TSE DAO CHUEN v. CHEUNG WAI YAN formerly known as CHEUNG SUET NGOR

DCCJ 1078/2020

[2021] HKDC 399

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1078 OF 2020

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BETWEEN

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JUDGMENT

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Introduction

1.  Mr Tse commenced these proceedings against Madam Cheung to claim the entire beneficial interest in a property known as Flat D, 11^th Floor, Block 3, Sereno Verde, Phase 1, 99 Tai Tong Road, Yuen Long, New Territories, Hong Kong (“the Property”).

2.  Madam Cheung counterclaims for a declaration that she is a beneficial owner of the Property and further prays for an order that the Property be sold pursuant to section 6(1) of the Partition Ordinance, Cap.352 (“the PO”).

3.  Mr Tse is now a retired pastor and is 93 of age. Mr Tse came to know Madam Cheung in his church in or about June 2002. Madam Cheung then worked as a volunteer there. In the following month, Mr Tse became the godfather of Madam Cheung. Madam Cheung is presently a full-time pastor.  

4.  Before long, by an assignment dated 8 January 2004 (“the Assignment”), Mr Tse acquired the Property at the purchase price of HK$1,071,000 (“the Purchase Price”) and had it registered in the joint names of Mr Tse and Madam Cheung. It is not disputed that the Purchase Price was paid by Mr Tse alone and Madam Cheung made no financial contribution.

5.  By a Notice of Severance dated 10 March 2017 (“the Notice”), Mr Tse gave Madam Cheung notice that pursuant to section 8 of the Conveyancing and Property Ordinance, Cap. 219, he desired to sever the joint tenancy with effect from the date of the Notice and they shall hold the Property as tenants-in-common in equal shares.

6.  Now Mr Tse alleges that he is the sole beneficial owner of the Property and Madam Cheung merely holds her 50% beneficial interest in the Property on trust for him. Madam Cheung insists that she has half of the beneficial interest in the Property.

Issues

7.  The 5 issues identified by Mr Lau, for Madam Cheung, in his opening submissions and Ms Yeung, together with Ms Wong, for Mr Tse, agrees to his formulation.

8.  The 5 issues are as follows:

(1) Whether the Property was purchased subject to any condition or was Madam Cheung’s beneficial interest an absolute gift (“Issue 1”);

(2) If the Property was purchased subject to condition, whether the condition was legally invalid and/or unenforceable because:

(i) It would have been a domestic arrangement between a godfather and a goddaughter with no intention to create any legal relations; and/or

(ii) The condition was uncertain. (“Issue 2”)

(3) If the Property was purchased subject to a condition which was legally valid and enforceable, what were the legal consequences of Madam Cheung’s breach of the condition, in particular:

(i) Whether a common intention constructive trust and/or resulting trust arise over Madam Cheung’s 50% beneficial interest in the Property; and/or

(ii) Whether Madam Cheung was estopped from asserting any interest in the Property. (“Issue 3”)

(4) If the Property was purchased subject to a legally valid and enforceable condition, whether Mr Tse’s claim against Madam Cheung’s breach of the condition is:

(i) time barred by the Limitation Ordinance (Cap. 347); or alternatively,

(ii) barred by equitable principle of laches. (“Issue 4”)

(5) If Mr Tse’s claim fails, whether this court should grant an order for sale of the Property pursuant to section 6 of the PO (“Issue 5”).

9.  Ms Yeung and Mr Lau agree that if on Issue 1, this court finds that the gift of the beneficial interest in the Property was an absolute one subject to no condition, this finding will be dispositive of Issues 2 to 4. Hence, the key issue is whether Mr Tse, at the time of the acquisition the Property, gave Madam Cheung her share of the beneficial interest in the Property as an absolute gift or as a conditional gift. This is a factual issue.

10.  Logically, I shall first determine Issue 1. I shall review the respective pleaded cases of the parties and set out the uncontroversial background facts before scrutinizing the evidence to resolve the factual dispute.

Issue 1

11.  In his Amended Statement of Claim, it is pleaded that Mr Tse made the proposal to Madam Cheung (“the Proposal”) that she should promise to take care and look after him when he was unable to do so during his lifetime and arrange a funeral service for him when he passed away and if she did so, Mr Tse would purchase the Property under the joint names of Madam Cheung and him. Madam Cheung made the promise (“the Promise”) and on that basis Mr Tse acquired the Property and became joint-tenants with Madam Cheung in respect of the same.

12.  The Promise, or the alleged breach of Madam Cheung thereof, forms the factual basis of Mr Tse’s claim for the entire beneficial interest in the Property despite Madam Cheung’s holding of its legal title.  His pleaded case is that since his heart operation in June 2015, Mr Tse had difficulty in taking care of himself. However, Madam Cheung failed to honour the Promise and did not look after him.

