LEUNG YEE SHAN AND OTHERS v. LEUNG KIN WING

DCCJ 1693/2025

[2025] HKDC 1208

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1693 OF 2025

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DECISION

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INTRODUCTION

1.  Before me is the summons filed by the Plaintiffs (“Ps”) on 21 May 2025 for default judgment to be entered against the Defendant (“D”) for:

(a)  A declaration that D holds the property situated at Flat 11, 20^th Floor, Block B (Chui Ho House), Sheung Chui Court, No 376 Sha Tsui Road, Tsuen Wan, New Territories, Hong Kong (the “Property”) on trust as a trustee for and on behalf of Ps in equal shares;

(b)  Further and/or other relief as the Court deems fit; and

(c)  Costs of this action (including this application) be paid by D to Ps forthwith, to be taxed if not agreed.

2.  Ps’ summons was made under O 13 r 6 and O 19 r 7 of the Rules of the District Court (“RDC”) (“Summons”).

3.  After Ps served their Writ of Summons with indorsed Statement of Claim dated 21 March 2025 (“SOC”), D has not filed or served any notice of intention to defend and defence.

4.  D was absent at the hearing. I have reviewed the affirmations of service of Fung Lok Wai. I am satisfied that D has been given proper notice of the hearing and it is expedient to proceed to hear Ps’ application notwithstanding D’s absence, pursuant to O 32 r 5(1) of RDC.

5.  I took the view that declarations vis-à-vis proprietary interests in land should never be granted hastily (see for eg Chan Kang Hung Bovis v Chan Kang Kong, the executor of the estate of Chan Sun Chi, deceased [2023] HKDC 933 (unreported judgment of DDJ Kenneth KY Lam at §5). I reserved my decision on the matter.

6.  In summary, I grant the declaration sought by Ps for the reasons stated below.

APPLICABLE PRINCIPLES

7.  As D has not filed any defence, Ps are entitled to apply for judgment pursuant to O 19 r 7 of the RDC.

8.  In Cheung Sai Lon v Cheung Sai Ha and another [2020] HKCFI 2551 (unreported judgment of Coleman J), it was observed that the power to give default judgment in respect of declaratory relief is discretionary. In the exercise of that discretion, it is to be recognised that it is not the normal practice of the Court to make a declaration without trial. This is not a legal or inflexible rule, but rather a rule of practice, which need not be followed when the plaintiff has a genuine need for declaratory relief and justice would not be done if such relief were denied (at §31). See also Times Square Ltd v Lee Kwun Kit [2020] HKCFI 438 at §14.

9.  In an application under O 19 r 7, the Court cannot receive any evidence but must consider whether to give judgment according to the pleadings alone. The statement of claim must show a proper case for the order the applicant seeks to obtain, and the Court shall give such judgment as the plaintiff appears entitled to on the statement of claim only, and only if the pleaded facts give rise to the relief sought (Cheung Sai Lon at §30).

10.  Ps case is based on a resulting trust and in the alternative, a common intention constructive trust.

11.  Ps submit that if the Court is satisfied that the Resulting Trust is established based on pleaded facts about contribution of down payment and repayment of monthly mortgage loan, Ps will not pursue the relief to declare the existence of Constructive Trust 1 and Constructive Trust 2. However, as submitted by Mr Lau at the hearing, Ps primary submissions are based on a common intention constructive trust, and in the alternative, a resulting trust. As between resulting trust and constructive trust, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust: Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 per Lam VP at §1.3; Tam Sui Lim William v Fung Ho [2023] HKCFI 1583 per Ng J at §28.

12.  In Cheung Sai Lon v Cheung Sai Ha & Another [2020] HKCFI 2551 Coleman J stated the principles for a common intention constructive trust (at §§15-18):

“15. Where a common intention constructive trust has arisen, ownership in the property is split into legal ownership and beneficial ownership. The trustee holds the legal title on trust for the beneficiary: see, for example, Luo Xing Juan Angela v Estate of Hui Shui See Willy, deceased [2009] 12 HKCFAR 1 at §38.

16. Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the three elements of (1) the common intention, (2) the claimant’s detrimental reliance on their common intention, and (3) the unconscionability of the property owner departing from it.

