WAN CHOW KI v. WAN CHOW KAN

HCA 1490/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1490 OF 2002

____________

____________

_______________

J U D G M E N T

_______________

1. The Plaintiff in this action is the younger brother of the Defendant. By an Assignment dated 1 May 1978, the Plaintiff became the sole registered owner of the property known as Shop No. A4, Ground Floor and car-parking space No. 31 on the First Floor of Tai On Building at Shau Kei Wan ["the Property"]. This is the subject matter of this action.

2. By another assignment dated 28 April 1989 ["the 1989 Assignment"], the Plaintiff assigned 1/2 share in the Property to the Defendant. By a further assignment dated 11 October 1994 ["the 1994 Assignment"], the Plaintiff assigned the remaining 1/2 share in the Property to the Defendant. Hence, since 1994, the Defendant has been the sole registered owner of the Property. It is common ground that the 1989 Assignment was executed by the Plaintiff in 1984. However, it was not executed by the Defendant until 1989 after the pre-existing mortgage had been paid off and the bank's consent for such assignment would not be required. The execution by the Plaintiff in 1984 was treated as execution in escrow.

3. The Plaintiff now claimed that he had no idea that he had executed these two Assignments to assign his interest in the Property to the Defendant. He seeks declaratory relief that these Assignments were void by pleading non est factum. In modern language, the Plaintiff said that these Assignments were not his deeds and as such they did not have any legal effect. At an earlier stage, the Plaintiff also claimed that the signature on the 1989 Assignment was not his signature and pleaded forgery against the Defendant. At the beginning of this trial, counsel for the Plaintiff Mr Tang very properly abandoned such a plea. The Statement of Claim was amended accordingly. The Plaintiff now accepted that the signature on that document was his signature although it was executed by him in 1984 and he said he thought he was executing a Power of Attorney instead of an Assignment.

4. Even with the abandonment of the plea of forgery, the Plaintiff is still making very serious allegations in his evidence against the Defendant and those involved in events leading to the execution of the two assignments. In a nutshell, the Plaintiff alleged that his mother deceived him in 1984. The mother had been handling the tenancy matters in respect of the Property. He claimed that his mother told him to go to a solicitor firm to execute a Power of Attorney in favour of the Defendant to facilitate the latter's dealing with the tenants. He said the suggestion first came from a bank manager in view of the Plaintiff's plan to settle in the United States at that time. His mother took that opportunity and somehow instructed the clerk of the solicitor (a Miss Chan, who was once a neighbour of the family) to prepare an assignment instead of a Power of Attorney. The Plaintiff claimed that Miss Chan did not explain to him the nature or contents of the 1989 Assignment before he executed the same. He was only shown the last page and he put down his signature as directed by Miss Chan. He claimed that he was in a hurry at that time and a car was waiting for him to take him to the airport. Although it was pleaded in Paragraphs 37 and 37A that there were misrepresentation on the part of Miss Chan, the Plaintiff did not give any evidence as to any misrepresentation of the effect of the 1989 Assignment by Miss Chan. He only said that she did not explain the nature or contents of the document to him. His evidence was that he was deceived by his mother.

5. As regards the 1994 Assignment, the Plaintiff said the Defendant deceived him. His evidence was that the Defendant misrepresented to him that the 1994 Assignment was a document for adding the Defendant's name as a registered co-owner to the family home at Pine Mansion, Taikooshing. He said he did not peruse the document and no-one explained the nature of the document to him. He executed the same in front of a notary public in the United States. Although he had visited a lawyer friend of his before he executed the document, he did not seek his advice or explanation about the document.

6. These are of course very serious allegations and the Plaintiff had at one stage made a report to the police. The Defendant denied all these allegations. The Defendant, Miss Chan, the mother (an old lady of 80 years old) gave evidence before me refuting the allegations of the Plaintiff.

7. The defence case is basically that the Plaintiff was fully aware of what he was doing when he executed these assignments. The Plaintiff had got financial assistance from the family and intended to execute these assignments by way of discharge of his debts to the family. The mother also testified that she had paid for part of the purchase price of the Property when it was acquired in the name of the Plaintiff in 1978 and she also had a beneficial interest in it.

