

問：係定唔係？

答：係。

問：好喇，咁跟住第8段，妳嘅證人陳述書第8段，妳就提及過跟住之後呢一個嘅答辯人就同廣東財務就做咗一份貸款協議書嘅，妳睇睇文件冊309頁tab 26，妳確認呢一份就係妳證人陳述書第8段所講嘅貸款協議喇，係咪？

答：係。

問：好喇，跟住揭去妳證人陳述書嘅第9段，即係第--下一頁。咁就借錢嘅時候，亦都做咗一份按揭嘅。第9段，妳嘅證人陳述書所講就係叫佢做second mortgage。妳揭一揭去文件冊嘅161頁至到184頁，係另外一個bundle喇，bundle B1，161至184，妳確認呢一份就係頭先妳第9段，證人陳述書第9段所講嗰個按揭文件喇，係咪？

答：係。

問：咁跟住妳可以跳去妳份證人陳述書嘅第12段。

答：係。

問：呢一度就提及過，除咗頭先妳--我哋啱啱所講嘅第一次借款之外--之後，就有第二次借款嘅，咁妳第12段就講，就2015年6月11日就有一個second loan agreement（第二次嘅貸款協議）。妳睇睇文件冊332至354，即係B2。332至354。妳確認呢一個就係嗰個妳第--證人陳述書第12段所述嘅second loan agreement喇？

答：係。

問：好喇，妳確去妳證人陳述書之後嗰一頁，第15段。妳提及到second loan agreement嘅同時，就整咗另外一個按揭嘅，咁嗰個按揭呢，或者妳睇睇文件冊191至214。B1，應該係，191至214。呢一份妳確唔確認就係我哋啱啱提及到嘅second loan agreement？

答：係嘅。

問：好喇，咁跟住妳再揭去妳嘅證人陳述書第32段。就妳證人陳述書就提及到，喺答辯人向你哋借錢之前，佢已經向恒生銀行借咗錢㗎喇，咁就而喺恒生嗰度亦都做咗嘅按揭嘅，咁妳就喺32段嗰度就提及過恒生銀行嘅按揭，就話喺恒生銀行嘅按揭嗰度，答辯人亦都係保證佢自己係呢一個物業嘅唯一受益人咁樣嘅。或者妳睇睇B1文件冊，96至160頁。妳確唔確認呢一份就係妳證人陳述書入面所提及到嘅恒生銀行按揭？

答：係嘅。

問：而妳又再睇睇第142頁，係同一份文件142頁。最褸屘第6段，即係呢一頁最褸屘嗰度，妳見到個六--「妳的申述和保證」咁樣，見唔見到？

答：唔。

問：6.1（A），妳申述同埋保證，喺按揭嘅當日，妳係物業嘅唯一實益擁有人定擁有物業嘅妥善同埋有價嘅業權，呢一度係咪妳--就係妳喺妳證人陳述書32段所講嘅答辯人向恒生銀行所作嘅保證？

答：係。

問：好喇，就我想知道，而家個呢--關於呢一個涉案物業友聯（譯音）唐樓嘅樓契喺邊個嘅手上，妳知唔知？

答：喺我哋嘅手上。

問：係。點解會喺你哋嗰度㗎？妳知--妳可唔可以解釋？

答：因為佢嗰個恒生銀行，我哋要幫佢full pay，咁所以恒生--我哋個律師就會搵--搵咗梁耀華授權畀佢哋，跟住就搵恒生銀行去畀佢哋去睇，睇過冇問題，我哋先會作出批核嘅。

問：係，咁除咗睇完之後，嗰套契需唔需要話畀番任何人咁樣㗎？

答：之前同梁xx傾過，佢就話畀我哋keep住嘅，所以我哋一直都keep住。

問：係。就妳呢一份證人陳述書，妳願唔願意作為妳嘅證詞嘅主問證供？講出嚟，願唔願意？

答：願意，願意，願意。

問：係。

MR CHEUNG：法官閣下，我再冇其他問題。

官：Thank you。證人，仲有問題問妳嘅，其他大律師，妳要聽清楚個問題。

答：Okay。

官：Mr Chow。

MR CHOW：If I may，your Honour。

官：Yes。

MR CHOW盤問

問：楊小姐，早晨。

答：係，早晨。

問：聽到我講嘢，係咪？

答：聽到，聽到。

問：因為我距離妳比較遠啲...

