NG PO YU AND ANOTHER v. LAM KAI ON, the executor of the estate of WONG MUI, deceased

HCA 77/2014

[2018] HKCFI 1618

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 77 OF 2014

____________

____________

_______________

J U D G M E N T

_______________

A. INTRODUCTION

1.  The 1^st Plaintiff (“the Daughter”) is the daughter of Ng Chi Keung, deceased (“the Father”) and Madam Wong Mui, deceased (“the Mother”) (collectively, “the Parents”).

2.  The Mother died, leaving the subject property (“the House”) by will to her 3 sons by a former marriage, including the Defendant (“Mr Lam”).

3.  The House was purchased in the sole name of the Mother.  The Father claimed to have an interest in the House by way of constructive trust as the purchase was funded by the business revenue of the Parents and rent.

4.  The Daughter claims that after the Asian Financial Crisis in 1997, the Mother requested her to run the business of the Parents, maintain the Parents and repay the mortgage of the House.  In return, the Mother allegedly promised to give her the House.  The Daughter did as requested.  She claims that there was a post-acquisition common intention constructive trust, resulting trust or proprietary estoppel in respect of the House.  She seeks a declaration that the House belonged to her and/or equitable compensation.

5.  Mr Lam denies the Daughter’s case.  He suggests that the Daughter’s maintenance of the Parents and repayment of the mortgage were in discharge of her filial duties, which did not create any interest in the House.

B.  THE FACTS

6.  The following facts are, save where otherwise stated, undisputed or indisputable in the light of contemporaneous documents. 

7.  The Mother had a daughter who pre-deceased her and 3 sons, by a previous marriage.  The Daughter was born out of her subsequent marriage to the Father.

8.  The Parents used to run a merchandise and fabric business in the 1960s. In 1982, they set up a business of fabric wholesale in the name of Shun Lee Trading Co (“Shun Lee”).  They held equal shares as partners. 

9.  Over the years, the Parents had purchased 6 properties held under the sole name of the Father or the Mother:

Date of purchase	Property/Purchase price/(use)	Title holder	Date of sale
25.3.1976	SW Building $71,000 (for lease)	Mother	7.12.1988 $490,000
7.7.1980	Ample Building $211,940 (as family residence)	Father	25.9.1987 $465,000
10.7.1987	Beacon Heights $1,675,080 (as family residence)	Father	3.9.1998 $8,328,000
22.6.1991	The House, being House 78 at 1st Street, Section D, Fairview Park, Yuen Long $1,600,000 (for rent)	Mother
15.8.1991	House 61 of Fairview Park $1,550,000 (for rent)	Mother	7.12.1995 $2,570,000
About 1992	228, 7th Street, Oakland, CA 94607, USA (“California Property”) $400,000	Mother	Sold to Mr Lam in mid-2001 at $400,000

10.  In the 1990s, the Daughter gave up her job to assist the Parents in Shun Lee.  There is dispute as to when and why she did so.

11.  1995-1996 saw some important property dealings in the family.  At the end of 1995, House 61 was sold at a profit.

12.  On 10 February 1996, a shop at G/F, No.32 Boundary Street, Kowloon (“the Shop”) was purchased at $7.39 million in the name of Fully Profit Ltd (“Fully Profit”).  There is dispute over the ownership of this company.  On 3 June 1996, the date of completion, the Shop was mortgaged to Dah Sing Bank.

13.  In the first half of 1996, 3 mortgages were created in respect of Beacon Heights in January, the House in May and the Shop in June.  They were to secure banking facilities for Shun Lee granted by the Dah Sing Bank.

14.  On 24 September 1996 Shun Lee Trading (Holdings) Limited (“Holdings”) was incorporated to do export trade.  The shareholders were the Father (51%), the Mother (45%) and the Daughter (4%).  (Shun Lee and Holdings shall be jointly referred to as “the Shun Lee Business”.)

15.  Then came 1997.  By a facility letter dated 30 May 1997 (“the 1997 facility letter"), the Hongkong Chinese Bank Limited (“HKC Bank”) granted a $6.5 million instalment loan.  The Father and the Daughter were named as borrowers.  The loan and credit facilities of unknown amount were secured by legal charges over Beacon Heights, the House and the Shop.  There is dispute as to why the Father and the Daughter were borrowers, but not the Mother.

16.  The Asian Financial Crisis occurred in about September/ October 1997. It caused the property market and businesses in Hong Kong to collapse.  As a result, the HKC Bank pressed the Parents to sell the properties so as to reduce the debts.

17.  In a declining property market, the Shop was the most difficult to sell.  There was a quarrel between the Father and the Mother as to which property to sell.  The Mother said that the House was hers and she would not sell it.  She went to the USA to seek financial assistance from her sons but to no avail. 

18.  In the end, Beacon Heights was sold.  The Parents moved out of Beacon Heights to the House, where they lived until her/his respective death.  The Daughter has been living apart in a public housing unit in Tai Hang Sai Estate (“the PHU”).

19.  On 25 March 2000, the Daughter set up Bo Bo Deco as a partnership with the Father to run a curtain retail business.

20.  The Shop was sold on 31 July 2000 at $4,200,000, at a loss.  Since then, there was only one instalment loan but no more credit facilities for the Shun Lee Business.  The House became the only property in the family.

