SIU WAI MING v. SHIU WAI HONG AND OTHERS

CACV 84/2020, [2025] HKCA 237

On Appeal From [2020] HKCFI 386

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 84 OF 2020

(ON APPEAL FROM HCA NO 290 OF 2014)

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REASONS FOR JUDGMENT

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Hon G Lam JA (giving the Reasons for Judgment of the Court):

1.  The main dispute in this case lies between two brothers, the plaintiff and the 1^st defendant, in relation to the beneficial ownership of a flat in Scenic Garden, Kotewall Road, Hong Kong (“Scenic Garden Property”), of which the 1^st defendant was registered owner at the material times. The plaintiff claimed he had a half share in that property, and therefore in the proceeds of its sale to a third party in 2009. After trial, in her judgment dated 5 March 2020 (“Judgment”),[1] B Chu J found that the plaintiff had in May 1998 given up his interest in that property and dismissed the plaintiff’s claim. The plaintiff’s claims against the 2^nd to 4^th defendants for dishonest assistance, knowing receipt and tracing were also dismissed. From the Judgment the plaintiff appealed to this court. At the conclusion of the hearing, the appeal was dismissed with costs. These are our reasons for the decision.

Background

2.  The principal facts that are undisputed or found by the judge may be set out as follows.

3.  The late Mr Shiu King (邵敬) (“Father”) and his wife had 3 sons born in 1949, 1952 and 1956 respectively, named Wai Yin, Wai Hong (the 1^st defendant), and Wai Ming (the plaintiff) (“3 Brothers”). From 1946 onwards, Father had run a wood furniture business under the trade name of “Pao Sun” (寶新) in Wan Chai. While furniture businesses under various other trade names were operated in the 1970s to 1980s with business registration in the names of Wai Yin or the 1^st defendant, the judge found that they were essentially part of, and set up with capital sourced from, the furniture business founded by Father (“Family Business”), which was at all material times operated from the shop at 15 Queen’s Road East (“15 QRE”).[2] At various points in time the 3 Brothers each worked and helped in this business.

4.  The Family Business flourished and Father shared part of the profits with the 3 Brothers. Apart from working in the Family Business, the 3 Brothers also invested their income in real properties in equal shares between 1982 and 1995. The judge found that the capital outlay including mortgage repayments and expenses for all the properties thus acquired had all come from the Family Business and that the 3 Brothers each held an equal one-third beneficial interest in each of the properties, until the so-called “3 Brothers’ Agreement” referred to in §10 below.[3] Of relevance for present purposes are the following properties:

(1)  In 1984, a flat in Kar Yau Building, 34-38 Queen’s Road East (“Kar Yau Property”) was purchased in the name of Wai Yin.

(2)  In 1987, 2 shops at Dominion Centre, 43-59A Queen’s Road East (“Dominion Shops”) were purchased in the name of the 3 Brothers, with financial assistance given by Father with funds raised by mortgaging 15 QRE. At the same time they began to run a furniture business there with a business registration in the name of all three of them as partners. But after a few years, in 1991, the Dominion Shops were sold at a considerable profit, and the stock and business was brought back to the Family Business at 15 QRE.

(3)  In 1989, the Scenic Garden Property was purchased in the name of the 1^st defendant for $2.82 million.

(4)  In 1992, two flats (Flats 6C and 6D) in Tian He District of Guangzhou were purchased (“Guangzhou Properties”), one (6C) in the name of the plaintiff and the other (6D) in the name of Wai Yin.

(5)  In 1993, the 3 Brothers also invested $500,000 in a development in Sanshan, Nanhai (“Sanshan Development”).

5.  When the 3 Brothers moved back from the Dominion Shops to 15 QRE in April or May 1991, Father had retired, and the 3 Brothers continued to operate the Family Business there as equal partners (“Partnership”), paying Father a monthly rent in the amount of $15,000 for the premises, though Father apparently retained ultimate control over the business.[4]

6.  In about October or November 1991, the 1^st defendant emigrated to Vancouver, Canada with his own family. The Family Business at 15 QRE was handed over to the plaintiff to operate and manage, until he too emigrated in August 1994.

7.  There were allegations at trial against the plaintiff for mismanagement and misappropriation of funds from the business, resulting in debts owed to a supplier, Shen Fat, remaining unpaid and outstanding, which the 1^st defendant discovered towards the end of 1994. The judge found that contrary to his duty as a litigant to give discovery in the action, the plaintiff had made only selective disclosure of the business documents and failed to disclose financial records or business documents for a substantial part of the period between November 1991 and August 1994 (namely, early 1992 to June 1994). The judge found that the plaintiff failed to provide a convincing explanation for the deficiencies in disclosure and criticised his evidence on where the disclosed documents were kept as “completely unsatisfactory”.[5]

8.  Based in part on an adverse inference from the plaintiff’s failure to make full disclosure, the judge found that during this period, in which the plaintiff was in control, he mismanaged the business and took funds from the business for his personal use,[6] with the result that debts were owed to Shen Fat, totalling around $1.2 million.[7] The 1^st defendant alleged that by the end of 1994 the debts stood at $2 million. The judge found that when the plaintiff and his own family also emigrated to Vancouver, Canada in August 1994, there were business debts owed to suppliers, at least to Shen Fat. Although the exact amount could not be ascertained because of the plaintiff’s selective disclosure of documents, they amounted to at least $600,000.[8]

9.  Upon the plaintiff’s emigration in August 1994, the business was handed over to Wai Yin and his wife Madam Tam to manage and operate. The 1^st defendant’s evidence, which the judge accepted, was that in March 1995 Father asked him to return to Hong Kong to save the Family Business as there were $1 million worth of debts owing at the time.[9] Accordingly the 1^st defendant returned and took over the management of the business from Wai Yin. The plaintiff also came back to Hong Kong temporarily in April 1995.

