LAM YING WAI OLIVER v. CHOW WON KEI

HCA 2572/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2572 OF 2009

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BETWEEN

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JUDGMENT

Background

1.  This is a sad story of the breakdown of trust between two individuals.

2.  Mr. Lam and Mr. Chow worked together in a primary school. Mr. Lam was the principal of the school until his retirement in 1995, and Mr. Chow worked as an accounts clerk in the school. Mr. Chow regarded Mr. Lam as his respected mentor. On Mr. Lam's part, although he was Mr. Chow's direct superior at work, Mr. Lam considered Mr. Chow as his pupil as well as a trusted friend. It is not disputed that Mr. Lam had genuine concern not only for Mr. Chow's own well-being, but for the well-being of Mr. Chow's family such as Mr. Chow's younger brother and his nephew. He gave advice to Mr. Chow, and counseled Mr. Chow's younger brother when the latter was faced with family and psychological problems at one stage of his life. Mr. Lam also employed Mr. Chow's younger brother when he lost his job. At the same time, Mr. Chow acted as Mr. Lam's personal assistant in Mr. Lam's own affairs outside his work as principal. Mr. Chow managed Mr. Lam's personal accounts, and Mr. Lam entrusted Mr. Chow with his cash receipts and petty cash expenditure. It is clear from their history that the relationship between Mr. Lam and Mr. Chow was built on mutual trust, and that each had confided in the other. This state of affairs had lasted about 10 years before the events leading to the present dispute took place.

3.  It is not disputed that in November 1988, Mr. Lam made a gift of money to Mr. Chow, to assist Mr. Chow to purchase a property as his home. According to Mr. Lam, this was a gift of $100,000. According to Mr. Chow, it was not as much as $100,000 but was (on his evidence) "nearer to $85,000". Mr. Chow could no longer recall the exact amount of the gift. The parties are in agreement that Mr. Lam's advice to Mr. Chow was that in accordance with traditional Chinese thinking, he should acquire landed property in Hong Kong, so that his conditions in life can improve. Mr. Lam offered to help Mr. Chow in making the down payment required for the purchase, and advised as well as helped Mr. Chow to procure a mortgage loan to pay for the balance.

4.  As a result of Mr. Lam's advice, Mr. Chow went about to look for an appropriate property, and eventually found one which he liked at 3rd floor, 25 Warren Street, Hong Kong ("Property"). Mr. Lam said that he had accompanied Mr. Chow to look at the Property prior to the purchase. Mr. Chow denied this, but nothing material turns on this.

5.  The Property was eventually purchased by Mr. Chow in his own name, at the total price of $535,000 ($480,000 of which was stated to be the price of the Property, and $55,000 of which was apportioned as the price of the furniture). It is not disputed that he used the gift of money received from Mr. Lam in the purchase. On Mr. Lam's introduction, he was also able to obtain a mortgage loan of $300,000 secured by the Property. Mr. Chow paid for the balance of the purchase price and the solicitors' expenses from his own savings. The Property was assigned to him in November 1988.

6.  Prior to the purchase of the Property, Mr. Chow had been leasing a flat in Southern Building in North Point ("North Point Flat"), where he had resided with his family (Mr. Chow's grandparents, his younger brother and his nephew).

7.  Mr. Lam claims that his gift of $100,000 to Mr. Chow for his purchase of the Property was conditional on Mr. Chow moving into the Property to live, and on Mr. Chow ceasing to lease the North Point Flat, and using the rental thus saved to pay the mortgage loan repayment installments and the other expenses relating to the Property. There is no dispute that some time in December 1988 or January 1989, an oral agreement was made between Mr. Lam and Mr. Chow, whereby Mr. Lam was to pay to Mr. Chow $3000 per month.