21.  Over the years, the HKC Bank had been issuing facility letters, with intervening events, summarized as follows (“Table A”):

Facility Letters dated	Facilities/Loan made available		Named borrower	Charged properties and guarantees
30.5.1997	Instalment loan: HK$6,500,000.00 and credit facilities of unknown amount		Father & Daughter	(1)  First legal charge on (a)  The Shop; (b)  Beacon Heights; (c)  The House
19.7.1997	Mortgages registered against Beacon Heights, the House and the Shop with the Mother as mortgagor, Shun Lee, Holdings, the Father and the Daughter as borrowers and HKC Bank as mortgagee
4.6.1998	(1)   Instalment loan:  HK$3,600,000; (2)   Overdraft: HK$6,800,000		Shun Lee Business	(1)   First legal charge on (a)   The Shop; (b)   Beacon Heights; (c)   The House (2)  Joint and several guarantee by the Father, the Mother and the Daughter for account of Holdings
24.7.1998	Agreement for sale and purchase of Beacon Heights; price $8,328,000
14.8.1998	(1)    Issuance of import L/C: HK$500,000 (2)    Overdraft: HK$2,500,000		Facilities for L/C for Holdings OD for Shun Lee	(1)  First legal charge on (a)  The Shop; (b)  The House; (2)   Joint and several guarantee for unlimited amount by Father, Mother and Daughter for Holdings
17.8.1999	(1)    Issuance of import L/C: HK$500,000		Facilities for L/C for Holdings	(1)  First legal charge on (a)  The Shop; (b)  The House; (2)  Continuing joint and several guarantee for unlimited amount by Father, Mother and Daughter for Holdings
	(2)   Overdraft limit: HK$2,500,000		OD for Shun Lee
	(3)   Instalment loan $6,298,524.76		Father and Daughter
20.7.2000	Agreement for sale and purchase of the Shop
27.7.2000	New instalment loan: HK$5,220,000.00		Father and Daughter	(1)   First legal charge on the House; (2)   Continuing personal guarantee by Mother
31.7.2000	Completion of the sale of the Shop; price $4,200,000
25.6.2003	Mortgage loan facility: HK$4,934,878.50 ($15,000 pm)		Father and Daughter	(1)   First legal charge on the House (2)   Guarantee by Mother
16.6.2005	Mortgage loan facility: HK$4,932,169.09 ($15,500 pm)		Father and Daughter	(1)   First legal charge on the House; (2)   Guarantee by Mother
1.12.2006	Mortgage loan facility: HK$4,884,555.81		Father and Daughter	(1)   First legal charge on the House; (2)   Guarantee by Mother

22.  There is dispute as to what the eventual amount of the mortgage of the House was and how the Daughter and the Father had applied the credit facilities over the years.

23.  The Shun Lee Business was run at a loss after the Asian Financial Crisis until it was closed down in 2005.

24.  Throughout the years, the sons had not financially supported the Mother or helped her in repayment of the mortgage over the House. 

25.  The Mother died on 15 May 2012.

26.  When the Daughter applied for letters of administration, she discovered the existence of the Will dated 15 May 1992 in the possession of Mr Lam.

27.  The Will appointed Mr Lam as executor and devised House 61 and the House to the 3 sons, and the California Property to the Daughter.  The remainder of the assets were given to the 3 sons and the Daughter as tenants-in-common.  The Mother’s most significant asset at her death was the House, which is still subject to a mortgage.

28.  After commencement of this action, the Father had become mentally incapacitated.  He died before trial.

C.  THE PARTIES’ RESPECTIVE CASE AND ISSUES

29.  The pleaded case of the Father and the Daughter is rather convoluted for which Mr Chow (their counsel) is not responsible.

30.  The Father’s case is that there was a common intention between him and the Mother to hold the House for investment purpose.  The House was funded by revenue from the Shun Lee Business and rental income.  The general banking facilities obtained as a result of the mortgage of the House was used for investment purpose.  The House was thus owned jointly by him and the Mother in equal shares until such time as the Daughter assumed liability, jointly with the Father or alone.

31.  The Daughter’s case in the amended statement of claim (“ASOC”) can be summarized into 3 limbs.

32.  Limb 1 was premised on a General Promise of the Parentswhich eventually led the Daughter to leave her job.  She then (i) handled the Shun Lee Business, (ii) repaid the mortgage, and (iii) maintained the Parents (“the 3 Conditions”) (§16 ASOC). 

33.  Limb 2 was premised on the Mother’s request to the Daughter to perform the 3 Conditions upon “the express understanding” that the Mother would leave the House to the Daughter, which was subsequently “confirmed” or “agreed upon” as creating a proprietary interest in the House (§19 ASOC). 

34.  Limb 3 was premised on common intention constructive trust which arose after restructuring of the bank loans.  The Daughter assumed the liability of repayment in return for the Mother’s agreement to leave her the interest in the House. 

35.  The Daughter claims for transfer of the House to her; alternatively for equitable compensation.

36.  Mr Lam’s case is that registration of the House in the sole name of the Mother showed that the Parents intended the Mother alone to own the House. 

37.  Mr Lam asserts that he had assisted in the Mother’s business since the 1970s-80s.  The Mother assured him from time to time that he would inherit her assets with the other 2 sons as reward for their unremunerated work.

38.  Mr Lam avers that the Mother did not borrow any money and thus would not have asked the Daughter to repay the loans on her behalf.  He avers that the bank loans were borrowed wholly or partly for the personal use of the Father and the Daughter in purchasing stocks, properties and private cars. Since they had capitalized on the House and Shun Lee to the prejudice of the Mother, the Mother did not vary the Will.

39.  Mr Lam also avers that the Daughter provided the maintenance and repaid the mortgage in discharge of her filial duties and not in exchange for the House.  The source of the money for mortgage repayments came wholly or substantially from the loans borrowed on the security of the House.

40.  The issues are therefore:

In respect of the Father,

(1)   Whether there was a common intention that the House be for the joint benefit of the Parents;

In respect of the Daughter’s case,

(2)   Whether the Mother had promised or agreed to give the House to the Daughter as alleged under any of the 3 Limbs;

(3)   What was the source of money for the repayment of the mortgage?

