CHEN TEK YEE AND OTHERS v. CHAN MOON SHING AND ANOTHER

HCA 954/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 954 OF 2010

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J U D G M E N T

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I. INTRODUCTION

1.  The 1^st plaintiff Chen Tek Yee (“Chen”), who was born in 1932 and 82 years old at the time of trial, resided/resides at Flat No 4 on 17^th Floor (with Carpark No 12 on 5^th Car Port), Wun Sha Tower, Nos 33‑45 Wun Sha Street, Hong Kong (“Flat” and “Carpark”, collectively “Property”). She was divorced and had four children, ie the 2^nd plaintiff Liang Lin Lin (“Lin”), the 3^rd plaintiff Leung Wai Wendy (“Wendy”), another daughter and a son (collectively, “Children”).  Lin was born in Taiwan in 1954, and was 56 years old at the time of trial.

2.  In/about 1967 Chen (who was then 35 years old) developed a romantic relationship with Chan Kwok Cheung (who was born in 1914 and then 53 years old, “Deceased”), and they cohabited in Taiwan and later in Hong Kong.  The Deceased was divorced and had a son, ie the 1^st defendant Chan Moon Shing (“Chan”),[1] but did not have any children with Chen.  The Deceased, Chen and Daughters (collectively, “Family”) lived together at the Property from about 1982 to May 1997 when the Deceased (then 83 years old) moved to live at an old-age home.  The Deceased remained at the old-age home until he died (at the age of 95 years) on 26 August 2009, but Chen/Daughters continued/continue to reside at the Property. 

3.  Legal process in the present action had not been served on Chan, and he did not appear at trial.  The 2^nd defendant (“Ng”), who was 62 years old at the time of trial, was a dried seafood businessman and a well experienced property investor.  He had bought/sold several ten properties, and held over ten of such properties for more than five years before resale. 

4.  It was common ground that:

(a) By two assignments both dated 31 December 2010 (“Flat and Carpark Assignments”), the Deceased and Chen as joint tenants purchased the Flat and Carpark for the respective price of $290,400 and $45,000. 

(b) By a Mortgage dated 31 December 1980 (“Mortgage”), the Flat was mortgaged to Hong Nin Bank Limited (“Bank”) for a loan of $100,000 for purchase of the Flat (“Loan”), and for overdraft facilities to the extent of $150,000 (“Overdraft”).  By a Receipt on Discharge of a Charge dated 19 May 1989, the Mortgage was discharged.

(c) By a Memorandum of Sale and an Assignment both dated 24 April 1997 (“Chan Memorandum” and “Chan Assignment”), the Deceased severed and assigned to Chan 50% share of the Property in his name (“50% Share”) for a stated consideration of $2,000,000 (“Chan’s Consideration”).

(d) At an auction held on 19 July 2010, Ng successfully bidded for the purchase of the 50% Share put up by Chan for the price of $1,200,000, and he signed a Memorandum of Agreement for such purpose on the same day (“Ng Agreement”).

(e) By an Assignment dated 19 August 2010 (“Ng Assignment”), in consideration of $1,200,000 paid by Ng to Chan, Chan assigned to Ng the 50% Share subject to inter alia a sealed copy of the writ of summons issued herein on 18 June 2010 and registered at the Land Registry (“Writ of Summons”) and occupation of the Property by Chen as the other tenant-in-common.

5.  The first dispute concerned the beneficial ownership of Property.  Chen/Daughters claimed the 50% Share (or such part/share thereof as the court shall determine, “Part Thereof”) was/is held by the Deceased, Chan and Ng respectively as trustee on trust for Chen,[2] but Ng claimed he beneficially held/holds the 50% Share.  The second dispute concerned Chen’s/Daughters’ claim that they respectively had a life interest under a trust for sole and exclusive occupation of the Property during their respective lifetime, but Ng denied this.

6.  Initially, Ng claimed that Chen’s/Daughters’ alleged rights/ interests in respect of the 50% Share were/are subject to his rights as bona fide purchaser for value without notice.  But his counsel Mr Leung conceded that Ng would not take such point if Chen/Daughters were able to establish their case under either dispute.  Mr Miu, counsel for Chen/Daughters, in his closing submissions confirmed they would only rely on the principles of constructive trust and not those of resulting trust.  Further, neither counsel relied on principles as to promissory/proprietary estoppel.

II.  PARTIES’ RESPECTIVE CASE

(a)  Chen’s/Daughters’ case

7.  Chen/Daughters claimed that when the Property was purchased in 1980 the Deceased told Chen he would have to provide most of the purchase money and to service repayment of the Loan, and he promised Chen/Daughters that if they were responsible for all mortgage payments and household expenses they could stay at the Property for the rest of their lives (“Contractual Licence”).  Pursuant to the Deceased’s request and with the common intention that the Property would be the Family’s permanent home, Chen gave the Deceased $200,000 for the purchase of the Property, and paid the monthly mortgage instalments and household expenses out of the Daughters’ monthly contributions.  Since 1982, by relying on the Contractual Licence Chen/Daughters (together with the Deceased) occupied the Property as their family home, and they used their own monies to repair/maintain the Property.  Before the Deceased left for the old-age home, he reassured Chen/Daughters that “whatever was going to happen in future, he would leave [the Property] for [them] to live there exclusively for the rest of their lives and/or as stated under the terms of the Contractual Licence”, and he also told Chen the Property would go to the Daughters upon their respective death. 

8.  It was the case of Chen/Daughters that the Deceased held the 50% Share or Part Thereof on trust for Chen, but he assigned the same to Chan without Chen’s knowledge/consent.  They claimed Chan did not pay the Chan Consideration for such assignment, and the Deceased/Chan (a) were fully aware of their rights/interests in the Property[3] and (b) held the 50% Share or Part Thereof on trust for Chen, so it would be inequitable for Chan who had notice of the Contractual Licence to take free of the same.  They further claimed that by reason of the “Particulars of Property” drawn up and the advertisements placed for auction sale of the 50% Share, Ng had constructive notice of their rights/interests, and the 50% Share or Part Thereof was held on trust for Chen and was/is subject to the Contractual Licence.

9.  Chen/Daughters therefore claimed for declarations that (a) the Deceased, Chan and Ng respectively as trustee held/holds the 50% Share or Part Thereof on trust for Chen, and the Property was/is subject to the Contractual Licence for Chen/Daughters, and (b) Chen/Daughters were/are entitled during their respective lifetime to sole and exclusive occupation of the Property to the exclusion of Chan, Ng and/or their successors-in-title.

(b)  Ng’s case

10.  Ng denied such claims.  He averred he had no knowledge of the matters in paragraph 7 above, and denied the matters in paragraph 8 above.  Ng claimed that by assignment of the 50% Share from the Deceased to Chan and from Chan to Ng, the Deceased/Chan exercised their full rights as beneficial owners of the 50% Share, so Chan and then Ng were/are the legal and beneficial owner of the 50% Share, and the Property had since been held by Chen/Ng as tenants-in-common in equal shares.  Ng claimed he only had notice of Chen’s alleged claim indorsed in the Writ of Summons, and not those as presently pleaded by Chen/Daughters. 

11.  Ng counterclaimed for mesne profits in respect of the 50% Share from 19 August 2010 onwards, and for sale of the Property pursuant to the Partition Ordinance Cap 352.  Ng asked for a declaration that he was/is the legal and beneficial owner of the 50% Share, for damages to be assessed, and for an order to sell the Property and to distribute the net sale proceeds to Chen/Ng in equal shares.

III.  ISSUES

12.  First, both counsel confirmed Chen/Daughters and Ng would not pursue their respective claim for damages.  Secondly, both counsel also agreed (and I ordered) there shall be a split trial between the Chen’s/ Daughters’ claim and Ng’s counterclaim, and the latter was adjourned sine die with liberty to restore.  Thirdly, Mr Leung initially argued Chen’s/Daughters’ alleged right to lifetime occupation of the Property (which Ng denied) was at best a mere equity to be satisfied by the minimum award necessary to do justice which might sometimes be no more than a monetary award, but Mr Leung confirmed at trial Ng would not rely on such alternative argument to ask the court to grant any monetary award.

13.  Thus, the core issues were (a) whether there was a common intention constructive trust for the Deceased as trustee to hold the 50% Share (or Part Thereof) for Chen as beneficial owner that was binding on Chan and later Ng, and (b) whether there was the Contractual Licence to the exclusion of Chan, Ng and/or their successors-in-title that gave/gives rise to a trust.

IV.  COMMON INTENTION CONSTRUCTIVE TRUST

14.  The Property was registered in the joint names of Chen/ Deceased, and occupied by the Family as their family home.  Chen argued the Deceased held the 50% Share for her absolutely on a constructive trust that gave effect to a common understanding between them at the time the Property was purchased and subsequently maintained, which caused her to act to her detriment in reliance on that intention and made it unconscionable for the Deceased (and also Chan/Ng) to take half of the beneficial ownership of the Property and to deny Chen’s beneficial interest in the 50% Share.

