WONG LEUNG WING, a mentally incapacitated person, suing by his wife and next friend TSOI PUI WAH v. WANG JEN KANG AND ANOTHER

HCA 3021/2015

[2020] HKCFI 3086

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3021 OF 2015

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JUDGMENT

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1.  The disputes herein concern the beneficial ownership of a property known as Flat Q, 10/F, State Theatre Building, North Point, Hong Kong (“the Property”).

2.  The 1^st defendant (“D1”) and the 2^nd defendant (“D2”) are husband and wife.  They were the registered owners of the Property.  By a sale and purchase agreement dated 12 October 2016 entered between the defendants (“Ds”) as the vendors and Solar King Limited as the purchaser, Ds sold the Property at HK$15,700,000.  Thereafter, there were proceedings under the Land (Compulsory Sale for Redevelopment) Ordinance in the Lands Tribunal concerning the land on which the Property was situated.  Eventually, the sale and purchase was completed on 9 November 2020, and Ds assigned the Property to Orient Sea Investment Limited.

3.  P is now claiming a declaration that Ds held the Property on trust for P immediately prior to the assignment of the Property to Orient Sea Investments Limited.  This is denied by Ds.  The real subject matter at stake is the sale proceeds.

4.  These proceedings were commenced by 王良榮 (“WLW”) on 21 December 2015.  He was acting in person at that time.  On 1 November 2016, WLW filed a statement of claim prepared by him.  The statement of claim has never been amended.  P’s claim from the beginning to the end is based upon this statement of claim.

5.  By a summons filed by蔡培華 (“TPW”) on 22 January 2018, TPW sought an order to appoint her as the next friend of WLW in these proceedings and to change the plaintiff in these proceedings to “WONG LEUNG WING, a mentally incapacitated person, suing by his wife and next friend TSOI PUI WAH”.  TPW was legally represented in this application.  On 8 October 2018, the application was allowed by the court.

6.  WLW & TPW (“the Couple”) and Ds are relatives.  I would first set out the respective pleaded cases of the parties.

P’s CASE

7.  In the statement of claim, WLW said the following in his own words:

“1.  本人是本案的原告人。本人於1972年12月30日與母親蔡淑卿聯名購入香港北角英皇道277號至291號，渣華道4號、4A至D號、6號、6A-D號，電廠街2至16號皇都戲院大廈10字樓Q室(以下簡稱為“該物業”)。

2.  於1989年，由於本人生意失敗，面臨破產，所以便要求舅父蔡天生幫本人託管該物業，但被他拒絕。於是本人要求弟弟王人康(即第一被告人)替本人託管該物業，第一被告人當時答應本人託管該物業，而且承諾毋須支付任何代價。於是在1989年12月12日，本人便將本人的業權轉到第一被告人名下，並作價30萬，由第一被告人向銀行申請按揭貸款，以供本人用作公司業務資金周轉之用。而所貸款的金額，第一被告人清楚及明白是用作本人公司業務資金周轉之用，並不代表第一被告人已給予本人30萬元樓價購入該物業。

3.  於1990年，由於要籌措律師費跟美國運通打官司，所以便要求本人母親蔡淑卿及第一被告人將該該物業的業權轉到表哥黃加和的名下。於是在1990年7月23日，蔡淑卿及第一被告人便將業權轉給黃加和，並作價90萬，由他向銀行申請按歇貸款，以供本人打官司之用。而所貸款的金額，黃加和清楚及明白是用作本人打官司之用，並不代表黃加和已給予本人90萬元樓價購入該物業。

4.  其後，黃加和告知本人不想繼續當該物業的受託人，因此要求本人自行處理。但當時本人負債累累，已計劃到外國生活。本來想要求母親再次為本人託管物業，但母親年紀漸老，亦打算回鄉下暫住。無計可施下，只好要求第一被告人再次為本人託管該物業。本人於1992年初已離開香港到美國生活，有關該物業的轉名安排已全權交給表哥黃加和處理。本人知道黃加和將該物業轉名予第一被告人，當時作價120萬，並由第一被告人向銀行申請貸款，以幫本人償還銀行按揭。第一被告人從來沒有向黃加和購入該物業的意圖，因為第一被告人清楚知道該物業的真正擁有人是本人。因此第一被告人沒有支付任何代價給黃加和及本人。第一被告人當時已知道該物業是連有租約，而每月收取租金約1萬元，而第一被告人的每月按揭還款大約是六千多元，第一被告人承諾餘下的三千多元，扣除每月差餉、管理費後，還剩下大約二千元會給予本人父親母親作為每月的生活費。

5.  本人回來香港後，要求第一被告人轉回該物業的業權予本人時，經第一被告人告知該物業已由第一被告人跟第二被告人共同持有。第一及第二被告人當時拒絕轉回該物業的業權予本人。

6.  由1972年12月30日到現在，本人一直都是該物業業權的真正擁有人。有關時段該物業的其他擁有人其實都是本人的受託人。”

8.  This is P’s case as pleaded, no more and no less.

Ds’ CASE

9.  Ds do not dispute that the transfers of the Property in 1989 and in 1990 mentioned in [2] and [3] of the statement of claim are trust arrangements as said by WLW.  However, Ds contend that the transfer in 1992 as said in [4] of the statement of claim is a genuine sale and purchase and not a trust arrangement as alleged by WLW.  Ds claim that they have genuinely acquired the Property in 1992.

THE CRUX

10.  The crux in these proceedings is whether the 1992 transaction is a trust arrangement as claimed by P, or a genuine sale and purchase as contended by Ds.

THE PRINCIPLES

11.  The issues in a trial are defined by pleadings, not by evidence.  One cannot slip in an unpleaded issue by saying that there is evidence on the issue.  As said by Ma CJ in Kwok Chin Wing v 21 Holdings Ltd^[1]:

“21. It should by now really be quite unnecessary to issue yet another reminder on the rationale behind pleadings. The basic objective is fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case) so that proper preparation is made possible, and to ensure that time and effort are not expended unnecessarily on other issues:- Wing Hang Bank Limited v Crystal Jet International Limited [2005] 2 HKLRD 795, 799 [6(1)]. It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced. As the Court of Appeal remarked in Wing Hang Bank Limited v Crystal Jet International Limited:-

‘(2) In a trial, particularly where evidence is given by witnesses, it becomes extremely important that each side knows exactly what are the live issues. Where issues are sought to be introduced that have not been adequately or properly pleaded, amendments must be sought unless the consent of the other party or parties has been obtained. It will simply not do for unpleaded issues to be “slipped in” when evidence is being given in the hope that the other side is not sufficiently alert to object.’

22. …… one does not sift through the evidence adduced in a trial in the hope that something was said that can conceivably found a cause of action. Issues, I would reiterate, must be properly pleaded unless for some reason the pleadings have assumed a less significant role in the proceedings.” (Emphasis added)

12.  As to assessing the credibility and reliability of witnesses, a succinct summary of the guiding principles can be found in Lee Fu Wing v Yau Po Ting Paul^[2], in which DHCJ Au (as he then was) said:

“53. In assessing the credibility of a party’s case on a particular issue, I accept the submissions of [counsel] that the Court should take into considerations the following: -

(1) Whether the party’s case is inherently plausible or implausible.

(2) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable.

(3) Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility.

(4)  The demeanour of the witnesses.”

13.  Where there is a long passage of time between the events and the trial, contemporaneous documentation is of particular importance. In Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [3], Stock JA (as he then was) said:

“…… Comparison with contemporaneous documentation is always an aid to reliability of oral testimony, unless there is reason to believe that the documentation is contrived or materially incomplete; but where the passage of time between events and trial is as long as it was in the present case, and where there is such a host of contemporaneous documentation, as there was in this case, the documentation must, I would have thought, assume a special importance. ……

I would venture to suggest that the truth, in so far as one is able to reach it or, as is sometimes the case, to reach a version of it that is more likely to be correct than not, can best be tested by reference to contemporaneous documentation where it exists, or to its absence where one would expect it to have been created, as well as to inherent probabilities (though bearing in mind that there may be occasions where the truth may run against that particular grain) having regard to all the facts that are known. This is particularly so in a case such as the present, where events have taken place so long before trial and where there exists a mountain of contemporaneous documentation that can be used to point the way. This is not to say that the documentation should have been treated as if it stood on its own, not to be explained, contradicted or supported by oral testimony. It is however to say that in this case the approach adopted to assessment of the facts placed far too much emphasis on character impression and too little upon what was suggested by the documentation and by the inherent probabilities in their historical context. That documentation, as well as conflicts within the evidence, inherent probabilities, and a study of how matters were originally pleaded and asserted in witness statements – these are the factors which in a trial such as this, so long removed from the time of the events in question, were likely to be of particular use in assessing the facts ……” (Emphasis added)

14.  In respect of disputes between family members, the following have to be borne in mind:

1.  In Chen Tek Yee & Ors v. Chan Moon Shing^[4], Yuen JA said:-

“29. …… when the parties are in a personal relationship (as contrasted with parties in a commercial transaction), it would be unrealistic to expect written records of assurances ……”

2.  Similarly, in Cheung Lai Mui v. Cheung Wai Shing & Ors^[5], Wilson Chan J said:

“95. …… Members of the family dealt with each other on the basis of trust, not mistrust. They could not have envisaged litigation in the future, and they would not have generated records to protect themselves out of the blue.”

THE PLEADINGS

15.  At the trial, I have invited counsel to make submissions on whether in the statement of claim, a reasonable cause of action has been disclosed against D1 and D2.  Counsel for P and counsel for Ds have a different view on this.

16.  In respect of D1, counsel for P submits that the causes of action pleaded against D1 are express trust, resulting trust and constructive trust.  Counsel argues that sufficient particulars have been given in [4] of the statement of claim in support of P’s claim.  Counsel for Ds disagrees.

17.  With no disrespect to counsel, it would not be necessary for me to set out all the arguments advanced by counsel in this judgment.  It would be sufficient for me to say that having considered the submissions made by counsel, I am of the view that a reasonable cause of action against D1 has been pleaded in the statement of claim.

18.  In my view, reading [4] of the statement of claim from the perspective of a reasonable reader and not through the magnifying glass used by a pedantic lawyer, the plain meaning of that paragraph is that WLW requested D1 to hold the Property on trust for WLW again in 1992, and D1 agreed.  Thereafter, WLW asked 黃加和 (“WKW”) to transfer the Property to D1.  D1 had no intention to purchase the Property for D1 knew very well that WLW was the true owner.  D1 did not make any payment to WKW or WLW in the transaction.  In this paragraph, it is in fact alleged that there was a common intention in 1992 between WLW and D1 that D1 should hold the Property on trust for WLW.  This alleged common intention would be sufficient for the purpose of a constructive trust in a domestic context.  Since WLW and D1 are relatives, arguably the disputes in these proceedings are disputes in a domestic context.

19.  There can be a constructive trust in a domestic context by reference to common intention.  The principles have been recently succinctly summarized by Recorder Winnie Tam SC in Chin Nai Man v Chin Yat Keung Alex[6], in which the learned judge said:

“9. It should first be noted that the plaintiff does not rely on express trusts, notwithstanding his case that there was an express agreement between the plaintiff and the defendant over the creation of trusts over the Six Properties. Any express trusts would have failed for formal requirements under s5(1) of the Conveyancing and Property Ordinance (Cap 219). Rather, the plaintiff relies on both resulting and constructive trusts.

10. The following legal principles are not in dispute. Legal ownership of a property is normally consistent with the beneficial entitlement. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership: see Chan Hin v Chen Bai Dyi (unreported, HCA 680/2014, 25.7.2017, Anthony Chan J) at §21; Stack v Dowden [2007] 2 AC 432 at §§56, 68. In the present case, the burden rests on the plaintiff.

11. In a domestic context, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust: see the recent Court of Appeal decision of Primecredit Ltd v Yeung Chun Pang Barry (unreported, CACV 246/2016, 21.7.2017) at §1.3 (per Lam VP).

12. In ascertaining the (alleged) common intention;

(a) The plaintiff must prove (i) 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; (ii) the plaintiff altered his position in detrimental reliance upon such common intention; and (iii) it is unconscionable for the defendant to assert ownership in reliance on his legal title to the property;

(b) 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;

(c) 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;

(d) Even where 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.

See Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §§46‑50, Godfrey Lam J, approved in WML v LCK (unreported, CACV 82/2014, 27.2.2015 at §41).

13 The modern approach in conducting the assessment is to adopt a holistic approach having regard to the context. Context was even described as a “:fundamental consideration” : Chan Hin v Chen Bai Dyi (unreported, HCA 680/2014, 25.7.2017).

14.  In the context of a traditional Chinese family involving older generations, where explicit discussions on property rights within the family was not that common, the Court has to pay more regard to circumstantial matters: Primecredit Ltd v Yeung Chun Pang Barry (unreported, CACV 246/2016, 21.7.2017).”

