LKFJ v. CFH

FCMC 10082/2016

[2019] HKFC 75

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 10082 OF 2016

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Decision

(preliminary issues on beneficial interest in landed properties)

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1.  This is the trial on preliminary issues arising out of the ancillary relief proceedings between the Petitioner (“Wife”) and the Respondent (“Husband”). The issues concern disputes over the beneficial ownership of the following properties which are located in the same residential complex in Yuen Long, New Territories:

(1)  G/F, Block F, XX Garden, Yuen Long, New Territories (“G/F Property”); and

(2)  1/F, Block E, XX Garden, Yuen Long, New Territories (“1/F Property”).

2.  It is necessary to determine the above as preliminary issues in order ascertain the extent to which the said properties need to be factored into the pot of the matrimonial assets.

3.  The 1^st Intervener is the Husband’s father; he was born in 1928, now aged about 91. The 2^nd Intervener is one of the children born in the wedlock; she was born in 1997, now aged 21.

4.  (a)  At All material times and until the Notice of Severance dated 9 August 2017, the G/F Property was held by the Husband and the 1^st Intervener as joint tenants.

     (b)  The 1/F Property is held under the sole name of the Husband.

5.  (a)  In relation to the G/F Property, the Husband and the 1^st Intervener premise their case on express agreement, common intention constructive trust and/or resulting trust. They seek a declaration that the 1^st Intervener is the sole beneficial owner of the G/F Property, with the Husband holding his half share on trust for the 1^st Intervener.

     (b)  In relation to the 1/F Property, the Husband and the 2^nd Intervener premise their case on express agreement and/or fiduciary duty trust. They seek a declaration that the Husband is holding the 1/F Property on trust for the 2^nd Intervener, and the 2^nd Intervener is the sole beneficial owner of the 1/F Property, subject to the 1^st Intervener and his wife Madam Wong’s right to reside therein during their lifetime.

Issues for Determination

6.  In relation to the G/F Property, the core issue for determination is whether it is beneficially owned by the Husband and the 1^st Intervener in equal shares; or whether the Husband is holding his half share on trust for the 1^st Intervener.

7.  This will involve consideration of

(a)  whether there is evidence of an express agreement on the beneficial ownership of the G/F Property;

(b)  if not, whether the court can infer from the available evidence a common intention on the beneficial ownership of the G/F Property to give rise to a constructive trust; and

(c)  further or in the alternative, whether resulting trust operates as a matter of law.

8.  In relation to the 1/F Property, the core issue for determination is whether it was assigned by the Husband’s late sister (“Deceased”) to the Husband to hold on trust for the 2^nd Intervener; or whether it was an outright gift to the Husband himself.

9.  This will involve consideration of

(a)  whether there existed an express agreement between the Deceased and the Husband that the latter should receive the 1/F property for the benefit of the 2^nd Intervener; and

(b)  whether as a matter of law, it therefore gives rise to a fiduciary duty trust in favour of the 2^nd Intervener.

10.  As regards the 1^st Intervener and Madam Wong’s life interest in the 1/F Property, it is no longer at issue. The Wife has eventually conceded and accepted this part of the Husband and the 2^nd Intervener’s case.

Relevant Factual Background

11.  The 1^st Intervener and his wife Madam Wong (“Madam Wong”) got married in about 1959. They have 3 children: the eldest son born in 1959, the Deceased (a daughter born in 1961 but passed away in July 2007) and the Husband born in 1963.

12.  The 1^st Intervener was the registered tenant of a public housing unit in So Uk. The family of five used to live therein until the 3 children moved out respectively in 1985, 1992 and 1994. Before the 1^st Intervener retired in 1988 at the age of 60, he run his hairdressing business. 

13.  The Husband and the Wife got married in March 1997 after a period of cohabitation. They have three children: the 2^nd Intervener born in 1997, a son born in 2000 and a daughter born in 2001.

14.  Pursuant to a Housing Authority loan scheme, the 1^st Intervener in 1996 surrendered the So Uk public housing unit to apply for an interest-free loan to finance the purchase of the G/F Property. As evidenced by the Mortgage dated 28 March 1996, a HK$600,000 interest-free loan was obtained from the Housing Authority (“HA Loan”) and a HK$400,000 mortgage loan was obtained from HSBC (“Bank Loan”).

