NGAI PAK HANG v. 李丹閑 AND ANOTHER

DCCJ3988/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3988 OF 2012

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JUDGMENT

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Background and undisputed facts

1.  The plaintiff is the registered owner of the property known as Flat A on 11^th Floor of Block B Chong Yip Centre, 12-21 Whitty Street, Hong Kong (the “Property”).

2.  The 2^nd named defendant is the plaintiff’s mother’s second elder brother and the 1^st named defendant the former wife of the 2^nd defendant.

3.  On or about 11 July 1980, the plaintiff’s father, Mr Ngai Tang Yiu (the “Father”) purchased the Property as a resident for him and his family. 

4.  The defendants have been residing in the Property since August 2002 (according to the plaintiff) or June 2001 (according to the 2^nd named defendant).

5.  In early 2005, the Father required addition funds for his business and sold the Property to Madam Chan Mei Yin (“Madam Chan”), the wife of the plaintiff’s mother’s third elder brother (the 2^nd named defendant’s younger brother).

6.  On or about 28 September 2011, the plaintiff bought the Property back from Madam Chan.

7.  On or about June 2012, the plaintiff issued notice to the defendants to vacate the Property, the defendants refused to comply and the plaintiff brought this suit.

The plaintiff’s case

8.  On or about June 2002, the Father purchased and moved his family to another property in North Point.  The Property was then vacant.

9.  The defendants asked the plaintiff’s maternal grandmother, the Father’s mother-in-law (the “Mother-in-Law”), to permit the defendants to live in the Property.

10.  The Father agreed to grant the defendants a licence to occupy the Property, subject to 5 conditions, namely: (a) the licence will be terminated by written or oral notice by the Father or his successor in title; (b) the defendants are responsible for all rates, government rents, management fees, utilities charges and all other outgoings; (c) no assignment, subletting or part with possession of any part of the Property; (d) cannot be used for any illegal or immoral purposes; (e) full indemnification in favour of the Father and his successor in title due to any default or neglect by the defendants.

11.  In 2005, the Father required additional funds for his business and sold the Property to Madam Chan.  Madam Chan did not require immediate use of Property and agreed to allow the defendants to continue occupation of the Property under the same terms.

12.  On or about August 2011, the plaintiff purchased the Property back from Madam Chan and the Father asked the plaintiff to allow the defendants to continue their occupation of the Property under the same terms as before.

13.  Later, the plaintiff was getting married and required the use of the Property.  Accordingly, in or about May 2012, the plaintiff gave oral notice to the defendants to vacate the Property.  The defendants refused and therefore on or about 27 June 2012, the plaintiff instructed solicitors to give the defendants written notice to vacate.

The 2^nd named defendant’s case

14.  The 2^nd named defendant failed to file any defence and default judgment was entered against him on 7 May 2013.  The 2^nd named defendant did not participate in this proceeding.  For easy of reference, hereafter I will refer to the 1^st named defendant simply as the defendant.

The 1^st named defendant’s case

15.  On or about June 2001, she came to Hong Kong from the mainland on a two-way permit, with her son, who is a permanent resident.

16.  When the defendant first arrived, she rented a flat on Shun Ning Road and lived there with her son.

17.  The Mother-in-Law, the Father and his wife asked the defendant to purchase the Property because it was in a good school district and the defendant’s son can get into a good school if she moves to the Property.

18.  The defendant then paid the Father RMB800,000 in cash, to purchase the Property.

19.  The defendant alleged that she was deceived into believing she had to live in Hong Kong for 7 years before she can purchase property.  The Father and his wife told her after 7 years, they will transfer title of the Property to the defendant.

20.  The defendant has been living in the Property since then, paid all rates, government rents, management fees, utilities charges and all other outgoings in relation to the same.

21.  The defendant did not ask for the transfer of the title after 7 years because she was afraid if she raise this issue, the family relationship would turn bad.

The claim

22.  The plaintiff claims against the defendant: vacant possession of the Property and mesne profit to be assessed.

The defence and counterclaim

23.  The defendant counterclaimed against the plaintiff for a declaration that the plaintiff holds the Property in trust for the defendant; an order that the plaintiff execute a transfer to the defendant or in the alternative, an inquiry as to the beneficial shares the defendant is entitled to in the Property.

The issues

24.  Mr Fung, for the plaintiff, submitted there are 4 issues at dispute:-

(1)   Whether there was a licence granted by the Father and subsequently by the plaintiff to the defendant under the term of the licence?