10.  It was common ground that while they were all in Hong Kong, the 3 Brothers had a meeting in which they reached an oral agreement regarding, inter alia, the division of two of the properties they had jointly acquired. The judge called this the “3 Brothers’ Agreement”. Accepting the 1^st defendant’s evidence on this agreement, the judge found that it was agreed that Wai Yin would, as he had himself proposed, take the Kar Yau Property and give up his interest in the Scenic Garden Property which would become beneficially owned by the plaintiff and the 1^st defendant. The Guangzhou Properties and the Sanshan Development were not affected and remained co-owned by the 3 Brothers. By implication, the plaintiff and the 1^st defendant, as the two beneficial owners of the Scenic Garden Property, would be responsible for sharing equally all outgoings, expenses and liabilities in respect of this property including repayment of the mortgage loans, while the 3 Brothers would together share the outgoings, expenses and liabilities in respect of the Guangzhou Properties.

11.  In the rough calculations made at the time as the basis for the division, it was estimated that the Scenic Garden Property had a value of $9.2 million subject to an outstanding mortgage loan of about $2 million, and that the Kar Yau Property had a net equity of about $2 million.

12.  It appears also to have been broadly accepted by Wai Yin and the 1^st defendant at the time that, as the plaintiff claimed, he had disbursed money, totalling $1.12 million according to him, on expenditure common to them, including $355,000 for the Family Business, $500,000 for the Sanshan Development, and $265,000 for the Guangzhou Properties and a van. On this basis, it was agreed that the 1^st defendant would pay Wai Yin $1 million by instalments to make up for the shortfall in his overall share having taken the Kar Yau Property and given up the Scenic Garden Property, while the plaintiff would waive the claims arising from payments he said he had made on behalf of them all.[10]

13.  There was a dispute in the action as to whether or not it was also agreed that the Partnership among the 3 Brothers in relation to the operation of the Family Business was terminated. It was the plaintiff’s case, denied by the 1^st defendant, that the Partnership was terminated by the 3 Brothers’ Agreement and the Family Business was thereafter carried on solely for the account of the 1^st defendant. After closely examining the evidence including the handwritten notes made by the plaintiff and Wai Yin respectively (and also the earlier notes made by the 1^st defendant’s wife, Madam Cheung), the judge rejected the plaintiff’s case that the Partnership was terminated by the 3 Brothers’ Agreement.[11] It follows that notwithstanding the 3 Brothers’ Agreement, the plaintiff could be called upon by the 1^st defendant to meet his share of the Partnership debts.

14.  It was the plaintiff’s case that on the same occasion, following the 3 Brothers’ Agreement, there was a separate oral agreement between the plaintiff and the 1^st defendant only, in relation to the Scenic Garden Property (“2 Brothers’ Agreement”), to the effect that the plaintiff would not be registered as a co-owner and the legal title would continue to be vested in the 1^st defendant alone, that the 1^st defendant would be responsible for the management and maintenance of the property and would lease it out to generate rental income to cover mortgage payments, that the 1^st defendant would consult the plaintiff with regard to important matters relating to the property such as its sale, and that subject to the plaintiff’s approval, the 1^st defendant would sell the property when the real estate market was favourable in future and share the sale proceeds with the plaintiff.[12]

15.  The judge rejected the plaintiff’s case of the 2 Brothers’ Agreement and held that after April 1995, the plaintiff had simply left everything relating to the Scenic Garden Property and the Family Business to the 1^st defendant to deal with while the plaintiff himself returned to live in Canada.[13]

16.  The Scenic Garden Property had been occupied by the plaintiff and his family and Father since its acquisition in 1989. After the plaintiff’s emigration in August 1994, Wai Yin and his family moved in and lived with Father there.[14] After the 3 Brothers’ Agreement, in around April 1995, Wai Yin’s family moved out, and the 1^st defendant lived there while he was in Hong Kong, as he was then splitting his time between Hong Kong and Canada. But the 1^st defendant and Father moved out later in 1995, presumably so that the flat could be let out. The judge accepted the 1^st defendant’s evidence that he spent $400,000 on renovating the Scenic Garden Property in order to lease it out. The 1^st defendant managed to let it to a Korean finance company, KEB, for a 2-year term from 1 November 1995 at a monthly rent of $53,000.

17.  The judge accepted the 1^st defendant’s case that he had to mortgage his property in Canada in 1995 to raise CAD 400,000 in order to cover the deficits in the Family Business resulting from the plaintiff’s misappropriations, and that this in turn resulted in a debt in this amount owed by the plaintiff to the 1^st defendant (“Debt”). The judge also accepted that the 1^st defendant tried many times in vain between 1996 and 1998 to call the plaintiff to ask him to repay the Debt.[15]

18.  In addition, the judge considered that the plaintiff should be responsible for half of the mortgage instalments and outgoings including renovation expenses relating to the Scenic Garden Property during the times when it was not rented out, and one-third of the mortgage instalments and outgoings relating to the Guangzhou Properties.[16]

19.  In August 1996, the 1^st defendant arranged for the Scenic Garden Property to be re-mortgaged, raising a mortgage loan of about $1.6 million, which was used to discharge the existing mortgage, and a personal loan of $1.2 million, of which $500,000 was remitted to Canada for the 1^st defendant’s children’s education expenses and $700,000 was apparently used to repay debts of the Family Business owed to a supplier. Given the plaintiff’s attitude at the time, the judge did not find it unreasonable for the 1^st defendant to procure the re-mortgage without consulting him.[17]

20.  KEB’s tenancy of the Scenic Garden Property was renewed for another 12 months from 1 November 1997 at the same monthly rent, but due to the Asian economic crisis, the tenant terminated the lease before its expiry. Rent was only paid up to the end of April 1998.

