LAM CHUEN LUNG v. TSE HOU WAN

CACV 7/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 7 OF 2015

(ON APPEAL FROM HCA 1443/2011)

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REASONS FOR JUDGMENT

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Hon Chow J (giving the reasons for judgment of the court):

INTRODUCTION

1.  This is the plaintiff’s appeal against the judgment of Mr Justice Chung given on 19 December 2014 dismissing his claim for, inter alia, a declaration that he is the sole beneficial owner of the property known as Flat F, 17/F, Block 4, Sceneway Garden, No 8 Sceneway Road, Lam Tin, Kowloon, Hong Kong (“the Property”) held in the joint names of himself and the defendant.  At the conclusion of the hearing, we allowed the plaintiff’s appeal and directed that there be a re-trial of the plaintiff’s action against the defendant, with reasons for our judgment to be given later.  This we now do.

BASIC FACTS

2.  The plaintiff is the eldest son of the defendant and Lam Sing Yin (“Lam Senior”), who have 6 other children.  In early 1998, the plaintiff and his wife were living in a flat in Laguna City, Lam Tin, Kowloon, while the defendant, Lam Senior and some of their children were living in 2 small units (of 320 sq ft and 280 sq ft respectively) in Tak Shing House, Tak Tin Estate, Lam Tin, Kowloon.  At that time, the relationship between the plaintiff, his parents (ie the defendant and Lam Senior) and his other siblings was harmonious.

3.  The plaintiff was at all material times a doctor in private practice, having graduated from the University of Hong Kong.  His clinic was located inside the shopping mall of Sceneway Garden.

4.  On or about 15 January 1998, the plaintiff entered into a provisional agreement (“the Provisional Agreement”) for the purchase of the Property at the price of HK$4,200,000. Originally, the plaintiff was the only purchaser of the Property named in the Provisional Agreement.

5.  According to the plaintiff:-

(1) It was his intention, at the time of the purchase of the Property, that it would be used by the defendant and Lam Senior as their residence in view of their then crowded living conditions, while he and his wife would continue to reside in their Laguna City flat.

(2) It was also his intention to finance the purchase of the Property with the assistance of a mortgage loan from the Bank of East Asia Limited (“BEA”) because he had learnt that BEA would offer a concessionary interest rate to any borrower who was a graduate of the University of Hong Kong provided that he/she was also the holder of a credit card issued by BEA specially designed for graduates of the University of Hong Kong (“HKU Affinity Card”).

(3) For this reason, he decided to purchase the Property in his own personal name, instead of through a corporate vehicle, which was what he had previously done in relation to the purchase of another flat in Sceneway Garden.

(4) However, when he later talked to the sub-branch manager of BEA at Laguna City about his intention to apply for a mortgage loan from the bank, he was told that BEA might refuse his application because the Property was not purchased for “self use” but was intended to be occupied by his parents.  After further discussion, the plaintiff eventually came up with the solution of adding the defendant’s name as one of the registered owners of the Property so as to satisfy the self use requirement of the bank.  The plaintiff then informed the defendant that he had purchased the Property and proposed to add her name as one of the registered owners of the Property.  The defendant did not object to the plaintiff’s proposal.

(5) It was for the above reason that the defendant’s name was subsequently added, on or about 16 January 1998, to the Provisional Agreement, as one of the purchasers of the Property.

6.  On the other hand, according to the defendant:-

(1) In or about early 1998, she wished to purchase a flat to be used as residence for herself, Lam Senior and two of their children because the two units in Tak Shing House in which she, Lam Senior and some of their children were then residing would soon become too crowded with the anticipated arrival of a grandson.  It was also her intention to purchase a flat in Sceneway Garden because it would be close to her children’s homes in Tak Shing House as well as the plaintiff’s clinic in Sceneway Garden and his flat in Laguna City.  In that way, she could continue to look after her children (including bringing lunch over to the plaintiff’s clinic which she had been accustomed to do) as well as the plaintiff’s wife who was then also pregnant.

(2) The defendant told the plaintiff of her intention to purchase a flat in Sceneway Garden, and the plaintiff said that he would keep an eye on the matter as he knew some estate agents who were operating in that locality.

