POON TING CHAU v. WONG KWOK CHI AND ANOTHER

HCMP 5314/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 5314 OF 2002

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J U D G M E N T

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The Dispute

1.  The Plaintiff and the 2^nd Defendant are husband and wife.  They have been living separately since early 2002.  The present dispute is about a property at which they had been living together.  The property is at Flat F, 6^th Floor, Hanley House, Nos. 68-80 Canton Road, Kowloon [“the Property”].  It was purchased by the Plaintiff in 1977.  In 1978, he assigned it to the 2^nd Defendant.  On the face of the document, it was a sale at the price of $340,000.

2.  The 1^st Defendant is the brother-in-law of the 2^nd Defendant.  He was embroiled in this litigation because the Property had been held assigned to him in 1988 at a consideration of $380,000.  He conveyed it back to the 2^nd Defendant by an assignment at nil consideration in 2002.  The Plaintiff had strong objection to that mode of assignment which I shall call a Gift.  He said it created a defect in the title to the Property and the banks would refuse to grant mortgage for such a property.  He also asserted to have a half interest over the Property. 

3.  The Plaintiff’s case was that the 1^st Defendant was only a trustee in holding the legal title to the Property and he acted in breach of trust by conveying the title by Gift.    

4.  Before the Plaintiff could assert any claims, he must establish his beneficial ownership in the Property.  He alleged that all along he was the only person who made payments to service the mortgages under the 1987 and 1988 transactions.  He also alleged in his testimony that he had made a partial repayment of $120,000 for the 1987 mortgage. 

5.  These assertions are disputed by the Defendants.  The 2^nd Defendant said the 1987 transaction was a genuine purchase by her and she paid the down payment to the Plaintiff and made all the mortgage payments.  In 1988, both defendants said there was a genuine sale to the 1^st Defendant and all mortgage payments under the 1988 mortgage were paid by the 1^st Defendant. 

The burden of proof

6.  Before I discuss at greater length the two transactions in 1987 and 1988, I would dispose of some false premises of the Plaintiff in advancing his case of beneficial ownership on his part.

7.  In his submissions, the Plaintiff said he did not need to bear any burden of proof because the trust is established by a separate of legal estate and the beneficial enjoyment of the Property.  Since he had been living there during the relevant period and the Property was used as a matrimonial home of his family, he had a beneficial interest in the Property.  He cited some passages from some textbooks to support his contention: Sarah Nield, Hong Kong Land Law, 2^nd Edn Para. 1.6.2.3; Alastair Hudson, Equity & Trusts, 3^rd Edn Chapter 14.

8.  Since the Plaintiff is a layperson, I do not blame him for misreading the textbooks.  It is very dangerous to read some passages from textbooks out of context and treat such passages as a full and complete statement of the law.  Reading the textbooks cited in proper context, I do not consider the authors subscribed to the propositions relied upon by the Plaintiff. 

9.  In the present case, we are not dealing with the interest of the Plaintiff in the property of the 2^nd Defendant as his husband as the Family Court would need to in the context of an ancillary relief application in a divorce suit.  The parties are still married to each other and there is no divorce suit on foot.  The pleaded case of the Plaintiff asserts proprietary interest in the Property on his own right based on his contribution to the purchase price and mortgage payments for the Property.

10.  Whether it is a case of express trust or implied trust, the Plaintiff bears the burden of proof of establishing the factual matrix based on which he claims the trust arises.  Even though occupation may give rise to constructive notice of beneficial ownership, it is never sufficient for a person to assert beneficial ownership by simply showing that he has been occupying a property or that the property was used as his matrimonial home.  There could be many reasons why even though he is not a beneficial owner of the property, he is yet allowed to live there by the real beneficial owner.  One possibility is that he is allowed to live there out of the generosity of the real owner due to the relationship between the parties or the relationship between the real owner and his spouse.

11.  In the present case, the Property was assigned to the 2^nd Defendant in 1987.  According to the 1987 Assignment, it was a sale at a consideration of $340,000.  The Plaintiff did not dispute (and he actually admitted in Paragraph 27 of his Affirmation of 3 April 2004) that he had received the said sum from the solicitor handling the sale.  There is also documentary evidence showing payment of the down payment and legal expenses by the 2^nd Defendant and the 1987 mortgage was in her name.  Hence, prima facie the beneficial ownership was transferred to the 2^nd Defendant.   