(4)   Whether the Daughter repaid the mortgage out of filial duty?

(5)   What relief should be granted to the Daughter?

D.  LEGAL PRINCIPLES ON CONSTRUCTIVE TRUST

41.  Beneficial interest follows the legal title.  The burden of proof therefore rests on the Father and the Daughter to establish the contrary: Mo Ying v Brillex Development Ltd [2014] 3 HKLRD 224, §34.

42.  The principles for establishing common intention court trust have been set out in Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §§46-50 per G Lam J; approved in WML v LCK, CACV 82/2014, 27 February 2015, at §41:

“46. … the plaintiff must prove: (a) there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the Property despite that it was acquired in the defendant’s name; (b) the plaintiff altered his position in detrimental reliance upon such common intention; and (c) it is unconscionable for the defendant to assert ownership in reliance on her legal title to the Property.

47. In ascertaining whether there was a common intention, it is the objective intention of each party ‘which was reasonably understood by the other party to be manifested by that party’s words and conduct’ that one must examine.

48. In the present case it is the parties’ common intention at the time of the acquisition of the Property that is relevant, there being no suggestion from anyone that the intention had changed.

49. Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached. between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions. It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention.

50. Even where, as in this case, reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.”

43.  Where the alleged constructive trust involved a post-acquisition common intention, the evidence must support an inference that there was a fresh agreement as to beneficial ownership before the court can give effect to the common understanding.  In other words, in that situation, there must be some evidence to infer that the original beneficial owner has agreed to give up some of his interest in the property in favour of the other party: Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343 at §§34-36.

44.  The conversation relied on for express common intention must not be equivocal.  The recipient must have been led to believe that she would have an interest in the property concerned: Mo Ying v Brellix Development Ltd [2014] 3 HKLRD 224, §59.

45.  In Lui Kam Lau v Leung Ming Fai [1994] 3 HKC 477, substantial mortgage repayments were made by D some years after the property had been purchased by P. They were, in the absence of evidence to the contrary, held to evidence a common intention that P was to have an interest in the property by way of resulting trust.

E.  LEGAL PRINCIPLES ON PROPRIETARY ESTOPPEL

46.  For proprietary estoppel, the 3 main requirements are:

(a)   A clear and unequivocal representation or assurance made by the property owner to the claimant;

(b)   Reliance on it by the claimant; and

(c)   Detriment to the claimant in consequence of his/her reasonable reliance.

See:  Szeto Chak Mei v Chan Lam Shan HCMP 836/2012, 1 March 2016, at §§31-41.

47.  There must be sufficient causal link between the promise relied on and the conduct which constituted the detriment: Fung Oi Ha v Fung Pui On, HCA 17/2012, 6 June 2016, Recorder Lisa Wong SC (as she then was) at §109;

48.  “Unconscionability” is part of the doctrine: Szeto Chak Mei v Chan Lam Shan, at §42.

F.  CREDIBILITY OF WITNESSES

49.  Where a plaintiff is making a claim against the estate of a deceased person who cannot give evidence against her claim, the court has to approach such a claim with suspicion, especially where the only witness in support of the claim was the donee.  The court would look for clear and reliable evidence of where, when and what the deceased said.  See Yung Shu Wu v Vivienne Sung Wu [2011] 14 HKCFAR 39, §§73-76; Szeto Chak Mei v Chan Lam Shan,§§43 and 99.

50.  This is a classic situation where the plaintiffs assert rights over a property after the death of the title holder.  It is made more difficult because the Father had not made a witness statement.  The furthest he had gone was to sign the statement of truth to the SOC dated 14 January 2014.  However, according to the Daughter, since 2014, he had not been able to recognize her.  So his statement of truth has no value.

51.  Mr Lam lived apart and knew little of the family affairs except from what the Mother allegedly told him.  A large part of his case was bare assertion, eg how the Father and the Daughter spent the bank loans. Whilst I accept that Mr Lam had worked in Shun Lee unremunerated, he had been remunerated in the Mother’s jade business.  Moreover, it was simply illogical to say that because of his contribution to Shun Lee that the Mother had made the gifts under the Will not only to him but all the 3 sons.

52.  His assertion that the Mother had told him that the House would be left to the sons so that each of them could occupy one floor when they came back to Hong Kong and each could occupy one floor was made without context.  At best it was a general remark by the Mother who welcomed her sons to reside with her whilst they were in Hong Kong.

53.  Save where otherwise stated, I place little weight on Mr Lam’s evidence.  However, I do take into account his hypotheses based on surrounding circumstances, which his counsel suggested to the Daughter in cross-examination to cast doubt on the veracity of the Daughter’s case: cf Birkenhead Properties and Investments Ltd v Lam Kai Man, HCMP 1588/2012, 12 January 2016, To J.

54.  The Daughter was thus effectively the only witness as to what actually happened among her and her parents.  Her credibility was crucial.  As events happened 20 years ago, I place a lot of weight on the contemporaneous documents and the inherent probabilities in her version.

55.  As I shall demonstrate, the substantial changes of the pleaded case on the promise to give her the House and ownership of the Shop undermined the Daughter’s case.

56.  In addition, the Daughter was not aware of the existence of the Will until after the Mother’s death.  This court is alert to the possibility that she might have made up a story about the Mother’s promise when she realized that she could receive nothing from the Mother’s estate after years of financial support.