(3) One evening in mid-January 1998, the plaintiff told the defendant and Lam Senior that he had found a suitable flat in Sceneway Garden, ie the Property, which was 785 sq ft in area with 3 bedrooms, and the price was HK$4,200,000.  He further told the defendant that he had already signed a provisional agreement and paid an initial deposit for the purchase of the Property.

(4) “After discussion, it was agreed between the plaintiff and the defendant that they would purchase the flat together.  [Lam Senior] agreed to contribute towards the payment of the deposits for the purchase, and the defendant and the plaintiff agreed to pay the mortgage instalments” (see paragraph 4(b)(vii) of the Amended Defence, hereinafter referred to as the “Alleged Oral Agreement”).

(5) The following day (ie 16 January 1998), the defendant went with the plaintiff to the estate agency and her name was added as a purchaser in the Provisional Agreement.

7.  In the subsequent formal agreement for the sale and purchase of the Property dated 5 February 1998, the assignment of the Property dated 8 April 1998, and the legal charge/mortgage of the Property dated 8 April 1998, the defendant’s name appeared as a purchaser/borrower together with the plaintiff.  In the formal agreement and assignment, the plaintiff and defendant were also described as “joint tenants” of the Property.

8.  It is not in dispute that:-

(1) the initial deposit of HK$180,000 for the purchase of the Property was paid by the plaintiff;

(2) the further deposit of HK$240,000 and stamp duty on the formal agreement of HK$102,000 were paid using funds provided by Lam Senior on or about 4 February 1998;

(3) further sums of HK$840,000 and HK$19,905 respectively for payment of part of the purchase price and the legal costs in connection with the purchase of the Property were provided by Lam Senior on or about 7 April 1998; and

(4) a mortgage loan of HK$2,940,000 was obtained from BEA to pay the balance of the purchase price of the Property.

9.  The total sum paid by Lam Senior came to HK$1,201,905.  The defendant’s case is that this sum represented Lam Senior’s contribution to the purchase of the Property in accordance with the Alleged Oral Agreement.  On the other hand, the plaintiff’s case is that this sum represented a loan made by Lam Senior to him, and such loan had subsequently been repaid by him to Lam Senior.  We shall come back to the plaintiff’s case on the repayment of the alleged loan later in this judgment.

10.  It is common ground that the monthly mortgage payments to BEA were effected through a savings account held in the name of the defendant with BEA and that the passbook of that account was kept by the plaintiff.  The parties disagree, however, on who made the mortgage payments.

(1) According to the plaintiff, every month he would give cash and the said passbook to the defendant for her to make payment at the bank, after which the defendant would return the passbook to him for safekeeping.

(2) On the other hand, according to the defendant, she would make cash contributions to the plaintiff every month to discharge part of the mortgage payment. Initially, the amount of the mortgage payment was around HK$32,000 per month and her contribution was HK$20,000 per month.  Later, when the amount of the monthly mortgage payment was reduced, she also reduced her contribution to HK$15,000, and eventually to HK$10,000, per month.  Her contributions lasted until October 2007 when the relationship between the plaintiff and defendant turned sour, after which time the plaintiff refused to accept any more contribution from her.

11.  On or about 7 May 2008, the plaintiff paid the sum of HK$1,238,054.56 to BEA to discharge the mortgage of the Property.

12.  The relationship between the plaintiff and defendant/Lam Senior turned sour in about the end of 2007, for reasons which it is not necessary to set out in this judgment.

13.  In or about April 2011, the defendant changed the lock of the iron gate installed at the entrance of the Property, leading to a complaint by the plaintiff that he was thereby denied access to the Property and eventually the present action, which the plaintiff commenced by way of a writ of summons on 25 August 2011.

14.  In the Amended Statement of Claim, the plaintiff seeks, inter alia, the following relief against the defendant:-

(1) a declaration that he is the sole beneficial owner of the Property;

(2) an order directing the defendant to transfer and assign her legal title and interest in the Property to him;

(3) an order for the delivery up of vacant possession of the Property;

(4) damages for trespass, or alternatively mesne profits for the defendant’s use and occupation of the Property; and

(5) alternatively, if the defendant is adjudged to be a co-owner of the Property having some beneficial interest in it:-

(a) a determination of the extent of the plaintiff and defendant’s respective beneficial share and interest in the Property; and

(b) an order for the sale of the Property pursuant to the Partition Ordinance, Cap 352.

