TANG KA YEE MIRANDA v. TANG FU LIN

HCA 58/2018

[2022] HKCFI 3085

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 58 OF 2018

________________________

________________________

________________

J U D G M E N T

________________

This Dispute, the Parties, and Their Respective Case

1.  This dispute concerns a flat, together with carpark, in Beverly Hill, 6 Broadwood Road (the “Flat”). The Plaintiff (“Niece”) is a niece to, viz., a daughter of an elder brother of, the Defendant (“Aunt”).

2.  Niece and Aunt purchased the Flat at the price of HK$13.38 million in August 2005, registering it in their names as joint tenants. They lived there together with Niece’s grandmother, i.e., Aunt’s mother. Niece moved out around the time of marriage in 2014; Grandmother passed away in 2016.

3.  Aunt served on Niece a Notice of Severance of Joint Tenancy dated 4 December 2017. Niece commenced this action by a Writ dated 9 January 2018.

4.  Niece’s case is that, prior to the purchase of the Flat, she and Aunt had an oral agreement and mutual understanding that they would each contribute HK$3 million towards the purchase price and expenses related to the purchase, Niece would be responsible for the subsequent mortgage repayments and other expenses related to occupation and use, both would have the right to live in the Flat during their respective lifetime, and the Flat would be registered in the form of joint tenancy such that Niece would be able to take the whole interest by way of the right of survivorship (the “Niece’s Version”).

5.  Niece alleges a common intention trust and seeks an Order for sale and distribution of the proceeds in accordance with either the parties’ respective financial contributions towards the purchase price and incidental expenses, or their respective payments towards the down payment and the subsequent mortgage repayments.

6.  Aunt also alleges a common understanding but says it was a different one, namely that she would solely contribute the down payment, Niece would be responsible for the mortgage repayments, they would share equally in expenses, they would hold the legal title jointly but the beneficial interest in equal shares, and that Niece promised the joint tenancy would be severed upon her marriage (“Aunt’s Version”).

7.  Aunt concedes to an Order for sale, but seeks the distribution of proceeds in equal shares.

8.  Aunt originally counterclaimed Niece for HK$474,829, said to be the sum of half of the initial deposit, half of the further deposit, and an alleged deficit from the sale of a flat, together with a carpark, in Y.I., 10 Tai Hang Road (the “YI Flat”) which they had purchased together in May 2001, lived there since, and sold in April 2006. But Aunt abandoned this counterclaim after close of the evidence and before closing submissions.

The Trial and the Parties’ Oral Evidence

9.  Trial of this action took place during the 5^th wave of the covid pandemic. The hearing had to be by video link. Thanks to the assistance of both sides, it went efficiently as well as smoothly.

10.  Niece and Aunt were their respective witness. Both evidently felt strongly about their own version of the oral agreement and/or mutual understanding and against other side’s version – and, at times, against the other side. This is perhaps natural for a person who is speaking from (what he/she believes or has come to believe to be) his/her memory of events and conversations many years ago.

11.  Neither side has produced any document which records or in any way reflects any agreement or understanding as to their ownership of the Flat. This is only expected. Aunt and Niece were close relatives buying the Flat as family for living together as family. Discussion was naturally informal; oral communication would remain oral and not be documented.

12.  Mr Erik Shum (leading Mr Wong Cho Lik) for Niece and Ms Helen Au for Aunt did not take long in cross examination of the other party. Further, what cross examination each conducted appeared more aimed at highlighting certain changes in the opposite party’s storylines and issues of inherent probability, rather than at exposing any material inconsistency or falsehood. Mr Shum and Ms Au are experienced counsel; that neither saw much to go on in their cross examination reflects the difficulty of dealing with this kind of “he said, she said” (Aunt said, Niece said) situation.

13.  Having listened to the witnesses’ oral evidence carefully and considered counsel’s submissions thereon, I do not think it safe to base my decision on an assessment of their credulity. It may well be that a witness genuinely believed she was telling the truth, because she truly felt that the other, a close relative, had wronged her.

14.  Further, one must accept, and expect, that memory fades over time. Details become hazy. But simultaneously the “main story” is often influenced by feelings to harden to give a false clarity. This indeed appears to be what has happened in the present case.

Subtle Changes in Aunt’s Substantive Case

15.  As I have noted above, counsel used their cross examination to highlight certain changes in the other party’s case. Mr Shum pressed the point again in his closing submissions.

16.  Aunt amended her Defence three times and filed two witness statements (all before Ms Au was instructed). A careful reading does show subtle changes in Aunt’s storyline:

(1)  In her original Defence dated 25 June 2018, Aunt pleaded an oral agreement that “[the parties] would hold [the Flat] as joint tenants until [Niece] would enter into a marriage in the future, at which point the parties would modify their status so as to hold [the Flat] as tenants in common in equal shares.”

