LLC v. LMWA AND ANOTHER

FCMC 4683 /2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 4683 OF 2014

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J U D G M E N T
(Preliminary issue on beneficial ownership of
former matrimonial home/carpark)

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The preliminary issue

1.  Since the breakdown of their marriage, the petitioner (“wife”) and the 1^st respondent (“husband”) have been entangled in numerous rounds of contested litigation mainly relating to their ancillary relief matters, and this trial is one of them.  After a 6 ½ day’s trial, this court is tasked to determine as a preliminary issue, before the parties can hopefully proceed to the stage of financial dispute resolution (FDR), the beneficial ownership of their former matrimonial home and a carpark situate at Sorrento, Kowloon (respectively “Sorrento Property” and “Sorrento Carpark”; and collectively “Properties”) which are said to worth over $20 million as at the trial.

2.  It has now been established that within the ancillary relief proceedings, any trial involving third party beneficial interest in a property should follow the procedural approach set out in the English authorities of TL v ML & Other (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1263.  In Leung Wing Yi Asther v Kwok Yu Wah & others (2015) 18 HKCFAR 605, the Court of Final Appeal of Hong Kong has endorsed the view of the Court of Appeal on the necessity of pleadings and discovery.  Mr Justice Stock NPJ expanded on the correct procedures at §29 of the judgment like this,

“In this regard, I endorse the practice commended by the Court of Appeal that in the context of matrimonial proceedings for ancillary relief, disputes between a spouse and a third party as to ownership of property should procedurally be approached as in standard claims for ownership of property: in other words, after a direction for trial of the dispute as a preliminary issue and the joinder of the claimant as intervener, by directions for the filing of pleadings on the preliminary issue and for witness statements and discovery relevant to that issue.”

3.  According to the land registry records, the Sorrento Property is registered in the joint names of the husband and his father, the 2^nd respondent herein (“Father”), whereas the Sorrento Carpark is registered in the sole name of the Father. The Properties were purchased about 2 years prior to the marriage of the husband and the wife.

4.  The Father and the husband both say that the beneficial interest of the Properties should follow their legal title.  They say that it was their mutual understanding and agreement that the Sorrento Property was purchased as a co-investment to be jointly owned by them as joint tenants, whereas the Sorrento Carpark shall remain fully and beneficially owned by the Father.

5.  This is not accepted by the wife. So, she joined the Father into these proceedings for determination of beneficial ownership of the Properties. Broadly said, it is her case that prior to the acquisition of the Properties, the husband and the Father had expressly discussed and agreed on the holding of the Properties that the husband shall be the only and sole beneficial owner of the Properties which were intended to be the matrimonial home of the couple, and that the moneys paid by the Father for the purchase of the Properties were his gifts to the husband. Such agreement, she says, can be inferred from various pre- and post-acquisition conduct of the husband and/or the Father (set out more clearly in her pleadings).

6.  As all the parties have alleged that there was an express agreement or understanding reached between the husband and the Father on the beneficial holding of the Properties, the core task of this court is to determine the common intention formed between them prior to the acquisition of the Properties, to be considered in the light of various pre- and post-acquisition conduct/facts pleaded by the wife in her pleadings;[1]

7.  There are 4 witnesses in this trial, namely the parties themselves and a Mr Fung, who is the estate agent involved in the purchase of the Sorrento Property (“Estate Agent”). He gives his evidence on behalf of the husband. 

Background

8.  In my earlier judgment dated 26 August 2016 in respect of the wife’s application for litigation funding, I have already set out briefly the background of the couple and the history of this case at §8-16 therein. For clarity, I shall set out the same below with some additional and relevant undisputed or indisputable background facts.

(i)   The parties

9.  The Father is an engineer and is now in his 60s. His late father was one of the founders of 2 companies, NW Co Ltd and HKB Co Ltd, specialising in fabric manufacturing and trading. The Father is the executive director of these 2 companies. He has 2 sons. The husband is his younger son. He impresses me as a loving father and is rather conservative in his financial arrangement. He prefers to keep a lot of cash reserve at bank(s). He is also very mindful that his sons would not become “lazy bones” (「大食懶」) despite the wealth of the family.  Therefore, when the husband was still young and in the USA, the Father had safe-kept on his behalf cash, stock or dividends of NW Co Ltd and HKB Co Ltd in the total value of about $1 million.

10.  The couple are now in their 30s. They were born in Hong Kong, but migrated to the USA when they were young. They started their romance in/about July 2005 in the USA.  At that time, the wife was about 24 and working as an assistant engineer, while the husband was only 25 and working as a management analyst.  Soon, they developed into a very intimate relationship.

11.  They were relocated back to Hong Kong in 2006.

12.  In September 2008, they got married.  Two children, a son and a daughter, were born within their wedlock, in 2011 and 2014 respectively.  The son is now 6 years old, while the daughter is 3.

13.  They separated from each other in October 2013 when the husband moved out of the matrimonial home then at King’s Park Hill. The wife issued her petition in April 2014, alleging unreasonable behaviour including an extra marital affair on the part of the husband, to which he did not defend. Decree nisi was granted on 17 January 2017.

14.  By a consent order dated 12 May 2016, the custody of the children is granted jointly to the parties, with care and control to the wife and access to the husband.

15.  As at this trial, the wife is a housewife taking care of the children with the assistance of maid(s). The husband is a business director of NW Co Ltd and HKB Co Ltd.

(ii)   Viewing of properties in December 2005

16.  Soon after they started an intimate relationship, the wife was asked by the husband to return to Hong Kong to visit his parents around Christmas 2005. During that Christmas holidays, he took her to view, together with his mother, various properties at the Kowloon Airport Express Station, including those at the Sorrento and the Waterfront, under the arrangement of the Estate Agent. 

17.  Upon returning to the USA, the husband had several email exchanges with the Estate Agent between 4 and 19 January 2006. The emails mainly relate to new transactions or openings on various Flat Fs in Tower 5 at the Sorrento (these are not the Sorrento Property). One or some of such emails which was/were copied by the husband to the wife and the Father. More will be said about these emails in the later part of this judgement.

18.  It is fair to point out that the husband/wife had not viewed the Sorrento Property or Carpark during Christmas 2005. The Sorrento Property was only open for sale on 17 January 2006.

(iii)   Purchase & financing of the Sorrento Property

19.  Two days after the Sorrento Property was open for sale, the Father signed the Preliminary Sale and Purchase Agreement on 19 January 2006to buy the Sorrento Property at $7.7 million in his sole name, followed by the Formal Sale and Purchase Agreement on 10 February 2006.

20.  At the time when the aforesaid conveyancing documents were signed, the husband was in the USA. However, by 6 February 2006, he had already planned to return to Hong Kong between 17 and 19 February 2006 to sign a power of attorney in favour of the Father. The said power of attorney was signed on 18 February 2006 in relation to the Sorrento Property.

21.  No power of attorney, however, was signed regarding the Sorrento Carpark.

22.  On 16 February 2006, the husband and the Father exchanged emails about the mortgage loans offered by the HSBC and Hang Seng Bank. In the end, a mortgage-link arrangement offered by Hang Seng Bank (“Mortgage Link Arrangement”) was taken (to be elaborated further below).

23.  On 11 March 2006, the Father signed a nomination to add the husband as a joint owner of the Sorrento Property. Completion of the Sorrento Property took place on 18 March 2006.

24.  As to the financial arrangement for the purchase of the Sorrento Property, it is not in dispute and/or indisputable that:

(1)   The Father paid for, at least, its preliminary and further deposits amounting to 30% of the purchase price (ie $2,310,000). The balance ($5,390,000) was financed under the Mortgage Link Arrangement with Hang Seng Bank;

(2)   The Father had also paid for the stamp duty, estate agency fee, legal costs of the conveyancing documents including the power of attorney and nomination of the Sorrento Property;

(3)   In/about August 2012, the husband paid about $4,640,000[2] to pay off the remaining balance of the outstanding mortgage of the Sorrento Property, which is free of mortgage as at the trial.

(4)   Under the Mortgage Link Arrangement, the Father was required to keep 50% of the mortgage loan amount (ie $2,695,000) in a deposit account (“Deposit Account”), which would bear interest at the same rate of the mortgage rate. The interest generated from the Deposit Account could not be withdrawn but would be transferred automatically to the mortgage loan account in order to set off with the mortgage repayment;

(5)   Before the redemption of the mortgage of the Sorrento Property, the Father had deposited a total sum of $1,084,880 on divers dates into the Deposit Account in order to fulfil the requirement of the said locked-up sum of $2,695,000;[3]

(6)   The mortgage interest rate, of course, fluctuated from time to time. But roughly calculated, the interest generated by locking up $2,695,000 in the Deposit Account was about $13,000 per month, and if upon setting off with the monthly mortgage repayment of about $30,000 per month, the net monthly sum to pay was about $17,000 (“Monthly Net Sum”);

(7)   The total mortgage repayments payable between the date of acquisition of the Sorrento Property in 2006 and date of redemption of mortgage in 2012 was $1,898,596 (about 78 monthly repayment ranging from $30,119 to $21,930 each);

(8)   The interest generated from the locked-up sum in the Deposit Account between the date of acquisition of the Sorrento Property in 2006 and date of redemption of mortgage was about $561,489.82;

(9)   Hence, the net monthly mortgage repayment payable, after setting off with the interest generated in the Deposit Account was $1,347,987.18 (“Total Net Mortgage Repayments”);

(10)   Very roughly calculated and excluding the necessary costs such as stamp duty, legal costs and agency fee, the total amount that had been paid for the down payment, principal and interest of the mortgage in respect of the Sorrento Property was $8,848,596 ($2,310,000 + $1,898,596 + $4,640,000) (“Total Costs”).

25.  However, there is dispute as to who had paid for the monthly mortgage repayment of the Sorrento Property before the husband fully redeemed the mortgage, which will be further discussed later in this judgment.

(iv)   Purchase and financing of the Sorrento Carpark

26.  On the same day when the assignment of the Sorrento Property was executed, ie 11 March 2006, the Father signed a sale and purchase agreement to purchase the Sorrento Carpark at $478,000 in his sole name. He subsequently executed the assignment on 28 April 2006.   The Father paid the purchase price in full.  

27.  The husband is never a legal owner of the Sorrento Property, nor did he pay for any part of its purchase price.

(v)   Elder Brother’s flat at the Sorrento in September 2006

28.  By the time when the Properties were purchased, the elder son of the Father (“Elder Brother”) had returned from the USA to work in NW Co Ltd and HKB Co Ltd for a few years. 

29.  About 6 months after the completion of purchase of the Sorrento Property, the Father and the Elder Brother signed a formal sale and purchase agreement to buy a flat in the same tower of the Sorrento Property on 10 August 2006 (“Elder Brother’s Flat”) in joint names. They executed the assignment and a mortgage deed in favour of Hang Seng Bank on 18 September 2006.

30.  It is now common ground among the parties that the Father had paid 30% deposit/down payment for Elder Brother’s Flat, while the mortgage repayments (which is not under a mortgage link arrangement) were/are paid by the Elder Brother.

31.  The importance of the purchase and financing of the Elder Brother’s Flat is that the wife contends that the Father made more or less the same kind of gift (ie 30% down payment) to the Elder Brother when the Elder Brother purchased his flat. This will be further analysed later in this judgment.

(vi)   Occupation, outgoings & rental income of the Properties

32.  Since the purchase of the Properties in/about January 2006, the Father or other family members has never lived at or occupied any of the Properties. They were left vacant until February 2008 when the husband and the wife started their cohabitation therein.  And from then on, the Properties were occupied by them exclusively until October 2011, when they moved to a bigger rented apartment at King’s Park Hill.  Since the breakdown of the marriage, the wife and the children moved back to the Sorrento Property in/about April 2014. She, with the children, has been occupying the Properties since then.