21.  The 1^st defendant believed that the market value of the Scenic Garden Property had fallen drastically by then. After the tenant’s termination of the lease, he was not able to raise funds to pay the mortgage instalments for that property as well as the Guangzhou Properties. (Although Flat 6D of the Guangzhou Properties had been awarded by a Guangzhou court to Wai Yin’s mistress in 1996 after their relationship broke down and Wai Yin’s appeal was dismissed in 1997, apparently the 1^st defendant was not aware and continued to arrange for payment of the mortgage instalments for Flat 6D from the Family Business.) The 1^st defendant approached Wai Yin to see if he could help financially, but Wai Yin said he did not have any money. The judge accepted that the 1^st defendant had “serious concerns” about the finances at the time.

22.  It was in these circumstances that, according to the 1^st defendant’s and Madam Cheung’s evidence which the judge accepted, in May 1998, a telephone call was made by Wai Yin and the 1^st defendant, in the presence of Madam Cheung, to the plaintiff in Canada to seek his help “out of desperation” (“May 1998 Telephone Call”), which the judge described as follows:[18]

“ … Wai Yin, in the presence of D1 and Madam Cheung, telephoned P who was in Canada at the time. During this call, Wai Yin had requested P to remit some money to meet the mortgage payments of the Guangzhou Properties, but such request was refused by P. D1 said he then took over the telephone and he himself spoke to P to explain that the tenant of the Scenic Garden Property was moving out and the Family Furniture Business turned worse, and requested P to remit HK$30,000 odd to Hong Kong, to pay for one month’s mortgage instalments for the Guangzhou Properties and the Scenic Garden Property, in order to avoid repossession by the mortgagee banks, but P told D1 that (i) he had no money; (ii) he did not want anything; (iii) he had already ‘cut off’ Hong Kong; (iv) not to call him again. P then hung up on D1. In Chinese, what was alleged to have been said by P was ‘我冇錢，我咩都唔要，我都賣斷香港，以後唔好再打電話俾我’. Although Wai Yin had tried to call P again, P never answered the call.”

23.  It appears that after this conversation, the 1^st defendant managed to find funds to pay the mortgage instalments for the Scenic Garden Property but not the Guangzhou Properties, as a result of which Flat 6C was later repossessed by the mortgagee bank.

24.  The judge concluded:

“ 252. It was not disputed at the time when the May 1998 Telephone Call was made, the Hong Kong economy and the property market had collapsed due to the Asian financial crisis, and I have found earlier that KEB’s early termination of the lease would have caused D1 serious concerns as both the property market and the business looked gloomy. I find that it was against such background that D1 together with Wai Yin had made the May 1998 Telephone Call to P asking P to transfer HK$30,000 odd to meet expenses. The small amount in fact would be consistent with D1’s concern and desperation. P did not deny there was a call from D1 but as said earlier, his attitude was that the rental income should cover the mortgage payments/outgoings/ expenses and that if not, D1 could sell the property. I find that P’s evidence indicated that D1 did in the May 1998 Telephone Call mention the financial difficulties faced by D1 at the time in the business, and with the continuing mortgage repayments and other outgoings not only for the Scenic Garden Property but also Flat C of the Guangzhou Properties.

253. Further, I find what happened after the May 1998 Telephone Call was consistent with D1’s case that P refused to help out and did not want to be called upon again in relation to the Scenic Garden Property or the business and in fact surrendered his interest in the Scenic Garden Property.”

25.  The 1^st defendant never contacted the plaintiff again or made any further request to him for contribution after the May 1998 Telephone Call. The 1^st defendant managed the Family Business until September 1998 when he returned to Canada. From then until about August 1999, Father managed the business. In August 1999, the plaintiff moved back to Hong Kong from Vancouver and took over the management and operation of the Family Business. The plaintiff alleged that soon after he came back, he saw the 1^st defendant at 15 QRE and asked him about the Scenic Garden Property and that the 1^st defendant said he would sell it and account to the plaintiff, but the judge rejected this evidence.[19]

26.  Father decided to sell 15 QRE in March 2000. The furniture business there moved to a different place and became carried on by a company, Pao Sun Furniture Co Ltd, set up by the plaintiff in June 2000.

27.  The 1^st defendant came back to Hong Kong for visits from time to time and eventually returned to Hong Kong with his family permanently in 2005. He later decided to dispose of the Scenic Garden Property and the sale was completed on 12 March 2009 at the price of $13.68 million, out of which the 1^st defendant received $1.38 million by way of deposit and $10,587,562.09 as the net balance of the sale proceeds on completion.

28.  On 1 April 2011, the 4^th defendant, a company held by the 1^st defendant’s son and his wife, who are the 2^nd and 3^rd defendants herein, purchased a flat on Broadwood Road, Hong Kong for $36.65 million together with a car parking space for another $1.3 million (together the “Broadwood Road property”). The 2^nd to 4^th defendants were joined in the action by the plaintiff on the ground that part of the purchase monies of the Broadwood Road property came from the rental income and/or sale proceeds of the Scenic Garden Property.

29.  Father passed away on 27 December 2012.

30.  The judge found that for many years after the May 1998 Telephone Call, the plaintiff did nothing that showed any interest in the Scenic Garden Property. She rejected the plaintiff’s explanation that he could not locate the 1^st defendant until he ran into him by chance at a restaurant in February 2009.[20] She found that the first time the plaintiff brought up the subject of the Scenic Garden Property with the 1^st defendant was at Father’s funeral in January 2013 (almost 15 years after the May 1998 Telephone Call), and that he did so because he changed his mind after he found out that its value had increased substantially by the time of the sale. The 2^nd defendant, who was present at the funeral when the plaintiff raised the matter, immediately retorted that the plaintiff had already surrendered his interest in the Scenic Garden Property.[21] (The 2^nd defendant was not cross-examined on this incident.)