20.  As to the law on common intention constructive trust, see also the Court of Final Appeal’s decision in Luo Xing Juan v Estate of Hui Shui See[7], and the Court of Appeal’s decision in Cheung Lai Mui v Cheung Wai Shing[8].

21.  I am of the view that if P is able to prove the matters as set out in the statement of claim, P’s claim against D1 would succeed.

22.  However, in respect of D2, the situation is different.  D2 is only mentioned in [5] of the statement of claim.  There is no plea in the statement of claim alleging that D2 has ever had any discussion with WLW.  There is also no plea alleging that D2 has actual or constructive knowledge of all the matters between P and D1 as set out in [4] of the statement of claim.

23.  Counsel for P submits that it has been pleaded in [5] of the statement of claim that D2 refused to transfer the Property back to WLW, and that would be sufficient to hold D2 liable.  With respect, I am unable to agree.  There is simply nothing in the statement of claim explaining why D2 should have an obligation to transfer the Property back to WLW.

24.  In my judgment, no reasonable cause of action against D2 has been pleaded in the statement of claim.  Since the issues in a trial can only be defined by the pleadings and not by the evidence[9], as no reasonable cause of action against D2 has been pleaded, P’s claim against D2 must be dismissed.

THE UNDISPUTED FACTS

25.  Before turning to the evidence, I would first set out the undisputed facts as a background.

26.  WLW was born in 1949 and was adopted by TSH in the same year in Fujian. TSH was born in 1930 in Fujian.

27.  Both D1 and D2 are also of Fujian heritage. D1 was born in 1956 whilst D2 in 1954, both in Fujian.  D1’s mother is the sister of TSH.

28.  In 1960s, WLW and TSH immigrated to Hong Kong from the Mainland and had since, until 1972, rented a room of about dozens of feet from the mother of WLW’s paternal cousin[10], at Java Street, North Point.  They lived with SMY’s family in that period.

29.  TSH worked as a factory worker since her immigration to Hong Kong.  WLW and TSH were supported by occasional maintenances remitted from WLW’s foster father, 王善蘭 (“WSL”), who was doing business in the Philippines at that time.

30.  In about 1968, WLW finished his secondary education and began to make a full-time living by painting pictures ordered by customers.  At that time, WLW was about 19 years old.

31.  By an assignment dated 31 December 1972, TSH and WLW became the joint owners of the Property.  The Property was purchased at the price of HK$120,000.  On 3 January 1973, a mortgage loan of HK$40,000 secured over the Property was taken out by TSH and WLW.

32.  After acquiring the Property, TSH and WLW moved into and lived at the Property.  TSH rented out most of the available rooms to various tenants, all of whom were friends and relatives.  TSH collected the rent from the tenants as landlord of the Property.

33.  In 1975, WLW met TPW and they got married in the same year.  After marrying to WLW, TPW moved into the Property and the Couple lived in the Property together with TSH.  Most of the rooms of the Property were still rented out to friends and relatives and the rental incomes continued to be collected by TSH.

34.  In around 1978, D1 immigrated to Hong Kong from Fujian and started living in the Property with TSH and the Couple, along with other tenants.  Within a week of his arrival, D1 started to work at a cassette tape factory.  A month later, D1 moved to work at an electrical parts factory and started earning around HK$700 per month.

35.  On 2 March 1979, the Couple signed a sale and purchase agreement to purchase an uncompleted unit at Bedford Gardens (“the Bedford Gardens Property”).

36.  In about 1980, WLW, D1 and their uncle 蔡天生 (“TTS”), jointly opened a store at Jupiter Street, North Point (“the Store”).  In the same year, D1 moved out from the Property and started living at the Store.  He quitted his full-time work and started to work in the Store, so that the Store became managed by D1 and TTS together, whilst WLW continued to make a full-time living by painting pictures at the Property.

37.  On 14 August 1981, the Bedford Gardens Property was assigned to the Couple at HK$278,000.  The Couple completed the transaction with the assistance of a mortgage loan of HK$260,000 from a bank.

38.  On 1 October 1981, WLW further charged the Bedford Gardens Property to a bank for a further loan.

39.  In around the same time, the Couple set up a stationary shop, Express Printing Stationary & Supplies (“Express Printing”).  TPW managed the operation of the business, receiving orders from factories which included one in the name of “ABC 商業信封廠有限公司” (“ABC”).

40.  On 21 January 1982, WLW and TSH further mortgaged the Property to a bank for a loan of HK$80,000.

41.  On 22 July 1982, WLW and TSH further mortgaged the Property to a bank for a further loan of HK$80,000.

42.  By about 1982, TSH, the Couple and their three daughters had moved out of the Property and started living at the Bedford Gardens Property.

43.  By 1983, WLW became a majority shareholder of ABC and operated Express Printing as a sole proprietor and stopped his painting works. Express Printing also began to receive orders from American Express International Inc (“AE”).

44.  WLW also became acquainted with a senior employee of AE, Mr Fung (“Fung”), and AE eventually became an important business partner of Express Printing until 1989.

45.  In around 1984, WSL came back from the Philippines and lived with TSH and WLW’s family at the Bedford Gardens Property.

46.  In December 1984, the Couple sold the Bedford Gardens Property.  Thereafter, WLW’s family moved to a rented property in City Garden, whilst TSH and WSL moved back to live at the Property.  In around mid-1985, WLW’s family also moved back to the Property, joining TSH and WSL.

47.  By around 1984, D1 moved out of the Store after the cessation of the business, and lived with another uncle, 蔡清水 (“TCS”) and his family at TCS’s property.

48.  On 15 May 1985, the Property was further mortgaged by WLW and TSH by way of a second legal charge and a further legal charge for bank loans of HK$50,000 and HK$60,000 respectively.

49.  On 10 October 1985, a legal charge over the Property to secure general banking facilities of HK$267,000 was obtained by WLW and TSH.

50.  D1 met D2 in 1985 and got married in 1986. After the marriage, D2 moved in and lived with D1 at TCS’s Property until 1989, and thereafter they moved to a rented property shared with the D1’s friend 吳錫然 (“NSY”) at a property at Wing Hing Street (“the Wing Hing Street Property”).  Since Ds got married, D2 continued to work as a shop-keeper, earning around HK$4,000 to 5,000 per month, whilst D1 was running his own merchandising business.

51.  In 1986, D1 and 林耀南 (“Lam”) jointly purchased a property in Central (“the Central Property”) as an investment.  Lam is a businessman and the husband of D1’s god-sister. D1 and Lam had been acquainted with each other since 1976 in Fujian.  D1 and Lam collected and shared the rental proceeds generated from the Central Property via a joint bank account (“the OUB Joint Account”) maintained at Overseas Union Bank (“OUB”).  By 1987, D1 also carried on a hand-watch merchandising business.

52.  On 5 March 1988, the Couple purchased a property in Provident Centre (“the Provident Centre Property”) for HK$1 million.  The purchase was done with the assistance of a mortgage loan obtained from a bank for HK$816,000.  WLW’s family once again moved out from the Property to live at the Provident Centre Property, whilst TSH and WSL remained at the Property.

53.  In 1989, WLW’s Express Printing business took a sharp downturn following Fung’s cessation of employment with AE in March 1989. At around the same time, AE suspected that WLW and Fung had entered into collusive agreement arrangements and AE reported the matter to the authority on 16 August 1989.

54.  By 13 September 1989, the contracts with Express Printing were terminated by AE.

55.  In the same year, WLW faced a lot of litigations.  WLW were sued by the Commissioner of Inland Revenue, Fung, a printing company, and a paper company.  In those circumstances, WLW had great financial difficulties and was on the verge of bankruptcy.  WLW therefore sought assistance from his family members.

56.  WLW requested TTS to hold the Provident Centre Property on trust for him, but was refused by TTS.  Thereafter WLW sold the Provident Centre Property at HK$1,450,000 on 19 August 1989, and the assignment of which was completed on 28 September 1989.

57.  On 6 November 1989, WLW trading as Express Printing commenced litigation against AE for alleged outstanding sums of up to HK$1.8 million (“the AE Lawsuit”).

58.  At about the same time, WLW sought assistance from D1, asking D1 to hold the Property on trust for him.  D1 agreed.  By an assignment dated 12 December 1989, with a stated consideration of HK$300,000 thereon, WLW and TSH assigned the Property to D1 and TSH as joint tenants.  No payment was in fact made by D1 to WLW in the transaction.  In relation to this transaction, D1 obtained a mortgage loan of HK$210,000 over the Property and advanced the sum to WLW for WLW’s use.  D1 did not receive any benefit in all these arrangements.

59.  After the 1989 transaction, TSH and WSL moved back to live in the Mainland.

60.  In 1990, WLW was involved in further litigations.  The Commissioner of Inland Revenue commenced further legal proceedings after WLW.  AE also commenced a lawsuit against WLW.

61.  WLW needed funds to pay the suppliers, his employees and his lawyers.  He therefore arranged a transaction by which the Property would be transferred to his cousin WKW and WKW would hold the Property on trust for him.   Through this transaction, a further mortgage could be obtained. WKW agreed to assist WLW.

62.  By an assignment dated 23 July 1990 with a stated consideration of HK$900,000, D1 and TSH transferred the Property to WKW.  WKW did not make any payment for the purpose of obtaining the assignment.  WKW obtained a mortgage over the Property from a bank for an all money loan, the benefit of which was all provided to WLW.  Neither WKW nor D1 received any benefit in all these arrangements.

63.  Both the 1989 assignment and the 1990 assignment and the relevant mortgages were prepared by and executed at the law firm Patrick Chung & Co (“PC”) as arranged by WLW.  All the costs and disbursements incurred were paid and settled by WLW personally.  The two mortgage loans obtained in these arrangements were also personally repaid by WLW.

64.  In 1991, Express Printing’s business ceased to operate.   In March 1991, the Couple sent their 3 daughters to the US and by around late to the end of 1991, the Couple also made plans to emigrate to the US.

65.  In about late 1991:

(1)  An undated provisional agreement in respect of the Property was signed by D1 and TPW (“the PSPA”) which provided, inter alia, for the Property to be sold to D1 at HK$1.2 million.

(2)  An internal inspection of the Property for the purpose of valuation for a mortgage loan from OUB was carried out by a property consultancy company on 14 December 1991.  Subsequently, a valuation report was compiled on 17 December 1991 (the “Valuation Report”), valuing the Property at an open market price of HK$1.4 million and a forced sale value of HK$1.1 million. The costs of the Valuation Report were billed to the OUB Joint Account.

(3)  On 31 December 1991, OUB confirmed in writing the grant of a home mortgage loan of HK$400,000 and overdraft facilities of HK$200,000 to D1 on the security of the Property (“the OUB Mortgage”) and a continuing personal guarantee given by Lam.

66.  Subsequently, in 1992:

(1)  On 3 January 1992, a receipt for the sum of HK$50,000 stated as “further deposit subject to contract” was issued by PC to Ds (“the PC Receipt”).  As set out in the PC Receipt, the subject matter of the receipt is the Property.

(2)  A formal sale and purchase agreement dated 6 January 1992 (“the SPA”) was entered into between WKW as the vendor and Ds as the purchasers of the Property. The purchase price as stated in the SPA is HK$1.2 million.

(3)  By an assignment dated 24 March 1992, the Property was assigned by WKW to Ds.

67.  In 1994, WSL passed away in the Mainland and TSH came back to Hong Kong and lived with Ds at the Wing Hing Street Property.

68.  In around June 1995, Ds and their children, together with TSH, moved out from the Wing Hing Street Property and started to live in the Property.

69.  In around 2009, the Couple came back from the US and in 2010 made an application for a public housing unit and had been in Hong Kong ever since.

70.  In around 2015, news of redevelopment and acquisition of the State Theatre Building (where the Property was located) started to spread. The writ of these proceedings was then issued in the same year on 21 December 2015.

THE EVIDENCE

P’s witnesses

71.  P has filed the witness statements of the following persons:

(1)  WLW

(2)  TPW

(3)  SMY

(4)  蔡麗玉 (“TLY”)

(5)  黃清輝 (“WCF”)

(6)  蔡玉愛 (“TYO”)

(7)  葉惠蘭 (“Yip”)

72.  Apart from WLW, all the other P’s witnesses have given live evidence at the trial.

73.  There is also a written statement signed by WKW dated 20 June 2016 (“WKW’s statement”), which is annexed to the witness statement of WCF and the witness statement of TYO.  WKW passed away on 15 July 2016.  As to how much weight can be attached to WKW’s statement, that would depend upon my analysis of WCF’s evidence and TYO’s evidence.

WLW

74.  There is one witness statement signed by WLW dated 26 February 2018.  Since WLW is a MIP, P has not called WLW to give any live evidence at the trial.