12.  Given their relationship, it is not surprising that the 2^nd Defendant allowed the Plaintiff to continue to reside at the Property after the transfer of the beneficial ownership.  Occupation per se does not establish the Plaintiff’s beneficial ownership in these circumstances.

13.  In order to establish his beneficial ownership, the Plaintiff has to counter the prima facie position by showing that the 1987 Assignment was a sham and he had paid back the money to the 2^nd Defendant and he made payment for the 1987 mortgage.  Further, by virtue of the presumption of advancement (given the relationship between the Plaintiff and the 2^nd Defendant), he also needs to show this arrangement was not intended to be a gift from him by telling the court what was the real purpose of such arrangement.  The Plaintiff bears the burden of proof in respect of all these matters.

14.  Unless the Plaintiff satisfies this court that he somehow remained as a beneficial owner after the 1987 transaction, he has no right to complain about what happened afterwards.  The Plaintiff emphasized in his submissions that this case is not only about resulting trust and he also has causes of action in breach of trust, breach of fiduciary duties, undue influence and misrepresentation.  However, irrespective of how the Plaintiff framed his case by reference to all these different causes of action, at the heart of the matter the Plaintiff has to establish his beneficial interest in the Property. 

15.  As regards the 1988 transaction, the documents show that prima facie it was a sale from the 2^nd Defendant to the 1^st Defendant at the price of $380,000 and the 1^st Defendant did pay the purchase price to the 2^nd Defendant through the solicitor. 

16.  Even if the Plaintiff succeeds in establishing that he remained as a beneficial owner after the 1987 transaction, his equitable interest cannot prevail over a bona fide purchaser for value without notice.

17.  The Plaintiff asserts that the money that the 1^st Defendant used to pay the purchase price and mortgage payment actually came from him.  It was further averred that the 1988 transaction was stage two of a “money kiting arrangement” instigated by the Plaintiff purportedly on legal advice.  He bears the burden of proof in respect of these. 

The transactions and the Plaintiff’s alleged beneficial interest

(1) The internal flaws in the Plaintiff’s case 

18.  It is not disputed that the Plaintiff suffered a loss in his securities trading in 1987.  He admitted he was sued in respect of his liabilities arising from such trading for around $900,000 at the end of 1987.  He was in need of cash.

19.  The 2^nd Defendant testified that the Plaintiff asked her to buy the Property from him at the price of $340,000.  She complied with his request and paid him $80,000 as down payment with the balance of $260,000 financed by a bank mortgage.  She testified that she paid the mortgage payments herself.  She was working as a midwife and earning about $10,000 per month at that time.  The Plaintiff paid her $2,500 for household expenses and on top of that he paid all the utilities and other outgoings relating to the Property.  She said she could afford to pay the $3,090 mortgage payment each month.

20.  On the other hand, the Plaintiff testified that he had repaid the 2^nd Defendant the $90,000 she paid ($80,000 purchase price plus $10,000 legal expenses) using the sale proceeds he received from the solicitor under the 1987 transaction.  The balance of the money he asked the 2^nd Defendant to deposit into the account of the 1^st Defendant for the purpose of facilitating stage two of his money-kiting arrangement.

21.  The Plaintiff also testified that he had partly paid off the 1987 mortgage before the 1988 transaction.  In his affirmation of 3 April 2004, he said he could not remember the figure.  During the course of the trial, he suddenly recalled that the sum was $120,000.  He could not explain why he could suddenly remember this figure without any assistance almost 10 years after the event whilst he could not remember that in 2004.

22.  The Plaintiff is a meticulous person and he kept a lot of records relating to the Property.  He produced some cheque stubs of his to evidence the payments he made in respect of the outgoings of the Property.  There are cheque stubs of relative small monetary amounts dated back to 1987 in the trial bundles.  If the Plaintiff had actually made such a substantial payment to the 2^nd Defendant for repayment of her $90,000 and onward transfer to the 1^st Defendant, it is unbelievable that he had not kept the cheque stub for the same.  Likewise, it is also unlikely that he had not kept the cheque stub for his alleged $120,000 repayment of the mortgage.

23.  The Plaintiff cannot produce any documentary evidence to support his payment of the $340,000 to the 2^nd Defendant and the repayment of $120,000 to the bank.  These are substantial amounts and they added up to $460,000.  The Plaintiff was in need of cash to finance his debts.  Against that background, is it likely that he would use money as he alleged instead of paying off his debts?