8.  According to Mr. Lam, this agreement was reached because Mr. Chow told Mr. Lam after the purchase of the Property that he would not be moving into the Property with his family after all, and that he would like to retain the Property to sell at a profit when the price had risen, and in the meantime to continue the lease of the North Point Flat. On Mr. Lam's case, Mr. Chow told Mr. Lam that he would not be able to afford paying the rent for the North Point Flat and the monthly mortgage repayments for the Property at the same time, and asked Mr. Lam if he would be interested in investing in the Property in joint venture with Mr. Chow. According to Mr. Lam, agreement was reached between them in January 1989 whereby, in essence, commencing on 15 January 1989, Mr. Lam would contribute $3000 per month for repayment of the mortgage loan on the Property and for payment of other expenses of the Property such as rates and Government rent, and in the event of the sale of the Property, the proceeds of sale would be shared between Mr. Lam and Mr. Chow equally ("Joint Venture Agreement").

9.  Mr. Chow denies that there was such a Joint Venture Agreement, as alleged by Mr. Lam. According to Mr. Chow, at the time of the assignment of the Property to him in November 1988, he had intended to lease out the Property and to use the monthly rental to pay for the mortgage installments. On Mr. Chow's case, when Mr. Lam learned that he wished to lease out the Property, he asked Mr. Chow to lease it to him for $3000 per month for storage ("Lease Agreement"). Although Mr. Chow claims that he knew that the market rent was higher than $3000 per month, he agreed to lease the Property to Mr. Lam as he was grateful for Mr. Lam's initial help to him.

10.  It is not disputed that Mr. Lam paid $3000 per month to Mr. Chow from January 1989 to June 2007, and from July 2007 to June 2008, he paid an increased amount of $4000 per month to Mr. Chow at the latter's request. The monthly mortgage installments payable to the bank ranged from $2500 to $3000 between 1988 and 1998, and from $2900 in 1999 to $2300 in 2002. They were reduced to $400 after a lump sum repayment made by Mr. Chow in 2004. It is thus apparent that all the mortgage repayments to the bank were financed entirely by Mr. Lam's monthly payments of $3000. Mr. Lam paid a total sum of $714,000 in respect of the mortgage and expenses of the Property over the years from 1989 to 2008, excluding the money he spent on renovating and decorating the Property between 1989 and 2001.

11.  On 28 November 2008, the Property was sold to a company for redevelopment, and Mr. Chow received a sum of $4,400,000. Mr. Lam claims that pursuant to the Joint Venture Agreement, he is entitled to a half share of the sale proceeds of the Property, in the sum of $2,200,000. Mr. Lam claims that in breach of the Joint Venture Agreement, Mr. Chow only paid to him a sum of $400,000. He seeks the balance of $1,800,000 from Mr. Chow.

12.  Mr. Chow denies that Mr. Lam has any claim to or interest in the Property, which is in his own name. He claims that all the payments received from Mr. Lam from January 1989 to June 2008 were rent paid by Mr. Lam for his use of the Property pursuant to the Lease Agreement. He admits that he had paid a sum of $400,000 to Mr. Lam in December 2008 after he had sold the Property. He claims that $100,000 was a token to express his gratitude for the gift he had received from Mr. Lam when he purchased the Property in 1988. Of the balance of $300,000, Mr. Chow claims that he made this payment to Mr. Lam after the sale of the Property, when Mr. Lam told him that he was in financial difficulties and needed help. Mr. Chow counterclaims for the return of the sum of $300,000, as the payment was made in reliance on Mr. Lam's fraudulent misrepresentations, or alternatively Mr. Chow's mistaken belief, as to Mr. Lam's alleged financial difficulties.

Issues

13.  The issues for determination at trial are:

(1)   Was there a Joint Venture Agreement, or a Lease Agreement, made between Mr. Lam and Mr. Chow in 1989?

(2)   If there was a Joint Venture Agreement, what was Mr. Lam's share in the sale proceeds of the Property?

(3)   Did Mr. Chow make payment of $300,000 to Mr. Lam in December 2008 as a result of Mr. Lam's representations as to his financial difficulties as Mr. Chow claims, or did he make the payment pursuant to the Joint Venture Agreement as Mr. Lam claims ?

