TAM LAN CHI LORCHE, suing as an Administratrix of the Estate of TAM KAM FAI FRANCIS, deceased v. CHAN SIU MUI

CACV 427/2022, [2023] HKCA 1326

On Appeal From [2022] HKCFI 517

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 427 OF 2022

(ON APPEAL FROM HCMP NO 2084 OF 2017)

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J U D G M E N T

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

1.  This appeal concerns the beneficial ownership of a flat in Tower 15 of Costa Del Sol (Phase IIB) of Laguna Verde, Hung Hom, Kowloon, Hong Kong. We shall refer to it simply as “the property”. The main question at stake is whether the beneficial interest held by Mr Tam Kam Fai Francis, deceased (“Mr Tam”) in the property was held by him as a joint tenant or a tenant in common with the defendant.

Background

2.  The essential background may be stated as follows. The plaintiff is one of two daughters of Mr Tam from his first marriage. The defendant is the second wife of Mr Tam. They had a son born in 2000 in Mainland China. The defendant and the boy came to Hong Kong in around 2002. Mr Tam and the defendant married in Hong Kong in July 2004.

3.  In October 2004, Mr Tam purchased the property in his sole name and had since around 2005 lived there together with the defendant and their son. On 23 November 2005, the property was assigned by Mr Tam to himself and the defendant as tenants in common in equal shares. On 19 July 2007, Mr Tam and the defendant executed a Declaration (“Declaration”) prepared by the solicitors firm of Pang, Wan & Choi, which relevantly read as follows:

“ THIS DECLARATION is made the 19^th day of July Two thousand and Seven by:

TAM KAM FAI FRANCIS (譚錦輝) and CHAN SIU MUI (陳小梅) … (collectively referred to as ‘the Trustees’).

WHEREAS:-

A. By an Assignment dated the 23^rd day of November 2005 and made between Tam Kam Fai Francis as vendor of the one part (‘the Vendor’) and the Trustees as purchaser of the other part …, all the estate right title interest of the Vendor in the property … was conveyed by the Vendor to the Trustees as Tenants in Common in equal shares absolutely.

B. The Trustees desire that as from the date hereof they should hold the Property as beneficial Joint Tenants.

NOW IT IS HEREBY DECLARED by the Trustees that:-

1. as from the date hereof they shall hold the Property Beneficial Joint Tenants …” [sic]

4.  The Declaration was stamped and adjudicated as not chargeable with any stamp duty. It was registered in respect of the property in the Land Registry.

5.  On 17 December 2012, Mr Tam died intestate at the age of 75.

6.  There were initially disputes as to who should administer the estate. Eventually the disputes were resolved and the plaintiff and the defendant jointly applied to the court for letters of administration of the estate. As part of their application they filed a joint affirmation verifying a schedule of assets and liabilities of the deceased dated 12 May 2016. That schedule was in English and prepared by the solicitors firm of Li, Chow & Co. It listed the property as an asset, describing it as being held by the deceased and the defendant as tenants-in-common in equal shares. On 13 December 2016, letters of administration were granted to the plaintiff and defendant.

7.  Meanwhile, the Land Registry had entered a remark in the Owner section of the register in respect of the property (which showed Mr Tam and the defendant as the owners). That remark underwent several changes. Initially, after the Declaration was registered, the Land Registry entered a remark stating “NOW AS JOINT TENANTS” with reference to the memorial of the Declaration. When the letters of administration were registered in January 2017, the Land Registry entered a remark in the Owner section stating “NOW AS TENANTS IN COMMON IN EQUAL SHARES”.

8.  After the death of Mr Tam, the defendant continued to repay the mortgage loan of the property, which was fully repaid in around January 2017. The defendant then engaged Pang, Wan & Choi to prepare documents for redeeming the mortgage, who discovered that the schedule of assets attached to the letters of administration described the property as being held on a tenancy in common. They wrote to the Land Registry pointing out that the property was held on a joint tenancy pursuant to the Declaration, whereupon the Land Registry changed the remark in around March 2017 to “NOW AS JOINT TENANTS”. However, upon discovering this, the plaintiff wrote to the Land Registry on 28 March 2017 stating that the remark was wrong and should be removed. In May 2017, the remark was removed from the register altogether.