17. The burden of proving each element of common intention, detrimental reliance and unconscionability is on the person seeking to show that the beneficial ownership is different from the legal ownership. The focus is on the intention of the parties at the time of acquisition of the asset. Contemporaneous conduct is inherently more likely to be a reliable indicator of intention, to be given greater weight, than are words and conduct after the event.

18. Common intention can be expressed or implied. It can be deduced or inferred objectively from the parties’ conduct. As a matter of common sense, it is easier to infer such an intention prior to the acquisition of property which results in an obvious change in legal ownership (rather than after such an acquisition where there is no change in legal ownership and a change in beneficial ownership is not otherwise apparent).”

(see also Lam Ka Kui v Choi Yuen Ling [2020] HKCFI 2647 per Coleman J at §§8-12; Pang Kit Ping, the administratrix of the estate of Chan Yuk Ho, deceased and another v Chan Chin Bong Dominic [2025] HKCFI 974 DHCJ Chow at §9).

13.  In Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at §§2.3-2.4, Cheung JA identified two situations where a common intention constructive trust may arise. The first is where at any time prior to acquisition, or exceptionally at some later date, there is an agreement, arrangement or understanding reached between the parties on how the property is to be held beneficially. The finding of such an agreement or arrangement can only be based on evidence of express discussions between the parties, however imperfectly remembered and however imprecise their terms may have been. The second situation is where there is no evidence to support a finding of an agreement or arrangement on the beneficial ownership of the property, and the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention on the beneficial ownership of the property and as the conduct relied on to give rise to a constructive trust. In this situation, direct contributions to the purchase price by the party who is not the legal owner, whether initially or by mortgage instalment payments, will readily justify the inference necessary to the creation of a constructive trust.

14.  A resulting trust arises under two circumstances as set out in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 708A‑D, per Lord Browne‑Wilkinson (as referred to in Tam Sui Lim William v Fung Ho [2023] HKCFI 1583 at §31):

“Under existing law a resulting trust arises in two sets of circumstances: (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter‑presumption of advancement or by direct evidence of A’s intention to make an outright transfer … (B) Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest ... Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust) but gives effect to his presumed intention.”

15.  Contributions to the purchase price may be gifts or loans, but the ancient rule of equity is that normally, in the absence of evidence to the contrary, the law will presume a resulting trust, that is to say, the acquisition of a beneficial interest in the property by the person providing all or part of the purchase price, in proportion to his contribution. Or the parties may have had a common intention that the person providing the funds was to have a beneficial interest and may even have executed a deed of trust saying what that interest should be: Cheuk Shu Yin v Yip Po Wan and another [2013] 1 HKLRD 656 at §21.

16.  Lord Hoffmann in the Court of Final Appeal in Cheuk Shu Yin v Yip Po Wan and another [20l3] 1 HKLRD 656 at §32 observed that there had been several cases, going back to 1993, in which judges of first instance had assumed that in principle HOS flats could be subject to constructive or resulting trusts in favour of contributors to the purchase price. He further observed at §33 that it was in the public interest that persons with incomes so low that they are not only eligible for a HOS flat but unable to pay the deposit or keep up the mortgage payments out of their own resources should be able to buy a flat with the assistance of their family or friends, on the basis that the latter will have beneficial interests which they can realize when the restriction period has expired.

17.  The onus is on Ps to show that they have any beneficial interest in the Property at all based on the pleaded facts in the SOC. This court should first examine the SOC in support of Ps principal case of common intention constructive trust and if necessary, their fallback position of resulting trust: Tam Sui Lim William v Fung Ho [2023] HKCFI 1583 at §33.

DISCUSSION

18.  I have examined the SOC. I am satisfied that it makes out a strong and obvious case on common intention constructive trust and in the alternative, resulting trust on the pleadings.

19.  The Father, the Mother and D lived in a public rental housing unit in Kwai Shing Estate West (葵盛西邨) registered in the name of the Father (“Unit”) (at §4.1).

20.  The Father intended to surrender the Unit to the Housing Authority in exchange for the entitlement to purchase the Property at the consideration of $2,693,900 under the Home Ownership Scheme (at §4.2).

21.  After discussion, the Father, the Daughters being the Ps, and D orally agreed (the “Oral Agreement”) (at §4.3) that:

(a)  Ps should be responsible for contributing in equal shares (“Contribution”) to the payment of legal costs, renovation, refurbishment, expenses, the down payment and all mortgage loan repayments of the Property.