(2)  In her Witness Statement dated 17 June 2019, the story took on a different colour. She said: “Regarding the ownership of [the Flat], the original intent was … to own it in the way of tenancy in common with each of us holding 1/2 but not joint tenancy. However, in the morning on the day when we were to attend the solicitors’ office to deal with the formalities, [Niece] dashed a glass and let loose a torrent of abuse and questioned why I chose to adopt tenancy in common while [another relative] and I adopted joint tenancy. [Niece] also worried that my other nieces and nephews would share the interests with her in the future. [Niece] demanded to change the form of ownership to joint tenancy. I refused immediately and would rather not purchase the property since tenancy in common was my initial intention … Subsequently … Then, she kept calling to beg me hard and said that she would change the form of ownership … to tenancy in common if she got married. In a moment of weakness, I therefore agreed … on the condition that we were to change the form of ownership to tenancy in common when [Niece] got married that each of us was to hold 1/2 (“the Tenancy in Common Agreement”).”

(3)  In her Supplemental Witness Statement dated 10 September 2019, she seemed to have toned down the story: “… [Niece] and I had always had the intention to jointly purchase a new property, and upon discussion, agreed to hold [the Flat] in the form of tenancy in common, the same as with [the YI Flat] … The major difference in the purchase of [the YI Flat] and [the Flat] was that joint tenancy was chosen for the latter. And I eventually agreed to adopt the form of joint tenancy because [Niece] only told me in the morning on the day of signing the formal agreement that the transaction would be terminated so that the seller could forfeit the deposit if the form of joint tenancy was not adopted. She also begged me hard and promised to change the form of ownership back to tenancy in common after she was married. In any case, the intention of both parties … was that each of us would hold half of the ownership no matter how much monetary contribution was actually made by each party in the purchase of the property.”

(4)  In her Amended Defence dated 14 January 2020, Aunt deleted the averment above and pleaded instead that “[Niece] coerced [Aunt] into accepting the joint tenancy form of co-ownership instead of the tenant-in-common form of co-ownership, not-withstanding [her] concern that [the Flat] would fall into the hands of an outsider should [Niece] got marriage [sic] in the future.”

(5)  In her Second Supplemental Witness Statement dated 21 April 2020, Aunt went into great detail as to the discussions she and Niece had, even setting out numerous conversations verbatim.

(6)  In her Re-amended Defence dated 29 April 2020, Aunt added to her averments that “[Niece] promised that the joint tenancy would be severed after her marriage and coerced [Aunt] into accepting the joint tenancy form of co-ownership instead of the tenant-in-common form of co-ownership, notwithstanding [her] concern that [the Flat] would fall into the hands of an outsider should [Niece] get married in the future; and the parties] would hold the legal title jointly and would share the beneficial interest in equal shares … no matter what form of joint ownership is [sic].”

(7)  She also added a section on “Common Intention Construction Trust” and expressly averred a common intention on the part of both parties that “they would own the legal and beneficial interests of [the Flat] in equal shares.”

(8)  In her Re-re-amended D&CC dated 9 November 2020, Aunt added a paragraph: “Insofar [as] [Aunt] admits that there is a common interest constructive trust, [Aunt] denies that it was in accordance with [Niece’s Understanding] and avers that the mutual agreement, arrangement or understanding between [the parties] was as pleaded … above.”

(9)  She further added that “since she was legally and beneficially entitled to half share of [the Flat], she had the right to dispose of her share as she deemed fit.”

17.  In the original Defence, Aunt’s case was that she and Niece in fact agreed to purchase the Flat as joint tenants but that they also agreed to sever the joint tenancy upon Niece’s marriage. In her Witness Statement, this changed to an intent all along to purchase as tenants in common, but that in the morning of the day of going to the solicitors, Niece threw a fit and demanded joint tenancy which Aunt “immediately refused”, and it was only after Niece’s begging that, in a moment of weakness, Aunt agreed.

18.  In her Supplemental Witness Statement, Aunt’s story became that, in the morning of the day of going to the solicitors, Niece suddenly said the transaction would be terminated if joint tenancy was not adopted and that this, together with Niece’s begging, persuaded Aunt.

19.  Then, in the Amended Defence, Aunt made for the first time an allegation of coercion. Later, in the Re-amended Defence, she added a number of averments that the parties had a common intention for the legal and beneficial interest to be always in equal shares.