(2)   Whether the defendant did give a sum of RMB800,000 to the Father for the purpose of purchasing the Property?

(3)   If so, whether there was a trust created between the Father and the defendant?

(4)   Whether the respective parties are entitled to the relief(s) sought?

25.  I see the issues a little simpler. There is really just one issue in this dispute: Did the defendant paid the Father RMB800,000 as purchase price for the Property back in June 2001?

26.  If I find the defendant did not pay the Father RMB800,000 as purchase price for the Property, it does not matter if there was an expressed licence or not.  If there was a licence, the defendant must vacate upon notice.  If there was no licence, the defendant is a trespasser and she must vacate the Property as well.

27.  If I find the defendant did pay the Father RMB800,000 as purchase price for the Property, by operation of law, there was a resulting trust and the claim must fail.

28.  Mr Fung, on behalf of the plaintiff, has agreed to waived all claims of mesnes profit and therefore if I find the defendant did not pay the Father RMB800,000 as purchase price for the Property, the plaintiff, as owner of the Property is clearly entitled to possession of the Property.  If I find the defendant did pay the Father RMB800,000 as purchase price for the Property, the defendant is clearly entitled to the first 2 relieves sought in the counterclaim.

29.  The only issue left is in defendant’s alternative remedy of an inquiry as to her beneficial shares.  The defence never suggested that the defendant only paid part of the purchase price for the Property.  In fact, the defendant pleaded that the market value of the Property at the time of payment was only HK$680,000.  Mr Sujanani, for the defendant, did not make any submission on the alternative relief and I treat that as having been abandoned.  Accordingly, I can see no possible issue at dispute on the alternative remedy in the counterclaim.

30.  As I have already stated above, I see only one issue in this matter: Did the defendant paid the Father RMB800,000 as purchase price for the Property back in June 2001?

31.  This is of course a question of facts only.  There are no legal issues, complicated or otherwise, involved.

32.  As usual, the basic burden of proof is on the plaintiff.  Here, the plaintiff is the registered owner of the Property is not disputed.  As the registered owner, the plaintiff is prima facie entitled to possession of the Property.

33.  Mr Sujanani seeks to discredit the plaintiff’s case on two grounds: First, the Father only received a primary 5 education and lacks the legal knowledge to set out the sophisticated conditions of the licence.

34.  True, the Father did not have the necessary legal skill to spell out the conditions stated in his witness statement.  These conditions were clearly put into legal language by the plaintiff’s solicitors.  This however, does not mean his statements were necessarily untrue.  In fact, these conditions need not even be expressed.  The licence was a gratuitous one, all of these conditions can be easily implied. 

35.  Second, Mr Sujanani argued the Father and the plaintiff were not trustworthy witnesses because in both the Father to Madam Lee and the Madam Lee to plaintiff purchase and sale agreements, the vendors gave covenant of vacant possession knowing they could not do so because they have already granted licenses to the defendant.

36.  Unlike his first allegation, where Mr Sujanani submitted the Father lacks sufficient legal knowledge, in the second allegation, Mr Sujanani submits the Father and the plaintiff had sufficient legal knowledge to understand the covenant for vacant possession and knowingly lied in the purchase and sale agreements.

37.  Realistically, neither the Father nor the plaintiff, who received a form 5 education, would have sufficient knowledge about any of the covenants contained in a purchase and sale agreement. Even if the covenants were explained to them, I doubt they will have the foresight to raised the license with their solicitors and ask him or her to reflect it on the purchase and sale agreements.  Like most, if not all, vendors and purchasers, they most likely just followed their solicitor’s instruction, signed at the dotted line and left the office.

38.  The fact that there was a conflict between the vacant possession covenant in the purchase and sale agreements and the licences granted to the defendants, did not mean the father or the plaintiff were untrustworthy witnesses.

39.  Having considered both of Mr Sujanani’s arguments, I find plaintiff has satisfied his basic burden of proof.

40.  The burden now shifts to the defendant to prove her case.  As I see it, the defendant’s burden can be separated into 3 steps: (1) Around June 2001, she had RMB800,000 in cash; (2) paid the RMB800,000 to the Father; and (3) as purchase price for the Property.

(1) Around June 2001, the defendant had RMB800,000 in cash

41.  In paragraph 2 of her witness statement, the defendant stated she came to Hong Kong around June 2001 with her three years old son to live with her husband.  When she came to Hong Kong, she carried the RMB800,000 in cash, which was all of the money she had at the time, in a suitcase.