(b)  The Property would be registered in the name of the Father and for the purpose of facilitating the mortgage application, also in the name of D as joint tenants.

(c)  The Contribution was not a gift or loan to the Father or D.

(d)  The Father and the Mother would live in the Property unless the Property was sold with the consent of Ps.

(e)  Due to this arrangement, the Father or D would not include the Property in any will that may be made by the Father or D in the future.

22.  It is Ps case that it was the common intention (“Common Intention”) among the Ps, the Father, and D that (at §4.4):

(a)  The Father and D as the joint trustees would hold the Property on trust for and on behalf of Ps in equal shares.

(b)  Further and/or in the alternative, after the death of the Father, D as the trustee would hold the Property on trust for and on behalf of Ps in equal shares.

23.  By an Assignment dated 24 July 2017, the Property was assigned to the Father and D as joint tenants (at §5).

24.  By a Legal Charge dated 24 July 2017, the Property was charged to Bank of China (Hong Kong) Limited (“BOC”) for a mortgage loan of $2,519,537.33 (“Mortgage Loan”). Since then, the monthly instalments of the Mortgage Loan were automatically deducted from cash balance of the account (“Repayment Account”) in the name of the Father and D maintained with BOC (at §6).

25.  It is Ps’ case that a resulting trust (“Resulting Trust”) or common intention constructive trust (“Constructive Trust 1”) was established or created in which the Father and D as the joint trustees held the Property on trust for and on behalf of Ps in equal shares. Following the death of the Father as one of the trustees, D as the other trustee held the Property on trust for and on behalf of Ps in equal shares (at §7).

26.  Further and alternatively, a common intention constructive trust (“Constructive Trust 2”) was established or created in which after the death of the Father, D as the trustee held the Property for and on behalf of Ps in equal shares (at §8).

27.  When asked about whether it was the first or second situation of common intention constructive trust referred to in Primecredit, Mr Lau submitted that it could fall under both limbs. In this case, given Ps pleaded case, it is the first situation that constitutes the common intention constructive trust, namely there is an agreement, arrangement or understanding reached between the parties on how the property is to be held beneficially – namely the Oral Agreement and Common Intention as pleaded at §§ 4.3 and 4.4 of the SOC.

28.  I accept that the pleaded facts support the causes of action relied upon for common intention constructive trust and resulting trust.

29.  Regarding common intention construction trust, the three elements, namely (1) the common intention; (2) Ps’ detrimental reliance on their common intention; and (3) the unconscionability of the Property owner (D) departing from it have all been pleaded at §§4.4, 10, 11, 12, and 19 of the SOC.

30.  I have set out §4.4 above. §§10-12 of the SOC pleads the detrimental reliance suffered by Ps in the form of contributions in equal shares towards various payments made by the agents of Ps – consisting of the downpayment for the purchase price of the Property, legal costs incurred in the purchase of the Property, and deposits - used for payment of renovation, refurbishment and expenses of the Property, and monthly mortgage repayments. In §19 of the SOC, Ps plead that it is unconscionable for D to depart from the Oral Agreement and/or Common Intention.

31.  Regarding Ps’ alternative case for resulting trust, Mr Lau submitted that it was situation A of the two situations for resulting trusts as set out in Westdeutsche Landesbank Girozentrale: where Ps pay (wholly or in part) for the purchase of the Property which is vested in the joint names of the Father and D, there is a presumption that Ps did not intend to make a gift to the Father and D: the Property is held on trust for Ps in shares proportionate to their contributions.

32.  I agree Ps’ alternative case for resulting trust has been made out on the pleadings: see §§4.4, 10-14. Specifically, it is pleaded that various payments were made for the purchase of the Property (including the downpayment for the purchase price and monthly mortgage repayments §§10-12), the Father and D as the joint trustees would hold the Property on trust for and on behalf of Ps in equal shares (or in the alternative, after the death of the Father, D as the trustee would hold the Property on trust for and on behalf of Ps in equal shares) (§4.4). It is further pleaded that at all material times, the Father or D did not make any financial contributions toward the Property (§13) and at all material times, the Contribution for the Property was not a gift or advancement to the Father or D (§14).

