LAI SAU KING v. LAM CHARP FAT

No. A7670 of 1992

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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Introduction

1. This action arises out of the former cohabitation between the parties. It is the plaintiff's case that, during the period of cohabitation, she made available, to put it neutrally, certain sums of money to the plaintiff. She now pursues four separate claims against the defendant : -

First, she seeks a declaration that Shop 6, Ground Floor, Jing Ying Building, Yuen Long (the shop) is held on resulting trust for her by the defendant to the extent of 50%. This on the ground that she contributed some 36% of the purchase price and made other contributions in kind. She also seeks other appropriate declarations and orders.

Second, she seeks a declaration that she is the sole beneficial owner of Flat A, 1st Floor, Shiu Yat House, On Lok Road, Yuen Long (the flat) now held jointly by the plaintiff and the defendant, and other appropriate relief. This on the ground that she contributed the whole of the purchase price of the flat.

Third, she seeks $50,000 as money lent to the defendant.

Fourth, she claims damages of $75,262.07 for breach of an agreement by which she loaned $200,000 to the defendant, the money having been raised by way of mortgage on the flat.

The plaintiff's case

2. The plaintiff gave evidence. She said she first met the defendant when aged 17 or 18 (which would be in about 1965) through their mothers. They became acquaintances. Then the plaintiff went to Holland where she worked hard on a farm and occasionally in a restaurant. She married a Mr. Ottens in 1972 by whom she had a son Wai Chi in November 1972. They separated in 1977 and divorced in 1979.

3. At about the beginning of 1977, the plaintiff set up her own restaurant in Holland, Hong Kong Restaurant. For this purpose, she purchased a house with the help of a bank loan of Dutch Guilders 90,000. The ground floor of the house was turned into the restaurant. For this, the plaintiff obtained a loan from a finance company of Guilders 80,000, secured on the inventory of the restaurant. The plaintiff also expended a sum in the region of Guilders 80,000 from her own pocket. Additionally, she obtained a loan of Guilders 80,000 from her father, the intention being to pay off the loan used to purchase the house. In the event, it was not used for that purpose but for general business purposes and was not required to be repaid. The restaurant made little profit over the years, although the plaintiff was paid between Guilders 2,000 and 3,000 per month as wages. Ultimately, in circumstances which are a matter of dispute, the restaurant was sold in 1980.

4. In 1977, the plaintiff said she met the defendant by chance when, with her younger brother, she went into the defendant's restaurant in Amsterdam to use the telephone. The defendant's restaurant was called Sam Sing Restaurant. Following this, they frequently contacted each other and at the end of the year or at the beginning of 1978 began to cohabit.

5. Next came the purchase of the shop. Because of its importance, I set out the plaintiff's evidence in full : -

"In 1979, I let the defendant bring Guilders 160,000 to Hong Kong to buy property in Hong Kong. We intended to come back to Hong Kong for further business development. We had a discussion. We decided to use our money to buy property in Hong Kong. He brought the money to Hong Kong and afterwards returned to Holland and asked me to go to Hong Kong to look at the site."

6. The plaintiff said that the money she gave to the defendant to take to Hong Kong was money which she had saved. The defendant left the money with his mother in Hong Kong. On the defendant's return to Holland, he said that the plaintiff should go to Hong Kong in 1980 to look at the site. This she did, and visited the site with the defendant's mother where she obtained a catalogue or brochure showing the size of the shop premises. On her return to Holland, she and the defendant decided to buy the shop and asked the defendant's mother to purchase it for them. The price was to be $1,138,380. The defendant's mother was given a power of attorney to act on behalf of the defendant in the purchase of the shop. The shop was registered in the defendant's name only.

7. I should mention here that the plaintiff was asked why the shop was registered in the defendant's sole name. The plaintiff said that she asked the defendant why this had been done and the defendant said : "in future when we get married, you automatically get a share of the property". Mr. Li, for the defendant, at that stage as at other times objected to the evidence because the plaintiff's pleaded case was one of contribution giving rise to a resulting trust. He said that it was not open to the plaintiff to rely upon a promise, an agreement or any other form of factual basis giving rise to the plaintiff's interest other than the one pleaded. Mr. Poon, for the plaintiff, said it was and would remain the plaintiff's case that her interest arose because of contribution. No amendment was made to the statement of claim. Accordingly, I disregard this piece of evidence as I do assertions by the plaintiff that there was an agreement that they were acquiring half shares in the shop.

8. The plaintiff said that she also made decisions about and arrangements for the decoration of the shop including the installation of a cockloft, a staircase and a rolling shutter. She said she paid in arrears 6 months management fees of $100.00 per month for the period February to July 1981. She said that, with the defendant's mother, she negotiated a tenancy agreement of the shop with a Mr. Yeung Kam Sing in 1981. The rent arising from that tenancy was collected by the defendant's mother. After the plaintiff returned to Hong Kong in 1982 to settle there, the defendant's mother intended to return all the rent to her but the plaintiff suggested that the mother keep half of the accumulated rent in the bank to earn interest while the plaintiff received the other half for household expenses. The plaintiff explained that, in mid 1982, she set up her own boutique. From this, she had enough money for her expenses so told the defendant's mother to keep the rent.

