KWOK MEI HA MAY v. CHIU YUNG

HCA 3079/2015

[2018] HKCFI 462

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3079 OF 2015

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DECISION

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1.  I will now give my Decision in this matter. I make an order that the same be transcribed and that copies of this Decision be provided to the parties.

2.  This case involves competing claims in relation to Section C of Lot No 3155 in DD 129, being the 2nd Floor and roof of No 322 Sha Kong Wai, Ping Shan, Yuen Long, hereinafter referred to as “the premises”. 

3.  The plaintiff, who is the current registered owner of the premises seeks today to strike out the defendant’s defence and counterclaim, or alternatively seeks summary judgment and yet further seeks the determination of questions of law under Order 14A. 

4.  The defendant, who appears today unrepresented, has not put in any affidavit evidence.  However, the plaintiff has, in its own application, produced evidence as to the background leading to this case, including correspondence from the defendant, and has fairly stated that for the purposes of today’s applications the facts alleged by the defendant (appearing primarily in her defence and counterclaim and further and better particulars, the contents of which the defendant has confirmed to be true) are not disputed unless contradicted by documentary evidence or by the defendant’s own evidence. 

5.  As such, the undisputed background for today’s purposes only is that the premises at Lot 3155 were previously registered in the name of a Mr Ho Kwok-lun.  In about 2009, Mr Ho entered into an oral agreement with a Mr Charles Tang Chik-kit, whereby Mr Tang would finance the construction costs of a house on the lot, and upon completion, Mr Ho would transfer ownership of the 2^nd Floor and roof of the premises to Mr Tang. 

6.  Mr Tang appears to have complied with his obligations, and once the house was substantially completed the defendant, who had been Mr Tang’s girlfriend for a number of years, together with her daughter, moved into the premises.  The defendant says she paid about in the region of $200,000 to decorate and furnish the premises. Furthermore, it is the defendant’s case that Mr Tang had gifted the premises to her and her daughter. 

7.  On 14 October 2014, Mr Tang suddenly died before he could discharge his obligations to pay a premium required by the government.

8.  On 5 October 2015, Mr Ho entered into a sale and purchase agreement for the premises with the plaintiff.  But before doing so, he provided the plaintiff with a letter from the defendant’s solicitors dated 15 January 2015, which made clear that the plaintiff and her daughter resided in the premises and that the same, on the defendant’s case, had been gifted to her and her daughter by Mr Tang. 

9.  The plaintiff nevertheless bought the property but at a 20% discount to account for the fact the premises were occupied and then proceeded to try to evict the defendant and her daughter. 

10.  The plaintiff accepts that if she is fixed with notice of an equitable interest in the property she would have to take the same subject to that interest.  The plaintiff’s case, however, is that the defendant has no equitable interest in the premises that can bind the plaintiff, not least because it is said that Mr Tang, himself, had no proprietary interest in the property. 

11.  The defendant, however, in her defence and counterclaim says there was a common intention constructive trust in that Mr Ho held the premises on trust for Mr Tang as equitable owner pending the transfer of legal title from Mr Ho to Mr Tang.  Furthermore, that Mr Tang had gifted his equitable interest to the defendant and in reliance on the same, the defendant had moved into the premises and expended considerable sums in fixing it up. 

12.  The principles relevant to a strike out application and to summary judgment applications are well established.  With regard to striking out under Order 18, rule 19(1)(a), the facts alleged in the pleadingsare assumed to be true in determining whether the defence and counterclaimdiscloses a reasonable defence.  The mere fact that a case is weak and not likely to succeed is no ground for striking out.  A strike out will only be granted in plain and obvious cases. 

13.  In summary judgment applications, the defendant must show that there is a triable issue or an arguable defence.  Summary judgment is for clear cases in which there is no material factual dispute, and if there be a legal issue, then no more than a crisp legal question as well decided summarily as otherwise.  Summary judgment is not appropriate where there is a serious dispute as to fact or law. 

14.  At this stage, I am able to deal with the matters raised by Mr Wong on behalf of the plaintiff in fairly short form.  My decision hereinafter is of course only relevant to today’s issues and is in no way a final determination of the issues between the parties. 

15.  As regards the legal relationship between Mr Ho and Mr Tang, I have no hesitation in finding that there is at least an arguable case that Mr Tang obtained a beneficial interest in the property, the same held on trust for him by Mr Ho.  Pursuant to the agreement made between Mr Tang and Mr Ho, Mr Tang financed the construction of the house whereupon Mr Ho surrendered possession of the top floor and roof to Mr Tang.  Mr Tang expended substantial money under the expectation that Mr Ho would transfer legal title to him, which is a basis for a proprietary estoppel claim. 