Was there a Joint Venture Agreement, or a Lease Agreement, made between Mr. Lam and Mr. Chow in 1989?

14.  This is the real issue between the parties, on which determination of all the other questions in dispute turn. It is essentially a question of the credibility of Mr. Lam and Mr. Chow, and whose evidence I believe or prefer.

15.  As I have attempted to explain to the parties in the course of the trial, the key issues in dispute in this case are primarily factual in nature and in deciding these factual disputes, the Court will consider, essentially, the inherent probability of the parties' assertions. Demeanor of witnesses is of course a consideration, but the appellate courts have repeatedly warned trial judges against placing undue reliance upon demeanor isolated from the inherent probabilities. Contemporaneous documents and incontrovertible evidence will be an aid in the fact finding exercise and in the overall assessment of the parties' credibility, but there is only a limited number of contemporaneous and incontrovertible documents in this case.

16.  It is not disputed that Mr. Lam made a gift of money to Mr. Chow in 1988 to finance Mr. Chow's purchase of the Property. The purpose of the gift and whether it was conditional is material, not because Mr. Lam seeks the return of the gift, but because it sheds light on the nature of the agreement made between the parties in early 1989.

17.  It is Mr. Chow's own evidence that it was because of Mr. Lam's advice that he should acquire landed property and to have a home of his own that he began to look for an appropriate property to purchase. Mr. Chow claims that Mr. Lam had asked him to calculate how much savings he (Mr. Chow) had, and told him that he (Mr. Lam) would be able to help, to enable Mr. Chow to make a down payment for the purchase. According to Mr. Chow, he had savings then of about $200,000, and the Property which he wanted to buy cost $535,000. Although Mr. Chow denied that it was Mr. Lam who had introduced him to the bank which provided the mortgage loan, he accepts that Mr. Lam referred him to Mr. Pak of the firm of solicitors who arranged for the mortgage loan and the mortgage documentation.

18.  According to Mr. Chow's evidence, because Mr. Lam had offered to “help” him in the purchase of the Property, it went without saying that the money he received was a gift from Mr. Lam which was not repayable.  He understood it as such.  He also claims that the gift was unconditional.

19.  On Mr. Lam’s case, Mr. Chow had told him that due to his low salary and his obligation to support his family, it was difficult for him to buy a flat without financial assistance despite his eagerness to do so.  Having considered Mr. Chow’s hardship and appreciating the assistance Mr. Chow rendered to him at work and outside work, Mr. Lam agreed to give Mr. Chow financial assistance in the latter’s acquisition of the Property.  According to Mr. Lam, he made a gift of $100,000 to Mr. Chow on 2 conditions.  First, Mr. Chow and his family were to reside at the Property after it was purchased.  Secondly, Mr. Chow was to cease letting the North Point Flat and use the saved rental to repay the mortgage loan and the other expenses of the Property.  Mr. Lam’s evidence is that his aim and purpose in making the gift of money to Mr. Chow was to enable Mr. Chow to have his own home, which was to be used as a residence for Mr. Chow and his family. His intention was never to give money to Mr. Chow to make an investment for sale at a profit, as otherwise he would have made a loan to Mr. Chow, instead of an outright gift. The conditions imposed were in order to secure the purpose of the gift.

20.  I accept Mr. Lam’s evidence as to his reasons for making the gift of money to Mr. Chow.  It is not common for people to be so generous as to offer monetary help to others, and $100,000 or even $80,000 is not an insignificant sum in 1988, but from the evidence of the witnesses called on behalf of Mr. Lam, it would appear that generosity was part of his nature and that Mr. Lam was unstinting in his efforts to help others in need.  Even Mr. Chow accepts this in his evidence.       

21.  It was argued that the conditions which Mr. Lam claims he had imposed on the gift were somehow unreasonable or intrusive, and hence improbable. However, having heard Mr. Lam and considered all the evidence produced in this case, I have concluded that it was in character for Mr. Lam to impose the conditions on the gift to Mr. Chow.  Mr. Lam had been a school principal for a long time and was accustomed to dealing with and supervising young people.  He was, in his own words, too used to planning for others, and this no doubt extended to making plans for those working for him like his mentee, Mr. Chow.

