陳淦輝 v. 楊忠 AND OTHERS

HCA 1122/2019

[2024] HKCFI 357

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1122 OF 2019

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BETWEEN

(By Original Action)

AND

BETWEEN

(By Counterclaim)

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JUDGMENT

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A. INTRODUCTION

1.  The present action concerns a dispute over the beneficial ownership of Flat E on L30/F of Tower 6, Vista Paradiso, No.2 Hang Ming Street, New Territories (the “Property”). Kwok So Yuet, the Plaintiff in the Counterclaim (“Madam Kwok’) purchased the Property from its registered owner, Mr Yang Zhong (“Mr Yang”), and became the legal owner of the same upon completion on 10 October 2018.

2.  Mr Yang and Madam Kwok signed a provisional sale and purchase agreement on 24 June 2018.

3.  陳淦輝(“Mr Chan”) was and is still an occupant of the Property. He lived in the Property with his ex-wife, Madam Liu Jing (“Madam Liu”). Mr Yang is the husband of Madam Liu’s sister.

4.  Mr Chan claims that he is the beneficial owner of the Property as he contributed RMB300,000 to the down payments of the Property. He also claims that he paid off all the mortgage payments of the Property at around HK$11,000 per month through his wife. The main difficulty faced by Mr Chan is that he adduces no documentary evidence to support his financial contributions to the Property which is the entire basis of his case.

B. ANALYSIS AND DETERMINATION

5.  I am of the view that the key factual issue in this case is whether Mr Chan can discharge the burden of proof that on a balance of probabilities, he indeed made the financial contributions to the Property as he claims. If the answer is in the negative, there is no need for this Court to embark on an inquiry as to whether Madam Kwok is a bona fide purchaser of the Property without notice of Mr Chan’s equitable interest in the Property.

6.  Mr Yeon for Mr Chan was only instructed shortly before the pre-trial review of the present action. He has done his very best but is inevitably handicapped by the lack of evidence to support Mr Chan’s case.

7.  Having considered the evidence, including both documentary evidence and the oral testimony of Mr Chan and Madam Kwok respectively, I have no hesitation to come to the view that there is simply no evidence, other than Mr Chan’s bare allegation, in support of Mr Chan’s case.

8.  First, whilst Mr Chan’s case is that when his ex-wife left him, she took away with all the documents such that he could not have obtained any documents to prove his case, it is surprising that he could not even obtain or produce copies of his own bank statements which could have shown a pattern of withdrawal from his bank account to support his case.

9.  Mr Lee for Madam Kwok is right that in terms of the RMB300,000, there is not a single document whatsoever evidencing the same whether in the form of a loan to Mr Yang and/or a repayment of the loan.

10.  Mr Lee for Madam Kwok also submitted that Mr Chan himself appears to be uncertain whether the RMB300,000 paid by Mr Yang would constitute repayment of his loan. At one point during cross-examination, he denied that the RMB300,000 constituted re-payment and said that it was simply Mr Yang contributing (夾錢) RMB300,000 together with other family members of Madam Liu. At another juncture, he agreed that the RMB300,000 did constitute repayment and that his relationship with Mr Yang was one that was “有借有還”. However, the key is there is no evidence to support his payment of RMB300,000 towards the down payment of the Property.

11.  As for the mortgage repayments, the only relevant documents produced by Mr Chan to support his contribution to the purchase price are: (a) a statement of Mr Chan’s BEA bank account and (b) a 1-page copy of the passbook of Mr Chan’s BEA bank account. The statement shows the transactions in Mr Chan’s account from 3 January 2017 to 14 February 2017. It indicates that, save for a sum of HK$800,000 deposited on 13 February 2017 which was withdrawn the next day on 14 February 2017, the account balance was ranged from HK$0 to HK$601.44. The passbook shows a similar picture. Save for 2 sums totalling HK$322,985.67 deposited on 4 December 2010 which was almost entirely withdrawn on the same day, the account had a balance ranging from HK$0 to HK$8,000.01 from 4 December 2010 to 3 July 2014.

12.  I agree that on the evidence, Mr Chan has not shown that he had the financial means to pay for the mortgage repayments of about HK$11,000 per month.

13.  Further, the documents do not support any pattern of transfer or withdrawal of cash of around HK$11,000 per month.

14.  Under cross-examination, Mr Chan, for the first time, suggests that he kept all his cash derived from his trading business as a parallel goods trader (水貨客) at home, and he paid Madam Liu around HK$30,000 each month in cash.