9. Between 1985 and 1987, the plaintiff and the defendant sold fruit and snacks from the shop. From 1st September 1987 until 31st August 1990, the shop was let at $22,000 or 23,000 per month. And from 1st November 1990 until 31st October 1993 at $38,000 per month. The defendant collected the rent throughout and kept it all in spite of the plaintiff asking for it.

10. After returning to Hong Kong in 1982, the plaintiff purchased the flat using Guilders 160,000 arising from the sale of her restaurant in Holland. She said she sold the restaurant in 1981 to her younger brother for that sum. She kept the house in Holland which was subsequently let. The tenant paid rent to her bank account from which she authorised the defendant to draw half, the other half being used to pay off the bank loan on the house. The defendant, however, drew more than half and later the tenant stopped paying. Eventually, she sold the house in 1985 by private sale to a neighbour for Guilders 90,000. After paying off the bank, little money remained.

11. The plaintiff said that the flat was put in the joint names of the defendant and herself because the defendant returned to Hong Kong for a visit in June 1982. The defendant said it would be more convenient for him to apply for water and other utilities because the plaintiff was busy with her boutique and the two children. Accordingly, by nomination dated 30th June 1982, the plaintiff nominated the defendant as joint tenant.

12. The defendant had previously been married, that marriage having been dissolved in Hong Kong in January 1980. He had one son by that marriage. After the flat was purchased in mid 1982, the plaintiff said that she, the defendant and their two sons went to live there. Shortly thereafter, the defendant returned to Holland and, until 1985, lived partly in Holland and partly in Hong Kong where he stayed both with the plaintiff and with his mother. The plaintiff looked after the defendant's son until 1983 when the boy went to live with the defendant's mother. After the defendant returned to Hong Kong to settle in 1985, he still divided his time between the plaintiff and his mother because, according to the plaintiff, the defendant could not face the plaintiff because of what he had done with the rent of her house in Holland. Eventually, the defendant moved out of the flat altogether at the end of 1989.

13. In 1987, the defendant told the plaintiff that he wanted to run a business and asked her to obtain a loan of $200,000. An agreement was signed with the Kwang Tung Provincial Bank on 12th March 1987. On 20th March, $200,000 were paid into a savings account opened in the plaintiff's sole name, the flat having been mortgaged to the bank for the purpose of the loan. $100,000 were immediately transferred to the defendant. The defendant was to repay the loan and he kept the passbook for this purpose. In cross-examination, the plaintiff accepted that the defendant decided that he only wanted a loan of $100,000 and that the balance would be used to repay the mortgage, to which arrangement the plaintiff said she agreed. She said that 3 withdrawals in October 1987 of $42,480, $50,400 and $50,430 and re-deposits of slightly increased amounts were 3 forex trades. They were carried out at the request of the defendant who simply gave her the necessary documents to sign because all transactions on the savings account required the plaintiff's signature.

14. The plaintiff said that when the defendant finally left her and the flat at the end of 1989, he returned the passbook to her. She found a balance of only $238.99. She discovered that some $60,000 of the loan had not been repaid to the bank. Through solicitors, she discharged the mortgage by paying the solicitors $75,262.07 which included $69,082.07 for redemption of the mortgage.

15. On 14th March 1988, the plaintiff said that she transferred $50,000 to the defendant's account at his request to help him buy shares. The defendant never repaid that sum.

16. The plaintiff's evidence covered many years and a great deal of ground. She was, accordingly, subjected to a lengthy and probing cross-examination. In this cross-examination 2 important matters were canvassed.

17. First, at the beginning of 1980, the plaintiff became the subject of bankruptcy proceedings in Holland. The genesis of these proceedings lay in the default by the plaintiff's husband in repayment of a bank loan for a car. Although the plaintiff was guarantor of this loan, her liability, according to sealed copies of documents from the District Court in Assen, appears to have arisen from community of property. Although she had been divorced in February 1979, partition of the joint matrimonial property had not yet been enforced. Accordingly, the plaintiff was liable for half of the outstanding loan, her liability being about Guilders 10,500. According to the court documents, she was declared bankrupt on 29th April 1980.

18. In his report dated 6th June 1980, the plaintiff's trustee in bankruptcy (the trustee) recorded that the plaintiff had sold her restaurant to her brother on 24th March 1980, in consideration of the brother making repayments on the restaurant loan. The mortgage on the house was being repaid out of rent paid by the brother to the plaintiff. Neither the bank nor the finance company appeared, according to the trustee, interested in foreclosure.

19. On 19th September , the trustee reported a deficit of about Guilders 12,000 including the car loan. By 14th January 1981, the deficit had risen to approximately Guilders 27,000. However, the trustee anticipated a settlement by virtue of a payment of Guilders 20,000 to be made by her brother on behalf of the plaintiff. On 24th March 1981, the court sanctioned a settlement by which preferential creditors were paid in full and ordinary creditors, who included the finance company which had made the car loan, received 25%.