33.  During the time when they moved to live in the King’s Park Hill apartment, the Sorrento Property and the Sorrento Carpark were rented out for about 2 years between March 2012 and April 2014. The total rental income, about $42,000 per month, were paid into the husband’s bank account and used by him for family expenses/payment of the rent of King’s Hill Park apartment (then standing at $45,000 per month).

34.  Before the husband and the wife moved into the Sorrento Property, the outgoings of the Properties, such as management fees, rates and property tax (if any) were settled by the Father. Since the couple moved into the Sorrento Property, the same were paid by the husband.

(vii)   Viewing other properties in 2009 and 2011

35.  In/about February 2009 and 2011, the husband had considered replacing the Sorrento Property with other properties, such as Little Palm Villa in Clearwater Bay, Casa Marina in Sai Kung and Cape Mansion on the Hong Kong Island.  Various spreadsheets were prepared by him to see how much he could cash out from selling the Sorrento Property and Carpark.[4]

36.  There is no need for me to go into the details of the spreadsheets and calculations therein at this stage. It is sufficient for me to point out that the wife relies on this conduct of the husband to show that he is the only beneficial owner of the Properties. I will say more on this point later in this judgment.

(viii)Transfer of $612,000 to the Father in September 2012

37.  It is not in dispute that after the husband had redeemed the mortgage of the Sorrento Property by paying about $4,640,000 in August 2012, he paid 2 sums of money, namely $204,000 and $408,000 (totalling $612,000), to the Father on 3 September and 26 September 2012 respectively.

38.  The purpose of paying the aforesaid $612,000 is disputed among the parties, which will be further considered below in this judgment. According to the wife, the aforesaid $612,000 represents 36 months of the Monthly Net Sum of $17,000 that were reimbursed to the Father by the husband.  On the other hand, the husband and the Father say that these 2 sums were for various purposes, including:

(1)   reimbursement of the Father for paying US tax on behalf of the husband;

(2)   allowances for the Father to buy gadgets; and

(3)   gifts to the Father to show the husband’s gratitude to the Father for allowing his family to live at the Sorrento Property all these years. 

The wife’s pleaded case

39.  Throughout this trial and in his submission, Mr Douglas Lam SC for the wife has reminded me from time to time that the wife is not running a case that she is one of the beneficial owners of the Properties under the common intention trust arrangement. Her case is that only the husband is the sole beneficial owner of the Properties, and her entitlement to the Properties would stem from what is beneficially owned by the husband in the Properties under the ancillary relief matters.

40.  According to her pleadings, shortly after she started an intimate relationship with the husband, he had already mentioned about his plan to marry her.  In December 2005 when they came to Hong Kong for holidays, the husband already told her that his family intended to purchase him a flat in Hong Kong. In mid-January 2006, the husband further told her that the Father decided to purchase the Sorrento Property for him, which was intended to be used as his future matrimonial home with her. One month later, the husband told her that the Father had purchased the Sorrento Carpark for him.

41.  The wife advances that the husband and the Father had express discussion/agreement as to the acquisition and beneficial ownership of the Properties and had reached a common intention “since no later than December 2005 and prior to the acquisition of the Properties” that:[5]

(1)   the husband would be the sole beneficial owner of the Sorrento Property, which was intended to be used as the future matrimonial home of the couple;

(2)   the Sorrento Property was purchased in the joint names of the husband and the Father merely because neither the husband and the wife had any income proof in Hong Kong for the relevant mortgage application;

(3)   the Father would pay for the deposit and down payment of the Sorrento Property as gifts to the husband, while the husband would be responsible for payment of the balance of the purchase price/the mortgage loan;

(4)   the Sorrento Carpark would be purchased in the sole name of the Father but as a gift to the husband, so that the husband would be the sole beneficial owner.

(collectively the “Common Intention”)

42.  She pleads that the Common Intention is self-evident or can be inferred from the conduct of the husband and the Father and other factual circumstances set out in §6 to 8 and §18 of her Amended Points of Claim, such as the husband’s referral to the Sorrento Property as “their property” and “love nest” in his conversation with her since no later than February 2006; their exclusive use of the Properties and the rental income generated therefrom; the setting up of a BVI company by the couple (“R Ltd”) purportedly to hold the Properties; the purchase of the Elder Brother’s Flat as a similar gift arrangement from the Father to the Elder Brother. 

43.  In particularly on the financing of the Sorrento Property, it is her case that it was purchased in the joint names of the husband and the Father merely for the purpose of obtaining a favourable Mortgage Link Arrangement with Hang Seng Bank, and it was mutually agreed between the husband and the Father that the former would pay the Monthly Net Sum of $17,000 out of the fund of about $1 million held by the Father for him as well as by 2 sums of $204,000 and $408,000 given by him to the Father in September 2012. 

The husband’s pleaded case

44.  In defence, the husband objects that there was any plan of marriage with the wife at the material times, as they had just started a relationship for a few months.  As such, he denies that the Sorrento Property was intended to be their future matrimonial home.[6] He further avers that he was not involved in the viewing, negotiating and any process in relation to the purchase of the Sorrento Property. He was asked to sign the documents prepared under the instructions of the Father and was told that the arrangement was for them to hold the Sorrento Property in joint names as joint tenants. [7]

45.  The husband insists that the beneficial ownership of the Properties should follow the law. It is his pleaded case that the common intention between him and the Father at all material times was that: [8]

(1)   The Sorrento Property would be purchased as an investment of the Father and the husband, and they would hold it as joint and equal legal and beneficial owners;

(2)   The Father would pay initially for 30% of the purchase price as his contribution to its acquisition. He would also pay the necessary costs, such as stamp duty and legal fees, and continue to pay for the monthly mortgage until such time as his contribution was and/or approximately 50% of the purchase price;

(3)   The Father would pay for the purchase price in full of the Sorrento Carpark, which would then be legally and beneficially owned by him.

46.  Further, the husband specifically denies that there was any mutual understanding between him and the Father that he would reimburse the Father with the Monthly Net Sum of $17,000. He avers that the $1 million that was held by his Father for him had either been returned to him, or had been utilized for other reasonable purposes. He pleads that the said sums of $204,000 and $408,000 transferred by him to the Father in September 2012 was for various purposes (set out more particularly in §[38] above.

47.  As to the rental arrangement of the Properties, the husband advances in his pleadings that the rental receipts were used to set off against the excess amount of his half share in the purchase price of the Sorrento Property, as he made one-off payment to redeem the mortgage in August 2012 by paying $4,640,000. He adds in his affirmation that he kept the rental income as a result of the agreement with the Father who offered to help him out of the rental payment of the King’s Hill Park apartment.

The Father’s pleaded case

48.  The Father advances his case in his Amended Points of Defence like this:

(1)   He did not intend to provide the Sorrento Property to the husband as a gift.[9] The Sorrento Property was first bought in his sole name. The husband’s name was only added subsequently because it is their common intention that they would legally and beneficially own the Sorrento Property together as joint tenants;[10]

(2)   He would pay 30% of the purchase price and the monthly mortgage repayment of the Sorrento Property until such time as his contribution was and/or approximately 50% of the purchase price. Pursuant to that, he had been paying the mortgage repayment out of his own funds until the husband redeemed the mortgage in August 2012; [11]

(3)   He denies that the Sorrento Property was purchased in the joint names of himself and the husband merely for the purpose of helping the latter in obtaining a favourable Mortgage Link Arrangement with Hang Seng Bank. He avers that had he really wanted to help the husband out, he did not have to be an owner of the Sorrento Property; he could have acted as the guarantor and/or provide other forms of security to the bank;[12]

(4)   Before the husband redeemed the mortgage of the Sorrento Property, the husband had not paid or reimbursed any monthly mortgage repayment to him. The husband’s payment of $204,000 and $408,000 to him was for other purposes, such as allowances for him to buy gadgets, which was in no way related to the reimbursement of the Monthly Net Sum;

(5)   He had agreed with the husband that the couple could use the Sorrento Property without paying rent, but they would have to move out upon the demand of himself and the husband;

(6)   The rental income of the Properties was paid directly into the husband’s bank account so that the husband could arrange for payment of management fees, government rates and rent. It has been agreed between them that the husband would hold such rental income in trust for and on behalf of both of them;[13]

(7)   The Sorrento Carpark is intended to be an investment of himself and/or with his wife, and it is never intended to be given to the husband as a gift.

Applicable legal principles

49.  In this trial, leading counsel/counsel confirm that resulting trust has no place in this case and that only common intention constructive trust would be relied on. It is trite to say that the law has evolved and the courts nowadays emphasise the importance of ascertaining the common intention of the relevant parties in order to decide if there exists a constructive trust.  In WML v LCK (CA), CACV 82/2014, date of judgment 27/2/2015, the Court of Appeal commented that where there was discussion and agreement on the nature of the holding of the property in question at the time of the acquisition, the starting point should be whether there was a common intention constructive trust (per Cheung JA at §41).

50.  The legal principles on common intention constructive trust are not of serious dispute and they are these.

51.  First, in a domestic context, when a property is held in joint names, and without any express declaration of trust, the starting point is that the beneficial interest is held equally. There is no presumption that that the parties intend that the beneficial interest be shared in proportion to their financial contributions to the acquisitions of the property.

52.  In Jones v Kernott [2012] 1 AC 776, Lord Kerr stated:

“68 The following appear to be the areas of agreement. (i) In joint names’ cases, the starting point is that equity follows the law. One begins the search for the proper allocation of shares in the property with the presumption that the parties are joint tenants and are thus entitled to equal shares. (ii) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home or (b) that they later formed the common intention that their respective shares would change. (iii) The common intention, if it can be inferred, is to be deduced objectively from the parties’ conduct. (iv) Where the intention as to the division of the property cannot be inferred, each is entitled to that share which the court considers fair. In considering the question of what is fair the court should have regard to the whole course of dealing between the parties.”

53.  Second, a party seeking to show that the beneficial title does not follow its legal title bears the burden of proof in asserting the otherwise. This is an onerous burden.  In joint names cases, it is also unlikely to lead to a different result unless the facts are very unusual: Stack v Dowden [2007] 2 AC 432 per Baroness Hale at §§56 & 68.

54.  Third, the court is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it: Stack v Dowden (supra) at §60.

55.  The distinction between an inferred intention and imputed intention was succinctly explained by Lord Neuberger in Stack v Dowden (supra), which was cited by Lord Walker in Jones v Kernott (supra) at §26, as follows:

“126. An inferred intention is one which is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements. An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention. Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend.”

56.  Fourth, the elements required to prove this type of trust have been succinctly set out by Godfrey Lam J in Liu Wai Keung v. Liu Wai Man [2013] 5 HKLRD 9, which was adopted by the Court of Appeal in WML v LCK (supra). His Lordship explained as follows:

“46. The focus of the inquiry is therefore on the elements that the plaintiff has to prove in order to establish a constructive trust in his favour. In the context of this case, this means that the plaintiff must prove: (a) there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the Property despite that it was acquired in the defendant’s name; (b) the plaintiff altered his position in detrimental reliance upon such common intention; and (c) it is unconscionable for the defendant to assert ownership in reliance on her legal title to the Property.

47. In ascertaining whether there was a common intention, it is the objective intention of each party “which was reasonably understood by the other party to be manifested by that party’s words and conduct” that one must examine: Gissing v Gissing [1971] AC 886, 906; Jones v Kernott [2012] l AC 776, 794 [51].

48. In the present case it is the parties’ common intention at the time of the acquisition of the Property that is relevant, there being no suggestion from anyone that the intention had changed.

49. Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions. It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention: Lloyds Bank Plc v Rosset [1991] 1 AC 107, 132-133.