75.  I would not give any weight to the matters mentioned in WLW’s witness statement.  Apart from the fact that WLW has not given any live evidence in the trial and has not been subject to cross-examination, WLW in fact was already a MIP when he signed his witness statement.  As said in the above, the application for appointing TPW to be the next friend representing WLW in these proceedings was made on 22 January 2018. Clearly, before 22 January 2018, WLW had become a mentally incapacitated person (“MIP”).  When WLW signed his witness statement on 26 February 2018, he was already a MIP.  This is not disputed by counsel for P.

76.  Counsel for P has told this court that he would not rely upon WLW’s witness statement in support of P’s case.  This is a fair and necessary concession.  Since WLW was a MIP when he signed the witness statement, that witness statement would not have any evidential value.  No weight can be attached to that witness statement.

TPW

77.  Having seen and heard TPW’s evidence, I am of the view that TPW is an evasive and unreliable witness.

78.  TPW has mentioned the following in her evidence:

(1)  TPW met WLW in 1975.  She claimed that in respect of events occurred concerning WLW before 1975, she learned about these in family gatherings, and she also heard those events from TSH, from WLW’s relatives and cousins.  She knew that WLW purchased the Property by his earnings from his painting works.

(2)  WLW started to be engaged as part time painter in 1966 and became full time painter in 1968. When WLW started his full time painting business, his painting business got off the ground immediately and his monthly earnings had already reached HK$8,000. WLW’s former girlfriend refused to marry him because WLW had no landed property. Because of this unhappy experience, WLW decided to try his best to buy a landed property as soon as possible.  In order to achieve this, WLW gave most of his earnings to TSH with the aim that TSH would save all the money for him.  WLW gave TSH HK$5,000 for saving and he kept HK$3,000 for himself each month. However, contrary to WLW’s expectation, TSH spent the money given to her by WLW and did not save the money for WLW.  WLW always expressed his grievance on this.

(3)  In 1972, WLW successfully purchased the Property.  The purchase price was HK$120,000.  WLW paid the purchase price by withdrawing HK$90,000 from his own savings, and borrowing HK$30,000 via TSH from his maternal aunt and his maternal aunt’s daughter.  In order not to exhaust all his savings, WLW applied for a HK$40,000 mortgage loan from a bank for decoration of the Property.  Notwithstanding that all the purchase price was paid by WLW, the Property was registered under the names of WLW and TSH as joint tenants.  The reasons were:

(a)  Being an adopted son, WLW had to express filial piety and seek recognition from TSH.

(b)  WLW wanted to thank TSH for her support and assistance in acquiring the Property, including helping him to save money.

(c)  WLW wanted to protect TSH’s right to settle in the Property safely and peacefully (安居權利).

(4)  TSH was an owner in name only and did not have any beneficial interest in the Property, for TSH did not pay any purchase price and all the purchase price was paid by WLW.

(5)  After acquiring the Property in 1972, WLW and TSH moved to the Property and lived therein.

(6)  TPW met and married WLW in 1975. After marrying WLW, TPW moved to the Property and lived together with WLW and TSH.  Most of the rooms in the Property were rented out and rentals were collected by TSH.  WLW led a very simple life and continued his painting work to shoulder the daily expenses.  Apart from betting on horses occasionally, WLW did not have other entertainment.  At that time, WLW earned between HK$8,000 and HK$10,000 per month and would give TPW and TSH each HK$1,500. Sometimes, WLW might need to pay HK$1,000 to HK$2,000 more to TPW when relatives and friends came to live in the Property from the Mainland.

(7)  Between November and December 1976, WLW won over HK$100,000 from betting on horses.  WLW accepted TSH’s proposal and did the following:

(a)  repaying maternal aunt and her daughter HK$30,000;

(b)  mailing part of the prize money to his uncle (大姑丈) in the Philippines to venture in hardware store business; and

(c)  bringing part of the prize money back to his hometown for distribution.

(8)  Around 1978, D1 came to Hong Kong from the Mainland and lived in the Property.

(9)  WLW purchased the Bedford Gardens Property in about 1980 at HK$278,000, with the assistance of a mortgage loan of HK$260,000 from a bank.  The Couple and their 3 daughters, together with TSH, moved to live in the Bedford Gardens Property, and all the rooms of the Property were rented out to friends and relatives.  The rentals generated from the Property were used to pay the monthly mortgage instalments concerning the Bedford Gardens Property.  After moving to the Bedford Gardens Property, TPW regularly met with 施婉貞 (“SYC”, WLW’s cousin) and her colleagues at 必得富物業代理公司.

(10)  Thereafter, WLW and his friends set up Express Printing, and WLW became a majority shareholder of ABC, a company which had a close working relationship with Express Printing.

(11)  In 1983, WLW became the sole proprietor of Express Printing and ceased his painting business. Express Printing’s business came mainly from AE.

(12)  Around 1984, WSL came to Hong Kong from the Philippines and lived with WLW’s family and TSH at the Bedford Gardens Property.

(13)  In December 1984, WLW sold the Bedford Gardens Property via SYC.  Thereafter, TSH returned to live in the Property whilst WLW and his family rented a unit in City Garden to live therein.  Later, WLW and his family moved back to live in the Property after redecoration of the Property.

(14)  In around 1988, the Couple via Rossda Investment Limited, assisted by a mortgage loan of HK$816,000 from a bank, purchased the Provident Centre Property at HK$1 million. After the purchase, WLW and his family moved to live in the Provident Centre Property.  Most part of the Property was changed to a manufacturing workplace.

(15)  In around 1989, AE on the belief that its former director, Fung, had received advantages from WLW, made a complaint against WLW to the authority and terminated AE’s contract with Express Printing, and withheld payments to Express Printing. WLW faced the most difficult time in his life and there was a volley of lawsuits launched by the Commissioner of Inland Revenue, by Fung, and by a paper supplier and by a printing company against WLW.  On 6 November 1989, the AE Lawsuit began.  The AE Lawsuit led to criminal investigation against WLW.

(16)  In order to prevent the Provident Centre Property and the Property being affected by the AE Lawsuit, the Couple planned to transfer the Provident Centre Property and the Property to someone to hold on trust. WLW requested his maternal uncle, TTS, to hold the Provident Centre Property on trust for him, but TTS refused straightaway.  Eventually, WLW via SYC sold the Provident Centre Property at HK$1,450,000.

(17)  As regards the Property, the Couple had a consensus that they had to retain the Property because the Property was WLW’s first property and was the P’s only property at that time. Also, they were of the view that the Property had to be retained and stressed that Fujian people thought high of “安居樂業”.   Initially, WLW planned to ask TSH to hold the Property on trust for him.  However, due to the old age of TSH, WLW did not ask TSH to do so. WLW asked D1 to hold the Property on trust for him, and D1 agreed. On 12 December 1989, WLW and TSH assigned the Property to D1 and TSH as joint tenants, and the consideration stated in the assignment was HK$300,000.  D1 and TSH executed a mortgage for a loan of HK$210,000.  At that time, D1 clearly understood that he held the Property on trust for WLW and TSH.  TSH also clearly understood that she held the Property in name only.  D1 did not pay any money under the 1989 assignment.  D1 remitted the balance of the mortgage loan money[11] to WLW for WLW’s cashflow and payment for goods and wages. WLW was responsible for the monthly mortgage-instalment payments.

(18)  In order not to make TSH worry over the AE Lawsuit, WLW arranged TSH to leave Hong Kong and live in the Mainland.

(19)  In early 1990, WLW was in desperate need of a considerable amount of money to pay wages, goods payment and litigation expenses. With WKW’s consent, WLW arranged for the Property to be held on trust by WKW so that WLW could use the Property to get a mortgage loan with a higher amount.

(20)  On 23 July 1990, D1 and TSH assigned the Property to WKW at HK$900,000.  At that time, WKW clearly understood that he held the Property on trust for WLW.  WKW did not pay any money under the 1990 assignment, but only paid the balance of mortgage loan money[12] to WLW.  WLW was responsible for the monthly mortgage-instalment payments.

(21)  In March 1990, WLW’s daughters went to the USA to study whilst the Couple stayed in Hong Kong to handle the litigations and the business.

(22)  By the end of 1991, WLW was still entangled by the AE Lawsuit. Since WLW was missing his daughters very much, he decided to emigrate to the US with TPW to reunite with their daughters no matter what the outcome of the litigation would be.  At that time, the Couple still insisted on retaining the Property in whatever situation.  Since WKW refused to continue to act as the trustee of the Property, WLW approached D1 again and asked him to hold the Property on trust for him again.  D1 agreed.

(23)  Because WLW had to concentrate on the AE Lawsuit, WLW left the trust matter to D1 and asked D1 to obtain a bank loan. In order to facilitate the loan application, TPW obtained a pro forma provisional sale and purchase agreement from 必得富物業代理公司 and filled information in the same according to the instructions of D1 (“the PSPA”).  D1 did not pay WLW any money under the PSPA.  Neither D1 nor D2 paid WLW any money directly or through WKW.

(24)  In 1992, the trial of the AE Lawsuit took place. The judgment (“the AE Judgment”) was handed down on 26 March 1992, and WLW’s lawyers had explained to WLW the AE Judgment.  WLW lost in the AE lawsuit.  At that time, the criminal investigation against WLW was still ongoing. After knowing the outcome of the AE Lawsuit, the Couple emigrated to the US to reunite with their daughters.

(25)  Before departure, WLW ceased all his businesses in Hong Kong and left all his belongings retained to TLY’s family for the latter to keep for him.  TPW said that WLW gave his belongings to TLY because TLY lived in a large property with space.

(26)  TPW knew from WLW that D1 told WLW that the procedure concerning the trust arrangement of the Property had been completed, legal fees paid, and previous mortgage loan taken out by WKW paid.  The rental incomes from the Property were sufficient to repay the monthly mortgage instalments, and there was a balance of HK$3,000 each month.  WLW only agreed with D1 that D1 would use the rental income from the Property to pay the monthly mortgage instalments, rates and property tax, and D1 would use the balance to take care of TSH’s daily living expenses.

(27)  After the Couple left Hong Kong for the US, they were contactable by D1 and TSH, and D1 was contactable by them as well.  Whilst in the US, the Couple contacted D1 and TSH frequently.

(28)  In 1994, WSL passed away and TSH returned to Hong Kong to live with D1’s family after handling the funeral mattes of WSL.

(29)  TPW returned to Hong Kong in 2003, and brought TSH to the US in 2007.  The Couple asked TSH about the Property, and TSH replied clearly that D1 was still holding the Property on trust.

(30)  In 2008, TSH returned to Hong Kong and lived with D1’s family.

(31)  In 2009, the Couple returned to Hong Kong for good and asked D1 to return the Property to WLW.  D1 refused and claimed that he had purchased the Property from WKW. Thereafter, the Couple learned from the land search record that the Property was vested not only in D1, but also in D2 as well.

(32)  In 2009, WLW applied for a public housing unit, and in 2013, was granted one.

(33)  TPW did not ask WKW to write any statement.  It was WLW who went to see WKW to ask WKW for assistance.

79.  Having considered TPW’s evidence, I am of the view that her evidence is untrue and unreliable on various material aspects.

80.  TSH’s interest in the Property

(1)  TPW only met WLW in 1975.  As to the events concerning WLW before 1975, TPW does not have any personal knowledge. Her evidence on these topics is hearsay evidence.

(2)  TPW claimed that WLW could make about HK$8,000 every month in his painting business in 1968.  She was not surprised by this. However, at that time, a factory worker only earned HK$4-5 per day, and TPW knew this because she was also a worker.

(3)  TPW claimed that in 1972, the Property was purchased by WLW by using his own money.  Since WLW wanted to express filial piety and thank TSH for helping him to save money, WLW caused TSH to be one of the registered owner of the Property, and TSH and WLW were registered as joint owners of the Property.  However, in her oral evidence given in the trial, TPW said that TSH in fact did not help WLW to save money.  All the money given by WLW to TSH had been spent by TSH, and WLW always expressed his grievance on this.  The evidence in TPW’s witness statement in fact is contradicted by her oral evidence.

(4)  In respect of the HK$30,000 loan from WLW’s maternal aunt and the maternal aunt’s daughter, in TPW’s oral evidence, at one time she said that WLW would give HK$1,500 to TSH each month and requested TSH to pass the sum to the aunt and the aunt’s daughter as a partial repayment. However, this was not mentioned in TPW’s witness statement.  When being pressed on this, TPW became evasive and no satisfactory explanation could be given.  In fact, if there was a monthly repayment of HK$1,500 to the aunt and the aunt’s daughter since 1972, the amount of the outstanding loan in 1976 would be less than HK$30,000.  Therefore, the sum repaid by WLW to the aunt and the aunt’s daughter in 1976 should be less than HK$30,000.  This is another example showing the unreliability of TPW’s evidence.

