RISEWAY INVESTMENT LTD. v. WONG KWOK CHIANG and Another

1994, MP No. 603

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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The Proceedings

1. This matter concerns a property at 73D Waterloo Road, Kowloon. The plaintiff is the owner of sixty-nine of the hundred undivided shares in the property, having purchased twenty-three shares each from Howard, Kenneth and James Wong, the brothers of the defendants. The first defendant is the owner of eighteen shares and the second defendant owns thirteen shares. On 30 November 1994, Patrick Chan J. made an order under the Partition Ordinance (Cap. 352) that the property be sold by public auction. Having made this order, he directed that the hearing be adjourned for "enquiry as to the nature of the Defendants' occupancy in the said property.". I have now conducted that inquiry. As I see the nature of my function in this inquiry, it is to make findings as the nature of the defendants' occupancy so that, when the property is sold, the rights that the defendants have in the property, if any, are clearly defined.

2. There are no pleadings for the purpose of this inquiry. At one stage, both defendants were claiming something in the nature of a life interest, but, at the hearing before Chan J. on 23 December 1994, Mr Mok, who appeared then, as he does now, for the second defendant, said that his client was no longer claiming this. Mr Mok repeated this before me, and said that the second defendant's claim to occupancy's rights was restricted to rights of tenancy; that is ordinary periodic tenancies over the basement and the first and second floors terminable with the appropriate notice. Mr Chang, who appeared for the plaintiff does not seriously challenge this occupancy right.

3. The first defendant continues to claim, or has not abandoned, a right in the nature of a life interest in the property. The existence and the nature of this right formed the main subject of my inquiry.

4. The first defendant was unrepresented at the inquiry. In other circumstances, this might have caused me concern because I am not sure that, by reason of illness, the first defendant was capable of presenting his own case. However, Mr Mok, in the best traditions of the Bar, in effect and effectively, presented his case, and has said everything that could possibly have been said on his behalf. I am most grateful to him for this.

The Rights of Occupancy

5. What rights of occupancy the defendants have in the property, if any, depend on the meaning and effect to be given to the words of the father of the five brother in an alleged conversation with the defendants and James in late February/early March 1984, shortly before the father executed an unconditional deed of gift of the property in favour of the five brothers.

6. In relation to this meeting, the second defendant said this in an affirmation dated 19 January 1995 -

"In late February/early March 1984, that is about one or two weeks prior to the date on which the Deed of Gift (referred to in my previous affirmations) was executed, there was a meeting held in a restaurant near our house at about 3:00 p.m.. My father, James Wong, the 1st Defendant and I attended the meeting. My father told us of his intention to transfer the Premises to us.

Howard Wong was in Canada at the time and Kenneth Wong was in Hong Kong but he did not attend this meeting.

At that meeting, my father told us he intended to transfer the property to me and my brothers. He said I would get 13%, the 1st Defendant would get 18% and James Wong, Kenneth Wong and Howard Wong would get 23% each.

He said that I only would get 13% because I was occupying the 1st and 2nd Floors and Basement of the Premises and I was paying a low rent for such occupation.

My father told us that after the Deed of Gift was executed I would continue to rent the 1st, 2nd and Basement at the same rent which was to be received by my father and such rental would represent the contributions to his living expenses contributed by all the brothers.

The 1st Defendant was given 18% because he had been occupying a portion of the Premises without paying any rent. [ Here follows information about the first defendant's medical condition] . . . my father said that he wanted me to look after the 1st Defendant as the 1st Defendant had no working abilities and he had no other place to live.

Because of the 1st Defendant's personal condition my father told us that the 1st Defendant should be permitted to continue to live in the Premises for the rest of his life and that I should live there so that the 1st Defendant could be taken care of.

My father also told James Wong to inform Howard and Kenneth of these matters. I was subsequently told by James Wong and I verily believe that he told Kenneth Wong and Howard Wong of this arrangement and they agreed to the arrangement.

7. James Wong is dead. The father is dead. The first defendant is incapable of giving evidence regarding this alleged meeting. The second defendant is the only witness capable of giving evidence regarding the alleged meeting and the conversation.

8. The first question for me to decide is one of fact: Did the meeting as described by the second defendant take place. If so, what was said at the meeting and what meaning and effect is to be given to the words used. In deciding this, I must look at what the second defendant said on other occasions, his evidence before me, any other evidence and the probabilities.