50. Even where, as in this case, reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.” (emphasis added)

57.  Fifth, in order to ascertain the true intention of the parties in a domestic context, which is very different from the commercial world, Baroness Hale set out at §69-70 in Stack v Dowden (supra) a list of relevant factors but emphasised that this was not an exhaustive list. Baroness Hale emphasised that nowadays, financial contribution in a domestic context was only one of the factors for consideration:

“60. The presumption of resulting trust is not a rule of law…These days, the importance to be attached to who paid for what in a domestic context may be very different from its importance in other contexts or long ago.”

58.  The non-exhaustive list of factors mentioned by Baroness Hale are summarised in the following:

(1)   any advice or discussions at the time of the transfer which cast light upon their intentions then;

(2)   the reasons why the home was acquired in their joint names;

(3)   the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys;

(4)   the purpose for which the home was acquired; the nature of the parties' relationship;

(5)   whether they had children for whom they both had responsibility to provide a home;

(6)   how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both;

(7)   how they discharged the outgoings on the property and their other household expenses;

(8)   the parties' individual characters and personalities.

Radical departure from the wife’s pleadings?

59.  Before I embark into a more detailed analysis on the factual evidence of this case, I need to address myself to the submission of the husband and the Father on the pleadings of the wife.  

60.  Both Ms Anita Yip SC (for the Father) and Mr Eric Leung (for the husband) submit that there is a radical departure of the wife’s case from her pleadings, in the result of which her claim should be dismissed outright (See: Waghorn v George Wimpey & Co Ltd [1969] 1 WLR 1764 per Geoffrey Lane J at 1771B-G; Poon Hau Kei v Hsin Chong Construction Co Ltd & Ors [2003] 2 HKLRD 56 per Ma JA (as he then was) at §42 of the judgment). The radical departure from her pleadings is broadly described as follows:

(1)   The wife’s pleaded common intention is that the husband and the Father intended the Sorrento Property would be purchased as the matrimonial home of the husband and the wife (“Version 1”);[14]

(2)   But in day 2 of the trial when being cross-examined by leading counsel for the Father, the wife admitted that the Father bought the Sorrento Property for the husband to get married and set up his home (「成家立室」) regardless of who the eventual spouse might be, and since it was possible that the husband might not marry her, it would not be their matrimonial home if he married somebody else (“Version 2”);

(3)   In day 6 during cross examination of the Father, leading counsel for the wife put to the Father a different case by relying on what the husband had said in his reply to the wife’s questionnaire. In the said reply, the husband averred that the Sorrento Property was a pre-martial asset purchased by the Father in 2006 because the husband was returning to Hong Kong from the USA in 2007 so that he would have his own place to live in (“Version 3”);

(4)   Also in day 6 of the trial, it was put to the Father by the wife that it was natural and logical (「理所當然」) for a traditional Chinese family (such as the Father’s) to buy a flat and pay for the down payment for the son when the son relocated back to Hong Kong (“Version 4”).

61.  Upon due consideration, I do not agree that there is any radical departure of the wife’s pleaded case in any of the aforesaid versions.  Her reply in Version 2 must be understood in the context that she was speaking, on the hindsight, if the husband had not married her but someone else. I agree with Mr Lam SC that her reply is more a true and fair statement of the fact that she was not yet married to the husband at the material time.  The version of the Sorrento Property to be used for the husband’s accommodation (Version 3) is not inherently inconsistent with the description that it was to be used as his future matrimonial home or the couple’s matrimonial home. The wife’s suggestion of traditional Chinese family arrangement (Version 4) in the cross examination on day 6 should not be taken out of context, for the very first question that was put to the Father along that line of cross examination (set out by Ms Yip herself in §15 (6) of her written closing submission) was whether he agreed that the Sorrento Property was purchased for the marriage of the husband. It was from there that the cross examination further developed and the suggestion of traditional Chinese family arrangement of buying a property for the son was made.

62.  In conclusion and with respect to Ms Yip SC and Mr Leung, I reject their submission on this pleading point.

A few salient points

63.  To begin with, I wish to make the following salient points by way of general observation and/or comment which apply to the overall analysis of this case, and to both the Sorrento Property and the Sorrento Carpark unless expressly stated the otherwise.

64.  First, it needs to be reiterated that the burden of proof lies squarely on the wife, but not the husband or the Father, to prove on the balance of probabilities that the beneficial ownership of the Properties should deviate from the legal ownership and the existence of the Common Intention as pleaded in her pleadings. At the end of the day, even if I was to find the case of the husband and/or the Father not acceptable or not totally acceptable, the wife still has to pass the hurdle of the burden of proof.

65.  Second, and of utmost importance, it is advanced by the wife in her pleadings that the Common Intention was formed and time-locked as “since no later than December 2005 and prior to the acquisition of the Sorrento Property”, and thus it is her duty to prove that the Common Intention was formed by that point of time, but not some other time.  She has not suggested that there was any change of intention on the beneficial ownership or shares of the Properties at any time subsequent to their purchase, such as upon the husband’s redemption of the mortgage of the Sorrento Property in August 2012 and/or upon the husband’s payment of the said sums of $204,000 and $408,000 to the Father in September 2012.

66.  Third, it is the wife’s case that the husband and the Father had formed the Common Intention by express discussion and agreement. Such express discussion and agreement, the wife says, can be inferred from the conduct of the parties. She has boldly confirmed through her leading counsel, Mr Douglas Lam, that she does not require this court to impute a common intention to the husband and the Father. The difference between inferred and imputed intention is already set out in the earlier part of this judgment. 

67.  Pausing here, one must bear in mind that the authorities make it clear that a common intention constructive trust “based only on conduct” will only be found in “exceptional” circumstances (Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985 at 1005).

68.  Fourth, the wife advances that the Common Intention was formed by express discussion and agreement between the husband and the Father. Yet, she was never privy to these express discussion. She relies heavily on what the husband had told her of the arrangement and holding of the Properties and numerous online chat records between them, especially during the time when they were still dating each other. Three points are to be taken on these chat records and they are these.

69.  First of all, Ms Yip SC points out to this court, which is accepted by me, that from all the online chat records that are disclosed and relied on by the wife, there is not even a single line of chat records, in particularly those chat records made immediately prior to the purchase of the Properties, where the husband directly and/or expressly said that the Father was going to buy a flat and/or a carpark space for him as his or their matrimonial home in Hong Kong. Neither are there any chat records which say that the Father would pay the down payment of the Sorrento Property and the full price of the Sorrento Carpark to him as gifts. The wife in her oral evidence conveniently said that the husband had told her so in their face to face conversation.  However, the overall evidence shows that this couple communicated extensively and regularly on numerous topics, big or small, by way of online chats at all material times. One of the topics they talked about most was on cars. In particularly, the husband had, on a few occasions, told the wife about the arrangement of the Father giving him $200,000 to buy a car. It begs an explanation why there is no traces of online chats between them on the gift arrangement of the Properties which is of more substantial amount than buying a car. In my view, the wife’s attempted explanation is not sufficient to explain away the lack of any traces in their online chat records on the Common Intention.

70.  Moreover, I take the view that these online chat records must be considered with extra care.  Indisputably, at those material times before their relocation to Hong Kong or their marriage, the husband was wooing the wife and trying to impress or convince her that he was serious in the relationship. As such, I am not convinced by the wife that the reference by the husband to the Sorrento Property as “our love nest”, “our room in Hong Kong”, “our master bedroom”, “little queen of the Sorrento” etc in these online chat would have much probative value on the Common Intention and/or beneficial ownership in issue.

71.  In any event, one has to bear in mind that the Father was not present or privy to most of these online chats between the couple, and thus he cannot be bound by what was said by the husband in these online chats. In his opening submission, Mr Douglas Lam SC submits that unless the husband was making things up, this court should have no reason to believe that he would make false representations to the wife. But Ms Yip SC for the Father is right in refuting that the chat record of 1 January 2007 is a solid piece of evidence that the husband was not completely being honest to the wife. In that chat record, he made untrue representation to her on his finances in responding to her that his whole savings was about $1.2 million, but in fact his bank balance stood at over $4 million as at 29 December 2006.[15]

72.  Fifth, I agree with Ms Yip SC that the focus of enquiry is whether the husband and the Father had formed the alleged Common Intention as pleaded by the wife and timed-locked as “since no later than December 2005 and prior to the acquisition of the Sorrento Property”. The intention of the husband and/or the intention shared by the couple prior to or subsequent to the purchase, if any, is irrelevant.

Analysis of factual evidence

73.  In this trial, each party, especially the wife since she bears the burden of proof, has literally left no stone unturned. Each of them puts forward his/her own interpretation to the relevant facts or conduct of the husband and/or the Father which span over more than a decade. There is also a massive volume of instant online chat records between the wife and the husband over the years, which are extensively and intensively reviewed during cross-examination. There are almost 300 pages of opening and closing written submission (excluding the authorities).

74.  However, for the purpose of this judgment, I do not find it necessary or useful to set out my consideration of each and every allegation of facts and/or submission made by the parties. Suffice it is for me to stress that I have considered them all, but would deal with the more significant points which I regard as being essential for a proper determination of the disputes herein. And for the avoidance of doubt, in so far as the matters set out in this judgment differ from the evidence of the wife, or the husband/Father (as the case may be), it is because I have preferred the evidence of one over the other because I find the preferred evidence more credible and/or logical, or because I consider that the documents produced confirmed my findings of fact. 

75.  Unless stated the otherwise, the following analysis apply equally to both the Sorrento Property and the Sorrento Carpark.

Purpose of purchase

(i)   As “their” matrimonial home

76.  Whether there was a firm marriage and/or relocation plan of the husband and the wife prior to the acquisition of the Properties is directly relevant to the purpose of purchase of the Properties, because it is the primary case of the wife that the Properties were purchased and intended to be their future matrimonial home in Hong Kong. It is understood as her stance that the Sorrento Property and the Sorrento Carpark are inseparable and should be considered as one.

77.  Among other things, she relies mainly on her viewing of various flats at the Sorrento and the Waterfront with the husband and his family in December 2005, as well as numerous online chat records between her and the husband, to show that they fell for each other head over heels shortly after they started courtship, and within 5 months of dating knew that they were destined to be married to each other and hence the Father’s purchase of the Sorrento Property as their future matrimonial home in Hong Kong. It is not disputed by the husband that on a few occasions in December 2005, he asked the wife to view various properties at the Kowloon Airport Express Station, including those at the Sorrento and the Waterfront, with his mother and the Estate Agent. He says that he and the wife just “tagged along” with his mother to property-viewing; it was his parents, not him, who wished to buy. He tries to explain that the wife joined in the property-viewing like calling a friend to join a big sale.

78.  While I do not accept this explanation proffered by the husband, I take the view that the wife’s participation in property-viewing per se, is not conclusive enough to support her contention that she and the husband had firm plan to get married, and hence the Sorrento Property would be bought and intended by both the husband and the Father to be used as their future matrimonial home. It needs to be reiterated that the couple did not get married until September 2008, which is more than 2½ years after the Properties were purchased.  Notably, according to the wife’s own case, the husband’s family is a traditional Chinese family.  One may then pose this question: is it more likely than not that parents in a traditional Chinese family in those days, such the Father in this case, would buy a flat for their son and girlfriend as their future matrimonial home, when by then (ie prior to the acquisition of the flat), their son had just started dating the girlfriend for about 6 months and the girlfriend had just met the parents for only one or two occasions. In my view, the answer must be in the negative, as it would be against common sense and therefore inherently implausible in the circumstances.

79.  Further, it is pertinent to take note of what the wife alleges in her 1^st demand letter dated 12 November 2014 to the Father.[16] In the said letter, she has not correlated the property-viewing in December 2005 to any intended marriage plan, lest to say they were searching for their ideal future matrimonial home in Hong Kong. Here are the relevant excerpts from the said demand letter:

“1. Our client was invited to accompany the [husband] to look for a property above the Kowloon Station in or around December 2005. No decision was made during their short stay in Hong Kong.