15.  I agree with Mr Lee for Madam Kwok that, on balance, this is not credible. First, Mr Chan himself admitted that he used a bank account to finance his previous purchase of a property under the Home Ownership Scheme (居屋). He was unable to give any explanation of why he would (as is commonplace) use a bank account in that previous purchase, but would only use cash stored at home for this purchase. Secondly, there is no evidence for his operation of a parallel goods business. He is unable to provide the Court with even the business registration certificate or any tax filings to support his alleged business. Apparently, he operated such business without any business registration certificate and did not pay any taxes for his business. Thirdly, I agree that it is inherently improbable that a person conducting a trade would keep virtually all his income as cash at home, leaving his bank account with virtually no or negligible amounts at all times. Mr Chan produced no documentary records of his purchases or sales of either parallel goods and/or antiques.

16.  Further, Mr Lee is right that under cross-examination, Mr Chan acknowledged that whilst he gave around HK$30,000 in cash to Madam Liu each month, he did not have direct knowledge of whether Madam Liu in fact gave that money (or any part thereof) to Mr Yang for the purpose of making mortgage repayments, since he did not follow Madam Liu to the bank to deposit the sums into Mr Yang’s bank account.

17.  Still further, Mr Chan also said during cross-examination that the sum of HK$800,000 appearing in his bank statement is a sum lent by his friend and used by him for the purpose of redeeming the Property (贖返層樓).

18.  I find that there is no evidence to support such claim. First, this was raised for the first time during cross-examination. HK$800,000 is not a small amount to Mr Chan. If he had indeed paid the said sum, it is inexplicable as to why he did not set that out in his witness statement even if he was then acting in person. Secondly, there is no evidence that the sum was in fact used by Mr Chan to “redeem” the Property. If he were to pay the sum to Mr Yang for the purpose of redeeming the Property, there should at least be a receipt of the said sum. Thirdly, there is no documentary evidence of him having, or transferring or withdrawing, the missing HK$700,000.

19.  Mr Chan’s explanation for his lack of documentary proof is that Madam Liu took away relevant documentary evidence. Mr Chan said under cross-examination that Madam Liu took away documents such as his passport, and invoices or receipts for payment of management fees, rates, etc.. The former is wholly irrelevant. As to the latter, he accepted that the documents would not show whether he paid for those expenses.

20.  Mr Lee for Madam Kwok is also correct in submitting that under cross-examination, Mr Chan acknowledges that in fact no relevant documentation exists, because he purportedly paid for everything in cash, and (even assuming Madam Liu deposited that cash into Mr Yang’s bank account) he does not know whether the deposit slips from the bank would indicate the cash originated from him.

21.  Secondly, in my view, the tenancy agreement reached between Mr Chan and Mr Yang in relation to the Property (the “Tenancy Agreement”) is fatal to Mr Chan’s case. The Tenancy Agreement executed by Mr Chan was for a term of 3 years only, from 18 December 2010 to 17 December 2013. If indeed Mr Chan had any beneficial interest in the Property, it is difficult to fathom as to why he entered into the Tenancy Agreement with Mr Yang, the legal and registered owner of the Property. Mr Chan said in cross-examination that he thought that a tenancy agreement would give him some protection as to his occupation rights. However, the Tenancy Agreement is the anti-thesis of Mr Chan’s asserted beneficial ownership. It makes no sense for a beneficial owner to “let” his own property to himself.

22.  This is particularly so when the tenor of the Tenancy Agreement was only for a period of 3 years. He could not have any protection after the 3-year period. He had to rely on an oral promise from Mr Yang.

23.  In Mr Chan’s affirmation filed in the Lands Tribunal proceedings dated 24 December 2018 pursuant to which Madam Kwok sought vacant possession of the Property, he, on oath, said that:-

“本人陳淦輝於2010年12月18日用港幣叄仟伍佰元租用聽濤雅苑六座30樓E室，為期三年，約滿後業主楊忠對本人講不用合約，你每月交租就得了，一直租用上址到現在。”

24.  This evidence directly contradicts Mr Chan’s case. In cross-examination, he further confirmed that there was never any agreement to rent the Property forever. This seriously affects Mr Chan’s credibility. He was willing to give false sworn evidence in solemn form in order to resist an order of vacant possession.

25.  His case all along before the Lands Tribunal was that pursuant to the Tenancy Agreement, he has the right to remain in the Property rather than he has any beneficial interest in the Property. One would have expected that if one had really paid substantially for the Property including settling all the mortgage payments, one’s first natural reaction would be that he has acquired interest of some sort in the Property rather than to assert his rights qua tenant.

26.  Thirdly, in fact during cross-examination, Mr Chan said that had Madam Kwok allowed him to stay in the Property for a few more months after the completion of the sale and purchase of the Property, he would have moved out of the Property peacefully. This again does not sit well with someone who thought that he has beneficial interest in the Property.