15.  The G/F Property was purchased in the joint names of the 1^st Intervener and the Husband at HK$1,370,000.

16.  The 1^st Intervener and Madam Wong moved into the G/F Property after its purchase.

17.  In November 2000, the Deceased bought the 1/F Property at HK$1,120,000 in her sole name. The Husband and his family moved into the 1/F Property; he rented it from the Deceased at the monthly rental of HK$5,000.

18.  Apart from the 1/F Property, the Deceased had 2 other properties. One was a property in Yuen Long purchased in joint names with her husband Mr Chan (“Chan”) in 1999; the other was a property in Tai Po purchased in her sole name in 2001.

19.  The Deceased and Chan operated a successful business called “XX Motors Limited”. Both the Husband and the Wife had been under its employ.

20.  In about 2002, the Husband fell out with the Deceased. Then the Husband left the employment of XX Motors Limited; he and his family left the 1/F Property and moved into the G/F Property. Shortly after, the 1^st Intervener and Madam Wong moved into the 1/F Property. As a result, there was a swap of places of residence.

21.  On 4 July 2002, the Housing Authority transferred its rights and liabilities under the HA Loan to HSBC. On 29 August 2006, all outstanding loans were settled; the Mortgage of the G/F Property was released.

22.  In about December 2006, the Deceased was diagnosed with terminal cancer.

23.  In 2007, the Deceased reconciled with the Husband.

24.  Shortly before her death in July 2007, the Deceased on 20 April 2007 assigned the 1/F Property to the Husband at no cost despite a stated consideration of HK$800,000. She also assigned the said Tai Po property to Chan at no cost. 

25.  On 16 July 2007, the Deceased passed away.

26.  In January 2011, the 1/F Property was mortgaged with HSBC for a facility loan up to HK$1,000,000.  The Husband was the mortgagor and the Wife’s fashion company was the borrower. Loan was obtained and the money was applied in each of the Husband’s and the Wife’s business.

27.  In August 2014 the 1^st Intervener and Madam Wong provided funds of HK$871,120 to redeem the mortgage of the 1/F Property.

Relevant Legal Principles

Constructive Trust

28.  The 1^st Intervener referred the Court to the case of  Bhura v Bhura [2015] FLR 153 in relation to ascertaining the common intention of the parties concerned to find a constructive trust. In short, it provides the guidance that if there is no express agreement about the beneficial interests then there is likely to be a tacit understanding. In determining whether there was such a tacit understanding, the court will look at all the evidence holistically and will examine the whole course of the parties' conduct in relation to the property. Where a tacit agreement could not be found by a process of inference, the court could impute to the parties the common intention and/or a fair agreement according to what is reasonable and fair in the circumstances.

29.  I think the above is no different from and is wholly in line with the approach as set out in Liu Wai Keung v. Liu Wai Man, [2013] 5 HKLRD 9, and the recent Court of Appeal case of Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327.

30.  Liu Wai Keung v. Liu Wai Man, supra, at 17, §46-50 has the following discussion:

“46.  The focus of the inquiry is therefore on the elements that the plaintiff has to prove in order to establish a constructive trust in his favor. In the context of this case, this means that the plaintiff must prove: (a) there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the Property despite that it was acquired in the defendant’s name; (b) the plaintiff altered his position in detrimental reliance upon such common intention; and (c) it is unconscionable for the defendant to assert ownership in reliance on her legal title to the Property.

47.  In ascertaining whether there was a common intention, it is the objective intention of each party “which was reasonably understood by the other party to be manifested by that party’s words and conduct” that one must examine: Gissing v Gissing [1971] AC 886, 906; Jones v Kernott [2012] 1 AC 776, 794 [51].

48.  In the present case it is the parties’ common intention at the time of the acquisition of the Property that is relevant, there being no suggestion from anyone that the intention had changed.

49.  Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions. It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention: Lloyds Bank Plc v Rosset [1991] 1 AC 107, 132-133.