官：係，大家可以大聲啲，我唔介意㗎，唔緊要，大家大聲啲，我都好大聲嘅，喀。

問：係，係，唔好意思，如果妳聽唔到我講嘢嘅，請妳話畀我聽。

答：Okay，okay，okay。

問：Okay，係，同樣地，請妳都大聲少少，因為我距離妳都比較遠嘅。

答：Okay。

問：請妳先打番開文件夾B2，280頁吖。

答：係。

問：剛才其實代表廣東信貸，即係妳公司嘅大律師張大律師，就帶妳睇過呢一份嘅貸款申請書㗎喇，有印象，係咪？

答：係。

問：2015年5月嘅時候，妳已經係入職咗廣東信貸嘅，係唔係？

答：係，係。

問：而其實梁xx先生呢一個嘅借款係由妳去負責處理嘅，同唔同意？

答：借款，你--我唔明你嘅意思。

問：係，問廣東信貸借，借。

答：我唔明你嘅意思，因為我哋有份前部分同後部分嘅。

問：何謂前部分、何謂後部分，可唔可以解釋一下？

答：前部分就係會有人--即係可能佢會打電話嚟搵人，搵我哋去了解下情況呀，咁我就負責係解釋呢一份合約。

問：呢份合約嘅意思係包括埋呢個嘅貸款申請書？

答：係。

問：同埋後面嗰個貸款合約，係咪？

答：係。

問：係。咁或者確認一下先喇，喺280頁下半部嗰度，我哋見到有兩個嘅簽名嘅。

答：係。

問：睇到吖嘛？

答：睇到。

問：一個就係申請人簽名，好明顯係寫住梁xx先生喇。

答：係。

問：另一個嗰個簽名，見證人簽名，係唔係就係妳本人？

答：係我。

問：係，咁即係話可唔可以簡單去到形容嗰個情況，就係喺2月15--唔係，對唔住，2015年5月15號嘅時候，妳就係親自向梁xx先生解釋咗呢份嘅貸款申請書同埋後面嘅貸款合約嘅內容畀佢聽。

答：係。

問：同埋係唔係當日，妳都向佢攞咗一啲關於佢自己嘅個人資料？

答：唔明你嘅個人資料意思。

問：例如話佢嘅姓名、佢嘅婚姻狀況喇，呢啲喺個貸款申請書上面有填寫嘅資料。

答：係。

問：都係當日攞嘅？

答：唔係當日攞㗎。

問：咁係幾時攞㗎？

答：我哋冇資料，我哋點樣做文係--唔係，做文件呀？

問：咁妳幾時攞呢啲嘅資料，就係佢嘅姓名喇、佢嘅婚姻狀況呢啲嘅資...

答：唔記得喎。

問：唔？

答：唔記得。

問：唔記得。

答：唔。

問：咁嗰啲嘅資料係...

官：唔係，sorry，sorry，Mr Chow。

MR CHOW：係。

官：證人，妳話妳--嗰個文件280頁，右上角有個5月15號日期嘅。

答：唔。

官：日期對下有啲資料，例如個婚姻狀況、身分證號碼呀、出生年月日、個地址呀、月薪50,000鈫呀，呢啲資料就係妳同意係妳問梁生攞嘅，不過妳就話畀我哋聽，就係妳唔記得係咪5月15號嗰日攞，係咪咁嘅意思？個日期係5月15印出嚟㗎嘛，咁妳係咪話畀我哋聽，妳係唔記得係唔係5月15號吖，抑或5月14呀、13、12呀，妳係點樣嘅情況呀？我想了解知。

