FONG YEE KEI v. AU MEI LING

HCMP 143/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 143 OF 2009

____________

____________

____________

______________

J U D G M E N T

______________

1.  This is an application by the applicant for a declaration that the registration of a memorandum of charge (“the charge”) at the Land Registry is void and for an order to vacate the registration.

The background

2.  The applicant is the stepmother of the respondent.  She is currently the owner of a flat in Mok Cheong Street, Kowloon (the “flat in question”) against which the charge has been registered.

3.  There is no dispute that the charge on the face of it is an equitable charge against the property for the repayment of a debt due from one Au Siu Yun (“Au”), deceased, to the respondent.

4.  Au was the husband of the applicant and the father of the respondent.  Au’s first wife had passed away in December 1994, leaving him five children, including the respondent who were all grown-ups.  Au remarried the applicant on 8 November 1996.  The applicant also moved to live with Au at his then home in a flat in Kowloon City (the “Kowloon City flat”).  The documentary evidence suggests that she had moved into this flat in or before May 1995. 

5.  They purchased the flat in question as joint tenants by an agreement of sale and purchase dated 20 March 1997.  The purchase was completed on 3 April 1997 at the price of $1,250,000.  The price was paid in full without any mortgage finance.

6.  The applicant said in her second affirmation that the Kowloon City flat was on the 5th floor of the building and had no lift.  Au was then in poor health and was suffering from hypertension, heart disease, asthma and diabetes.  He could hardly climb the stairs.  He, therefore, proposed to purchase another flat with lift access.  They then purchased the flat in question.  The applicant also said that Au purchased the flat in question as a wedding gift to her. 

7.  They lived in the flat until Au passed away on 8 June 2008.  The applicant thought that she had become the sole owner of the flat by survivorship.  She entered into a sale and purchase agreement on 16 September 2008 to sell the flat.  However, it was discovered that there was the charge in favour of the respondent dated 28 October 2004 and registered on 5 January 2005.  The sale was therefore aborted.

The dispute

8.  The charge stated that Au had borrowed $430,000 from the respondent for the purchase of the flat in question and Au had not repaid the same to the respondent.  The charge was, therefore, made to notify people dealing with the flat that the flat was charged for the repayment of the said sum and further moneys that might be due from Au to the respondent.

9.  Au’s signature at the bottom of the charge was attested to by a solicitor who also appended his signature there to confirm that he had interpreted the charge to Au.  The applicant had disputed Au’s signature, but she abandoned this argument at the start of the trial.  She had also raised an argument of limitation which she also did not pursue at the trial.

10.  The applicant said on affirmation that Au had never told her about the alleged debt.  Her solicitors asked the respondent for the particulars of the debt but the respondent did not provide any in the correspondence.  She disputes that there was such a loan of $430,000 as stated in the charge.  That is the only matter in dispute in these proceedings.

The evidence

11.  The respondent made an affirmation to oppose the application.  She said one day in early March 1997 when she had tea with Au, Au said that he intended to purchase the property in question but did not have enough money.  Au asked her for a loan of $430,000.  She told Au to obtain mortgage finance or to buy a cheaper flat, but she finally promised to lend Au the loan.

12.  She then withdrew $430,000 from her bank account with Hongkong Bank on 17 March 1997 and bought a cashier order for Au.  Au then used the cashier order to purchase the flat in question.  She had asked Au for repayment since 1997 but Au said he did not have enough money.  Au then signed the charge on 28 October 2004 and had it registered against the flat in question.  Au told her that the loan would be repaid to her when the flat was sold.

13.  The respondent produced her bank statement with the Hongkong Bank showing a withdrawal of $430,000 on 17 March 1997.  That was four days before the applicant and Au entered into the formal agreement for sale and purchase.  The respondent could not produce a copy of the cashier order as she did not keep a copy of it and the bank also had no copy because it was issued more than seven years ago.

14.  The applicant in her second affirmation denied that Au had borrowed any money from the respondent to purchase the flat in question.  She denied that the respondent had lent $430,000 to Au.  Alternatively, she said that the $430,000 was just part of the $500,000 payable by the respondent and her husband, Chan Kin Ming, to Au for their purchase from Au of the Kowloon City flat.

15.  The respondent and her husband entered into an agreement with Au on 23 April 1997 to purchase the Kowloon City flat at $500,000.  The transaction was completed on the same day.  Au acknowledged receipt of the $500,000 in the assignment.