8. The Defendant also averred that the present claim was an exercise by the Plaintiff to extort money from the Defendant. It is said that in mid 2000, the Plaintiff demanded US$300,000 from the Defendant as education fund for his daughters. The Defendant pleaded that the present claim by the Plaintiff is an abuse of civil process and counterclaimed for damages in respect of the same. Counsel for the Defendant, Mr Vaughan, asked for nominal damages.

9. Parties agreed that since the Plaintiff's only pleaded case is non est factum, the focus should be on how the Plaintiff came to execute the two assignments in question. It is not the Plaintiff's case that he executed these assignments to transfer the legal title to the Defendant to hold the Property on trust for him. Hence it is not suggested that beneficial ownership of the Property does not follow the legal title.

10. There is no dispute as to the law in respect of non est factum. The leading case is Saunders v Anglia Building Society [1971] AC 1004. In his final submission, Mr Tang accepted that in order to succeed, the Plaintiff must establish the following,

(a)	that there was a radical (or fundamental) difference between what he signed and what he thought he was signing;
(b)	that the mistake was as to the general character of the document, as opposed to its legal effect; and
(c)	lack of negligence, i.e. that he took all reasonable precautions in the circumstances to find out what the document was.

11. A party who avers non est factum bears a heavy burden. There is a distinction between an adult of full age and understanding who can read and write and those who for permanent or temporary reasons (not limited to blindness or illiteracy) is not capable of both reading and sufficiently understanding in terms of detecting a fundamental difference between the actual document and the document as the signer had believed it to be. This point is highlighted in the judgment of Lord Pearson in Saunders v Anglia Building Society [1971] AC 1004 in his qualification of the broad principle set out by Lord Denning MR in the Court of Appeal (see p. 1032G to 1035B). Where a man could easily have ascertained the true nature of a document by reading it and has taken upon himself the risk of not reading it, the plea cannot be raised successfully however much he may have been misinformed about the same (see p. 1034A to B). In respect of those who are not capable of both reading and sufficiently understanding, the plea is available provided he is not careless in signing the document. Lord Pearson further considered at p. 1036A to H the case where a man signed a deed without knowing or inquiring as to its nature or effect and did so because of his trust placed on others. His Lordship's conclusion was that the person who signs intends to sign the documents placed before him, whatever they may be and there is no basis on which he could successfully plead non est factum.

12. Lord Reid expressed general agreement with Lord Pearson and dicta to similar effect can be found at p. 1016B to F. See also Lord Wilberforce at p. 1025D to F and p. 1026C to 1027F.

13. One point to note is that the Plaintiff in this case did not formally plead any case of fraud against the Defendant in the Amended Statement of Claim. For some reasons unknown to me, the allegations by the Plaintiff in respect of the deceptions as to the effects of the two assignments (one by his mother in 1984 and the other one by the Defendant in 1994) were not relied upon to set aside the two assignments. As between the immediate parties to the deeds, fraud could of course be relied upon as an independent cause of action to render the deeds voidable. Since the Plaintiff did not rely on that and no submissions have been made by counsel in that respect, I need to say no more in that regard. In view of my findings of fact below, this point is academic in any event.

14. I have summarized the Plaintiff's evidence on the execution of the two assignments in Paragraphs 4 and 5 above. He also adopted his witness statement as his evidence in chief. I do not find him to be a reliable witness. He tried to impress this court that he could not read or write English. However, this is contradicted by the evidence of his ex-wife Pau Wai Chun ["DW4"]. She was married to the Plaintiff in 1976 and they divorced in 1979. According to her, the Plaintiff worked as a chef in New Zealand in 1976 and his English was fair. She said after they had divorced, they communicated with each other in English in their correspondence. She also saw the Plaintiff read English magazines in the past. DW4 also gave evidence as to her knowledge about the Plaintiff demanded the Defendant for education fund in 2000. I find DW4 to be an honest witness and I see no reason why she would lie about these matters in the witness box.

15. Moreover, the Plaintiff had been asked in cross-examination about the transactions relating to the acquisition of the premises at Pine Mansion in 1981. Counsel showed him the memorials in respect of an assignment, a declaration of trust and a mortgage. I observed that the Plaintiff did not have any difficulty in reading the documents in English at that juncture.

16. The dispute about the demand by the Plaintiff for US$300,000 as education fund also reflected adversely on the Plaintiff's credibility. The Plaintiff denied that he had made such a demand. Yet his letter to the Defendant and the parents dated 18 September 2000 plainly showed that this education fund was very much on his mind at that time. In the letter, he wrote he thought there was an education fund in Hong Kong and the parents and the Defendant would accede to his request,

"以為有教育基金在港,父母兄們會如願 ..."