THE JUDGMENT

15.  The trial of this action took place in November 2004, at which the plaintiff, the defendant and Lam Senior (and a few other witnesses) gave oral evidence.  On 19 December 2014, Mr Justice Chung handed down his written judgment (“the Judgment”).

16.  In the Judgment, the learned Judge found against the plaintiff on two important issues, namely:-

(1) the reason for adding the defendant’s name as a joint owner of the Property (see paragraphs 17 to 22 of the Judgment); and

(2) whether Lam Senior advanced a loan of about HK$1.2 million to the plaintiff for the purchase of the Property, and whether the plaintiff had repaid the alleged loan to Lam Senior (see paragraphs 25 to 30 of the Judgment).

17.  The learned Judge also accepted the defendant’s case that there was a consensus and common intention by the parties that the Property was to be co-owned by the plaintiff and the defendant (see paragraphs 39 and 43 of the Judgment).

18.  Accordingly, the learned Judge rejected the plaintiff’s primary case of sole beneficial ownership of the Property.  Having reached that conclusion, the learned Judge did not, however, deal with the other claims raised by the plaintiff in Amended Statement of Claim.  Instead, the learned Judge dismissed the whole of the plaintiff’s action against the defendant with costs.

THE RE-AMENDED NOTICE OF APPEAL

19.  The plaintiff’s Re-Amended Notice of Appeal consists of 8 broad grounds challenging various findings of fact made by the learned Judge in his Judgment.  For the purpose of disposing of the present appeal, it is not necessary for us to set out or examine all those challenges save the following two grounds:-

(1) Ground 1: “[t]he learned Judge erred in stating the plaintiff’s case to be that he had to add the defendant as a nominal co‑owner of the Property so as to fulfil the requirement of [BEA] that the Property was for self-use which was a condition for him to obtain concessionary interest rate on the bank loan secured by the Property [paragraph 17 of the Judgement] when the plaintiff’s case which was not disputed was rather that the self-use requirement was a condition for the grant of the bank loan which could be at concessionary interest rate as the plaintiff was a graduate of the University of Hong Kong and could be [a] card holder of ‘HKU Affinity Card’ issued by [BEA]”; and

(2) Ground 4: “[t]he learned Judge was wrong in coming to a view that the $700,000 paid by the plaintiff to the defendant by his cheque of 1^st October 2008 was not for repayment of the monies lent by Lam Senior to the plaintiff for the purchase of the Property but rather for the money lent by Lam Senior to the plaintiff for the decoration of the house at Silver Strand Bay”.

20.  In the Re-Amended Notice of Appeal, the plaintiff also complains about the learned Judge’s failure to deal with the other claims raised by him against the defendant in the Amended Statement of Claim mentioned above, in particular the claim for a determination of the extent of the plaintiff and defendant’s respective beneficial share and interest in the Property (in the event that the court should find that the defendant is a co-owner having some beneficial interest in it) and an order for the sale of the Property under the Partition Ordinance. In view of our decision to allow the plaintiff’s appeal and order a re-trial of this action, it is not necessary for us to deal with this complaint any further.

APPLICABLE PRINCIPLES

21.  The test for an appeal against findings of primary fact made by a trial judge is well settled.  As stated by Bokhary PJ (with whom the other members of the Court of Final Appeal agreed) in Ting Kwok Keung v Tam Dick Yuen [2002] 3 HKLRD 1 at paragraph 42, the question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is “plainly wrong”.

22.  As pointed out by Bokhary PJ in the same judgment at paragraph 43, the circumstances which would justify the Court of Appeal in feeling satisfied that a trial judge’s decision on the facts is wrong are infinitely various, and no useful purpose would be served by attempting to catalogue such circumstances. Nevertheless, Bokhary PJ did offer three illustrations of such circumstances, the second of which was where the trial judge “had misdirected himself as to the effect of certain evidence which he understood to support his conclusion” (see Universal Dockyard Ltd v Trinity General Insurance Co Ltd [1989] 2 HKLR 160 at 167I).