57.  Overall, I do not find her to be entirely reliable.

G.  THE FATHER’S CASE ON CONSTRUCTIVE TRUST

58.  The House was not purchased as a family home.  However, when talking about common intention constructive trust, the court should still view the whole course of conduct of the parties objectively to decide (i) whether it was intended that the other party has any beneficial interest in the property at all; and (ii) if he does, what that interest is: Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, Cheung JA, §5.17

59.  The Daughter’s own evidence as to the common intention of the Parents was heard from the Parents.  She herself could not have known, as she was only aged 7 when the first property in SW Building was purchased and she was studying in the USA when the House was bought.

60.  The Daughter relied on the accounts of Shun Lee to show the common intention.  Those accounts were, without disrespect, not prepared in a professional manner.  The Parents obviously had no idea as to what formed partnership assets and what not.

61.  Though the Father gave her books of accounts, it was he who decided what items to present to Inland Revenue Department (“IRD”).  The Daughter was so frank that she would disclose acts that misled the IRD without being aware that it was wrong to do so, eg:

(a)   She admitted that the agreement between Fully Profit and Shun Lee was created to satisfy the requisition of IRD although the mortgages were really repaid by Shun Lee.

(b)   The profit and loss accounts stated that she received annual salary of $72,000 for the financial year ending 31 March 1996 but the money remained with the Parents.  It was the Father who decided the amount of salary to state in the tax return in order to avoid salary tax.

62.  The accounts could not be taken at face value.  They were more catered for tax minimization than to reflect the Parents’ true intention towards the properties.

63.  However, the accounts showed consistently (from 1992/93 to 1995/96) that the deposits for Beacon Heights, House 61 and the House came from Shun Lee’s profits.

64.  I accept the Daughter’s evidence that it was due to oversight that in 1996/1997, she had mistakenly left out the item of “deposits for properties” from the accounts. She discovered the mistake in 1998.  As the IRD did not raise requisition in the subsequent years, she had not put back this item in the accounts of the following years.

65.  There was also documentary evidence to show that in respect of House 61 and House 78, there was autopay from Shun Lee’s bank account with HKC Bank to repay the mortgages.

66.  As borne out by the accounts, all cheques for rental of Beacon Heights and the House were deposited into Shun Lee.  They were presented to the IRD as income of Shun Lee.

67.  I also bear in mind that this case was about a family of 3 with a family business.  One cannot expect them to act in a formal and commercial manner like lawyers.  Ultimately, it was a question of whether the family of 3 had acted with the intention of creating legal consequences.

68.  I find on balance of probabilities that the deposit for the House, House 61 and Beacon Heights were funded by Shun Lee and rental.  Mr Gary Lam, counsel for Mr Lam, accepts that all mortgage repayments were made by Shun Lee.

69.  Rental income was shared by the Parents through Shun Lee.  Beacon Heights was shared as a residence.  Beacon Heights and the Househad been used as security for credit facilities of the Shun Lee Business.  The Parents made drawings from Shun Lee in equal amounts.

70.  However, these were not enough to establish constructive trust.  The Parent’s intention might still have been for the title owner to be the true owner.  What was damaging to the Father’s case were the following pieces of evidence.

71.  Firstly, 6 out of 7 properties purchased were in the sole name of either the Father or the Mother.  The Daughter was not aware of any reason why the properties could not be purchased in joint names.  In §5 of the pleaded reply, the Daughter confirmed that the Parents always insisted that their property purchases be in their own names though the funding came from the Shun Lee Business.

72.  Secondly, according to Mr Lam, the House was chosen by him and the provisional sale and purchase agreement was signed by him.  There was no evidence to contradict him. 

73.  Thirdly, the Mother made the Will in 1992, shortly after the House was purchased.  It was a clear piece of evidence that she regarded herself as the sole owner of the House, which she could dispose of together with 2 other properties in her sole name by the Will.

74.  Fourthly, when HKC Bank pressed for sale of properties to reduce the bank loans, the Parents had had a big quarrel over whether to sell Beacon Heights or the House. The Mother insisted that Beacon Heights should be sold instead of the House which was her property.  Even on the Daughter’s case, no one (including the Father) had any response to that assertion of ownership.

75.  The Mother had to try to enlist the assistance of the sons in the USA to salvage her property.  The heated quarrel with the Father continued after her return.  Eventually, the Father gave up and sold Beacon Heights.

76.  It was thus clear that the Parents regarded the House as the Mother’s property.

77.  Fifthly, the Daughter asserted that the Mother gave $1.02 million of the proceeds of sale of House 61 to Mr Lam (although Mr Lam denied it) instead of sharing it with the Father or applying it towards purchase of the Shop.  Again, the Mother treated House 61 as her own. 

78.  Considering all the factors in Section G, I am not satisfied on balance of probabilities that there was a common intention between the Parents that the House was to be jointly owned by them.  The claim of the Father is thus dismissed.

H.  WHETHER THE MOTHER HAD PROMISED OR AGREED TO GIVE THE HOUSE TO THE DAUGHTER AS ALLEGED UNDER ANY OF THE 3 LIMBS

H1.  Limb 1 of the Daughter’s case – the General Promise

79.  The Daughter claims that in 1996, the Parents prevailed upon her to leave her job in Toppan Moore in order to continue and improve the business of Shun Lee.  The Parents talked to her “in general terms” about expanding and running the business.  She was allegedly told that if she left her job, the Parents would leave her the business, and 3 properties, ie (i) House 61, (ii) the Shop and (iii) the California Property.

80.  Acting upon this General Promise, the Daughter left her job.  From Shun Lee’s accounts, the Daughter paid the mortgage instalments from 1996 through to 1997/98, and outgoings of the Parents when they moved to live in the House in 1998. 

81.  Thereafter in mid-2000, the Parents withdrew from the day to day running of the business.  They did not have an income of their own and the Daughter was the only person who could run the business, repaid the mortgage and financially supported the Parents.  By reason of that, the Mother was released from the liability to the HKC Bank.