(a)  Common intention

15.  The essence of common intention constructive trust is unconscionability.[4] Cheung JA discussed this extensively in his recent judgment in Mo Ying v Brillex Development Limited & anor.[5] In that case, the Court of Appeal upheld the first instance judgment by DHCJ Eugene Fung SC[6] cited by both Mr Miu and Mr Leung, and affirmed the first instance discussion on the subject.[7] The applicable legal principles are also restated in a trio of English cases, ie Stack v Dowden,[8] Abbott v Abbott[9] and Jones v Kernott.[10]

16.  Where (a) a domestic property is conveyed into the joint names of an unmarried couple, (b) both cohabitants are responsible for any mortgage and (c) there is no express declaration of trust, equity follows the law, and such cohabitants as legal joint tenants are presumed to be beneficial joint tenants (with equal beneficial entitlements).[11] The onus of proof lay on the party seeking to show that equity should not follow the law, ie to establish (i) the cohabitants intend their beneficial interests to be different from their legal interests and (ii) in what way.[12] The burden is a heavy one “because it will almost always have been a conscious decision to put the property into joint names, and committing oneself to spend large sums of money on a place to live is not normally done by accident or without giving it thought”.[13]

17.  The mere fact cohabitants have contributed to the acquisition of the property in unequal shares would not normally be sufficient to rebut the presumption arising from the conveyance.[14] But the presumption can be displaced by showing (a) the cohabitants had a different common intention at the time when they acquired the property or (b) they have later formed the common intention that their respective shares will change.[15]

18.  Such task is not to be lightly embarked in the context of family disputes.[16] First, if an unmarried couple in an intimate relationship decides to buy a family home, almost always with the help of a mortgage for which they are jointly and severally liable, that is on the face of things a strong indication of emotional or economic commitment to a joint enterprise.  Secondly, the notion that in a trusting personal relationship the parties do not hold each other to account financially is underpinned by the practical difficulty, in many cases, of taking such account many years later of the ups/downs of living together as an unmarried couple.[17] But there may be occasions when cohabitants may not necessarily have full understanding of the legal effects of their choice.  Nor do they always have a completely free choice, eg mortgagees tend to require homes to be jointly owned and both parties to assume joint and several liability for the mortgage.[18]

19.  But if the task is embarked upon, the conveyance of the property into joint names is sufficient, at least in the vast majority of cases, to surmount the primary or threshold hurdle of showing the claimant has any beneficial interest at all.[19] Thus, in a dispute over a joint-name property, the focus is on the second question as to the proportion of the unmarried couple’s respective interest, and on such question the search is for their actual shared intentions (if any), whether expressed or inferred, to take otherwise than equally at the relevant time.[20]

20.  A distinction is to be made between (a) cases based on evidence capable of establishing an express agreement between the cohabitants, and (b) cases where there is no such evidence but there is evidence of conduct (eg their words and their actions) from which the court can infer/deduce objectively the existence of an agreement.[21] But the court cannot impose a solution upon the cohabitants which is contrary to what the evidence shows they actually intended.[22]

21.  For a court to hold that the parties have formed an express common intention, evidence of express discussions is required, “however imperfectly remembered and however imprecise their terms may have been”,[23] and in appropriate circumstances even excuses may suffice.[24] A claimant must provide in his statement of claim as much particularity as possible of the discussions between the parties.[25] But “[even] where reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter of reference to which their assertions about the agreement or understanding must be gauged or tested”.[26] Where defined shares have been expressly agreed by the parties, the court will give effect to that agreement.[27]

22.  But if there is no evidence of express discussions in which the common intention is articulated, the court will be thrown back on the parties’ whole course of conduct in relation to the property to infer a common intention to give rise to a constructive trust.[28] A holistic approach should be adopted by undertaking a survey of the whole course of dealing between the parties and taking into account all conduct which throws light on the question what shares were intended.[29] Other than financial contributions, relevant factors may include inter alia:

“ 69. …… any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties’ relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses. When a couple are joint owners of the home and jointly liable for the mortgage, the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. The parties’ individual characters and personalities may also be a factor in deciding where their true intentions lay. In the cohabitation context, mercenary considerations may be more to the fore than they would be in marriage, but it should not be assumed that they always take pride of place over natural love and affection. At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.”[30]

23.  But where there is insufficient evidence to divine the quantification of the proportions in which the property was intended to be shared, then each party is entitled to “that share which the court considers fair having regard to the whole course of dealing between them in relation to the property”.[31] But the court is not concerned with redistributive justice, and the focus is on what is “fair” by reference to the conduct of the parties in dealings connected to the property.[32]

24.  As regards whether subsequent conduct and dealings in relation to a property can be taken into account, Snell’s Equity states as follows:[33]

“(c) Contemporaneous and subsequent conduct. The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute part of the transaction are admissible in evidence either for or against the party who did the act or made the declaration. It has been held that subsequent acts and declarations may only be admissible as evidence against the party who made them, and not in his favour. The preferable approach nowadays may be to treat the parties’ subsequent conduct as admissible even in their own favour, and to leave the court free to assess its probative weight. ……”

25.  Each case turns on its own facts.[34] Many more factors other than the cohabitants’ respective financial contributions may be relevant to enable the court to decide what shares were either intended or fair.[35] But when all relevant factors have been taken into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests would be very unusual.[36]

(b)  Detrimental reliance

26.  A claimant is also required to establish he has acted to his detriment or significantly altered his position in reliance upon the common intention which makes it unconscionable for the other party to deny the claimant’s beneficial ownership.[37] There must be some “link”/“referability” between the conduct and such common intention,[38] and the conduct must be that which the claimant could not reasonably have been expected to embark unless he was to take otherwise than equally.[39]

(c)  Post-acquisition common intention

27.  In the present case, there was no suggestion the common understanding was formed some time after the acquisition of the Property or there was any subsequent change to the common intention at the time of acquisition, so it is unnecessary for me to consider what Lord Hoffmann in Stack referred to as “ambulatory” constructive trust.

V.  CONTRACTUAL LICENCE GIVING RISE TO A TRUST

28.  A bare licence can be revoked at any time on reasonable notice, and a revocable licence is automatically determined by death of the licensor or assignment of the land.[40] A mere contractual licence to occupy land is a personal transaction that creates no property rights.[41] The mere fact that land is expressed to be conveyed subject to a contractual licence gives notice to the purchaser, but does not necessarily imply he is to be under an obligation, not otherwise existing, to give effect to the licence.[42]

29.  Appropriate facts may give rise to a constructive trust.  However, a constructive trust of land should not be imposed by relying on inferences from slender materials,[43] and the court will not impose a constructive trust unless it is satisfied the owner of the property has so conducted himself that his conscience has been affected and it will be inequitable to allow him to deny the claimant an interest.[44] But if a contractual licence gives rise to a constructive trust, it follows that third parties may be bound on ordinary trust principles.

30.  In Bannister v Bannister,[45] there had been an oral agreement by the defendant, who owned two adjacent cottages, to sell both of them to the plaintiff at a given price, on terms that the defendant was to be allowed to live in one of them rent free for the rest of her life.  The conveyance proceeded accordingly with nothing to record the defendant’s rights. The plaintiff later sought to terminate what he said was the defendant’s tenancy at will, but his attempt failed.  Mr Leung submitted Bannister was not a case about contractual licence and there was no question of a third party being subjected to the defendant’s rights.  Nevertheless, it was necessary in that case to address the issue of a constructive trust.  Scott LJ said at p 136 that:

“…… The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest …… Nor is it, in our opinion, necessary that the bargain on which the absolute conveyance is made should include any express stipulation that the grantee is in so many words to hold as trustee. It is enough that the bargain should have included a stipulation under which some sufficiently identified beneficial interest in the property was to be taken by another.”

31.  In Binions v Evans,[46] Lord Denning MR (but not other members of the court) decided on the basis that the plaintiff had a licence under which she was entitled to live in the cottage for the rest of her life, and that the defendant who had bought by a contract (at a reduced price for the cottage) expressly subject to her rights was to be precluded, by virtue of a constructive trust imposed by conscience, from acting inconsistently with the plaintiff's rights under her licence. 

32.  In Siew Soon Wah v Yong Tong Hong,[47] a tenant paid a sum of $8,000 in consideration of the landlord’s promise that the tenancy should be “permanent”.  The landlord’s interest passed to his children who served notice to quit on the tenant.  The Privy Council held that the effect of the agreement was to grant a tenancy for as long as Malaysian law allowed (viz 30 years) provided that the tenant paid the rent and wished to continue to occupy it.  Viscount Dilhorne, who delivered the judgment of the Privy Council, at pp 844-845 referred to inter alia Inwards v.  Baker[48] for the proposition that, even in the absence of a contract, the expenditure of money on a property, with the encouragement of the owner, could give rise to an equity which would defeat the owner’s claim to possession.  He concluded at p 846 that in the circumstances an equity or equitable estoppel arose in favour of the tenant which, subject to the proviso, protected his occupation.