24.  In fact, the so-called stage two of his money kiting arrangement did not make any sense.  The absurdity of the alleged money kiting scheme can be demonstrated by comparing the respective notional cashflow positions of the Plaintiff at different stages of his scheme.  From the 1987 transaction, the Plaintiff got the sale proceeds in the sum of $340,000.  After deducting the reimbursement of $90,000 to the 2^nd Defendant, the Plaintiff could have retained $250,000 for his own cashflow.  Instead of that, the Plaintiff’s case was that he had proceeded to what he called stage two to his money kiting scheme.  According to him, the $250,000 was used in the name of the 1^st Defendant to pay for the consideration under the 1988 transaction.  The purchase price of $380,000 was financed by a mortgage of $150,000 leaving a balance of $230,000 to be paid by cash.  The $250,000 was, the Plaintiff said, used up for the payment of that balance and the legal costs for the 1988 transaction.  Since the 1987 mortgage had to be discharged, together with legal costs around $20,000, all that the Plaintiff could have got at the end of stage two would be $100,000 ($380,000 - $260,000 - $20,000).  In other words, the Plaintiff would get $150,000 less by way of cashflow by going through stage two instead of stopping at stage one.  Does that make sense for someone who was in need of cash to meet a claim of $900,000?

25.  The above analysis is done on a notional basis.  I am aware that the Plaintiff said he had made a partial mortgage repayment of $120,000 and there were some mortgage instalment payments between December 1987 and July 1988.  These matters does not alter the net cashflow benefit that the Plaintiff could derive from his alleged scheme.  The $120,000 and mortgage instalment payments would need to come from the Plaintiff’s own resources and they would not affect the net cashflow position solely arising from the scheme after stage one and that after stage two.

26.  Further, there was a transaction cost of about $20,000 for stage two.  Hence, if the Plaintiff were to be believed, he had incurred $20,000 to put himself into a less advantageous position in terms of cashflow.  That does not strike me as credible.

27.  With the reduction of mortgage amount under the 1988 transaction, the monthly instalment payment was reduced.  However, it is not the Plaintiff’s case that this was the purpose of stage two.  If the aim was to pay less by way of monthly instalment payment, it could be achieved by making partial repayment instead of having the Property assigned to another person.

28.  Further, on the evidence before me, it is quite clear that the Plaintiff did not have a very close relationship with the 1^st Defendant.  They might have seen each other at family gatherings or other social occasions.  But it is quite clear to me that they did not have the mutual trust and confidence with each other to the extent that the Plaintiff would feel safe enough to put his property under the name of the 1^st Defendant without any written acknowledgement of trust by the 1^st Defendant.  The Plaintiff admitted under cross-examination that he had not directly dealt with the 1^st Defendant concerning the Property between 1987 and 2002.  All along, the 1^st Defendant only dealt with the 2^nd Defendant.  It strikes me as highly unlikely that the 1^st Defendant would agree to act as a trustee for the Plaintiff in such circumstances.

29.  On the other hand, I have observed the 1^st Defendant during the course of the 2^nd Defendant’s evidence.  I am satisfied that the 1^st Defendant did genuinely care for the well-being of the 2^nd Defendant and sympathize with her for her plight.  I accept his evidence that he had a good relationship with the 2^nd Defendant and her daughter.

30.  The Plaintiff modified his evidence on the purpose of the 1987 and 1988 transactions when he testified in the witness box.  He said he had to put the Property in the name of others to avoid some possible actions by his brothers.  He never mentioned this in the several affirmations and witness statements filed by him.  Those affirmations and witness statements were lengthy documents and if there were any truth in the Plaintiff’s assertion in the witness box, I believe he would certainly have mentioned it in them.  On the contrary, the Plaintiff deposed quite specifically at Paragraph 21 of his Affirmation of 3 April 2004 about the purpose of the transactions (adopted by him as his evidence in chief),

“Because I was in need of moneys, partly to implement the disposition and partly to fund my own export business …”

But no rational person would dispose of his property solely for the purpose of disposing of it.  The disposition must be a means to fulfill some substantive purposes.  The only purpose that the Plaintiff had given in his written evidence was his need of cash.  This assertion of concealment of ownership from his brother is a new allegation.  In the circumstances, this court is entitled to weigh this piece of evidence with a degree of skepticism. 