16.  The respondent was cross-examined at length on her evidence.  Her bank statement showed that she had used $430,000 to purchase a cashier order on 17 March 1997.  That sum was contributed to by a time deposit which matured on 14 March 1997.  The deposit was at $139,017.05.  There was another sum of $300,000 deposited into her account on the same day.  This sum came from her sister-in-law, Madam Chan Wai Man.  Madam Chan passed away in 1997. 

17.  Madam Chan’s bank passbook for February 1997 to May 1997 was produced.  This bank account did not appear to be an active one.  Before 12 March 1995, there was a credit balance of $125,414.32.  On 12 March 1997, a sum of $6,000 was deposited into the account through an automatic teller machine.  There were then two sums of $100,000 and $67,000 deposited into it on 13 March 1997 followed by two sums of $1,500 and $2,000 on 14 March 1997.  The credit balance then reached $301,914.32, and $300,000 was withdrawn on 14 March 1997.

18.  The respondent’s bank statement also showed a deposit of $200,000 on 2 December 1996.  She said she transferred this sum from her Hang Seng Bank account.  Out of this sum, she used $122,000 to purchase a cashier order and withdrew another $75,000, both on the same day.  She said in cross-examination that the cashier order was for the benefit of a friend of her then her fiancé who is now her husband.  She arranged for the cashier order for her fiancé’s friend at the request of her fiancé, and she had not inquired into the reason for the friend’s need of the money.

19.  Regarding the HK$500,000 which was paid by her and her husband to Au for the purchase of the Kowloon City flat, she did not produce any document to substantiate the payment.  She said after her mother had passed away in December 1994, there was a family gathering in early 1995.  Au told the gathering that he would go back to live in his ancestral village in Xinhui/Jiangmen.  That would mean that the respondent would have to live by herself in the Kowloon City flat.  Her fiancé then proposed to marry her.  She agreed.  Au then offered to sell them the Kowloon City flat at $500,000 for their use as the matrimonial home.  Since Au needed money to refurbish the ancestral home, about half of the HK$500,000 was paid to him in the Mainland through the arrangement of her fiancé.  The other half of the $500,000 was paid by her to Au in Hong Kong.  The payments were made in instalments of several ten thousands each time in 1995 and 1996 at the requests of Au.

20.  Despite payment having been made in full, the respondent and her fiancé did not press Au to complete the sale.  They left it to Au to arrange with the solicitors for them to sign the agreement and the assignment, and that took place on 23 April 1997.

The submissions and decisions thereon

21.  Counsel for the applicant submitted that the story about Au wanting to move to the Mainland is false as the applicant was already cohabiting with Au in May 1995.  However, there is no evidence as to when Au and the applicant had become acquainted or how long was the courtship.  I do not think the cohabitation date alone can disprove the family gathering in early 1995 and Au’s agreement to sell the Kowloon City flat to the respondent and her fiancé.

22.  Counsel also submitted that since the relationship between the applicant and the respondent was poor, there was no reason for the respondent to lend her own funds as well as borrowing from her sister-in-law for the purchase of the flat in question for the applicant.  However, it is the applicant’s own case that Au was in poor health and had difficulty in climbing the stairs of the Kowloon City flat.  I think the respondent was merely doing her filial duty in helping her father out with the living conditions.  Furthermore, Au was already aged 67 to 68 and had retired.  He could not have obtained mortgage finance for the purchase of the flat in question.

23.  Regarding the borrowing from the sister-in-law, counsel said the sister-in-law appeared to have exhausted all her resources to fund the $300,000.  Hence it was more likely that the sister-in-law was helping the respondent and her fiancé to purchase the Kowloon City flat from Au rather than helping the respondent to lend the money to Au.  I cannot see the logic of this.  I think the sister-in-law would have been more willing to provide her funds to the respondent to assist Au’s purchase rather than to assist the purchase by the respondent and her fiancé from Au.

24.  The purchase by Au of a new flat to improve his living conditions was a matter of the whole family, and whoever had the means might have wanted to contribute to its success.  For the purchase of the Kowloon City flat from Au, it was just a matter of the respondent and her fiancé.  If they did not have sufficient funds, they could have relied on mortgage finance.  There was little justification for the sister-in-law to exhaust her means to help.