82.  When assessing the veracity of Limb 1, I have taken into account the following factors.

83.  Firstly, the Daughter has changed her pleaded case.  In the SOC, the original §14(i) pleaded that she left her job at Toppan Moore in 1998 to rescue and/or improve the business of Shun Lee.  Eight months later, §16(i) ASOC changed the year she left her job to 1996 and the purpose as to continue and to improve the business of Shun Lee.  Her explanation for the amendment was that she discovered some documents which showed that she returned to Hong Kong and joined Shun Lee in 1996.

84.  I do not find her explanation convincing.  Between 1996 and 1998 was the Asian Financial Crisis.  As the Daughter herself admitted, she could not remember exact dates but would only remember events, a perfectly acceptable approach in my view.  She could not have forgotten the impact of the Asian Financial Crisis on the Parents’ business and wealth.  Whether she had come back to rescue or improve the business was not something she would have confused.

85.  Having regard to the setting up of Holdings in 1996 to do export trade, the need for the Daughter to assist in Holdings because the Mother was illiterate in English and the purchase of the Shop shortly before the Asian Financial Crisis, I find her amended plea to be true.

86.  Secondly, the contents of §16(i) of the ASOC did not appear in the Daughter’s witness statement.  She said they were not important, but her oral evidence was that the promise to give her the House was made in 1998 (not 1996), and was repeated between 1998 and 2000.

87.  Thirdly, the Daughter testified that §16 ASOC did not mean that if she were to leave Toppan Moore, she would get the properties there and then but that the business could increase in value if she were to use the properties.  She would have the opportunity to own them.  The Parents would be working with her together.  I find the words used to be too general to be able to establish a promise of beneficial interest in law. 

88.  Fourthly, the Daughter was given a lot of benefits at the beginning of her career in the Shun Lee Business, which was then in a prosperous state:

(a)   A salary of $72,000 which was much more than each Parent, when she had barely started working full-time at Shun Lee.  She denied receiving it but I doubt what she had lived on if she had not received this salary.  In any case, that amount of salary reflected the fact that she had assumed a more dominant role in the running of the Shun Lee Business than her Parents.

(b)   4% shareholding in Holdings, probably to facilitate her running of the Shun Lee Business.

(c)   On her own evidence, 50% share in the Shop through Fully Profit for free.

89.  I could discern neither an incentive on the part of the Parents to make the General Promise, nor any reason why the Mother would let the Father dispose of her House in favour of the Daughter.

90.  I pause here to say that there was no proof of ownership of Fully Profit.  The Mother was one of the directors of Fully Profit but not the Father.  The other director was the Daughter. 

91.  The Shop was the most expensive of all properties ever purchased in the family.  The Daughter’s evidence in her witness statement (§§12-15, 35) has all along been that the Shop was purchased by the Parents, funded as usual by Shun Lee.  It was to be held jointly for the Parents’ investment purpose as for other properties (which I have rejected).  It was only in her oral evidence that she first mentioned that she was given 50% share for free, the other 50% being with the Mother.

92.  The Mother had just sold House 61 whilst the Father still held Beacon Heights.  It would be illogical for the Mother not to hold any property herself and I find that she had interest in it.

93.  As will be demonstrated below (paragraph 149), the Daughter’s admission of having 50% interest in the Shop was an admission against her own interest and I hold her to it.

94.  Fifthly, it was inherently impossible that the Parents would have mentioned House 61 in their promise at all in 1996 because it was already sold in 1995.  The Daughter changed her oral evidence to say that she had remembered wrongly.  She said that the 3 properties referred to in §9 ASOC should have meant the House, the Shop and Beacon Heights.

95.  Later when cross-examined on §16 ASOC, she was asked if the Parents had mentioned giving the House or Beacon Heights to her back in 1996, she said she had forgotten.  She said that in accordance with her subsequent shouldering of the debts, the Mother told her that the property (not clear which) was the Daughter’s.

96.  Such changes in properties covered by the alleged General Promise undermined the Daughter’s credibility.

97.  Sixthly, when the Parents were arguing over whether to sell Beacon Heights or the House in 1998, the Daughter never asserted that she was promised ownership in any of those properties.

98.  Seventhly, the pleaded case was that mortgage repayments and financial support of the Parents came from Shun Lee, a business all along owned by the Parents.  So the Daughter had not suffered any detriment.

99.  Limb 1 is inherently incredible and I reject it.

H2.  Limb 2 – request to perform the 3 Conditions; express understanding confirmed or agreed upon as creating proprietary interest

100.  The pleaded case was that the Mother requested the Daughter to perform the 3 Conditions upon “the express understanding” that the Mother would leave the House to the Daughter, subject to letting the Father live in the House if he should survive the Mother.  There were oral discussions among the Daughter and the Parents confirming this arrangement when the Daughter visited them.  In the premises, there was an “agreement” by the Mother and/or the Father to create a proprietary interest in the House for the benefit of the Daughter.  The Daughter had “partly performed” the agreement by “paying off” the loan instalments and paying the living expenses of the parents up to their respective death.

101.  The words “express” and “understanding” in the pleaded case were self-contradictory. An understanding fell short of an unequivocal promise or representation.  How that understanding turned into an “agreement” and when were unclear from the plea.

102.  There was no mention of performance by running the business.  What the other part of the alleged agreement that was not performed was not pleaded nor explored in the evidence.  If some part was not performed, the Daughter might not be able to enforce the “agreement”.  As to the part that was performed, the Daughter did not plead how it constituted detriment to her.