答：因為嗰啲資料通常之前一兩日我哋就已經收到嘅，但係因為我哋部機就好低能嘅，就一定要係嗰日打呢，佢先會出番嗰日嘅日子，咁所以我哋打出嚟一定係嗰日嘅。

官：Okay，咁妳係咪言下之意，即係話妳話部機低能喇，咁言下之意就係話，呢個見到啲資料係喺5月15號之前已經有㗎喇，會？

答：係。

官：但係妳肯定唔係佢當日嘅？

答：唔係。

官：肯定㗎喇嘛？

答：肯定。

官：Okay，yes，Mr Chow。

問：係，咁喺5月15號之前，係妳親身問梁先生攞資料吖，定是話係由其他人負責問佢攞呢啲嘅資料㗎？

答：同事。

問：同事。

答：唔。

問：但係妳喺處理呢一個嘅貸款申請嘅時候，妳都有同梁生去到核實呢啲嘅資料嘅？

答：係，一定要嘅。

問：係唔係？

答：係。

問：當其時，其實妳最遲就係喺2015年5月15號嘅時候，已經知道梁生係一個已婚人士，係唔係？

答：係。

問：而妳同佢去到講解呢份貸款申請書嘅時候，亦都知道佢嘅住址就係呢一個嘅友聯唐樓，即係話個涉案嘅物業單位，同唔同意？

答：同意。

問：咁妳最遲喺5月15號當日，係咪同樣地，妳都已經知道梁先生係會攞呢一個嘅友聯唐樓嘅涉案單位，嚟作為一個嘅抵押，向你哋公司廣東信貸去到借錢？

答：係。

問：我想問埋落去喇，喺呢一個嘅信--貸款申請書裡面，其實妳一路由上而下睇落去，有一欄嘅，就係寫住 “living with”、「與誰居住」，見到嘛？

官：Sorry，你--in the middle？In...

答：唔。

官：Sorry，where is it，Mr Chow？

MR CHOW：“Living with”，其實就喺 “residential”、「住宅」下面有一間，比較窄、比較細嘅。

官： “Living with”？You are right，yes，見到，係。

MR CHOW：係。

官：係，證人，妳睇到，嗬？妳睇到Form，妳知道㗎喇，有個 “living with”嘅地方。Yes，Mr Chow，your question。

問：係咪？

答：係，係。

問：咁妳同梁先生講解呢一份嘅貸款申請書嘅時候，妳有冇問過梁生，「你呢個友聯唐樓嘅單位，有冇其他人一齊住㗎？」

答：冇。

問：有冇咩嘢原因妳唔問嘅？

答：有咩嘢原因呀？有陣時--因為啲客有陣時會覺得係私隱呀，唔想我哋答，即係唔想我哋通常就係唔會問。

問：所以妳係冇問到？

答：冇問到。

問：直頭係冇問過，係咪？

答：冇問過，凈係問佢有冇已婚啫，係喇。

官：凈係問佢有冇？凈係問佢有冇咩嘢話？

答：即係已婚嗰度就有囉。

官：Okay。即係婚姻狀況有問，但係冇問過--妳記得冇問過佢同邊個居住？

答：冇。

問：咁但係妳當其時喺5月15號掌握嘅資料，就係話梁先生--唔好意思，係已婚人士，係咪？

答：唔。

問：係咪？

答：係。

問：咁妳都冇問佢喇，我相信，就係佢嘅配偶係咪同佢一齊住？

答：冇問。

問：冇問。點解唔問嘅？

答：Assume佢會係㗎喇。

問：Assume一齊住嘅？

答：係。

問：係咪？即是話...

官：妳assume，妳假定佢會係，係咪呀，證人？

答：係。

問：即是話，其實妳去處理呢一個嘅貸款申請嘅時候，妳係心裡面都相信就係話，梁先生至少會係同佢嘅配偶喺呢個友聯單位裡面一齊去到居住嘅，...