31.  In February 2014, the plaintiff commenced the action below against the 1^st defendant, joining the 2^nd to 4^th defendants upon re-amendment of the statement of claim in July 2014.

32.  As against the 1^st defendant, the plaintiff claimed, inter alia, a declaration that the Scenic Garden Property was held by the 1^st defendant on trust for himself and the plaintiff in equal shares from April 1995 until its sale in March 2009 and an account of the rental income and the sale proceeds. The plaintiff claimed against the 2^nd and 3^rd defendants for dishonest assistance in the 1^st defendant’s breach of trust and claimed against the 4^th defendant for dishonest assistance and knowing receipt and also sought to trace his half share in the sale proceeds of the Scenic Garden Property into the Broadwood Road property.

33.  The main defence, raised by the 1^st defendant, was that the plaintiff had abandoned or surrendered all his interests in, inter alia, the Scenic Garden Property in the May 1998 Telephone Call in order to avoid his responsibility for the Debt, for the mortgage loans and outgoings for the Scenic Garden Property and the Guangzhou Properties and for settling all outstanding accounts arising in respect of the Partnership.

34.  As for the 2^nd, 3^rd and 4^th defendants, their case was that the 1^st defendant provided a sum of $15.18 million in connection with the 4^th defendant’s purchase of the Broadwood Road property, of which $6,406,000 was repayment of funds previously placed by the 2^nd defendant with the 1^st defendant and the balance in the sum of $8,774,000 was a loan from the 1^st defendant to the 2^nd defendant, which had since been repaid in full. It was denied that there was any dishonest assistance or knowledge of breach of trust.

The Judgment below

35.  At the trial the plaintiff called no other witness apart from himself to give evidence. On the defence side, the 1^st defendant, his wife Madam Cheung and their son the 2^nd defendant gave oral evidence. There was also expert evidence on the valuation of various properties and on the rentals as at various dates, which were eventually agreed.

36.  The judge did not find either the plaintiff or the 1^st defendant a completely reliable witness.[22] As mentioned above, however, she accepted significant parts of the 1^st defendant’s evidence, which was corroborated by Madam Cheung. She found the 2^nd defendant a credible witness and accepted his evidence.[23]

37.  The principal factual findings made by the judge have been set out above. On the main question, the judge essentially accepted the 1^st defendant’s evidence and case that the plaintiff uttered the words alleged in the May 1998 Telephone Call and abandoned his interest in, inter alia, the Scenic Garden Property.

38.  In relation to the 2^nd to 4^th defendants, the judge accepted the 2^nd defendant’s evidence and found there was insufficient evidence to prove that he was guilty of dishonest assistance or knowing receipt.[24]

39.  The plaintiff’s claims were therefore dismissed with costs.

Grounds of Appeal

40.  On this appeal, Ms Athena Wong, who did not appear below, advanced 4 grounds of appeal on behalf of the plaintiff.[25] They may be very broadly described as follows:

(1)  Ground 1: The judge erred in finding that the 1^st defendant did utter the words he alleged in the May 1998 Telephone Call and in finding that the plaintiff had surrendered his interest. The 1^st defendant suffered no detrimental reliance.

(2)  Ground 2: The judge erred in finding that the plaintiff had misappropriated funds from the Family Business.

(3)  Ground 4: The judge erred in finding that there was a surrender of the plaintiff’s interest from day one and that the plaintiff was not entitled to seek an account from the 1^st defendant.

(4)  Ground 5: The judge ought to have found that the 2^nd and 4^th defendants failed to prove that they were bona fide purchasers for value without notice and that they were liable for dishonest assistance or knowing receipt.

41.  On behalf of the defendants, Mr Richard Khaw SC and Mr Jeffrey Lee opposed the appeal. The defendants also filed a supplementary respondents’ notice setting out additional or alternative grounds for affirming the Judgment. They pertain to factual matters which will where appropriate be discussed below in the course of dealing with the plaintiff’s grounds of appeal.

The legal analysis and principles

42.  As far as the substantive legal analysis is concerned, the Judgment, adopting the defendants’ terminology, referred to what resulted from the May 1998 Telephone Call as a “surrender” by the plaintiff of his interest in, inter alia, the Scenic Garden Property. But it is clear that this is not a reference to any separate legal doctrine concerning a unilateral disposition of equitable interest. The parties’ debate and the judge’s analysis were, correctly in our view, squarely founded on the principles of common intention constructive trust.

43.  The Scenic Garden Property had, from its acquisition by the 3 Brothers in 1989, been held in the name of the 1^st defendant. He was at all material times the sole legal owner. It was common ground, however, that from the start, the property was beneficially owned by the 3 Brothers in equal shares. It was also common ground that a new common intention was formed in April 1995, by way of express consensus in the form of the 3 Brothers’ Agreement, that it was to be beneficially owned by only two of them, namely, the 1^st defendant and the plaintiff. What was in issue was whether there was a further changed common intention arising in May 1998 that it was to be wholly beneficially owned by the 1^st defendant, with the result that the previous common intention constructive trust ceased to exist, as the 1^st defendant would have become the sole legal and equitable owner. We will return later to the question of detrimental reliance.

44.  Whether there was such a change of common intention is a question of fact. In ascertaining the intention of the parties, it is the objective intention of each party which was reasonably understood by the other party to be manifested by that party’s words and conduct that one must examine. Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions. It is only where there is no evidence to support a finding of such an agreement, arrangement or understanding that the court seeks to infer from the conduct of the parties the relevant common intention: see e.g. Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §§47-49.

