SIU MEI LIN ANGEL v. YEUNG KAM SIM

HCA 2369/2017

[2021] HKCFI 492

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2369 OF 2017

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JUDGMENT

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A.   INTRODUCTION

1.  The Plaintiff (“P”) is the daughter of the Defendant (“D”).   P is a merchant.  She has a daughter, Yung Tsz Wai Theresa, born on 18 June 1998 (“Theresa”); and a son, Yung Ka Wui Jimmy (“Jimmy”) born on 16 May 2001.  D was born on 6 December 1941.  She retired as a general worker in school more than 20 years ago, and is a full-time housewife.

2.  P claims that D holds various assets on constructive trust for her.  D has never appeared in these proceedings.  Default judgment has been granted in relation to some of the assets save and except the 4 following insurance policies purchased in March and April 2013 under which D has been named as the policyholder:

INSURER	POLICY NUMBER	INSURED	DATE OF COMMENCEMENT
The Prudential Assurance Company Limited (“Prudential”)	000010686598	Theresa	16 April 2013
Prudential	000010686592	Jimmy	16 April 2013
AIA International Limited (“AIA”)	B960421499	Theresa	6 March 2013
AIA	B960421486	Jimmy	6 March 2013

They will be referred to as the Prudential Policies and the AIA Policies respectively.  The Prudential policy under which Theresa is the insured is no longer in issue because P has successfully procured the transfer of policy to her name on about 11 July 2020 with the help of Theresa.  What remains in issue is the 3 other policies.

3.  At this trial, D was absent. P gave evidence on oath, and confirmed the truthfulness and correctness of the content of her witness statement dated 16 January 2019.  She also gave short supplemental oral evidence.  In the absence of any evidence suggesting otherwise, I am satisfied that her evidence is true and correct.

B.    THE FACTS

4.  P has been a merchant for many years and operates a company called A & S Enterprises Limited.  The company’s main business is to provide representative office services for international corporations.  She is the sole beneficial owner of the shares in the company.

5.  P maintained a good relationship with D in the past.  She would give at least HK$10,000 a month to D each month.  On the other hand, D would from time to time take care of Theresa and Jimmy as their grandmother.

6.  In late 2012, P’s husband suffered a sudden health problem, and was hospitalized for more than 2 weeks and had undergone 3 operations. He was unable to work for a few months afterwards.  As a result, he had financial problems and was at the verge of bankruptcy.   His factory was wound up. Although his debts and liabilities were separated from those of P and her company, she was concerned that she may be adversely affected sooner or later. Her immediate reaction was to protect her two children, who were then only 14 and 11 years old respectively.  She intended to set aside sufficient funds for them for their future uses, and looked for some saving plans to achieve such purpose.  What she contemplated was that, after about 5 to 10 years, they would have sufficient sums as back-up either for their education or their own business.

7.  After careful consideration, she decided to purchase the Prudential Policies and the AIA Policies.  These policies share similar salient features. First, she was required to pay only 5 yearly equal installments in the sum of about HK$300,000 each year for each policy.   Second, most of the premiums would be utilized as savings and only a very small portion would be related to the insurable risks (namely, the life of her children).

8.  However, P decided not to become the policyholder of the policies after discussions with D.  She wanted to set aside sufficient sums for her children which would be beyond the reach of anyone including her husband and his creditors.  Accordingly, she invited D to become her bare trustee to hold the policies on her behalf and upon her directions. D agreed to do so without hesitation, and understood that she would never have any interest in the policies.  D also promised to act in accordance with P’s directions, and would transfer the polices back to P whenever necessary in the future.  Their discussions took place at D’s home, and were verbal and informal.

9.  D did not have the financial means to pay the premiums. Over the years, she was maintained by P and her siblings.  Further, apart from P’s siblings, D has grandchildren other than Theresa and Jimmy.  Even if she had the financial means to do so, she would not have purchased insurance policies in favour of Theresa and Jimmy only.