答：係。

問：...莫講話其他人喇，喀。

官：答案「係」吖嘛，係咪？

答：係。

問：但係當樣地，妳亦都冇問到梁先生，佢嘅配偶喺呢一個嘅友聯物業單位裡面，有冇係個--有冇任何嘅權益喺個單位度嘅？

答：冇。

問：冇問到。

答：冇。

問：有冇任何特別嘅原因唔去問？

答：因為佢嗰個--首先呢，佢嗰個做個land search出嚟係佢嘅全名喇，咁就證實係佢一個人擁有喇，然後因為佢有恒生銀行同埋有開業銀行（?）嘅借貸喇，咁我哋相信之前嗰啲銀行呀、財務公司都有作出過準--即係嗰啲叫咩嘢？即係估計喇，即係做個測驗呀嗰啲，咁所以我哋相信呢個物業係屬於嗰個梁先生擁有嘅，係亦都冇問題，亦都唔會覺得佢另一半會話反對，咁樣囉，...

問：答...

答：...所以我哋就覺得...

官：唔覺得，妳係唔覺得另一半反對，係咪？

答：係，因為之前嗰啲財務--即係嗰啲銀行都冇問題吖嘛。

問：咁但係妳同唔同意我嘅講法，楊小姐，就係之前借過錢畀梁先生嘅嗰啲嘅銀行或者財務機構，第一，佢哋有冇作出任何嘅調查，妳根本係唔知道嘅。

官：同唔同意？

答：唔同意喎。

問：唔同意？

答：咁銀行喎，銀行...

問：即係妳知道佢哋有調查過嘅？

答：銀行好--審查好嚴厲㗎嘛。

官：唔係，唔係一個慣常做法，妳知唔知人哋有冇查過先，個問題就係？

答：通常律...

官：因為妳估、...

答：因為唔係，因為...

官：...妳諗佢會查過。

答：因為律師同我講過話，如果銀行做過嘅話嘅話呢，佢哋係好安全嘅，咁同我講過。

官：邊個律師？

答：金律師，即係唔係呢度嘅。

官：即係有法律意見？

答：係。

官：Thank you。Mr Chow。

問：但係其實嗰個律師，我唔係--金律師，係咪？

答：唔。

問：佢都唔知道之前嗰啲銀行有冇查過㗎嘛。

官：妳同唔同意吖？

問：你同唔同意？

答：咁我唔知喎。

問：唔知道。至少妳冇問過之前借過錢畀梁生嘅嗰啲銀行，佢哋有冇審查過梁生係唔係呢一個友聯唐樓嘅單一嘅實益擁有人，係咪？

答：Sorry，我唔係好明。

問：妳自己冇問過之前借過錢畀梁生嘅銀行，佢哋有冇審查過梁生係...

答：我唔會直接問佢哋嘅。

問：冇--妳冇直接問過，係咪？

答：冇，冇，冇。

問：冇直接問過，有冇間接問過？都冇，係咪？

答：冇。問唔到㗎。

問：所以其實妳相信話之前啲銀行審查過冇問題，都係妳自己嘅估計？

答：唔係，都話我係問過律師囉。

官：就係嗰個金律師，妳所講？

答：係。

官：但係金律師，妳唔係之前代表銀行嗰啲金律師，係咪？妳想identify金律師嗰個可能係--即係係咪...

答：幫我哋做物業文件嗰個囉。

官：即係妳公司嗰啲？

答：係，係。

官：Okay。

問：簡單嚟到講，呢個妳叫做金律師嘅律師，係喺2015年嘅時候，係廣東信貸嘅一個可以叫做法律顧問，可唔可以咁樣講？

答：唔係，佢係幫我哋做物業貸款嘅律師囉，即係我哋搵開佢哋做嘅。

問：係，明白。但係妳知唔知道佢有冇幫恒生銀行或者康業做物業貸款？

答：我唔知喎。

問：唔知道。咁但係我可唔可以咁樣講呢？或者睇下妳同唔同意呢？因為喺妳嘅證人口供紙第31段裡面，文件夾A嘅第44頁嗰度。頭先妳嘅即係廣東信貸嘅代表大律師張大律師都帶妳去睇過㗎喇，妳就喺個口供紙裡面依賴咗就係話，先前梁生攞咗層物業去按畀恒生銀行，作為一個嘅證明嘅，呢度係咪咁講？