2. A few months later, in February/March 2006, the [husband] and [the Father] purchased the [Sorrento] Property when the [husband] was still in the US with our client. The purchase price of the [Sorrento] Property was HK$7,700,00. The down payment equivalent to 30% of the purchase price as well as the related legal costs and stamp duty (“the Down Payment and Expenses”) was financed by [the Father]. Our client was informed by the [husband] that the Down Payment and Expenses were made by you as gift to him and the [Sorrento] Property was for the use of his future matrimonial home.

3. About a month later in April 2006, [the Father] purchased the [Sorrento Carpark] in [his] sole name also as a gift to the [husband].

4. The [husband] and our client came back to Hong Kong in 2006. Our client was informed by both the [husband] and [the father] that the [Sorrento] Property and the [Sorrento Carpark] were to be used by the [husband] and our client as their matrimonial home….”

80.  During cross-examination, Mr Leung for the husband puts to the wife that §4 of the aforesaid demand letter objectively shows that it was only in 2006 (ie long after the acquisition of the Properties and also after they were relocated back to Hong Kong) that she was chronologically told that the Properties were to be used as their future matrimonial home. In reply, she attempts to explain that this was not the first time that she was being so told by the husband and the Father. She adds that she was being told, for the first time, that the Sorrento Property and Sorrento Carpark would be their future matrimonial home in December 2005 during the property-viewing. I would readily dismiss this piece of evidence from the wife.  Had she been really told so by the husband and the Father as early as December 2005 during the property-viewing, this would surely be one of the most important piece of evidence privy to all 3 of them which she cannot not afford to miss out in her pleadings or affirmations.

81.  As to the chat records relied on by the wife, I do not propose to list them all out. They can be found at the wife’s opening and closing written submission. I would name just a few below as examples:

(1)   Since July 2005, the husband would write long emails to the wife, tell her in online instant chats that he treated her like he treated his family, and send her flowers and cards to convey the message to her that he would like to spend the rest of his life with her; [17]

(2)   On 22 August 2005, when the wife asked the husband what he thought would have happened if they met earlier on, he said “maybe we are already married”;[18]

(3)   On 25 October 2005, the husband confirmed with the wife that “as a fact”, the Father liked her.  The Father later sent them a Christmas card on 13 December 2005;[19]

(4)   On 23 January 2006 (5 days after the Preliminary Sale and Purchase Agreement of the Sorrento Property) was signed, the husband told the wife that he was making all sorts of plans because he wanted to save up more and for them to have more choices later in life;[20] 

(5)   On 7 February 2006, the husband said he would take care of her, and she could retire, take care of their dog and live the “tai tai” life by going to high tea every day;[21]

(6)   The husband constantly referred the Sorrento Property as “our love nest”, “our master bedroom”, “our kitchen”, etc.

82.  I have already given my general observation/comment on these online chat records at §[68]-[71] of this judgment.  I would add that the overall impression gleaned from the chat records prior to the acquisition of the Properties is that the husband was obviously doing his best to impress the wife and to make her believe that he was very serious about their relationship and thus a bit pushy.  It may well be true that he even brought up the topic of marriage and/or relocation to Hong Kong to the wife during their chat. However, the wife was worrying that the relationship had developed too fast and that made her feel a little suffocating.[22] She clearly showed her reservation to the topic of marriage and relocation.

83.  For example, on 25 October 2005, when the husband asked her during their online chat about her mother’s response of their “getting married soon”, the wife did not even reply to him but shifted to another topic of requesting him to buy some body-slimming tea/pills in Hong Kong for her.[23] When cross-examined by the Father’s leading counsel, the wife admitted that she did not make reply to the husband on the topic of marriage because she thought he was sweet-talking her.

84.  Even after the Preliminary Sale and Purchase Agreement of the Sorrento Property was signed, the wife had not displayed a very confirmed stance on relocating to Hong Kong. Two examples can be taken to demonstrate this point.

85.  According to the chat record of 23 January 2006 (ie 4 days after the Preliminary Sale and Purchase Agreement of the Sorrento Property was signed), when the husband asked her about her view of going back to Hong Kong, she exhibited her worries of not being able to find a job that she liked in Hong Kong. In the end, she only said the she “might” (but not “would”) start looking for a job in Hong Kong after April 2006. When the husband attempted to impress her by saying that he could manage to support her while she was looking for jobs in Hong Kong and asked her to trust him, she responded by saying that “it’s a discussion topic” only.

86.  In his closing submission, Mr Lam SC stresses that the online chat of 6 February 2006 is significant, in that the husband told her that he would be returning to Hong Kong to sign a power of attorney relating to the Sorrento Property, and that he asked the wife whether she would like to adopt “retro style” for “their” future room at the Sorrento Property. However, it is pertinent to point out that on the following day of 7 February 2006, the wife sent a link to the husband presumably on job advertisements in Hong Kong and commented that the salary was low. When the husband tried to point out to her the good points about Hong Kong, such as no sales tax, no capital gain tax and thus able to save more in the long run, the wife, rather than giving a positive reply to the husband’s assurance, responded by the word “sigh” at least 3 times.

87.  It is thus clear to me that prior to December 2005 and not later than the acquisition of the Properties, despite the husband’s wooing, the wife had reservation about marriage and/or relocation to Hong Kong. She had definitely not at all made up her mind completely on relocating back to Hong Kong.  In my view, it would be chronologically impossible that the Properties, in particularly the Sorrento Property, were bought with the common intention that it would be used as their matrimonial home in Hong Kong.

(ii)   As “his” future matrimonial home

88.  The wife also says that the Sorrento Property was purchased by the Father for the husband because the latter was returning to work in Hong Kong and it was just natural for a traditional Chinese family such as the Father’s to pay the down payment for his son’s future matrimonial home. She avers that the tradition of making substantial gifts to their offspring in the husband’s family can be evidenced by the gift of shares of NW Co Ltd and HKB Co Ltd by the grandparents to the husband and the Elder Brother.

89.  Upon consideration of the facts of this case, I am unable to accept this modified version of the wife. My major reasons are as follows.

90.  About 4 days after the Preliminary Sale and Purchase Agreement of the Sorrento Property was signed, the husband himself had not completely made up his mind to return to Hong Kong. In the online chat record of 23 January 2006 with the wife, he told her that he was still asking the Father to “really think deeply and [he] will think really deeply whether [he] should go work for [the Father] b4 [they] make the final decision”. It is chronologically impossible for the Father to buy a future matrimonial home for the husband when the plan to be relocated to Hong Kong was yet to be decided, let alone any confirmed plan/date to get married.

91.  Besides, the Father makes it very clear in his oral evidence during cross-examination, which I accept, that his family does not have the tradition of gifting a property to the children when they are still young. He recalls that when he got married, he lived with his parents in his mother’s flat only, because it was his father’s belief that if a property was bought to his children when they were still young, the children might become very lazy in the future (「驚佢第日做到好大食懶」). He follows his father’s foot print, and thus would not gift the children with a flat when they are still young but would prefer them to learn to save up without over-spending (「我亦都唔會當佢哋咁後生嘅時候去送層樓俾佢哋嘅， 所以我希望佢哋係學下儲錢，唔好咁大使」). I hold the view that his explanation is more logically in accord with what a parent in a traditional Chinese family with some assets in those days would think. It must be borne in the mind when the Properties were purchased, the husband was just about 3 years out of school and at a relative young age of about 26 only.

92.  As to the gift of shares of NW Co Ltd and HKB Co Ltd by the grandparents to the husband and the Elder Brother, I only have to point out that although the shares were gifted to them, it is the unchallenged evidence of the Father that his 2 sons had no control over the dividends.  The Father received all their dividends in one cheque and it was he who had the final say as to when the dividends would be given to his sons.   

93.  I will have more to say on the wife’s allegation of gift later in this judgment.

(iii)    As co-investment

94.  Both the husband and the Father explain that the Sorrento Property was at first acquired in the Father’s sole name for the purpose of long term investment. It is indisputable or not in dispute that the Father and his wife had been interested in flats near the Kowloon Airport Express Station since or about the SARS epidemic in 2003. After the Father had revealed to the husband that he had signed a sale and purchase agreement to buy the Sorrento Property, the husband asked that he be allowed to co-invest with the Father in the Sorrento Property, so that the Father did not need to use up a large portion of his cash to buy the Sorrento Property because the husband’s young age would facilitate them to obtain a longer term of mortgage from the bank(s). The Father agreed to the husband’s suggestion subsequently. Hence, the husband flew from the USA to Hong Kong to sign a power of attorney in favour of the Father, subsequent of which the Assignment was executed in the joint names of the husband and the Father.

95.  Mr Lam SC for the wife submits that this long term co-investment allegation does not sit well with the fact that the Father did not make any serious attempt to rent out the Properties and had let them stood vacant for almost 2 years. Senior counsel also argues that it is wholly implausible that the Father was unable to find a good tenant, whereas the husband/wife were able to have the Properties rented out very soon after they moved out of the Sorrento Property in 2012. Such conduct of the Father, Mr Lam argues, does not sit well with the claimed intention of investment.

96.  In response, the Father says that after the Sorrento Property was purchased, he instructed the Estate Agent to try to find a Japanese i-banker as tenant to the Properties.  He admits in his oral evidence that he was picky on choosing the right tenant, because he had met unsatisfactory tenant(s) who defaulted in paying rent after a few months in the past. However, the Estate Agent was not able to find the right tenant for him way back in 2006.  Then, the husband returned to Hong Kong in September 2006 and was repeatedly telling him that he had been living alone in the USA for a long time and was not very accustomed to living together with the parents. Hence, the Father let the husband live in the Sorrento Property.  

97.  I accept the explanation and evidence of the Father as aforesaid. It is logical and clear. Pertinently, it is also noted that back in 2006, the famous landmark near the Sorrento Property such as the Elements or ICC had yet to be opened. It is thus obvious to me that the Sorrento Property in 2006 was not as attractive to potential tenants as it was in 2012.  On the other hand, I would add that it is a common view among most of the people in Hong Kong, especially the older generation such as the Father, that buying “bricks” (ie landed property) is one of the safest mode of investment, for passive growth in the value of the property (even without renting it out for rental income) is in its own right a long term investment.

98.  In the cross examination of the Father, Mr Lam SC asks him how he and the husband would share the sale proceeds of the Sorrento Property in the case that the Properties were sold before the husband redeemed the mortgage in 2012. The Father replies that the husband would receive half of the sale proceeds after taking into account the necessary sale costs and contribution paid by him. Senior counsel is adamantly in submitting that the Father’s reply is illogical and does not sit well with the idea of c-investment, because this would mean that the husband did not have to contribute a single penny to the purchase price of the Sorrento Property but yet he was able to share the sale proceeds.

99.  With respect to Mr Lam SC, I do not agree. This line of submission has overlooked the fact that we are talking about a domestic relationship between father and son. It is more likely than not that the arrangement being them, including financial arrangement, tends to be a loose and casual one. A balance sheet approach used in a commercial context is not applicable to this case at all.