50.  Even where, as in this case, reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.”

31.  The case of Primecredit Ltd v Yeung Chun Pang Barry, supra, have identified two situations where a common intention constructive trust may be found:

“2.3  The first situation where common intention constructive trust may arise 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.

2.4  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.” 

Fiduciary Duty Trust

32.  In De Bruyne v De Bruyne [2010] 2 FLR 1240, a family agreed, as recorded in a written agreement, to terminate the family trust and convey shares in a company to the husband “for the benefit of [his] five children”. The English Court of Appeal held that the husband should be bound by the agreement and a constructive trust was imposed on the husband even though the children were not privy to any common intention or understanding in a real way which might support a common intention constructive trust.

33.  It was observed that equity will hold the transferee of property to the terms upon which it was acquired by imposing a constructive trust to that effect, notwithstanding the absence of detrimental reliance:

“The concept of fraud in equity is much wide and can extend to unconscionable or inequitable conduct in the form of a denial or refusal to carry out the agreement to hold the property for the benefit of a third party which was the only basis upon which the property was transferred. This is sufficient in itself to create the fiduciary obligation and to require the imposition of a constructive trust…”

34.  In Lewin on Trusts, 19^th edn, the learned author characterised the trust imposed in De Bruyne, supra, as a “fiduciary duty trust” (§7-019), a constructive trust arising where the defendant has voluntarily undertaken fiduciary duties.

35.  The decision in De Bruyne, supra, was affirmed and discussed in Yang Foo Oi, Wai Wai Chen (unrep., HCA 1739/2010, 29 November 2016):

“146….. the underlying principle in de Bryune is much wider – it is based on the assumption of fiduciary duties upon receiving properties upon certain terms, and the unconscionability of the recipient denying those terms.”

36.  In other words, unlike with a claim for a common intention constructive trust, there is no need for the beneficiary to show any detrimental reliance on his part in order to establish a constructive trust in his favour.

Evidence

37.  As there is no document recording expressly the relevant intention of the parties in this case, the determination of the material issues turn largely on the Court’s assessment on the credibility of the witnesses.

38.  In seeking to resolve the factual differences between the parties, I bear in mind the general principles which judges apply as to fact finding and the assessment of credibility. Some of these principles were summarised in Hui Cheung Fai v Daiwa Development Ltd (unrep.; HCA 1734/2009, 8 April 2014):

“[77] Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility …..

[78] In deciding to accept whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events.

[79] In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement

[80] I have cautioned myself against the dangers of too readily drawing conclusions about trufulness and reliability solely or mainly from the appearance of witnesses, or from the assessment of the witnesses’ character.”

39.  I agree that the Court in ascertaining the intention of the relevant parties at the time of the transfer of the properties in question, should consider the evidence in the round and weigh the rival factual contentions having regard to the inherent probabilities, where appropriate draw inferences in the light of common human, societal or cultural knowledge and experience. Further, parties’ dealing subsequent to the relevant transactions is also relevant because they help to inform the Court of the true intention of the relevant parties. (see HSYC v CLTK [2017] 2 HKLRD 675, §14)

40.  Altogether 5 witnesses have testified: the 1^st Intervener, the 2^nd Intervener, Chan, the Husband and the Wife. Their evidence essentially encompasses, inter alia, the following areas of factual disputes:

(a)  the background against which the Husband became the joint legal owner with the 1^st Intervener;

(b)  who contributed to the purchase price and mortgage repayment of the G/F property?

(c)  whether the relationships between and among the parties concerned support and explain the gifting of the 1/F Property by the Deceased to the 2^nd Intervener?

(d)  Parties’ dealing and conduct subsequent to the relevant transactions.

The background against which the Husband became the joint legal owner with the 1^st Intervener

41.  The 1^st Intervener testified that in about 1996, the Housing Authority introduced a loan scheme wherein a public housing unit tenant who surrenders his unit would be eligible to apply for an interest-free loan to finance his purchase of a private residential property. It is not in dispute the interest-free loan was inter-linked with the mortgage loan in that one must first secure a private mortgage before he would be eligible to obtain the interest-free loan from the Housing Authority.