答：唔，唔。

問：咁但係如果梁生係呃恒生銀行嘅話，其實梁生都可以呃埋你哋廣東信貸㗎喎，同唔同意？

答：同意。

問：而恒生銀行做啲乜嘢嘢，佢有冇去調查過，其實恒生銀行係冇對廣東信貸有任何嘅責任嘅，同唔同意？

答：同意。

問：如果廣東信貸係需要自己去查下或者去研究，究竟呢個嘅友聯唐樓嘅涉案單位有冇其他人有實質權益嘅話，其實係廣東信貸自己嘅事嚟嘅，同唔同意？

答：咁我哋都有問咗律師㗎，意見㗎。

問：律師嘅意見唔代表律師有自嘅--有做調查吖嘛，同唔同意？

答：調查--你意思調查乜嘢先？

問：調查呢層樓，講緊呢一個涉案單位，有冇其他人有權益？

答：都--咁都話佢--本身佢又有契畀我哋，又可以畀我哋keep，咁然後又有加上銀行又可以做到按揭，咁唔會懷疑㗎喎。我都問佢係咪佢自己擁有，佢又話係。

問：所以妳就連究竟佢嘅配偶有冇權益，妳都冇問到喇？

答：冇。

問：更加冇講話問梁生，除咗佢配偶之外，有冇其他第三方可能有權益喺呢一個嘅友聯唐樓嗰度，妳都冇問喇？

答：冇，因為我哋信賴咗呢個樓契嘅問題囉。

問：明白。

答：因為拎得出嚟就係㗎喇。

官：等等先，等等先，妳就冇問，因為信賴咗樓契嘅問題。

答：唔。

問：好。其實妳除咗睇啲樓契同埋靠梁生講畀妳聽之外，妳喺2015年5月15號同梁生去講解頭先嗰啲嘅信貸文件嘅時候，妳知唔知梁生實際係唔係喺友聯唐樓嗰個涉案單位嗰度居住㗎？

答：咁佢話畀我聽佢喺嗰度住㗎嘛。

問：妳冇上去睇過佢係咪喺度住嘅？

答：冇。

問：明白，okay，好。

MR CHOW：法官閣下，我冇其他嘅盤問問題。

官：好，thank you。

MR CHOW：唔該。

74.  Towards the end of her testimonies, this Court raised further questions with Miss Yeung as to the routine procedure of loan application. The following questions and answers in bold print are important[27] :-

“問：個運作係咪approach咗你哋先，你哋有第一個機會見到個客人，知道佢嘅需要，然之後喺呢個會面裡面，跟住就係可能佢帶定契又唔定，抑或返屋企攞畀妳--係畀你哋，你哋pass畀律師㗎嘛。

答：係。

問：咁同埋資料方面係你哋攞㗎嘛。

答：呢...

問：佢唔係話要同律師講吖，妳見到佢係咪同律師講？

答：唔係，唔係，因為呢--我已經唔記得咗喇，咁耐，究...

問：唔係，你哋成個routine做法。

答：Routine嘅做法就係佢會打電話嚟喇，跟住就係佢會話提供一啲資料畀我，我哋跟住就去估價喇，跟住去check佢個land search，就睇下有冇joint tenant或者係佢自己，咁就係喇，我計過條數okay，咁樣計埋佢出面嗰啲借款呀、「盛」咁樣嗰啲喇...

問：睇TU喇，嗰啲係咪？會睇TU喇。

答：係，係喇，TU，我哋一定要睇喇，咁就check晒佢所有嘅嘢，咁就證明有水位做喇，即係有錢嗰個位喇，我哋先會做畀佢嘅，咁做畀佢嘅時候，跟住我先會要求佢就畀佢嗰啲document喇，即係佢嗰啲文件我哋睇，咁樣我哋check過冇問題喇，咁樣--咁我哋會話...

問：文件嘅意思就係包括契約，包括屋契，抑或點㗎？因為呢個個案嘅屋契係喺恒生度㗎嘛。

答：未住先，未住先，都未嘅，都未問佢攞契住嘅，凈係...