33.  In DHN Food Distributors Ltd v Tower Hamlets Borough Council,[49] premises were owned by a company and occupied by an associated company within a group under an informal agreement between them.  The premises were subsequently purchased by the council, and the English Court of Appeal held that the associated company had an irrevocable licence to occupy the premises.  Lord Denning MR at p 859 confirmed that “a contractual licence (under which a person has a right to occupy premises indefinitely) gives rise to a constructive trust under which the legal owner is not allowed to turn out the licensee”.

34.  In Lyus v Prowsa Developments Ltd,[50] a building company was developing an estate that was subject to a bank mortgage.  The company agreed to sell a plot to the plaintiffs, which was to be transferred to them once the house had been built on it.  The plaintiffs had paid a deposit, but the company became insolvent.  The mortgage bank contracted to sell the land (including the plot which the plaintiffs had agreed to buy) to the defendant, and the contract was expressed to be subject to and with the benefit of the contract between the company and the plaintiffs.  Further, before the date of the bank’s sale to the defendant, the defendant’s solicitors wrote to the bank’s agents giving an assurance that the defendant would take all reasonable steps in its power to make sure the interests of contracting purchasers (such as the plaintiffs) were dealt with quickly and to their satisfaction.  Three matters were of note: (a) the third party rights in question were specifically identified in the contract under which the defendant agreed to buy the property, (b) the bank had no need to protect itself as regards enforcement of the plaintiffs’ contract because the mortgage had priority, and (c) consequently the plaintiffs could have done nothing to ensure that a purchaser from the bank was affected by their rights.

35.  Dillon J pointed out the plaintiffs in that case had continuing rights against the vendor under the licence, such that if evicted there would have had a claim for damages against the vendor.  He said at pp 1051-1052:

“In the factual matrix it was necessary for the protection of the vendors to interpret the agreement between the vendors and the purchasers as conferring rights on the defendant as against the purchasers, and this was done through the medium, as Lord Denning MR put it, “of imposing a constructive trust on the purchasers for the defendant’s benefit”.

By contrast, there are many cases in which land is expressly conveyed subject to possible incumbrances when there is no thought at all of conferring any fresh rights on third parties who may be entitled to the benefit of the incumbrances.  The land is expressed to be sold subject to incumbrances to satisfy the vendor’s duty to disclose all possible incumbrances known to him, and to protect the vendor against any possible claim by the purchaser if a third party establishes an overriding right to the benefit of the incumbrance against the purchaser.  So, for instance, land may be contracted to be sold and may be expressed to be conveyed subject to the restrictive covenants contained in a conveyance some sixty or ninety years old. No one would suggest that by accepting such a form of contract or conveyance a purchaser is assuming a new liability in favour of third parties to observe the covenants if there was for any reason before the contract or conveyance no one who could make out a title as against the purchaser to the benefit of the covenants.”

36.  Dillon J came to his conclusion in favour of the plaintiffs at pp 1054-1055 as follows:

“It seems to me that the fraud on the part of the defendants in the present case lies …… in the first defendant reneging on a positive stipulation in favour of the plaintiffs in the bargain under which the first defendant acquired the land. That makes, as it seems to me, all the difference. …… it is fraud for a person to whom land is agreed to be conveyed as trustee for another to deny the trust and …… to claim the land for himself. ……”

37.  Lyus was considered in Ashburn Anstalt v Arnold & anor.[51] In that case, a leaseholder had sold its lease under an agreement made in 1973 but retained a contractual right to remain in occupation of the property as licensee, and also had a right to be granted a lease of a shop on the site by the purchaser after development of the site.  The plaintiff bought the freehold of the premises where the former leaseholder was still carrying on business subject to the terms of the 1973 agreement, but refused to accept it was bound by the 1973 agreement.  The English Court of Appeal held that the agreement created a tenancy, but went on to consider the position if there had not been a tenancy and formulated in general terms the test under the constructive trust approach, ie “whether the owner of the property has so conducted himself that it would be inequitable to allow him to deny the claimant an interest in the property.” The court then reviewed the above cases, and at pp 24-25 said Lyus was “a case where a constructive trust could justifiably be imposed.  The bank were selling as mortgagees under a charge prior in date to the contract.  They were therefore not bound by the contract and on any view could give a title which was free from it.  There was, therefore, no point in making the conveyance subject to the contract unless the parties intended the purchaser to give effect to the contract”.

38.  The English Court of Appeal would not have held there was a constructive trust on the facts in Ashburn Anstalt.  Fox LJ concluded at pp 25-26 as follows:

“ …… The court will not impose a constructive trust unless it is satisfied that the conscience of the estate owner is affected. The mere fact that that land is expressed to be conveyed “subject to” a contract does not necessarily imply that the grantee is to be under an obligation, not otherwise existing, to give effect to the provisions of the contract. …… The words “subject to” will, of course, impose notice. But notice is not enough to impose on somebody an obligation to give effect to a contract into which he did not enter.”

39.  The principles can be summarised as follows:

(a) Even in a case where, on a sale of land, the vendor has stipulated that the sale shall be subject to stated possible incumbrances or prior interests, there is no general rule that the court will impose a constructive trust on the purchaser to give effect to them.

(b) The court will not impose a constructive trust in such circumstances unless it is satisfied the conscience of the estate owner is affected so that it would be inequitable to allow him to deny the claimant an interest in the property.  It is important not to lose sight of the fact that it is the conscience of the new estate owner that is under consideration, and the issue is whether he has acted in such a way that, as a matter of justice, a trust must be imposed on him.[52]

(c) In deciding whether or not the conscience of the new estate owner is affected in such circumstances, the crucially important question is whether he has undertaken a new obligation, not otherwise existing, to give effect to the relevant encumbrance or prior interest. 

(d) In matters relating to the title to land certainty is of prime importance, so it is not desirable that constructive trust of land should be imposed in reliance on inferences from slender materials, so the creation of a constructive trust is not warranted unless there are special circumstances as explained above.[53] But proof that the purchase price by a transferee has been reduced upon the footing that he would give effect to the relevant encumbrance or prior interest may provide some indication that the transferee has undertaken a new obligation to give effect to it.[54]

VI.  WITNESS EVIDENCE

40.  Chen, Lin and Ng gave evidence at trial, and they adopted their witness statements as their evidence-in-chief.  In assessing witnesses’ credibility, I bear in mind not only their demeanour in court but also the intrinsic value of their evidence upon considering the totality of their evidence against the chronology of events, the documentary evidence, and inferences based on inherent probabilities and/or undisputed facts.[55]

41.  Chen and Ng met only once in late June 2010, so apart from this meeting their evidence dealt with matters and events that did not overlap.  Ng and the Daughters had never met.  Hence, there is little direct conflict in their evidence.  Nevertheless, it is still necessary to assess the credibility/weight of the witness evidence along the principles discussed in the above paragraph.

42.  I bear in mind that Chen is elderly, and the events canvassed in her evidence spanned several decades.  She was quite forthcoming and articulate in her reply under cross-examination, and she was firm on most of the material matters.  She could not remember some matters and there were some minor discrepancies in her evidence, but given her advanced age they do not detract from the reliability and truthfulness of her other evidence that I accept, and in particular I accept her evidence as to what the Deceased told her in relation to the Property, the occupation of the Property by the Family and later by her/Daughters, and the financial contributions by her/Daughters for the initial purchase price, mortgage repayments, mortgage redemption, property redecoration and building renovation.

43.  Lin’s evidence was measured and articulate.  Although her evidence had a touch of disdain for the Deceased who failed to make significant financial contribution for the Property and/or the Family, she was on the whole truthful and reliable.  In particular, I accept on balance her evidence as to her earnings and her contributions to the mortgage repayments and household expenses.

44.  As for Ng, he was a shrewd and forceful businessman with an eye on profitable investment opportunities.  I find on balance that even though he had notice of Chen’s/Daughters’ occupation rights (and hence awareness of possible risks over title/occupation in respect of the Property), he had no qualms in purchasing the 50% Share (for about 30% below the market price) because he thought he would be able to convince Chen (who occupied the Property with the Daughters) to either (a) sell her half share of the Property to him at a modest price (since it would not be realistic to expect a competitive market of willing buyers for a half‑share property co-owned by a stranger) or (b) if that did not find favour with Chen, buy from him the 50% Share at market/enhanced price (since Chen would have no choice but to buy from him).  His evidence (and in particular his optimistic confidence in the integrity of his interest in the 50% Share, and his casual dismissal that Chen’s claim of her/Daughters’ occupation rights as mere bluff) must be considered through the prism of such opportunitic intentions, and weighed against his substantial experience as a property investor.