27.  Fourthly, I agree that an agreement to live in the Property forever is contradicted by Mr Chan’s own acceptance later on under cross-examination that the alleged agreement was simply that Mr Chan could live in the Property only on the basis that Mr Yang himself remained the legal owner and could let the Property to him. As and when Mr Yang ceases to be the legal owner then Mr Chan’s right to live in the Property is also terminated. Hence, I do not accept Mr Chan’s evidence that there is an oral agreement for him to rent or live in the Property forever.

28.  Fifthly, I find Mr Chan’s evidence at times confusing. At one stage during the cross-examination he said that since Madam Liu’s sister had acquired a property, his mother-in-law also said that Madam Liu should also acquire a property. Further, when asked on why Mr Yang and his mother-in-law would effectively gift US$200,000 (which amounted to nearly half of the purchase price for the Property) to Mr Chan, Mr Chan’s response was that this was because Mr Chan’s mother-in-law wanted to finance the purchase of the Property for Madam Liu (“外母意思…要買樓比女”). Mr Chan confirmed that it was only his own unilateral understanding that whatever belonged to Madam Liu was shared with him since they were a married couple. If that be the case, the intention might have been that it is Madam Liu rather than Mr Chan should have beneficial interest in the Property.

29.  Sixthly, there is also merits in Mr Lee’s submission that Mr Chan admitted under cross-examination that the alleged agreement was in fact not an agreement between himself and Mr Yang at all, but was merely a unilateral decision made and “announced” (宣布) by Mr Chan’s mother-in-law (i.e. Madam Liu’s mother). Under cross-examination, Mr Chan said that the decision or announcement was made in mid-2010, in the presence of Madam Liu, Mr Chan and his mother-in-law. He did not know whether Mr Yang was present. He also said that he does not recall whether he confirmed with Mr Yang whether the announcement by his mother-in-law represented Mr Yang’s wishes. Hence, there is no evidence that Mr Yang agreed to what his mother-in-law announced. Accordingly, there is no basis to suggest that Mr Yang had made any agreement with Mr Chan.

30.  Seventhly, under cross-examination Mr Chan’s evidence is that after he discovered that the Property had been sold by Mr Yang to Madam Kwok, he never even contemplated claiming the proceeds from Mr Yang and/or Madam Liu. In particular, he did not contemplate enquiring with Madam Liu (during his encounter with her at the Marriage Registry whilst handling the procedures for their divorce in or about 2021) about the sale proceeds or demanding from her that he be entitled to the proceeds of the sale. I agree that this does not sit well with someone claiming to have a beneficial interest in the Property.

31.  Eighthly, Mr Chan also acknowledges under cross-examination that he did not enquire how much mortgage repayments he had to make in total at the time when the alleged agreement was made. I agree that it is inherently improbable that an intending debtor would agree to take up a debt the amount of which he does not know.

32.  Ninthly, Mr Chan said under cross-examination that the bargain was for the Property to be transferred to him only after he had completed all of the mortgage repayments (expected to be around 20 years after purchase). He thus took the risk with his eyes wide open that unless and until he completes all payments in 20 years, he would not have any proprietary interest in the Property (save, perhaps, as tenant). This negates any suggestion that the agreement was for Chan to have a beneficial interest in the Property from the outset, from 2010 onwards.

33.  Finally, for the sake of completeness, I do not consider the evidence of Mr Chan Wah (陳華) helpful. Under cross-examination, Mr Chan Wah confirmed that he has no knowledge of the property rights to the Property, nor does he know whether Mr Chan entered the estate qua legal owner, beneficial owner, tenant, or guest. He simply knew that Mr Chan from time to time entered and exited Vista Paradiso, the estate in which the Property was situated. That fact is neither here nor there.

34.  For all the above reasons, I find as a matter of fact that Mr Chan does not have any beneficial interest in the Property. That should be the end of analysis.

Bona Fide Purchaser Without Notice

35.  Strictly speaking, there is no need to deal with this issue. However, for the sake of completeness, even if this Court is wrong about the analysis above, I find that Madam Kwok is a bona fide purchaser without notice of Mr Chan’s beneficial interest. During cross-examination, there was no challenge to Madam Kwok’s or Mr Hung’s evidence that, during their inspection of the Property, there was nothing to suggest that Mr Chan occupied the Property. The fact that there were two pillows on a bad is neither here nor there. Hotel beds have two (sometimes many) pillows. This fact alone is insufficient to attribute any notice to Madam Kwok.

36.  It was put to Mr Hung, Madam Kwok’s son, that, at the time of inspection of the Property in June 2018, he did not know whether the father of Madam Liu’s daughter lived in the Property or not (to which he agreed).

