NG PIK YUK v. CHOW FUNG KAM

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiff is the registered owner of the property known as Flat A, 10th Floor, Wing Fat Court, Nos.506-510 Fung Wing Street, Kowloon. She is the wife of the defendant's cousin. The defendant is now occupying the flat. The plaintiff seeks a declaration that she is the sole beneficial owner of the flat and asks for vacant possession of the flat and mesne profits against the defendant since September 1992. The defendant counterclaims that she is entitled to a share in the flat since she and the plaintiff had purchased the flat together as a joint venture but using the plaintiff's name as the registered owner.

The evidence

2. A number of facts are not in dispute between the parties.

The plaintiff's case

3. According to the plaintiff, her reasons for purchasing this flat were these. She was then living in the Tuen Mun area which was far from her husband's place of work. It was also difficult to get her son enrolled in a good middle school. She intended to get him a school in the Shamshuipo area.

4. The plaintiff accepted that the defendant had paid for the initial and further deposits in the total sum of $92,610 and some solicitor's fees. However, she said that in May 1990, the defendant was indebted to her for $61,800. This was because the defendant had lost some money in her garment business and was in need of money and so the plaintiff had lent her money from time to time. It was the plaintiff's case that after the defendant had paid for the deposits and charges on her behalf, the plaintiff would then owed the defendant $30,810. She said that she had promised to repay the defendant when she had the money and she did.

The monetary dealings between the parties

5. The plaintiff had produced various pay-in slips and transfer forms to try to substantiate her allegation that in May 1990 when the flat was purchased, the defendant was indebted to her in the sum of $61,800. According to those pay-in slips and transfer forms, which were dated from 8th January 1988 to 29th March 1990, there were a total of 11 payments amounting to $112,000. Copies of her bank statements however confirmed 10 of these payments in the total sum of $102,000. She said that there was one payment of $10,000 which she had made to the defendant in cash and hence there was no documentary proof. However, the bank statements also showed and the plaintiff herself admitted that during the period in question, the defendant had paid the plaintiff 10 payments amounting to a total of $67,000. In fact it can be noticed that for 9 of these sums, the dates of payment by the defendant to the plaintiff were within a short time from the alleged payments made by the plaintiff to the defendant as shown in the bank statements. Working on these documents and even accepting that it was the plaintiff who lent money to the defendant in respect of these pay-in slips and transfer forms and that the deposits of money shown in the bank statements were made as repayments by the defendant to her, the defendant was indebted to the plaintiff in May 1990 only in the sum of $45,000 and not $61,800. When the plaintiff was asked how this figure was arrived at, she said that the defendant had also borrowed cash from her on ten other occasions. The total amount to is $30,000. These cash loans were alleged to have been made between April 1988 and December 1989. There was no documentary proof of these loans except certain entries in the plaintiff's own diary. However, this diary was never disclosed in the list of documents. Counsel for the plaintiff had indicated that he had not seen such a diary before. In any event, even taking the $30,000 into account, the total debt alleged to be owed by the defendant to the plaintiff was still not $61,800 but exceeded that. I am not satisfied that the defendant owed the plaintiff that sum in May 1990.

6. On the other hand, the defendant denied that she was ever indebted to the plaintiff. She said that she had already closed her garment business at the times when the plaintiff said that she had lent money to her. On the contrary, she had given assistance to the plaintiff's husband before his marriage with the plaintiff. She had accommodated him, provided him with food and lodging and had lent him money from time to time. She said that it was her cousin, the plaintiff's husband, who was indebted to her in the sum of $50,000 to $60,000. The plaintiff had made certain repayments to her. She also said that she had from time to time asked the plaintiff who was only a housewife to do some gold transactions on her behalf. That was why she had these money transactions by which she meant the payments to and received from the plaintiff. I do not find the defendant's evidence on the alleged debts owed to her by the plaintiff's husband and the alleged gold transactions performed by the plaintiff on her behalf to be satisfactory at all. No details could be given to me by the defendant. When the pay-in slips, transfer forms and bank statements of the plaintiff were shown to the defendant, she could merely say that they were either repayments from the plaintiff of the loan given by her to the plaintiff's husband or the payments of the proceeds of gold transactions. Again, no documentary evidence was produced before me.

