CHU YIP YAU AND ANOTHERv. CHU YIP SING

HCA 1492/2013

[2018] HKCFI 1430

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1492 OF 2013

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J U D G M E N T

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1.  This dispute concerns a residential property and a car parking space, which were purchased pursuant to the commitment of joint contribution by brothers but registered in the sole name of one of them. The defendant used to be legally represented. He acted in person at the trial.

Background

2.  Four of the five brothers in the family were involved in the purchase of the properties in question.  Amongst these four brothers, the defendant (“Sing”) is the eldest, followed in accordance with seniority by the 2^nd plaintiff (“Fu”), the 1^st plaintiff (“Yau”) and the youngest brother, Chu Yip Keung (“Keung”).

3.  In 1988, the four brothers committed with each other for joint contribution towards a fund in support of the purchase of a residential flat, namely, Flat B, 10/F, Block 14, Chevalier Garden, No 2 Hang Shun Street, Shatin, Ma On Shan, New Territories (“the Flat”).  The down payment for the purchase and the incidental expenses were financed by the fund.  The balance of the purchase price was financed by mortgage, which was also repaid out of the fund.  Expenses such as rates and management fee for the Flat were also settled by the fund.  The four brothers agreed to contribute in equal shares towards the fund.

4.  In the following year, the four brothers also purchased a car parking space no 6 on the Ground Floor of Parking Area No 10 of the same development (“the Parking Space”) on a similar basis.

5.  The properties were purchased under the Home Ownership Scheme.  Sing became the sole registered owner of these properties, and held them for the four brothers in equal shares.

6.  In June 2002, the Flat was mortgaged for another loan of HK$940,000.  Part of this loan went to settle the previous outstanding mortgage.  Part of it was used to pay the premium to the Housing Authority in satisfaction of the pre-condition under the Home Ownership Scheme before the properties could be let for income.  The rest of this loan in the sum of about HK$177,000 went to Keung in consideration of his disposition of his ¼ beneficial interest in the properties to the other three brothers, the parties to this action.  Keung left the picture.

7.  Now the burden of repayment of the 2002 mortgage and payment of expenses in connection with the properties, such as electricity, telephone, rates and management fees, rested with the three brothers, the parties to thisaction.  The three brothers gave each other the same commitment of making equal contribution towards a fund for such purpose since June 2002.  Sing became holding the properties on trust for himself and the two others in equal shares.  The income from renting out the properties would enter and subsidize the fund on the same basis.

8.  In 2008, the manager of Chevalier Garden commenced legal action in relation to the Parking Space, and Sing as the registered owner was named as the defendant (District Court Action No DCCJ 3373/2008).  I happened to be the trial judge in that case in 2011.  I found for the manager and entered judgment against Sing in March 2011 with costs.  All those led to an amount of HK$647,835.78 payable.  Each of the three brothers should be responsible for contributing ⅓ share of such payable amount.

9.  According to the pleadings, the above background is the common ground of the parties.

The dispute

10.  According to Fu and Yau, by the time when Keung disposed of his interest in the properties to the other three brothers, Sing has already defaulted in making his share of contribution to the then four brothers’ fund.  The outstanding contribution by Sing amounted to HK$260,000.  Such shortfall effectively had to be made up by the other three brothers.  Each had to put up HK$86,667.

11.  When the properties became those of the Yau, Fu and Sing beneficially in 2002, they began contributing towards the three brothers’ fund.  However, since February 2004 [1], Sing has defaulted in making his contribution towards the fund.  The pleading suggests that the outstanding amount was HK$76,000.  Again the shortfall had to be made up by Fu and Yau.

12.  Now faced with the costs liability arising out of DCCJ 3373/2008, the brothers had to resort to sell the properties.  For that purpose, they attended the office of Raymond Chan, Kenneth Yuen & Co, Solicitors (“RC&KY”), on 11 April 2011, and gave instruction to the solicitors to handle the conveyancing.  A document was signed before the solicitor, whereby it was recorded that the brothers agreed to sell the properties and to instruct RC&KY for such purpose.  They also agreed to share the proceeds of sale, net of all the costs and expenses incidental to the sale, in the ratio of 15% to Sing and 85% to Yau and Fu (or 42.5% each).  According to Yau and Fu, the revised ratio was to reflect their relative contributions towards the brothers’ fund.