45.  Ms Wong drew attention to the judgment of Lord Neuberger (dissenting but not on this point) in Stack v Dowden [2007] 2 AC 432 at §138 where his Lordship said:

“ The fact that the ownership of the beneficial interest in a home is determined at the date of acquisition does not mean that it cannot alter thereafter. … It seems to me that ‘compelling evidence’ … is required before one can infer that, subsequent to the acquisition of the home, the parties intended the change in the shares in which the beneficial ownership is held. Such evidence would normally involve discussions, statements or actions, subsequent to the acquisition, from which an agreement or common understanding as to such a change can properly be inferred.”

See also Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343 at §§34-36 where this approach was endorsed.

46.  There was no real dispute before the judge or in this court as to the applicable legal principles. A few cases involving altered intentions arising from matters subsequent to the acquisition of the property will illustrate the operation of the principles in that context.

47.  In Quaintance v Tandan [2012] EWHC 4416 (Ch), the property was acquired in the joint names of a couple, with the common intention that they would hold the beneficial interest as tenants in common. The down payment was made by the woman alone and a mortgage was taken out in joint names. Their relationship however broke down after only a few weeks and the man moved out permanently and left no contact address, and thereafter made no financial contribution of any kind nor any attempt to discuss what should happen to the property. The trial judge found from the man’s conduct that he wished to have nothing further to do with the woman or the house and no longer wished to be subject to the trust. The subsequent net proceeds of sale of the property were therefore held to belong solely to the woman.

48.  In Jones v Kernott [2012] 1 AC 776, the property was also bought by a couple in joint names, and it was undisputed that their intention up to the time when they separated 8 years later was to hold it equally beneficially. After the separation the man moved out and contributed nothing further towards the property and very little to the maintenance of the children who continued to live in the house with their mother. About 2 or 3 years after the separation, the parties cashed in a joint life insurance policy and divided the proceeds, to enable the man to purchase a home of his own. The trial judge held that their intentions with respect to the beneficial interests in the jointly held property had changed, as evidenced from inter alia the purchase of a separate property by the man. The UK Supreme Court agreed, holding that the proper inference was that the parties intended that the man’s interest in the jointly held property should crystallise then, with the result that he would have the sole benefit of any capital gain in his new home and the woman would have the sole benefit of any capital gain in the original home. The trial judge’s ruling that the woman was entitled to 90% of the value of the property was upheld.

49.  In Pang Ketian Sally v Tam Yuk Hung Sallie (HCA 298/2012, 11 June 2013), the plaintiff, the defendant and another party agreed in October 2007 to invest in a property. Although the purchase would be made in the name of the defendant alone, it was agreed that each of them would contribute one-third in the joint investment, and each of them did contribute a sum representing about 5% of the price of $8.143 million towards the payment of the deposits. The trial judge, Recorder Coleman SC, found that the original common intention was that each of the three would have a beneficial interest in the property in accordance with their respective monetary contributions. As the completion date in April 2009 approached, the market value of the property had dropped to the range of $6.8 – $7.1 million. There was a meeting between the parties where the plaintiff said words indicating she wished to exit from the investment to limit her loss, from which the judge found a common intention formed that the defendant and the third party would be free to go on with the purchase of the property and take out a mortgage in order to do so but that the plaintiff would make no further contribution and in return would surrender her interest in the property. On this basis the plaintiff’s claim for a one-third beneficial interest in the property was dismissed. The decision was upheld by the Court of Appeal: CACV 147/2013, 25 April 2014.

50.  In Hudson v Hathway [2023] KB 345, a couple bought a house in joint names in 2007, with them being joint tenants both in law and in equity, but the man left the family there in 2009 and went to live with another woman whom he later married. In 2011 the house was blighted by an oil spill and a complicated insurance claim dragged on for years. In the course of their discussions about financial arrangements, the man sent an email to the woman in July 2013 in which he said, inter alia: “[This] leaves the house, a bad asset which is preventing all of us [from] … moving on with our lives … You know what, I want none of the proceeds of that either. Take it. Buy yourself somewhere you can afford to live …” This was accepted by the woman. In January 2015, the man ceased contributing to the mortgage repayments. It was held that there was a clear common intention that the woman would have the entire equity in the house and since she suffered detriment in reliance, there was a common intention constructive trust on the parties jointly in favour of the woman solely.

51.  On the legal principles, the central issue was whether the plaintiff and the 1^st defendant reached a common intention as a result of the May 1998 Telephone Call that the plaintiff would have no further interest (or obligations) in relation to the Scenic Garden Property.

Appeal against findings of fact

52.  At the outset it should be noted that the judge’s findings in this regard significantly depended on the oral evidence and thus the credibility of the witnesses, especially the plaintiff and the 1^st defendant. In her detailed Judgment, the judge comprehensively set out and paid close attention to the evidence and the inherent probabilities in the light of all the circumstances. The plaintiff faces a high hurdle in seeking to impugn the judge’s findings of fact after trial, and must identify sufficiently material palpable errors so as to satisfy this court that the findings are plainly wrong. The relevant principles were summarised by Kwan VP in her judgment (with which Yuen and Au JJA agreed) in Shine Grace Investment Ltd v Citibank NA [2022] HKCA 1341 at §60(1)-(3) as follows:

“ (1) The appellate process is not designed to give an appellant another chance of repeating his arguments in the hope that the appeal court might be persuaded to accept the account of facts he advanced unsuccessfully before the primary judge.

(2) It is the trial judge who has the primary role in assessing evidence and making relevant findings of fact, not the appeal court. The trial before the primary judge should be the ‘main event’, not a ‘tryout on the road’. The appeal court should defer to the trial judge’s conclusion even if in some doubt as to its correctness, because it is unlikely to gain as much insight to the facts from seeing how the evidence unfolded, or be as familiar with the evidence as the primary judge, who has lived with the trial from beginning to end. Besides, the perception of the appeal court may be narrowed or distorted by selective readings of the transcript when the focus is on the challenge of a particular finding.