9.  The plaintiff took the view that the Declaration was of no validity and effect, that Mr Tam continued to hold a half share in the property held by him as a tenant in common under the 2005 assignment, and that the half share should devolve as part of his estate upon intestacy. In September 2017, she instituted legal proceedings in her capacity as an administratrix of the estate claiming a declaration that the estate of Mr Tam had a half share in the property and an order directing the administratrices to sell the property. Pleadings were later directed to be filed, and the matter was eventually heard before Wilson Chan J in October 2021.

10.  On 18 February 2022, the judge issued his judgment (“Judgment”).[1]

11.  On the validity and effect of the Declaration, the judge noted that it was signed and sealed by Mr Tam and the defendant and was as such presumed to have been regularly executed. The judge considered that the Declaration satisfied the formal requirement of s 5 of the Conveyancing and Property Ordinance (Cap 219). He rejected the plaintiff’s argument that the only way to convert the prior legal and beneficial tenancy in common into a beneficial joint tenancy was by way of a deed of assignment. The judge did not consider either the views of the Inland Revenue Department in adjudicating upon stamp duty or the remarks entered on the register by the Land Registry to be significant. The judge found that the omission of the word “as” between “shall hold the Property” and “Beneficial Joint Tenants” in clause 1 of the Declaration was an obvious typographical error which did not affect the clear intention of the parties.

12.  As regards the joint affirmation verifying a schedule of assets which included the property as an asset held by the deceased and the defendant as tenants in common in equal shares, the judge accepted the defendant’s evidence that her affirmation was a mistake and that she was illiterate in English and signed it based on the trust in the competence of the solicitors who prepared the schedule. The judge also observed that a corrective affirmation could be made to amend the schedule under s 24A of the Probate and Administration Ordinance (Cap 10).

This appeal

13.  The plaintiff now appeals against the Judgment on several grounds which we shall discuss below. The defendant, when acting in person, had filed a Supplemental Respondent’s Notice (replacing the previous Respondent’s Notice). Mr Lo who appeared for the defendant before us confirmed at the hearing that it would not be relied upon.

14.  Under Ground 1, the plaintiff relies on certain passages (§§21–24 & 27–29) in Whitlock v Moree [2017] UKPC 44 including a sentence in §23 that reads “where the relevant property is transferred to the legal holders by a written instrument, a statement as to the beneficial ownership of the property in that instrument is usually conclusive”. The plaintiff argues that the instrument here that is conclusive is the 2005 assignment to Mr Tam and the defendant as tenants in common in equal shares, and that the Declaration is not a document of transfer but “an agreement by deed that merely sets out their intention as to how the Deceased and the Defendant co-own the Property between themselves”.

15.  The plaintiff is obviously mistaken here because whilst the 2005 assignment was conclusive as to how the beneficial interest was held after that assignment, it does not have the effect of precluding a subsequent legal act re-arranging the beneficial interest. Whitlock v Moree does not lay down any rule that beneficial interests cannot subsequently be created by declarations of trust.

16.  The plaintiff submits that the Declaration cannot bring about a subsequent variation from the tenancy in common to a joint tenancy. She cites a passage from Halsbury’s Laws of England, Vol. 87 (2017), p 152 concerning the creation of joint tenancy at common law, and submits that the Declaration is not a “grant, devise or disseisin”. But here we are concerned with an equitable joint tenancy and the passage does not appear to be relevant.

17.  The plaintiff submits that any change of the beneficial ownership would require the consent of the mortgagee bank and that there was no written consent obtained here. This point which alleges fraud against the mortgagee bank was not pleaded and is not open to the plaintiff now. In any event, the plaintiff has not been able to point to any legal rule that in these circumstances the Declaration could not take effect as a declaration of trust even if it might have resulted in a breach of the terms of the mortgage.