42.  In her testimony, the defendant further stated that before 2001, she has already been in the antique trading business for sometime and the RMB800,000 was from the profits of her business and from the sale proceeds of her Mainland property.

43.  Mr Fung argued that the defendant’s story has a number of problems: First, in her witness statement, the defendant stated she came to Hong Kong to live with her husband, but in court, she testified that when she first came she was not living with her husband.  In fact, she did not even know where her husband was living at the time.  Just he lived or worked in Sha Tin.

44.  Second, in her witness statement, the defendant stated she came to Hong Kong to live with her husband at the Property.  In court, however, the defendant testified that she first rented a flat on Shun Ning Road and then the Mother-in-Law, the Father and his wife came to the Shun Ning Road flat to get the defendant to move to the Property.

45.  Third, in her witness statement, the defendant stated the Father was able to purchase another property in North Point after receiving her RMB800,000.  When testifying in court however, the defendant stated the Father have already moved into the new North Point home before she gave him the RMB800,000.

46.  Fourth, the defendant testified in court that she only had RMB800,000 with her when she first came to Hong Kong; but when asked how she came up with the deposits for the Shun Ning Road flat, the defendant changed her story and said she also had several tens of thousands of dollars in her purse for spending money.

47.  Fifth, In her witness statement, the defendant testified she did not ask anyone for the transfer of title of the Property after 7 years; but in her testimony in court, the defendant clearly described she asked the Mother-in-Law to transfer title of the Property to her after 7 years and how the Mother-in-Law answer her request by saying she can live in the Property for 100 years.

48.  Sixth, in her testimony in court, the defendant alleged the Father needed to borrow RMB800,000 from her and she agreed to do so as long as she could live in the Property.  Although the defendant later returned to her original position that the RMB 800,000 was to purchase the property, this deviation shows the defendant’s story was unreliable.

49.  I agree with all of Mr Fung’s observations.

50.  In addition, I will also add 2 observations: First, in view of the danger of thief and confiscation by Mainland authorities (transporting this large a sum of cash out is prohibited by Mainland law), it does not make any sense for the defendant to take such a big risk and transport RMB800,000 to Hong Kong in  a suit case..

51.  Second, I understand and accept that real property transactions on the Mainland may not be as organized as it is in Hong Kong; however, I do not believe it would be conducted without any documentation.  If the defendant obtained part of the RMB800,000 from sale of her Mainland property, there must be some record of the property transaction and the money transfer.  Yet, nothing was filed by the defendant to prove she sold her property and obtained money from the sale before she came to Hong Kong.

52.  Having considered all of the evidence, the plaintiff’s, the Father’s and the defendant’s testimonies, my conclusion is the defendant is an untrustworthy witness.  Since except for the defendant’s own testimony, there is no evidence that the RMB800,000 ever existed,  I therefore find as a matter of fact, around June 2001 the defendant did not have RMB800,000 in cash.

53.  That should be the end of the defence; however, for completeness, I will also analyse the other two steps, as these analysis further reinforce my finding that the defendant did not have RMB800,000 cash in June 2001.

(2) Paid RMB800,000 to the Father

54.  Here, I will assume I found the defendant had RMB800,000 in cash around June 2001 (which is of course is not my finding).

55.  The defendant’s story is after arriving in Hong Kong sometime in June 2001, she first rented a flat in Shun Ning Road and was happy with the flat; however the mother-in-law came to her and said she should move to the Property because it is in a good school district.  Trusting the mother-in-law, she handed over all of her worldly possessions, RMB800,000 in cash to the Father and his wife.

56.  There are many problems with the defendant’s story.

57.  First, at the time she arrived in Hong Kong in June 2001, she is already estranged from her husband.  Why should she have trusted the Mother-in-Law to the point of giving over all of her worldly possessions to the Father and his wife?

58.  I understand the defendant testified that because they were “family” therefore she believed the Mother-in-Law’s words; but at the time, the defendant was already estranged from her husband, they were not living together.  The defendant didn’t even know where her husband was living.  Under that kind of circumstances, it is difficult to believe anyone would entrust all of one’s possession simply on the Mother-in-Law’s words.

59.  Second, during questioning by Mr Fung, the defendant testified she did not ask for a receipt after she handed over the RMB800,000 to the Father, because they were “family”.  However, the defendant also testified that she has had many years of business experience before she came to Hong Kong and had multi-million dollar dealings with international auction houses like Sotheby’s and Christie’s.