42.  The 1^st Intervener said he was at the time retired and had difficulty in obtaining a mortgage on his own. Therefore, the Husband who had income proof helped the 1^st Intervener to apply for the mortgage. I do not think such explanation when considered in a family context is unreasonable or unacceptable.

43.  While there was no suggestion from the Wife that the 1^st Intervener did not need help to obtain the mortgage, she challenged and queried why the 1^st Intervener did not ask the eldest son or the Deceased to apply for the mortgage with him. I cannot see how this can assist the Wife’s case. Such contention seems to suggest that by arranging the Husband rather than his siblings to apply for the mortgage, it is therefore intended that the Husband has beneficial interest in the G/F Property. Such suggestion sounds hollow and is devoid of substance. 

44.  The Wife also suggested that the true beneficial ownership in the G/F Property is reflected in the mortgage document in which the Husband was stated as the “beneficial owner” and “mortgagor”. I also fail to see how this can assist the Wife. As a matter of law, use of these phrases in a legal charge does not give rise to a party’s acknowledgment or warranty that he is the beneficial owner.

45.  The following observation of Slade LJ in Harwood v Harwood [1991] 2 FLR 274 at p.286 was echoed by Baroness Hale of Richmond in Stack v Dowden [2007] 2 A.C. 432

“The effect of including in a registered charge a provision that the mortgagors were charging the property “as beneficial owners” was simply to introduce the covenants implied under s.76(1)(c) of the Law of Property Act 1925, in the terms set out in Part III of the Second Schedule to the Act, in the case of unregistered land (see 26 Halsbury’s Laws of England (4^th edn), para. 1154). The introduction of the implied covenant in the legal charge in the present case by virtue of the use of the phrase “as beneficial owners” had the effect that the husband and wife were covenanting that they had the full power to mortgage the property; they were giving no kind of warranty that they themselves were the beneficial owners of the property, and the use of that phrase in the legal charge did not give rise to any estoppel of the nature alleged as against the husband.”

46.  Although the arrangement as stated in paragraph 42 above is not unacceptable to me, there is scant evidence to support the alleged express agreement between the 1^st Intervener and the Husband over the ownership of the G/F Property. In the 1^st Intervener’s Affirmation, he said “it was expressly agreed and commonly understood between the [Husband] and me that …… and the [Husband] is only an owner in name”; and that’s all.  There is no evidence of express discussion.

Who contributed to the purchase price and mortgage repayment of the G/F property?

47.  The purchase price of the G/F Property is HK$1,370,000 out of which HK$1,000,000 is financed by the HA Loan of HK$600,000 and the Bank Loan of HK$400,000, leaving a balance of HK$370,000.

48.  The 1^st Intervener said the Bank Loan was HK$300,000 and he has paid the balance sum of HK$470,000 plus other legal and conveyancing fee. He was obviously wrong on the 2 figures, but I do not think this is material at all. With the undisputed mortgage documents, actual figures can be arrived at by simple calculation; they are not matters of significance which one has to conceal or lie about. After all, the transaction has taken place more than 20 years ago and memory may fail anyone of the 1^st Intervener’s age.

49.  The 1^st Intervener said he has also paid for the monthly repayment of the HKHA Loan and Bank Loan; he transferred money into the HSBC mortgage account which was held jointly by him and the Husband. He also said he discharged the Mortgage by paying off the outstanding sum of $360,000 in August 2006.

50.  To show his financial capacity, the 1^st Intervener produced extracts of a savings notebook recording contributions from his children. While there are some mistakes and discrepancies in the record which the 1^st Intervener duly acknowledged, the Wife did not take issue or suggest that the notebook was fabricated.

51.  There is no evidence on the part of the Wife to refute the fact that   the 1^st Intervener had the financial ability to pay for the mortgage for the G/F Property. She admitted that she had no knowledge as to the financial capacity of the 1^st Intervener.