22.  Significantly, Mr. Chow himself states in his evidence on cross-examination that Mr. Lam had told him to buy a place to live in himself, and that Mr. Lam had thought that he was buying the Property for self-use (“自住”).  Notwithstanding his claims to the contrary, therefore, I find that Mr. Chow knew, and understood from Mr. Lam at the time of the gift, that the money was given to him to buy the Property to live in with his family, and not for resale. As both Mr. Lam and Mr. Chow knew that Mr. Chow would not be able to afford, with his salary of about $8000 a month, to continue to rent the North Point Flat and to pay for the mortgage installments for the Property, it was understood by them in November 1988 that upon completing the purchase of the Property, Mr. Chow would cease letting the North Point Flat so that he could use the rental saved to pay for the mortgage.

23.  It is not disputed that after completion of the purchase of the Property, and some time in January 1989, Mr. Chow told Mr. Lam that he would not move into the Property to reside after all. Mr. Lam's evidence is that Mr. Chow told him that he would wait for a good price to sell the Property. According to Mr. Lam, he was disappointed to hear this, as it was not the agreement reached when he made the gift of money to Mr. Chow. Mr. Lam claims that he expressed his disappointment to Mr. Chow.

24.  According to Mr. Lam, Mr. Chow then asked him to invest in the Property by contributing $3000 per month to repay the mortgage loan and the other expenses of the Property such as rates and Government rent. Otherwise, Mr. Chow would not be able to afford both the rental for the North Point Flat and the mortgage loan repayment at the same time. After some discussion, the Joint Venture Agreement was made, whereby it was agreed that from the time when Mr. Chow received from Mr. Lam the first monthly payment of $3000 as his contribution, the Property would become a joint venture between Mr. Lam and Mr. Chow, and that in the event of a sale of the Property, the proceeds of sale would be shared between them equally. The Property would not be leased out so that vacant possession could be delivered in the event of a sale at an opportune time when the price was right, but in the meantime, Mr. Lam would able to permit others to stay at the Property without any rental payments, provided that the occupant would have to vacate the Property upon short notice so that vacant possession could be delivered promptly in case of a sale. Mr. Lam would be responsible for renovating and furnishing the Property and keeping it in good condition for the purpose of selling it at a right price.

25.  According to Mr. Lam, Mr. Chow did not inform him the exact amount of the monthly mortgage repayments and he never asked. They had been colleagues and friends for a long time, and he had no reason to doubt Mr. Chow whom he fully trusted. He did not find it necessary to ascertain the exact amount of the mortgage repayments, which he left to Mr. Chow to deal with, and in the ensuing years he never asked Mr. Chow how much he was actually paying to the bank. Mr. Lam's evidence is that he had agreed at the time of the Joint Venture Agreement to pay $3000 a month for the mortgage and other expenses of the Property, and thereafter he performed his side of the Joint Venture Agreement by duly paying the agreed amount from January 1989 to June 2007, and $4000 per month from July 2007 to the eventual sale of the Property in June 2008. The increase of $4000 was paid at Mr. Chow's request in 2007, when Mr. Chow told Mr. Lam that he had incurred expenses in trying to negotiate a sale at a good price to developers. According to Mr. Lam, since his retirement in 1995, he had been asking Mr. Chow to sell the Property.

26.  On Mr. Chow's case, he told Mr. Lam in January 1989 that he would not move into the Property to reside after all, and that he was thinking of renting the Property out. According to Mr. Chow, Mr. Lam then asked him to rent the Property to him for storage. Mr. Chow explained that Mr. Lam had some embroidery products for a business, which products had to be stored. Although Mr. Chow claims that the market rent was higher than $3000, he agreed to Mr. Lam's request as he was grateful to him for his financial help. According to Mr. Chow's evidence, the market rental of the Property was about $4000 to $7000 between 1989 and 2008, but he only asked for an increase of rent from Mr. Lam in July 2007. He explained that he did not consider seeking an earlier increase, as Mr. Lam was his "big benefactor", and he was too embarrassed to ask.