103.  Limb 2 is inadequately pleaded and unsustainable on its face and on the evidence.

H3.  Limb 3 – common intention constructive trust

104.  The pleaded case was that restructuring upon sale of Beacon Heights and the Shop reduced the bank loans to $5,220,000.  It avoided the HKC Bank’s re-possession of the House.  The Mother was released as a borrower and the Daughter took over the liability to repay with the Father.  A common intention constructive trust was created whereby the Daughter assumed the liability of repayment in return for the Mother’s agreement to leave her interest in the House to the Daughter.

105.  When considering the veracity of Limb 3, I have taken into account the following factors.

106.  Firstly, although the restructuring took place in 2000, it was traceable to the instalment loan of $6.5 million that formed the subject matter of the 1997 facility letter.  That facility letter was addressed to the Father and the Daughter only. 

107.  The Daughter testified that she did not analyze seriously (沒有深究) why the Father and she were the borrowers but not the Mother, but she was the person taking up the responsibility of repayment (認頭人). I find that strange because by 1997, the Daughter had only worked for about 3-4 years.  Her last salary with Toppan Moore was only $18,000 per month.  The Mother obviously had a longer working life with profits.  Presumably that was the reason why the Mother became a guarantor on top of a mortgagor.

108.  Secondly, the Daughter claimed that the $6.5 million instalment loan was a “bridging loan” for the purchase of the Shop because the Mother was not willing to provide the proceeds of sale of $1.02 million of House 61.

109.  This explanation only first appeared in the Daughter’s oral evidence and was not borne out by contemporaneous documents.  The land search records showed the House, Beacon Heights and the Shop respectively to be mortgaged to Dah Sing Bank in 1996.  There was no loan to bridge in 1997.

110.  Further, the land search records showed that shortly after the 1997 facility letter, the mortgages to Dah Sing Bank were redeemed and the re-mortgage of the 3 properties to HKC Bank all took place on the same date, ie 19 July 1997.  In the 3 new mortgage deeds, the Father, the Daughter, Shun Lee and Holdings were named as 4 borrowers.  The inference is that the $6.5 million was more for re-financing than bridging and was in all probabilities secured by those 3 mortgages.  This is consistent with the Daughter’s own narration in paragraphs 12-23 of her witness statement.

111.  Thirdly, I accept the Daughter’s evidence that the $6.5 million was used in the Shun Lee Business.  She said that the 1997 facility letter came into being after she took up responsibility(認頭).  It tallied with the purchase of the Shop in a more commercial area (which Mr Lam said was at the Daughter’s instigation) and expanding the Parents’ business in Shun Lee.  The Shop had, since its purchase, been used for the Shun Lee Business.  The subsequent facility letters for 1998 and 1999 all referred to credit facilities granted to the Shun Lee Business.  Bo Bo Deco was not in existence in that period.  On the Daughter’s own evidence in her witness statement, all repayments of mortgages from September 1996 to April 2000 had been repaid by the Shun Lee Business.

112.  For lack of documentary proof, I do not accept Mr Lam’s evidence that the Father and the Daughter had used the bank loans for private purposes. Nor do I accept his hypothesis that the Father and the Daughter had plans to do business which were stalled because of the Asian Financial Crisis.  The 3-year interval between the instalment loan and setting up of Bo Bo Deco was too long to justify that hypothesis. 

113.  Fourthly, there was no evidence that there was any change in beneficial interest in the Shun Lee Business. 

114.  Mr Gary Lam drew to my attention that at least since 2000 the Daughter was able to draw cheques from the account of Shun Lee in favour of the Mother as “security” for the Mother’s loans to her.

115.  With respect, that was in 2000 when the Mother indisputably had had a stroke and was not income producing.  That could not explain why the instalment loan left out the Mother’s name in 1997.

116.  Fifthly, the fact of the Daughter being one of the borrowers could not be an indication that she had beneficial interest in any of the properties, I have already expressed doubt as to her ownership of the Shop.

117.  I find that the Daughter had failed to explain her personal liability for the instalment loan although it was plain that the loan was for the Shun Lee Business.  She failed to prove any promise by the Mother to give her the House, or inducement to or reliance by her to repay the mortgage.  It would not be unconscionable for the Mother to repudiate any promise (if made) in the circumstances of this case.  The claim in constructive trust and proprietary estoppel must fail.

118.  That was not the end of the matter.  As admitted by Mr Lam, the Mother was shocked by the Asian Financial Crisis. I do accept the Daughter’s evidence that the Mother’s health condition deteriorated.  She had been bed-ridden since about 2009, such that she was even exempted from renewing her ID card.  She had a stroke in 2000 (at the age of 74) and ceased running the Shun Lee Business altogether since then.

119.  In the 2 years since the Asian Financial Crisis, the Mother had witnessed the loss of properties within the family.  The Shop was a bad investment.  The Mother would rather give up accommodation at Beacon Heights, which was more conveniently located and of higher quality, and move to her new and only property in the more distant Yuen Long.

120.  In such context, I am satisfied on balance of probabilities that the Mother had, in about 1998, requested the Daughter to seek restructuring with the HKC Bank to avoid re-possession of the House.

121.  I accept the Daughter’s evidence that the facility letters were issued annually but if there was a sale of property, there would be more than one facility letter in that year.  Looking at Table A above, the bank loans reduced with each sale.  Save for the 2000 facility letter, the other facility letters did not state the total indebtedness.  The mortgage repayments were set out in a repayment schedule dated 7 April 2014 (“the 2014 Repayment Schedule”).

122.  The 2000 facility letter was critical.  It was said to supersede the previous facility letter dated 17 August 1999.  The remarks were as follows:

“HK$5,220,000.00 – the actual loan amount will be the balance of redemption money for HK$4,150,000.00 after full settlement of the account of Shun Lee Trading (Holdings) Ltd and Shun Lee Trading Co as will (sic) as partial settlement of the instalment loan No.IL9700806 on the drawdown date but in any event not greater than the bank’s approved amount.”  “No cash out-flow is allowed.”