20.  In the Second Supplemental Witness Statement, Aunt then set out in great deal the discussions between her and Niece. She even quoted numerous conversations verbatim. This is somewhat surprising, in that the evidence came rather late in the proceedings and, moreover, that she would be able to remember matters in such minutiae.

21.  Lastly, in the Re-re-amended Defence, Aunt averred further that she has the right to dispose of her share however she sees fit.

22.  I agree with Mr Shum that these changes make it harder to see Aunt’s story as reliable. But I do not think that they suffice to make Aunt or Aunt’s case incredulous. Reality is that pleadings and witness statements are usually drafted by lawyers. Differences could be the result of different degrees of diligence in taking instructions, different interpretation or even understanding on the part of the lawyers, different emphasis by either the client or the lawyers, and many other different factors.

23.  I do not think the changes in Aunt’s substantive case here are so inconsistent or significant that they point to falsehood. There are some elaborations or shifts of emphasis in places and over time. But it is difficult to tell whether these are merely a result of the litigation process or signs of creative embellishment, viz., lies.

Inherent Probability of the Rival Versions

24.  Mr Shum submits that Niece’s case is inherently probable and Aunt’s case is inherently improbable. I think both are possible.

25.  Niece’s Version is that Aunt would contribute only half of the down payment plus related expenses (HK$3 million), she would contribute the other half (HK$3 million) and all future repayments of the mortgage (principal sum HK$8 million) as well as relevant expenses (as it turned out, ~HK$200,000 per annum). Aunt then had a right to live in the Flat for life, whilst Niece had the same right plus an expectation to succeed to the whole Flat if, as in the normal course of events, she outlives Aunt.

26.  Such an arrangement strikes me as quite conceivable and even reasonable for an unmarried aunt who was at the time 57 years old, retiring, and living with a (then) unmarried niece who was 38 years old and having an upward career. It is all the more understandable in the context that, as both parties say, Aunt had helped raised Niece; the two were very close.

27.  Aunt’s Version is that she would contribute the whole amount of down payment (HK$6 million), whilst Niece would be responsible for the mortgage and all repayments (principal HK$8 million), and they would share expenses equally. But for Niece’s “coercion” and “begging”, in any event given Niece’s promise to sever and their agreement of equal shares, as between them, they would in effect be tenants in common.

28.  Such an arrangement is also conceivable and reasonable. The one aspect which gives me pause is the alleged promise by Niece to sever the joint tenancy upon marriage. Aunt could not have been concerned that Niece’s future spouse may seek to exclude her from the Flat. He or Niece would not have any power to do so, even if the joint tenancy remains.

29.  It would be rather strange if Aunt were concerned that Niece may inherit the whole Flat from her, not alone but with her future spouse. This is not inconceivable; maybe Aunt deeply disliked the person expected to be Niece’s spouse. But if that were the case, surely Aunt would not have so trusted Niece’s oral promise to sever the joint tenancy upon marriage.

30.  Further, if that were the case, surely it would be more natural for Aunt simply to not purchase a new flat with Niece. In any event, there has never been any suggestion that there was already a person expected to be Niece’s spouse, let alone that Aunt already disliked him. (The evidence is that such a person appeared later, and Aunt was indeed strongly against Niece’s marriage to him.)

31.  The only logical explanation of Niece’s promise is that whilst Aunt did not mind her share passing to Niece, she also wanted it to remain in the Tang family after Niece also passes away. But this would imply that there are relatively young members in the family and that Aunt wanted to benefit them. Alas, the parties have not adduced any evidence on this; the possibility was not canvassed at trial.

32.  In the circumstances, I would not consider Aunt’s Version to be inherently improbable, or any less probable than Niece’s Version. They are both possible.

Consistency with the Payment Records

33.  During pre-trial preparation, I invited the parties to compile a set of agreed facts as to payments. They provided a useful table setting out the payments, their nature, sources, amounts, dates, and other details (the “Agreed Table”).

34.  As the trial upfolded, I pointed out to counsel the possibility that the parties’ rival versions of their common understanding may be best assessed against the evidence on who paid how much of the down payment, the mortgage repayments, and the expenses. I invited specific reference to the Agreed Table. Counsel on both sides in their closing submissions have done so, which is very helpful.

35.  For the reasons which I have explained above on why I do not think the parties’ rival versions could be reliably assessed in other ways, indeed they must now be assessed against the payments. Once this is done, it is readily apparent that Niece’s Version should be preferred. It is more consistent, and Aunt’s Version is inconsistent, with the payment records in at least two major respects.