18.  The plaintiff submits that the deceased and the defendant were not joint tenants of the property and so were not able to declare a trust of the property for themselves as beneficial joint tenants because, inter alia, the four unities were not present. In thus arguing, the plaintiff has failed to understand the precise legal effect of the Declaration. In Hong Kong, land can be held by two persons under a tenancy in common at law (which is no longer possible in England after 1925 by reason of ss 1(6) and 34 of the Law of Property Act 1925): see Nield, Hong Kong Land Law (2^nd ed), p 228; Goo & Lee, Land Law in Hong Kong (4^th ed), §5.17. After the 2005 assignment, Mr Tam and the defendant were tenants in common at law and in equity, each holding a half undivided share in the property. Each was a full owner of his or her own half share. It is correct that, as such, they did not have unity of interest. It is clear from the Declaration that they intended to become beneficial joint tenants, without becoming joint tenants at law. It was therefore unnecessary to have a re-conveyance of the property to themselves as joint tenants at law. They had chosen instead to achieve their purpose by a declaration of trust, leaving the interests at law undisturbed. That a trust was intended is plain from the description of themselves as “trustees” in the Declaration.

19.  A settlor can of course create a trust by declaring himself a trustee of property belonging to him and, where that property is already held in his name, all he needs to do is make a declaration: Lewin on Trusts (20^th ed), §3-004. To give effect to the clear intention of Mr Tam and the defendant as expressed in the Declaration, what they should be taken to have done by that instrument is that each had declared a trust in respect of his or her half share in favour of both of them together as beneficiaries under a joint tenancy. In other words, after and by virtue of the Declaration, Mr Tam held his half share under the legal tenancy in common, on trust for himself and the defendant as joint tenants in equity. Likewise, the defendant held her half share under the same legal tenancy in common, on trust for herself and Mr Tam as equitable joint tenants. Strictly speaking there are two trusts, each set up by a different settlor and with a different trustee, but with the same two beneficiaries. Within each trust there were the four unities between the two beneficiaries, of possession, of interest, of title, and of time. Should one predecease the other, by the right of survivorship which is a characteristic of joint tenancy, the survivor would become solely beneficially entitled under both trusts, in that under one trust the deceased’s estate (or rather, his or her personal representative) would hold the deceased’s half share at law for the survivor in equity, and the other trust would come to an end as the survivor would hold his or her half share for himself or herself absolutely.

20.  The plaintiff also submits that a properly constituted declaration of trust would necessarily pass the beneficial interest and be chargeable for ad valorem stamp duty, and that the Stamp Duty Office had been defrauded by the Declaration. This is clearly misconceived, since the Declaration was submitted to the Inland Revenue Department who adjudged that no stamp duty was payable. The plaintiff’s allegation of fraud is baseless and is to be deprecated.

21.  By Ground 2, in so far as it does not repeat Ground 1, the plaintiff contends that s 5(1)(b) of the Conveyancing and Property Ordinance was not satisfied because Mr Tam and the defendant were not persons who were able to declare a trust of the property in joint tenancy. Section 5(1)(b) provides that “a declaration of trust respecting land or any interest therein shall be manifested and proved in writing signed by the person who is able to declare such trust or by his will”. Instead, the plaintiff argues that an assignment made by Mr Tam and the defendant as assignor to themselves expressly vesting the property in themselves as joint tenants would be necessary to achieve their purpose of creating a joint tenancy, but this was not done. The plaintiff further argues that insofar as the Declaration constituted a promise to hold the property as beneficial joint tenants, equity would not come to the aid of the defendant.

22.  These arguments are misconceived. As explained above, the Declaration is properly to be seen as a declaration by each of Mr Tam and the defendant of a trust over his or her half share of the property held under a tenancy in common at law. Each of them, being of full age and sound mind and the legal holder of the share, was able to declare such trust, which was manifested and proved in writing signed by them as attested by the solicitors’ clerk whose name also appeared on the document. The trust was properly constituted at once, and there was no further intervention from equity that needed to be invoked. The assignment route suggested by the plaintiff was a possible way to make the parties legal and beneficial joint tenants, but it was not the only way to achieve the parties’ purpose.

23.  In her written submissions the plaintiff contends that the defendant was estopped by her joint affirmation verifying the schedule of assets from asserting any entitlement under the Declaration. Estoppel is not a matter raised in the grounds of appeal and is not open to the plaintiff.