123.  The remarks were not grammatically fluent, but the meaning was plain. The $4.15 million tallied with the sale price of the Shop ($4.2 million) as shown in the land search record.  The HKC Bank would apply the sale proceeds to first settle the credit facilities to the Shun Lee Business and then partly settle the mortgage.  Compared to previous facility letters, it could readily be seen that the HKC Bank ceased granting facilities to the Shun Lee Business.  The Bank would not allow the borrowers to take any cash from those sale proceeds. 

124.  I find that a restructuring was attained, which culminated in the $5.22 million loan.  The HKC Bank has since refrained from repossessing the House.

125.  The Daughter had continued to pay the mortgage repayments from 1 August 2000 and maintained the Parents.  I am satisfied that the Parents had thanked her every now and then but I am still not satisfied that the Mother had, in that state of concern for her property, promised expressly or impliedly to give the House to the Daughter.  The case on common intention constructive trust fails.

I.  MONEY FOR SOURCE OF REPAYMENTS OF THE MORTGAGE

126.  It was indisputable that the Daughter, as opposed to any son, had borne the mortgage repayments.

127.  Shun Lee Business had been trading at a loss since 1997/98 until it ceased business in 2005.  Credit facilities had reduced to zero by 2000.  There was nothing to show that the stock in trade of Shun Lee Business had been transferred to Bo Bo Deco.  Whilst there were stock/accounts receivable for Shun Lee, there were also accounts payable.  There was plainly insufficient to pay for the mortgage of $49,000 per month plus monthly maintenance for the Parents.

128.  In 1999-2000, the Mother would rather lend $350,000 to the Daughter than to use it to reduce the mortgage.  In 2001, the California Property was sold at $400,000 to Mr Lam.  There was no evidence that the Mother applied the $400,000 to reduce the mortgage.

129.  Given his age, the Father’s role was limited and ancillary in taking care of the Shun Lee Business when the Daughter was in the Mainland for business. 

130.  I accept that the Daughter was the only income generator amongst the three.  She played the leading role in running the Shun Lee Business.  That was why she was able to draw 3 cheques from Shun Lee as security for her loans from the Mother and repaid in full.

131.  Since return to employment could not keep the family afloat, so the Daughter set up Bo Bo Deco with $500,000 from the Father.  As the HKC Bank had withdrawn credit facilities, the Daughter could not have used credit facilities granted to Shun Lee Business for Bo Bo Deco.  I am satisfied that she had borrowed from the Mother and other institutions instead.

132.  The Daughter had been deploying whatever money that came into her hands for maintenance of the Parents and struggled to keep up the repayments.  She admitted during cross-examination that she would mix the funds of Shun Lee and Bo Bo Deco, but as Shun Lee was running at a loss, it could hardly have afforded the mortgage repayments itself.

133.  As borne out by the 2014 Repayment Schedule, the initial repayment was $49,000 per month.  The daughter had got HKC Bank’s consent to reduce the monthly repayments to $35,000 per month in 2002, to $15,000 in 2003 (because of SARS) and then increased to about $18,000 in 2008. 

134.  The deposit slips showed that there had been repayments by cash.  I accept that those deposit slips for amounts of a few hundred or one thousand odd dollars evidenced penalties for late payment.

135.  I find that the source of repayment of the mortgage was the Daughter.

J.  WHETHER THE DAUGHTER REPAID THE MORTGAGE OUT OF FILIAL DUTY?

136.  Mr Gary Lam submits that the Daughter should not be entitled to compensation as she was merely discharging her filial duties to the Mother.  He relies on the case of Fung Oi Ha (paragraph 49 above) which dealt with whether or not children’s contributions could be used to support the inference of an intention to share in the beneficial interest of the parents’ property.  Recorder Lisa Wong, SC (as she then was) stated that:

“102. The relationship with which I am concerned is that between parents and children in what appears to be a conventional Chinese family practising traditional family values. In such a setting, the parents raise and provide for the children until adulthood. It is then commonplace for the children, after they attain financial independence or some measure thereof, to share with the parents a portion of their income. This may be done for a variety of reasons. Sometimes, the children are acting out of natural love and affection for the parents. Sometimes, they are required to do so by the parents. Sometimes, they volunteer to perform their filial duties to the parents. Sometimes, they are motivated by a moral obligation to help with the care of younger siblings who are still at school. Sometimes, the burden of the family expenses may require sharing. The children’s contributions may or may not happen to be used to discharge mortgage loan payments and outgoings and expenses of the family home. I daresay, in a lot of these cases, the parents (and probably the children too) would be taken aback if they be told that, even in the absence of an express agreement or arrangement or understanding, the children's contributions could be used to support the inference of an intention to share the beneficial interest of the parents’ property (which may be the parents’ only shelter in old age) if such contributions should happen to be applied toward the mortgage payments of the property.” (underline added)

137.  I do not accept Mr Gary Lam’s contention for these reasons:

138.  Firstly, according to the Will, the sons shall take the House subject to incumbrances.  Therefore, regardless of any filial duty, the Daughter was legally entitled to recover mortgage repayments from the Mother’s estate from the date of the Mother’s death.

139.  Secondly, whilst provision of maintenance for the Parents (including housing them) may be viewed as performance of filial duty, repayment of mortgage may not.  The filial duty at best requires a child to house her parents within her ability, in this case, in the PHU, and need not be the House.

140.  Thirdly, the present case is distinguishable from Fung Oi Ha on the facts:

(a)   Here was a single child personally handling the mortgage repayments, the money for which never passed through the hands of the Mother.