45.  I have reminded myself that I should refrain from impermissible extrapolation and unnecessary speculation concerning possible explanations/conclusions beyond inferences that can be properly/ legitimately drawn from the primary facts, and that I should focus on considering and determining whether Chen/Daughters have made out the case as they allege and as Ng has to meet.

VII.  DISCUSSION

(a)  Up to death of the Deceased

46.  Settling in Hong Kong  After WWII, Chen left Beijing for Taiwan.  She started to work when she was 18, and stopped when she had children.  In/about 1967, Chen came to know the Deceased who came to see her in Taiwan, and they cohabited at Chen’s place.  In 1972‑1973, the Deceased helped Chen settle in Hong Kong, and they continued to cohabit in a rented flat at Flat 9A, No 210 Hennessy Road, Wanchai, Hong Kong (“Rented Flat”).  The Family lived there from 1976 to 1982.  Chen’s other daughter and son eventually went to live/work in Japan.

47.  Daughters’ earnings  At that time, Lin worked as senior manager of a duty free shop earning more than $7,000/month, and Wendy earned even more as a Caledonian Airways stewardess with basic salary of $6,000/month and additional flight allowance.  In 1982, Lin worked as G/F store manager of Lane Crawford Department Store earning $13,000/month with bonus.  In 1987, she joined LVMH as boutique manager earning $20,000/month.  Wendy later joined British Airways and worked as a stewardess for 10 years.

48.  Deceased’s business  For a short while in 1976 the Deceased ran his business from a desk office.  Thereafter, Chen/ Deceased carried on a construction material business called Shing Tat (“Shing Tat”), which earned commission income from sale of toilet/mosaic tiles.  Chen never shared in Shing Tat’s profits, and was not paid any salary until the Deceased went into partnership with Yuen Moon Kwai.  All along Chen’s salary was $3,000/month (a bit more if there was more business) until the Deceased (then in his 80s) closed down his business in 1996-1997 following an illness. 

49.  Purchase of the Property  During 1980, Chen mentioned to the Deceased her intention to purchase a flat as residence.  He told her his developer friend could sell them one at Wun Sha Tower at a discounted price, but she would have to be responsible for most of the purchase price and to service payment for the mortgage loan related to the purchase.  The Deceased expressed to Chen his wish to jointly own the flat with her to emphasise his status and dignity at home, and because of her affection/trust towards him she purchased the Property as the Family’s permanent residence as joint tenant with him.  At that time Chen never gave any thought to upgrade to another property in future.  At the Deceased’s request, Chen personally gave him $200,000 in cash (from her savings brought over from Taiwan and kept at home) for purchase of the Property. 

50.  On 31 December 2010, the Flat and Carpark were purchased in the names of the Deceased/Chen as joint tenants for $290,400 and $45,000 respectively.  When the conveyancing documents were signed at the solicitors’ office, Chen was advised the Property was subject to “生死契” which meant that if one co-owner passed away the surviving co‑owner would own the entire Property.  Chen confirmed there was no change to such “長命契” arrangement up to the time when the Deceased passed away.

51.  Mortgage  The price for the Carpark was paid in cash, and Chen kept the title deeds.  It was the Deceased who negotiated/arranged the Mortgage of the Flat to the Bank for the Loan to cover the purchase price shortfall and for the Overdraft to facilitate his business cashflow.  Chen did not know how the Overdraft was utilised save that it was for the Deceased’s business.  The Loan was drawndown on 9 July 1980[56] to be repaid with interest by 60 equal monthly instalments of $2,455.30 each (subject to interest fluctuation) with the first instalment payable on 9 August 1980 and subsequent instalments payable on the 9^th day of each successive month thereafter.  Under the Mortgage, both Chen and the Deceased as mortgagor were jointly and severally responsible for repaying the Loan and Overdraft with interest.

52.  Letting the Property  The Rented Flat’s tenancy was yet to expire so the Family continued to live there, and the Property was let during 1980-1982.  The Deceased handled the rental arrangements and collected the rent, but Chen did not know how the collected rent was utilised.  In my view, since such collected rent was not paid to Chen/Daughters, it was presumably used for the Deceased’s business or for his personal expenses. 

53.  Household income The Deceased did not give Chen money for household expenses, and she would use her own money, her salary and contributions by the Children for such purpose.  At the time of purchase of the Property, the Daughters were working and already making contributions to Chen for household expenses.  Chen’s son/daughter who lived in Japan would visit her a few times a year and would give her over $10,000/visit.[57] Chen would deposit with the bank any cheque (eg salary cheque) she received, but she would keep her salary (when paid in cash) with her and not deposit it with the bank unless she had too much ready cash. 

54.  Upon purchase of the Property, each Daughter regularly paid $3,000/month to Chen (ie $3,000 for mortgage repayment and $3,000 for household expenses).  Chen gave $3,000/month to the Deceased to pay the mortgage instalment (which she did not know was less than $3,000).  Chen/Lin did not know how the Deceased made payment to the Bank.

55.  Moving into the Property  In/about 1982 Chen/Daughters paid about $100,000 for redecoration of the Flat,[58] and the Family moved into the Property as their permanent home in the same year.  The Daughters paid the building maintenance fees and government rates.  Lin claimed (and on balance I accept) the Deceased expressly told the Daughters that since they had contributed so much, they could definitely live at the Property without worry.

56.  Redemption of the Mortgage  The Loan was fully repaid and the Mortgage was redeemed on 19 May 1989.  At that time, the Deceased (then in his 70s) was still carrying on business.  Chen claimed (and on balance I accept) the Deceased’s business was not doing well and he could no longer service the Overdraft.  I further accept on balance Chen used her savings and borrowed $90,000 from her younger brother Chan Siu Chung in Taiwan to repay the Overdraft.  After the Mortgage was redeemed, Chen kept the title deeds of the Flat.  Since she kept the title deeds of the Property, Chen thought her interest would not be affected.  Thereafter, the Daughters gave more than $6,000/month to Chen for household expenses due to improved living standard. 

57.  Building renovation  There had been two major renovations of Wun Sha Tower.  The first one probably took place in 1993, but Chen could not recall how much she paid for such building renovation.  Chen gave evidence (and on balance I accept) that since she/Daughters paid the expenses relating to the Property and also settled the Overdraft for the Deceased, the Deceased (whilst he resided at the Property) assured them face to face several times that the Property would definitely be their permanent home, and Chen believed him. 

58.  Old-age home  In May 1997, the Deceased (who was 83 by then) moved to an old-age home whilst Chen/Daughters continued to reside at the Property.  Chen claimed (and on balance I accept) that some time after the Deceased moved to the old-age home he was on CSSA[59] and did not want it to be known he had family, so she visited him when he telephoned and asked her to come.  But she regularly gave money for him to spend (but did not know how he spent it or whether he had to pay the old-age home), and brought him tonic food, daily necessities and medicine etc.  Chen did not know whether Chan visited the Deceased at the old-age home.

59.  Chen gave evidence (and on balance I accept) that even after the Deceased left the Property he again assured her that whatever might happen, the Property would be the permanent home for Chen/Daughters and asked her not to worry.  Lin also confirmed that after visiting the Deceased at the old-age home Chen told the Daughters about the Deceased’s reassurance that in any event they could live at the Property permanently.

60.  Further building renovation  In 2003, the management office of Wun Sha Tower announced that maintenance work would be done for the building.  When Chen told the Deceased about this on a visit to the old-age home, he said he was unable to pay and Chen/Daughters should pay the maintenance costs since he had promised them they could stay at the Property as their permanent home.  The Daughters funded the maintenance costs, and Chen issued her own personal cheque for $34,897.50 in payment.[60]

61.  Deceased passed away  Chen claimed (and on balance I accept) that until his death on 26 August 2009 the Deceased never retracted from his assurance that the Property would be the permanent home for Chen/Daughters.  In fact, Chen only learnt that the Deceased passed away about a month later when Chan contacted her in October 2009 (see paragraph 88 below).  The Deceased did not leave any will, and Chen did not know whether there was any application for letters of administration in respect of his estate, whether he had other properties/assets, or how his bank accounts were dealt with after his death.

62.  Financial contributions  Mr Leung drew my attention to Chan Chui Mee v Mak Chi Choi[61] in which Lam J (as he then was) emphasised the importance of producing contemporaneous documents to discharge the onus of establishing that the claimant paid for the acquisition of the property and the mortgage instalments. 