10.  Nevertheless, in accordance with the agreement or common understanding between the parties, P procured the purchase of the 4 policies in early 2013.  Under the AIA Policies, it is expressly provided that the policyholder is the only person who may exercise the rights thereunder, including to change the ownership thereof.  Similarly, under the Prudential Policies, the policyholder enjoys wide contractual powers including to mortgage the policies or use them as guarantees to secure loans.

11.  P has produced documentary evidence (the details of which I need not set out here) showing that she had paid all the premiums due and payable under the Prudential and AIA Policies in the total sum of around HK$5,800,000 between 2013 and 2017.  There was no reason why P would give any real interest in the policies to D, in particular, by naming D as the policyholder. As mentioned, P has been maintaining D regularly; and in view of D’s age, she would not need the protection provided under the policies.  There is also no suggestion that P paid the premiums as loans advanced to D.

12.  After the purchase of the policies, P was the one in actual control thereof.  The insurers would send notices and statements to P’s residential address though they were addressed to D as the policyholder. D would also sign documents relating to the policies upon P’s instructions.  Among other things, D had provided written authorizations to allow P to handle the policies.

13.  Apparently, in about 2016, P’s siblings became dissatisfied that P asked D to sign many documents from time to time even though the policies have nothing to do with her siblings.  To the best of P’s knowledge and belief, her siblings suspected that she may be taking advantage of D.  In the circumstances, P asked D to sign all necessary documents to retire as the policyholder of the polices so that P would not need to trouble D further.  D agreed initially.  However, when the insurance agents were preparing the documents, D retraced from her promise and said that she wanted to discuss the matter with P’s siblings.   And even when all the documents were ready and an appointment had been made for D to sign them at her home in early 2017, P’s siblings sent D away and the documents could not be signed as a result.

14.  In late August 2017, P was informed by the insurers that the correspondence address relating to the policies had been changed. Further, on 4 September 2017, D suddenly revoked the written authorizations given to P. As a result, since September 2017, P is no longer eligible to access any information relating to the policies. She last met D on 29 September 2017 when she tried to resolve all disputes with her but in vain. After that, and up to the present, P has no chance to meet or talk to D as D refused to do so.

15.  In these circumstances, P commenced proceedings by issuing the writ herein on 12 October 2017.  On 19 October 2017, Lisa Wong J granted proprietary and mareva injunctions in relation to the assets in question, including the Prudential and AIA Policies.  On 27 October 2017, Chow J continued the injunctions until the conclusion of the trial or further order of the Court. Although D was required to sign documents to transfer some assets back to P pursuant to the default judgment granted against D on 9 January 2018, D failed and refused to do so making it necessary to appoint a solicitor of the firm representing P to sign the documents instead.

C.    ANALYSIS

16.  The principles concerning common intention constructive trusts are now well established and have been summarized recently by DHCJ Alexander Stock SC in Leung Hang Lin and another v Lam Mei Yung [2019] HKCFI 2819, §7 (citing Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 per Ribeiro PJ at §§35 – 38; Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9; Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985; Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327):

“In summary:

(1) The starting point is that equity follows the law. There is a presumption that the beneficial interest follows the legal interest. Where the property is registered in a defendant’s name, the plaintiff bears the burden of showing, on the balance of probabilities, that the defendant held the property on trust for him or her such that the beneficial ownership differs to the legal ownership. See: Liu Wai Keung §44; Mo Ying §5.16; Primecredit §17.

(2) The burden may be discharged by showing that: (i) there was a common intention held by the plaintiff and the property owner at the time of the purchase (or exceptionally, thereafter) that the beneficial ownership was to be different to the legal ownership; (ii) the plaintiff altered his or her position in detrimental reliance upon the common intention; and (iii)it is unconscionable for the property owner to assert ownership in reliance on the legal title. The constructive trust is constituted by the plaintiff’s detrimental reliance on the common intention and the unconscionability of the legal owner departing therefrom. See: Luo Xing Juan §38; Liu Wai Keung §46.