25.  Counsel also submitted that the respondent did not have the financial means to lend the $430,000 to Au and also to complete the purchase of Au’s Kowloon City flat.  The respondent submitted that the cashier order for the $430,000 and the cashier order issued on 2 December 1996 for $122,000 together constitute just over $500,000 and was the purchase price payable to Au for the Kowloon City flat.  If that is the case, I see no reason why the $75,000 withdrawn from the respondent’s account also on 2 December 1996 should be left out of this transaction.  If that $75,000 should be included, the total sum would be over $600,000, and that would have been much more than the price payable to Au.

26.  I also do not think that the respondent would have difficulty in funding her purchase of the Kowloon City flat and also to lend the $430,000 to Au.  The respondent has shown that she had $200,000 which came from her Hang Seng Bank account in December 1996 and her time deposit of $139,000 odd which matured on 14 March 1997.  What she has not shown is the $500,000 she said she had paid Au for the Kowloon City flat in 1995 and 1996.

27.  She had been working since 1983 at a starting salary of over $6,000 per month as a telephone operator.  By March 1997, she had worked for more than 12 years.  In 1998, she was already a supervisor and was earning $14,000 per month.  She was all along living with Au save for a short period when she moved out of the Kowloon City flat to live with a brother.  She had the habit of saving up some money.  Given a frugal lifestyle, I do not think it would have been difficult for her to accumulate some $600,000.

28.  Counsel also submitted that Au had over $2 million savings, but this evidence only came out for the first time in the re-examination of the respondent.  She said she saw the figure in Au’s bank passbook when Au was withdrawing funds to buy the flat in question in March or April 1997.  She did not mention this in her two affirmations or her evidence-in-chief.  I think she just invented something handy.  I do not believe it.

29.  Counsel also asked me not to believe the respondent when she said that Au who had operated a butcher’s stall in a housing estate could only have made ends meet and had no savings.  I think what the respondent said about Au’s means was only her guess as she said she had never looked into Au’s passbook.  In any case, she would have to accept that Au only needed $430,000 from her and he had sufficient funds to pay the balance of $820,000 to complete the purchase.

30.  Au no doubt was receiving some rental income from a roast meat workshop in Hung Shui Kiu, the New Territories.  There is a dispute of whether the rental was at $16,000 per month as the applicant had put it or just $8,000 per month as the respondent said.  In any case, Au had to support his living and that of the applicant.

31.  Counsel also said that since $300,000 had come from Madam Chan, therefore, the loan, if any, due to the respondent was only $130,000.  I disagree.  If Au, the respondent and Madam Chan were contented with the arrangement of a loan of $430,000 to be made by the respondent to Au, I am not here to rewrite their arrangement.  I also have no idea as to what arrangement there was as between the respondent and Madam Chan over the $300,000 given by Madam Chan to the respondent.

32.  Furthermore, the cashier order was issued by the respondent to Au.  Though the respondent’s explanation of how she and her fiancé had paid the $500,000 to Au was not supported by documents, I accept her evidence that the $430,000 she withdrew from her account was not part of the $500,000 that she had to pay Au for the Kowloon City flat.  I do not think it likely that the sister-in-law would have exhausted her means to assist the respondent and her fiancé to pay Au for the Kowloon City flat.  The respondent and her fiancé could have resorted to mortgage finance if need be.  It was more likely for the sister-in-law to help so as to benefit Au, her father-in-law.

33.  The respondent was cross-examined at length.  She was unshaken on her story.  She was quite straightforward in her answers.  I accept that she is a truthful witness.  I am satisfied that the sum of $430,000 was indeed lent by the respondent to Au on 17 March 1994, which was just four days before Au and the applicant had signed the sale and purchase agreement for the flat in question.

34.  More importantly, Au also admitted in the charge that he had obtained this loan of $430,000 from the respondent for the purchase of the flat in question.  If there were no such loan, the document would have been a false one.  The applicant could not have given any reason to explain why Au would have signed such a false document in October 2004.

Judgment

35.  The burden is on the applicant to show on the balance of probability that the charge was a false document, but she has failed in this task by a wide margin.  I, therefore, dismiss her application.

Costs order nisi

36.  I also make a costs order nisi that the applicant has to pay the respondent the costs of these proceedings.  I direct the solicitors for the respondent to fix a 9:30 a.m. hearing to take place outside the next 14 days for gross assessment of the costs payable.  The solicitors for the respondent should furnish the draft bill for gross assessment to the solicitors for the applicant no less than seven days before the hearing for gross assessment.