(3) For the appeal court to intervene, a palpable error identified must be sufficiently material to undermine the judge’s conclusion. The court should only intervene in respect of findings of fact if satisfied that such findings are plainly wrong.”

Ground 2 – The plaintiff’s misappropriation of funds

53.  Turning to the plaintiff’s grounds of appeal, it is logical to start with Ground 2 since its subject matter formed part of the background in the judge’s consideration of the question of surrender of interest.

54.  Ms Wong submitted that there were 3 specific errors in the judge’s approach to the question of whether the plaintiff misappropriated funds from the Family Business.

55.  First, the 1^st defendant’s evidence of such misappropriation was a bare assertion contradicted by contemporaneous documents particularly the handwritten notes made at the time of the 3 Brothers’ Agreement. Ms Wong submitted that the misappropriated sum or the debts arising from the misappropriation were not mentioned in those handwritten notes which in contrast recorded that the plaintiff had contributed $1.12 million to the Family Business and the Guangzhou Properties. Reliance is also placed on a statement of account dated 30 March 1995 and an invoice dated 11 July 1994 both issued by Shen Fat. It is said that the former showed that the total sum owed to Shen Fat as of July 1994 was only $491,552, not $1.2 million, and that the latter showed that the plaintiff was still operating the business in July 1994.

56.  We do not accept this argument. The handwritten notes made in around April 1995 were considered by the judge in detail. The judge noted that at that time the 3 Brothers did not have any financial statements before them and there were no documents to show how much money was left in the Partnership or how much stock there was. The judge also noted that on the plaintiff’s own case the $355,000 he claimed to have paid on behalf of the Partnership was for expenses such as wages and not for Shen Fat’s invoices. The judge said that the handwritten notes only indicated that the 3 Brothers agreed to the plaintiff being reimbursed for what he said he had paid for and on behalf of the Partnership. The judge evidently accepted the 1^st defendant’s evidence that the intention was that the accounts of the business under the Partnership would be worked out later.[26] The judge specifically rejected the plaintiff’s case that the 3 Brothers’ Agreement encompassed the immediate termination of the Partnership,[27] and the plaintiff had abandoned the ground of appeal directed at this conclusion. These are findings the judge was entitled to make on the evidence. On this basis the handwritten notes were clearly not meant to be a complete account of the rights and liabilities of the plaintiff in respect of the Partnership. The absence of any reference to the plaintiff’s liabilities arising from misappropriations of funds did not therefore contradict the evidence of such misappropriations.

57.  Nor were Shen Fat’s statement of account dated 30 March 1995 and invoice dated 11 July 1994 conclusive in the way Ms Wong argued. There was no oral evidence from anyone from Shen Fat, and the plaintiff had only made selective disclosure of the documents in the relevant period. The circumstances in which the statement of account was issued were not clear. The judge noted that the statement did not show any invoices issued by Shen Fat prior to June 1994 or what amounts were outstanding or paid between August 1993 and September 1994, and did not accept it showed a cumulative or continuing account.[28] The judge also heard oral evidence from the 1^st defendant and Madam Cheung on how they discovered the misappropriations. They said that about a month after the plaintiff landed in Canada in the summer of 1994, Madam Tam (Wai Yin’s wife) called from Hong Kong to tell them that the plaintiff had misappropriated about $1.2 million from the Family Business. Although Madam Tam suggested reporting the matter to the police, the 1^st defendant did not want to do so as he was worried this could affect the plaintiff’s immigration status in Canada. It was subsequently confirmed when the 1^st defendant and Madam Cheung called Mr Cheung Chuk Lam of Shen Fat and his wife respectively that the Family Business under the plaintiff’s management had owed Shen Fat about $1.2 million for over a year (and the 1^st defendant was not specifically cross-examined on this part of his evidence). The 1^st defendant also said that when he confronted the plaintiff, the plaintiff admitted to him that there were outstanding unpaid invoices from Shen Fat for over a year.[29] In these circumstances the judge’s findings can hardly be said to be plainly wrong by reference to the Shen Fat documents alone.

58.  The second error, Ms Wong submitted, was that the complaints about the plaintiff’s disclosure of documents were misconceived because various documents concerning the business during the plaintiff’s management were disclosed, and that the judge had failed to consider the effect on the safekeeping of documents from the transfers of the management of the business from the plaintiff to Wai Yin, then to the 1^st defendant, and then to Father, and the eventual closure of the business in March 2000.

59.  There is in our view no merit in this argument. The judge was fully aware that the plaintiff did produce some of the invoices and statements from Shen Fat which covered a few months (before early 1992 and from June to August 1994) of the period of the plaintiff’s management of the Family Business. But the fact is that the plaintiff did not produce any documents between early 1992 and June 1994. Further, the judge noted that the plaintiff had given discovery in a piecemeal fashion, through a total of 5 lists of documents, with no proper explanation. There was no convincing explanation why there were documents (such as tax assessments) for the years before and after but not during the relevant period. The judge also noted that the plaintiff changed his evidence several times in relation to a box he said Father gave him and its contents, in particular, as to whether any business documents were contained in it. The judge found his evidence as to where the disclosed documents had been kept to be completely unsatisfactory.[30] The judge was fully aware of the changes in the management of the business over the years but this could not explain why the plaintiff was able to produce documents for the period when the business was managed by others but not for the period under his management. On the evidence the judge was in our judgment fully entitled to criticise the plaintiff’s disclosure. We may add that in an interlocutory decision refusing permission to adduce further evidence for this appeal, Kwan VP said that the plaintiff’s “alleged accidental discovery of a box of documents after trial without any proper explanation is consistent with [his] selective and piecemeal discovery in the past and his casual attitude towards his obligation as a litigant to make proper discovery”.[31]

60.  Thirdly, Ms Wong submitted that, in light of the uncertainties about the amounts of the misappropriations or the business debts left unpaid, the judge erred in accepting the 1^st defendant’s assertion that he injected CAD 400,000 (HK$2 million) into the Family Business and also used part of the personal loan raised from re-mortgaging the Scenic Garden Property to repay the business debts to Shen Fat.