27.  Against such conflict in the evidence from Mr. Lam and Mr. Chow on the nature of the agreement made in January 1989, Mr. Lam claims that at the time when Mr. Chow proposed the Joint Venture Agreement to him, there was a witness to the said agreement. Mdm. Cheng Wai Fun ("Mdm. Cheng") was an assistant clerk at the school at which Mr. Lam and Mr. Chow worked. She confirmed in her evidence that Mr. Lam had often encouraged Mr. Chow and herself to buy their own property so that they could live a peaceful life and enjoy their career (“安居樂業”). Mdm. Chan learnt at the end of 1988 that Mr. Chow had purchased the Property.

28.  According to Mdm. Cheng, one day in January 1989, Mr. Chow asked her to go into Mr. Lam's office, and there, they asked her to act as a witness. Mr. Lam then related to her 3 matters. First, Mr. Chow had decided not to move into the Property to reside.  Secondly, Mr. Lam would pay $3000 per month to Mr. Chow for repayment of the mortgage loan installments and other expenses relating to the Property. Thirdly, Mr. Lam said that the Property was jointly owned by Mr. Lam and Mr. Chow, and if the Property was to be sold, they would share the proceeds of sale equally. According to Mdm. Cheng, Mr. Chow had nodded his head to confirm his agreement to what Mr. Lam said. She claims that Mr. Lam then asked her if she had any questions about the 3 matters, repeated the 3 matters to Mr. Chow, and then asked Mr. Chow if he had any questions. According to Mdm. Cheng, both she and Mr. Chow confirmed to Mr. Lam that they had no questions. They then left Mr. Lam's office, and the whole incident had lasted about 10 to 15 minutes.

29.  Mdm. Cheng left the school in September 1993, but she has continued to visit Mr. Lam at Chinese New Year, where she occasionally met Mr. Chow as well.

30.  Mdm. Cheng was cross-examined as to whether she had been prompted by Mr. Lam or by anyone else in relation to her recollection of the incident in early 1989, and why she was able to recall the incident with exact details. Mdm. Cheng has explained that 1989 was a memorable year for her. For the first time in her life, she acted as a witness to a matter. The June 4th incident occurred later in the same year. It was also the year when she acquired public housing. She explained that she thus had a deep impression of all these events.

31.  I accept Mdm. Cheng as an honest and direct independent witness. Her evidence was unshaken upon cross-examination. I can see no reason for her to lie in Court and to fabricate the entire witnessing incident which is denied by Mr. Chow to have ever taken place at all.

32.  Having heard and considered all the evidence, I find that as Mr. Chow himself understood that the gift of money from Mr. Lam was made for the purpose of enabling him to purchase the Property as a residence for himself and his family, and not for speculation or resale, he knew that it was against their understanding and contrary to Mr. Lam's aim in making the gift, should he not move into the Property with his family but lease it out or sell it instead. It was not clear to Mr. Chow then whether Mr. Lam would revoke the gift and ask for the money back. It was however clear that with his salary, Mr. Chow would not be able to afford to pay both the monthly mortgage installments and the rental for the North Point Flat at the same time. It was argued on behalf of Mr. Chow that he had savings which he could use, but Mr. Chow has admitted in his evidence that he was cautious and had not wanted to use all his savings on the Property. I consider that it was inherently more probable that Mr. Chow asked Mr. Lam to finance his mortgage payments and by such method to invest in the Property. This would in some way "alleviate" his breach of agreement relating to purchasing the Property for self-use and as a residence for himself and his family, as well as finance the mortgage payments.