20. The plaintiff was remarkably unperturbed by all this. According to her, in 1979 or 1980 she was chased for payment of the car loan. She spoke to her former husband, Mr. Ottens, and also to the company's lawyer. Following that, she understood that Mr. Ottens had repaid the loan and returned the car. She was no longer pressed about the bankruptcy proceedings. She did speak to the trustee who asked her if she could pay the debts. She told him she could. There was no enquiry about her financial position and she did not disclose it. Indeed, she said it was not necessary to disclose it because the trustee would soon find out anyway. She said she did not borrow from her family. She only told the trustee she would borrow if necessary. She did not pay her creditors because they trusted her and would only press her after she was declared bankrupt. In any event, when she transferred her restaurant to her brother, she said he would have to be responsible for her debts. Since then, she had not been pressed. She was adamant that she was never declared bankrupt.

21. At that time, both the plaintiff and the defendant were using the same accountant in Holland. For the purpose of these proceedings, both parties made enquires of the accountant. The replies which they received and which were in evidence before me are conflicting. Various suggestions were made as to the reason for this conflict. I am quite satisfied that there is nothing sinister attaching to this conflict. The accountant was trying to provide information about matters which occurred over ten years before. It may be that his records were incomplete and his memory not wholly accurate. Further, in all probability, he was irritated by the demands of two erstwhile clients. It is clear to me that the conflict between the accountant's letters amounts to no more than confusion and that the letters must be given no weight.

22. The documents to which weight must plainly be attached are the court documents relating to the bankruptcy proceedings. From the documents, it is clear that the plaintiff was declared bankrupt and that her ordinary creditors were not paid in full. Yet, if the plaintiff is believed, she had or could have made available funds from which the creditors could have been paid.

23. The second factor was that two documents were discovered during trial. These were two sale and purchase agreements by which the plaintiff's restaurant was sold first to her brother and then by her brother to another. An agreement dated 24th March 1980 recorded the sale by the plaintiff to her brother for Guilders 80,000 of which Guilders 2,666 were to be paid in cash, Guilders 40,000 were to settle a loan made by her brother to the plaintiff in 1977 and the balance was to defray the loan from the finance company.

24. The plaintiff explained that the actual price was Guilders 160,000 but this was stated in the agreement as Guilders 80,000 to avoid the attention of the tax authorities. In any event, the plaintiff said that because her brother had only just come to Holland, he had no money at all to pay her at the time.

25. The second agreement dated 17th April 1981 recorded the sale by the plaintiff's brother, also for Guilders 80,000. The plaintiff said that again the real price was Guilders 160,000. She gave the same reason as before for the difference between the recorded and real prices. She said it was upon this sale that she actually received Guilders 160,000 and was able to buy the flat in Hong Kong.

The defendant's case

26. The defendant's case was somewhat startling to say the least. The defendant said that he went to Holland in 1971 where he worked as a chef until 1975 when he opened Sam Sing Restaurant. He was divorced in January 1980, met the plaintiff for the first time in mid 1981 and at the end of that year began to cohabit with her. If that evidence is true, there can be no question of the plaintiff having contributed to the shop as it had already been purchased a year previously. According to the defendant, he took Guilders 200,000 back to Hong Kong in 1978 which, with his share of his father's estate, was used for the shop.

27. In 1982, the defendant said he returned to Hong Kong with the plaintiff who did not want to stay in Holland. In Hong Kong, they lived with his mother in her flat No. 7C located in the same building as the shop. The defendant returned to Holland where he received a call from the plaintiff saying that she did not get on with his mother and wished to purchase a flat in which to live with their two children. Before the defendant could react, the plaintiff had paid the deposit of $30,000 which the defendant said came from Guilders 20,000 he had left with her for expenses. The plaintiff, however, had no money to complete the purchase and, with his agreement, the balance of $270,000 was provided by his mother from family funds. He has since repaid his mother that sum.

28. In 1982 and 1983, the plaintiff ran a boutique for which she obtained an advance of $44,000 from the defendant's mother. After that the plaintiff invested in a restaurant in Tsim Sha Tsui but withdrew in 1985 when it made no profit. The defendant said he returned to Hong Kong in 1985, recovered possession of the shop from the tenant, Mr. Yeung, who had not paid the management fees and caused some damage. He began the Universal Fruit business in his name although the plaintiff assisted him. Later, he changed the business to 328 Snack Shop in which the plaintiff played no part. That business ceased about July 1987. Soon after, the shop was let.

29. At the time, when the defendant was considering changing to the 328 Snack Shop, the plaintiff said she wanted to go into business with two ex-schoolmates. Between them, they opened Hoi Wan Good Food Shop but after one month, they quarrelled. To help the plaintiff raise the money for that business, the defendant said he agreed to mortgage the flat for $200,000. It was agreed that each would have $100,000 and if both had good business, they would repay the mortgage together. The defendant used the money to change his business. The plaintiff told him that she withdrew large sums for speculation.

30. It is of course not in dispute that several large sums were transferred from the loan passbook into the plaintiff's forex account. It is, however, in dispute as to who instigated these transfers. In any event, the defendant denied that he was responsible and said that he had never had possession of the passbook.