7. Having considered the evidence of the plaintiff and the defendant on this aspect, I believe that there had been monetary dealings in the form of payments and receipts between the two parties. However, I am not satisfied at all that the defendant was indebted to the plaintiff in May 1990 or that the debt, if any, amounted to $61,800. Similarly, I am also not satisfied that the plaintiff or her husband was indebted to the defendant in the amount as described by the defendant. I do not propose to make any finding on their alleged financial dealings with each other since I find that neither was prepared to tell me truthfully the exact nature of these dealings and the exact amounts.

The main issue

8. The main issue before me is whether the parties had agreed to purchase the flat in question as a joint venture and if so, how much each is entitled to.

The defendant's case

9. The defendant who was unrepresented, testified to the following effect. She said that she had trusted the plaintiff who was the wife of her cousin and she had given help to the plaintiff and her husband. She further said that in about May 1990, she was employed by an estate agency. She came across the flat in question and she thought that it was a good investment. However, she feared that because of her position with the real estate agency, it would be inconvenient, to say the least, for her to purchase a property in her own name. She discussed the matter with the plaintiff and raised the question of a joint venture in purchasing a flat. She said that the plaintiff agreed. However, the plaintiff had no money at that time. She was therefore prepared to make her contributions for the time being. She said that initially the understanding was that they should share equally in whatever profit which might be made out of the investment. She said that she paid for the deposits, the solicitor's fees and had contributed to some of the mortgage repayments.

10. The defendant said that initially they wanted to resell the flat at the profit. She had in fact got a potential buyer who was willing to pay $70,000 more than the purchase price. However, the plaintiff said that she would rather wait until a higher price could be fetched. They therefore decided to let out the flat for the time being. She said that in October 1990, the flat was let out. She had received one month rent in the sum of $5,200. The two-month rental deposit was received by the plaintiff and they agreed that this sum was to be used to off-set the shortfall between the rental and the mortgage repayment. That was why it was only in June 1991 that further contributions had to be made by her.

11. The defendant further said that she had paid a number of sums to the plaintiff between May and September 1990 as her contributions towards the mortgage repayments. There were altogether five payments: $7,000 on 26th May 1990; $5,000 on 17th August 1990; $4,000 on 28th August 1990; $3,000 on 7th September 1990 and $3,500 on 20th September 1990. In support, she produced copies of her own cheques that were payable and indeed paid to the plaintiff into the latter's account with the CitiBank which was used for the mortgage repayments. There was one payment made on 28th August for which she had not got a copy of the cheque but she had been able to prove that by means of her bank statement. She said that she made payments of $1,100 on a number of occasions to the plaintiff as her contributions towards the mortgage repayments. They were payments of $1,100 each on 21st June 1991, 24th September 1991, 23rd November 1991 and 23rd January 1992. She also said that because in November she mixed-up with the plaintiff's accounts and paid another $1,100 in cash to the plaintiff. However, she was not able to show any documentary proof. In April 1992, the tenant moved out of the premises and there was no rental income. Hence, she had to make a contribution in the sum $6,300 in April 1992 towards the mortgage repayments.

12. The plaintiff admitted that she had received most of the payments alleged to have been made by the defendant. However, she denied that they were contributions by the defendant. She said that they were loans by the defendant to her and she had repaid most of them. She acknowledged that she was still indebted to the defendant in the sum of about $30,000. She was also not able to show me by reference to any document how she had repaid these loans from the defendant.