13.  As Sing has never put the properties on sale or further instructed RC&KY in that connection as agreed, Yau and Fu commenced the present action.  Yau and Fu seek to specifically enforce their agreement mentioned above.  Alternatively, they seek a declaration that Sing held the properties on trust for the three brother beneficially in equal shares, and claim damages or equitable compensation representing what Sing owes to Yau and Fu both during the time of the four brothers’ fund until 2002 and the three brothers’ fund since 2002.

14.  Sing denies the alleged failure on his part to make contribution during the period between 1998 and 2002.  By his pleading, Sing also raises the defence of limitation, saying that such claim is in any event time-barred.  Sing also denies the alleged failure to make contribution since 2004.  Instead he complains that Yau and Fu have failed to account for the rental income in respect of the properties since 2002, and counterclaims his ⅓ share of that in the sum of HK$132,000.  Sing accepts responsibility for ⅓ of the costs liability arising out of DCCJ 3373/2008.  He disputes the existence and correctness of the alleged agreement of the brothers to sell the properties and to share the net proceeds of sale.

Issues

15.  If the brothers’ agreement existed in terms as alleged by Fu and Yau, this should settle the rights and interests of the three brothers in respect of the properties back in 2011.  There will be no basis for either the alternative claim or the counterclaim.

The alleged agreement in April 2011

16.  I should mention a few matters revealed by the evidence constituting the backdrop of the alleged agreement in April 2011.

17.  First, the evidence shows that the brothers’ fund, from its conception as a four brothers’ fund and its becoming a three brothers’ fund, was understood to be utilised not just for discharging liabilities and settling expenses in connection with the properties but also for general family expenses including the maintenance of the brothers’ parents.  In his evidence, Sing also acknowledged that, and even considered his alleged direct payment to the mother for her maintenance as representing his contribution to the brothers’ fund.  In such context, there is and can be no issue as to whether or not any portion of their contributions to the brothers’ fund so utilised was referable to the acquisition and maintenance of the properties.  Nor is there any issue as to whether the same should be taken into account in substantiating their actual beneficial interest in the properties.

18.  Second, Madam Pang Yuen Yi (“Pang”) has been entrusted by the three brothers since June 2002 to keep the account and record of their contributions and the income as well as expenses of the brothers’ fund.  She was at the time and still is the girlfriend of Yau.  According to her, the records and account of the four brothers’ fund before she took over used to be prepared by甘育慈 (“Kam”), wife of the eldest of the five brothers of the family. 

19.  Third, Pang managed to keep detailed records, and explain the amount owed by Sing to the brothers’ fund at different stages since 2002.  Insofar as the alleged outstanding contributions by Sing to the three brothers’fund since 2004 is concerned, the witnesses on the plaintiffs’ side quantifiedthe amount to be HK$115,500 in their statements.  This apparently exceeds the amount pleaded.  However, according to the evidence of Pang in court and the documents referred to, the relevant amount remained close to, actually slightly less than, what was pleaded.  I shall turn to that in detail later in this judgment.

20.  Fourth, there was the undisputed outstanding contribution by Sing towards the costs in excess of HK$640,000 arising out of DCCJ 3373/2008.  According to Yau and Fu, they have been settling such costs by instalments.

21.  Against the above backdrop, I turn to the alleged agreement in April 2011.  As mentioned, Sing disputes the existence and correctness of the document dated 11 April 2011 that is said to evidence such agreement. According to the pleadings, the original of such document was at all times kept by RC&KY.  A copy of the document was given to Sing after signing. Sing’s dispute is based on the fact that Yau and Fu have failed to arrange inspection of the original of such document by his then solicitors despite repeated requests.

22.  There is no dispute that the solicitors for Yau and Fu wrote to the then solicitors for Sing in late 2013 reiterating that they did not possess the original of the document, but advised that Sing had the liberty to inspect the same at RC&KY.  In 2016, the solicitors for Yau and Fu requested RC&KY to provide a certified copy of the document.  It was eventually provided by the solicitor responsible for the making of the document, Mr Jim, in February 2018.  Mr Jim was also the solicitor representing Sing in DCCJ 3373/2008 and appearing for him at the trial.