31.  Even if the purpose of the transactions were to conceal his ownership of the Property instead of cashflow, I still fail to see why there had to be two stages.  There is no reason why the Plaintiff could not have transferred the Property into the name of the 1^st Defendant in 1987.

32.  Hence, I am of the view that the Plaintiff’s own case is inherently incredible and I do not find his evidence reliable.  I turn to examine the Plaintiff’s criticisms of the defence case of genuine sales under the 1987 and 1988 transactions.

(2)     The Plaintiff’s attacks of the defence case   

33.  If the 2^nd Defendant was the real beneficial owner after the 1987 transaction, she should retain the sale proceed under the 1988 transaction.  The Plaintiff said she did not do so.  He alleged that the 2^nd Defendant transferred the balance of the consideration she received from the 1^st Defendant under the 1988 transaction into his saving account.  He said the sum was about $190,000 minus legal costs.  He produced exhibit P-1 to support his assertion.  I do not think P-1 proves his case.  On the contrary, P-1 shows that he did not have such a large sum in his saving account.  Otherwise, he would not have to leave his current account in red.  He gave a disingenuous explanation that he wanted to leave a debit balance for the fear that the bank would cancel his overdraft facility if he did not use it.  Such testimony on his part only serves to demonstrate his lack of respect for the truth.

34.  P-1 does not show any deposit of $190,000.  Rather, the Plaintiff had to add up several cash deposits between 29 July and 5 August 1988 and then minus a cash withdrawal of $12,000 on 23 July 1988 to come up with a figure of $194,000 (see Trial bundle C306).  If the Plaintiff had received that sum from the 2^nd Defendant in early July, given that he would need to use the money in the near future as shown in P-1, the most straightforward way was to deposit the money into his current account.  Instead of doing so, the Plaintiff asked this court to believe that he deposited the money in his saving account (the record of which he could not produce whilst he could produce only one page of the bank statement for his current account) and he transferred the necessary cash into his current account when he drew cheques.  Again exhibit P-1 serves to discredit him on this story.  On 29 July 1988, three cash deposits were made by the Plaintiff and three cheques were drawn.  However, the cash deposits were not sufficient to cover the cheques, leaving an overdraft balance of $12,924.59 at the end of that day.  If the Plaintiff had $190,400 sitting in his saving account, why would he deposit less cash into his current account than the cheques he drew?   

35.  I do not believe the cash deposits shown on exhibit P-1 were monies from the 1988 transaction.  As suggested by defence counsel, they could be trade or other incomes received by the Plaintiff during that period that had nothing to do with the 1988 Assignment.  The whole exercise in respect of P-1 is, in my judgment, a contrived effort on the part of the Plaintiff to sustain his case that the sale proceed under the 1988 Assignment was paid to him.

36.  I also agreed with Mr Ng that it is strange that the Plaintiff would have kept the statement for his current account but not his passbook or other record for his saving account if his intention were to have evidence of the $190,400 payment to him.  If the Plaintiff did not deliberately keep P-1 for this purpose, then it is a remarkable coincidence that he only retained this particular bank statement whilst other bank records of his were lost.      

37.  Hence, I do not think P-1 assist the Plaintiff.

38.  The Plaintiff was on stronger ground in his reliance on a Power of Attorney dated 7 May 2002 executed by the 2^nd Defendant in his favour.  On the face of it, the 2^nd Defendant acknowledged in that document that the Plaintiff had made all the payments in respect of the purchase and the mortgage instalments of the Property.

39.  However, the document was in English and I accept the evidence of the 2^nd Defendant that she was not conversant with the English language.  The Plaintiff could not explain why he could not provide a Chinese document for the 2^nd Defendant to sign.  He said he copied the form from the Power of Attorney Ordinance.  But there was a Chinese version in the ordinance.  The Plaintiff had been able to write in Chinese fluently as demonstrated by his letter dated 19 January 2002 to the 1^st Defendant.

40.  The 2^nd Defendant said she executed the document on the misrepresentation of the Plaintiff that it was to facilitate the Plaintiff’s handling of the repair of the Property and the business of the incorporated owners.  The Plaintiff said he did not need such document to conduct such business as he was a resident secretary of the incorporated owners.  Yet by a Freudian slip, he told the court that he already had a simple authorization from the 2^nd Defendant for this purpose.  Weighing the evidence of the two witnesses, I prefer the evidence of the 2^nd Defendant.  In the circumstances, I did not attach weight on the acknowledgement in the power of attorney.