63.  Mr Leung complained that apart from Chen’s/Lin’s bare assertions, there was lack of contemporaneous, documentary and/or reliable evidence as to the financial circumstances of Chen/Daughters, the financial position of the Family as a whole, and how they arranged their finances to pay for the initial purchase price, flat redecoration, building renovations and mortgage repayments in respect of the Property with reference to the relevant source of funds.  Mr Leung noted Chen could not remember the purpose of the deposit/withdrawal entries from 1985 to 1994 in her bank savings passbook, and according to Chen’s solicitors Hobson & Ma (“HM”), none of such entries were directly referable to the purchase of the Property or mortgage instalments.[62]

64.  But bearing in mind the Deceased (a) was then carrying on business which earned commission income from sales, (b) was responsible for arranging the Mortgage with the Bank and securing the Property from his developer friend at a discounted price, and (c) told Chen she would have to be responsible for “most” (ie not “all”) of the purchase price,[63] I find on balance that in 1980 the Deceased contributed $35,400 towards the total purchase price of the Property of $335,400 (of which $100,000 came from the Loan and $200,000 from Chen’s savings from Taiwan).  Mr Miu submitted the “overwhelming probability” was that the shortfall of $35,400 came from the Overdraft,[64] but I find such suggestion impermissibly speculative and inconsistent with Chen’s evidence that the Overdraft was for the Deceased’s business cashflow. 

65.  I find on balance that in 1980 the Deceased (then 66 years old) had modest resources, and the best he could do was to make minor financial contribution of $35,400 for purchase of the Property and to make practical contribution by securing the Property from his developer friend at a discounted price and by liaising/negotiating with the Bank for the Mortgage.  His partnership business was a small-scale enterprise with only two partners, a few employees and Chen who provided clerical assistance.  Chen/Lin fairly acknowledged they did not know too much about the financial side of the Deceased’s business (and there was no evidence whether it was solvent or not when it closed down), but I see no basis to dispute either Lin’s impression that it did not have much business or Chen’s/Lin’s insistence that the Deceased was unable to and did not service the mortgage repayments.  I also bear in mind that the Deceased had to resort to the Overdraft for his business cashflow.  All in all, I agree that the Deceased’s business did not generate much wealth for him, but that said, such business was well able to afford Chen’s modest monthly salary over the years and to service the Overdraft at least until 1989, and to meet the Deceased’s own personal expenses and his financial obligations such as payment of rent for the Rented Flat.  For the Rented Flat, there was no suggestion the rental for such flat was paid by Chen/Daughters although the Deceased appropriated the rental income from letting the Property during 1980-1982. 

66.  But the tenor of the evidence was that by 1989 when the Deceased turned 75 he had difficulty in servicing the Overdraft, and it was Chen who paid off the Overdraft and redeemed the Mortgage through her own savings and a loan from her younger brother.  Even though Shing Tat did not cease operation until 1997, I accept on balance that the Deceased’s business dwindled as he got older and suffered ill health.  His limited financial means in his later years was reflected by his reliance on CSSA and on money and daily necessities that Chen gave him. 

67.  In my view, apart from the Loan under the Mortgage and the Deceased’s contribution of $35,400, Chen paid the rest of the initial purchase price of the Property from her own savings, made the mortgage repayments with financial help by the Daughters and redeemed the Mortgage by paying off the Overdraft out of her own resources and a loan of $90,000 from her younger brother in Taiwan. Such conclusion is supported by the fact that (a) Chen had worked at the weather observatory in Taiwan since she was 18 and had savings that she brought from Taiwan, (b) the Daughters, who had been working since before 1980, had sufficient income to comfortably support both household expenses and mortgage repayments, and (c) Chen also received monetary contributions from her son and other daughter. 

68.  Each case must turn on its own facts, and here I find nothing sinister in the lack of contemporaneous documents.  The period in question (ie from the purchase of the Property in 1980 to the redemption of the Mortgage in 1989) was some 25-34 years ago, and by the time of commencement of the present action the Bank no longer existed as an independent banking institution.  The absence of contemporaneous documentary evidence as to the matters in the above paragraph is readily understandable.  Further, there is also nothing untoward in Chen (who was 82 at trial) not remembering the purpose of various passbook deposit/ withdrawal transactions made in the 1980s.  Still further, Mr Leung did not cross-examine Chen/Lin on what other contemporaneous or documentary records they might have had in their possession, custody or power but had not been disclosed/adduced.  I am not persuaded I should draw adverse inferences against Chen/Daughters in this respect.

69.  But would such uneven contributions to the initial purchase price, mortgage repayments and redemption monies by the Deceased and Chen mean Chen beneficially owned the 50% Share or Part Thereof? Both Stack and Jones reminded that arithmetical calculations of each party’s financial contribution (particularly in a domestic context) is likely to be less important, [65] and it would be easier to draw the inference they intended that “each should contribute to the household as they reasonably could and they would share the eventual benefit or burden equally”.

70.  Mr Miu tried to suggest the Deceased was a man of low morality by taking the benefit of significant monetary contributions made by Chen/Daughters without giving anything in return.  On balance I am unconvinced by such argument.  In my view, the Family all along lived as a family unit, and (as I have found) the Deceased made a minor financial contribution to the initial purchase price which was the best he reasonably could do during the period from 1980 (initial purchase of the Property) to 1989 (redemption of the Mortgage). 

71.  Mr Miu particularly noted it was Chen who paid off the Overdraft and redeemed Mortgage.  But it must be forgotten that in the 9 years from 1980 to 1989 the Deceased serviced the Overdraft, and he also met his business outgoings and personal expenses and paid a salary to Chen as well.  There was no evidence Chen/Daughters made any contribution for those purposes.  Indeed, there was no suggestion Chen/ Daughters continued to pay him $3,000/month after the Loan was paid off by mid-1985.  So apart from enjoying his share of household expenses, the Deceased supported himself out of his own business income.  In such context, I am unconvinced that the Deceased was of low morality.  He did not deserve that epithet even when he needed Chen’s help to pay off the Overdraft, and when his business eventually went into decline as he got on his years. 

72.  Mr Miu submitted that since Chen relied on the Daughters’ contributions to meet the mortgage instalments, it was unlikely she would have intended to gift the 50% Share to the Deceased.  But such submission failed to take into account the fact that the Deceased did make some financial contribution (albeit a modest one) to the initial purchase price, and also failed to take into account the considerations in paragraphs 73-87 below.

73.  50% Share  I agree with Mr Miu there was no evidence of any express declaration of trust between Chen and the Deceased over the beneficial ownership of the 50% Share or Part Thereof.  It is therefore necessary to consider the whole course of conduct in relation to the Property, including what was said and done by Chen/Daughters and the Deceased, in order to divine Chen’s/Deceased’s true intentions.  Mr Miu placed emphasis on the fact that Chen never thought of selling the Property which was to be the Family’s permanent home, but this did not mean the court could not divine the then shared understanding between Chen and the Deceased over the 50% Share from their words/actions and the contextual background.

74.  I agree that when the Property was purchased in 1980 the Daughters were adult and working, so there was no pressing need to provide a home for young children. But still one cannot ignore the then domestic/familial context, ie Chen/Deceased had cohabited in Hong Kong for 12-13 years and were in stable unmarried relationship, and the Family had lived together as a family unit ever since Chen came to Hong Kong.

75.  Even on Chen’s own case, the Property was acquired following discussions between Chen and the Deceased. Such intention to buy a residence was first raised by Chen with the Deceased, and he discussed the arrangements with her.  I have no doubt that the acquisition of the Property was a joint/common enterprise between Chen and the Deceased following their express discussions with the common goal of providing a family residence and permanent home for the Family.  In my view, the Deceased’s request to be named as joint owner and Chen’s ready willingness to accede to such request as a mark of respect for the Deceased reflected a trusting and affectionate relationship and a conscious decision to acquire the Property on a shared basis.  Mr Miu’s submitted the Deceased’s request was merely to avoid being looked down upon by the Daughters as he did not contribute to the household expenses, and to avoid the Daughters persuading Chen “to throw him out of [the Property], if their relationship ever deteriorate, or even if there should be just a big quarrel” simply had no evidential foundation, and this court cannot descend into impermissible speculation. 

76.  The Deceased frankly told Chen he would not be able to afford the full purchase price, so Chen contributed to this joint/common enterprise by funding the down payment largely out of her own savings and taking up responsibility for servicing the mortgage repayments.  But the Deceased also made his contribution (a) by securing the Property from his developer friend at a discounted price, (b) by negotiating the Mortgage and handling the conveyancing with solicitors, (c) by making a minor contribution to the initial purchase price, and (d) more importantly, by recognising the financial contribution by Chen/Daughters in promising them the Property (inclusive of the 50% Share in his name) would be secured for their long-term/lifetime occupation as their permanent family home. 