52.  The Wife alleged that it was the Husband who has paid for all the   repayments for the HA Loan and the Bank Loan. Much evidence has been given on the Husband’s income and the financial situation of the family during the marital period. This pertains to whether the Husband had the ability to pay for the mortgage repayments for the G/F Property as alleged.

53.  The Wife said the Husband’s income in or about 1996 was about HK$35,000 which included salary of HK$25,000 and commission of HK$10,000. This is disputed by the Husband whose evidence is supported by Chan. Chan confirmed that the Husband was then earning about HK$20,000 per month plus year-end bonus. There was no monthly commission as alleged.

54.  It must be noted there was just over 1 year after the purchase of the G/F property that the 2^nd Intervener came to birth; followed by 2 more children born in 2000 and 2001. The Wife accepted that family expenses increased as the children grew older, and family finances became tight.

55.  She further admitted the following:

(a)  In 2000, the Husband fell victim to a scam and lost a substantial sum of HK$100,000.

(b)  In 2001, the family accumulated a lot of credit card debts and required the Deceased’s help to pay them off.

(c)  After the Husband ceased working at the Deceased’s Company in 2001, he was earning only around HK$16,000 per month.

(d)  the Husband sustained a major injury in around 2006 and could not work for a period of 10 months.

56.  The suggestion by the Wife that the Husband was the one responsible for repaying the mortgage of the G/F Property must be viewed against the financial reality of the family as highlighted above.

57.  It is important to note that the Wife admitted in cross-examination that she has never actually seen any bank documents showing the transfer of money from the Husband’s Hang Seng bank account to the HSBC mortgage account.

58.  According to the Husband, his only financial contributions to the G/F Property were:-

(a)  the renovation fees of HK$100,000 he paid for the 1^st Intervener out of filial piety; it was a gift using his bonuses while working at the Deceased’s company; and

(b)  the rates and other outgoings since 2002 when he and his family moved from 1/F Property to the G/F Property following an argument with the Deceased. In this connection, the Husband has explained that as he didn’t have to pay rent for residing in the G/F Property, he felt he should pay for the rates as a way to repay the goodwill of the 1^st Intervener.

59.  Chan testified with certainty that the mortgage repayments for the G/F Property were paid for by the 1^st Intervener, not the Husband. He said it was originally the wishes of the Deceased that the Husband would contribute to the mortgage repayment, such wishes were however never fulfilled. On this part of Chan’s evidence, no question was asked of him, no suggestion was put to him; there is no evidence on whether there was any underlying family arrangement which brought about such “wishes” of the Deceased.

60.  After all, it is the 1^st Intervener and the Husband’s common intention at the time of acquisition of the G/F Property that is relevant, not what the Deceased thought and wished.

61.  The Wife also challenged the amount of redemption in August 2001. She said it should only be about HK$151,327 instead of HK$360,000 as alleged by the 1^st Intervener. While relevant documents may be incomplete to show the exact figure, the Wife’s suggestion can still be easily ruled out.

62.  The Housing Authority’s transfer of its rights and liabilities under the HA Loan to HSBC should not be unrealistically construed. There is no basis to suggest that the HA Loan is no longer repayable, especially when monthly repayment of the two loans is without dispute over HK$7,000, out of which HK$3,296 is to repay the HA Loan. On the HA Loan of HK$600,000 with an interest-free mortgage period of 15 years (180 months), the outstanding sum as at August 2006 was already close to HK$200,000. Adding up the then outstanding sum under the Bank Loan, the 1^st Intervener’s figure of HK$360,000 is entirely acceptable.

63.  When considering the relevant background as a whole, I find that the Husband could not possibly have been able to afford the monthly mortgage repayments for the G/F Property. The 1^st Intervener has proved to the Court’s satisfaction that he has paid entirely for the purchase of the G/F Property, including HK$370,000 plus legal and conveyancing fee in 1996, subsequent monthly mortgage repayment and the redemption sum of HK$360,000 in 2006.

Whether the relationships between and among the parties concerned support and explain the gifting of the 1/F Property by the Deceased to the 2^nd Intervener?

64.  It is the unchallenged evidence of the 1^st Intervener, the 2^nd Intervener, Chan and the Husband that the Deceased was extremely fond of the 2^nd Intervener, and treated her like her own daughter, and the two enjoyed a very close relationship.