The Second Defendant's Other Statements

The Affirmation of 17 November 1994

9. In an earlier affirmation by the second defendant made on 17 November 1994, which, he said, he was authorised to make on behalf of the first defendant as well as on my own behalf, he referred to yet another affirmation made on 21 December 1993 "the content of which set out the background to these proceedings." This affirmation of 21 December 1993 was made in connection with injunction proceedings brought against him by the plaintiff.

10. In his affirmation of 17 November 1994, the second defendant said he and the first defendant opposed an order for sale and they "counterclaimed" for a partition order; that part "on which the main building from ground floor and above stand" to go to the plaintiff and "the remaining part on which the lower ground floor shop premises stand" going to him and the first defendant jointly. He submitted that it was possible "sensibly and equitably" to divide the property as he suggested.

11. He gave a history of the property and said "Both the 1st Defendant and I attach great sentimental value to the property. . . . By reason of the sentimental value which I attach to my late father's property, it is my strong desire to retain at least part of the building which my father had built in memory to him and be able to continue to occupy the shop premises and operate my business there.".

12. He spoke of the shares given to the brothers under the father's deed of gift and went on to say -

"The reason for the difference in the shares was, as my father had told me and my other brothers, that my 3 brothers who got a larger share were no longer occupying any part of the property and would derive no immediate benefit from it; they having emigrated elsewhere. They therefore got a larger share. In the case of myself and the 1st Defendant, we were still occupying the property - a residence for the 1st Defendant and both a residence and a shop for me. My Late father told us all the 1st Defendant and myself would be permitted to continue to occupy the property as we were then occupying for the rest of my and the 1st Defendant's lives and therefore less shares were given to us. An even less share was given to me even though I had the burden, which I honoured until my late father's death, to take care of his well being. This was because, as I was told by him, that I had and would continue to have the occupation and enjoyment of the property for my residence and the shop to operate my business at a low rent.

My father died in 1991. In accordance with his wish when he made the gift of the property to his children, both the 1st Defendant and I were able to continue to occupy the property and the shop as we had been doing during my father's lifetime. None of my three brothers Howard, Kenneth or James had ever, prior to the sale of their interest in the property to the Plaintiff, demanded that I should cease occupation of any part of the property. Even my offer to pay rent to James was declined by him."

The Affirmation of 21 December 1993

13. In his affirmation of 21 December 1993, the second defendant again said that he was authorised by the first defendant to make the affirmation on his behalf.

He said his father had let the first floor and the basement to him since the mid 1970s and let the second floor to him since 1981. The rent for the basement was $1500 a month, for the first floor was $600 and for the second floor, $900.

He tells of the deed of gift of 7 March 1984 and the way in which the property was shared. He says - ". . . all my brothers have, at all times both before and after the death of my father, recognised and consented to my continued exclusive occupation of the said parts of the Premises." "Further the 1st Defendant has been allowed exclusive occupation of his room for the last 40 years without any interruption or disturbance of his right of quiet enjoyment" Later, he repeats this and goes into some detail.

The Letters

14. In connection with his statement in his affirmation of 17 November 1994 that none of his three brothers, Howard, Kenneth or James had ever, prior to the sale of their interest in the property to the plaintiff, demanded that he should cease occupation of any part of the property, he was shown a bundle of correspondence dated between 21 March 1989 and 4 March 1991.

15. The letter of 21 March 1989 was from solicitors purporting to act for the first defendant and for Howard, Kenneth and James. The letter complained about the second defendant using the garage without the consent of the others and told him to stop.

16. A letter of 30 March 1989 was written by the second defendant's solicitors in reply. This letter said that the second defendant "has been using the garage for over 10 years and before the building was assigned to the present owners, our client was paying a rent of $1,500 per month to his father who was the previous owner of the building. In effect, the premises were assigned subject to the tenancy of our client and our client is entitled to use the same."

17. There was a response to this letter on 5 September 1989. It reiterated the complaint and said that the - "father has no authority to lease the garage of the captioned property to your client, nor to accept any rent therefor from your client, after assignment of the property to the present owners." This letter was, on the face of it, copied to the father.

18. There is another letter dated 7 February 1991 from solicitors purporting to act for the first defendant, Howard, Kenneth and James to the second defendant's solicitors. This letter proposed that the clients sell their interests to the second defendant or buy his interest. The second defendant's solicitors responded on 4 March 1991 saying that their client preferred to negotiate directly on the matter.