77.  In the circumstances, I find on balance that the purchase of the Property reflected a joint or shared commitment by both Chen and the Deceased notwithstanding their unequal financial contributions.  This was also abundantly borne out by the fact that from the very beginning and under legal advice Chen clearly understood and accepted the Property was subject to the right of survivorship under “生死契” or “長命契”.  Mr Miu suggested that in the ordinary course of events the Deceased (who was 18 years older than Chen) would have predeceased her (as indeed happened), so it was not intended for the Deceased to acquire any beneficial ownership in respect of the 50% Share.  I do not agree.  The arrangement (which Chen learned from the solicitors handling the conveyance at the time of purchase of the Property and which she was content to let rest for 29 years until the Deceased passed away in 2009) that the Deceased owned the 50% Share or might even end up owning her half-share of the Property should she (for whatever reason) predecease him does not sit well at all with, and indeed strongly contradicts, Chen’s case that she was intended to be the beneficial owner of the entire Property including the 50% Share ever since the initial purchase.[66]

78.  Both counsel reminded that in Re Superyield Holdings Ltd, Recorder Kotewall SC said where the covenant to repay the mortgage is joint and several, each party to such convenent to repay is taken to have contributed half of the sum raised for the purchase,[67] but he accepted whether any beneficial ownership is conferred by any given transaction depends on the intention of the parties at the time the transaction is undertaken, and if there is evidence of actual intentions there is little scope for the operation of various presumptions.[68]

79.  Here, Chen/Deceased as mortgagor were jointly and severally liable to the Bank for repayment of the Loan and Overdraft.  Mr Miu suggested that the Deceased’s potential liability under the Mortgage was academic because the Bank granted the Loan on the strength of the mortgaged Flat and not on the Deceased’s earning capacity.  Again, there is no evidence of this at all.  Moreover, the fact that the Mortgage secured both the Loan and Overdraft (and the latter facility was for the Deceased’s business) strongly suggested that the Bank would not have ignored the Deceased’s “earning abilities”.

80.  It is true Chen/Deceased continued to maintain separate finances and bank accounts, and did not pool their separate financial resources.  But that is not to say they never acted for the common good or kept their affairs in relation to the Property strictly or rigidly separate.  Here, the Deceased’s business did pay a monthly salary to Chen, and he took up joint and several liability under the Mortgage for repayment of the Loan even though he had already told Chen he could not afford it.  On the other hand, Chen (with the Daughters’ help) gave the Deceased’s $3,000/month leaving it to him to arrange payment to the Bank but without questioning him the exact amount of the monthly mortgage instalment (subject to fluctuation) or the disposal of any surplus,[69] and took up joint and several liability under the Mortgage for repayment of the Overdraft which was intended to be used and serviced by the Deceased’s business.  In my view, these are strong indications of their joint economic commitment in respect of acquisition of the Property. I am not persuaded that the totality of the contextual circumstances, including what was said and done, demonstrated any shared/common intention for Chen to have beneficial ownership of the 50% Share or Part Thereof.  Rather, the contextual circumstances affirmed the presumption that equity follows the law.

81.  Further, the Deceased’s subsequent express assurances on various occasions over the years that the Property would be the permanent home for Chen/Deceased and that they could live there permanently and without worry also do not sit well with the notion that Chen beneficially owned the 50% Share.  Had it been otherwise (ie Chen was the beneficial owner of the entire Property), there would have been no need for the Deceased as bare legal owner of the 50% Share to time and again assure Chen that the Property would be her permanent home and she could live there permanently without worry.  Plainly, the Deceased regarded himself as the legal/beneficial owner of the 50% Share, and he therefore reassured Chen/Daughters they could live at the Property permanently.

82.  The pleadings of Chen/Daughters were even more telling.  It was averred that before the Deceased left for the old-age home he reassured Chen/Daughters he would leave the Property for them to live there exclusively for the rest of their lives, and he also told Chen the Property would go to the Daughters upon their respective death.  If the shared/common intention was that Chen would beneficially own the entire Property, it would not be for the Deceased to say how the Property would be dealt with upon his and/or Chen’s death. 

83.  This was not a case in which the parties were silent on the subject of the Property.  Over the years the Deceased time and again gave express assurances for a permanent/family home for Chen/ Daughters during their lifetimes, but references to occupation rights (which I will return to below) are a far cry from clear inference of any common intention for Chen to beneficially own the 50% Share or Part Thereof.  Instead, the natural/sensible inference is that the Property was a cooperative endeavour by Chen/Deceased, and the shared understanding was for the Deceased to beneficially own the 50% Share, which was why he took the initiative to reassure Chen of her (as well as the Daughters’) long-term occupation rights.  In my judgment, the inferred common intention was that Chen and the Deceased held the Property legally and beneficially in equal shares.

84.  Mr Miu submitted that the Deceased’s interest in the Property was not any beneficial ownership of the 50% Share but beneficial interest in the form of a Bannister-type right of occupation for life or for so long as he wished to live at the Property, which Mr Miu claimed was the true meaning of a permanent home for the Family.  I do not agree.  Even on the case of Chen/Daughters, the Deceased gave up occupation of the Property in May 1997 when he moved to the old-age home, by which time any Bannister-type interest in his favour would have expired.  And yet the Deceased continued to assure Chen and (through Chen) the Daughters of their long-term occupation rights at the Property (including the 50% Share). More significantly, in 2003 (ie 6 years after the Deceased left the Property) Chen told the Deceased about building maintenance costs, and he told her he could not pay and instead Chen/Daughters would have to pay because he had promised them they could stay at the Property as their permanent home.  Such enquiry by Chen and such response by the Deceased clearly reflected their common understanding that Chen was not the beneficial owner of the Property.  If it were otherwise, she would not have troubled him (who was then almost 90) about such matter, and he would not have so responded.

85.  In arriving at the above conclusion, I am unconvinced that Chen’s/Daughters’ financial contributions to the acquisition of the Property, payment of household expenses, repayment of the Overdraft and financial contributions to property redecoration and building renovations were manifestations of any common intention that Chen should have beneficial ownership of the 50% Share.  On this fact-sensitive question, the overall contextual circumstances pointed towards a willingness on the part of Chen/Daughters to contribute to the purchase of the Property, to redeem the Mortgage and to finance renovations/improvements due to repeated reassurances and encouragements by the Deceased (even after he left the Property to live at the old-age home) that they were entitled to sole and exclusive occupation of the Property as their permanent home during their respective lifetime. 

86.  The expenditure of money by Chen/Daughters for the acquisition/improvement of the Property and for payment of its outgoings was plainly made in reliance of the Deceased’s repeated encouragement, and in all the circumstances I find that an equity arose in their favour to protect their occupation such that the Deceased would not be allowed to turn them out of the Property.  They have acted to their detriment or had altered their position in reliance of the trust imbued on the Contractual Licence, and it was on such basis that they had been in continued occupation of the Property.  In my view, this is plainly a case in which the Contractual Licence gave rise to a constructive trust because the Deceased had so conducted himself that his conscience had been affected.  This is bolstered by the fact that the Deceased never so much as even hinted that Chen/Daughters should vacate the Property or alternatively pay occupation rent to him/Chan for the 50% Share even though he left the Property and later assigned the 50% Share to Chan in 1997 (as seen in paragraph 88 below).  There is no suggestion that the pre-existing shared understanding changed or metamorphosed at all over the years.

87.  Mr Leung suggested that more likely than not the Daughters made the financial contributions as household expenses out of love/affection for Chen, which had no relation to the Contractual Licence.  But in fact the Daughters gave monthly contributions to Chan earmarking $3,000 for household expenses and $3,000 for mortgage repayment. Further, the payments for property redecoration in 1982 and building renovations in 1993 and 2003 were not paltry sums and were specifically related to the Property.  Indeed, in 1982 upon moving into the Property and in 2003 after moving to the old-age home, the Deceased expressly told the Daughters directly or through Chen they would live at the Property permanently without worry in view of their contributions.  In my view, it would have been inequitable or unconscionable for the Deceased to deny Chen/Daughters an interest over the entire Property (including the 50% Share) in the shape of the Contractual Licence giving rise to a trust.  On the particular facts of this case (which were much more than slender materials), I find on balance Chen/Daughters have established that the Contractual Licence giving rise to a constructive trust was imposed on the Property (including the 50% Share), and the Deceased undertook the obligation to give effect to it such that it would be unconscionable for him to resile from it.

(b)  Assignment of the 50% Share to Chan

88.  Assignment to Chan  On 7 October 2009, Chan’s solicitors Hau, Lau Li & Yeung (“HLLY”) wrote to ask Chen to purchase the 50% Share at a mutually agreeable price or to sell the Property in the market and share the proceeds equally with him.  Chen only realised then (after she consulted her solicitors HM) that without her knowledge and without asking her for the original title deeds, the Deceased had executed the Chan Assignment in April 1997 to sever/assign the 50% Share to Chan for the stated Chan Consideration.  The Chan Memorandum provided that “Vacant Possession of the Property shall be delivered to [Chan] on completion”.  The Chan Assignment provided that “[the] joint tenancy of and in the Property is hereby severed to the intent that [the Deceased] and [Chen] shall hold the Property as Tenants in Common in equal shares” (clause 1) and in consideration of $2,000,000 paid by Chan to the Deceased “as Beneficial Owner” assigned to Chan the 50% Share to the intent that the entirety of the Property shall thenceforth be vested unto Chan and Chen as tenants-in-common in equal shares. 