(5)  TPW’s allegation that WLW was the sole beneficial owner of the Property is contradicted by the Letter of the Legal Aid Department to Ds dated 29 January 2016 (“the LA Letter”).

(a)  WLW commenced these proceedings in person on 21 December 2015.  Thereafter, WLW applied for legal aid.  The Couple attended the Legal Aid Department and had been interviewed by the staff of the Legal Aid Department separately.

(b)  In the LA Letter, the Legal Aid Department said:

“ 王良榮先生申請法律援助以繼續上述民事訴訟，向你們追討上述物業的權益。

根據王先生提供的資料，你們沒有支付任何款項以購買該物業，換言之，你們是以信託形式代王先生及蔡淑卿女士持有該物業的。” (Emphasis added)

(c) Obviously, the Legal Aid Department only recited what WLW told them in the interview. WLW must have told the Legal Aid Department that the Property was beneficially owned by WLW and TSH, not by WLW alone.

(d) TPW could not offer any satisfactory explanation on this.

(6) TPW’s allegation that WLW was the sole beneficial owner of the Property after the 1972 transaction is not supported by reliable evidence and must be rejected.

(7) To be fair to TPW, the details of the 1972 transaction, including who had contributed to the purchase price of the Property in 1972 and who were the beneficial owner(s) of the Property after the 1972 transaction, are matters beyond TPW’s personal knowledge. However, since TSH was one of the co-owners of the Property after the 1972 transaction, TSH should be a beneficial owner of the Property unless there is satisfactory evidence showing the otherwise[13]. In my judgment, there is no such evidence before the court. Further, I am of the view that the LA Letter contains a clear admission made by WLW that the beneficial interest in the Property was vested in him and TSH.

81.  As to the PSPA, TPW in her evidence mentioned that D1 came up to her home (ie the Property) and asked for a provisional sale and purchase agreement, so that he could borrow a mortgage loan from a bank. TPW then obtained a pro forma provisional sale and purchase agreement from SYC[14] who personally delivered such document to TPW.  Thereafter, D1 returned to TPW’s home.  D1 read out some information from a piece of paper and asked TPW to fill the information in the pro forma provisional sale and purchase agreement.  TPW did so.  Since the transaction recorded in the provisional sale and purchase agreement was not real, TPW did not accurately put down some details in the provisional sale and purchase agreement, for example, the correct number of air-conditioners to be sold together with the Property.  She did not tell WLW the matters relating to the PSPA before she signed the same.  Although she signed the PSPA, in which she acknowledged receipt of HK$70,000 from D1 as a deposit for the sale and purchase, she in fact did not receive any payment from D1.

82.  In my judgment, TPW’s evidence concerning the PSPA is untrue and must be rejected.

(1)  TPW claimed that the purpose of having the PSPA was to facilitate D1 to obtain a mortgage loan from a bank.  However, there is no evidence showing any linkage between the PSPA on the one hand and the mortgage loan of HK$400,000 and the overdraft facilities of HK$200,000 granted by OUB to D1 in December 1991 on the other hand.  Further, even if it would be necessary to show the bank a sale and purchase agreement for the purpose of applying a mortgage loan from the bank, the SPA later executed on 6 January 1992 would serve the purpose.  The reason given by TPW explaining the existence of the PSPA is unconvincing.

(2)  In the PSPA, it is stated that the Property would be sold together with “肆部冷氣, 室內裝修”.  Under cross-examination, it was revealed that the number of air-conditioners as stated in the PSPA in fact was correct. In re-examination, TPW tried to say that there were other items which should have been stipulated in the PSPA, but she chose not to do so. Those items included a refrigerator and a washing machine. She simply wrote “4 air-conditioning units” and “with interior decoration” in the PSPA casually. With respect, the explanation offered by TPW in re-examination cannot hold water.  The items mentioned by TPW in re-examination are movable items, which usually would not be left to the purchaser and would not be included in a sale and purchase agreement.  Contrary to TPW’s allegation, in fact nothing stated in the PSPA is incorrect.

(3)  I do not accept that TPW signed the PSPA behind the back of WLW.  According to TPW, WLW was the owner of the Property.  TPW would meet WLW every night at home.  It is inherently improbable that TPW would choose to sign the PSPA on behalf of WLW before speaking to WLW and discussing the matter with him.

(4)  At the bottom right-hand corner of the PSPA, there is a signature by TPW.  Immediately after her signature, there are two written Chinese characters “代收”.  Obviously, on the face of the PSPA, TPW did not only on behalf of the owner agreed to sell the Property to D1 at HK$1,200,000, but also on behalf of the owner received a deposit of HK$70,000 from D1.  For the purpose of emphasizing the receipt of the HK$70,000 by TPW, the two handwritten Chinese characters “代收” were added immediately after TPW’s signature.

83.  There is no reason why TPW should not be bound by the acknowledgement of receipt contained in the PSPA, which is a document signed by her.

84.  TPW claimed that before WLW left Hong Kong in early 1992, WLW had repaid all the debts owed by him.  TPW said that the arrangement of having D1 to hold the Property on trust for WLW in 1992 was not for the purpose of facilitating WLW to evade liabilities.

85.  TPW’s evidence cannot be true.  In the statement of claim, WLW in his own words said when WKW was not willing to continue to be his trustee, at that time, he was heavily indebted (“當時本人負債累累”).  Since TSH was at her advanced age, without any other alternative, WLW turned to D1 and asked D1 to be the trustee of the Property again[15].  So it is clear that evening according to WLW, he was heavily indebted in early 1992.  Further, the only conceivable purpose for setting up the alleged trust in 1992 is to conceal the interest of WLW in the Property, so that the Property would not be targeted by the creditors of WLW.  If WLW did not owe anyone anything in early 1992, WLW could simply ask WKW to transfer the Property back to him.

86.  TPW’s evidence concerning the declarations made by WLW in support of his application for public housing is also untrue.

(1)  By a summons dated 8 June 2020, Ds sought an order from the court directing the Director of Housing to disclose documents concerning WLW’s application for public housing.  Subsequently, P, Ds and the Director of Housing signed a consent summons dated 18 June 2020.  Upon that consent summons, I made a consent order (“the Consent Order”) on the same date directing the Director of Housing to disclose the documents concerning WLW’s application for public housing.  I also granted leave to P and to Ds to file and exchange further witness statements, the contents of which should be limited to the matters relating to the documents disclosed by the Director of Housing.

(2)  Subsequently, documents relating to WLW’s application for public housing were disclosed.  D1 filed a witness statement concerning the documents disclosed, but P chose not to file any witness statement.

(3)  In support of his application for public housing, WLW made various declarations to the Hong Kong Housing Authority.  In the declarations made by WLW in 2009[16], 2012[17] and 2013[18], WLW declared that he did not have any landed property.  It is pertinent to note that in the 2012 declaration and in the 2013 declaration, the declarations contain the wording “直至現在, 我及我的家庭成員無以任何形式…擁有或與他人共同擁有任何住宅樓宇” (Emphasis added)

(4)  Questions concerning these declarations were put to TPW during cross-examination.  TPW explained that before WLW and she signed the form and the declaration in 2009, the Couple had made an enquiry to the staff of the Housing Authority over the phone.  TPW said that they told the staff member that they had a unit in Hong Kong, but that unit was occupied by a relative.  The staff member told them that since the unit had not been returned to them, they had no need to declare that property in their application.  So they just followed the advice given by that staff member in making the application.  TPW said she did not record the name of that staff member.

(5)  TPW further said after see the documents disclosed by the Housing Authority under the Consent Order, she went to the Housing Authority to enquire about whether WLW needed to declare the Property which was owned by him but occupied by a relative.  TPW claimed that the reply given by the Housing Authority was same as the one given in 2009.

(6)  However, the alleged reply given by the Housing Authority in 2009 was not mentioned in TPW’s witness statement dated 27 November 2018.  Further, TPW must know that the documents disclosed under the Consent Order would be evidence before the court at the trial.  If there is any truth in TPW’s evidence (ie the Housing Authority did give her the alleged reply in 2009, and did also give her the same reply at a time shortly before the commencement of the trial), TPW would have had filed a supplemental witness statement mentioning all these.  However, no witness statement has been filed by P pursuant to the leave given in the Consent Order.  In my judgment, the replies allegedly given by the Housing Authority are not true but are stories made up by TPW while she was in the witness box.

(7)  The wording of the 2009 declaration, the wording of the 2012 declaration and the wording of the 2013 declaration as set out in the above are clear and unambiguous.  The scope of all these declarations clearly covers beneficial interest in any residential property.  TPW’s allegation that the Housing Authority has repeatedly given her a reply which is contrary to the plain meaning of the two declarations is inherently improbable and cannot be believed. 

87.  I refuse to accept TPW’s evidence.

88.  I attach weight to the PSPA, in which TPW acknowledged that she had received HK$70,000 from D1 as a deposit for selling the Property to D1.

89.  I also attach full weight to the declarations signed by WLW in 2009, 2012 and 2013 in support of his application for public housing.  By signing those declarations, WLW declared that he did not have any interest in any residential property at the times of those declarations.   

SMY

90.  SMY is P’s cousin.  Her mother is the wife to the brother of TSH.  SMY mentioned the following in her evidence:

(1)  She came to know WLW and TSH when she was aged 5 or 6.  WLW and TSH came to Hong Kong from the Mainland at that time.

(2)  TSH worked as a waist-belt worker and later as a knitting worker in a factory. WLW was a student at a secondary school and graduated in 1968.  WSL was carrying on salt business in the Philippines.  Although WSL was working abroad, he nevertheless took care of WLW and TSH by sending money home to TSH.

(3)  After finishing his secondary education in 1968, WLW started working as a painter at home to gain money for livelihood. SMY did not know how much money WLW received for each painting. But from what WLW told the others, she knew that WLW earned about HK$1,000 per month. Upon knowing this, she was very surprised.

(4)  SMY started her employment as a salesperson selling clothing in 1974. At that time, she earned a salary of HK$700 per month.

(5)  She did not know the details concerning the acquisition of the Property in 1972.  After WLW and TSH moved to the Property in 1972, SMY had visited them in the Property. She remembered that the decoration of the Property was ordinary and not lavish.

(6)  SMY only remembered that WKW had held the Property on trust for WLW, and did not know anything after that. She did not know anything concerning the transaction in 1992.

(7)  She heard WLW said that the Property was his first property and he would not sell the Property.  She also said that because TSH was living in the Property, so WLW would not sell the Property.

91.  I am of the view that SMY is an honest witness. However, her evidence may not shed light on the issues in dispute in these proceedings.  As to the part that she heard WLW said that he would not sell the Property, she did not mention this in her witness statement.  She might not have a clear memory of this.  In any event, as to when WLW made this statement and in what context the statement was made, SMY could not give all these details.

92.  SMY’s evidence is of little assistance in these proceedings.

TLY

93.  TLY is WLW’s paternal cousin’s wife, and her father-in-law is the brother of WSL.

94.  TLY only started to think about or recall events which took place in 1979-90 when WLW and TPW came to her in mid-2018 and asked her to give evidence in these proceedings.  Before she made her witness statement, she had a discussion with WLW and TPW on matters relating to the Property.  In these circumstances, I am of the view that there is a real risk that TLY’s memory may have been tainted by the discussion.  It should further be noted that in mid-2018, WLW was already a MIP.  Matters said by WLW in the discussion therefore might not be true and correct, and these matters might have affected TLY’s memory.

95.  TLY mentioned the following in her evidence:

(1)  In about 1975, she, her husband and her mother-in-law lived in a room of the Property rented from TSH, and TSH collected rent from them.  At that time, WLW was single. TLY did not know who purchased the Property and how much money was paid for the acquisition of the Property.  WLW was painting pictures at that time.  WLW appeared to have steady income from his painting business.  At that time, TLY was working in a garment factory and her husband was making spectacles. She could not remember their incomes at that time.

(2)  TLY and her family left the Property in about 1977.  Although having left the Property, she regularly met with the paternal and maternal cousins in family gatherings on festive occasions. She knew that the Couple emigrated to the US in April 1992.  She did not remember how many times they met in the family gatherings between 1989 and April 1992. Neither did she remember the time when she last met up with them before they emigrated to the USA.

(3)  TLY knew that in 1989, WLW was in desperate need of money to pay the legal fees, wages of his staff, and the amount due to the paper suppliers.  In a family gathering, WLW had also expressed to his cousins and relatives that he wanted them to help him by lending him money. In early 1992 before emigration, WLW borrowed HK$20,000 from TLY for business cash flow.  In 2003 or thereabouts, TPW returned the HK$20,000 to TLY.

(4)  In 1989, when WLW intended to sell the Provident Centre Property which was WLW’s home at that time, TLY told WLW not to sell it unless it was necessary because the property was his asset.  However, notwithstanding her advice, P eventually sold the Provident Centre Property.