16.  Furthermore, the same is an arguable basis for a constructive trust claim such that it would be unconscionable for the legal owner, Mr Ho,to deny the existence of the beneficial interest.  The fact that Mr Tang died, before the legal title could be transferred to him, in no way extinguishes his beneficial interest. 

17.  The fact that Mr Ho then sold the lot upon which stood the house that Mr Tang had built and paid for and kept the proceeds entirely for himself is, in my view, arguably unconscionable, and as such, lends support to the contention that Mr Tang retained an equitable proprietary interest in the property. 

18.  The formal requirements of the Conveyancing and Property Ordinance, Cap 219, as to the creation of interest in land do not affect the creation or operation of constructive trusts.  See section 5(2) of the Ordinance. 

19.  As regards the relationship between Mr Tang and the defendant,it is clear that Mr Tang intended the defendant to have a beneficial interestin the premises.  The defendant’s conduct of moving into the premises andexpending substantial moneys on the same is consistent with this intention. 

20.  The plaintiff has relied upon the case of Luo Xing Juan Angela v The Estate of Hui Shui See, Willy [2009] 12 HKCFAR 1.  However, this case is readily distinguishable from the present situation in that the Luo Xing Juan case, the deceased had no beneficial interest whatsoever in the property, the same being held by a company. 

21.  The plaintiff also relies upon Southern Pacific Mortgages Ltdv Scott [2015] AC 385, which is a decision of the Supreme Court in England, concerning the United Kingdom Land Registration Act 2002, for the proposition that prior to the acquisition of the legal estate, a purchaser of property could not grant equitable rights of a proprietary character. 

22.  The facts of that case, though, were very different from the present.  In that case, the vendor agreed to sell the freehold interest in her home to a purchaser who promised the vendor that she would be entitled to remain in occupation indefinitely after completion at a discounted rent.  At the time this promise was made, the prospective purchaser apparently had no interest whatsoever in the property and certainly no equitable interest. 

23.  Paragraph 95 of the judgment, Baroness Hale had this to say:

“ I am reluctantly driven to agree that this appeal must fail for the reason given by Lord Collins of Mapesbury: the purchaser was not in a position either at the date of exchange of contracts or at any time up until completion of the purchase to confer equitable proprietary, as opposed to merely personal, rights on the vendor. But this produces such a harsh result that I would like to add a few additional words of explanation.”

24.  The learned judge then went on to conclude, having set out her view that there ought to be some middle way between the all or nothing approach to the present law, that it was to be welcomed that a Law Commission in the United Kingdom has included a wide-ranging review of the 2002 Act. 

25.  Whilst this authority may provide some basis to contest the defendant’s position, the same does not detract from my view that the defendant’s claim to an equitable interest in the premises is at least an arguable one.  As noted, Order 14 proceedings are only appropriate for crisp legal questions and there is nothing crisp about this issue. 

26.  The plaintiff says she was a purchaser without notice of the defendant’s alleged equitable interest, and in any event, that the defendant has no equitable interest. The question of whether, and if so, what, noticethe plaintiff had, is a question of disputed fact.  But it does appear as noted that she had notice of both the defendant’s occupation of the premises and the alleged fact that the same had been gifted to the defendant before she entered into the sale and purchase agreement. 

27.  In order not to be fixed with notice of prior unwritten equitable interests in a property, the purchaser must have made all usual and proper enquiries. See, for example, Wong Chim Ying v Cheng Kam Wing [1991] 2 HKLR 253. The enquiries made by the plaintiff are again a matter of factual dispute. 

28.  In conclusion, first, on the plaintiff’s strike out application, I find that the pleadings in the defence and counterclaim do disclose a reasonable defence and claim. 

29.  As to the Order 14 summary judgment application, I find for the reasons set out herein that the defendant has arguable defences to the claims made by the plaintiff. 

30.  As to the Order 14A application, I note that the three questions posed are based on hypothetical assumptions and are not based on undisputed or proven facts.  As such, it is undesirable for the court to split the legal and factual determinations so as to give rulings in a hypothetical context.  In my view, Order 14A procedure is not suitable for the just determination of the present case. 

31.  In conclusion:

(1)   the plaintiff’s application to strike out the defence and counterclaim is dismissed;

(2)   the plaintiff’s application for summary judgment is dismissed; and

(3)   the plaintiff’s application under Order 14A is dismissed. 

(4)   Costs reserved.