13. According to the defendant, in about May 1992 there were some disputes between the plaintiff and the defendant in respect of the sale of the flat. To facilitate the sale of the flat, the defendant was allowed to occupy the premises in order to take people to inspect the premises. However, she went on holiday for approximately two months. When she returned in August, she was told by the caretaker that the flat had been sold. There were some arguments between the two ladies. I need not go into the details or the rights and wrongs of what happened. Suffice it to say that the plaintiff had by then agreed to sell the flat to another person. The date of completion was postponed for a number of times due to this and other reasons. Finally, it was agreed that 1st September would be the date of completion. The plaintiff handed the keys to the new purchaser on that day. However, it appears that the purchaser was not able to occupy the flat. By then the defendant had through her solicitors raised objection. The purchaser then decided not to enter into possession on 2nd September. And the result of some of these disputes, on 9th September 1991, the defendant returned to the premises only to find that the lock had been changed and some of her belongings had been moved from the flat to a place outside the corridor. She got in touch with the plaintiff. An argument ensued. The police were called. It appears that the defendant had refused to take away those articles removed by the plaintiff. The plaintiff had also asked someone to return the documents and important articles to the defendant. The matter then went to court in October 1992 when the plaintiff issued the present writ.

14. Since September 1992, the defendant had been occupying the flat. However, she had not paid anything either as rental or contribution. The plaintiff has been making the mortgage payments since then.

Assessment of the evidence

15. I do not believe that the plaintiff purchased the flat to facilitate her son to get enrolled in a good middle school in Shamshuipo area. I find the reasons given by her far from convincing. In May 1990, the son was only in Primary 5 and there was still more than a year to go before he would start secondary education. If the purchase of the flat was indeed for facilitating the son to find a good middle school, the flat would not have been rented out in October 1990. This is because she would then have to decide how long the flat should be rented out for. It would be difficult to rent it out for one or less than one year. From the evidence before me, I find that it is more probable that the flat was purchased as an investment or for speculation purpose. I also note that in the memorandum for sale, the exact description of the flat was not stated. In other words, there was no particular flat which was stated as the subject matter of the sale. There is no reason why if the plaintiff was to purchase the flat for her alleged purpose, the flat in question should not be stated in this document. In my view, it seems more consistent with the defendant's allegation that the flat was purchased for the purpose of investment or speculation. Hence, the particular flat to be purchased was not stated in this document. This would facilitate any resale if a sufficiently high profit could be made. Furthermore, if it was really the intention of the plaintiff to purchase the flat for facilitating the son's education, one would expect that the plaintiff would have been ready and able to pay for the initial deposit or any further deposits. However, it is not disputed that the initial as well as the further deposits were paid by the defendant. I am not convinced at all that the plaintiff was telling me the truth about the purpose of buying this flat.

16. If it was in fact the plaintiff who had purchased the property all by herself, it is amazing that the plaintiff did not have any money ready to pay for the initial and further deposits and the solicitors' fees and had to ask the defendant to pay for those. If it were in fact the plaintiff's sole purchase and her own flat, why should the defendant have done so on her behalf? In my view, what happened as described by the defendant is consistent with the parties having a joint venture.

17. The plaintiff said that after the defendant had paid for all these deposits and solicitor's charges, she was indebted to the defendant. However she had made various payments to the defendant from time to time and had also borrowed some money from her. The plaintiff admitted that she still owed the defendant some money. I do not find her evidence to be very convincing. She was able to show me most of the so-called loans to the defendants from the bank statements and her diaries. It would seem therefore that she was a person who was careful with her monetary dealings with the defendant. Yet she was not able to show me how she had repaid some of the money she said she had owed the defendant.

18. Other pieces of evidence also tend to support the defendant's allegation that it was a joint venture between the parties. First, the defendant had paid for the decoration work. Although the plaintiff said that she had repaid the defendant, there does not seem to be any reason why, if the defendant was not interested in the flat at all, she would have been willing to arrange for the decoration, paid the deposit to the decorator and paid the balance of the price for the work only to be reimbursed by the plaintiff. Second, there were also the payments the defendant said she had made to the plaintiff between May and September 1990. They were all paid by the defendant's cheques which were paid into the plaintiff's account with the CitiBank from which the mortgage instalments were to be deducted every month. If these payments were merely loans from the defendant to the plaintiff, why were they paid into that particular account? If they were repayments from the defendant, why was there no record of any sort kept by the plaintiff? It seems to me that these payments are more consistent with contributions made by the defendant rather than loans or repayments from the defendant to the plaintiff.