100.  In Stack v Dowden (supra), Lord Walker commented that the court should avoid using “the balance sheet approach” in determining the contribution of each party and said this:

“33. In the ordinary domestic case where there are joint legal owners there will be a heavy burden in establishing to the court's satisfaction that an intention to keep a sort of balance-sheet of contributions actually existed, or should be inferred, or imputed to the parties. The presumption will be that equity follows the law. In such cases the court should not readily embark on the sort of detailed examination of the parties' relationship and finances that was attempted (with limited success) in this case. I agree with Lady Hale that this is, on its facts, an exceptional case.” (emphasis added)

101.  This court is also referred to the husband’s reply to the wife’s questionnaire, in which he says that:

“[The Sorrento Property] is in fact a pre-marital asset purchased by the [Father] in 2006 because [the husband] was returning to Hong Kong from the US in 2007 so that [the husband] will have his own place to live.” (emphasis added)

102.  In addition, I am also invited to take note of the Father’s 1^st affirmation where he explains the following:

“5. At the time of the purchase, I signed the Agreement for Sale and Purchase as the sole purchaser since I thought that the Property could be a good investment. Upon discussion with the [husband], we decided that both the [husband] and I should also have interest in the [Sorrento] Property together where the [husband] could manage the [Sorrento] Property and /or live in it if he likes.” (emphasis added)

103.  In my view, such evidence is not inherently inconsistent with the co-investment arrangement.

Inheritance from his grandfather/gift from the Father

104.  It is common ground that the Father paid at least the down payment, ie 30% or $2,310,000, of the Sorrento Property and the full price ($478,000) of the Sorrento Carpark. The factual dispute of whether the Father had paid any of the mortgage repayment of the Sorrento Property would be discussed later in this judgment. 

105.  The wife pleads that the aforesaid sum is gift from the husband’s family and part of his family inheritance. She elaborates in her 3^rd affirmation that the aforesaid sum represents the husband’s share of the inheritance from his grandfather out of the sale proceeds of a house in Hong Lok Yuen, Tai Po.  However, she has dropped this allegation in relation to Hong Lok Yuen property in her closing submission, for it has now become clear that the time frame of the sale of Hong Lok Yuen property does not match with the purchase date of the Properties.

106.  I will not repeat what I have already said earlier in this judgment at §[92] on the gifts of shares of NW Co Ltd and HKB Co Ltd by the grandparents to the husband.

107.  In my view, the ultimate question to ask here is this: whether the Father had an intention to gift the down payment of the Sorrento Property and the full purchase price of the Sorrento Carpark to the husband. I have the following observation/comment:

(1)   There is no place for the presumption of advancement in this case because it is not pleaded;

(2)   There is the evidence of the Father set out at §[91] of this judgment, which I have accepted;

(3)   The wife attempts to rely on the purchase of the Elder Brother’s Flat to show that similar gift arrangement was made between the Father and the Elder Brother. If the wife’s logic was correct, it remains unexplained why the Elder Brother’s Flat was not bought in the sole name of the Elder Brother. Of importance is that her suggested hurdles of “absence in the Hong Kong” or “lack of income proof” does not apply to the Elder Brother at all;

(4)   I shall rely on and repeat what I have said in §[69] of this judgment, namely there lacks any traces in the online chat records between the husband and the wife that the Father was making a gift to the husband;

(5)   In particularly, the online chat of 23 January 2006 between the husband and the wife warrants a closer reading. This online chat took place about 4 days after the Preliminary Sale and Purchase Agreement of the Sorrento Property was signed. Towards the end of that online chat, the wife asked the husband what the Father had said to him. The husband revealed that the Father,

“didn’t say much”

“he’s always like that”

“he jus[t] need time to think it all thru”

In my view, had the Father intended to gift the down payment of the Sorrento Property to the husband, he would not have responded/behaved in the way described by the husband as aforesaid.

(6)   Last but not the least, it begs an explanation why the Sorrento Carpark was registered in the sole name of the Father, but not that of the husband, had it meant to be a gift. The alleged assistance from the Father for mortgage loan application simply does not arise in the purchase of the Sorrento Carpark. It is true that the husband was not in Hong Kong at the time when the Sorrento Carpark was purchased; however, it is equally true that he could have executed a general power of attorney in favour of the Father for the purchase of the Sorrento Carprk, at the same time when he signed the power of attorney in respect of the Sorrento Property.

108.  Having considered all the evidence, I have to conclude that the wife has not made out her case of gift from the Father to the husband in respect of the Properties.

Why the Sorrento Property was purchased in joint names?

109.  According to the wife, the Sorrento Property was registered in the joint names of the husband and the Father because of the mortgage arrangement. Neither the husband nor the wife had any income proof in Hong Kong for the relevant mortgage loan application. On the other hand, the Father was a VIP customer of Hang Seng Bank and had a substantial amount of cash, so that he could assist the husband in obtaining the Mortgage Link Arrangement.

110.  It is indisputable that at the material times, the husband lacked the requisite income proof to obtain a mortgage in Hong Kong at the material time. However, it is my judgment that this is not a conclusive factor.  There are other facts which should be considered and given due weight and they are these.

111.  First, it must always be remembered that the husband was not named as one of the legal owners of the Sorrento Property in the Preliminary Sale and Purchase Agreement, or the Formal Sale and Purchase Agreement. He was named as a joint owner at a much later stage, only when the Assignment was signed. If, since no later than December 2005 and prior to the acquisition of the Sorrento Property, it was the shared intention of the husband and the Father that the former would be the sole beneficial owner of the Sorrento Properties, it is illogical and against common sense that the Preliminary Sale and Purchase Agreement (as well as the Formal Sale and Purchase Agreement) did not bear the husband’s name at all. It would have made more sense that the husband’s name should have been added in the Preliminary Sale and Purchase Agreement (as well as the Formal Sale and Purchase Agreement).

112.  In my opinion, the fact that the husband was not in Hong Kong but in the USA is not sufficient to explain away this point, for his anticipated absence at the material times could have been cured by the Father’s signing the Preliminary Sale and Purchase Agreement on his behalf, or the husband’s executing a power of attorney in favour of the Father in December 2005 before he returned to the USA with the wife.

113.  Second, the wife attempts to rely on the purchase of the Elder Brother’s Flat to show that similar mortgage link and gift arrangement was made between the Father and the Elder Brother. But I have already rejected this line of argument. I reiterate what I have analysed in §[107(3)]. In my view, if similarity is to be drawn between the purchase of the Sorrento Property and the Elder Brother’s Flat, that similarity must suggest, as Ms Yip SC submits, that the Father is one of the registered and beneficial owners of each of the property.   

114.  Third, Ms Yip SC submits on behalf of the Father that there are many alternatives for the Father to assist the husband with mortgage without the need to register the Sorrento Property in joint names. I tend to accept her submission. I take note that the wife has conceded during cross examination by Ms Yip SC that the Father could have acted as a guarantor for the husband in order for the latter to obtain a mortgage.

115.  The wife, however, does not agree with Ms Yip SC that it was a good alternative to the Mortgage Link Arrangement for the Father to place a large sum of money in a deposit account under the husband’s name. The wife is of the view that the Mortgage Link Arrangement is much simpler and more preferred. Nevertheless, it is not her evidence that the said suggestion made by Ms Yip SC cannot not be a possible alternative. And in my view, the suggestion made by Ms Yip SC is a possible and plausible alternative for the following reasons:

(1)   The Father had an abundant amount of cash of about $8 million - $9 million at the material time. There should be no problem for him to lock up about $2 million - $3 million in a deposit account under the husband’s name;

(2)   The actual amount that the Father needed to place under the husband’s name might be less, if it was to be taken into account the $1 million cash and/or stock that he was keeping for the husband as at the acquisition of the Sorrento Property;

(3)   The actual amount that the Father needed to place under the husband’s name would be further lesser, if it was to be further taken into account the dividends of the husband’s shares of NW Co Ltd and HKB Co Ltd, to be received after September each year, which was historically given in one cheque to the Father who had control on when to pay it out to his 2 sons.

116.  It is the submission of the wife that the husband’s conduct shows that he was intended and expected to be fully responsible for discharging the mortgage loan. She relies on various chat records.

117.  For an example, in the chat record of 12 January 2006, the husband said that he had to “get all the numbers done this weekend…it’s better to get it while the price is still low…” On my part, I do not find this chat record too relevant, for the Sorrento Property was not open for sale until 17 January 2006. As such, it would not be chronologically possible that the husband was referring to the Sorrento Property in that chat record.

118.  For other examples, she relies on the chat record of 23 January 2006, in which the husband told her that he will “finish up all the math we need to know about paying and financing Sorrento…”  She also places weight on 2 emails both dated 16 February 2006 between the husband to the Father, in which the husband forwarded a link of the mortgage plans offered by all the banks in Hong Kong to the Father. The Father then replied by setting out the terms of HSBC and Hang Seng Bank. She submits that these chat record/emails directly contradict the husband’s affirmation evidence that he was not involved in the financial arrangement of the transaction. I note that these chat record/emails took place after the Preliminary Sale and Purchase Agreement was signed by the Father.  According to the oral evidence of the Father on this point, which I accept, after he signed the Preliminary Sale and Purchase Agreement, he told the husband that he had purchased the Sorrento Property. The husband then suggested to co-invest with him, to which he replied that he needed to think it over. Subsequently, the Father agreed the suggestion.  In such circumstances, what was said by the husband to the wife in the chat record of 23 January 2006 on finishing up the math on financing Sorrento Property between the husband and the Father, as well as the emails on mortgage plans, is chronologically possible and logically.

119.  In saying so, I have not overlooked the prima facie contradiction of the Father’s affirmation and his oral evidence, in that he suggests in his affirmation that the discussion of naming the husband as a co-owner of the Sorrento Property took place after the Formal (as opposed to Preliminary) Sale and Purchase Agreement was signed.  But upon due consideration, I am of the view that this is a very trivial discrepancy which has no material bearing on the final outcome of my judgment. After all, the discussion in question took place more than a decade ago in 2006. Immaterial and minor discrepancies in evidence is understandable. 

120.  Looking at the evidence in totality, I am unable to accept that the only reason for the Sorrento Property to be registered in the joint names of the husband and the Father was because the latter was required to assist the former with mortgage under the Mortgage Link Arrangement.

How the purchase was financed?

121.  The basic and indisputable facts in relation to the financing of the Sorrento Property are already set out in §[24] and of the Sorrento Carpark in §[26] of this judgment. I shall not repeat them here.

122.  As identified, the major dispute is who had paid the monthly mortgage instalments of the Sorrento Property before its redemption in August 2012. The husband and the Father both claim that it was the Father who had paid these. The wife, on the other hand, avers that they were paid by the Father but reimbursed by the husband by (i) utilizing his money kept with the Father and (ii) 2 lump sums totalling $612,000 given by the husband to the Father.

123.  To illustrate her point, her legal team produce a table to this court on the 1^st day of the trial, setting out her computation of the Total Mortgage Repayments and Total Net Monthly Repayments, etc from the date of acquisition to the date of redemption of mortgage of the Sorrento Property (“Wife’s Table”).[24]

124.  The relevant factual disputes under this topic can be conveniently analysed under the following sub-headings.

(i)   The money kept with the Father

125.  It is the wife’s pleaded case that both the husband and the Father intended and agreed that from May 2006 onwards, the Father would make the monthly mortgage repayments on behalf of the husband by way of about $1 million kept with the Father.  She relies mainly on the Wife’s Table and 3 emails in May 2006 between the husband and the Father.

126.  For easy discussion, I shall briefly describe the said 3 emails in May 2006 in the following.

127.  On 9 May 2006, the husband sent email to the Father entitled “My Portfolio” in which he suggested selling his shares then kept for him by the Father in order to pay for the 1^st year’s mortgage of the Sorrento Property (“9/5/2006 Email”). The relevant excerpt of this email is set out below for easy discussion:

“ I [the husband] am thinking about selling them [the shares] before the market goes back down. I plan to use that money to help me pay for the 1^st year of mortgage.

…

Can you also please find out how much am I paying for my mortgage (I think [it] is about $18,000 x 12 = $216,000)? I need to find out how much money I have with you and I need to transfer those back to my account so I can start managing my money….” (emphasis added)

128.  The Father replied to the husband on 15 May 2006, in which he told the husband the portfolio of cash and shares then kept by him for the husband (“Portfolio Email”). He described that the grand total with him from the special bonus received from NW Co Ltd and HKB Co Ltd and piggy money left was $1,000,489.95. After deducting the shares bought and/or given to the mother of the husband as her present, the balance was $784,289.