36.  First, as the available bank records show, and as the parties agree in the Agreed Table, Niece transferred a sum equal to half the down payment and incidental expenses (HK$3 million) into an account at HSBC in her and Aunt’s joint name (the “HSBC Joint Account”) shortly before payment was made, and that this money indeed went to down payment and incidental expenses. In contrast, Aunt is unable to show in the evidence or even just say broadly how, in accordance with her version, she contributed all the down payment.

37.  The best that Aunt and her team could do is to point to certain withdrawals from the HSBC Joint Account in the months before purchase of the Flat, and allege that Niece had made those withdrawals and applied those sums to her later deposit of her half share of the down payment plus expenses into the same account.

38.  This allegation does not further Aunt’s case.

(1)  At least some of the withdrawals were before the parties had identified, let alone decided to purchase, the Flat. It cannot be that Niece made the withdrawals to finance her later deposit.

(2)  It beggars belief that a person would withdraw funds from an account in order to aggregate them and deposit the sum back later as his/her own money. The allegation is fanciful.

(3)  Notations made to the bank records show that Niece operated the HSBC Joint Account for Aunt and withdrawals were made to pay or reimburse herself for paying Aunt’s expenses. Also, Niece’s unchallenged evidence is that she sometimes parked extra funds in the account to maintain a minimum balance for its “Premier” status with the bank. This explains some of the larger deposits and withdrawals.

(4)  In any event, even if one assumes the withdrawals before the purchase to be theft, it would give Aunt a claim against Niece. It would not vitiate Niece’s deposit of her share of the money for the down payment. Even on Aunt’s case, that Niece went through so much trouble to create a deposit would go further to support Niece’s Version, viz., that Niece had to contribute towards the down payment; it undermines Aunt’s Version that she alone was to contribute to the down payment.

39.  The bank records also show, and the parties all along agreed, that Niece paid for all the mortgage repayments (except for one lumpsum repayment, which I will return to discuss further below). This is consistent with both Niece’s Version and Aunt’s Version.

40.  Second, as the bank records show and the parties also agreed in the Agreed Table, Niece paid the expenses related to occupation and use of the Flat. This included for government rent and rates, management fees, water and electricity, gas, repair and maintenance, and development-wide renovation.

41.  Niece did so until this dispute arose. Thereafter Aunt insisted on paying half of the expenses, in accordance with her version of the parties’ understanding. Obviously, one cannot cite that as support for her version. Rather, the pre-dispute payments support Niece’s Version and tend against Aunt’s Version.

42.  For the above reasons, I prefer Niece’s factual case to Aunt’s. I find that the parties had an oral agreement and mutual understanding in accordance with Niece’s Version. I further find a common intention trust.

Aunt’s Reliance on Stack v Dowden

43.  Ms Au spent considerable parts of her opening and her closing submissions on Stack v Dowden [2007] 2 AC 432 and certain authorities following and elaborating upon it. She argues that when family members put their home under their joint names, the law makes a strong presumption that they have equal shares, and disproportionate financial contribution – indeed even no contribution by a family member – does not suffice to rebut the presumption.

44.  Ms Au’s extensive legal research and thorough arguments are commendable. They initially gave me an impression that the relevant legal issues may be difficult.

45.  Further reflection and a rereading of the authorities, however, have led me to conclude that the presumption is of limited relevance to the present case. As Baroness Hale noted in Stack v Dowden at §69:

“In law, ‘context is everything’ and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties’ true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties’ relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses. When a couple are joint owners of the home and jointly liable for the mortgage, the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. The parties’ individual characters and personalities may also be a factor in deciding where their true intentions lay. In the cohabitation context, mercenary considerations may be more to the fore than they would be in marriage, but it should not be assumed that they always take pride of place over natural love and affection. At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.”

46.  Her Ladyship was underscoring a fundamental principle: one must examine each case to decide whether a presumption should apply as to the parties’ shares in a joint tenancy and how circumstances may show the parties to have different intention.

47.  The principle is repeated in Jones v Kernott [2012] 1 AC 776 at §51(2); Mo Ying v Brillex Development Ltd [2014] 3 HKLRD 224 per DHCJ Eugene Fung SC at §44; Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985 (CA) at §5.16 (citing Jones v Kernott); Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 (CA) at §1.6.

48.  For the reasons which I have already explained, I find that the parties had an oral agreement and mutual understanding in accordance with Niece’s Version. The issue of presumption no longer arises. In any event, any presumption would be displaced by the facts as I have found them.

Proportion and Distribution of Proceeds

49.  As I have noted at the outset, the parties are ad idem that there should be an Order for sale of the Flat. I make such an Order. The natural next question is the proportion in which the proceeds should be distributed.