61.  This is a bald submission against the judge’s decision accepting the 1^st defendant’s evidence, which the judge having heard all the witnesses was entitled to do. There is no ground for this court to interfere with this decision.

62.  Ground 2 therefore failed.

Ground 1 – The plaintiff’s surrender of interest

63.  The gist of Ms Wong’s argument under Ground 1 is that the judge should have accepted the plaintiff’s version of the May 1998 Telephone Call, i.e. that the plaintiff suggested selling the Scenic Garden Property to pay off the mortgage if the rental income fell short of meeting the repayments and that he did not say what the 1^st defendant claimed he said. Ms Wong made the overall submission that “P’s account of the conversation is far more credible and sensible, and the Judge erred in preferring D1’s version over P’s”.

64.  With respect, such a submission is an invitation to this court to re-try the case without regard to the judgment below, which must be firmly rejected. As Godfrey JA said in Tang Kwok Ming v Daxprofit Scaffolding Ltd [1999] 1 HKC 657, 663:

“ It is important for counsel and solicitors (and for the legal aid authorities) to remember the very limited extent to which this court will interfere in a case in which the appellant seeks to dispute the judge’s findings of fact. If it is necessary to disturb an adverse finding of primary fact, the appellant has to demonstrate either (1) that there is no evidence to support it; or (2) that it is contrary to documentary or other incontrovertible evidence which the judge overlooked. It is not enough to show there is little evidence to support the judge’s finding, or that it was ‘contrary to the weight of the evidence’. The weight of the evidence is a matter for the trial judge. It does not matter how many witnesses say one thing, and how few say the contrary. The judge is perfectly entitled to prefer the evidence of the few to that of the many.”

65.  In Yu Man Fung Alice v Chiau Sing Chi Stephen [2021] HKCA 1456 at §36, Kwan VP also said:

“ … How evidence should be assessed and considered against other evidence and what is the appropriate weight to be given are matters entirely for the trial judge. In the absence of identifiable errors that are sufficiently material to undermine the judge’s conclusions, there is just no basis for the appeal court to intervene. …”

66.  In support of her overall submission, Ms Wong submitted that the words said by the plaintiff as found by the judge were brief, vague and emotional and made no mention of the co-owned properties or business. In our view this is not sufficient to impugn the judge’s finding. The judge correctly directed herself that the parties’ common intention is to be deduced objectively from their words and conduct, as reasonably understood by the other party.[32] The words found were obviously not the sole content of the conversation but were preceded by Wai Yin’s and the 1^st defendant’s requests to the plaintiff for money for the Guangzhou Properties and the Scenic Garden Property. The context of the conversation is significant and includes the fact, as found by the judge, that the 1^st defendant had tried many times between 1996 and 1998 to ask the plaintiff to repay money but on the one occasion when he managed to talk to the plaintiff, the plaintiff simply said he would find time to deal with this.[33]

67.  As to Ms Wong’s point that the words found were not in the defence as originally filed but only added by amendment, the judge had taken this into account.[34] Further, the 1^st defendant was not cross-examined on this point. This is not a valid basis for impugning the judge’s finding.

68.  Ms Wong submitted that the defence case was “implausible” and “unlikely” given the plaintiff’s significant financial contribution to the deposits and mortgage repayments for the joint investment properties and given the substantial value of the Scenic Garden Property. At the hearing Ms Wong submitted certain written calculations of such contribution and value. We do not think that these detailed calculations, down to the last cent, added much to the points already made at trial. No such calculations were prepared on behalf of the plaintiff at the trial. In any event they ought to have been provided much earlier if they were to be relied upon on this appeal, so that the respondents could have a fair opportunity of dealing with them. But more importantly, the judge was aware of and plainly took into account how the various properties were acquired and funded and had a sufficient grasp of the amounts involved. She spent a whole section (§§71-92) of the Judgment on the source of funds for the acquisition of the joint investment properties, concluding that the purchase monies including mortgage instalments and expenses had all come from the Family Business.

69.  The judge was also fully aware of the value of the plaintiff’s share of the net equity of the Scenic Garden Property, which she reckoned to be, as understood by the parties at the time, in the region of $3.45 million (based on the original mortgage) or $2.75 million (based on the re-mortgage, which the plaintiff did not know at the time).[35] It is true it did not represent “negative equity” as in the case of Pang Ketian Sally v Tam Yuk Hung Sallie mentioned above. But as explained by the judge, on the liabilities side the plaintiff’s obligation was not limited to the $30,000 which the 1^st defendant was urgently asking for. There were also his obligations arising from the earlier misappropriations and liabilities of the Partnership, including the Debt mentioned above. There was the Asian economic crisis and the property market was falling and KEB’s tenancy had been terminated prematurely. Failure to pay the mortgage instalments could lead to the mortgagee bank commencing a mortgagee’s action to recover the property for a forced sale, on which the estimated value, calculated on a willing vendor and willing purchaser basis, might not be realised. In addition there were the mortgage payments for the Guangzhou Properties. In hindsight we know of course that the property market rebounded but the parties did not have a crystal ball.

70.  In these circumstances it is not entirely implausible for the plaintiff to have wanted a “clean cut” with the past so as to be free from any relevant risks in the future and for the 1^st defendant to have understood and accepted this as the plaintiff’s expressed intention. The fact that the plaintiff could have suggested selling the Scenic Garden Property, even at a depressed price, does not mean that the judge was plainly wrong in accepting the 1^st defendant’s and Madam Cheung’s evidence that this was not what the plaintiff said.