19. On 27 February 1991, the same solicitors acting on behalf of the same clients wrote to the second defendant saying that, if any part of the property was leased to the second defendant, he was given notice to quit.

The Second Defendant's Evidence

20. When these letters were put to the second defendant, he said he recalled receiving them. He did not discuss them with his brothers or his father. He did not talk to brothers because he thought they would talk to him. He denied he was not on speaking terms with them or his father.

21. He conceded that in his affirmation of 21 December 1993, the conversation with father shortly before the deed of gift was executed was "not mentioned at that time." He was asked if he did not regard that conversation as important. He said - "Now, I think this was important. At the time, I remembered the conversation but I did not think it was important so did not write it down. At the time it didn't cross my mind."

22. As to why the first defendant got lesser share, the second defendant said it was, his father said, because the first defendant suffered from illness. His father said that the first defendant "had to stay at home in the long run". His father also said the first defendant could stay in the same place "in the long run" because the first defendant "had lost his working capacity already and could not have anywhere else to live". When questioned about the phrase "in the long run", the second defendant said that his father had said "until death". "He can stay until his death - the first defendant - that is what he said." To him, the second defendant said, the two phrases meant the same; "in the long run" meant until "death".

23. When it was pointed out to him that his idea of partitioning the property would leave the first defendant with nowhere to live, he said "That's why the idea was wrong at the time." When it was put to him that when he made the proposal he had forgotten about the first defendant, he said this was not correct; he had just forgotten what his father had said - that's why he made the proposal. If he had recalled what his father had said, he would not have made the proposal. When he was shown that in the same affirmation as he made the proposal, he had recited what his father had told him, and asked how he could have forgotten, he said - "I did not realise that after the partition, there could be nowhere for us to live."

24. He agreed that after a partition he could still look after the first defendant in other premises, but not as his father wished.

Evidence of Howard Wong

25. Mr Howard Kwok-hong Wong, in an affidavit sworn at Vancouver on 12 December 1994 said -

"Before the Deed of Gift dated 7th March 1984, the said property had all along been the family house with my late father as head of family and each of the family members resided in or used the said property with permission of my late father.

After the said Deed of Gift, our rights of occupation of the said property were as co-owners and I can say for sure for myself and my 2 brothers, James Kwok-hung Wong and Kenneth Kwok-wai Wong that we never agreed that Wong Kwok Gee or Wong Kwok Chiang be granted exclusive possession of any part of the said property, although the lower ground floor was used by Wong Kwok Gee to run a photo shop.

My Late father had never told me and/or my other family members that, as deposed by Mr. Wong Kwok Gee in his affirmation dated 17th. November 1994 in paragraph 6 on page 8, the Defendants would be permitted to continue to occupy the said property as they were occupying for the rest of the lives of the Defendants and therefore less shares of the said property were given to the Defendants."

26. Howard spoke to Mr Cheng Ki Yeung, a solicitor for the plaintiff, on 27 January 1995. Howard was referred to the paragraphs in the affirmation of the second defendant dated 19 January 1995 in which the second defendant spoke of the conversation with his father. Mr Cheng reported that Howard said that "the said meeting certainly did not take place with such contents as he had already deposed in his earlier affidavit (i.e. Affidavit of Howard Wong filed on 17th December 1994) and he was never informed by his late brother James Wong of the alleged arrangement nor he could have agreed to the alleged arrangement. . . . "his late father had never told him and/or his other family members that the Defendants would be permitted to continue to occupy the said property as they were occupying for the rest of the lives of the Defendants and that would mean he was never told by his late brother James Wong of the alleged arrangement and that would also mean that he could not have agreed to the alleged arrangement."

Assessment of the Evidence and the Probabilities

27. The second defendant says that the conversation with his father took place shortly before his father executed the deed of gift in favour of his sons. If it is so that the father intended that the shares of the property should be assigned to Howard, Kenneth and James burdened with obligations in favour of the defendants, especially obligations that might endure for a long time and greatly affect the value of the property, one would have expected that the deed of gift would have made the gift conditional. It was not. If one is to suppose that the father seriously intended that Howard, Kenneth and James should be bound to carry out his wishes, and that the defendants would be entitled to enforce the obligation, it seems odd that the father did not, having his very specific wishes clear and fresh in his mind, stipulate in the deed of gift that Howard, Kenneth and James were to take subject to those wishes. Clearly, the father was not a man who dealt with his affairs informally; he was not inclined to treat legal formalities lightly. He went to the lengths of consulting solicitors about the gift and having a deed executed according to the formalities required by law. If he intended the expression of his wishes at to the occupancy rights of the defendants to be binding, there seems no explanation for his failure to record those wishes at the same time as he recorded the expression of his associated wish that give the property to his sons.