19. Third, similarly, the payments of $1,100 each made by cheques from the defendant to the plaintiff were also paid into the plaintiff's accounts with the CitiBank where the mortgage repayments were to be deducted every month. I do not believe that these payments of $1,100 each were loans by the defendant to the plaintiff. This is the different between the rental and the mortgage instalment for each month. These were made during the period when the flat was let out and receiving rentals. According to the plaintiff, during some of these months, she had repaid the defendant various sums, in the amounts from $3,000 to $4,000. I find no reason why on the one hand she would make repayment of those sums to the defendant while she would had to borrow $1,100 from the defendant. Further, it does not seem to be a coincidence that for so many occasions, the plaintiff would borrow $1,100 from the defendant.

20. Fourth, there were also the payments of management fees. It is not disputed that the defendant had paid the management fees for a number of times. I do not believe that they were loans by the defendant to the plaintiff when the plaintiff were short of money. Afterall the management fees was only $290 per month. If the defendant were not interested in the flat and not a partner in the joint venture, I doubt if she would be prepared to pay management fees in the sum of $290 per month for a few months. Fifth, the insurance premiums. If it were not for the fact that the defendant was also interested in the flat, she would not have been prepared to pay the insurance premiums. They were small amounts and I do not believe that the defendant paid because the plaintiff was short of cash and needed to borrow from the defendant. The same can be said of the rates. It is not disputed that the defendant had paid rates.

21. I take note that the plaintiff said in evidence that she had repaid various sums of money to the defendant. As I have said earlier, I do not believe that the payments by the defendant to the plaintiff and the payments by the plaintiff to the defendant were loans and repayments. There were obviously a lot of dealings between the plaintiff and the defendant. They were not clearly shown to me as relating to the flat. I would let them deal with these between themselves.

22. It was submitted that the defendant's evidence was incredible when she said that she asked the plaintiff to register the flat in her name because she feared her boss might know about this and that there was nothing in writing about this joint venture. I do not agree. The defendant was in the real estate business. It is not surprising that she might be able to know some properties offered for sale and she might be tempted to take some of them for speculation. She might have one or two properties in her own name, but there must be a limit to how much a boss should know and what the circumstances of each speculation by an employee were. I find that her fear was reasonable and acceptable. The plaintiff and the defendant were relatives and I am not surprised that the joint venture agreement was not in writing.

The payments toward the purchase

23. I now turn to the payments made towards the purchase of the flat, the outgoings and expenses and also the payments which the defendant said she had made. I would take the dividing line as at October 1992 when the plaintiff issued the writ in this action. Having looked at the documentary evidence, it appears that the total amount paid towards the acquisition or maintenance of the flat are as follows:

Total costs and payments

Payments in connection with the purchase & decoration

Mortgage repayments

Insurance premiums

Rates

Utility deposits

Management fees

Less

Rental received

Net total required to acquire and maintain the flat (up to October 1992)

Contributions made by the defendant (as proved by documents)

24. It is therefore clear that of the net total of payments required to acquire and maintain the flat up to October 1992, i.e. $232,199.30, the defendant was able to show by documentary evidence that she had paid $137,076.20. That was slightly more than half (which was $116,099.65). From the evidence before me, I think that it is more likely that the plaintiff had paid for the balance of the payments. There is no evidence suggesting that there were other persons who might be making contributions and therefore entitled to a share in the flat. I am entitled to treat the balance as having been paid by the plaintiff. The above calculation further illustrates that it was more likely than not that the parties did intend a joint venture in the acquisition of this flat.

Findings

25. I would therefore make the following findings. I accept the evidence of the defendant and find that there was an intention on the part of the parties to embark on a joint venture in the purchase of the flat in question for investment and/or speculation purpose. The agreement was that each would share half and half provided that they made similar or the same contributions. However, since they were relatives, there was no fix and rigid rule that each should pay for half of every cent. They were then left to make adjustments at the end of the day. I also find that the defendant did make contributions at the beginning by paying for the deposits, legal fees and other items and later when the rentals received were not sufficient to pay for the monthly instalments, she also made contributions from time to time. I also find that the balance towards the payment of outgoings, expenses and mortgage instalments were made by the plaintiff. I hold that each party is entitled to one half of the interest in the flat. There will be an adjustment as to how much the defendant had under or over paid. Half of all the payments and outgoings was $116,099.65. The defendant had thus overpaid $137,076.20 - $116,099.65 = $20,976.55.