31. The defendant said he repaid the mortgage until January 1991 because "if I didn't, who would". He said he ceased living at the flat since December 1989 when, to avoid a dispute with the plaintiff, he stayed with his mother for two days. When he returned, he found the plaintiff had changed the locks of the flat and he could not gain access. He continued to pay the mortgage thereafter because he still wanted to try and maintain a happy family and anyway his daughter was living there. It is not in dispute that the plaintiff had a daughter by the defendant in 1987. In 1991, however, the defendant said there was a bad quarrel between the parties after which he ceased paying the mortgage.

32. As to the loan of $50,000, the defendant said that in 1987, when he let the shop, he lent money acquired from that letting to the plaintiff for investment. He said she transferred it back to his account in March 1988 when he asked for its return so that he could pay for some shares.

Availability of funds

33. Unlike the plaintiff, the defendant is able to point with some conviction to sources of funds available to him or his mother for the purchase of the shop and flat. First, the defendant said, and there seems no reason to doubt it, that his Sam Sing Restaurant which he opened in Holland in 1975 was very successful. In evidence was a commercially printed postcard of the restaurant from which it appears to be large, well decorated and well appointed. It seems the restaurant was still in business until at least 1989 because the defendant's younger brother, Lam Bo, continued to operate it until then. It was, said the defendant, from the profits of the restaurant that in 1978, he brought Guilders 200,000 from Holland to Hong Kong. The money was left with his mother who suggested putting it into property rather than a bank. As a result, the shop was eventually purchased.

34. It must be said that the defendant brought that money to Hong Kong for the same reason as the plaintiff remitted her funds namely, to avoid coming to the attention of the tax authorities.

35. Second, it is clear that the defendant's family was quite well-off. The defendant's father died in 1974 leaving land. Some land was sold privately and some resumed by the government for cash compensation and Letters B. New Territories Land Office records show that the private sales were worth approximately $1.3 m. The defendant also said, and it was not challenged, that his father left $300,000 cash. The defendant, his mother and sister all said that the family had approximately $2 m. There seems no reason to doubt this.

36. According to the defendant and his mother, the $2 m. was divided into four shares, one for each of the defendant and his two brothers, and one for his mother. The defendant's share, $500,000, together with the sum of Guilders 200,000 would, it seems, more or less have financed the purchase of the shop. The money for the purchase of the flat came from money still retained by the defendant's mother but which was recently repaid by the defendant.

37. The plaintiff's account of the funding of the shop and the flat lacks any support other than that she is named as a joint owner of the flat. That, however, is equally consistent with the parties' relationship as with a contribution to or complete provision of the price. The evidence of the bankruptcy proceedings and of the two sale and purchase agreements of her restaurant tended to undermine the plaintiff's case.

The defendant's credibility

38. There is, however, evidence which in my judgment destroys the defendant's credibility entirely and which goes some way to breathing life into the plaintiff's case. The plaintiff has three photographs (exhibit P1) labelled A, B and C taken, she said, in Holland on the occasion of the wedding banquet of an acquaintance, Madam Yeung Wan Hen (PW2). The plaintiff said that the banquet was held in the defendant's Sam Sing Restaurant on 2nd December 1978, i.e. at least two years before the defendant said that they first met. Photograph B shows the defendant sitting behind PW2, the bridegroom and friends. Photograph C shows the plaintiff, defendant and plaintiff's son Wai Chi.

39. Photographs A and B also show the traditional red wedding cloth signed by guests at a wedding banquet. This too was produced and appears to bear, amongst others, the signatures of the plaintiff, defendant and plaintiff's son.

40. PW2 gave evidence. She said her future husband worked in Sam Sing Restaurant where she occasionally helped him. She saw the plaintiff and the defendant there in 1978 while preparing for her wedding. After the wedding, she went to live in the Sam Sing Restaurant's dormitory where she saw the plaintiff and defendant sharing a room. She confirmed the identity of the persons appearing in the photographs, where the photographs were taken and the contents of the wedding cloth. She said that the defendant in fact helped take some photographs on the occasion. She identified him in court, picking him out of three men sitting together, one of whom was the defendant's younger brother, Lam Bo.

41. The defendant asserted that the photographs do not depict his restaurant, that the man alleged to be him is his elder brother Lam Chak Tai, and that the lady alleged to be the plaintiff is unknown to him as is the child (it is worth noting that, in cross-examination, it was put to the plaintiff that the lady in photograph C was the niece of PW2's husband). He expressed his suspicion about the wedding cloth, saying that it looked in good condition although the inscription of the occasion was of poor quality compared with the guests' signatures. He could not explain why the characters of his name appear on the cloth. He would not however go so far as to say that it was some sort of fabrication.