問：咁妳又叫文件，攞啲文件畀妳睇，攞咩嘢文件畀妳睇先？

答：即係譬如可能係差餉單呀、物業單嗰啲喇，即係身分證，跟住又可能係有bank statement嗰啲喇，或者係salary slip喇嗰類咁嘅嘢嘅，咁就問佢攞晒所有嘢之後，睇過晒，跟住我哋批出個銀碼同埋percentage利息...

問：利息條款嗰啲喇。

答：係喇，咁你話okay喇，我哋先會問你攞嗰個契，因為費事問咗你攞契，到時你又話唔okay，咁就費事拎嚟拎去喇，係咪？咁就會有呢種咁嘅情形，咁話--哦，咁你話okay，我哋問你攞契囉，咁譬如你話你個契喺對方嘅，我哋就會搵律師，跟住就叫佢上去律師度簽一封授權信，咁對方律師畀咗封授權信佢簽咗，佢先去攞番個契過嚟嘅，因為我哋唔可以直接同銀行去攞個契呀、諸如此類，就算第二間財務公司，我哋都唔可以咁做，必須要through律師樓去做呢樣嘢嘅。

問：唔。

答：係喇，咁本身嗰個applicant係必須要上到去律師樓簽一個授權信，先可以攞到契。

問：呢樣我知，okay，咁但係妳又要個客--叫個客戶喺電話go through之後，佢步--拎咗文--初步第一步就拎啲文件上嚟嘅話，咁就結婚證書妳唔知有冇攞，抑或點？

答：唔會攞㗎。

問：唔會攞嘅。

答：唔會嘅。

問：咁但係又有個資料要填㗎，點解唔攞呢？我唔明白，因為點解呢？因為呢個form有啲譬如話50,000鈫，寫咗佢50,000鈫入息嘅，咁妳頭先講過喇，咩嘢income proof呀、嗰啲吖嘛，但係有個位同樣寫已婚嘅，但係妳唔攞呢啲結婚證書㗎？

答：唔--其實我都唔知點解個設計會咁樣設計囉，係呀，咁但係一般通行都唔會問人攞㗎喎，係呀，所以我哋都跟住通行，咁唔會攞。

75.  In summary, Miss Yeung agreed that despite she noticed that H’s marital status recorded on the form was “Married” when she gone through the contents of it with H on 15/5/2015 :-

-  that she herself did not check with H whether he was living with his spouse or where was his spouse;

-  that she herself did not ask H whether his spouse had any beneficial interests in the Property;

-  that she accepted H was residing at the residential address recorded in the Form which was the address of the Property;

-  that she was aware the Property would be mortgaged to the Intervener as security for the loan advanced to H;

-  that the Intervener would not carry out any physical property inspection if the property involved was a private dwelling (私樓), and this was the reason for not inspecting the Property;

-  that she relied upon the other Declaration Form[28] signed by H where at paragraph 3 therein it was printed with the following words :

“本人/吾等在此聲明，買入上述物業之款項均由本人/吾等支付，而按揭供款均一直由本人/吾等支付，並沒有其他人代為供款，本人/吾等聲明擁有此物業之全部業權。”;

-  that she had consulted a lawyer Miss Kam who used to handle property related loan application for the Intervener;

-  that she was told by Miss Kam that since Hang Seng Bank and Konew Financial Express Limited had lent moneys to H with the Property as security before the Intervener, there would be little problem for the Intervener to do likewise;

-  that the Intervener already had possession of the title deeds of the Property; and

-  that the land search revealed H was the sole owner of the Property.

(collectively called “factual reliance”).

76.  Although Miss Yeung said her colleagues would check the accuracies of H’s information which had been provided to the Intervener few days in advance of her meeting H, and she said her colleagues would review H’s bank statements or pay slips, there was no direct evidence on such process of checking before the Court apart from her own testimonies, which was only given during trial and was also hearsay by nature. There was no affirmation filed by the colleague(s) who carried out the checking process. There was no documentary evidence of any pay slip(s) either, to show that H’s income was $50,000 in May 2015. Such evidence on process checking was not even mentioned by Miss Yeung in her witness statement.