129.  On the same day of 15 May 2006, the Father set out another email to the husband to provide him with mortgage repayment information (“Mortgage Email”). This email is repeated below for easy understanding:

“[Son],

Maximum interest received (if I keep HK$2,695,000 unused) per month: HK$13,816

Monthly installment (at current interest rate): HK$30,948

$30,948-$13,816=17,132

Balance as my last e-mail: HK$784,289

784,289 – 205,584=578,705

I have paid $2,310,000 for down payment and now lock up 2,695,000 to get high interest. Hope you understand my situation.

Dad” (emphasis added)

130.  On behalf of the wife, Mr Lam SC advances his argument in this way:

(1)   According to the Wife’s Table, the Total Net Mortgage Repayments (described as “net out of pocket” in the Wife’s Table) is $1,347,987.18;

(2)   Upon deducting the 2 lump sums in the total amount of $612,000 (that was given to the Father by the husband in September 2012) from the Total Net Mortgage Repayments, the balance is about $735,987;

(3)   The said balance of $735,987 is co-incidentally similar to the cash balance of $784,289 mentioned in the Mortgage Email;

(4)   Hence, these 3 emails strongly suggest that the husband and the Father had agreed in May 2006 to use the husband’s cash in the value of about $1 million, which was held by the Father in Hong Kong, to pay for the Net Monthly Sum of roughly $17,000 per month. These 3 emails also directly contradict the husband’s affirmation evidence that the monthly mortgage instalments were never intended to be deducted from the Father’s account and subsequently be reimbursed by him to the Father.

131.  In the trial, the husband and the father are cross-examined at length by Mr Lam SC on these 3 emails. The Father confirms that whether the husband should start paying the 1^st year of mortgage of the Sorrento Property was discussed, but it was never put into practice, because it was his view that the husband was then financially unaffordable to pay for the monthly mortgage repayment. The Father further says that the husband’s money that was kept with him was returned to the husband shortly after the husband relocated back to Hong Kong. Hence, the Father says, the husband’s money that was kept with him was never used for payment of mortgage repayment of the Sorrento Property.

132.  The husband gave similar evidence that he had not paid for any of the mortgage instalment. He was then confronted with the 9/5/2006 Email, to which he claimed that he wrote the 9/5/2006 Email merely to give an appearance as a good son.

133.  Upon considering all the evidence and submission on this sub-issue, in particularity the said 3 emails and the husband’s money that was kept with the Father, I arrive at the following finding/conclusion.

134.  Firstly, the wife at some stage relies on the husband’s use of “me” and “my mortgage” in the 9/5/2006 Email to support her claim of a common intention for the husband to pay for the mortgage of the Sorrento Property. However, I do not agree that the use of such words/phrases in the 9/5/2006 Email is sufficiently indicative of his alleged sole beneficial ownership of the Sorrento Property or Sorrento Carpark. I proffer 2 major reasons.

135.  It must be remembered (as I have so found) that at the material times, the husband was still trying his best to woo and persuade the wife, who showed her worries evidenced from her online chat of 7 February 2006, to return to Hong Kong with him. The 9/5/2006 Email, worded in the way it now shows and was copied to the wife, would more likely than not serve the purpose of reassuring her of the husband’s purported financial ability which in return would address to her worries. Whether what was said in the 9/5/2006 Email would be implemented at the end of the day is, in my view, a different matter.

136.  The husband’s eagerness to assure the wife of his financial ability can be gleaned from her own affirmation evidence, ie her 7^th affirmation dated 16 June 2015, in which she says:

“25. After completion if the purchase of the Sorrento Property in or around May 2006, I [the wife] was further told by the [husband] that though he was supposed to start paying the monthly mortgage repayments, the [Father] would help in taking care of the monthly repayment as the [husband] was still in the US. Indeed, the [husband] also told me and I verily believe that he should have a total sum of over HK$1,000,000 held by the [Father] in Hong Kong. Though he did not earn much in the US, he had no worry about meeting the mortgage loan repayments.” (emphasis added)

137.  On the other hand, the wife herself used similar description, such as “we” or “our place”, to address the Diamond Hill property which, she says, does not belong to her but to her parents as follows (with emphasis):

“My mom told me our place sorta has a view”

“Its more like an investment for me”

“…We are debating rather to buy a brand new one w/club house…”

“After much considering…we decide to buy it near MTR stations”

“so after much consideration…we went for older housing for location lor”

138.  She is cross-examined on this point by Mr Leung, counsel for the husband. She adamantly says that the reference to “we” or “our” place in reference to the Diamond Hill property actually means her parents only. Quite clearly, the wife applies a double standard here. When the husband used such terms as “me” or “my” mortgage, the wife says that he was meaning his beneficial interest in the Sorrento Property. But when it comes to she herself using similar terms in relation to the Diamond Hill property, she twists to say that she meant it was her parents only. As such and in all fairness, I cannot possibly assign much probative value to the use of “me” or “my” mortgage in the 9/5/2006 Email.

139.  Secondly, I agree with Ms Yip SC and Mr Leung that the wife’s case on the purported reimbursement of the mortgage repayments by the husband with his money kept with the Father is convoluted and inconsistent. She begins in her pleading by saying that the whole $1,000,000 or so kept with the Father was used to pay the mortgage repayments. But in her 7^th affirmation, she changes to say that only some of the money, namely $205,584, was used to pay for the 1^st year of mortgage repayments. Yet in the trial, by producing the Wife’s Table, she now says that the full balance kept with the Father and mentioned in the Mortgage Email (ie $784,289) was utilised to pay for the mortgage repayments.

140.  My overall impression is that the wife has no idea on the actual financial arrangement agreed by the husband and the Father on the payment of mortgage repayments. All she knows is what the husband told her in the course of wooing and persuading her to return to Hong Kong with him, on which it is unsafe to rely.

141.  Thirdly, Mr Lam SC asks me not to believe the evidence of the husband and the Father that the former’s proposal to be responsible for the 1^st year of mortgage was never implemented due to his financial constraint. His reasoning is set out at §130 of his 1^st written closing submission. In particularly, he points out that as at 28 October 2006, the husband had personal savings in the sum of over $4 million and he received dividends of NW Co Ltd and HKB Co Ltd in the sum of $813,289.95 for the year of 2004-2005 and in the sum of $3,557,366.07 for the year of 2005-2006. Therefore, the allegation that the husband could not financially afford to pay for the mortgage repayments simply unsustainable.

142.  With respect to Mr Lam SC, I do not agree with him. What is indisputable is that as at the said 3 emails in May 2006, the husband was still working in the USA and his income was then not much. He did not return to work in Hong Kong until September 2006. In addition, rightly pointed out by Ms Yip SC and Mr Leung, the dividends of NW Co Ltd and HKB Co Ltd were not declared until September each year. Further, even if the same was declared and paid, it was given to the Father in one cheque and it was the Father alone who decided when to pay out the dividends to his sons. Of importance is the Father’s evidence that he would not give away substantial assets to his sons when they were still young, in order not to make them lazy. In such circumstances, I cannot totally rule out the inherent plausibility of the Father’s evidence that the payment of the 1^st year mortgage by the husband was never implemented.

143.  I would add that if, according to the wife’s case on these 3 emails, the husband was then financially strong enough to start paying for the mortgage repayments, it would beg an explanation as to why the Father would still need to continue depositing substantial sums into the Deposit Account, which is said to be in the sum of $1,084,800 in the Wife’s Table. Logically and without any further ado, the husband could have paid his own moneys into the Deposit Account from time to time.

144.  I also take note that while the wife purports to rely on the suggestion of the husband in the 9/5/2006 Email that he would start paying for the 1^st year of mortgage of the Sorrento Property, she has conveniently left out the other part of the husband’s suggestion in the same email, namely he asked the Father “to transfer those [money] back to [his] account so that [he] can start managing [his] money”. One would have no difficulty to see that this other suggestion of the husband in the 9/5/2006 Email does not sit quite well with the Father’s continuing to deposit money into the Deposit Account for payment of the mortgage instalment, which in turn weaken the wife’s case on said 3 emails.

145.  The submission by Mr Lam SC of the lack of financial documents from the Father to show that he had returned the husband’s money to the husband has already been considered but is unable to persuade me to the otherwise.

146.  Fourthly, Mr Lam SC submits that the alleged agreement not to implement the suggestion of the husband’s paying the 1^st year of mortgage does not sit well with the fact that the Father had performed detailed calculations for the husband in the Mortgage Email, and the fact that the Father even commented that he had already done a great deal to help the husband and thus hoped that the husband would understand his situation.  

147.  I have given a great deal of thought on this point.  On one hand, Mr Lam SC has made an alluring argument before me. But on the other hand, I am unable to say that the Father’s explanation/clarification to the Mortgage Email should not be accepted at all.  I embrace his evidence that he is an engineer by profession, so that he would spontaneously provide the figures and mathematical calculations when asked to. The content of both the Portfolio and Mortgage Emails generally proves his point.  Further, the Father has provided his explanation/clarification to the sentence “hope you understand my situation” in the Mortgage Email. He says that he meant to tell the husband that in so far as their co-investment was concerned, that was the amount which he could provide but no more (「我兩個co-investment上面，我話我只能夠去到呢條數， 再多我唔得喇」).  In my view, this is not an inherently implausible explanation/clarification of the Father. The unchallenged evidence is that his bank reserve at the time when the Sorrento Property was purchased was about $8 million - $9 million and that he was prepared to use at the most half of it for purchasing the Properties, as he would feel financially unsafe if he had not kept sufficient cash at hand.

148.  Having considered the evidence in its totality, I am unable to conclude that the sentence “hope you understand my situation” in the Mortgage Email must be interpreted in the way advanced by Mr Lam SC.

149.  In conclusion and upon due consideration, I would reject the wife’s case that the husband’s money kept with the Father was used to reimburse the Father of the mortgage instalments. I accept, on balance of probabilities, that the same was returned to the husband by the Father, shortly after the husband relocated back to Hong Kong.

(ii)   Redemption of mortgage

150.  As a recap, the husband redeemed the mortgage of the Sorrento Property by paying $4,640,000 in August 2012. There is factual dispute as to why the husband redeemed the mortgage.

151.  Both the husband and the Father explain that the Father bought a new property in Providence Park in/about July 2012 and was required to pay a down payment of $12,800,000. The husband therefore paid up the remaining outstanding balance of the mortgage of the Sorrento Property, so as to alleviate the Father’s financial burden and to free up the cash that had been locked up under the Mortgage Link Arrangement.

152.  The wife invites this court not to believe in this explanation. It is the submission of her senior counsel that the Father had not provided any documentary proof to show that he was in financial stress at the material time, yet there is evidence that he received dividends of $9.84 million between 2005 – 2012, in additional to his monthly salary as executor director of NW Co Ltd and HKB Co Ltd. Senior counsel further argues that if it was a truly 50-50% co-investment in the Sorrento Property, the logical thing to do would have been for the husband and the Father to work out the apportionment before making the redemption to see how much each of them had to contribute to the redemption in order to ensure an equal contribution.

153.  In my judgment, it is beyond dispute that there is a close proximity in time between the husband’s redemption of the mortgage of the Sorrento Property and the Father’s purchase of the Providence Park. According to the land search of Providence Park, the relevant sale and purchase agreement was signed on 16 July 2012 in the sole name of the Father. The purchase price was $16,830,000. The oral evidence shows that the Father had to pay a sum of $12,800,000 as down payment, which, in my view, is a substantial sum to the Father. An equitable mortgage of Hang Seng Bank was executed on 9 October 2012. It should be noted that the equitable mortgage of Provence Park was made after the husband had redeemed the mortgage of the Sorrento Property.

154.  When all the above evidence is considered in its totality, I take the view that the husband’s redemption of the mortgage of the Sorrento Property would not only free the Father’s locked-up capital of $2,310,000 under the Mortgage Link Arrangement, it would also release the Father from the existing mortgage of the Sorrento Property and thus enhance him to take up the new equitable mortgage with Hang Seng Bank in respect of the Providence Park.