23.  The document was a one-sheet photocopy of the three brothers’ identity cards, followed by the following handwritten content:

“ 我等朱業富、朱業陞及朱業有現確認同意及指示陳兆明袁耀彬律師事務所處理售出位於沙田富安花園14座10樓B室和10號停車區之6號泊車位之法律手續，並在出售上述單位和泊車位得到的售價中扣除DCCJ 3373/2008訴訟涉及之費用和售賣這單位及車位之律師費、地產佣金及其他支出，然後將售價餘額之15% 分配支付給朱業陞，而其餘之 85% 即平均分配給朱業富和朱業有二人 (即各佔42.5%) 。

日期：二〇一一年四月十一日

……”

24.  Literally, the three brothers confirmed their agreement to sell the properties and to instruct the solicitors to handle the conveyancing.  Deducting the costs in DCCJ 3373/2008 and the costs, commission and expenses incidental to the sale, the sale proceeds should be distributed to Sing and the other two in the ratio of 15% and 85% (or 42.5% each) respectively.

25.  Sing admitted the occasion at the office of RC&KY on 11 April 2011 and his signing of the document.  But he carried on by asserting that Yau and Fu wrongfully induced him to attend the office of RC&KY on that day for the purported purpose of explaining the judgment in DCCJ 3373/2008.  He rendered his identity card and signed the document as a result of duress by his brothers.  The content of the document was entirely dictated by Yau to Mr Jim.

26.  The nature of Sing’s above allegations renders his such evidence inadmissible in the absence of any or proper pleading.  Yau and Fu apparently did not object to dealing with such un-pleaded allegation. And it is not difficult to see why.  Yau and Fu called Mr Jim to testify under subpoena.

27.  Whilst the existence of the above document dated 11 April 2011does not seem to be in dispute any more during the trial, Mr Jim nevertheless explained that the original of the document has been passed to the staff of his then Yuen Long office responsible for conveyancing pending further instruction.  Whilst the document might not have been lost, it could not be located despite search effort.  However, he confirmed that the document was prepared by him and he put down the handwritten content as a memorandum of the brothers’ agreement to instruct him on the occasion.

28.  Sing’s cross examination of Yau and Fu in respect of what happened at the office of RC&KY on 11 April 2011 was next to no effect.  Sing’s cross examination of Mr Jim was likewise futile.  Mr Jim confirmed that there was no way he could have produced the memorandum of instructions without the information and terms of the agreement conveyed to him by the brothers.  He also confirmed that the document was given to the brothers to read before signing.  I have no reason for doubting Mr Jim’s evidence.

29.  I find that the wrongful inducement or duress alleged by Sing on the occasion of 11 April 2011 was totally unfounded.

30.  I find that the brothers’ agreement as evidenced by the memorandum of instruction dated 11 April 2011 in fact existed in terms as alleged by Yau and Fu.

31.  This was the agreement of the three brothers to realise the properties in order to meet the ends and consequentially to settle their respective shares of the net proceeds of sale as at April 2011.  The disparity in the brothers’ shares, ie, the substantially less share of Sing, was explained by what was said to be outstanding in his supposedly equal share of contribution to their fund.  Mr Chan appearing for Yau and Fu submitted that the revised ratio of share was more than fair, if one considers the evidence of valuation of the properties at the time [2] and that of the amount that Sing owed to the other two brothers at the time.  The exact calculation will have more to do with the alternative claim of Yau and Fu, and therefore more will be said about this later in this judgment.  Suffice it to say at this juncture that against the abovementioned backdrop revealed by the evidence, the actual disparity in the contributions over the years made by Yau and Fu on the one hand and those made by Sing on the other hand was obvious.

32.  More importantly, even assuming that the final account amongstthe three brothers in respect of their contributions to their fund might yet to be worked out on 11 April 2011, they had provided valuable consideration for the agreement as the solution to meet the financial needs and a mutually acceptable settlement of the net proceeds of sale to be shared amongst themselves.  The factual context also supports the binding effect of the agreement, even though it was one amongst family members.  No ground was actually pleaded in defence for challenging the binding effect or the enforceability of the agreement, once it is found to exist in terms as alleged by Yau and Fu.

33.  I see no reason why the three brothers should not abide by the agreement.

34.  This would have sufficed in disposing of the dispute, without turning to the alternative claim or the counterclaim.  I would nevertheless turn to the other factual disputes albeit briefly.

The alleged outstanding contribution by Sing to the brothers’ fund

35.  It became clear from the evidence, that of the witnesses included, that the basis for saying that Sing’s share of contribution to the four brothers’ fund was outstanding in the total amount of HK$260,000 as at 2002 was the report of Kam.  Whilst he denies that he owed such sum to the fund, Sing has pleaded no positive case in respect of his contributions during the period between 1998 and 2002.  In his evidence in court, Sing revealed that at the material times, his monthly income was irregular, and on average about HK$5,000.  His ability to honour his commitment to his brothers to contribute to the fund is objectively doubtful.