33.  It was argued on behalf of Mr. Chow that he could lease out the Property at market rent when he decided not to use the Property as his family residence, as opposed to proposing a joint investment with Mr. Lam. Yet, by leasing out the Property to a stranger, Mr. Chow would have appreciated that there would be risks and delay to a speedy sale of the Property with vacant possession. In agreeing to let Mr. Lam use the Property for storage or permit his friends to stay at the Property, Mr. Chow secured Mr. Lam's promise that vacant possession of the Property would and could be delivered up at short notice. The $3000 per month which Mr. Chow was to receive from Mr. Lam was also in line with the monthly mortgage repayments Mr. Chow had to make to the bank in 1988 (which was $3045), as opposed to the market rent of the Property, which was higher (at least $4000, on Mr. Chow 's case).

34.  It is understandable that Mr. Lam would not require the Joint Venture Agreement to be recorded in writing, notwithstanding the fact that Mr. Chow had not adhered to the earlier agreement reached to use the Property as a residence for himself and for his family. Mr. Lam trusted Mr. Chow. Further, as I accept, the essential terms of the Joint Venture Agreement were witnessed by Mdm. Cheng, and it is inherently believable that Mr. Lam would consider that to be sufficient.

35.  I do not find the evidence of the other witnesses to be helpful on the finding of whether there was a Joint Venture Agreement made between Mr. Lam and Mr. Chow as to their joint interests in the Property. There was no reason for either of Mr. Lam and Mr. Chow to disclose to third parties their respective proprietary interest in the Property under their own private arrangement.

36.  I do, however, accept the evidence of Mr. Lam's witnesses that they had not paid any rent to Mr. Lam in respect of their stay at the Property at different times. Mr. Lam had simply allowed them to stay as a gesture of helping his friends when they were in need.

37.  As for Mr. Chow's own manuscript notes and records ("Records") of his petty cash expenditure and money received from Mr. Lam, they are his own records and I am not satisfied that Mr. Lam had agreed to the terminology used by Mr. Chow. Even on Mr. Chow's evidence, Mr. Lam was never given copies of the Records and would only occasionally take a cursory glance at the figures. They cannot be taken as Mr. Lam's acceptance of and agreement to any amount recorded as having been deducted at any time as "rent" in respect of the Property, as Mr. Chow alleges.

38.  Moreover, the Records are neither complete (being only for a particular period of time from 30 July 1990 to 21 September 1991, and from 18 February 1992 to 16 June 1994) nor unequivocal in their entries. I do not regard them as having much probative value.

39.  Mrs. Lam claims that on the occasions when she gave the cheque for $3000 to Mr. Chow's younger brother ("Ping") to pass to Mr. Chow, she only put the cheque in an envelope and asked Ping to hand it to Mr. Chow without specifying what the envelope contained or what it represented. She claims that she would not hold any conversation with Ping, whom she regarded as a mere employee. Ping's evidence is that Mrs. Lam had referred to the payment as "rent" for Mr. Chow. Even if he is to be believed in this respect, I do not regard what Ping claims to be Mrs. Lam's description of the payment of $3000 as conclusive on the issue of whether it was a Joint Venture Agreement or a Lease Agreement which was made between Lam and Mr. Chow in 1989.

40.  Counsel for Mr. Chow has emphasized that Mr. Chow made repayment of $100,000 in one lump sum to the mortgagee bank in 2004. It is not disputed that he made this payment from his own funds, and that Mr. Lam had no knowledge of the repayment. After the repayment, the monthly mortgage installments which Mr. Chow had to pay to the bank was reduced to under $500. It was argued on Mr. Chow's behalf that his repayment of $100,000 was only consistent with the fact that Mr. Chow was the sole owner of the Property, as otherwise he would have no incentive to make the payment, and not to seek any recourse from Mr. Lam.