33.  In the absence of filing any defence, D is taken to have impliedly admitted the facts pleaded in the SOC.

34.  Even though the creation of the beneficial interest (whether by common intention constructive trust or resulting trust) has not been expressly pleaded, the elements of common intention constructive trust and resulting trust have been pleaded. Furthermore, the beneficial interests have been impliedly pleaded; the Common Intention (at §4.4) refers to the situations in which (i) the Father and D as the joint trustees would hold the Property on trust for and on behalf of Ps in equal shares; or (ii) in the alternative, after the death of the Father, D as the trustee would hold the Property on trust for and on behalf of Ps in equal shares (see also §7), despite the legal assignees being the Father and D pursuant to the Assignment dated 24 July 2017 (at §5).

35.  This is exactly the same situation observed by Lord Hoffmann in Cheuk Shu Yin at §§32-33: the purchase of an HOS flat with the assistance of their family (in this case Ps), on the basis that Ps would have beneficial interests.

RELIEFS

36.  Although the power to give default judgment in respect of declaratory relief is discretionary, in my view a proprietary declaration in this case is genuinely necessary for the following reasons: (i) D has moved into the Property after the Father’s death; (ii) in order to secure the Mother’s residence in the Property and avoid the situation that D might sell the Property without notice and/or consent of Ps, Ps requested D as their trustee to confirm the Oral Agreement and the Common Intention and reduce them to writing; and (iii) despite the request, in breach of the Common Intention, Resulting Trust, Constructive Trust 1 and Constructive Trust 2, D as the trustee of Ps failed and/or refused to confirm the Oral Agreement and the Common Intention and reduce them to writing (see §§16-18).

37.  Without the declaration, Ps are severely prejudiced. It is open for D to sell the Property without notice and/or consent of Ps. Ps are unable to recover the Property without the declaration and/or derive any fruits and entitlements from their proprietary rights.

38.  Justice would not be done if declaratory relief were denied. The denial of a remedy to a person who paid all or part of the purchase price on the understanding that they would acquire a beneficial interest can be very unjust: see Cheuk Shu Yin at §35.

39.  I agree with Mr Lau’s submissions that absent any attempt to contest the proceedings and where the relevant pleading has been made, there is no benefit or purpose in requiring the claim to go through the interlocutory process to a trial: see Cheung Sai Lon at §44.

40.  There is no real benefit in requiring Ps to go through an expensive discovery exercise, the filing of witness statements, and a full-blown trial: see §23 of Chan Kang Hung Bovis. In my view, it would be an unnecessary use of the Court’s time and a waste of expenses to order a trial.

41.  Ps have also requested further and/or other relief as this Court deems fit. Under section 45(g) of the Trustee Ordinance (Cap 29), where land or any interest therein is vested in a trustee whether by way of mortgage or otherwise, and it appears to the court to be expedient, the court may make a vesting order vesting the land or interest therein in any such person in any such manner and for any such estate or interest as the court may direct, or releasing or disposing of the contingent right to such person as the court may direct.

42.  Accordingly, I grant a vesting order under section 45(g) of the Trustee Ordinance, for reasons similar to those given by DHCJ Jenkin Suen SC in Zhai Jin Cheng v Wang Lijun & Wang Yajuan [2023] HKCFI 1039 (at §23 to §25) and DDJ Kenneth KY Lam in Chan Kang Hung Bovis at §26.

43.  In Ps Submissions dated 30 June 2025, Ps submitted that since D did not file any acknowledgement of service or contest this action, Ps requested the Court to grant an order of no order as to costs.

DISPOSITION

44.  For all these reasons, I formally make the following orders:

(a)  A declaration that D holds the Property on trust as a trustee for and on behalf of Ps in equal shares;

(b)  All legal and beneficial titles, interests, rights, and shares of and in the Property be and are vested in Ps absolutely by a vesting order hereby made by this Court pursuant to Section 45(g) of the Trustee Ordinance (Cap 29);

(c)  D shall do such acts and things including executing any document necessary to give effect to this order;

(d)  Should D neglect, fail or refuse to execute document in respect of the Property within 14 days, a partner of Messrs B Mak & Co. Solicitors for Ps, shall be nominated, appointed, and authorized to execute any and all such document(s) in place of D pursuant to Section 38A of the District Court Ordinance (Cap 336);

(e)  There be liberty to apply; and

(f)  There be no order as to costs.

45.  I thank Mr Lau for his assistance.