(5)  Starting from 1989, the Property was held by various persons as trustees, and WKW was one of those persons. The reason for the transfer was to prevent the Property being affected by the litigations involving WLW and to raise cash to pay the business and legal expenses of WLW.

(6)  In a family gathering before WLW left Hong Kong in 1992, TLY heard WLW saying that he would not sell the Property because the Property was his first property, last property and a Fung Shui property. But TLY could not remember the exact time of that family gathering.

(7)  TLY did not fully understand the transfer and trusteeship matters concerning the Property because she was not involved in those matters.  She did not know clearly the purpose of each transfer.

(8)  Before emigrating to the US, WLW brought 2 packages containing documents, each of 2’ x 1’x 1.5’, to TLY’s home.  At that time, TLY was living in a village property of about 300 odd square feet. WLW told her that the 2 packages contained miscellaneous letters. TLY did not examine the contents of the two packages but found a place in her congested living place for storing them. Eventually, she kept the 2 packages at the corner of a cabinet. About half a year later, her husband told her that TSH had come over to get back the packages.

96.  While TLY does not have personal knowledge on the matters relating to the issues in these proceedings, she has tried to say that WLW had never said that he would sell the Property.  She was reluctant to admit that WLW was under financial difficulties and had been trying every means to raise funds from 1989 onwards.  However, she said that the Property was held by various persons on trust since 1989, and the purpose of having a trust was to prevent the Property being affected by the litigations and to raise cash for WLW.  But at the same time, she also said that she did not know the trust arrangements concerning the Property, for she was not involved in those arrangements.  There are internal inconsistencies in her evidence.

97.  I do not regard TLY’s evidence as reliable.  I am of the view that it would not be safe to rely upon TLY’s evidence to make any factual finding.

WCF

98.  WCF is WKW’s son.  WKW is the cousin of WSL.

99.  WCF said the following in his evidence:

(1)  He did not know the details of the matters relating to the issues in these proceedings.  He only knew that at one time, his father WKW had agreed to be a trustee to hold the Property on trust.

(2)  In July 1900, WKW told him and TYO that WLW wanted WKW to hold the Property on trust for WLW.  After discussion, WCF supported his father’s decision to hold the Property on trust for WLW pending outcome of the litigation concerning WLW.

(3)  In 1991, WKW told WCF that WLW planned to emigrate to the US.  WCF therefore requested his father to stop being the trustee of the Property because firstly, he did not think right and indeed worried about his father holding the Property as trustee for an indefinite period of time, and secondly, this would affect their family’s eligibility for public housing.  WKW did not tell WCF as to how long WLW had requested WKW to hold the Property on trust for.

(4)  Later, WKW told WCF that he had transferred the Property to D1.  However, WCF did not know the details of the transfer.  He only remembered his father said that he (ie WKW) was not required to be the trustee anymore.  In his oral evidence, WCF said that he could not be sure whether his father had mentioned to him that D1 was the new trustee.

(5)  When WKW made and signed his written statement on 20 June 2016, he was not accompanying his father and he did not know the situation.

100.  I am of the view that WCF is an honest witness. However, his evidence is of very limited assistance in these proceedings.  In particular, since WCF was not present at the scene while WKW was making and signed his written statement, WCF’s evidence does not shed any light on the reliability of WKW’s statement.

TYO

101.  TYO is WKW’s wife, and WCF’s mother.  She has a “withdrawn” personality and seldom contacted her husband’s relatives. Even if she participated in her husband’s family gatherings, she would only listen to them.  She has limited understanding of the disputes in these proceedings.  She only had a clearer recollection of the details about her husband holding the Property as trustee for WLW from 1990 to 1991.  She remembered that her husband told her that the purpose of the trust was to prevent the Property being dragged in and adversely affected by the outcome of the litigation concerning WLW.

102.  A crucial point in TYO’s evidence is what happened when WKW signed his statement on 20 June 2016.  According to TYO, she was present at the scene when WKW signed the statement.  In her evidence, TYO said the following:

(1)  WLW called WKW and asked WKW to write a statement.  Thereafter, WLW came to their home.  WLW came alone and no one else came with him.

(2)  WLW and WKW sat at the table in the sitting room and had a discussion.  TYO sat on a sofa behind them.  She was able to hear the exchanges between WLW and WKW.  She heard that WLW asked her husband to write out what her husband knew about the transfer of the Property.

(3)  WKW then wrote out a statement.  WKW read out the statement to her when she was still sitting on the sofa.

(4)  After WKW finished reading out the statement to TYO, TYO went over to the table to read what her husband had written down.

(5)  After all these, WKW signed the statement.

103.  With respect, I am of the view that the evidence given by TYO in respect of WKW’s statement is unreliable.  In her witness statement, TYO said that with the assistance given by all of them, WKW signed the statement (“在大家的協助下簽署了一份供詞”).  However, according to TYO’s oral evidence given in the witness box, the statement was written and signed by WKW without any assistance from anyone.  TYO was asked to explain who offered what assistance to WKW in the preparation of the statement.  Ample opportunities have been given to TYO to answer this question, and TYO could not answer this question at all.  The fact that this question being unanswered shows that the circumstances in which WKW signed the statement may very well not be those said by TYP in her oral evidence.

104.  Since TYO’s evidence on this crucial point is unreliable, I cannot accept TYO as a reliable witness.  I refuse to accept her evidence.

WKW’s statement

105.  As a result of my analysis of WCF’s evidence and TYO’s evidence as set out in the above, there is no reliable evidence showing under what circumstances WKW signed his statement.  It is not known whether anyone had discussed anything with WKW before WKW signed the statement, and if yes, whether the discussion would have influenced the contents of the statement.  It is also not known whether WKW was of a sound mind at that time and signed the statement out of his own volition without any improper influence from anyone.  That being the case, I cannot attach any weight to the matters said in WKW’s statement.

Yip

106.  Yip was as an estate agent in必得富物業代理公司 and provided service to WLW in the sale of the Bedford Gardens Property, the purchase of the Provident Centre Property and the sale of the Provident Centre Property.  She did not hear from WLW, TSH or SYC that WLW had any intention to sell the Property.  They have never instructed Yip to sell the Property.

107.  I am of the view that Yip is an honest witness. However, her evidence does not shed any light on the controversies in these proceedings.

Adverse inference against P since P has not called SYC to give evidence?

108.  Counsel for Ds submits that I should draw an adverse inference against P, for P has not called SYC to give evidence in these proceedings.  Counsel submits that SYC should be a family member whom was involved in handling WLW’s various sales and purchases of properties between 1984 to 1989.

109.  With respect, I am unable to accept these submissions.  An adverse inference against a party can only be drawn when the party without a proper explanation fails to call a witness whom the party might reasonably be expected to call[19]. While SYC might have some knowledge in respect of WLW’s handling of properties in 1984 to 1989, the material events in these proceedings in fact occurred in 1991 and 1992.  There is no reason to suggest that SYC would have personal knowledge of these material events.  Accordingly, it cannot be said that SYC should be a witness whom P might reasonably be expected to call.  Further, while TPW was giving evidence, counsel for Ds did not ask TPW (who has been representing P and handling these proceeding since 8 October 2018) why P did not arrange SYC to give evidence in these proceedings.  Without giving an opportunity to TPW to offer an explanation on this question, it cannot be said that P has failed to call SYC as a witness in these proceedings without a proper explanation.

Ds’ witnesses

110.  Ds have filed the witness statements made by the following persons:

(1)  D1

(2)  D2

(3)  Lam

111.  Ds also seek to rely upon a statutory declaration made by TSH on 9 January 2017 (“TSH SD”) and a witness statement of TSH dated 19 December 2017 (“TSH WS”).  TSH passed away on 25 February 2020, and therefore Ds could not have TSH as their witness at the trial.

D1

112.  I am of the view that D1 is an honest and a reliable witness.  He frankly answered all the questions put to him.  His evidence is consistent with the contemporaneous evidence and is inherently probable.

113.  D1 said the following in his evidence:

(1)  In 1978, he came from Fujian to Hong Kong. He lived in the Property with WLW and TSH.  After coming to Hong Kong, he had various jobs at different times, including a job in cassette tapes factory and a job in an electrical parts factory. Whilst working in the electrical parts factory, he earned about HK$700 per month.  He made monthly payments to TSH as rentals and food expenses.

(2)  D1 learned from TSH that for the purchase of the Property at HK$120,000 in 1972, TSH paid HK$70,000 from her own savings, and borrowed HK$40,000 from her brother-in-law (her elder sister’ husband).  The remaining HK$10,000 were from WLW. On 3 January 1973, the Property was mortgaged to a bank to raise a loan of HK$40,000 to repay her brother-in-law.

(3)  In or about 1980, WLW, D1 and TTS jointly invested to set up the Store in North Point. The Store mainly sold grocery, clothing, umbrellas and provided parcels delivery service. The Store was initially managed by TTS. At a later time, TTS was assisted by D1 after D1 resigned from his job.  D1 moved to live in the Store. D1 was paid a salary of HK$1,500 per month and received dividends once or twice a year, and the dividends each time would be in the range of HK$4,000 to HK$5,000.

(4)  In 1982, D1 carried on a photocopier-trading business in Shenzhen, earning HK$20,000 odd per year.  It was since about this time that WLW had also started borrowing money from D1.

(5)  In 1983, D1 invested with others to run a bronzing/gilding factory in Shenzhen.  He earned HK$20,000 to HK$30,000 per year.

(6)  In or about 1984, WLW or Express Printing owed the landlord rental payments. D1 lent WLW HK$20,000 to settle the matter. In the same year, the Store was closed down and D1 moved to live with TCS’s family at TCS’s property.  In the same year, D1 carried on trading business on his own in Shenzhen.

(7)  In 1985, D1 met D2, and they married in January 1986.  After marriage, D1 and D2 lived in a rented room at the TCS’s property.

(8)  In or about 1986, D1 and Lam jointly invested and purchased the Central Property. Since D1 and Lam were merchants, they frequently met to share investment experience and discuss investment plans.

(9)  In or about 1986, D1 invested together with his friends in watch-trading business in North Point. Between 1986 and 1989, D1 earned HK$100,000 odd per year.

(10)  In or about 1989, D1, D2 and their 2 children moved out from TCS’s property and shared a rented flat with NSY at the Wing Hing Street Property.  D1 started to run a hand-watch trading business on his own in 1989.

(11)  In late 1989, WLW told D1 that because of his debts, he was entangled by lawsuits resulting in him being cash strapped, that he needed cash flow, and that to prevent the Property from being sold compulsorily because of failure in litigation, he requested to transfer the Property to D1 for D1 and TSH to hold the Property as joint tenants. D1 agreed. On 12 December 1989, D1 and TSH executed the 1989 assignment and the relevant mortgage document.  WLW paid the legal fees arising from the transfer.

(12)  Between 1989 and 1990, TSH moved to reside in the Mainland. In the same year, D1 and TSH transferred the Property to WKW since WLW wanted more cash flow.

(13)  In 1991, TSH in the Mainland phoned D1, informing D1 that WLW intended to sell the Property at about HK$1,250,000 and asking D1 to help to enquire whether two relatives were interested in purchasing the Property.  Later, the 2 relatives via D1 told TSH that they were not interested to purchase the Property.

(14)  In late 1991, D1’s mother phoned D1, suggesting that D1 should purchase the Property from WLW and TSH. Thereafter, D1 and D2 discussed the matter, and they finally agreed to do so.

(15)  Since the Property was in a very old building, it was difficult to obtain a mortgage loan of a large amount.  D1 met with Lam in about November 1991.  At that meeting, D1 shared with Lam that he and his wife intended to purchase the Property for self-use, but they had difficulties in obtaining a mortgage loan.  Lam then introduced a manager surnamed Tsang of OUB (“Manager Tsang”) to D1.

(16)  Later, upon the arrangement of Lam, Manager Tsang met with D1 and Lam at OUB.  At the meeting, D1 told Manager Tsang that he wanted to borrow HK$600,000 from OUB.  Manager Tsang orally agreed, for Lam agreed to be D1’s guarantor.  As a matter of procedure, OUB needed to compile a valuation report of the Property.

(17)  At about the end of 1991, D1 phoned up WLW proposing to purchase the Property.  One day later, the Couple went to see D1 at the Wing Hing Street Property in the morning and had the first meeting with D1 on the intended purchase in a restaurant near the Wing Hing Street Property (“the 1^st Meeting”).  In the 1^st Meeting, WLW and D1 agreed the following:

(a)  The Property would be sold to D1 at HK$1.2 million.

(b)  Since WLW had financial difficulties, TSH agreed to take only HK$400,000.  As to how to pay TSH this sum, the matter would be discussed by D1 and TSH at a later time.