89.  In my view, it is impossible (on the available evidence) to speculate as to the reason why the Deceased severed and assigned the 50% Share to Chan.  Mr Miu suggested the Deceased hid this development from Chen because he feared she would not visit and look after him if she got wind of this.  I am unable to draw such inference based on the primary evidence before this court, but what is clear was that the Deceased did not tell Chen/Daughters about this transaction.

90.  Mr Miu next suggested that Chan had agreed with or was under instruction from the Deceased not to alert Chen of the Chan Assignment until the Deceased passed away and no longer needed Chen’s care and attention.  Again, there is no evidence of such specific arrangement.  But I find on balance that the conscience of Chan (as the new estate owner of the 50% Share) was affected such that it would be inequitable to allow him to deny the Contractual Licence in favour of Chen/Daughters giving rise to a trust.

91.  First, the Deceased never mentioned this to Chen during all of her visits to the old-age home, and instead he continued to give assurances to Chen/Daughters as to their continued occupation of the Property.  Secondly, neither Chan nor the Deceased ever asked for the original title deeds (which were kept by Chen all along) for the purpose of effecting this transaction.  Chan should have been alert to make enquiries given that (a) the Deceased did not reside at the Property, (b) the original title deeds were not available, and (c) he only acquired a half-share of the Property.  The most basic enquiry would have been whether Chen as co‑owner was in occupation of the Property, but there was no evidence of any communications between Chen and Chan even though Chen/Daughters were in continuous occupation of the Property.  Thirdly and interestingly, the Chan Memorandum stated that vacant possession of the Property shall be delivered to Chan on completion (which was the very same day as the Chan Memorandum).  Since Chen/Daughters all along resided at the Property, this was quite strange and, more importantly, untrue.  But it became stranger still.  Fourthly, notwithstanding the provision for vacant possession to be delivered on completion, during the 12 years after he became owner of the 50% Share Chan never demanded Chen/Daughters to pay occupation rent for their sole and exclusive occupation of the Property, or take any action to enforce the 50% Share directly against them.  Fifthly, although the stated consideration in the Chan Assignment was HK$2,000,000, it is doubtful whether the Deceased ever received such sum as it did not sit well with the Deceased’s dependency on CSSA as well as on monies and supplies of daily necessities by Chen.  This is especially so when the Deceased, who was on CSSA, even feared that others might find out he had family.  Sixthly, I note that after quietude of 12 years, Chan conveniently came out of the woodwork to make demands on Chen in respect of the Property very shortly after the Deceased passed away. 

92.  In my view, the Chan Assignment in respect of the 50% Share was clearly consistent with my conclusion that the Deceased was the legal and beneficial owner of the 50% Share.  But the unusual features discussed in the above paragraph led inexorably to the probable and persuasive conclusion that notwithstanding the Chan Memorandum Chan well knew and/or had constructive notice that not only Chen/Daughters occupied and were entitled to occupy the Property, but also they were protected from eviction.  I also find on balance it was unlikely that Chan paid the stated consideration of $2,000,000.  In the special circumstances, I find on balance that despite the suggestion in the Chan Memorandum that vacant possession would be delivered upon completion (which was demonstrably incorrect), Chan by the Chan Memorandum and Chan Assignment had undertaken a new obligation to give effect to the relevant encumbrance being the Contractual Licence that gave rise to the imposition of a trust.  Clearly, Chan was not a bona fide purchaser of the 50% Share for value without notice.

93.  Negotiations with Chan  Chan instructed HM to issue a reply letter to HLLY to object to the proposed sale of the 50% Share and to assert she/Daughters had a permanent right of occupation in the Property.[70] Chen claimed her immediate concern at that time was her own and the Daughters’ right to continue to occupy/live at the Property.  After negotiations through solicitors, Chan finally indicated that unless Chen accepted his proposal to buy the 50% Share for $1,800,000 he would sell it by public auction.  Chen felt she had no choice but to offer to buy the 50% Share at $1,200,000 to save the trouble of litigation and to ensure she/Daughters would have a secure home.  But there was no reply until 10 June 2010 when HLLY wrote to say Chan would proceed with auction sale of the 50% Share on 23 June 2010. 

94.  I agree with Mr Leung that Chen’s offer to buy the 50% Share for $1,200,000.00 was wholly inconsistent with her case that she was the beneficial owner of the 50% Share.  It would be meaningless for Chen to pay well over a million dollars to buy real property that was beneficially owned by her.  The amount involved was not a small sum and Chen had sought legal advice, so it could not be so easily brushed aside by the suggestion that Chen was then so anxious about the right to occupy/reside at the Property that she ignored her alleged beneficial ownership of the 50% Share.  However, there was insufficient evidence for me to come to any conclusion as to why Chan eventually decided to sell the 50% Share by auction rather than by private treaty to Chen.

(c)  Assignment of the 50% Share to Ng

95.  Auction sale scheduled on 23 June 2010  HM told Chen about a newspaper advertisement on 18 June 2010 by CS Auctioneers Limited (“Auctioneers”) of an auction sale of the 50% Share (一半業權) on 23 June 2010 with minimum price of $1,200,000 to be sold “as is” without vacant possession (不交吉現貨出售). 

96.  Ng read a similar advertisement.  His interest was aroused because the minimum price for the 50% Share was about 30% lower than market price (which was quite attractive to him), and he thought he could negotiate with the co-owner of the Property after he purchased the 50% Share.  Ng knew he might not be successful in such negotiations, but he was not particularly concerned because he would simply earn more profit if he were successful in his negotiations and less profit if he were not.  This was the first time Ng contemplated buying a half share/interest in a property.  He gave evidence that he was aware title to such half share/interest in a property would be less clear-cut, but he did not think there was any title problem.  He also testified that in his property investments he would only buy properties with no title problems, and he was familiar with various solicitors’ firms whom he retained for legal advice and/or conveyancing work. 

97.  The  “Particulars of the Property” drawn up for auction of the 50% Share on 23 June 2010 included (a) sale of the 50% Share would be on “as is” basis with occupation by the other tenant-in-common in equal shares (paragraph (f) headed “Remarks”), (b) the purchaser shall not raise objections/requisitions in respect of the title of the 50% Share and shall (i) declare he had been given the opportunity to inspect all title documents irrespective he had inspected the same, (ii) be deemed to purchase with full notice of the contents thereof and (iii) declare he accepted the vendor’s title without further enquiry/requisition upon the signing of the Memorandum of Agreement (paragraph 4(i) of the Special Conditions of Sale), (c) the 50% Share was to be sold in its then condition on “as is” basis without raising any requisition/objection (paragraph 14 in the General Conditions of Sale), and (d) the 50% Share was to be sold subject to occupation by a tenant-in-common in equal shares (paragraph 21 in the General Conditions of Sale).

98.  The auction for the 50% Share on 23 June 2010 was postponed.  Ng claimed the Auctioneers’ staff/agent notified him 2-3 days in advance (even though HLLY only wrote to the Auctioneers on 23 July 2010 to confirm that the auction on 23 June 2013 would be postponed to 6 July 2010 pursuant to a telephone conversation between them that morning).  Ng explained that auctioneers would sometimes notify him a few days in advance of any likely cancellation.  He thought the auction was postponed to 19 or 20 July 2010, and forgot it was in fact postponed to 6 July 2010. 

99.  Ng’s visit to the Flat  In/about the afternoon on 23 June 2010 (after cancellation of the auction), by which time Ng was interested in the 50% Share but had not made up his mind to bid for it, he went to view the Property and to investigate the situation with the owner/occupier.  When Chen answered the door, they talked to each other for 5-6 minutes across the closed metal gate.  Upon Ng’s enquiries, Chen said she lived at the Flat and she was the owner.  Ng explained he learnt that the 50% Share was put up for auction.  Ng claimed (but Chen disagreed) that he asked her whether Chan was her son to which she replied he is her husband’s son, and that he suggested Chen could buy the 50% Share from him (after he bought it) to which she replied she had no money for that.  However, there was no dispute that Ng asked Chen whether, if he bought the 50% Share to be auctioned, she would be willing to sell her half share in the Property to him.  Chen claimed she told Ng she would not sell the Property as she had to live there, but Ng claimed (which Chen denied) she told him (a) she had no idea what she would do if Chan sold the 50% Share and/or (b) she could not make a decision and had to discuss with the Daughters.  Chen declined to give her contact number to Ng, so he left her his mobile telephone number.  Since Chen did not intend to sell the Property, she/Daughters did not contact Ng afterwards.

100.  On balance I prefer Chen’s evidence.  I find it more likely and probable that Ng was anxious to find out whether Chen was willing to sell her half-share of the Property to him because he would then be able to sell the entire Property in the market for better profit.  I do not agree that at such preliminary stage when he had yet to seriously negotiate with Chen to acquire her half-share of the Property Ng would seek Chen’s interest in buying the 50% Share from him (after he bought it).  After all, he anticipated he would be able to acquire the 50% Share for 30% less than the market price (if he made a successful bid at the postponed auction), and he could negotiate down the price for Chen’s half-share of the Property (since it was unlikely a willing third party buyer would be interested to buy a half-share property in co-ownership with a stranger (ie Ng)). 