36.  The case of Yau and Fu is that the amount so owed by Sing to the four brothers’ fund was not only known but acknowledged by Sing. Mr Chan relied on section 23(3) of the Limitation Ordinance, and submitted that the right of Yau and Fu to claim for the amount owed by Sing up to 2002, albeit outside the 6-year limitation period, freshly accrued upon the acknowledgement of the debt by Sing by entering into the brothers’ agreement on 11 April 2011.  However, for the purpose of section 23(3),section 24 provides that such acknowledgment shall be in writing and signed by the person making the acknowledgement.  Whilst their agreement was evidenced by the memorandum of instruction signed by the brothers, the document itself strictly contained no reference to any quantified debt which Sing may be said to be acknowledging by signing it.

37.  Nevertheless, there is force in Mr Chan’s submission that the account amongst the brothers was taken into consideration in determining the revised ratio of share of beneficial interest in the properties, and thus the balance of the proceeds of the intended sale in April 2011.  Indeed Sing said that he has been told, though only in 2011, that he owed HK$260,000 to the four brothers’ fund. In his closing submission, Sing even contended that the burden arising out of such amount should be occasioned to the other three brothers then instead of Yau and Fu only [3].  The fact, as I find above, is that he did sign the memorandum of instructions to their solicitor on 11 April 2011, which reflected the revised ratio of share.  Ruling out the unfounded allegation of wrongful inducement and duress, I do not see why Sing would have accepted the terms of the revision and the instruction to the solicitor then, had it not been the outstanding amount that he knew he owed to the other three brothers.

38.  As to the sum of HK$76,000 said to be outstanding from the share of contribution by Sing to the three brothers’ fund since his failure to make any contribution in March 2004, the relevant running account prepared by Pang shows that between 2002 and June 2010, Yau and Fu eachhad contributed a sum of HK$140,472 [4] while Sing had contributed a sum ofHK$39,800 [5] since 2002 until March 2004.  As the shortfall was effectively covered by Yau and Fu, each of the two brothers has effectively paid about HK$33,557 more.  This would be less than that claimed (HK$38,000). Mr Chan was not able to advance any other calculation on the basis of the materials that he asked the court to refer to.

39.  Then there were the costs incurred in DCCJ 3373/2008 in the sum of HK$647,875.78.  Sing must be responsible for ⅓ of the sum, ie, HK$215,958.59.  The plaintiff in that action has apparently sought to enforcethe judgment by way of possession proceedings, namely, DCMP 1623/2012.  The evidence shows that Yau and Fu have shouldered up the burden of paying such outstanding costs so that the properties are safeguarded up to today.  Each of Yau and Fu has covered HK$107,979.30 of Sing’s ⅓ share of such costs liability, which he has admittedly not paid.

40.  As to the counterclaim, the claim for an account of the rental income from the properties fails to give credit to the fact that such income has entered and subsidized the brothers’ fund.  Further, the calculation projected in the counterclaim fails to take into account the utilisation of the brothers’ fund towards the various expenses.  This also highlights the lack of equity in Sing’s seeking an account of the rental income whilst at the same time denying his brothers’ entitlement to be compensated for shouldering up his outstanding contributions towards the fund.  In his closing submission,Sing seemed not to press on with his counterclaim, and suggested that it was the mistake of his then solicitors.

41.  In view of my conclusion in respect of the primary claim of Yau and Fu, I need say no more.

Disposition

42.  I make an order that Sing do specifically perform the agreement.  Only that the parties should now be given the liberty to agree on the appointment of the solicitors to conduct the conveyancing of the properties in the sale.  Failing such agreement, Yau and Fu on one part and Sing on the other part may put forward their respective nominations for such purpose.  Unless only one side has put forward nomination, in which case such solicitors nominated shall be appointed by default, the solicitors shall be appointed by the court in its discretion.  There will be liberty to the parties to apply for directions in respect of the conduct of the sale of the properties.

43.  Following the above event, I make an order nisi that Sing shall pay his brothers’ costs of this action, including any costs reserved, to be taxed if not agreed.  The costs order shall become absolute in the absence of application within 14 days to vary.

44.  I thank counsel for his assistance.

If requested, interpreter would be arranged to assist the defendant in receiving this judgment when handed down.