(c)  HK$80,000 would be set off by the past loans (a total of about HK$100,000) advanced by D1 to WLW.

(d)  HK$120,000 would be paid by as much cash as possible within a few days.

(e)  WLW would also receive HK$600,000 at a later time.

(18)  At the 1^st meeting, WLW told D1 that he was in urgent need of cash and asked D1 to give him as much cash as possible within a short period of time. D1 told WLW that he would arrange and would inform WLW after his cash was ready.

(19)  A few days later, D1 withdrew HK$70,000 from his bank account.  D1 therefore phoned WLW or TPW (D1 forgot who answered the call) and invited them to meet again at the same restaurant.  D1 had the second meeting with the Couple there (“the 2^nd Meeting”).  At the 2^nd Meeting:

(a)  TPW took out the unsigned PSPA (all the information thereon had already been filed in) with 2 carbon copies and asked D1 to sign the PSPA.  D1 did so.  TPW also signed the PSPA.

(b)  D1 paid TPW HK$70,000 cash, which was part of the deposit (HK$120,000) as stipulated in the PSPA.  D1 was told to pay the balance of HK$50,000 at a solicitors’ firm at a later time.  The Couple would inform D1 of which solicitors’ firm D1 needed to go to for payment and execution of documents.

(c)  The Couple took away the original (white) and the 1^st carbon copy (blue) of the PSPA, whilst the 2^nd carbon copy (yellow) was kept by D1.

(20)  After signing the PSPA, D1 phoned TSH. D1 told TSH that he had already reached the terms of the agreement for sale and purchase of the Property with WLW, and he wanted to discuss with TSH on the details of the payment of HK$400,000.  D1 and TSH agreed that the HK$400,000 would be temporarily kept by D1, but D1 would pay the sum by instalments at the request of TSH.

(21)  On 17 December 1991, a valuation report of the Property was prepared (“the Valuation Report”).

(22)  On 31 December 1991, OUB informed D1 in writing that OUB agreed to grant D1 a home mortgage loan of HK$400,000 and overdraft facilities of HK$200,000 on the security of the Property and a guarantee given by Lam.

(23)  In January 1992, D1 went to OUB to open a bank account for the home mortgage loan and the overdraft facilities.  On that occasion, a supervisor of OUB briefly explained the contents of the Valuation Report to D1.

(24)  In early January 1992, D1 and D2 attended the office of PC for payment of HK$50,000 and execution of the SPA.  Prior to attending the office of PC, WLW phoned D1, telling him of the name of the solicitors’ firm, its office address, the time to attend the solicitors’ firm for payment of the HK$50,000 and execution of the SPA, and reminding him to bring HK$50,000 to the solicitors’ firm. At that time, D1 had already decided to add D2 as a joint tenant in the SPA.

(25)  On 24 March 1992, D1 and D2 attended the office of PC to execute the 1992 assignment and the OUB mortgage.

(26)  Between 1992 and 1994, D1 paid TSH or persons designated by her a total sum of HK$400,000.

(27)  In or about June 1995, D1 and his family left the Wing Hang Street Property and moved to live in the Property after decoration.

(28)  D1 paid up the legal fees charged by PC for the purchase, the stamp duty, the insurance premiums relating to the Property, the rates of the Property and all mortgage-instalment payments, as well as electricity.

(29)  Since the Couple returned to Hong Kong for good, they had not questioned Ds’ title to the Property despite the fact that they regularly visited TSH and Ds at the Property when TSH was still living with Ds. It was only on 29 January 2016 when Ds received the LA Letter that Ds began to know that P had commenced these proceedings against them.

114.  In respect of TSH SD and TSH WS, D1 said the following in his evidence:

(1)  TSH passed away on 25 February 2020.  Prior to that, TSH was of sound mind, spirited and clear-headed.

(2)  TSH was all along healthy until December 2019. In December 2019, she broke her hip as a result of a fall.  However, her mind was unaffected.  She fell again in February 2020.  The second fall led to an internal haemorrhage in her brain. This was an unexpected occurrence. TSH eventually passed away on 25 February 2020.

(3)  TSH made TSH SD upon his request.  He called TSH and requested TSH to make a statutory declaration to record the matters she knew about the transfer of the Property in 1992.  However, as to the contents of TSH SD, those contents were not from D1 but were TSH’ own words.  As to the details of the payment of HK$400,000 made by D1 to TSH, TSH had her own records.

(4)  The contents of the exhibit[20] to TSH SD were TSH’s own handwriting.

(5)  As to TSH WS, TSH signed the same in the office of Ds’ solicitors. D1 accompanied TSH to the office to make the witness statement. Before putting her signature on the witness statement, TSH read the statement carefully.  While TSH was reading the witness statement, D1 did not say anything to TSH, for those representing him did not allow him to do so.

(6)  D1 said although TSH might not have received formal education, TSH’s father was a primary school headmaster.  TSH would be able to read and write Chinese.

115.  D1 frankly admitted that at the time of the SPA, he had not paid HK$240,000 as the initial deposit for the sale and purchase, although there was such a stipulation in the SPA.  D1 also admitted that he had not paid all the HK$1,200,000 at the time of the 1992 Assignment, notwithstanding the receipt clause in the 1992 Assignment.

116.  There is no dispute that the HK$600,000 loans obtained by D1 from OUB in early 1992 were eventually channeled to WLW.  The difference between D1 and WLW on this point is whether that sum was a part payment of the purchase price in the 1992 transaction, or just a financial assistance obtained by D1 on WLW’s behalf, and WLW had repaid the sum by the rental incomes generated from the Property.

117.  In my view, P’s case that WLW had repaid the HK$600,000 by rental incomes generated from the Property is inherently improbable.  If there is any truth in P’s case, the Couple would have liaised with D1 from time to time to monitor the rental incomes generated from the Property, and would have made records in respect of all the rental incomes.  It would be necessary for the Couple to make sure that the rental incomes would be sufficient to repay the loans on time.  However, no such rental incomes records kept by the Couple have been produced.

118.  In respect of the HK$50,000 paid by D1 through PC, Ds have produced the PC Receipt in support of this.  The authenticity of the PC Receipt is not in dispute.  In my judgment, the PC Receipt is a piece of evidence providing strong support to Ds’ case, ie the 1992 transaction is a genuine sale and purchase as averred by Ds, and not a trust arrangement as alleged by P.

119.  The PC Receipt is certainly an important document in these proceedings.  As to this, counsel for P argues that:

(1)  The PC Receipt only shows that the law firm received a sum of HK$50,000 from Ds as “further deposit subject to contract”. There is no documentary evidence showing the said HK$50,000 has been paid by PC to WKW’s solicitors.  There is no documentary evidence showing WKW’s solicitors then paid the HK$50,000 to WKW or WLW.   Since D1 said under cross-examination that he had properly kept all the documents concerning the Property in a file, it would not have been difficult for him to produce evidence to show the above.  There is no evidence showing where this HK$50,000 has gone.  It is equally possible that the HK$50,000 were returned to Ds.

(2)  There is no record of the payment of this further deposit in the SPA.  The pro forma clause concerning further deposit was crossed out in the SPA.  That would mean that no further deposit was paid by PC to WKW’s solicitors.

(3)  There is no reason why D1 would pay the HK$50,000 through solicitors.  D1’s evidence is that P was in need of money, and D1 therefore paid WLW HK$70,000 in cash.  There is no reason why D1 decided to issue a cheque and paid the HK$50,000 to WLW through solicitors.

120.  With respect, I am not persuaded by these submissions.

(1)  Bearing in mind that the SPA dated 6 January 1992 and the 1992 assignment dated 24 March 1992 were executed and all these were handled by PC on behalf of Ds, naturally PC would have advanced the HK$50,000 to the solicitors representing WKW in the transaction.  To say that PC have returned the HK$50,000 to Ds in these circumstances, with respect, is contrary to common and commercial sense.

(2)  D1 in his oral evidence admitted that the receipt clause concerning the initial deposit in the SPA did not represent the truth.  However, as to why such a receipt clause was inserted into the SPA, D1 was not further questioned on that.  More importantly, as to why the pro forma clause concerning further deposit in the SPA was deleted, D1 was not asked to offer an explanation on this.  It has also not been put or suggested to D1 that the HK$50,000 paid to PC had been returned to him by PC.  In these circumstances, in my view, P should not be entitled to use the SPA as a basis to suggest that the HK$50,000 had been returned to D1.

(3)  As to why D1 only paid an initial deposit of HK$70,000 to WLW in cash but not more, this question is neither here nor there.  D1’s evidence is that WLW requested D1 to pay him as much cash as possible.  D1 did not say that he had agreed to pay all the deposit, ie HK$120,000, by cash.  The PC Receipt is a clear evidence showing that D1 paid HK$50,000 through PC as a further deposit for acquiring the Property.

(4)  The HK$70,000 paid under the PSPA, plus the HK$50,000 as shown in the PC Receipt, would be HK$120,000.  That would be 10% of the total purchase price, ie HK$1,200,000.  Paying a deposit which is equivalent to 10% of the purchase price has been a conventional practice in the Hong Kong property market for a long time.

121.  In respect of the payment of HK$70,000 as recorded in the PSPA, for the reasons set out in the above, I have refused to accept TPW’s evidence.  I am of the view that D1’s evidence on the PSPA is inherently probable and I accept his evidence.

(1)  The existence of the PSPA is an undisputed fact.  Clause 1 of the PSPA reads as follows:

“於1991年12月30日或之前簽署買賣合約/轉名時付HK$170,000 壹拾柒萬元正”

(2)  The only copy of the PSPA produced in these proceedings is the copy kept by D1.  On that copy, D1 wrote a figure “50,000” above “170,000”, and changed “170,000” to “190,000”.  However, no alteration was made to the words “壹拾柒萬元正”.  D1 explained that after having the copy, he himself did some calculations and put down some remarks on the copy.  At that time, he could not image that there would be legal proceedings in future and the copy kept by him would become evidence in the legal proceedings.  So he directly wrote his own remarks on the copy.

(3)  Counsel for P submits that D1 has tried to tamper the evidence by altering the record.  I do not agree.  I accept the explanation given by D1.  The remarks on the copy were written there by him before the commencement of these proceedings, and he had no idea at that time that his copy would become evidence in future legal proceedings.  Further, the figure “壹拾柒萬元正” has not been changed at all.  Anyone can easily see that the subject matter in clause 1 of the PSPA is HK$170,000. D1 has no intention to cover up this.

(4)  Save and except D1’s own remarks in clause 1, it is not disputed that everything in the PSPA was already there when TPW and D1 signed the same.  In my view, the existence of the PSPA is consistent with Ds’ case, ie the 1992 transaction is a genuine sale and purchase.

(5)  In my judgment, the PSPA is a document in support of a payment of HK$70,000 made by D1 as the initial deposit for the acquisition of the Property.

122.  In respect of the HK$400,000 paid by D1 to TSH, for the reasons set out below, I attach weight to TSH SD and TSH WS.  I find that D1 did make payments to TSH for the purpose of acquiring the Property, and TSH agreed that D1 had made full payment to her.

123.  Counsel for P relies upon D1’s reply to the LA Letter made on 5 February 2016 to argue that D1 in fact did not make any payment to WLW in the 1992 transaction.  In that reply.  D1 said:

“本人王人康於2月3日收到貴署寄來檔號 …… 信，關於王良榮要申請法援訴訟本人同我太太許麗娜之事，這一切都是王良榮講大話，胡說八道，欺騙貴署，如下幾點可說明

一. 王良榮原本就是個大騙子，他同本人是親戚姨表關係，他在二十幾年前欠所有親戚，其它公司很多錢，被人告官司敗訴欠律師、政府的錢，跑到美國避債，不敢來香港，到近幾年才來香港，現聽到皇都大廈要收購重建，就捏造事實，利用手段來威脅我 ，想向我要錢。

二. 更好笑是我購買皇都大廈10/F Q室時，業主不是王良榮本人(即時轉名時業主根本不是他)當然沒有收到我的款項。

三. 我買皇都大廈10/F Q室，是向銀行貸款及分期付款，所有手續是在銀行指定的律師辦理，全部有証有據。

四.   蔡淑卿女士是王良榮母親，她現在香港自己生活，她聽到這件事都對良榮非常憤怒，對我講有需時她可為我作証，老人家為替他還債工作到七十多歲，王良榮幾十年來不但沒有供養她 ，反而經常向老人家要錢……”

124.  Counsel for P submits that D1 has made two statements in the reply which are inconsistent with his case, ie (a) WLW did not receive any purchase money; (b) because WLW was not the owner of the Property.  In his submissions, the answers given by D1 under cross-examination concerning this reply is unconvincing.

(1)  When being shown the reply letter, D1 said at that time, he gave the money to WKW and the mortgagee bank (for the purpose of discharging the previous mortgage), and hence WLW did not receive the money.