65.  A piece of strong evidence in support is the photo album prepared by the Deceased for the 2^nd Intervener. It recorded a heart-warming message written by the Deceased, and contained photos of some of the day to day moments which the Deceased and the 2^nd Intervener experienced together.

66.  Such extremely close relationship supports and explains why the Deceased in about April 2007 in contemplation of her prognosis, would wish to gift the 1/F Property to the 2^nd Intervener. Chan gave affirmative evidence that it was the Deceased’s intention to gift the 1/F Property to the 2^nd Intervener. By reason of him being the Deceased’s husband, Chan had first-hand knowledge of what the Deceased had contemplated at the relevant point in time.

67.  The Wife alleged that she has never heard of a gift by the Deceased to the 2^nd Intervener. The Wife described her relationship with the Deceased to be close like sisters, hence the Deceased would confide in the Wife as to her inner thoughts and wishes, including her intentions regarding the disposition of the 1/F Property.

68.  The Wife said she would communicate regularly with the Deceased by email. Yet she failed to produce documentary record of any such communication before 2007. This is despite her claiming that she went through 10,000 emails in her inbox to look for evidence in preparation of the trial.

69.  The Wife produced the email dated 1 March 2007 in support; but it was indicative of very little. The email was sent in around the time when the Deceased already knew that she had terminal cancer and was actively trying to reach out to and patch up her relationship with her family members before her departure of life. One should not read too much into it to assume a long-existing relationship of closeness and intimacy.

70.  It is more probable than not, as testified by Chan, the Wife had an average relationship with the Deceased and the two were often in conflict. It is therefore highly doubtful that the Deceased would divulge to the Wife her intentions regarding the disposition of the 1/F Property.

71.  The Husband’s evidence is corroborated by Chan’s. It was said that since the 2^nd Intervener was only aged 10 in 2007, the Deceased decided that the 1/F Property be registered in the name of the Husband, who would transfer it to the 2^nd Intervener when she is of age.

72.  The change of title was effected on 20 April 2007, for a stated consideration of $800,000, but which payment was waived by Deceased.  Mr Chan paid for the legal fees and stamp duty of the transfer.

73.  Since Chan said in cross-examination the Deceased did have concern about the Husband’s management of financial matters, it raised my query why the Deceased would transfer the 1/F Property to the Husband rather than asking someone else to be the trustee. As the 2^nd Intervener submitted and I am persuaded, the act took place at the time when the Deceased was actively patching up her relationship with her family members, in particular with the Husband, it is understandable the Deceased would avoid demonstrating distrust on the Husband whom she just reconciled with.

74.  It is not disputed that the Deceased has given the Husband money, although parties’ evidence differs in respect of the amount. No matter the amount is HK$350,000 or HK$500,000, it is difficult to understand why the Deceased would decide to make two different dispositions/gifts to the Husband in around the same time as the Wife alleged, one being the gift of the HK$500,000 and the other being the 1/F Property.

75.  Far more logical and plausible in the circumstances of the case is that the 1/F Property was a gift from the Deceased to the 2^nd Intervener, her favoured niece. This conclusion is squarely supported by the evidence of Mr Chan, whose evidence should carry particular weight as he is an independent witness with no interest in the outcome of the proceedings.

Parties’ dealing and conduct subsequent to the relevant transactions

76.  Dealings and conducts relevant for consideration include the following: use and occupation of the G/F Property after its purchase; custody and possession of the title deeds of the G/F Property; and the way how the 1/F Property was being managed or dealt with.

use and occupation of the G/F Property after its purchase

77.  As regards use and occupation of the G/F Property, the 1^st Intervener and Madam Wong moved in and resided there after its purchase. The Husband and his family continued to live in a rented premises.

78.  It is difficult to conceive why, in light of the limited income of the Husband at the material time, the Husband would in 1996 commit to a property investment which was not intended to be his immediate residence nor for generation of rental income.