23.  For reasons which we will explain below, the present case is one which we have come to the conclusion that the trial judge did misdirect himself as to the effect of the evidence before him, which led to his rejection of the plaintiff’s case on the two important issues identified in paragraph 16 above.

JUDGE’S MISUNDERSTANDING OF PLAINITFF’S EVIDENCE ON REASON FOR ADDING DEFENDANT AS JOINT OWNER OF PROPERTY

24.  At paragraph 17 of the Judgment, the learned Judge set out what he understood to be the plaintiff’s evidence on his reason for adding the defendant as a joint owner of the Property, namely, that he had been told by the sub-branch manager of BEA that because the Property was not for self use, the bank would not give him a concessionary interest rate, and he therefore added the defendant as a joint owner of the Property purely because he wished to obtain a concessionary interest rate from the bank.

25.  It seems to us to be clear that the learned Judge’s understanding of this part of the plaintiff’s evidence is mistaken.  In both his witness statement (at paragraph 9), which the plaintiff adopted as his evidence in chief, and in his cross examination, the plaintiff clearly stated that he was told by the sub-branch manager of BEA that if the Property was not to be occupied by him but by his mother, it would not be regarded by the bank as being purchased for “自住    ” (self use) and thus the bank might refuse to grant his mortgage application.  In other words, the self use requirement went to the question of whether the bank would grant a mortgage loan, not whether the bank would grant a concessionary interest rate, to the plaintiff.

26.  This misunderstanding of the plaintiff’s evidence is material because one of the reasons given by the learned Judge for rejecting his evidence is that there was nothing in the letter, in BEA’s standard form, signed by the plaintiff and defendant seeking concessionary interest rate (“the Application Letter”), which was submitted as part of his application for the mortgage loan, to suggest that the grant of a concessionary interest rate was linked or related to the bank’s requirement of self use the Property.  Instead, the letter mentioned that the grant of a concessionary interest rate might be subject to revision from time to time at the bank’s discretion in the event that the borrower should cease to be a card holder of “HKU Affinity Card” (see paragraphs 20 and 21 of the Judgment).  In our view, there was no inconsistency between the plaintiff’s evidence (as properly understood) and the contents of the Application Letter.

27.  Another reason which the learned Judge gave for rejecting the plaintiff’s evidence (as understood by him) that the bank would not give him a concessionary interest rate if the Property was not for “自住” (self use) was based on what the learned Judge considered to be the ordinary usage or meaning of the expression “自住”.  At paragraph 18(1) of the Judgment, the learned Judge expressed the view that permitting or allowing a property to be occupied by one’s family members (such as parents and siblings) should also be regarded as “自住” according to the ordinary usage or meaning of that expression.  On that reasoning, there was no need to add the defendant as a joint owner of the Property.  However, it was the plaintiff’s evidence that he had been told by the sub-branch manager of BEA that if the Property was not to be occupied by him but by his mother, it would not be regarded by the bank as being purchased for “自住” (self use).  What seems to us to be relevant for the present purpose is how the bank interprets its own “自住” (self use) requirement, not how the expression “自住” is ordinarily used or understood.  Thus, to the extent that the learned Judge rejected the plaintiff’s evidence based on his understanding of the ordinary usage or meaning of the expression “自住”, such reasoning could not be supported.

JUDGE’S MISREADING OR MISUNDERSTANDING OF PLAINTIFF’S PREVIOUS EVIDENCE IN CRIMINAL TRIAL

28.  The plaintiff’s case relating to the repayment of the alleged loan of about HK$1.2 million advanced by Lam Senior is, in summary, as follows:-

(1) In or about 1998 he made eight repayments in the total sum of HK$500,000 to Lam Senior, leaving an outstanding balance of about HK$700,000.

(2) At the beginning of 2000, he informed the defendant that he was in a position to make repayment of the outstanding amount of the loan to Lam Senior but the defendant told him that it was not necessary to do so because Lam Senior wished to give that sum of money to him as decoration expenses for a house at Silver Strand Bay (“the House”) which the plaintiff had purchased in March 1999.