13.  Mr Tse relies on common intention constructive trust or alternatively, resulting trust, as the legal basis of his claim.

14.  Madam Cheung denies that Mr Tse had ever made the Proposal and that she had ever made the Promise prior to the purchase of the Property.

15.  The following matters are not in dispute and relevant to Issue 1.

16.  Mr Tse and Madam Ng who was his wife used to reside in a flat in public housing estate in Yuen Long. Madam Ng passed away in or about April 2002. They did not have any children.

17.  Two months later, Mr Tse met Madam Cheung and soon developed a close relationship. After Mr Tse had become her godfather, he treated her as his natural daughter.

18.  In 2003, Madam Cheung started her 5-year course in theology. The annual course fee was about HK$60,000. Mr Tse promised to give financial support to Madam Cheung and pay all her course fees together with all the miscellaneous expenses throughout the 5 years. Mr Tse altogether spent no less than HK$330,000 on her studies. Some time after graduation, Madam Cheung became a pastor.

19.  After the acquisition of the Property, Mr Tse gave up his flat in the public housing estate and started residing at the Property alone in April 2004. There are two bedrooms in the Property and Mr Tse told Madam Cheung that she could occupy one of them when she got married.

20.  Up till now, Madam Cheung remains single and has never resided at the Property.   

21.  Mr Tse was very generous financially to Madam Cheung. Over the years, he gave Madam Cheung and her family members a considerable amount of money.

22.  In May 2004, Mr Tse lent a sum of HK$60,000 to one of the younger brothers of Madam Cheung. He never obtained the repayment of the loan and he has not pressed for repayment. Up till now, no repayment has been made.

23.  In July 2004, Mr Tse lent another sum of HK$10,000 to one the sisters-in-law of Madam Cheung.

24.  In 2009, Madam Cheung wanted to set up her own church. Mr Tse provided the set-up cost in the total amount of HK$150,000 and paid Madam Cheung such cost by 3 equal instalments in 2010. The church of Madam Cheung was named after Mr Tse. Mr Tse used to officiate the Holy Communion every Sunday in her church.

25.  Throughout Mr Tse had maintained a close relationship with the family of Madam Cheung. In 2006, Mr Tse had a holiday trip to Singapore and Malaysia with Madam Cheung and her mother (“the Trip”). Mr Tse paid all the travel expenses occasioned by the Trip.

26.  In May 2011, Mr Tse passed the title deeds of the Property (“Title Deeds”) to Madam Cheung for safekeeping purpose.

27.  In June 2015, Mr Tse had a pacemaker implant surgery. In late July 2015, Mr Tse attended his 88^th birthday banquet organised by Madam Cheung and one Madam Chan who was the goddaughter of Madam Ng.

28.  In August 2015, Mr Tse came to know Madam Huang and on 10 December 2015, they got married. Since then they have been residing at the Property as their matrimonial home.

29.  In late 2016 and early 2017, Mr Tse issued three letters to Madam Cheung (“the Letters”)[1] and, among other matters, demanded the return of the Title Deeds.

30.  In March 2017, Mr Tse executed the Notice with legal advice. The Notice was registered in the Land Registry.

31.  In October and November 2017, the former solicitors of Mr Tse issued two demand letters to Madam Cheung asking for the return of the Title Deeds and the transfer of her beneficial interest in the Property to him (“the Demand Letters”). Madam Cheung did not reply substantively to these letters before Mr Tse instituted these proceedings.

Analysis of the relevant evidence

32.  Both of the Proposal and the Promise were allegedly made orally and not evidenced by any documents. Mr Tse alleges that they were made just between them and there was no witness. This is therefore a case of one’s words against another and basically an issue of credibility.  

33.  The relationship between Mr Tse and Madam Cheung started almost 20 years ago and inevitably they have a lot of accusations against each other. I shall not attempt to deal with all of them here. I should just focus on those relevant to Issue 1.

34.  Due to the health problem of Mr Tse, Mr Tse’s evidence was taken before Master Raymund Chow on 25 November 2020 pursuant to Order 39 r.1, Rules of the District Court. By consent, the deposition of Mr Tse by way of the transcript of the examination (“the Transcript”) was admitted as evidence in the present trial.

35.  I have studied the Transcript. I could not discern that Mr Tse had any problem with giving relevant testimony at all. He was responsive and able to testify coherently. He attended the trial in his wheelchair and made outbursts in the public gallery occasionally when Madam Cheung testified in the witness box.

36.  I now turn to the evidence and assess the parties’ credibility taking into account inherent improbabilities, the relevant factual matrix and the contemporaneous documents.