He was obviously so upset by the turning down of such request by the Defendant that he wrote at the end of his letter,

"我四個女兒改名為無教無育無基無金, 無拖無欠聽過。"

17. The Plaintiff said that the Defendant and his family members refused to speak to him when he returned to Hong Kong and brought along US$335,000 with intent to repay the debts he owed his family and relatives. He said all that he was told was that they did not owe each other anything ("無拖無欠"). Hence he put down these words at the end of the letter. This part of his evidence simply does not make sense. If the Plaintiff had not made any demand and only proposed to make repayment to the Defendant, it is difficult to understand why the Defendant would refuse to talk to him.

18. He further said in his evidence that the reference to 教育基金 in the letter mentioned above was in fact a reference to the rental income of the Property over the years. He thought those had been saved as an education fund for his daughters. This is however contradictory to his pleaded case as to the use of the rental income in Paragraph 16 of the Amended Statement of Claim. In that paragraph, it was pleaded that the excess rental income (i.e. deducting the mortgage payment in respect of the Property) was intended by him to be applied towards the mortgage repayment of Pine Mansion flat and given to the parents as contribution to their living expenses.

19. Apart from DW4, the Defendant himself and the mother also gave evidence about the demand for US$300,000. Their evidence were consistent and coherent. The mother testified that the father had scolded the Plaintiff for making such a demand. This is indeed corroborated by the Plaintiff's own words in the second paragraph of his letter of 18 September 2000. The Defendant's evidence that the Plaintiff threatened the Defendant with the personal safety of his sons were also corroborated by the Plaintiff's reference to "日後有驚心動魄的日子" and "惡果自取,責無可卸" in the same letter. I do not accept the Plaintiff's explanation that these were referring to litigation in the future. I have no hesitation in preferring the evidence of the defence witnesses to that of the Plaintiff. I am sure that the Plaintiff had not told the court the truth about what happened in September 2000. I find as a fact that the Plaintiff did make a demand for US$300,000 from the Defendant.

20. The Plaintiff's story is also inherently improbable. His case that the mother deceived him of the 1/2 share interest in the Property in 1984 is incredible. According to his own evidence, he had a good relationship with the mother at that time. His counsel even suggested to the defence witnesses that the mother treated him better than the Defendant. Against such background, it is difficult to understand why the mother would suddenly cheat her favourite son of 1/2 share in the Property in favour of the Defendant.

21. Moreover, as pointed out by Mr Vaughan, if there was any plan or intention on the part of the Defendant to deceive the Plaintiff and surreptitiously deprive him of the Property, it is difficult to explain why the Defendant would wait for 5 years before he executed the 1989 Assignment and why that was not done in one go instead of having two assignments which necessitated deception to be practiced on two occasions with a considerable time lapse in between. I cannot find any answers to this submission. In fact, there is practically no point to cheat the Plaintiff of 1/2 share in the Property whilst he remained as the registered owner of the other 1/2 share.

22. The purported reason given by the Plaintiff for the execution of the 1994 Assignment was also unbelievable. He said he thought he was executing a document to enable the Defendant to become one of the registered owners of the flat at Pine Mansion. The Plaintiff was not a registered owner of that flat. The parents were the only registered owners. It must be plain to the Plaintiff (even if he had no legal training) that the name of the Defendant could not be added as an owner to the flat without the consent of the parents. It was simply of no use that the Plaintiff consented. The Plaintiff was simply in no position to execute any document which would have the effect of adding the name of the Defendant as one of the registered owner of that flat. I fail to see how the fact that Plaintiff was named as the borrower under the mortgage of that flat could enable the Plaintiff to do that.

23. Further, there was also no reason why the Defendant would need to request the Plaintiff to assist in that regard. At the time when the flat at Pine Mansion was acquired in 1981, the parents had already executed a declaration of trust in favour of the Defendant. Hence, ever since 1981, the Defendant had always been the beneficial owner of the flat. The Plaintiff had always been aware of that since, according to his own testimony, he accompanied the parents to the solicitor firm to execute these documents.