71.  Further, Ms Wong argued that the judge erred in finding that the plaintiff was obliged to contribute to the mortgage repayments and outgoings of the Scenic Garden Property. We agree with Mr Khaw that there was no basis for this submission. The question was not whether there was any strict enforceable legal obligation on the part of the plaintiff, but the intentions of the parties in the context of all the circumstances. Even on the plaintiff’s own evidence, he was responsible for sharing equally all mortgage repayments and outgoings. Further, the judge had found as an implied term of the 3 Brothers’ Agreement that the 1^st defendant and the plaintiff, as the sole 2 beneficial owners of the Scenic Garden Property, were responsible for sharing all its outgoings, expenses and liabilities.

72.  Ms Wong argued that a decision to surrender or waive must be an informed one but the plaintiff had no knowledge of the fact that the 1^st defendant re-mortgaged the Scenic Garden Property and used part of the loan proceeds for his own purposes. We do not think there was any error in the Judgment here. We are not concerned with the legal doctrine of waiver, but with the factual question whether there was a change of common intention with regard to the beneficial ownership of the property. The judge accepted that the plaintiff was not told about the re-mortgage but this was in part the result of the plaintiff’s own attitude, though the judge did not find that there was any breach of trust by the 1^st defendant.[36] This was not inconsistent with the judge’s finding based on positive evidence that the plaintiff evinced an intention to cut his ties with Hong Kong including his assets and liabilities.

73.  Ms Wong also argued that the judge took into account irrelevant matters in the form of the plaintiff’s inaction in relation to the Scenic Garden Property after the May 1998 Telephone Call. We do not agree with the submission. The judge was entitled to look at all the evidence, including the plaintiff’s subsequent conduct, in evaluating the evidence on the change of common intention in May 1998: see e.g. Liu Wai Keung v Liu Wai Man, supra, at §50; Pang Ketian Sally v Tam Yuk Hung Sallie, supra, at first instance, at §63.

74.  Finally, Ms Wong argued that the 1^st defendant suffered no detrimental reliance and thus acquired no beneficial interest from the plaintiff. There was no analysis of detriment in the Judgment apparently because no real issue was taken with it at trial. In his skeleton argument Mr Khaw’s primary submission was that detrimental reliance was not required for the plaintiff’s renunciation of his beneficial interest, but he very properly drew our attention to the English Court of Appeal’s decision in Hudson v Hathway [2023] KB 345 which held that detrimental reliance is a key component in establishing a common intention constructive trust. As mentioned above, the applicable analysis is common intention constructive trust, for which detrimental reliance is required. But detrimental reliance in this case is in our view evident. The judge found that the 1^st defendant did believe and accept the plaintiff’s surrender of his interest in the Scenic Garden Property.[37] As the judge noted, after the conversation in question the 1^st defendant never contacted the plaintiff again and never made any further request to him for contribution.[38] In Gillett v Holt [2001] Ch 210 at 232, Robert Walker LJ said of detriment that “it is not a narrow or technical concept” and it “need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial”, and that the requirement “must be approached as part of a board inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances”. The fact that the 1^st defendant shouldered all the responsibilities thereafter in relation to the Scenic Garden Property, stopped repaying the mortgage of the Guangzhou Properties with the result that Flat 6C was repossessed by the bank, and gave up any claims he might have had against the plaintiff as a co-partner or otherwise, was in our view sufficient.

75.  Accordingly Ground 1 also failed.

Ground 4 – The plaintiff’s claim for account

76.  This ground asserts that the judge was wrong to find that the plaintiff was not entitled to seek an account from the 1^st defendant above the re-mortgage since there was no waiver of rights by the plaintiff as a beneficiary without full knowledge. We have dealt with this in the context of Ground 1 above.

77.  Plainly, on the basis that the parties’ common intention had changed in May 1998 and the plaintiff was held to have given up his interest in the Scenic Garden Property, there could be no right to an account in relation to anything after that point in time.

78.  In Ms Wong’s skeleton argument, the point was made that the judge was wrong to conclude that the plaintiff had surrendered his interest “from day one”.[39] If by this it was submitted that even if the plaintiff failed on his primary case that there was no change in beneficial interest in May 1998, he would still be entitled to an account in respect of the period before May 1998, then in our view this was not a contention open to the plaintiff on this appeal. First, the argument was not raised in the supplementary notice of appeal which set out all the grounds for this appeal. Secondly, the issues were formulated at trial jointly by the parties on the basis that if the plaintiff was found to have surrendered his interests in the Scenic Garden Property by virtue of the May 1998 Telephone Call, that would be the end of the plaintiff’s case and the question of accounting for the re-mortgage would not arise. In the light of that common ground on which the defendants no doubt relied and on the basis of which the judge proceeded to try the action, it was not permissible for the plaintiff to contend otherwise on appeal. In any event, it appears from the Judgment that the judge found the common intention to be for a clean break. On the basis of that changed intention it is difficult to see how the plaintiff could have had some remaining claims in relation to the Scenic Garden Property.

79.  Ground 4 should therefore be rejected.

Ground 5 – The plaintiff’s tracing claims

80.  In the light of the conclusions above, the fundamental basis of the plaintiff’s claims against the 2^nd, 3^rd and 4^th defendants for tracing, dishonest assistance and knowing receipt was not established and those claims must accordingly fail.

81.  There was in any event no basis to challenge the judge’s factual findings that these defendants were not volunteers and that the 2^nd defendant believed that the Scenic Garden Property wholly belonged to the 1^st defendant as the plaintiff had given up his interest.

82.  Ground 5 therefore also failed.

Conclusion

83.  For the above reasons, none of the grounds of appeal was made out and the appeal was accordingly dismissed.