(2)  D1 was then reminded of his earlier evidence that WLW did inform him that WLW received the money, and that according to his evidence he paid HK$70,000 to WLW in cash.  D1 finally said that his reply to the LA Letter was incorrect, and that reply was sent before he found a lawyer, and he was not clear about the law and the legal procedures.

(3)  However, the matters stated in his reply to the LA Letter are factual matters.  Whether D1 had obtained legal advice at that time is irrelevant.  D1 only had to make a reply on facts which would not have changed even after he found a lawyer.  He did not need a lawyer to teach him how to say the truth.

(4)  D1’s reply to the LA Letter contains an admission by D1 that WLW did not receive the purchase price in the 1992 transaction.

125.  In my view, these criticisms must be viewed in context.

(1)  The tenor of D1’s reply to the LA Letter is that WLW did not have any beneficial interest in the Property.  D1 did make payments to acquire the Property, and D1 paid the purchase price by loans from a bank and made repayments by instalments.

(2)  In saying that WLW was not the owner, D1 put in a remark, ie at the time of the transfer, WLW was not the owner of the Property (“即時[21]轉名時業主根本不是他”).  Reading in context, D1 was saying that at the time of the transfer, WLW was not the registered owner of the Property.

(3)  The reply was written in February 2016.  At that time, D1 had not yet dug out the documents concerning the 1992 transaction.  D1 only found the binder containing those documents in late 2016.

(4)  Without any document assisting him to refresh his memory (including the PSPA), it would be difficult for D1 to recall the details of the 1992 transaction in February 2016.  At the time of this reply, the 1992 transaction would be an event occurred more than 24 years ago.

(5)  While the registered owner of the owner was WKW and it was WKW transferring the Property to him in the 1992 transaction, it would be naturally for D1 to have an impression that the purchase price should have been paid to WKW.

(6)  Viewing D1’s reply to the LA Letter in context, I do not think there is anything in that reply contradicting D1’s case.  It is important to note that in that reply, D1 did not say that he became a registered owner of the Property without paying anything.  On the contrary, D1 was saying that he had paid full consideration to acquire the Property in the 1992 transaction.

(7)  For the reasons above, I am unable to accept P’s submissions on D1’s reply to the LA Letter.

126.  Counsel for P has also made some other criticisms against D1’s evidence.  With respect, I am of the view that there is no merit in those criticisms.

(1)  D1 said that after acquiring the Property, he divided the Property into two units and rented out the 2 units.  P submits that D1’s evidence is contradicted by the Valuation Report, for it has been stated in the Valuation Report that at the time of the inspection, the Property was rented out to a number of tenants.  With respect, there is no merit in this submission.  The inspection stated in the Valuation Report was conducted on 14 December 1991.  The 1992 transaction was only completed on 24 March 1992.  So, the situation of the Property mentioned in the Valuation Report is the pre-completion situation. The situation of the Property mentioned by D1 in his evidence is the post-completion situation.

(2)  P submits that D1’s case on the manner of paying the purchase price of the HK$1.2 million in the 1992 transaction has changed from time to time.  Having considered Ds’ pleadings, D1’s witness statements, and D1’s oral evidence given in the trial, I am of the view that this criticism is incorrect.  The manner of payment in D1’s case is the one set out in [113(17)] in the above at all times.

(3)  P argues that PC was arranged by WLW to act for Ds in the 1992 transaction, and this is consistent with the trust arrangement. With respect, I am unable to accept this submission.  Merely introducing a law firm to Ds to be their solicitors in the 1992 transaction is neither here nor there.  After all, WLW and D1 are relatives and they were on good terms at the time of the 1992 transaction.  Introducing PC to Ds could be merely due to the good relationship between WLW and D1 at that time.  To say that the introduction has provided support to P’s case would be reading too much into the matter.

(4)  P submits that according to the Valuation Report, the marker price of the Property at that time in fact should be HK$1.4 million.  If the 1992 transaction is a genuine sale and purchase, the price of the transaction should be HK$1.4 million and not HK$1.2 million.  With respect, there is no force in this argument.  According to P, the PSPA, the SPA and the 1992 assignment were intended to be instruments facilitating WLW to obtain a bank loan. If P’s case is true, the transaction figure as recorded in these documents should be HK$1.4 million, for that would enable WLW to obtain a larger loan from the bank.  However, as a matter of fact, the purchase price in the 1992 transaction is HK$1.2 million.  The best explanation is that the figure is the price agreed by WLW and D1 at that time.  Since WLW was in urgent need of funds at the time, the agreed price was therefore slightly in favour of the purchaser.

127.  I accept D1’s evidence.

TSH SD and TSH WS

128.  TSH SD was made by TSH on 9 January 2017 in the Kwun Tong office of the Home Affairs Department before a commissioner therein. In TSH SD, TSH said:

“本人蔡淑卿 ，對於王人康同許麗娜購買皇都大廈10/F Q室 ，支付金額清楚，手續完整，時間二十多年，本人兒子王良榮提出訴訟，與事實不符，完全不合情理，本人很心痛，所以自覺得憑良心講公道說話，特此聲明，本人1972年買皇都大廈10/F Q室連兒子王良榮名，各佔百份伍拾業權，絶對不是王良榮所言，受託人，到92年3月，經濟困難，真正成交皇都大廈10/F Q室給王人康同許麗娜120萬元，王良榮兒子以我協商，只有40萬給我夫妻度晚年，我同意40萬港幣向王人康取。

92年4月28日取2萬寄給王良榮，92年4月取5萬7仟元替王良榮還債，因大陸鄉中建大佛廟，鄉中眾人捐，寄王良榮，被他用去，92年5月份取拾壹萬伍仟，我建屋費用，92年9月21日取4萬交黃育根還同鄉會此款王良榮借，92年11月27日取8萬，94年1月4日取8萬合計17萬多少替王良榮還黃家和40萬王人康給多次還我清楚 。”

129.  In TSH WS , TSH gave a detailed account concerning the purchase of the Property in 1972 and the 1992 transaction.  In TSH WS, TSH said:

 “10.約於1991年，原告人致電本人告知本人他在打官司需要資金，故需要出售該物業。雖然該物業的買賣價及裝修費多均是由本人負責支付，但眼見原告人需要資金周轉，本人與原告人達成共識，本人只會收取出售該物業所得金額的其中40萬港元(“該金額”) ，剩餘金額則歸原告人所有。

11.  本人曾經從內地致電身在香港的第一被告人，請第一被告人幫忙詢問本人的兩位鄉親，烏美及秀霞有否興趣購買該物業，但他們對購買該物業都不感興趣。

12.  其後，本人從蔡麗霞獲悉第一被告人有意購入該物業。原告人其後致電本人，告知本人原告人以作價120萬港元出售該物業。本人只記得第一被告人於1992年購入該物業，但不記得第一被告人與第二被告人一起購入該物業。

13.  完成該買賣後，第一被告人分段向本人支付該金額。第一被告人把該金額的一部份寄回內地給本人興建石屋。第一被告人其後依照本人指示作海外匯款及代原告人向其他人清還債項，作為本應向本人支付該金額的餘額。本人前後代原告人向同鄉會、阿群、麗芳、良炳、黃家和、蔡天生及蔡清水等人償還多於40萬港元的債項。

14.  於1993年，第一被告人已向本人全數支付該金額。”

130.  In my view, the contents of the witness statement are consistent with the contents of TSH SD.

131.  TSH passed away on 25 February 2020 at the age of 81.  Counsel for P argues that TSH SD and TSH WS should not be admissible evidence, or alternatively no weight should be given to these documents. Counsel submits that Ds have failed to secure TSH’s live evidence by deposition under Order 39 rule 1, and hence P has been deprived of the opportunity of cross-examining TSH.  Further, there are some significant internal inconsistencies in TSH’s evidence which can only be clarified by cross-examination. In these circumstances, it would not be fair and just if TSH SD and TSH WS are treated as evidence carrying weight in these proceedings.

132.  Counsel for P relies upon Ko Nga Chun v Companhia De Desenvol Vimento Wui San Limitada & Anor[22] in support of his submission.  In that case, DHCJ To refused to admit the hearsay statement of a deceased witness, and said at [20]:

“…… It is important that the evidence of such a crucial witness should be tested by cross-examination. Should a witness of such critical importance be about to demise, the party seeking to rely on his evidence should have taken steps to secure his evidence by deposition under Order 39 rule 1 of the Rules of the High Court. Ko Kan’s death was well anticipated. Yet the Plaintiff failed to adopt this course and thereby deprive the defendants of the chance of cross-examination. Without such cross-examination, the defendants are severely prejudiced. This is an appropriate case which the Plaintiff should have secured the evidence of Ko Kan by Order 39 procedure and to avail her opponent the chance of cross-examination.”

133.  Counsel for P further argues that there are some significant internal inconsistencies in TSH’s evidence which can only be clarified by cross-examination:

(1)  In TSH SD, adding up all the alleged payments made by D1, (ie HK$20,000 on 28 April 1992; HK$57,000 in April 1992; HK$115,000 in May 1992; HK$40,000 on 21 September 1992; HK$80,000 on 27 November 1992; and HK$80,000 on 4 January 1994), the total would be HK$392,000.  The meaning of “合計17萬多少” is not understood.  This requires clarification under cross-examination.

(2)  The purposes of obtaining those payments are contradicted by the preceding paragraph.  In the preceding paragraph, it was said that WLW gave her HK$400,000 for she and her husband to live for the remaining lives (“給我夫妻度晚年)”. However, in the next paragraph apart from the sum of HK$115,000 for the building of a house, all the payments were all for repayment of WLW’s debts.

(3)  In TSH WS, TSH claimed that she repaid the creditors of WLW and the total amount repaid by her was more than HK$400,000.  Most of the creditors mentioned in TSH WS were not mentioned in TSH SD.

(4)  Counsel argues that when the total amount repaid by TSH to WLW’s creditors is HK$400,000, adding the money for building the house (ie HK$115,000) and the money transferred to WLW (ie HK$20,000), the total would be HK$535,000.  This would be much greater than HK$400,000.

134.  Counsel for Ds submit that there is no contextual similarity between the maker of the hearsay statement in Ko Nga Chun and the evidence of TSH in this case.  Counsel submits that:

(1)  In the Ko Nga Chun case, the maker of the hearsay statement is a Mr Ko Kan (“Ko Kan”).  Ko Kan was a party to the action and against whom there was a substantial counterclaim of $25 million.

(2)  The evidence in the Ko Nga Chun case revealed that Ko Kan was “a person of suspicious character. He had every reason to conceal or misrepresent the truth through hearsay statements made for the purpose of the present proceedings”[23].

(3)  Ko Kan did not die a sudden death but died ten years after he was diagnosed of lung cancer.

(4)  The information on Ko Kan’s death was only disclosed 17 months after his death and just 3 months before commencement of the trial. The delay to notify the court and the opponent was unexplained and this casted doubt on the plaintiff’s motive of the delay.

(5)  The plaintiff in the Ko Nga Chun case only filed a hearsay notice for the first time 6 weeks prior to the commencement of the trial, asking for Ko Kan’s hearsay statements to be adduced as evidence at trial. The court was of the view that such conduct might be taken as an attempt to ambush her opponent.

(6)  The court took the view that Ko Kan’s death was well anticipated.  The party seeking to rely on his evidence in fact should have taken steps to secure his evidence by deposition under Order 39, rule 1.

(7)  Exclusion of Ko Kan’s hearsay statements would not cause any prejudice to the plaintiff there, but its inclusion would cause severe prejudice to the defendants in that case.

(8)  However, in this case, unlike Ko Kan, TSH did die a sudden death in February 2020. Prior to that, TSH had only had a fall in December 2019 which did not threaten her life or affect her mental capacity.

(9)  A special feature in this case is that the majority of the witnesses, including the parties in these proceedings, were of advanced age.  P’s witness, TYO, in fact is a very senior lady.  It has never been suggested that all witnesses of advanced age should have made depositions under Order 39, rule 1.

(10)  There has never been any evidence to suggest that TSH would not be an independent witness or of a suspicious character or had any tendency to misrepresent the truth.

(11)  It is plain that the evidence of TSH relates to some important aspects of Ds’ case and its exclusion would cause severe prejudice to Ds and prejudicial to the interests of justice.

135.  I agree with counsel for Ds and accept Ds’ submissions.  I further observe:

(1)  That TSH was of good health at all times and her death in February 2020 was a sudden death is a matter not disputed by P.  TPW, being the daughter-in-law of TSH, would certainly be aware of TSH’s health conditions at all times.