79.  On balance of probability, the reality is more like the 1^st Intervener’s case that the purchase of the G/F Property was never an investment of himself and the Husband.

custody and possession of the title deeds of the G/F Property

80.  As regards who was in possession of the title deeds of the G/F property, the 1^st Intervener said it was Madam Wong and she has kept the same in her safe deposit box with HSBC. The Wife disputed and asserted that the title deeds were always kept in the safe in the G/F Property.

81.  To refute the Wife’s assertion, the Husband produced photos to show that the safe in the G/F Property is too small to hold the title deeds. I do not attribute much weight to these photos; first it remains uncertain whether it shows the same safe the Wife was referring to; further, there are no dimensions of the safe and the title deeds for the Court to make a proper assessment.

82.  In considering the 2 conflicting versions, it is rather the Wife’s own elaboration that fails her. In support of her assertion, the Wife said the 3 children were fond of seeing what was inside the safe, they knew the password and had unrestricted access to it. I find it difficult to imagine and believe any parent would as alleged permit children to have unrestricted access to a safe which contained important and valuable items.

the way how the 1/F Property was being managed or dealt with

83.  In January 2011, the 1/F Property was mortgaged with HSBC for a facility loan up to HK$1,000,000.  The Husband was the mortgagor and the Wife’s fashion company was the borrower. The facility was available to a bank account of which only the Wife has access. Loan was obtained and money was applied in each of the Husband’s and the Wife’s business. The Husband took $300,000 from that facility; bank records show that he has subsequently repaid.

84.  The Wife submitted that the Husband has dealt with the 1/F Property as his own, hence it is evident that he is the beneficial owner rather than a trustee. On the mortgage of the 1/F Property, the Husband admitted that he was in the wrong and was in breach of his duties as trustee when, out of desperation, he took out the mortgage to help salvage the business of the Wife.

85.  The Husband said, by May 2014 the facility was drawn down to more than $867,000. Out of concern that the bank might foreclose on the property and hence affected the interest of the 2^nd Intervener and their life interest, he sought help from his elder brother. Eventually the 1^st Intervener and Madam Wong gathered funds to pay off the facility and clear the 1/F Property from encumbrances. The 1^st Intervener said this sum is not yet repaid to him.

86.  The 2^nd Intervener has already turned 18 in 2015 and she is 21 by now, the Husband has yet transferred the title in the 1/F Property back to 2^nd Intervener. It is therefore relevant to consider whether there is any reasonable explanation for his inaction.

87.  As confirmed by Chan, the Deceased has not specified when (whether 18 or 21 of age) the 1/F property should be transferred to the 2^nd Intervener. The Husband further explained that the divorce proceedings have commenced in August 2016, he therefore did not make any attempt to transfer or dispose of assets under his name. The 2^nd Intervener said she has never made request for the transfer because there is no urgency to do so; she further expressed that she trusted her father. I find the above explanation reasonable.

Credibility of Witnesses

88.  The 1^st Intervener, the 2^nd Intervener, the Husband’s evidence are largely consistent and coherent. They gave logical and straightforward answers. I find them credible and reliable witnesses. There may be errors or mistakes in their account of events, but they are relatively minor and will not render their evidence incredible.

89.  Chan testified for the 2^nd Intervener and he answered question directly and spontaneously. The 1^st Intervener and the Husband also rely on his evidence. Chan’s evidence deserves considerable weight. He does not stand to personally gain or lose anything from the outcome of these proceedings. There could thus be no incentive for Chan to mislead the Court as to the true position. In fact, the Wife, during cross-examination of Chan has not made any of such suggestion. I find Chan a reliable and credible witness.

The Wife’s case and her evidence

90.  As I observed, the Wife’s case is shaky without a firm base. The following is, inter alia, basis of my observation.

(a)  The Wife in her pleadings did not admit the life interest of the 1^st Intervener and Madam Wong in the 1/F Property. She subsequently accepted the same in her Supplemental Witness Statement. However, during her Counsel’s Opening Submissions, the issue of life interest is still not conceded, submitting that one should not “read too much into” the Wife’s Supplemental Witness Statement. It was not until the Wife testified then she finally admitted the life interest of the 1^st Intervener and Madam Wong in the 1/F Property. As there is no reason to doubt Counsel not acting on her instructions, a fair comment is that the Wife’s case shifts and shakes.