26. From October 1992, the date of the issue of the writ up to the present, the defendant has been occupying the flat but has not made any payment of rent or any further contribution towards the outgoings, expenses and mortgage repayments. At the end of the trial, counsel for the plaintiff suggested that I should make a rough assessment of the rent based on the previous rentals received (i.e. $5,200 per month) or slightly more and order the defendant to pay half of that for her occupation of the flat since October, 1992. Counsel referred me to the case of Tang Yin Ling v. Wong Sai, unreported MP No. 2527 of 1992. That had the attraction of making things simple for the parties and I fixed the average rent at $6,000 per month and directed that the defendant should pay $3,000 x 40 or $120,000 rent for her occupation.

27. On reflection, however, I do not think that this is the best and fairest way of adjudicating the rights and obligations of the parties. First, there is no evidence of what the market rent was during the three and a half years. It might have fluctuated and I should not arbitrarily fix it at $6,000 per month. Further, the defendant was unrepresented and might not have appreciated the significance of such assessment without evidence being adduced from both sides. This would end up either being unfair towards the plaintiff or the defendant. Third, it seems that there is no clear evidence of ouster by the defendant of the plaintiff. There is evidence that the plaintiff had at one stage changed the lock to the flat and tried to evict the defendant. But the defendant had since 9th September 1992 succeeded in gaining entry and staying there. On the other hand, there is no evidence that the defendant had refused to let the plaintiff as a co-owner to enter the flat or to remain there. Nor is there evidence that the plaintiff had made a request to exercise her right of possession as a joint owner. Hence I do not think it is fair to assume there was an ouster and that the defendant should be required to pay her share of the occupation rent.

28. What is however clear from the evidence is that the defendant as a joint owner of the flat has not made any further contribution towards the mortgage repayments and it was the plaintiff who has shouldered all the monthly instalments since then. I think as a co-owner the defendant has an obligation to do so. I have worked out the total amount of payments made up to end of October 1992 which was the date of the issue of the writ. The defendant should at least pay her half share of $6,289 per month, i.e. $3,144.50 from October 1992 up to present and should also continue to do so until the flat is sold and/or there is a partition. The difference (of say $144.50 per month) may not be great, but that should be the more proper thing to do than the payment of a half share of rent for occupation. There are of course the other miscellaneous items, such as rates etc. The parties should also share them equally.

29. Hence, unless the parties can easily work out the total of outgoings, expenses and mortgage repayments, I propose to direct that an account be taken before the Master as to how much the plaintiff had incurred towards the outgoings, expenses and mortgage repayments since 1st November 1992 and that after the taking of account, the defendant do pay to the plaintiff half of that but shall be allowed to set off part of it from the overpayment (i.e. $20,976.55) she had made prior to October 1992.

Conclusion

30. I would therefore declare that the defendant was entitled to a half interest in the flat. Since the defendant is a joint owner of the flat, the plaintiff is not entitled to vacant possession. Unless there is clear evidence of ouster, she is also not entitled to mesne profit (or occupation rent). Failing agreement on the total amount of outgoings, expenses and mortgage repayments since November 1992, there shall be an account taking before the Master and after that, the defendant shall pay to the plaintiff half of the amount so found giving credit for $20,976.55.

31. The defendant also claims that the plaintiff had thrown away her properties. There were some smaller items returned through a relative. As a result, she said she had lost a lot of items. She did not say how much these other items were worth. No value had been pleaded. She mentioned some HK $200,000 cash, US $100,000 cash and some valuables. I do not believe that she could have kept so much cash in the flat. Further it seems that it was she who refused to take those items herself. I do not think that the defendant can prove that those items were lost as a result of the plaintiff's wrongful conduct or the values of those items. I would dismiss her counterclaim for damages.

32. In view of the circumstances of this case, I order that each party to pay her own costs.