(2)  If TPW (who is the one representing P since 8 October 2018) is of the view that anything said in TSH SD or in TSH WS is untrue or incorrect, TPW has ample opportunities to conduct investigations and to adduce rebuttal evidence before the commencement of the trial.  Being the daughter-in-law of TSH, TPW would certainly be aware of the death of TSH on 25 February 2020 or at a time shortly thereafter.  TSH has given many details of the recipients and the purposes of the payments relating to the HK$400,000 in TSH SD and TSH WS.  If TPW really intends to test the veracity of the matters mentioned by TSH in TSH SD and TSH WS, TPW could contact those relatives mentioned by TSH.  TPW could also make some enquiries to see whether the house mentioned by TPW had been built and was built with a contribution of HK$115,000 from D1.  However, TPW has not done all these.  If there is any evidence which may cast some doubt on the matters said by TSH, I may be reluctant to attach weight to TSH SD and TSH WS without cross-examination.  However, there is no such evidence.

136.  As to the alleged inconsistencies in TSH’s evidence, with respect, I am unable to agree with counsel for P.

(1)  Reading TSH SD in context, the meaning phrase “合計17萬多少” clearly refers to the two loans mentioned in the last sentence in that paragraph.  There is no ambiguity.

“92年4月28日取2萬寄給王良榮，92年4月取5萬7千元替王良榮還債，因大陸鄉中建大佛廟，鄉中眾人捐，寄王良榮，被他用去，92年5月份去拾壹萬伍千，我建屋費用，92年9月21日取4萬交黃育根還同鄉會此款王良榮借，92年11月28日取8萬92年1月4日取8萬合計17萬多少替王良榮還黃家和。40萬王人康給多次還我清楚”(Emphasis added)

(2)  The sentence “92年11月28日取8萬92年1月4日取8萬合計17萬多少替王良榮還黃家和” reveals that the figures mentioned in TSH SD are approximate figures.  Therefore, although the total of these figures is only HK$392,000, it would not be a surprise for TSH to say that in fact D1 has paid her all the HK$400,000.

(3)  In the first paragraph of the TSH SD, TSH was saying that when WLW told TSH that the Property would be sold for HK$1.2 million, WLW told TSH that among the HK$1.2 million, only HK$400,000 would be given to her as living expenses (“給我夫妻度晚年”).  However, subsequently, TSH had to use a significant part of the sum to repay the loans owed by WLW.

(4)  In [13] of TSH WS, TSH did not say that all the repayments to WLW’s creditors mentioned therein are related to the HK$400,000. In that paragraph, TSH is saying that she has helped WLW to make repayments to his creditors, and the total of the repayments was more than HK$400,000.

137.  Having considered all the above, in my judgment, there is no reason to exclude TSH SD and TSH WS from the evidence.  I am of the view that TSH SD and TSH WS should be admissible evidence, and I attach weight to the matters mentioned therein.

D2

138.  D2 met D1 in 1985 and they married in 1986.  She does not have personal knowledge of the matters which are the controversies in these proceedings.  Although she was a signatory to the SPA and the 1992 Assignment, she did not have any discussion with WLW or WKW.  Everything was arranged by D1.

139.  I am of the view that D2 is an honest witness. However, her evidence is of limited assistance in these proceedings.

Lam

140.  Lam impressed me as an honest and forthcoming witness.  Lam’s credibility and reliability are not challenged by counsel for P.  Lam told the court the following in his evidence:

(1)  He was D1’s friend and D1’s god-sister’s husband.  He and D1 became friends since their acquaintance in Fujian in about 1976.

(2)  In about late 1991, D1 approached Lam for help as D1 wanted to purchase a property for self-lodging (自住).  Under cross-examination, Lam was asked the exact wording said by D1.  Lam said “凈係記得佢話佢想買住宅，買自己住既地方，有困難，叫我幫佢”.

(3)  D1 approached Lam and told him that D1 had difficulties in obtaining a mortgage elsewhere due to the old age of the Property.  After hearing this, Lam was minded to take D1 to OUB, for Lam had connections with the bank.

(4)  At the meeting with Manager Tsang in the bank, it was Manager Tsang (not D1) requested Lam to be the personal guarantor of D1.

(5)  Lam agreed to be the personal guarantor of D1, for Lam wanted to assist D1 in purchasing his own property.  Lam had trust towards D1’s personality and humility.

(6)  Lam was present in the meeting with Manager Tsang, in which Manager Tsang orally approved D1’s application for loans.

(7)  In that meeting, Lam had not discussed with Manager Tsang as to whether a valuation report of the Property would be necessary.

141.  Lam also confirmed that he and D1 jointly purchased the Central Property for investment in 1986.

142.  Lam was the last witness giving evidence in the trial.  He was not present in the courtroom at any time before he gave his evidence.  He did not have the benefit of refreshing his memory by hearing the other witnesses’ evidence.  I also note that Lam does not have any personal interest in these proceedings.  He is an independent witness.  I accept Lam’s evidence and attach full weight to his evidence.

143.  In my view, Lam’s evidence has provided solid support to Ds’ case.  Lam’s evidence clearly shows that in late 1991, D1 intended to purchase the Property for self-lodging, and he sought Lam’s help in this matter.  In the light of Lam’s evidence, P’s case is inherently improbable.

MY FACTUAL FINDINGS

144.  Based upon the evidence accepted by this court, I find that before the 1992 transaction, TSH was a co-owner of the Property having beneficial interest therein.  Apart from TSH SD and TSH WS, there is also clear documentary evidence on this point, ie WLW’s admission contained in the LA Letter.

145.  I also find that the 1992 transaction is a genuine sale and purchase as said by D1, and not a trust arrangement as alleged by P.  Apart from D1’s own evidence, this conclusion is also supported by Lam’s evidence and the documentary evidence, including the PSPA, the PC Receipt, and the declarations made by WLW in 2009, 2012 and 2013 in support of his application for public housing.

146.  In my judgment, P’s case is untrue.

DECLARATION AS A DISCRETIONARY RELIEF

147.  P is seeking the declaration as set out in [3] in the above as the relief in these proceedings.  It is well established that declaration is a discretionary relief.

148.  During the trial, I have raised my concern on one matter, ie assuming that P’s case is true, whether I should exercise my discretion in favour of P and grant the declaration sought by P.  For the reasons set out in the above, in my judgment, P’s case is untrue.  Accordingly, this question does not arise.  However, for the sake of completeness, I would set out my observations on the question.

149.  Reading P’s case as pleaded in the statement of claim as a whole, in my view, it is plain and obvious that the purpose of setting up the alleged trust in 1992 is to conceal a valuable asset of WLW (ie the Property), so that WLW’s creditors would not know the existence of that asset and would not be able take enforcement actions against that asset.  If the court grants the declaration sought by P in these proceedings, this may convey a message to the public that evading liabilities by creating a trust of this kind is something condoned, recognized or even protected by the court. That would be extremely undesirable.  In my judgment, the 1992 trust arrangement (if true) is an unlawful arrangement, for the purpose of which is to facilitate WLW to evade the liabilities owed by him to his creditors.

150.  I note that the unlawful aspect of the 1992 transaction has not been raised by Ds in their defence.  Further, the issue has not been explored during the evidence stage.  However, I am of the view that I am still entitled to take the unlawful aspect of the 1992 transaction into account, for the 1992 transaction is ex facie unlawful.  I say so because based upon the matters pleaded in the statement of claim, which are all true according to P’s case, it is plain and obvious that the purpose of the 1992 transaction is to enable WLW to evade the liabilities owed by him to his creditors.

151.  It is well established that the court may decide that a contract is unenforceable by reason of illegality if the contract is ex facie illegal, whether the illegality is pleaded or not.  In Igal Dafni v CMA CGM SA[24], Recorder H Wong SC said:

“31. …… In my judgment, the authorities are clear that it is only in the case where the relevant contract is ex facie illegal – or if it is not, the Court is nonetheless satisfied that all the relevant facts and circumstances bearing on the question of illegality are fully known to it – that the Court becomes entitled to decide that the contract is unenforceable by reason of illegality even though the issue of illegality has not been pleaded by either party. As Lord Moulton pointed out in the case of North Western Salt Company Ltd v Electrolytic Alkaline Company Ltd (supra, at p.476), the position:

‘…… may be shortly put as follows: if the contract and its setting be fully before the Court it must pronounce on the legality of the transaction. But it may not do so if the contract be not ex facie illegal, and it has before it only a part of the setting, which it is not entitled to take, as against the plaintiffs, as fairly representing the whole setting.’

32. The proper approach which the court should adopt in a case where evidence of illegality is before the court but has not been relied on in the pleaded defence is that set out in the judgment of Devlin J inEdler v Auerbach[1950] 1 QB 359, 371, cited by Potter LJ in the case of Pickering v McConville [2003] EWCA Civ 554, at §18, as follows:

‘First that, where a contract is ex facie illegal, the court will not enforce it whether the illegality is pleaded or not. Secondly, that where, as here, the contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be admitted unless the circumstances relied on are pleaded. Thirdly, that where unpleaded facts, which taken by themselves show an illegal object, have been revealed in evidence (because perhaps no objection was raised or because they are adduced for some other purpose) the court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it but, fourthly, that where the court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object, it may not enforce the contract whether the facts are pleaded or not.’

33. It is hence clear that unless a contract is ex facie illegal, evidence of its illegality is not admissible unless the circumstances or facts relied on have been pleaded. In situations where unpleaded facts are revealed or become known to the Court (for example, through evidence admitted for some other purpose) which tend to show illegality, the Court is only entitled to act on them if it is satisfied that all the relevant facts bearing on the perceived illegality are known to it. No finding of illegality should be made on unpleaded facts unless the Court is sure that it has all the relevant facts before it to enable it to see clearly that the contract is in fact tainted with illegality. The following reminder of Devlin J, given in the Auerbach case (at p.371) in regard to the danger for making a finding of illegality on unpleaded facts is worth repeating:

‘… the court must be satisfied of the illegality of the transaction; that means that it must be satisfied that it knows all the relevant facts. On any issue which is raised on the pleadings the court may safely assume that the relevant facts will be brought before it by one side or the other: where notice or the issue is not given on the pleadings, there is a danger that that assumption may break down, and the decision in North Western Salt Company Ltd v Electrolytic Alkaline Company Ltd is a warning against overlooking that danger.’

34. As is often pointed out, in our adversarial system the Court is not on an “independent truth-finding mission” (to use the words of Mr Bartlett in his submissions) but is there to resolve the dispute between the parties in accordance with justice and procedural fairness. Our rules of pleadings provide an important means for safeguarding procedural fairness. …… Where the contract concerned is ex facie illegal, the illegality concerned, as Lord Moulton pointed out in the Electrolytic Alkaline Company case (see p. 475 of the judgment of Lord Moulton), is a question of law and the Court may safely conclude on the face of the contract that it is unenforceable for being illegal or in contravention of public policy. Where the contract is not ex facie illegal, and the Court is not satisfied that it has all the relevant facts bearing on an allegation of illegality before it, it is highly dangerous for the Court to make findings of illegality; and in my judgment it is equally dangerous for it to abdicate its function as a Court of adjudication working within an adversarial system and take on the role of an independent investigator by embarking on an investigation based on unpleaded facts. Illegality and breach of public policy are (except in cases where the contract concerned is ex facie illegal) issues that are often facts-sensitive, and the relevant facts have to be pleaded to enable proper findings of facts to be made (c.f. Chao San San v Worldport Industrial Limited (unrep.) CACV 158/2002, 21 March 2003, at §9 per Yuen JA).” (Emphasis added)

152.  By reason of the matters pleaded in the statement of claim, I am of the view that the 1992 transaction is ex facie unlawful, for the purpose of which is to facilitate WLW to evade liabilities.  I may take this into account in considering in what way I should exercise my discretion.

153.  Assuming that P’s case is true, if I exercise my discretion in favour of P and grant the declaration now sought by P, that may convey an undesirable message to the public as stated in the above.  On the other hand, if I exercise my discretion against P and refuse to grant the declaration, D1 would have a windfall, ie obtaining an interest in the Property without paying anything.  That may also be an undesirable outcome.  In this scenario, how to exercise the discretion to achieve a fair and just outcome would not be an easy task.

154.  However, eventually it would not be necessary for me to consider how to exercise the discretion.  As said in the above, P’s case is untrue.

DISPOSITION

155.  I dismiss P’s claim.

156.  Costs should follow the event.  There be a costs order nisi that costs of these proceedings (including all costs reserved, if any) be paid by P to Ds, to be taxed if not agreed.  Both the factual issues and the legal issues (including the pleadings issue as set out in [15] to [24] above, and the declaration issue discussed in [147] to [154] above) in these proceedings are of some complexity.  In my view, it would be appropriate for me to grant a certificate for 2 counsel in these circumstances.  The costs order nisi would therefore include a certificate for 2 counsel.

157.  Lastly, it remains for me to thank counsel for the helpful assistance rendered to the court.