41.  Actually, the terms of the power of attorney contradict the Plaintiff’s case that all along he was responsible for the mortgage payments under the 1988 mortgage.  In the power of attorney drafted by the Plaintiff, it is said that the mortgage payment was made until June 2001.  In truth, according to the bank records produced by the 1^st Defendant, the 1988 mortgage had been fully repaid in March 2001.  When the Plaintiff was cross-examined in this regard, he said he was expecting there might be some other charges.  That is another blatant lie by the Plaintiff to cover his mistake.  The power of attorney was prepared in May 2002.  By then, it must have been plain to everyone that no other charges had to be paid after March 2001.  

42.  The Plaintiff placed reliance on the fact that he was allowed to occupy the Property even after 1988 and he paid for the outgoings.  At the same time, the 1^st Defendant did not derive any benefit from the Property.  No rent was collected from the 2^nd Defendant throughout the years between 1988 and 2002.

43.  Whilst these are some of the circumstantial matters that the court may take into account in considering whether any inference should be drawn as regards the real beneficial ownership of the Property, there are countervailing circumstances in the present case,

(a)     In view of the relationship between the 2^nd Defendant and the 1^st Defendant (which I have already alluded to), it is not at all surprising that the 1^st Defendant permitted the 2^nd Defendant to live at the Property without any payment of rent; 

(b)    The 1^st Defendant had testified that initially the arrangement was meant to be temporary and the 2^nd Defendant said she had once planned to move to live with her parents;

(c)     The permission to occupy the Property was given to the 2^nd Defendant and the Plaintiff only lived there as the husband of the 2^nd Defendant;

(d)    The 2^nd Defendant promised the 1^st Defendant that she would take care of all the outgoings relating to the Property as long as she lived there;

(e)     Since the Plaintiff was living there as well, and he was the husband with income, it is not surprising that he should pay for all the outgoings as part of his matrimonial responsibility irrespective of the beneficial ownership of the Property;

(f)     Prior to a letter dated 16 May 2002, the Plaintiff had never asserted to the 1^st Defendant that he had a beneficial interest in the Property by reason of his contribution to the mortgage payments and that the 1987 Assignment was a sham.

44.  The Plaintiff also submitted that the 1^st Defendant stands to lose at least about $3 million in making the Gift if he was the real beneficial owner.  He submitted that the 1^st Defendant was not such a generous person.

45.  If the donee of the Gift were the Plaintiff, this would be a powerful submission.  Given the relationship between the 1^st Defendant and the Plaintiff, it is most unlikely that the 1^st Defendant would have made such a gift to him.  However, the donee was the 2^nd Defendant.  As I said, I accept that the 1^st Defendant did genuinely care for the 2^nd Defendant.  Of course, this does not detract from the fact that the Property was a valuable asset in 2002.  But I must assess the likelihood of this being a genuine gift in the light of the following factors as well,

(a)     The 1^st Defendant was very ill at the time of the Gift and he wished to make adequate provision for the 2^nd Defendant and her children.  Initially, he wanted to make a gift in favour of the daughter of the 2^nd Defendant.  His health condition was such that he thought he could not wait for the return of the daughter who was studying abroad;

(b)    The Property had all along been used by the 2^nd Defendant and her family.  The 1^st Defendant and his family did not have much use of the Property;

(c)     The family of the 1^st Defendant was well provided for in terms of their financial needs;

(d)    The Property had been acquired in 1998 at an under-value (see the discussion below). 

46.  Taking all the circumstances into account, I am not satisfied that the court can infer from the occupation of the Property by the 2^nd Defendant and her family and the Gift in 2002 that the 1^st Defendant was not the beneficial owner of the Property between 1988 and 2002.  In any event, this submission does not assist the Plaintiff since he was not the donee.

47.  The Plaintiff cross-examined both Defendants with a view to establish that they did not have the means to finance the mortgage payments.  I do not think he succeeded in doing so.  The monthly mortgage payment under the 1987 mortgage was $3,086.25.  From the 2^nd Defendant’s account of her monthly income and expenditure at the material time, she could afford to pay this monthly sum.  I am satisfied that her account was truthful.