42. I have no hesitation in rejecting the defendant's evidence on this topic. The photographs were quite clearly taken in Sam Sing Restaurant. Photograph C shows part of a window of the establishment. The "M" of Sam and "S" of Sing can be seen in reverse. Although obscured by a curtain, it is almost possible to read the word "Sam". Further, with other wording on the window, the whole clearly resembles the logo of Sam Sing Restaurant as shown upon the postcard to which I referred earlier. In photograph A, although taken in another part of the restaurant, the word "Sing" and the "S" of Sam are clearly visible on the window in the background. Further, the decoration of the restaurant and the chairs shown in the postcard appear in the photographs. The defendant explained that he copied the decoration from another restaurant and indeed that there is a number of similar restaurants in Amsterdam. I found that explanation rather feeble. In my view, the decorations shown in the photographs and the postcard are identical, down to the last detail including the red lanterns with their yellow tassels shown in the postcard, because the bottom of the yellow tassels appear in the photographs. I have no doubt they are the same restaurant.

43. Notwithstanding the lapse of over 16 years since it is said the photographs were taken, the man in photograph C is plainly the defendant, who has a rather pronounced and distinctive aspect to his left jaw. The lady in photograph C is certainly the plaintiff. It is significant that the defendant's elder brother, Lam Chak Tai, who was identified as the man in photograph C and photograph B, did not give evidence. He was in Hong Kong throughout the period of the trial. Early in the proceedings I was told from the bar that it was unlikely he would be available to give evidence because he was involved in an important ceremony, which I understood to be connected with the birth of his first grandson. In the event, he did not give evidence, partly for that reason; I was told also because he was superstitious and because he was reluctant to give evidence. Mr. Li, of course, was only following his instructions. But I found his instructions far from convincing or satisfactory.

The plaintiff's witnesses

44. I see no reason to believe that PW2 was other than an honest witness who reliably recalled her wedding banquet and the persons there present. She said that copies of photographs taken at her wedding were sent to the plaintiff about a week after the wedding banquet itself. The wedding cloth she brought to Hong Kong when she returned in 1982, where it has been in the custody of her father-in-law until provided to the plaintiff for the purpose of the trial.

45. The plaintiff called two other witnesses in support of her case. Yeung Kam Sing was the first tenant of the shop in 1982 who, I bear in mind, might not have been an entirely disinterested witness, having been sued by the defendant for possession of the shop. He said that he met the defendant's mother at the shop when he went to look at it but she told him she was unable to make any decision without instruction from her daughter-in-law, the plaintiff. That night, he said, he met the plaintiff and her mother-in-law at Lok To Restaurant where agreement was reached. He said in mid August he went to a firm of solicitors to sign the tenancy agreement, where the plaintiff and her mother-in-law were present. He also said that the plaintiff wrote a receipt for the cheque deposit which he then paid and that he was able to recognise her signature on subsequent rent receipts in which the plaintiff was named as landlord. He said he no longer had those receipts.

46. That evidence was substantially in accord with that of the plaintiff. The only real flaw was as to the date when all this took place. In answer to a request for further and better particulars, the plaintiff said that she "negotiated with the first tenant, Mr. Yeung Kam Sing in beginning of 1981, inside and outside the shop . . .". The plaintiff's passport showed and she accepted that she was not in Hong Kong at the beginning of 1981. She was in Hong Kong only between 10th June and 8th July. The tenancy agreement is dated 23rd June 1981. Apart from the evidence of Mr. Yeung, there was nothing to suggest that the date on the tenancy agreement is not the date when it was actually signed. Therefore, it was perfectly possible for the plaintiff to have taken part in the negotiations and in the signing of the tenancy agreement.

47. Mr. Yeung, apart from putting the visit to the solicitor's office in mid August, also said that he did not go in the shop to inspect it. After all this time, I do not find these discrepancies to be of great significance.

48. The plaintiff also called another acquaintance, Madam Wong Kwai Hing. This lady said that she was in the flat at the end of December 1989 when a man came, took some clothing and left behind a passbook. She identified this passbook as the plaintiff's passbook relating to the loan. She also purported to identify the defendant whom she said she had not seen before or since. Mr. Poon for the plaintiff did not seek to rely on that identification. Madam Wong also purported to recall the exact date on which this incident occurred. In the circumstances, I attach little weight to her evidence. Its only significance, it seems to me, is to demonstrate the extraordinary lengths to which the plaintiff must have gone in order to substantiate the story she has allegedly concocted.

49. There are other discrepancies in the plaintiff's case. For example, the plaintiff was adamant that the $200,000 loan was for the defendant only, and that she did not need it for and had no part in the business of the Hoi Wan Good Food Shop. PW2, however, in cross-examination said she had heard that the plaintiff was operating the shop and that the plaintiff had mentioned that she was a partner. That answer, however, was a vague one involving reference to both a fruit shop and a good food shop. I am satisfied that PW2 was simply confused about the businesses which had previously been carried on in the shop which, at the time mentioned to her, would have been of no great significance.