(3) At about the end of 2007, the relationship between the defendant/Lam Senior and the plaintiff broke down.

(4) On 1 October 2008 Lam Senior went to the plaintiff’s clinic to demand for repayment of HK$700,000 by way of principal and HK$800,000 by way of interest on the loan.  According to the plaintiff, Lam Senior behaved in a threatening manner, which led to the police being called to attend his clinic.  Eventually, the matter was resolved by the plaintiff giving Lam Senior two cheques for HK$700,000 and HK$800,000 respectively.  In that manner, the plaintiff repaid in full the loan advanced by Lam Senior together with interest thereon.

29.  The learned Judge rejected the plaintiff’s aforesaid case because he considered it to be inconsistent with his previous evidence given as a prosecution witness in the criminal trial of Lam Senior for the offence of criminal intimidation in KTCC 8143/2009 (“the Criminal Case”).

30.  At paragraph 28 of the Judgment the learned Judge recited the relevant part of the plaintiff’s evidence in the Criminal Case, which he relied upon to reach his conclusion, as follows:-

“問：銀線灣獨立屋，其實早於差唔多99年你就買嘞，係咪？

答：係，冇錯。

問：所以供畀你嘅錢，都係講緊99年、或者2000年呢段時間，啱唔啱？

...

答：係呀，冇錯，都係2000年左右吖，係。

問：辯方嘅講法，或者被告人嘅講法，其實個銀碼唔係70 萬喎,係150萬喎，你有冇印象呀？

...

答：我話咗所有錢，我都畀番我阿爸，剩番70萬尾數，阿媽就話阿爸畀你做裝修，就唔係150萬。

問：唔好理有幾多尾數先喇，前前後後，總共就住銀線灣，你買樓又好、做裝修又好，被告人畀咗差唔多150萬咁上下嘅款項你，係咪呀？

答：銀碼我唔清楚。

...

答：我淨係記住我貝爭幾多。

...

答：可能唔止150，可能係300，我唔記得。

問：即係唔止70萬喇，係咪？

答：我淨係記住我貝爭幾多。中間可能大家有錢銀來往。

問：講緊銀線灣嗰度先喇。

答：係，冇錯。

...

問：辯方嘅另一個講法其實呢150萬當時係借畀你，從來冇講過話咩70萬畀你。

答：你可以今日嚟咁講，你今日點講都得，你今日話嗰陣時借畀我，係咪呀?啱唔啱呀？

問：當日，無論呢150萬係分開幾多次畀你都好，從來都冇話過係畀你，係要還，同意定唔同意呀？

答：梗係唔同意喇。

...

問：喺2008年10月1號，當你話開嗰兩張票，就係還番呢150萬，所以你開兩張票，就係一張70萬、一張80 萬，只係還番銀線灣獨立屋，早於99年借畀你嘅錢。

答：你根本就打橫嚟講，我話畀你聽係70萬，阿爸畀我嘅裝修費，我已經重新強調咗好多次，當然你可以著你嘅版本，你可以講到300萬添，不過咁啱如果有一張票70、一張票80，80係當時阿爸話要嘅利息，我仲番去篤過機，我睇下還得夠唔夠，我究竟還得夠唔夠，我就打你10年計，我用複式去計，我有8里嘞，咁我心安理得，8里複式，每年，我驚還得少。律師，你唔好成日以為我話還，就係代表我應承咗係借呀，明唔明呀？即係我希望你唔好會話我話還，就係對imply咗我之前應承咗係借，做人要講下口齒，我阿爸冇親口講話畀我，我都話咗係我阿媽，話阿爸畀你做裝修嘅，就係咁嘞。

問：咁阿爸就住呢150萬，喺你2008年10月1號開票之前，佢自己有冇嚟追過你呀？

答：係冇嘅，冇追呢筆數嘅，但係我自己係由於我舖、同埋其他家庭瑣碎事項之後，覺得我真係心都碎，我自己曾經開過一個70萬票畀阿媽，但係阿媽就搣咗嘅。

問：阿爸就冇嚟追你喇，直至到去2008年12 ...