101.  I also do not accept Ng and Chen discussed the effect of Chan’s intended sale of the 50% Share.  By the time of Ng’s visit to the Flat after the auction scheduled on 23 June 2010 was cancelled, Chen already knew of the advertised auction sale from her solicitors HM.  I find it improbable that she told Ng she had no idea what she would do if Chan sold the 50% Share and/or she could not make a decision and had to discuss with the Daughters. I find more probable that Chen told Ng she would not sell to him as she had to live at the Property. 

102.  Chen’s expression of her stance to Ng was plainly consistent with her understanding of her right and the Daughters’ right to lifetime occupation of the Property which the Deceased repeatedly promised and reassured them (ie the Contractual Licence giving rise to a trust), and inconsistent with Chen’s assertion of beneficial ownership interest over the 50% Share.  If she believed she was such beneficial owner (and it was telling that she was already under legal advice by that time), she would have told Ng that Chan had no right to sell and Ng could not buy the 50% Share because she was all along the rightful beneficial owner of the 50% Share.

103.  Writ of Summons  Chen caused HM to issue the Writ of Summons on 28 June 2010 against Chan for a declaration that Chen/ Daughters were entitled during their lifetimes to sole and exclusive occupation of the Property to the exclusion of Chan and/or his successors-in-title. The Writ of Summons was registered at the Land Registry on 29 June 2010, and HM sent a copy to HLLY on the same day. 

104.  On 2 July 2010, the auction for the 50% Share was re‑advertised on the same terms as before.  But on the same day HLLY wrote to the Auctioneers to advise that such auction would be postpond until further notice.  On 5 July 2010, there was an advertisement that the intended auction on 6 July 2010 was withdrawn (收回).  Ng had a faint recollection that the Auctioneers’ staff told him in early July 2010 that the 50% Share was withdrawn from auction.  He did not know why, but it was not unusual for properties to be withdrawn from auction.

105.  On 19 July 2010 the auction sale of the 50% Share on that day was re-advertised, but the advertisement no longer mentioned that the 50% Share would be sold “as is” without vacant possession (不交吉現貨出售).  Chen did not sight such advertisement because the Auctioneers had already told him the auction was postponed to 19 July 2010.  However, he knew the 50% Share was not open for inspection since the auction sale was on the basis of “不交吉現況出售” (ie sold “as is” without vacant possession).  The “Particulars of the Property” drawn up for the auction on 19 July 2010 were similar to that for the auction scheduled on 23 June 2010 except that (a) sale of the 50% Share would be on “as is” basis with occupation by the other tenant-in-common in equal shares and subject to the Writ of Summons (paragraph (f) headed “Remarks”), (b) the 50% Share was to be sold subject to and with the benefit of the deed of mutual covenant and the Writ of Summons (paragraph 5 of the Special Conditions of Sale), and (c) the 50% Share was to be sold subject to occupation by a tenant-in-common in equal shares and the Writ of Summons (paragraph 21 in the General Conditions of Sale).

106.  The Auctioneers faxed the Writ of Summons to Ng 2-3 days before the postponed auction. He checked the land search records and the claim endorsed on the Writ of Summons, and decided there was no title problem in respect of the 50% Share.  Ng took the view that Chen’s claim in the Writ of Summons (which Chen did not mention when he visited the Flat) was not substantiated, and it was just Chen’s wishful thinking or mere bluff for ulterior motive.  He did not (a) consult any solicitor about the contents of the Writ of Summons, (b) instruct any solicitor to write to HM to make enquiries on his behalf and/or (c) return to the Flat to check with Chen.  Ng just thought he could negotiate with the co-owner of the Property after he bought the 50% Share. 

107.  Auction sale on 19 July 2010  At the auction sale of the 50% Share on 19 July 2010, there was no other bid and Ng successfully bidded for purchase of the 50% Share for $1,200,000.  Ng signed the Ng Agreement on the same day.

108.  By the Ng Assignment dated 19 August 2010, Chan “as Beneficial Owner” assigned to Ng the 50% Share subject to inter alia the Writ of Summons and the occupation of the Property by Chen being another tenant-in-common.  Ng never met Chan since the sale was effected by Chan through a power of attorney dated 7 July 2010 granted to a Li Siu Fung. 

109.  Analysis  Mr Leung noted that the indorsement of claim in the Writ of Summons did not expressly aver the Deceased/Chan held the 50% Share as trustee in favour of Chen as beneficial owner until the re-amendment on 26 February 2014 shortly before trial.  I agree that this is consistent with my conclusion that Chen was not the beneficial owner of the 50% Share, and that Chen/Deceased were legal and beneficial owners of the Property in equal shares.

110.  In my view, when Ng purchased the 50% Share on 19 July 2010, he was clearly aware from the auction advertisements, the Auctioneers’ “Particulars of the Property”, his visit to the Flat and the Writ of Summons that (a) the Property was to be sold “as is”, (b) no requisitions/objections as to title could be raised (even though the original title deeds kept by Chen were not available), (c) the Property was occupied by Chen/Daughters, (d) no vacant possession would be delivered upon completion, (e) the 50% Share was sold subject to Chen’s occupation of the Property and the Writ of Summons, (f) the Writ of Summons expressly spelled out Chen’s claim and averment that she/Daughters were “entitled” during their lifetimes to sole and exclusive occupation of the Property to the exclusion of Chan and/or his successors-in-title. 

111.  Mr Leung submitted the above merely gave notice of a Contractual Licence simplicter without any trust, so even if Ng had notice of any such Contractual Licence it was revocable upon notice by him.  I do not agree. Ng knew that in the Writ of Summons Chen/Daughters asked for a court declaration to the effect that they were “entitled” to lifetime occupation of the Property free from eviction by Chan and his successors-in-title (which would include Ng if he purchased the 50% Share).  Chan was far from being silent, and Ng was put on notice as to Chen’s/Daughters’ right to exclude any purchaser of the 50% Share from the Property.  It cannot be said that Chen withheld any information about her/Daughters’ interest such that it would be inequitable to rely on their priority.  In my view, she had done enough to make such interest known to and discoverable by any intended purchase of the 50% Share, and any such intended purchaser could not reasonably assume that no adverse interest would be claimed.

112.  Yet Ng did not make enquiries at all either with HM or Chen as to the extent of Chen’s/Daughters’ claimed equity even though he was invited by the auction to purchase the 50% Share “as is” without vacant possession, title investigation or sight of the original title deeds, and he knew Chen was living at the Property and unwilling to sell her half-share to him.  Ng had ready access to solicitors if he wished to make enquiries, but he chose not to do anything.  I am unable to see how Ng (without making any enquiries) could regard Chen’s claims as to her/Daughter’s rights to be mere wishful thinking or mere bluff when it was made by way of Writ of Summons under legal advice and any auction purchase of the 50% Share was expressly made subject to Chen’s occupation of the Property and the Writ of Summons. 

113.  I have no hesitation in concluding that the conscience of Ng (as the new estate owner of the 50% Share) was affected when he undertook the new obligation to give effect to such encumbrance or prior interest to which the 50% Share was subject.  Significantly, the auction price of the 50% Share was 30% less than the market price, and I find on balance it was reduced upon the footing that any purchaser would have to give effect to such encumbrance and prior interest.  In my view, Ng knew this so he did not avail himself of the opportunity to make enquiries (even though it would have been easy for him to approach solicitors or return to make enquiries with Chen), and he proceeded with the auction purchase of the 50% Share because he still expected he would be able to convince Chen to sell her half-share to him, or if that could not be achieved, to persuade her to buy the 50% Share, all with a view to profit.  He knew the title of the 50% Share was not clear-cut and clean, and he took a calculated risk that he could nevertheless still turn a profit.

114.  In all the circumstances, Mr Leung was right in conceding not to take the point that Ng was a bona fide purchaser for value without notice.  Ng’s conscience was effected by the Contractual Licence giving rise to a trust, and it is therefore unconscionable for him to claim he could revoke and deny the Contractual Licence in favour of Chen/Daughters.

VIII.  CONCLUSION

115.  I therefore grant a declaration that Chen, Lin and Wendy were entitled to sole and exclusive occupation of the Property during each of their respective lifetime for so long as each of them wishes to continue to occupy the Property to the exclusion of Chan, Ng and/or their respective successors-in-title.

116.  There is no reason why costs should not follow event.  I therefore grant a costs order nisi that Ng shall pay Chen, Lin and Wendy half of their costs of the action in respect of their claim (but excluding costs of the counterclaim), including all costs reserved if any, to be taxed if not agreed.  Chen, Lin and Wendy did not get their full costs because Lin/Wendy only conceded at a late stage at trial that they no longer claimed beneficial ownership interest in the 50% Share, and Chen failed in her claim for declarations that the Deceased, Chan and Ng held the 50% Share on trust for her as beneficial owner.