60.  Even if I believe the defendant’s trust in the Mother-in-Law was reasonable, which is not my finding; I find it in creditable an experienced business woman like the defendant would have not asked the Father for a receipt after handing over RMB800,000.

61.  After all, the defendant and the Father and his wife were practically strangers, having only met him once or twice before June 2001 and when the Mother-in-Law was not present when the RMB800,00 was handed over to the Father, it would have been natural for the defendant to ask the Father for a receipt.

62.  Third, when asked by Mr Fung, why she did not insist on transfer of the property after 7 years, the defendant said she did not insist on the transfer because the Mother-in-Law told her it may create trouble in the family.

63.  The problem with this part of her story is, based on the defendant’s testimony she has had no contact with the Father since June 2001.  The family, at least between the defendant’s side and the Father’s side, were not close.  Why should the defendant be concerned with trouble within the family, when she was merely asking for what she paid for and was entitled to?  The defendant’s explanation simply did not make any sense.

64.  Finally, when questioned by Mr Fung, the defendant stated the husband knew nothing about her purchase of the Property, the RMB800,000 payment and the problem with getting title to the Property.

65.  This is again very difficult to believe.  The defendant testified that although she and her husband lived together in the Property after June 2001, they lived separate and apart, therefore she never discussed the purchase of the Property, the payment of the RMB800,000 or the trouble she had in getting title to the Property after 7 years with him.

66.  The problem with this explanation is this matter concerned a transaction between the defendant’s husband and his brother-in-law. Even if the defendant and her husband were not on good terms, there was bound to be some discussions or conversations on this topic.  Not having discussed it simply makes no sense.

67.  This is especially true after the Mother-in-Law refused to transfer title of the Property after 7 years.  To say none of these were ever discussed with the husband is simply unbelievable. 

68.  Having considered all of the evidence, even if I found the defendant had RMB800,000 with her in June 2001 (which is not my finding), I would have found as a matter of fact, the defendant did not pay the Father RMB800,000.

(3) As purchase price for the Property

69.  I am again assuming I found the defendant had RMB800,000 around June 2001 and she paid the Father RMB800,000 (which are of course not my findings), the defendant must still prove the RMB800,000 was paid as purchase price for the Property.

70.  Here the defendant runs into other problems; in her witness statement, the defendant stated she knew in June 2001, the Property had a fair market value of HK$680,000, yet she handed over RMB800,000 to purchase it.

71.  At the conclusion of the trial, I asked the parties’ solicitors’ to submit evidence on the exchange rate between HK$ and RMB in 2001. Messrs S Cheng & Yeung, solicitors for the plaintiff submitted by letter that the rate was 1.0608 in 2001 and 1.0607 in 2002. Clearly there would have been fluctuations from time to time, but it is safe to assume the rate did not change much and for this dispute, I will assume the HK$ and RMB was at par around the relevant time.

72.  So the defendant’s story was she knowingly agreed to pay RMB120,000 above market value for the Property and when asked why, her answer was: it does not matter, because they were “family”.

73.  As I have already pointed out above, the defendant and the Father was not close, it is simply not logical for anyone to knowingly agree to pay close to 18% above market value for a Property, just because they were “family”.

74.  In addition to this over payment, during her cross-examination, the defendant testified the Mother-in-Law offered her RMB300,000 to vacate the Property and she accepted the offer.  It was the plaintiff’s fear the defendant would refuse to move out after receiving the money that doomed the deal. 

75.  If the defendant did pay RMB800,000 for the Property, I find it unbelievable that she would even consider accepting RMB300,000 to give up her rights to the same.

76.  Also, during her testimony, the defendant for the first time, stated the Father wanted to borrow the RMB800,000 and the defendant agreed but she wanted to take the Property in return.  Although later, she denied the RMB800,000 payment was a loan, but was purchase price for the Property.  The defendant has given two different purposes for the RMB800,000: one, as a loan and the other, as purchase price of the Property.

77.  The defendant’s story simply has too many inconsistencies to be believable.  Accordingly, even if I found the defendant had RMB800,000 around June 2001 and she paid the Father RMB800,000 (which are of course are not my findings), I would have found the RMB800,000 was not payment for the purchase price for the Property.

78.  Judgment is therefore for the plaintiff.

79.  The counterclaim is dismissed.

Orders

(a) The 1^st named defendant do give the plaintiff possession of the premises described as: Flat A on 11^th Floor of Block B, Chong Yip Centre, 12-21 Whitty Street, Hong Kong.

(b) Costs of this action be to the plaintiff, to be taxed on party/party basis, if not agreed.