...

答：但係我已經答得好清楚，佢之前冇追過吖嘛。

...”。

31.  At paragraph 29 of the Judgment, the learned Judge stated that the plaintiff had accepted, in his previous evidence, that he once borrowed HK$1.5 million (or even HK$3 million) from Lam Senior in connection with the purchase or decoration of the House, and that apart from the HK$700,000, which the plaintiff claimed to be a gift from Lam Senior, the rest was all connected with the House.

32.  It would seem that the learned Judge considered the plaintiff’s previous evidence (as understood by him) to be inconsistent with his case that the payment of HK$1.5 million to Lam Senior on 1 October 2008 was for repayment of the outstanding amount of the loan and interest on the loan, which (according to the plaintiff) Lam Senior had advanced to him for the purchase of the Property, and on the basis of such inconsistency rejected the plaintiff’s case (see paragraphs 25, 26 and 30 of the Judgment).

33.  We have carefully read the above extract of the plaintiff’s evidence, as well as a fuller version of the transcript of his evidence, in the Criminal Case.  In our view, upon a fair reading of the plaintiff’s evidence, he never accepted that he borrowed HK$1.5 million (or HK$3 million) from Lam Senior in connection with the purchase or decoration of the House.  Instead, the plaintiff’s evidence was that he could not remember how much Lam Senior had lent to him for the purchase or decoration of the House, but he maintained that the defendant had told him that Lam Senior would give him HK$700,000 for decoration of the House.  More significantly, the plaintiff never said that the two cheques for HK$700,000 and HK$800,000, which he gave to Lam Senior on 1 October 2008, were for repayment of any loan which Lam Senior had advanced to him for the purchase or decoration of the House.

34.  In our view, the learned Judge has misread or misunderstood the plaintiff’s evidence in the Criminal Case, and his reason for rejecting the plaintiff’s case relating to the repayment of the alleged loan of about HK$1.2 million advanced by Lam Senior cannot be supported.

Judge’s CONCLUSION OF consensus and common intention that Property was to be co-owned by plaintiff and defendant IS UNSATISFACTORY

35.  At paragraph 43 of the Judgment, the learned Judge found in favour of the defendant that there was a consensus and common intention by the parties that the Property was to be co-owned by the plaintiff and the defendant.

36.  In making that finding, the learned Judge had considered a number of matters which he set out in paragraph 40 of the Judgment.  The learned Judge did not, understandably, consider whether he would have made the same finding had he not rejected the plaintiff’s case on the other two issues discussed above. Although those issues may not necessarily be decisive of the ultimate question of whether the Property was intended to be co-owned by the plaintiff and defendant both legally and beneficially, it is clear that a proper resolution of those issues would be relevant to the overall assessment of that ultimate question. Accordingly, we consider the learned Judge’s conclusion that there was a consensus and common intention by the parties that the Property was to be co-owned by the plaintiff and the defendant to be unsatisfactory.

37.  The various issues discussed above are all facts sensitive.  On the materials that we have seen, we consider it to be open to a fact finding tribunal, properly directed on the evidence, to reach conclusions on those issues in favour of either the plaintiff or the defendant.  Not having the opportunity or advantage to receive the evidence at first-hand of the various witnesses called at the trial, we do not feel able to make our own findings on those issues.  In all the circumstances, we have reached the conclusion that the only proper course to take would be to order a re-trial of the plaintiff’s action against the defendant.

DISPOSITION

38.  For the foregoing reasons, we allowed the plaintiff’s appeal, set aside the judgment below, and directed that there be a re-trial of the plaintiff’s action against the defendant.

39.  On the question of costs, we ordered that:-

(1) the costs of the trial below be in the cause of the re-trial;

(2) the costs of the appeal be to the plaintiff to be taxed if not agreed, save that (a) only 10% of the costs of preparation of the trial bundles is allowed in view of the inclusion of many unnecessary documents in those bundles, and (b) we would not grant certificate for two counsel; and

(3) the costs of the plaintiff’s summons dated 25 May 2016 to further amend the Amend Notice of Appeal be to the defendant.