41.  Taken to the highest, the repayment of $100,000 in 2004 only reflected the fact that Mr. Chow treated the Property as his own in 2004, rightly or wrongly. Mr. Lam did not know that this repayment was made by Mr. Chow. It is also not disputed that throughout the period from 1989 until the sale of the Property in 2008, Mr. Chow had pocketed the balance of the payment of $3000/$4000 received from Mr. Lam, after paying the actual mortgage installments due to the bank, which ranged from about $3000 in 1989 to about $400 in 2008 (as particularized in paragraph 10 above). I do not find such repayment to be inconsistent with the Joint Venture Agreement.

42.  To conclude my findings on the first issue, I accept that Mr. Lam had made a gift of money to Mr. Chow in 1988 to finance Mr. Chow's acquisition of the Property for self use. When Mr. Chow decided in January 1989 not to move into the Property with his family, he knew that it was a breach of his understanding with Mr. Lam in relation to the gift made. For that reason, Mr. Chow agreed with Mr. Lam that in consideration of the gift of money which Mr. Lam had made, and in consideration of Mr. Lam paying $3000 a month henceforth to finance the mortgage payments on the Property, Mr. Lam would have a 50% interest in the Property and in the proceeds of sale when the Property is sold. These terms of the Joint Venture Agreement are as witnessed by Mdm. Cheng.

43.  Mr. Lam and Mr. Chow had willingly entered into the Joint Venture Agreement at arm's length and with full understanding. Having agreed that the Property was to be a jointly owned one, each with a 50% interest, Mr. Chow cannot subsequently, by his own unilateral decision or conduct, alter the Joint Venture Agreement by labeling Mr. Lam's monthly payments as "rent", or by making a lump sum repayment of the mortgage loan without Mr. Lam's agreement. They had agreed that the monthly payment to be made by Mr. Lam was to finance the mortgage loan, as Mr. Lam's contribution for acquisition of his 50% in the Property. The nature and substance of the payment under the Joint Venture Agreement cannot be altered by the mere attachment of a different label to it.

If there was a Joint Venture Agreement, what was Mr. Lam's share in the sale proceeds of the Property?

44.  I have found that the Joint Venture Agreement was made between Mr. Lam and Mr. Chow in January 1989. Under the Joint Venture Agreement, they agreed that the Property was jointly owned by them, and that in the event of its sale, the proceeds would be divided between them equally. I see no reason why Mr. Lam should receive either more, or less, than 50% of the sale proceeds of $2,200,000 in accordance with the Joint Venture Agreement made.

Did Mr. Chow make payment of $300,000 to Mr. Lam in December 2008 as a result of Mr. Lam's representations as to his financial difficulties as Mr. Chow claims, or did he make the payment pursuant to the Joint Venture Agreement as Mr. Lam claims ?

45.  After the Property was sold to the developer in 2008, Mr. Chow paid $400,000 to Mr. Lam out of the sale proceeds of $4,400,000.  According to Mr. Lam, Mr. Chow paid him $100,000 in cash on about 10 December 2008, but told him that he had to delay the payment of the balance of Mr. Lam’s half share, as Mr. Chow had some personal difficulties. On Mr. Lam's case, Mr. Chow said that he could only pay the sum of $2,100,000 by 7 installments of $300,000 each. Mr. Lam had no alternative but to agree, and the first installment of $300,000 was received from Mr. Chow on 11 December 2008 by 2 cheques, one dated 10 December 2008 for the sum of $200,000, and one dated 11 December 2008 for $100,000.

46.  According to Mr. Chow, he paid Mr. Lam $100,000 after the Property was sold, in appreciation of the gift of not more than $85,000 Mr. Lam had given him back in 1988. To his surprise, Mr. Lam told him that he was in financial difficulties, citing his son's low income, his own mortgage on his home, his diabetic condition and his retirement since 1995. Mr. Lam asked if Mr. Chow could help out, and wrote $500,000 on the back of a piece of paper.