Criticisms of the plaintiff's case

50. I accept that, notwithstanding my rejection of the defendant's evidence, there must still be credible evidence of the plaintiff's assertion, particularly in relation to the shop which is in the defendant's name only. In assessing the plaintiff's evidence upon which her case alone depends, I keep in mind all the factors urged upon me by Mr. Li. In particular, there is effectively a complete lack of any documentary evidence. The plaintiff said that on bringing Guilders 160,000 from the sale of her restaurant to Hong Kong, she deposited it in a bank. The records relating to that deposit she had long since thrown away. In contrast, she was insistent that Lam Bo has in Holland several boxes of her belongings including three boxes of documents which he kept for her after she sold the house in Holland. There is some credence perhaps to be attached to this. Lam Bo brought to Hong Kong, just before trial, the two agreements for the sale of the plaintiff's restaurant in Holland and also some papers relating to the loan made to the plaintiff by her father in connection with her restaurant. Lam Bo denied that he had simply extracted from the boxes documents favouring the defendant. He explained that they were three documents he had found when clearing up for the defendant when the defendant finally left Holland in 1985. He said that there are no other documents and no boxes of belongings. Lam Bo's evidence I am unable to accept for reasons to which I shall come.

51. Mr. Li pointed out that the plaintiff produced one document namely, what is essentially an address book in which there is a note to the effect that the defendant had borrowed (or had had lent) Guilders 160,000 in 1979, also that the plaintiff had lent Guilders 50,000 to her father. I attach no weight to the document as it is not clear when or why this entry was made. Mr. Li, however, made two points on it. First, the use of the word "borrow" or "lent". He said that the plaintiff had in evidence also spoken of lending Guilders 160,000 to the defendant or of the defendant borrowing that sum. He argued that if Guilders 160,000 was given to the defendant, it was given as a loan. Therefore, no questions of contribution and trust arose. At best, he said, the plaintiff would be entitled to seek repayment of the loan, a claim which is now statute barred.

52. I reject that argument. If the plaintiff's evidence is accepted, it is plain she was not using those words in their strict sense but in the sense simply of having transferred money to the defendant.

53. Second, Mr. Li said that it is curious that the plaintiff was lending money to her father when the loan for the restaurant was still outstanding. The plaintiff explained that it was for the purpose of sponsoring a visit by her father to Holland. I find that explanation not to be wholly lacking in credibility.

54. Next, Mr. Li submitted that the bankruptcy proceedings cast doubt both upon the plaintiff's financial position and her credibility generally. He said that it is inexplicable that the plaintiff could be as well off as she said she was at the time and able to pay her creditors in full when the court documents show that she had to borrow money from her family, that the agreement for the sale of the restaurant to her brother recites that she had earlier borrowed from him, and that the ordinary creditors received a dividend of only 25%. Further, the plaintiff's evidence to the effect that she was ignorant of the progress and effect of the bankruptcy proceedings is unacceptable from someone who had been and continued to be a business woman.

55. Mr. Li added that the bankruptcy documents and the two agreements for the sale of the restaurant indicated that, even if the price for the restaurant was actually Guilders 160,000, she would have received nothing like that sum once various commitments had been paid off.

56. Mr. Li then pointed to confusion on the part of the plaintiff. In a letter before action, the plaintiff's solicitors asserted a claim by the plaintiff to the whole of the shop. In contrast, no claim for rent was made until the statement of claim was amended.

57. In relation to the flat, Mr. Li suggested that the plaintiff's explanation of why the defendant's name was added is barely credible, particularly as the defendant was then only in Hong Kong for a short stay and not yet intending to settle in Hong Kong.

58. Finally, Mr. Li said that the plaintiff's evidence about the loan of $200,000 was inconsistent with her pleaded case and anyway incredible. He pointed out that the plaintiff's evidence was that, having arranged the loan from the bank, the defendant said that he only required $100,000, which was transferred to his business at the shop, and that he would use the balance to pay off the mortgage. The plaintiff agreed to that. Mr. Li said the plaintiff's evidence was that there was then a number of forex transactions, using money left in the plaintiff's account, at the instigation of the defendant who prepared the necessary documents which she merely signed. Mr. Li said that the plaintiff is a business woman in her own right who admitted trading in forex and gold and would hardly be amenable to signing without question any documents which the defendant put before her.

The defendant's witnesses

59. The defendant, for reasons which I have already given, was left with little credibility after his effort to try and establish that he had no link or relationship with the plaintiff before 1981. That part of his evidence I reject entirely. The remainder, necessarily, I view with the utmost suspicion.

60. In support of his case, the defendant called four witnesses. His younger brother, Lam Bo, said that he first met the plaintiff only in 1981 in Sam Sing Restaurant. He said he did not know PW2 or her husband. He said that the photographs do not show Sam Sing Restaurant, that the man in photograph C is Lam Chak Tai, while the lady is not the plaintiff. In view of my findings in relation to the photographs, I reject Lam Bo's evidence.

61. Mr. Leung Kwok Choi had been employed by the defendant as a chef in Sam Sing Restaurant for about nine months. He had been approached by the plaintiff and signed a prepared statement in which he said the plaintiff and the defendant met him when he arrived in Europe in 1980. He was called by the defendant. He said that the date given in that statement was incorrect and the date should have been in 1981. In my view, Mr. Leung clearly could not recall exactly when he arrived and was in Holland. He did however say that the plaintiff and the defendant were living together and that he saw the defendant's mother when she visited Holland.