48.  As regards the 1^st Defendant, whilst his account at D-1 may have understated certain items like car-running expenses and management fees, the mortgage instalment was only $1,772 per month.  It was well within his financial ability to pay the same.  The 1^st Defendant had produced his passbook to prove his payment of the mortgage instalments from 1998.

49.  Conversely, the Plaintiff had not given any account of his income and expenditure pattern during the material times.  He said he contributed $8,000 per month to household expenses and the mortgage payments were included in that.  On the other hand, the 2^nd Defendant said he had only paid $2,500 per month to her although in addition he paid for the outgoings relating to the Property.  I prefer her evidence to that of the Plaintiff.

50.  At one point, I was concerned about the alleged partial repayment of the 1987 mortgage before the 1988 Assignment.  Whilst there was evidence to enable this court to infer a partial repayment (comparing the mortgage amount of $260,000 and the $143,997.78 paid for discharging the mortgage on completion under the 1988 Assignment), there is no reliable evidence showing that the partial repayment was made by the Plaintiff.  For reasons already given, I do not find him to be a credible witness and I would not act on his uncorroborated testimony.  Further, he had not even cross-examined the 2^nd Defendant with regard to the alleged partial repayment.  In the circumstances, bearing in mind the burden of proof is on the Plaintiff, and the specific assertion of payment of $120,000 was only first made in the course of the Plaintiff’s oral testimony, I do not think this court should draw any adverse inference against the 2^nd Defendant for not dealing with the alleged partial repayment in her evidence.

51.  At the trial, the Plaintiff belatedly relied on the fact that he had the letters from the Rating and Valuation Department and the Inland Revenue Department in his possession (exhibits P-2, P-3 and P-4) concerning the inadequacy of the consideration for the 1988 Assignment as evidence of acknowledgment of his beneficial interest by the 1^st and 2^nd Defendants.  The Plaintiff did not include these documents in the trial bundles notwithstanding this court’s specific direction on 1 March 2007 at the pre-trial review.  Nor did he give evidence about the circumstances he got these documents when he gave evidence in presenting his case.  He only raised the point when he cross-examined the 2^nd Defendant.  By then he had closed his case and the 1^st Defendant had also closed his case.  The Plaintiff did not put these documents to the 1^st Defendant in cross-examination.

52.  This court exercised its discretion to grant indulgence to the Plaintiff to re-open his case and he testified that he got P-2 and P-3 in April 1989 through the 2^nd Defendant.  He also got P-4 from the 2^nd Defendant.  He believed they were documents given by the 1^st Defendant to the 2^nd Defendant for onward transmission to him because these documents were addressed to the 1^st Defendant and the solicitor acting for him in the 1988 transaction.

53.  The 1^st Defendant had no recollection about seeing P-2 and P-3.  He pointed out that P-2 was sent to the Property.  With regard to P-4, he said he had handed it together with some other documents relating to the Property to the 2^nd Defendant in April 2002 after he had executed the Gift.  He had not handed the documents to the 2^nd Defendant for onward transmission to the Plaintiff.  The 1^st Defendant was aware of the valuation of the Property at $650,000 by the Rating and Valuation Department and in 1990 he paid the additional stamp duty for the 1988 Assignment through the solicitor.  He did not do anything to compensate the 2^nd Defendant for the undervaluation as he could not afford to pay a higher price. 

54.  The 2^nd Defendant had no recollection about these documents.  But she confirmed that the 1^st Defendant had handed some documents relating to the Property to her at the time of the Gift.  She used to let the Plaintiff handle all English letters.

55.  As regards the undervaluation, the 2^nd Defendant said she did not have any proper valuation at the time of the 1988 Assignment.  Instead, she only added several ten thousands on top of the price at which she acquired the Property from the Plaintiff in 1987.  She thought the price was reasonable.  The 1^st Defendant just paid her the price she asked.

56.  There are two different aspects stemming from the evidence relating to P-2 to P-4.  The first one is whether the possession by the Plaintiff of these documents constituted evidence of acknowledgment by the Defendants of his beneficial ownership of the Property.  I accept the evidence of the 1^st Defendant that he did not forward any documents to the 2^nd Defendant for onward transmission to the Plaintiff.  I also accepted his evidence that he learnt about the need to pay additional stamp duty in 1990 and he paid accordingly.  Further, I accept the evidence of the 2^nd Defendant that she used to pass English letters to the Plaintiff for handling.  The 2^nd Defendant was also a client of the same solicitor regarding the 1988 transaction.  The 1^st Defendant had an accident in 1989.  It is quite possible that the letters of 1989 were not brought to his attention.  It is also quite possible that the 2^nd Defendant had unwittingly passed those letters to the Plaintiff.