24.  Ground 3 contends that by virtue of s 9(1) of the Conveyancing and Property Ordinance, only a “vesting instrument” can create a joint tenancy, and that as the Declaration is not a vesting instrument, the expressed intention therein does not create a joint tenancy. Section 9 provides:

“ (1) Where a tenancy in the same estate or interest in land vests in 2 or more persons under an instrument or a will, it shall be presumed, unless the contrary intention is expressed in that instrument or will, that the tenancy vests in those persons as tenants in common rather than as joint tenants.

(2) This section shall not apply to any instrument or will made before the commencement of this section.

(3) This section shall not apply to a tenancy vesting in trustees or personal representatives.”

25.  The terms of s 9 make it plain that it does not say what the plaintiff suggests it says. This ground has no merit.

26.  Ground 4 contends that there is inconsistency between the 2005 assignment and the Declaration and the “inconsistency rule of interpretation” means that the earlier 2005 assignment, which transferred the property to the assignees as tenants in common, put it “out of power” for the later Declaration to convert them into joint tenants. Once the effect of the Declaration is properly understood as analysed in §19 above, it can be seen that this ground is misconceived. The parties to the Declaration, who were tenants in common at law by reason of the 2005 assignment, were each at liberty to declare a trust over his or her undivided share in the property in favour of beneficiaries of his or her choice. There is no inconsistency as alleged between the 2005 assignment and the Declaration.

27.  Ground 5 relates to the defendant’s affirmation verifying the schedule of assets. It was said that the judge failed to take account or gave manifestly inadequate weight to three matters, namely: (1) that the defendant made an affirmation on 29 July 2013 in her first application for grant of letters of administration (HCAG 009828/2013) verifying the schedule of assets and liabilities which already included the property as an asset held by the deceased and the defendant as tenants in common in equal shares; (2) that the defendant made an affirmation on 30 July 2014 in HCCA 001104/2014 (proceedings relating to the caveat entered by the plaintiff) stating that half of the property belonged to the estate; and (3) that in WhatsApp messages in February 2015, in an attempt to settle the distribution of the estate, the defendant proposed to the plaintiff’s sister that the defendant and her son should have half of the property.

28.  As to (1) and (2), these are affirmations made prior to the joint affirmation made on 12 May 2016 verifying a schedule of assets. The 2016 affirmation was the one pleaded by the plaintiff in her Reply (at §4(c)) and relied upon in her submissions as the so-called “LA Declaration” constituting a waiver or renunciation (see §§8 & 46–48 of the plaintiff’s opening submissions). The judge was right to focus on that document. The fact that he did not mention the other two affirmations did not show that he overlooked them. The explanation that the defendant trusted the solicitors who prepared the documents and thus signed the documents in mistake, which the judge accepted, could equally apply to the earlier affirmations. There was no readily understandable reason why the defendant would voluntarily “waive” or “renounce” her interest as the surviving joint tenant. As to (3), on the plaintiff’s own case the defendant’s message was sent in an attempt to settle the disputes between the parties. The judge was entitled not to place weight on it as a renunciation by the defendant of the Declaration or of any interest in the property. The judge had seen and heard the parties give evidence at trial and was in the best position to consider the circumstances in which the defendant made the statements that appeared to be contrary to the effect of the Declaration. He accepted the defendant’s evidence, noting that she was unshaken in cross-examination and gave her answers in a truthful and straightforward manner. The plaintiff has not come near the threshold for impugning the finding of fact by the judge.

29.  The plaintiff also relies again on the entries made by the Land Registry. For the reasons given by the judge, they have no significance for the purposes of the determination of the legal issues by the court.

30.  For the above reasons, the appeal should be dismissed.

31.  The plaintiff submitted at the hearing that should the appeal be dismissed, the costs should be paid out of the estate. We do not agree. The plaintiff obtained the court’s determination of the questions she raised below. She has brought the appeal to impugn the Judgment. The appeal is in our view wholly unmeritorious and should not have been brought. There is no reason why the estate, of which the defendant and her son are the majority beneficiaries, should bear these costs. Accordingly, we make an order that the plaintiff shall personally pay the defendant’s costs of this appeal, to be taxed if not agreed.