62. The defendant's mother also gave evidence. She is an engaging but redoubtable lady of at least 80. She was plainly determined to protect her family and family interests. Her evidence was emphasized periodically by "I didn't know her at the time" when referring to the plaintiff. She was adamant that she did not know the plaintiff until after the shop had been let for the first time in 1982. Yet, if Mr. Leung is to be believed, she must have met the plaintiff in Holland at least in 1981.

63. The defendant's mother certainly supported the defendant's case. She said she was responsible for buying the shop, and also a flat for Lam Bo, using money in her possession that is, the brothers' respective shares of the estate and, in relation to the defendant, Guilders 200,000 which he had provided. She said she arranged decoration of the shop and also its letting before the plaintiff came on the scene. Later, she advanced $270,000 to the plaintiff to purchase the flat.

64. It is, in my view, on that sum of $270,000 that her evidence finally founders. It was not until late in the defendant's cross-examination that this figure, a precise one, first occurred when the defendant said that he had repaid his mother $270,000 in two instalments, being $150,000 and $120,000, in mid 1994 out of rent collected from the shop. His mother gave evidence to the same effect. She had, however, made a witness statement on 4th August 1994 in which she said that she totally gave the plaintiff $297,000, the plaintiff having paid a deposit of $3,000. She made no mention of any repayment by the defendant. Given the explanation for the sum of $270,000, it is difficult to see why that amount only emerged so late in the case and why the defendant's mother should have referred to a different sum in her statement, a sum which she simply never mentioned at trial. It is no explanation that the mother is an old and illiterate lady. She was quite alert and quick to understand questions put to her. She had no difficulty in remembering figures, dates and other facts when it suited. With great reluctance, I find myself unable to accept her evidence.

65. The only witness called by the defendant who remained undamaged was his sister, Lam Yuk Wah. The importance of her evidence was that the plaintiff was not involved in the purchase, decoration or letting of the shop and that she first met the plaintiff in early 1982.

66. From the plaintiff's evidence and her passport, the plaintiff returned to Hong Kong on 10th February 1982 to settle. She had, however, been in Hong Kong in June/July the previous year by when, there is no dispute, the plaintiff and the defendant were already cohabiting. It seems inconceivable that the plaintiff would not seek to assist the defendant in dealing with the shop even if the defendant had provided the finance, and that she would not have met the defendant's mother and sister at that time.

Evaluation

67. The plaintiff was generally a composed witness who gave evidence of events spanning many years. Her account was an elaborate one. But it hung together and was not, as far as I could see, undermined in any significant or substantial way in a lengthy cross-examination. The dates, sequence of events and other details did not begin to unravel under persistent questioning as they would undoubtedly have done if the story was wholly contrived. The plaintiff's account was, however, exposed to all the criticisms which I have already set out. It is true that the sums which the plaintiff said she was able to save or derive from the sale of her restaurant were substantial, particularly when set against the background of her financial difficulty in Holland. Chinese people, however, have a well deserved reputation for hard work and thriftiness, particularly when working in another country. I see no reason why the plaintiff should not have been able to accumulate funds as the defendant said he did. Both parties said that they tried to avoid the attention of the tax authorities in Holland. The plaintiff is as likely as the defendant to have been anxious to repatriate hard-earned money. She would have had, I have no doubt, no scruples about putting a price lower than the real one in a contract and, I have no doubt, about depriving creditors of their full entitlement.

68. In all the circumstances, after accepting all the justified criticism of the plaintiff's evidence, in particular the complete lack of any documentation to support the financial aspect of it, I am satisfied that the plaintiff was giving an honest account of the financial transactions between her and the defendant. In relation to the shop, I find that the plaintiff did give the defendant Guilders 160,000 which was used as part of the purchase money for the shop. I infer from what passed between the parties at the time and from the plaintiff's activities in visiting the site and the shop generally that it was the intention of the parties that the plaintiff should have a beneficial interest in the shop. That beneficial interest, however, I find to be limited to her financial contribution. I am quite unable to accept that the somewhat loose cohabitation arrangement between the parties, the relatively short period during which the plaintiff looked after the defendant's son or any other activities on her part, somehow increased her contribution to an interest in the shop. Although pleaded, no evidence was led as to the exchange rate between the Dutch Guilder and Hong Kong dollar at the time. Unless the parties can, as they should, reach agreement upon the rate, I propose to order an enquiry for that purpose so that the correct percentage of the plaintiff's contribution can be assessed. Subject thereto, the plaintiff appears entitled to the relief which she seeks in relation to the shop.

69. I also find that the plaintiff paid the whole of the purchase price of the flat. There can be no question in the circumstances but that it was intended that she should be the beneficial owner. Again, the plaintiff appears entitled to the relief which she seeks.

70. I also find that the plaintiff loaned the sum of $50,000 to the defendant in 1987. She is entitled to the repayment of that sum.

71. In spite of Mr. Li's submission, I do not find that the plaintiff has departed from her pleaded case in relation to the loan of $200,000. Accepting, as I do, the plaintiff's evidence, the whole sum was obtained at the request of and made available to the defendant. How the defendant then decided to use the money was entirely a matter for him as long as he honoured the agreement to repay the loan which, in the event, he did not. Accordingly, I find the plaintiff entitled to the damages she seeks.