57.  On the evidence available, I do not think the court should infer that the letters were forwarded to the Plaintiff by the Defendants in recognition of his beneficial ownership in the Property.  Had that been the case, one would expect them to demand the Plaintiff to pay the additional stamp duty.  The incontrovertible evidence was that the additional stamp duty was paid by the 1^st Defendant.  There is no substance in the Plaintiff’s allegation that the additional stamp duty was paid with his own money retained by the solicitor firm in the 1988 transaction.  The different figures in the respective completion statements rendered to the 1^st and 2^nd Defendants speak for themselves and one cannot sensibly conclude that some money had been retained by the solicitor out of the differences. 

58.  Thus, the possession of these documents by the Plaintiff is neither here nor there in terms of the proof of his beneficial interest over the Property.

59.  The second aspect stemming from exhibits P-2 to P-4 is the undervaluation of the Property in the 1988 sale.  This is a factor that the court must take into account in deciding whether the transaction in 1988 was a genuine sale or, as alleged by the Plaintiff, a sham transaction to facilitate his money-kiting.

60.  In this connection, one must bear in mind that, as explained above, the Plaintiff bears the burden of proof.  The Defendants did not have to prove anything if the Plaintiff fails to make out his case that the 1988 sale was a sham transaction devised by him with the beneficial interest retained by him despite the transfer of the legal title.

61.  Bearing in mind all the matters alluded to above, I do not think it is right to infer from the undervaluation that the 1988 sale was a transaction instigated by the Plaintiff for money-kiting.  As analysed above, the 1988 sale did not make any sense if it was conducted for the generation of cashflow for the Plaintiff.

(3) The overall conclusions on the Plaintiff’s alleged beneficial ownership

62.  In the light of the above discussion, I am not satisfied that the Plaintiff had repaid the 2^nd Defendant the sale proceed under the 1987 transaction and that he had paid the mortgage payments under the 1987 mortgage.  

63.  Further, I am not satisfied that the 1^st Defendant acted as a trustee for the Plaintiff between 1988 and 2002.  I do not believe the Plaintiff’s assertion that he made the payments under the 1988 mortgage.  Nor am I satisfied that the 1987 and 1988 transactions were sham transactions devised by the Plaintiff for his money-kiting purposes.

64.  In other words, the Plaintiff fails to discharge the burden of proof in establishing that he remained as a beneficial owner of the Property after the 1987 Assignment.

The result

65.  Having reached that conclusion, the Plaintiff simply has no right to complain about the Gift.  All his causes of action are misconceived.  The action must be dismissed.

66.  There shall also be a costs order nisi that the Plaintiff shall pay the costs of the Defendants, such costs to be taxed if not agreed.

Postscript

67.  The Gift was made in 2002.  Since then, estate duty has been abolished.  In any event, even under the old law, the potential risk regarding a charge arising from estate duty for the estate of the donor would have lapsed after three years from the date of the Gift.  Further, 5 years have elapsed and as far as this court is aware, no bankruptcy petition has been presented against the 1^st Defendant.  By reason of Sections 51 and 49 of the Bankruptcy Ordinance, a gift is only at risk of being set aside by a trustee in bankruptcy for a period of 5 years ending with the day of presentation of a bankruptcy petition against the donor.  It seems that the Plaintiff’s concern about the adverse effect the Gift might have over the title of the Property has been spent.  In other words, even if the Plaintiff could have established his beneficial interest, there is simply no point to set aside the Gift. 

68.  I was told at the trial that at one stage the 2^nd Defendant was willing to transfer half share of the Property to the Plaintiff.  I have not explored the details of that since that piece of information is irrelevant for the purpose of my adjudication.  However, if there had been such an offer, this piece of litigation is rather meaningless.  Moreover, by reason of the hostile and aggressive stance adopted by the Plaintiff, the relationship between him and the 2^nd Defendant had been broken down.  Further, a large amount of costs must have been incurred by the defendants in defending this meaningless and senseless piece of litigation.  These are the prices that the Plaintiff has to pay for his own folly.