155.  Regarding the wife’s argument on working out the apportionment before redemption, I have to say again that the so-called co-investment of the husband and the Father must be understood as an arrangement in a domestic context. It is thus erroneous to adopt a dollar for dollar approach in considering their respective contribution to the Sorrento Property. My analysis/view in §§[99]-[100] is reiterated. Besides, the Father’s oral evidence on this point, in particularity during cross examination by Mr Lam SC, is logical and clear, and thus accepted by me.  In nutshell, the Father agrees that if merely based on the purchase price of the Sorrento Property, the husband had contributed more than him. However, he had locked up a sum of $2,650,000 in the Deposit Account to generate interest which could not be withdrawn but could only be used to set off with the mortgage repayments. In so doing, he had forgone the opportunity cost of, for example, using the locked-up sum and interest thereon to invest in another property. When such opportunity cost was taken into account, the Father says, he may end up contributing more than the husband. The Father further adds that he would finalise the calculations with the husband if and when the Sorrento Property was sold. He clarifies in re-examination that calculations would be done by taking into account the outstanding mortgage amount and respective contribution to the purchase price/purchase costs (「成本」), and the net balance would be shared on a 50-50 basis.

156.  My conclusion is thus this. The discharge of the mortgage of Sorrento Property by the husband in August 2012 was related to the purchase of the Providence Park by the Father, namely to alleviate the Father’s financial position by freeing up the locked-up sum of $2,310,000 and by releasing him from the existing mortgage to take up the new equitable mortgage of the Providence Park.  The wife has failed to prove that the redemption of the mortgage of the Sorrento Property was as a result of the Common Intention.

(iii)    The payment of $612,000 to the Father

157.  It is not in dispute that after the husband had redeemed the mortgage of the Sorrento Property in August 2012, he paid 2 sums of money, namely $204,000 and $408,000 (totalling $612,000), to the Father on 3 September and 26 September 2012 respectively. It is also beyond argument that these 2 sums of $204,000 and $408,000 are co-incidentally and wholly divisible by the Monthly Net Sum of $17,000.

158.  While I accept that the aforesaid co-incidence calls for suspicion and concern, I have to say that at the end of the day, the real issue to be determined here is this and this alone: whether $612,000 must be the reimbursement of the Monthly Net Sum of $17,000 from the husband to the Father pursuant to the Common Intention that was already formed way back in 2005 or 2006.

159.  The wife adamantly says that $612,000 represents 36 months of the Monthly Net Sum of $17,000 that were reimbursed to the Father by the husband. The Wife’s Table shows that actual “out of pocket” sum that the husband needs to reimburse the Father is $1,347,987 (covering 78 months).  She claims that the balance of $784,289 kept with the Father and set out in the Mortgage Email was applied in full to reimburse the Father.  If so, deducting $17,000 per month until $784,289 is fully depleted would take slightly over 46 instalments/months. That would leave only about 32 (78 - 46) instalments/months to be paid by the husband.

160.  Pausing here, one can easily notice the mathematical dilemma in the wife’s own contention.  If her contention was correct, the husband would have paid 4 (36-32) Monthly Net Sum more than necessary. As such, I am simply not able to rule out the submission of Ms Yip SC that the wife was re-jigging or backward-engineering the figures.

161.  On the other hand, the husband and the Father say that $612,000 was paid to the Father for various purposes, including:

(1)   reimbursement of the Father for paying US tax on behalf of the husband;

(2)   allowances for the Father to buy gadgets; and

(3)   gifts to the Father to show the husband’s gratitude to the Father for allowing his family to live at the Sorrento Property all these years. 

162.  I express reservation to the husband’s explanation that part of these 2 lump sums was for reimbursement for the Father’s payment of the US tax on his behalf over the years, because no meaningful particulars have been provided as to when, how and the breakdown. On the other hand, the wife has provided the 2004-2012 US tax returns and payment slips showing that the husband had settled total tax liability of US$92,609 for taxable years of 2007-2012 on 18 October 2013 by cashier cheques drawn from the husband’s Hang Seng Bank account.  

163.  Neither do I find the husband’s other explanation of offering allowances for the Father to buy gadgets, namely a brand-name watch that was stolen during a burglary, very convincing. According to the Father, the watch was a gift from the Elder Brother but was stolen in a burglary in 2010. Later, the Elder Brother bought a similar watch for him, for which the Father paid about $204,000. The husband came to know of all these and thus reimbursed the Father of $204,000 further later. Yet, in the oral evidence of the husband, he claims that $204,000 is the reimbursement of US tax paid by the Father for him. There is clearly inconsistency between their evidence. Further, Mr Lam SC is right in pointing out the burglary took place in 2010, but no explanation had been given as to why the reimbursement only took place in September 2012.

164.  That leaves for discussion the final explanation offered by the husband, namely to show his gratitude for the Father’s permission to live in the Sorrento Property. Mr Lam SC asks me to note that before the husband paid the said $612,000 to the Father, he had already paid about $4,640,000, representing more than half of the purchase price, to redeem the mortgage of the Sorrento Property in August 2012. Leading counsel works out a table on p55 of his closing submission which shows that the contribution made by the husband and the Father, immediately before the said $612,000 was paid, was in the ratio of 58:42.[25] In order to balance out their respective contribution to the effect that each would share 50% of the purchase price, the Father would have to repay the husband a sum of $696,590.41. It thus makes no logical sense, Mr Lam SC submits, that in September 2012, the husband would on one hand continue receiving the full rental of the Sorrento Property and Sorrento Carpark, but on the other hand transferring $612,000 to the Father to show his gratitude.

165.  Upon due consideration, I am not able to agree with Mr Lam SC on his submission. I reiterate what I have said at §§[99]-[100] and §[155] of this judgment. I would add that according to my finding, the husband had not made any contribution to the mortgage instalments before he redeemed the mortgage of the Sorrento Property, but yet he (and his family) was able to enjoy the occupation/use of the Sorrento Property and Sorrento Carpark.  Under such circumstances, there is nothing objectionable for him to give the Father $612,000 to show his gratitude.

166.  In any event, even if the husband meant that the said $612,000 was for reimbursement of the Monthly Net Sum to the Father, the total sum paid by him for the Sorrento Property would then account for about 59% of the Total Costs [($4,640,000 + $612,000) ÷ $8,848,596 x 100%], the percentage of which is not determinative enough for this court come to a different conclusion on the outcome of the case.  

167.  At this juncture, I think it would be helpful to refer to the useful comment made by Baroness Hale in Stack v Dowden (supra) as follows:

“68. The burden will therefore be on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests, and in what way. This is not a task to be lightly embarked upon. In family disputes, strong feelings are aroused when couples split up. These often lead the parties, honestly but mistakenly, to reinterpret the past in self-exculpatory or vengeful terms. They also lead people to spend far more on the legal battle than is warranted by the sums actually at stake. A full examination of the facts is likely to involve disproportionate costs. In joint names cases it is also unlikely to lead to a different result unless the facts are very unusual. Nor may disputes be confined to the parties themselves. People with an interest in the deceased's estate may well wish to assert that he had a beneficial tenancy in common. It cannot be the case that all the hundreds of thousands, if not millions, of transfers into joint names using the old forms are vulnerable to challenge in the courts simply because it is likely that the owners contributed unequally to their purchase.

69. In law, “context is everything” and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties' true intentions…. 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…. 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.” (my emphasis added)

The husband’s other conduct indicative of sole ownership?

168.  The wife relies on a number of other pre-acquisition and post-acquisition conduct of the husband to prove her claim that the Sorrento Property was intended to be solely owned by him.  I shall now consider those other conduct contended by the wife, but would not seek to repeat those conduct which have already considered and analysed by me in the earlier part of this judgment, nor will I set out those irrelevant or peripheral conduct which I have considered but do not find it/them to have any significant bearing on the outcome of this case. 

(i)   The communication with the Estate Agent

169.  According to the wife, she and the husband returned to the USA after the property-viewing in Hong Kong in December 2005. Thereafter between 4 and 11 January 2006, the Estate Agent and the husband were in active email correspondences on the latest transactions and flats offered for sale in the Sorrento, showing that it was the husband’s intention to buy a flat in Hong Kong.  In one of the more important emails dated 10 January 2006 from the Estate Agent to the husband (which was forwarded by the husband to the wife and the Father), the Estate Agent was seeking to persuade the husband to purchase a flat F in Tower 5 of the Sorrento. [26]

170.  Both the Estate Agent and the husband are cross-examined on why they had such email correspondences. The Estate Agent says that it was the husband’s parents, but not the husband, who wished to buy.  But he was requested by the husband to provide the aforesaid information/data because he was helping the husband, a “nosy” son who wished to help out his parents by monitoring and making sure that they would not be cheated by deceptive estate agents.  The husband, on the other hand, gives an alternative oral explanation that he was requesting the information/data from the Estate Agent for his academic research or indices analysis so that he could track his list and form a view as to whether the market trend was within his prediction.

171.  By way of general comment, I agree that the Estate Agent is uncooperative in terms of his manner and substance of his answers during the first part of cross-examination by Mr Lam SC. It is only upon the explanation of this court to him on the right of the wife’s senior counsel to cross examine him and his duty as a witness to answer questions courteously that he became more forthcoming in his answers to Mr Lam’s cross examination.  I also take note that the Estate Agent was, and still is as at the trial, in the realty industry, an industry commonly known to rely greatly on his clients or potential clients, such as the Father and the husband. He has a reason not to say anything which would harm his relationship with his clients or potential clients. I thus come to the conclusion that the Estate Agent has not told me all the truth.  His evidence must be scrutinised with extra care. 

172.  Despite what I have said in the preceding paragraph, I am also of the view that the Estate Agent’s emails with the husband, at the most, can only prove that the husband had an intention of buying a flat in Hong Kong. But this was something which the husband had already admitted himself during cross examination by Mr Lam SC.  In fact, the evidence shows that he had the idea of getting his own place in Hong Kong as early as 30 June 2005, even before he started to date with the wife.[27] The wife has to accept that both she and the husband had a hobby and interest to discuss about landed properties and their prices, even before they started dating.  In my view, what the husband had communicated with the Estate Agent (which was copied to the wife) was nothing out of the ordinary or character of the husband. I do not form the view that such intention on the part of the husband must lead to the result of the Common Intention as pleaded by the wife.

173.  More importantly, as the Estate Agent did not claim to possess any first-hand knowledge over the private affairs of the husband and the Father in respect of the beneficial holding of the Properties, his overall evidence does not throw any light on the most controversial issue of this case.

174.  The wife also places reliance on 2 documents prepared by the Estate Agent or his estate agency. She says that these 2 documents help to prove that the husband was the true buyer of the Sorrento Property. They are:

(1)   a press release issued on 20 January 2006 to announce that an “overseas professional” had just purchased the Sorrento Property at the price of $7.7 million; and

(2)   an internal memo recording the purchaser of the Sorrento Property was the Father, but the husband’s Hong Kong mobile number was used therein.

175.  The wife submits that “overseas professional” in this context must have referred to the husband as opposed to the Father. The Estate Agent, however, explains that the press release is only a promotional gimmick to enhance the marketability of the Sorrento development. The husband, when presented with this advertisement, offers to say that the Father wished to maintain a low profile and did not want his identity or occupation to be revealed in a public statement.