24. The story of the Plaintiff as to the purported reason for his execution of the 1989 Assignment is also incredible. He said the mother asked him to execute a power of attorney to enable the Defendant to collect rent. At that time, the Defendant worked as a seaman and was often not at home. The Defendant would not be an appropriate candidate to play such a role. The mother had been collecting rent and (according to her testimony) she is still doing so. Mr Tang's submission that commercial tenants would require a power of attorney before they signed any tenancy agreements is simply unsupported by evidence. It is contradicted by the undisputed fact that the mother managed to collect rent prior to 1984 without any power of attorney.

25. The Plaintiff admitted that he had borrowed large sums of money from the Defendant and an aunt in 1992 and 1993 for his business in the United States. He admitted that he had not repaid the same despite his promise to do so. He said he intended to repay those loans in 2000. But he failed to account for the lack of commitment on his part during the interim period. He did not make any repayment nor give any definite promise as to when those sums would be repaid. In the meantime, the Defendant had to shoulder such indebtedness. It strikes me as unreal to suggest that nothing happened in the meantime and all of a sudden the Plaintiff decided that it was time to make repayment in 2000. It is more probable that, as suggested by the defence case, the Plaintiff assigned the remaining half share in the Property to the Defendant by way of repayment. Hence, the 1994 Assignment was executed.

26. As regards the 1989 Assignment. The Plaintiff admitted that he got bank loans in the total sum of $300,000 by 1983 and no repayment was made by him. The Plaintiff however said that the rental income from the Property was sufficient to pay for the same. That might be so. However, one should not lose sight of the claim of the mother that she had an interest in the Property. Whilst the Property was acquired in the sole name of the Plaintiff (and he was the sole borrower under the mortgage), there is no dispute that the mother made a contribution in the process. The Plaintiff said the $21,500 paid by the mother was for the purchase of a chicken fryer in the shop whereas the purchase price of the Property was entirely funded by mortgage. The mother said she borrowed $10,000 from others to fund the down payment. In addition, according to the evidence of the Defendant, the Plaintiff used $220,000 out of the proceeds of sale of the previous family residence at Wah Shan Mansion (held in the names of the parents and the Defendant) to redeem the then mortgage in respect of the Property. When the Plaintiff was cross-examined, he did not deny this and said it was possible.

27. For present purposes, it is not necessary for enquire into the details. Suffice to say that it is plain to me that both the Plaintiff and the mother regarded the mother as having some beneficial interest in the Property and the Plaintiff was by no means regarded as to sole beneficial owner. Hence, all along it was the mother who collected the rent in respect of the Property and handled its finance with the assistance of the father and the Defendant. The mother never accounted to the Plaintiff in respect of the rent and the Plaintiff had never demanded the same from the mother. The Plaintiff averred in his own pleadings that the excess rental income was used to pay off the mortgage of the flat in Pine Mansion. Therefore, when the Plaintiff used the Property to procure a facility of $300,000 from the bank, it is plausible that he proposed to assign 1/2 share to the Defendant since the financial burden shouldered by the Defendant in Hong Kong had increased.

28. As I said, the allegations of the Plaintiff were very serious. They tantamount to fraud on the part of the mother and the Defendant. Cogent evidence is required before this court could be satisfied that the mother and the Defendant were fraudulent. I do not think the Plaintiff's evidence meet such standard of cogency and for all the reasons set out above, I do not believe him. Mr Tang referred this court to some correspondence between the Plaintiff and the Defendant. I have considered those letters again after trial. I do not find them to be of much assistance. It is neither here nor there that the Defendant had expressed wishes to go to the United States in those letters. Given the admission by the Plaintiff in his evidence as to the financial benefit and assistance he had received from the family, the Defendant's references to the financial situations of the family did not have much significance.

29. On the other hand, I find the evidence of the defence witnesses to be credible. Although the Defendant made a mistake as to the place where he executed the 1994 Assignment, I find him to be an honest witness. His evidence was consistent with that of the other witnesses and contemporaneous documents. Further, his version made much more sense than the Plaintiff's version. I need not repeat his evidence in details, insofar as the Plaintiff's plea of non est factum is concerned, the gist of the Defendant's evidence was that the Plaintiff executed these assignments with full knowledge as to their effect and explanation had been given by the lawyer friend of the Plaintiff about the 1994 Assignment before the Plaintiff executed the same in front of a notary public. According to the Defendant, the 1994 Assignment was prepared at the request of the Plaintiff as consideration for financial assistance rendered by the family to the Plaintiff for his investment in the United States. He also testified that since 1983, he had to supplement the rental income from the Property in order to meet the mortgage instalment payments of the flat at Pine Mansion and the Property. Before the acquisition of the flat at Pine Mansion, the family lived at a flat at Wah Shan Mansion, Taikooshing. That was held in the joint names of the parents and the Defendant. At the behest of the Plaintiff, that unit was sold in 1981. The Plaintiff used $220,000 out of the proceed of sale of that unit to redeem part of the mortgage for the Property.