72. The plaintiff also seeks payment of her share of the rental income of the shop from 16th August 1987 onwards. In fact, the shop was let for three years from 1st September 1987 at a rent of $22,000 per month which continued until 1st November 1990 when, under a new agreement, the tenant paid $38,000 per month. Although that agreement expired in 1993 at the end of three years, the tenant has, according to the defendant, remained in the shop paying the same rent. There being no evidence to the contrary, apart from the plaintiff's suspicion, the proportion of rent payable to the plaintiff must be calculated on the basis of a rent of $38,000 still being payable. I leave it to the parties to work out the exact figure.

Discretion

73. On the assumption of all facts being found against him, Mr. Li fell back upon the principle that he who seeks equity must come with clean hands to receive it, a principle followed by the Court of Appeal in Yim Bo Ying v. Chan Iu Warm (1985) HKLR 354. In that case, the defendant said that he had provided the purchase price but directed the conveyance into the name of the plaintiff to effect a saving in stamp duty. The Court of Appeal denied the defendant relief upon the basis that "there is no resulting trust where it would be against public policy to permit the presumption".

74. Mr. Li relied upon three matters. First, the second sum of Guilders 160,000 at least was brought by the plaintiff to Hong Kong to avoid the attention of the tax authorities. Second, the first sum of Guilders 160,000 was not, when it could have been, made available for payment of creditors in Holland. Third, the mis-statement of the sale price of the plaintiff's restaurant was apt to deceive both the tax authorities and the trustee. Therefore, said Mr. Li, the money contributed by the plaintiff was tainted money, the plaintiff should be denied the equitable relief which she seeks in relation to the shop and flat, and as the Court of Appeal said, "the estate should lie where it falls".

75. Mr. Poon drew my attention to Snells Equity, page 32 paragraph 6, where it is said : -

"The maxim must not be taken too widely; "Equity does not demand that its suitors shall have led blameless lives". What bars the claim is not a general depravity but one which has "an immediate and necessary relation to the equity sued for," and it is not balanced by any mitigating factors."

76. Mr. Poon made two points. First, he said that, unlike the case with which the Court of Appeal was dealing, there was no direct connection between the taint, if it be a taint, affecting the plaintiff's money and the purchase of the shop and flat. Second, the plaintiff's activities were not tax evasion, as I was minded to describe them, but rather the not uncommon practice of a lay person who, having received money which he believes not to be taxable, keeps it secret in order to avoid becoming unnecessarily entangled with the tax authorities.

77. I accept that, in Hong Kong at least, it is not necessary to declare to the tax authorities all sums of money of which a person is or becomes possessed. It seems to me, however, that if a business person seeks to hide substantial savings, the proper and adverse inference to be drawn is that they derived from some income or profit which itself has not fully been disclosed. I would think that a person, like the plaintiff, in business on his or her own account can have few illusions on that score. While what the plaintiff did may not have been tax evasion in its strict sense, it was certainly an evasion of the tax authorities. The same applies to the understatement of the price in the agreement for the sale of the restaurant. The money is plainly tainted.

78. I accept that the taint attaching to the money has no direct connection with the use to which the money was ultimately put. There is, however, a plain connection in that the money affected by the taint was used for the purchase of and effectively has become the shop and flat. If the matters rested there, I would be inclined to deny the plaintiff the relief which she seeks in relation to these two premises.

79. I take into account, however, that the defendant on his own evidence is not blameless in relation to the tax authorities in Holland. Further, the plaintiff has been hardly treated by the defendant in relation to these two premises. The manner in which the defendant has conducted these proceedings, in which he has not only denied any contribution at all on the part of the plaintiff but sought to deny any knowledge of her existence in what can only have been an attempt to try and avoid the loss of any interest in the shop, militates strongly against the defendant. In the circumstances, I am not prepared to deprive the plaintiff of the relief which she seeks.

80. Accordingly, I give judgment for the plaintiff for declarations that the plaintiff is the sole beneficial owner of the flat and that the defendant holds the legal estate jointly with the plaintiff on trust for the plaintiff. I also order that the defendant transfer and vest the legal estate in the flat in the plaintiff.

81. I grant declarations that the plaintiff is beneficial owner of the shop as to a percentage to be ascertained, and that the defendant holds the legal estate in the shop on trust for the plaintiff to that extent. I order that the defendant pay to the plaintiff her share or rental income from the shop calculated with effect from 1st September 1987. I am satisfied that, in principle, there should be an order for sale of the shop, the net proceeds of which are to be divided between the plaintiff and defendant, according to their respective entitlements. I will hear counsel on the precise terms of such an order if the terms cannot be agreed.

82. The defendant is to repay the plaintiff the sum of $50,000 being money lent.

83. I award the plaintiff damages for breach of contract amounting to $75,262.07.

84. I dismiss the counter claim.

85. I make an order nisi that the plaintiff have the costs of the action.

86. I will hear counsel further on the question of interest if this cannot be agreed.

87. There is to be liberty to apply.