50.  Counsel on both sides agree that I have a discretion to decide what is fair. Mr Shum proposes two options: (1) distribution in proportion to the parties’ contributions at the time of the purchase, whilst counting the mortgage principal sum (HK$8 million) towards Niece’s contribution; and (2) distribution in proportion to the parties’ actual contributions over time.

51.  As it happens, the total of the repayments on the mortgage to date (HK$7.1 million) is numerically close to the principal sum. The two options may lead to rough the same proportions, viz., 78.6% vs 21.4% and 77.1% vs 22.9%.

52.  Ms Au urges for distribution in equal shares as part of her case on Aunt’s Version. In the event that I am against her case, she raises two matters which would affect the question of proportion.

53.  First, a lumpsum partial early mortgage repayment of HK$2.4 million was made on 21 August 2006. Aunt alleged that this amount came from the HSBC Joint Account thus half of it was hers.[1] Niece, however, said that the funds was all hers, comprising HK$1 million of her share of the proceeds from sale of the YI Flat, HK$400,000 from the HSBC Joint Account, plus another HK$1 million directly from herself.[2]

54.  The bank records show[3] that an exact sum of HK$2.4 million was debited from the HSBC Joint Account on 18 August 2006. There is no dispute that Niece made this debit and it went to her. The same amount was paid by Niece as a lumpsum partial early mortgage repayment three days later, on 21 August 2006.

55.  This disproves Niece’s claim that (at least) HK$1 million of the HK$2.4 million came directly from herself.

56.  Incidentally, since the trial I have looked up what days of the week the dates fell on: 16 August 2006 was a Friday, 21 August 2006 was a Monday. This would explain the three-day gap. However, I do not recall whether this point was put to Niece. I therefore do not ascribe any weight to it. As I have found, the matching debit and repayment already disprove Niece’s claim that the HK$2.4 million all came from her.

57.  I have also considered whether this matter of HK$2.4 million should have been pleaded. It does not relate to the substantive dispute (in a manner of speaking, liability) but only goes to relief or proportions in the relief (in other words, quantum), some flexibility and allowance should be given. Aunt raised the point in her written evidence and Niece had ample opportunity to respond.[4] Ms Au also made the point in cross examination; Niece could have explained further in cross examination or re-examination. I am satisfied that it is fair to find against Niece on this matter.

58.  Taking into account the matter and seeing the HK$2.4 million repayment as Niece and Aunt’s contribution in equal shares means Niece has contributed HK$8.9 million and Aunt has contributed HK$4.2 million. The proportion would become 68% to 32%.

59.  Second, Ms Au further submits that some account should be taken of the fact that, even on Niece’s case, Aunt would have been entitled to live in the Flat free of rent for life. I am unable to accede to this.

60.  No attempt has been made by either party to give even a rough estimate of what this entitlement may be worth or how it could be taken into account in numeric terms.

61.  Moreover, it is Aunt’s service of a Notice of Severance which prompted this action and its resultant Order for sale. The evidence shows, and the parties do not dispute, that Niece was content for Aunt to continue to live in the Flat. She even continued to pay for all the expenses.

62.  In the circumstances, Aunt could hardly seek to receive value for the entitlement or expectation that she would have lived in the Flat for longer. After all, she herself ended that entitlement or expectation.

Determination and Costs

63.  For the reasons I have explained above, I make an Order for sale of the Flat and for distribution of the net proceeds to Niece and Aunt in the proportion of 68% to 32%.

64.  I also make an Order nisi that Aunt pays 65% of Niece’s costs, with certificate for two counsel, and to be taxed if not agreed, on the normal basis. In coming to this view, I have already considered (1) the matters in paragraphs 61 and 62 above; (2) Niece succeeded in her main case at trial; (3) in her Writ and original Statement of Claim, Niece sought a declaration that she is the sole beneficial owner, which claim she subsequently dropped; (4) Aunt abandoned her counterclaim and did so relatively late in the action; (5) Aunt succeeded in her argument for a higher proportion than Niece proposed, albeit that the issue did not take up much time during the trial hearing; and (6) Niece has two counsel in a not very complex or heavy dispute, and some reduction in costs entitlement may be due if I am to grant a certificate for two counsel.

65.  It is most unfortunate that close relatives have had to resort to litigation over their home. Life’s savings may be wasted or at least reduced. Moreover, invaluable relationships are further damaged. I hope both Aunt and Niece may put this matter behind them. I urge also their legal advisers to help them do so.

66.  Lastly, it remains for me to thank Mr Shum (together with Mr Wong) and Ms Au again for their sensible and tactful manner in conducting the trial and for their assistance to the Court.