37.  It is plain to me that at the time of the acquisition of the Property, Mr Tse had intense feelings for Madam Cheung. I need not determine the exact nature of these feelings though I am not sure whether it was purely for religious reasons as contended by Mr Tse. Mr Tse adopted Madam Cheung as her goddaughter shortly after they became acquainted. In his witness statement, Mr Tse explained that the purpose of the adoption was to ensure that Madam Cheung would take care of him when he was unable to do so. And Madam Cheung expressly agreed to this.

38.  In both his witness statement and his oral testimony, Mr Tse stated that he treated Madam Cheung as his natural daughter after the adoption. He was willing to give Madam Cheung unreserved financial support though he was already in his seventies with little earning capacity and financial resources. He offered to commit himself financially to pay for Madam Cheung’s 5-year course in 2003 and the total course fees were sizable, amounting to more or less one-third of the Purchase Price.  There is no allegation that the payment of the course fees and the incidental charges over five years was subject to any condition.

39.  For the acquisition of the Property, there is no allegation that Madam Cheung had asked for any beneficial interest. The idea solely came from Mr Tse. I do not find it probable that Mr Tse found it necessary and appropriate to expressly require Madam Cheung to agree to take care of him when he was unable to do so before he agreed to make her a joint tenant of the Property in view of their relationship. This is particularly so given Madam Cheung had already agreed to do so at the time of the adoption according to his own evidence.  

40.  Under cross-examination, Mr Tse recounted what he told Madam Cheung before his purchase of the Property. The account markedly differed from the pleaded case in that he merely told Madam Cheung that he treated her as his daughter and wished that Madam Cheung could take care of him and help him when he could not do so. Madam Cheung agreed and assured him that she would take care of him. Mr Tse was sure that he told Madam Cheung in those terms.[2]

41.  Furthermore, under cross-examination, Mr Tse was adamant that the foregoing exchange between Madam Cheung and him took place twice. The first one was when she went to inspect the Property with him and the second one was when he was required to make payment for the acquisition.[3] The latter was mentioned for the first time and I believe Mr Tse merely made it up to make his account sound more credible.

42.  The difference between the pleaded case of Mr Tse and his evidence is not insignificant given the oral nature of the Proposal and the Promise. I require cogent evidence to find the existence of the Proposal and the Promise. Mr Tse’s evidence is unable to support his pleaded case and cannot meet the requirement. On his evidence, he did not really raise the Proposal and make it an express condition upon which the beneficial interest in the Property was to be vested in Madam Cheung. 

43.  I turn to the evidence of Madam Cheung. She said that prior to the purchase of the Property, Mr Tse told her that he wished her to dedicate her life and time in missionary works without the need to worry about having a place to live. He also told her that he had always treated her as his own daughter and since his wife had already passed away and he had no children of his own, he would want her to have beneficial interest in the Property.

44.  Her testimony by and large supports her pleaded case. I do not find the additional details given and some minor inconsistencies under cross-examination could cast doubt on her credibility. She appeared to be forthcoming and truthful.  Her account is far more probable. I do not think she should be required to explain the purported reasons given by Mr Tse for the gift. Even if they did not make perfect sense, the nature of the gift cannot be altered.

45.  On this crucial issue, I prefer the evidence of Madam Cheung. I accept that she did not make the Promise and that the Proposal did not exist at all. I find that Mr Tse did have strong affinity for Madam Cheung at the material time and he intended to gift her with the beneficial interest in the Property unconditionally.

46.  The following matters further reinforce my belief that Mr Tse indeed intended that the beneficial interest in the Property was an absolute gift to Madam Cheung free of conditions. 

47.  First, as shown in the undisputed facts above, after the acquisition of the Property, Mr Tse continued to make unconditional monetary gifts to Madam Cheung and her family including the set-up cost of her church and the expenses of the Trip.

48.  Secondly, I cannot accept that Mr Tse became unable to take care of himself after the operation in June 2015. In my view, it is a fiction to build his case of the common intention constructive trust. He did attend the birthday banquet in the following month and it is not disputed that there were about 90 guests. In his witness statement, Mr Tse said he was too weak and could not eat anything during the banquet. He said he was reluctant to take part but Madam Cheung insisted on his attendance because the invitations to the guests had been sent.

49.  I do not accept the evidence of Mr Tse. He looked smart and jovial in the group photo taken in the banquet. He could also manage to get married with Madam Huang a few months later. The invitation card of his wedding ceremony shows that there would also be a wedding banquet held at a local seafood restaurant on 10 December 2015 and Madam Cheung would lead the prayer at the ceremony. Mr Tse was physically fit to deal with those big events and he was apparently still on good terms with Madam Cheung despite her alleged breach of the Promise.