30. Miss Chan also gave evidence as to how she had explained the effect of the 1989 Assignment to the Plaintiff before he executed the same in front of her. She testified that she had confirmed with the Plaintiff about his instructions in preparing the 1989 Assignment. Before the Plaintiff executed the same, she confirmed with him about the price and the subject matter of the assignment (1/2 share in the Property). The Plaintiff also told her that the parties would take care of the payment themselves. I find Miss Chan to be a reliable witness and I accept her evidence. I see no reason why Miss Chan would conspire with the mother and the Defendant to cheat the Plaintiff. It is in fact not the case of the Plaintiff that there was such conspiracy. However, if it were not a case of conspiracy, the mother's alleged scheme to cheat the Plaintiff would only succeed if she knew that Miss Chan would not properly explain the 1989 Assignment to the Plaintiff. Why would the mother expect that? This highlights the unlikelihood of the Plaintiff's case.

31. The mother also gave evidence before me. She denied cheating the Plaintiff in respect of the 1989 Assignment. She said the Plaintiff voluntarily suggested the assignment of 1/2 share in the Property to the Defendant because he had drawn facilities in the sum of $300,000 secured by a charge on the Property and the Defendant would be responsible for repayment of such facilities. She testified firmly that based on the request of the Plaintiff, she told Ms Chan to prepare an assignment, not a power of attorney. She corroborated the Defendant's evidence as to the Plaintiff's demand for US$300,000.

32. Mr Tang suggested that there was a motive on the part of the mother to retain the Property since the parents and the Defendant are living on the rental income derived from the Property. It seems to me to be a far fetch suggestion. The relevant time was 1984. At that stage, the Defendant was working as a seaman and had a regular income. I see no basis for any suggestion that the mother perpetuated a fraud on the Plaintiff in 1984 because she wanted to keep the rental income. There is simply no suggestion in the evidence of the Plaintiff that the Plaintiff had ever protested to the mother about her collecting the rental income and using the same without accounting to him.

33. I find the mother to be an honest witness and I accept her evidence. I have already dealt with DW4's evidence.

34. In summary, I reject the evidence of the Plaintiff and accept the evidence of the Defendant and his witnesses. Based on their evidence, I find as a fact that the Plaintiff was fully aware of the nature and effect of the two assignments when he executed the same. His reason for doing so was in consideration of the Defendant taking up the responsibilities in repaying various debts incurred by the Plaintiff in Hong Kong. The Plaintiff's story as to his professed ignorance about the two assignments is just a pack of lies.

35. By reason of such findings, the Plaintiff's claim must fail. I need not deal with the alternative question raised by Mr Vaughan, viz. whether the Plaintiff is barred from relying on a plea of non est factum due to his carelessness. I would however record my findings that the Plaintiff was at the material time capable of reading the assignments even though they were written in English and he could have made enquiries from Ms Chan in 1984 and Mr Jim Wong in 1994 about the nature and effect of these documents.

36. Hence, the Plaintiff's claim is dismissed.

37. As regards the counterclaim, Mr Vaughan accepted that it is necessary to establish an ulterior purpose to sustain a claim based on abuse of civil process (see Speed Seal ltd v Paddington [1985] 1 WLR 1327). He submitted that the letter of 18 September 2000 showed that the purpose of this action is to extort money from the Defendant instead of a bona fide claim with regard to the Property. But there is no evidence to suggest that such a demand had been repeated after the commencement of the action or that this was the price demanded for withdrawal of the claim. The Plaintiff was not cross-examined about his motive in bringing this action. The manner in which the case had been conducted did not suggest any ulterior motive on the part of the Plaintiff. I am not satisfied that this is a proper case to hold that there was an ulterior purpose on the part of the Plaintiff. I will also dismiss the counterclaim.

38. The Defendant should have the 9/10 of the costs of the action to reflect the dismissal of both the claim and the counterclaim. There will be a costs order nisi to such effect.