(3) The approach to ascertaining common intention is objective. One looks to the intention of each party which was reasonably understood by the other party to be manifested by the first party’s words and conduct. See: Liu Wai Keung §47; Mo Ying §5.16.

(4) The doctrine is sometimes described as having two limbs. First, where at any time prior to the acquisition (or exceptionally, at alater date), there is an agreement, arrangement or understanding reached between the parties as to how the property is to be held beneficially, based on evidence of express discussions. Second, where there is no evidence to support such a finding but the court relies on the parties’ conduct as a basis from which to infer a common intention. There is some authority that under the second limb, direct contributions to the purchase price by a party who is not a legal owner will readily justify the inference. See: Mo Ying §5.8; Primecredit §§2.3 and 2.4.

(5) However, the modern approach is to assess the parties’ common intention by a holistic approach having regard to the context and the particular facts. The court is not constrained to consider only pure direct monetary contributions to the purchase price. In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family are not that common, the court has to pay more regard to circumstantial matters. See: Mo Ying §§5.14 and 5.15; Primecredit §1.6. “

17.  In the light of the evidence adduced by P (which I accept), I am satisfied that all the essential elements of a common intention constructive trust have been established.  I am also entitled to take into account D’s failure to appear in these proceedings. It is improbable that, in a family context, the common intention would be evidenced in writing.  In this case, the common intention between P and D that D should hold the policies on trust for P is supported by considering both the relevant documents and inherent probabilities.  In view of P’s concern, at the time when her husband was in crisis, over the future of her children and to ensure that her children would be protected irrespective of what may happen to her husband and her, it is understandable why she would like to conceal her interest in the policies on the face of the documents.  It is natural that D, being P’s mother and the grandmother of Theresa and Jimmy, would agree to help.  It is indisputable that P paid all the premiums under the policies, which supports and is consistent with the existence of, and P’s reliance on, the common intention.  There is no conceivable reason why P would intend D to be the true policyholder of the policies.  Further, the facts that all correspondence was sent to P, and P was authorized to handle the polices, until about September 2017 also support P’s claim.  It is unclear to me exactly why D changed her stance in about 2017; and it is also unnecessary to decide whether this was because of some improper influence exerted by P’s siblings on D as alleged by P.  Suffice for me to say that, irrespective of what the reason was, it is unconscionable for D to fail and refuse to transfer the polices back to P upon P’s requests.

D.    CONCLUSION AND ORDER

18.  For the above reasons, I shall grant the following relief to P:

(a)   A declaration that D as a bare trustee was and still is at all times holding the AIA Policies nos. B960421499 and B960421486, and the Prudential Policy no. 000010686592 as particularized in the Statement of Claim on trust and on behalf of P;

(b)   An order that D shall sign all necessary documents to change the policyholder of the aforesaid 3 Policies from D to P at nil consideration within 28 days from the date of service of this Order, failing which the senior partner of Messrs Cheng, Chan & Co, Mr Cheung Chi Hung (“Mr Cheung”), a practicing solicitors, be empowered, on behalf of the D, to execute all necessary documents for that purpose pursuant to section 25A of the High Court Ordinance (Cap 4);

(c)   Paragraph 2 of the Order of the Honourable Madam Justice Lisa Wong dated 19 October 2019 be varied to the extent of allowing D, or Mr Cheung, to comply with the order under paragraph (b) above, and the injunction under that paragraph of the said Order be discharged upon compliance with paragraph (b) above;

(d)   Liberty to apply.

19.  P indicated that she does not wish to seek costs against D (including costs which have been reserved) in the hope of mending her relationship with D later.  Accordingly, I will not make any order on costs.  As to costs orders which have already been made, it is open to P not to enforce them.