37.  It was also explored with Mr Hung whether Madam Liu introduced herself as the tenant of the Property when Mr Hung visited the Property. Mr Hung’s answer was that Madam Liu said she represented the landlord to allow prospective purchasers to inspect the Property, and that Madam Liu did also introduce herself as the tenant at the time. This is an additional factor as to why Mr Chan’s case is unbelievable. If indeed, they had been paying the mortgage payments, there was no reason for Madam Liu to inform Mr Hung that she was a tenant. I find Mr Hung’s evidence to be credible.

38.  I also agree that Madam Liu’s statement that she represented the landlord and/or that she was a tenant could not reasonably have alerted Madam Kwok to the existence of another person (such as Mr Chan) having a beneficial interest in the Property.

39.  Further, in relation to Madam Liu’s authority to represent Mr Yang, a written authorisation letter as well as a power of attorney proving Madam Liu’s authority to act on behalf of Mr Yang was obtained prior to completion. There is no suggestion that these documents are invalid, not authentic, or in any way suspicious. I agree that all reasonable steps to answer any query on Madam Liu’s authority to act on behalf of Mr Yang have been taken.

40.  In fact, the very fact that Madam Liu acted for Mr Yang as the legal and registered owner to sell the Property further shows that Madam Liu did not consider she has any beneficial interest in the Property as asserted by Mr Chan.

41.  I also find it nothing unusual that Mr Hung did not ask for the tenancy agreement between Mr Yang and Madam Liu. It was not a sale subject to tenancy agreement. Mr Lee is correct that by doing the best one can, one could muse that Mr Hung would have been told by Madam Liu that as in June 2018 there was no written tenancy agreement. In other words, Mr Hung would only have discovered that Madam Liu was a tenant under an oral tenancy. He would not have been able to discover Mr Chan’s beneficial interest from such answer. The casual link is thus broken.

42.  I shall also say that on the whole, I find Madam Kwok to be a very credible witness. Although she was confused and might be a bit slow in answering the question as to whether she had signed the Provisional Sale and Purchase Agreement herself, I do not find this aspect of the evidence material. There is no dispute that Madam Kwok in fact signed on the formal sale and purchase agreement and, crucially, the Assignment. It is the Assignment that operates to grant Madam Kwok the legal estate of the Property.

43.  Accordingly, I find as a matter of fact that Madam Kwok purchased the Property and became the legal owner of the Property from the completion date of 10 October 2018.

44.  I share with Mr Lee’s submission and sentiment that the regrettable and undisputed reality is that Madam Kwok, who is elderly and not in good health, purchased the Property using virtually all her lifetime savings some 5 years ago as her retirement home; yet, she has to date due to Mr Chan’s actions not been able to enjoy the use of the Property at all. In the meantime, Madam Kwok continues to have to walk up and down the stairs to access her flat in a “tong lou” (唐樓) in Kowloon City each day. This state of affairs cannot be right and should not be prolonged any further.

AMENDMENT APPLICATION

45.  On 19 December 2023, after close of viva voce evidence, Mr Chan took out an application for amendment of his Amended Statement of Claim per the draft Re-Amended Statement of Claim. By reason of the factual findings make by this Court above, I do not accede to the amendment application. In any event, the proposed amendments come very late and cause prejudice to Madam Kwok.

46.  The amendments seek to introduce Mr Chan’s evidence mentioned for the first time in the trial, principally, the “family financing arrangement” allegedly common in the Mainland (“家庭成員夾資模式”). I agree that this idea was only first raised in cross-examination, in respect of which Madam Kwok had no prior opportunity to response to.

47.  In any event, even with such evidence, there is still no factual basis for this Court to find for Mr Chan. For the avoidance of doubt, this Court has taken all the proposed amended facts into account in the consideration of the merits of Mr Chan’s case.

48.  Mr Yeon for Mr Chan fairly accept that based on the present Amended Statement of Claim, Mr Chan has no case to assert a beneficial interest over the Property.

DISPOSITION

49.  For all the reasons stated above, I make the following orders against Mr Chan:

(1) An order for possession of the Property. Mr Chan is to deliver up vacant possession of the Property forthwith.

(2) An order to pay mesne profits on a joint and several basis with Liu, and the mesne profits be assessed at: (a) HK$18,410/month from 6 December 2018 to 5 December 2020 ; and (b) HK$16,832/month from 6 December 2020 till delivery of vacant possession of the Property.

50.  I also make a costs order nisi that Mr Chan is to pay the costs of and incurred by Madam Kwok in these proceedings, on a party to party basis, to be taxed if not agreed. This costs order nisi will be made absolute within 14 days from the date of this judgment unless an application is taken out to vary the same within the 14 days period.

51.  Finally, it reminds for this Court to thank Mr Yeon for Mr Chan and Mr Lee for Madam Kwok for their helpful assistance.