77.  Upon cross examination by Counsel for W as to the reason why the column “Living with 與誰居住” in the Loan Application Form was left blank, Miss Yeung’s answer was that clients might refuse to provide for privacy reasons and therefore she did not ask H for it. For verifying H’s marital status, she also did not ask H for marriage certificate as they followed the common practice of not asking marriage certificate. Surprisingly, she then added that she did not know why the Loan Application Form was so designed[29].

78.  From Miss Yeung’s evidence, it is clear that the entire process of loan application, starting from going through the Loan Application Form, approval of the application, signing of forms and declarations, execution of loan agreement and deed of mortgage, release of the approved loan was all done within a day. While this might be so arranged in order to facilitate the borrower who might be in need of funds urgently, this did cause concern as to the adequacy of “check and vet” that was normally required of the money lending business under similar circumstances to be completed within a day.

79.  In my decision, none of those factual reliance could obviate the need of the Intervener to carry out usual and proper inquiry as to H’s asserted 100% beneficial ownership of the Property. Quite to the contrary, in my decision, H’s personal details provided to the Intervener; in particular, his marital status, his monthly income of HK$50,000, and asserted residence at the Property but without stating with whom he was residing, even naming his spouse, are important facts which are alarming in that it was reasonable to put any money lending business same as the Intervener on notice to make inquiry, not only as to the accuracies of them, but also to the possible existence of other’s interests in addition to H’s interests. Failure to make such inquiry or take such steps as are reasonable to verify whether there exist other earlier interests casted upon the Intervener with constructive notice in that their interests would be subject to it.

80.  Miss Yeung’s evidence that she had consulted and was advised by the lawyer Miss Kam that there was little problem for the Intervener to proceed with the transaction given the fact that there were prior mortgages by H with Hang Seng Bank and Konew Financial Express Limited and that similar inquiries would already have been made. In my decision, this fall short of the level of prudence that was required by law for avoiding any finding of constructive notice[30]. Whatever “advice” or “views” provided by the lawyer Miss Kam could neither displace the fact that the Intervener themselves did not make the usual and proper inquiry which ought to have been made in the circumstances after being aware of those important and alarming facts of H nor dispense with the need to do so.

81.  Reliance upon actual possession of title deeds and records of ownership of legal title likewise could not dispense with the need for the usual and proper inquiry of any other possible beneficial interests in existence which would not be discoverable merely by reviewing documents of title.

82.  Given the benchmark is what was usually done by men of business under similar circumstances, the Intervener’s failure to inspect the Property or to make the usual and proper enquiry with H constituted constructive notice of W’s beneficial interests and thereby acquiring their interests subject to W’s interests.

83.  As a matter of fact, had the Intervener carried out inspection of the Property, it would also reveal W’s presence in occupation.

Conclusion

84.  For all the above reasons, I find the Intervener acquired their beneficial interests over the Property with constructive notice of W’s beneficial interests under her spousal relationship and presence in occupation in the Property.

85.  That said, the Intervener’s beneficial interests acquired through the Deed(s) of Mortgage rank after W’s beneficial interests. The extent of W’s beneficial interests vis-à-vis H had yet to be determined at the ancillary reliefs trial.

Costs

86.  The Intervener was unable to succeed on claiming full beneficial interests whereas W was unable to succeed on her defence to the Intervener’s claim. I am of the overall view that neither of them could be said to be the winning party.

87.  H (the Respondent) adopted a neutral stance throughout this preliminary issue trial but was involved as a matter of cause and procedure.

88.  Given the above, I believe that it is fair and reasonable that there should be no Order as to costs between all parties; save and except H’s (Respondent’s) own costs be taxed in accordance with Legal Aid Regulations.

Orders

89.  I now make the following Orders :

(1)  The Intervener’s beneficial interests in the Property was subject to constructive notice of W’s (the Petitioner’s) beneficial interests;

(2)  W’s (Petitioner’s) counterclaim for beneficial interests in these preliminary issue proceedings be dismissed;

(3)  There be no Order as to costs between all parties including all costs reserved; and

(4)  The Respondent’s own costs be taxed in accordance with Legal Aid Regulations.

90.  Last but not least, I wish to thank all parties’ legal representatives and Counsel for their valuable assistance to this Court.