50.  It is absurd for him to allege that he could not take care of himself despite the birthday banquet and the wedding. He was in fact very socially active. Furthermore, I cannot understand how Mr Tse could expect Madam Cheung could fulfill the Promise even if it had existed given his marriage with Madam Huang. There is also no suggestion let alone evidence that Mr Tse ever indicated to Madam Cheung that he had become unable to take care of himself and required her fulfillment of the Promise. Nor is there any evidence that Madam Cheung was aware of his allegedly dire physical condition.

51.  Thirdly, Mr Tse did not mention the Proposal and the Promise in any of the Letters. Nor did he start to deny the beneficial interest of Madam Cheung in the Property in those lengthy documents.

52.  Fourthly, the Notice is the most telling document. By the Notice, Mr Tse unequivocally acknowledged Madam Cheung’s beneficial interest in the Property. There is no reason why Mr Tse would still accept her beneficial interest if she had allegedly breached the Promise, even on legal advice. The Notice is cogent evidence contrary to the pleaded case of Mr Tse.

53.  Lastly, in the Demand Letters, there was no allegation of the Proposal or the Promise and the assertion of the sole beneficial ownership of Mr Tse was made on the basis of his financial contribution to the Purchase Price and the related costs only.

54.  For the foregoing reasons, I am of the firm view that the beneficial interest in the Property was an absolute gift to Madam Cheung. It was an advancement made by Mr Tse to Madam Cheung as his goddaughter. Neither the Proposal nor the Promise was ever in existence.  I cannot accept the pleaded case of Mr Tse.

55.  In light of this conclusion, Issues 2 to 4 become academic and need no consideration. What remains to be determined is the counterclaim of Madam Cheung and, in particular, Issue 5.

Issue 5

56.  As it now stands, Mr Tse and Madam Cheung are the equal beneficial owners of the Property. The parties agree that it is a basic right of a co-owner to rid himself of the shackles of co-ownership.

57.  The parties also agree that it is impractical to partition the Property. The only remedy available appears to be an order for sale.

58.  To argue against the grant of an order for sale, the burden is on the opposing co-owner to show that such an order will not be beneficial to all the co-owners or that it will result in very great hardship to him. This court has to determine whether such an order is beneficial to all the co-owners objectively: Wong Chun Kei v Poon Vai Chung [2007] 1 HKLRD 825 at §§18-19 per Recorder Fok SC (as he then was).

59.  The evidence of Mr Tse does not cover this issue. Ms Yeung asks this court to consider his advanced age and poor health. She further submits that it can be inferred that Madam Huang and Mr Tse have no alternative residence given his financial difficulties.

60.  There is no evidence of Madam Huang’s financial condition. In any event, Mr Tse would be entitled to his share of the proceeds of sale of the Property with which he could pay for his accommodation elsewhere.

61.  It is not fair for Madam Cheung to be locked in the unhappy co-ownership of the Property though it is a gift. Nevertheless, I accept that Mr Tse may suffer certain hardship if he is ordered to leave his long-term residence and stay at a new home in his twilight years.   

62.  Madam Cheung in the witness box indicated that she would agree that she would wait until the passing of Mr Tse to sell the Property and in the meantime Mr Tse could continue to use it as his matrimonial home. Based on this indication, Mr Lau invites this court to make an order for the sale of the Property until after the passing of Mr Tse.

63.  I welcome this invitation but I also accept Ms Yeung’s submission that it is reasonable to allow some time for the vacant possession of the Property to be delivered after the passing of Mr Tse. She asks for 6 months. Mr Lau agrees.   

64.  In view of these special circumstances, I agree to grant an order for sale of the Property not less than 6 months after the passing of Mr Tse. I should give parties liberty to apply.

Conclusion and Order

65.  For the reasons given, I reject the evidence of Mr Tse regarding his case of common intention constructive trust and resulting trust. I dismiss his claim accordingly.

66.  I conclude that Mr Tse and Madam Cheung have equal beneficial interest in the Property as tenants-in-common and I allow the counterclaim of Madam Cheung and grant the declaration sought.  I further make an order for sale of the Property pursuant to section 6 of the PO but the sale could only take place not less than 6 months after the passing of Mr Tse. The parties are given liberty to apply for directions to materialize the sale in due course.

67.  Costs should follow the event. I make an order nisi that Mr Tse do pay Madam Cheung her costs of the action including any reserved costs with certificate for counsel, to be taxed if not agreed. His own costs are to be taxed in accordance with the Legal Aid Regulations.

68.  Lastly, I thank all counsel for their assistance.