28. If what the second defendant says is true, one would expect his father's wishes to be uppermost in the second defendant's mind in any situation in which the future of the property is concerned. Yet, in the injunction proceedings, in which he made the affirmation dated 21 December 1993 and in which he talks specifically and in some detail of his occupancy of the property and that of the first defendant, he makes no mention at all of the important conversation with his father. The explanations for this that he gave in evidence, if they can be called such, are not acceptable or believable.

29. Even in his affirmation of 17 December 1994, for the purpose of these proceedings, the first thing he mentions as a reason for his wish to remain on the premises is based on sentimental grounds. His assertion that his late father had told them that he and the first defendant would be permitted to occupy that property for the rest of their lives, without specifics as to time and place and detail, has the appearance of an afterthought.

30. The fact that the second defendant proposed a partition that would have the effect of leaving the first defendant with nowhere to live, indicates clearly to me that the second defendant did not have in his mind that he was obliged to carry out his father wishes. If he did not consider that he was bound, why should the other brothers be bound? His explanations in evidence for this were conflicting; one, that he had forgotten what his father had said and, two, that he did not realise that, after the partition, there would be nowhere for them to live, and, in any event, were most unsatisfactory. He could hardly have forgotten what his father had said because he deposed to what his father had said in the same affirmation, and, if he had his father's wishes in mind, he could not have failed to realise that the partition would make it impossible to carry them out.

31. And then there are the letters. His explanation for saying, falsely, that his brothers had not demanded that he cease occupation of any part of the property is not acceptable. I do not believe that he could have forgotten a dispute of this nature with his own brothers, especially if, as he maintains, he was on good terms with them. And his failure to mention, in these letters, the obvious point, if he is telling the truth about the conversation with the father, that his father had specifically given him certain rights over the property is inexplicable.

32. As for the way in which the second defendant gave his evidence, it is, of course, always difficult to assess credibility when, as here, a witness gives evidence through an interpreter. But I am able to say that the second defendant did not impress me sufficiently to overcome the considerable doubts arising from the factors I have mentioned above.

33. With respect, I agree with the words of Fox L.J. in Ashburn Anstalt v. Arnold [1988] W.L.R. 706 at 729 -

"In matters relating to the title to land, certainty is of prime importance. We do not think it desirable that constructive trusts of land should be imposed in reliance on inferences from slender materials. In our opinion the available evidence in the present case is insufficient."

34. This, of course, applies with equal force to obligations sought to be enforced under equitable concepts other than constructive trusts.

35. The lack of certainty that would produced in the case before me is illustrated by the second defendant's own uncertainty as to whether the father meant that the defendants' should enjoy the rights "in the long run" or "until death". And this is reinforced by Mr Mok's submission that I should construe the right vesting in the first defendant as being to live on the property "for as long as he liked" or "for as long as he needed to". I cannot imagine greater uncertainty as to the title to the property than for me to declare that the first defendant had a right to live on the property -

a) in the long run; or

b) until death; or

c) for as long as he liked; or

d) for as long as he needed to.

36. I conclude that I cannot accept that there is any credible evidence that the father created any equitable right over the property in favour of the first defendant.

That being my finding on the facts, there is no need to venture into the interesting and difficult area of law under which the courts seek to recognise and give remedies for the sort of equitable rights contended for in this case, but I will say that, if I had been able to find that Howard, Kenneth and James took the gift from the father on the promise, assumption, undertaking or whatever that they would honour their father's wishes regarding the first defendant's occupancy of the property, I would have sought a way to enforce that arrangement.

The Result

37. In the result, I find that there is no acceptable evidence that the first defendant has any right in respect of the property beyond his holding of the undivided shares, and that the property may be sold without being subject to any such right.

38. As for the second defendant, I find that he occupies the basement and the first and second floors under ordinary periodic tenancies terminable with the appropriate notice, and that the sale of the property must, if they are not terminated earlier, be subject to these tenancies.

The Costs

39. Under the order of Chan J. of 30 November 1994, the costs were reserved. I have heard no argument on this aspect of the matter. In the absence of agreement, I will hear counsel.