176.  As to the husband’s telephone number on the internal memo, I have checked the court’s recording on this part of the Estate Agent’s evidence. What he essentially says is that his company requires him to provide a true telephone number of the real purchaser in the internal memo. By providing the husband’s Hong Kong mobile number, he could comply with the company rules on one hand, but on the other hand, prevent the true buyer, ie his own client (the Father), from being disturbed by other estate agents (「公司嘅規定， 就係一定要保留真實買家電話，咁而呢個電話， 因爲[the husband]佢唔喺香港， 第一，我哋符合咗公司嘅要求， 第二，亦都唔需要影響真正嘅買家。」)

177.  Although I do not find that the Estate Agent is a particularly impressive witness, I am not prepared to conclude that the explanation offered by him in relation to the press release and the internal sales memo must be rejected. After all, the husband was merely a management analyst at the material time and cannot correctly be described as a “professional” more than the Father. And, it is understandable that an estate agent would not like the contact details of his own client(s) to be shared by other estate agents, for it is quite obvious to me that clientele is one of the most important assets to an estate agent.

178.  In any event, I am of the view that the points taken by the wife are trivial and minor, and in the light of my finding set out earlier in this judgment, cannot have any material bearing on the final outcome of this trial.

(ii)   Renovation, expenses/outgoings relating to the Properties

179.  Since the purchase of the Sorrento Property, 2 major renovations were done. The 1^st one was before the couple moved into and started their cohabitation at the Sorrento Property. The wife relies on a number of online chat records that it was she and the husband who decided on the renovation project including what style to adopt for the Sorrento Property. The 2^nd renovation was done after the couple separated and the wife moved back to the Sorrento Property with the children. The wife points out that the husband paid for all renovation fees of the 2 renovations. He also bears other miscellaneous expenses of the Properties, such as management fees, government rates and rent and property tax. The wife invites me to infer from such conduct that the husband is the sole beneficial owner of the Properties.

180.  However, it is very clear to me that these facts or conduct are not indicative enough for such an inference to be drawn. Rather, I see them as neutral in nature. Not only is it inherently plausible, but it also makes perfect sense that a joint owner in use/occupation of a property would usually bear the related miscellaneous expenses so long as he/she is in use/occupation of the property.

(iii)    Renting out of the Properties

181.  For about 2 years between March 2012 and April 2014, the Sorrento Property and Sorrento Carpark were rented out.

182.  According to the wife, which is indisputable, she and/or the husband were responsible for the tenancy arrangement, such as liaising with the estate agents or potential tenants. Although the tenancy agreement of the Sorrento Property was signed by the husband and the Father, the former, at one stage, purported to sign the tenancy agreement of the Sorrento Carpark as its sole legal owner. The total rental income of the Sorrento Property and Sorrento Carpark (about $42,000 per month) were paid into the husband’s bank account and used as family income. All these, the wife argues, are indicative that he is the owner of the full beneficial interest of the Properties.

183.  The husband in his pleadings alleges that there was an agreement between him and the Father that he received the rental income of the Properties because his payment of the redemption sum of $4,640,000 had exceeded half share of the purchase price of the Sorrento Property. Obviously, this cannot be chronologically correct. The Properties were rented out in March 2012, but the redemption did not take place until August 2012.

184.  The Father in his pleadings says that the rental income was deposited into the husband’s bank account so that he could arrange for the payment of the management fees, government rates and rent, and to partially pay for the rental of King’s Park Hill apartment. He further explains in his oral evidence that after his first grandson (ie the elder of the couple) was born, the couple moved to the larger King’s Park Hill apartment with the grandson. The husband complained to him that household expenses were increasing. Hence, the Father suggested that the husband should keep the rental of the Properties (at $42,000) to help paying for the rental of King’s Park Hill apartment which then stood at $45,000. He adds that such rental can be accounted for by the husband if and when the Sorrento Property is to be sold in the future. I find the Father’s evidence reasonable and logical. I believe in him.

185.  Submission was made on behalf of the wife that if indeed the Sorrento Property was a joint investment, it falls short of logic that the rental received was not applied to pay for the monthly mortgage repayments, but to be received and used by the husband who, by then, had not contributed a single penny to the Sorrento Property. It is also argued that the husband was not in financial difficulty at the material times at all, as he had cash reserve of millions in his bank.

186.  Despite the eloquence of Mr Lam SC in his submission, I find myself unable to be in accord with him.  I only have to reiterate that the arrangement between the husband and the Father must strictly be considered in a domestic context. As such, there is nothing out of the ordinary for a father to assist his son (who has just given him his first grandson in the family) by letting his son receive the rental of the properties jointly/solely owned by him. Importantly, it is also the wife’s case that the Father and the husband has a very close relationship, to the extent that the husband regards the Father as his hero. I would even venture to comment that it would not surprise me that (just assuming) at the end of the day, the Father did not ask for reimbursement of the rental received by the husband, out of fatherly love to the husband.

187.  It may well be true that the husband had large sum of cash in his bank account at the material times. But it is also the wife’s own evidence that the husband is a person who needs to keep a lot of cash in order to make him feel safe and secured. H also needs capital to inject into his company (P Co Ltd).

188.  The submission on the husband’s purported signing of the tenancy agreement of Sorrento Carpark as its sole owner is considered. But this is not conclusive to show that a shared intention was formed way back in 2005-2006 that the Sorrento Carpark was fully and beneficially owned by the husband. I accept the Father’s evidence that if it was the shared intention that he would gift the Sorrento Carpark to the husband, it would have been registered in the husband’s sole name to begin with. 

189.  There are other points made by Mr Lam SC in his closing submission.  I shall not repeat them all here. Suffice it is for me to say that they are all considered, but they are not indicative enough to show that the husband must be the sole beneficial owner of the Properties under a shared intention formed in 2005-2006.

(iv)   Discussion of the sale of the Properties

190.  It cannot be disputed that in February 2009, the husband had considered selling the Sorrento Property to purchase a property at Little Palm Villa in Clearwater Bay. He accepted in his oral evidence that in the course of doing so, spreadsheets were prepared by him to see how much he could cash out from selling the Sorrento Property and Carpark.[28] Similar calculations were made and tabulated into various spreadsheets by him for the purpose of analysing the potential purchase of a property at Casa Marina. The assumptions that were made were that he would pay 30% of the purchase price of Casa Marina as down payment by liquidating the Sorrento Property and Carpark at the price of $12.7 million, with any surplus of the monies he could cash out from the sale for renovation.[29]

191.  It is pinpointed by the wife that the calculations shown in the above spreadsheets are premised on the full amount of the sale proceeds of the Properties being available to the husband.

192.  Later in July 2011 (about 2 months after their first child was born), the husband considered the possibility of selling the Sorrento Property again in order to purchase a bigger flat at Cape Mansion. He told the wife in one of the instant online chat that the Cape Mansion flat was valued at $28 million while the Sorrento Property at about $18 million with an outstanding mortgage of about $5 million. He could ask the Father to help him out by borrowing a few million to him.

193.  The wife advances an argument that by 2011, the husband had not contributed a single penny towards the acquisition of the Properties and thus he would not even be entitled to 50% of the net equity value of $13 million, let alone the whole sum. Plainly, he could not have afforded to purchase Cape Mansion even with a loan of a few million from the Father unless he was entitled to the whole of the sale proceeds.

194.  I will dispel the wife’s argument in the preceding paragraph right away and reiterate once more that any financial arrangement between the husband and the Father is made in a domestic context which is very different from the commercial world. Additionally, I believe in the Father’s oral evidence that the husband had revealed his idea of replacing the Sorrento Property with a bigger flat to him and even took him to property viewing. I also accept the Father’s oral evidence that he had told the husband that he could re-invest his half share of the sale proceeds into buying a bigger flat if needed be. Such evidence, which is not challenged seriously by the wife in the trial, is symbolic and important, for it shows that no matter how loose the arrangement, including financial arrangement, was made between the husband and the Father, the Father always retains a certain degree of say and control in the Sorrento Property, and thus support his case that he is one of the beneficial owners of the Sorrento Property.

(v)    Setting up of R Ltd

195.  The wife relies on the setting up of a BVI company, R Ltd, by the husband in May 2011 and the manuscript note that he prepared during their family financial planning “brainstorming” to show that the husband treated the Properties as his own. She suggests that “Corp A” in the manuscript note is in fact R Ltd, which was intended by the husband to be the indirect owner of the Sorrento Property. The wife then repeats similar argument on the financial contribution. She proffers to say that by 2011, the husband, according to his case, had not contributed a single penny to the purchase price of the Sorrento Property, it would make no sense that he would place the Sorrento Property under R Ltd.

196.  To this line of argument, I shall rely on what I have said in §[194] of this judgment. I shall add that in any event, the Sorrento Property was never transferred to R Ltd, which was dissolved at the end.

Conversation between wife and Father in 2014

197.  It is the wife’s case that she had a conversation with the Father in February or March 2014 at the Sorrento Property as follows:[30]

“I was informed by the [Father] in or around February/March 2014, after the birth of the daughter that though the [husband] did make some reimbursements, the total amount was not sufficient to cover all the instalements repayments. I was informed on the same occasion that the [Father] was annoyed by the [husband’s] failure to settle all the property tax of the [Sorrento Property] as this was the [husband’s] sole and own liability.”

198.  Mr Lam SC submits that the Father’s attitude as reflected from the above conversation supports the inference that he never regards himself as the owner of the Sorrento Property. However, I do not agree that such an inference can be drawn. In my view, it is nothing out of the ordinary for the husband (who was then in use of the Sorrento Property) to be responsible for paying the property tax.

199.  Mr Lam SC also avers that the Father never responds to the wife’s allegation in his affirmation. He merely gives a bare denial in his oral evidence. Mr Lam thus invites me to infer that the aforesaid conversation asserted by the wife did take place and make a finding that the husband did reimburse the Father of the Monthly Net Sum pursuant to their common intention.

200.  To begin with, the wife’s argument on the reimbursement of the Monthly Net Sum has been considered in the earlier part of this judgment and I do not propose to repeat here. This further submission by Mr Lam SC has not persuaded to the otherwise. True as it may be that the Father did not respond specifically to the alleged conversation between the wife and him in his 2^nd affirmation, but if the same is read in totality, it becomes clear that it already contains a denial to her allegation that the husband had paid/reimbursed him of any of the mortgage instalments before he redeemed the mortgage of the Sorrento Property. The Father’s case on the mortgage repayments is thus consistent all along.

Conclusion

201.  For all the reasons set out above, I am not satisfied that the wife has proven her case on the balance of probability that the husband is the sole beneficial owner of the Sorrento Property and the Sorrento Carpark. I find that the common intention of the husband and the Father formed “since no later than December 2005 and prior to the acquisition of the Properties” is that they were the joint legal and beneficial owners of the Sorrento Property, and that the Father was the sole legal and beneficial owner of the Sorrento Carpark.

202.  There is no reason why costs should not follow the event. The wife is thus ordered to bear the costs of the husband and the Father, to be taxed if not agreed. Since she herself has engaged 2 counsel in this trial, I see no reason why certificate for 2 counsel should not be granted to the Father. This would be in the form of a nisi order, which will be made absolute within 14 days from the date of this judgment.

203.  Her legal team should draw up this court order for approval.

204.  However, I do wish to remind all parties at this stage that the husband is contributing to the wife’s litigation costs pursuant to my last judgment dated 26 August 2016 on her application for legal costs contribution.  Massive costs have been incurred.  As I have said in my last judgment of 26 August 2016, litigation costs are flaring up to about $4.6 million within 2 years (up to March/April 2016) merely between the husband and the wife. This has not yet taken into account of the Father’s costs of this trial, which according to his Form H dated 22 July 2015 is running up to $862,000. The total costs set out above already account for about ¼ of the total price of the Properties (said to be worth about $20 million as at the trial).

205.  I therefore give my strong words to all parties that it was high time for each of them to seriously consider the question of proportionality of costs, and to reflect if they should continue to litigate on every area of possible disputes, big or small. Hopefully, they would exercise their good sense, with the ultimate intention to save up for the 2 young children of the family.

206.  Lastly, I wish to convey my gratitude to senior counsel/counsel for their valuable assistance rendered to me in this trial.