47.  On Mr. Chow's evidence, he found $500,000 too much to give to Mr. Lam, but could not refuse in view of Mr. Lam's persistence. Mr. Lam telephoned him repeatedly, to ask when the funds would be ready. According to Mr. Chow, he was very troubled and thought hard "how to avoid making any further payment to Mr. Lam". His payment of $100,000 in cash and agreement to make a further payment was a “delaying tactic". Mr. Chow finally wrote out 2 cheques respectively dated 10 December 2008 and 11 December 2008 for the total sum of $300,000, and gave them to Mr. Lam on 8 December 2008. On Mr. Chow's evidence, even after 8 December 2008, Mr. Lam had repeatedly called him to ask for more money.

48.  Mr. Lam made a recording of his telephone call to Mr. Chow on 3 February 2009. He claims it was to evidence Mr. Chow's indebtedness to him regarding the balance of the sale proceeds, which he never received after the initial payment of $400,000. The recording was made after Mr. Lam's receipt of what he claims to be the first of the 7 installments of the total sum of $2,100,000 promised by Mr. Chow, and after the second installment had fallen due on 11 January 2009 but was unpaid. Counsel for Mr. Chow highlights the fact that in the entire recorded conversation, neither Mr. Lam nor Mr. Chow mentioned anything of Mr. Chow's indebtedness. Mr. Lam had simply asked if the cheques were ready, and Mr. Chow answered "not yet".

49.  Counsel for Mr. Chow argued that in the recorded telephone conversation, Mr. Lam did not in any way sound like a creditor chasing a debtor for money due. In this regard, Mr. Lam explained that he was not speaking to an enemy. Mr. Chow was still his friend whom he had known for decades. I accept Mr. Lam's explanation to be in line with his character, as can be seen from the evidence produced in this case. It is not inherently improbable that he was trying, by the recording, to obtain evidence of Mr. Chow's acknowledgment of his agreement to make payment of further amounts due to him.

50.  On the other hand, if Mr. Chow's evidence is to be believed, Mr. Lam had no beneficial interest in the Property and no claim to the proceeds of sale of the Property. He was a mere tenant who had had the benefit of the possession of the Property for nearly 20 years, paying an unreasonable amount below market rent. It is probable that Mr. Chow had suspected that Mr. Lam had even been receiving rent from some occupants. Yet, after Mr. Chow had given $100,000 in cash to Mr. Lam in 2008, Mr. Lam demanded a further sum of $400,000, and had the temerity to call Mr. Chow repeatedly and continuously for days if not weeks to press for payment. I find it surprising, and unbelievable, that Mr. Chow would not ultimately make an outright rejection of Mr. Lam's demands in any one of the numerous telephone calls that Mr. Lam had made to Mr. Chow, as Mr. Chow claims. It is improbable that Mr. Chow would not make it clear to Mr. Lam that he had no claim to the proceeds and that Mr. Chow would not be making any more payment after the one of $400,000. I see no need for Mr. Chow to "delay" making the payment to Mr. Lam, as Mr. Chow repeatedly claims in his evidence. His admission of delaying payment appears to be more consistent with a liability on his part to make some payment to Mr. Lam.

51.  I also consider that there are inconsistencies in Mr. Chow's evidence as to whether he had made any investments, or any loss on his investments at the time when Mr. Lam claims that he had proposed installment payments of the sum of $2,200,000 to Mr. Lam.

52.  In all, I reject Mr. Chow's claims in relation to his payment of $400,000 to Mr. Lam. I find that this was his part payment of the 50% sale proceeds due to Mr. Lam under the Joint Venture Agreement.

53.  It follows that I reject Mr. Chow's purported Counterclaim relating to the alleged representations made by Mr. Lam which had induced his payment of $400,000 to Mr. Lam.

Conclusion

54.  I grant judgment in favor of Mr. Lam, and make a declaration as sought that the proceeds of sale of the Property are held by Mr. Chow on trust for Mr. Lam and himself in equal shares. I further make an order that Mr. Chow should pay to Mr. Lam the outstanding sum of $1,800,000, with interest.

55.  The Counterclaim is dismissed.

56.  I will further make an order nisi that the costs of the original action and the Counterclaim are to be paid by Mr. Chow to Mr. Lam, to be taxed if not agreed, with certificate for counsel.