(b)   The restructuring was at the Mother’s express request.  The mortgage repayments were to assist the Mother in preserving property rights and was not in discharge of filial duty.

(c)   There was alternative accommodation for the family at the PHU but the Mother chose to move to the House. 

(d)   The House was used exclusively for the Parents (with 2 maids) and not the Daughter.

(e)   The mortgage repayments ($49,000) were distinct from and 3.8 times the monthly maintenance ($13,000) for the Parents.

141.  That said, it must not be forgotten that the Daughter has a legal obligation as a borrower to repay.  As a young business woman, she has interest in protecting her credit-worthiness.  However, as she said, if the House were sold, she could have supported the Parents frugally (窮養) and the three of them could have lived in the PHU.

142.  I find that the Daughter’s repayment of the mortgage was not out of filial duty, but partly out of legal obligation and partly to assist the Mother.

K.  WHAT RELIEF SHOULD BE GRANTED TO THE DAUGHTER?

143.  Mr Chow, rightly in my view, does not seek compensation for maintenance of the Parents.  There is no legal cause of action anyway.

144.  The Daughter’s repayment of the mortgage (not just the capital but also interest) saved the House from re-possession, housed the Mother and spared her from her repayment obligation.  It would be wholly inequitable and an unjust enrichment for the Estate to take the House without the burden of repaying the Daughter.

145.  Mr Gary Lam submits that there was no pleaded basis for the Daughter to recover the mortgage repayments since the date of death of the Mother.  With respect, this was covered by prayer no. 6 of the ASOC. 

146.  Mr Gary Lam submits that the limitation period had expired.  With respect, limitation was not pleaded as a defence and thus should not be considered: Hong Kong Civil Procedure 2018, Vol 1, §18/8/21.

147.  I do not think the notion of resulting trust in Lui Kam Lau v Leung Ming Fai (paragraph 45 above) assists the Daughter.  The evidence was insufficient to support her case that she should have beneficial interest.  In any case, there was only the bare assertion of the Daughter as to the value of the House, which I decline to accept.  I am unable to turn her repayments into a percentage of the beneficial interest in the House.

148.  I instead pay regard to the true nature of the outstanding indebtedness. The 1997 and 1998 facility letters showed the total indebtedness to be over $16 million.  Sale of Beacon Heights and the Shop reduced the amount to $5.22 million.  The Father had fully borne his share of the indebtedness (even assuming it was 50%), because Beacon Heights was not a negative asset.  The Daughter had 4% in Holdings, and Holdings’ liability was cleared as part of the indebtedness of the Shun Lee Business. 

149.  The remaining indebtedness would have related to the Shop and the House. In paragraph 93 above, I have stated that the Daughter should be held to her admission that she owned 50% of the Shop.  Accordingly, the remaining indebtedness should be split between the Mother and the Daughter in the ratio of 3:1.

150.  In his closing submission, Mr Enzo Chow only seeks reimbursement for the period on and after 1 August 2000.  The total mortgage repayments up to 30 March 2014 were $3,405,288.9 and from 1 April 2014 to 1 March 2018 were $860,805.16.

151.  The Will devised the House subject to existing mortgages.  However, as mortgagor, the Mother could have recovered the loan (pro rata) from the Daughter.  Applying the ratio of 3:1, the Mother’s estate should reimburse the Daughter for $3,199,570.55.

152.  In addition, the Mother’s estate should reimburse the Daughter to the extent of 3/4 until the executor takes over the mortgage.

153.  I accept counsel’s joint suggestion that pre-judgment interest should be half of P+1% per annum to reflect the fact that the lump sum was accumulated over a period.  Thereafter judgment rate shall apply. 

154.  All mortgage repayments by the Daughter on behalf of the Estate on and after the date of this judgment shall attract judgment rate as well.

155.  I order that the monetary judgment shall stand charged on the House until full payment by the Mother’s estate.

L.  COSTS

156.  The Father’s case formed a small part of this case.  The Father’s estate should bear 20% of the overall costs of the Defendant.

157.  The Daughter lost on all claims except for reimbursement.  Mr Gary Lam suggests that she should bear costs because if her case had simply been one of reimbursement, it would have been a question of arithmetic and the trial would not have taken that long.

158.  I am unable to agree.  Mr Lam insisted on using filial duty as a defence without offering to reimburse the Daughter.  The trial was inevitable.   The sum awarded to the Daughter is substantial.  I order that 80% of the overall costs of this action should be borne by the Mother’s Estate.

M.  CONCLUSION

159.  I order as follows:

(1)   The claim of the 2^nd Plaintiff is dismissed.

(2)   There be a declaration that the House has been solely owned by the Mother;

(3)   The estate of the Mother do pay the 1^st Plaintiff a lump sum of $3,199,570.55 to the Daughter, being ¾ of the mortgage repayments made by the 1^st Plaintiff on behalf of the Mother from 1 August 2000 to 1 March 2018.

(4)   The estate of the Mother do reimburse the Daughter for ¾ of any mortgage repayments made by her on and after 2 March 2018 until the executor takes over the mortgage.

(5)   Interest on the sums in sub-paragraphs (3) and (4) shall be at [(P+1%) ÷ 2] from 1 August 2000 to the date of judgment and thereafter at judgment rate until full payment.

(6)   Until full payment by the Mother’s estate, the judgment sums in sub-paragraphs (3) and (4) (including interest) shall stand charged on the House, subject to prior incumbrances.

(7)   On a nisi basis, the estate of the 2^nd Plaintiff do bear 20% of the Defendant’s costs of this action.

(8)   On a nisi basis, the Mother’s estate do bear 80% of the Plaintiffs’ costs of this Action.

160.  I thank counsel for their assistance.