(b)  As evident by the transcript of a direction hearing on 26 February 2018, it was submitted for the Wife that the Husband purchased the 1/F Property from the Deceased at HK$800,000. A moment later, it was submitted that it was gifted to the Husband by the Deceased.  It appears that the Wife is not sure of her case to give clear and firm instructions.

91.  On quality of her evidence, the following are, inter alia, aspects which are devoid of logic, against the inherent probabilities, internally inconsistent and/or incredible. Where it is shown that a witness has been discredited over one or more matters to which she has testified, this fact is relevant to the assessment of her overall credibility.

(a)  The Wife alleged that the Deceased had once proposed to redeem the outstanding mortgage of the G/F Property and its title be transferred to the Wife and herself. This defies sense when such suggestion would mean having the 1^st Intervener give up his interest in the G/F Property.

(b)  On one hand, the Wife said the 1/F Property was gifted to the Husband to provide him with one more living place. On the other hand, she said the Deceased gifted a sum of $500,000 to help the Husband emigrate to Australia. The Wife was unable to provide any logical explanation on this. 

(c)  During examination in chief, the Wife said, in most definite terms, that she had never “heard” or “seen” the Deceased doing revision with the 2^nd Intervener. This however was different from what she said in her Witness Statement. When she was asked to explain such inconsistency, she was unable to provide any satisfactory answer.

(d)  On the Wife’s oral evidence that the Husband had contributed to the purchase price in addition to the mortgage instalments, she was asked why such important evidence was never mentioned in the (Amended) Points of Defence. She shifted answers and said she was told that the Husband had spent a lot of money on the G/F Property, but she did not know exactly what those monies were for. To follow up on her answer, she was asked how then could she be so sure those spending by the Husband was contributed towards the purchase price. In response, the Wife changed her evidence and claimed that the Husband had in fact told her that he had paid for the down payment for the G/F property. Least to say these evidence are contradictory, they are never mentioned in her pleadings.

92.  On her overall performance as a witness, the Wife failed to give direct and straightforward answers. She has the habit of pausing for long periods of time during cross-examination when faced with difficult questions which would undermine her case.

93.  By reason of the aforesaid, I find the Wife an incredible witness.

Findings on Fact and in Law

94.  Since the burden rests upon the 1^st Intervener and the Husband (in respect of the G/F Property) and the Husband (in respect of the 1/F Property) to establish that the beneficial ownership differs from the legal title, it is important to examine closely on each part of their evidence to determine whether they have discharged such burden. Based on the discussion and analysis of evidence above, I am satisfied that they have.

95.  The Wife has adduced nothing that is capable of lending significant probative value either in support of her case or to rebut that of the Husband, 1^st Intervener and the 2^nd Intervener. Insofar as the Wife’s evidence differs from that of the 1^st Intervener, the Husband, the 2^nd Intervener and Chan, I prefer the latter’s.

The G/F Property

96.  As discussed in paragraph 46 above, I do not think there is sufficient evidence of an express agreement between the 1^st Intervener and the Husband that the beneficial interest in the property belongs entirely to 1^st Intervener despite that it was acquired in their joint name.

97.  Despite the aforesaid, it is still open to the Court to ascertain the common intention of the parties concerned to find a constructive trust by looking at all the evidence holistically. Having examined the whole course of the parties' conduct (as discussed in paragraphs 41 to 63 and 77 to 82 above), I find that there was a common intention constructive trust that the 1^st Intervener is the sole beneficial owner of the G/F Property, and the Husband holds his half share in the G/F Property on trust for the 1^st Intervener.

98.  In coming to this finding, I have placed significant weight on the   fact, as I find, that the 1^st Intervener has made the entire contribution to the purchase price of the G/F Property. As discussed in Lloyds Bank Plc v Rosset [1991] 1 AC 107, 132; and Primecredit Ltd (supra), direct contributions to the purchase price will readily justify the inference necessary to the creation of a constructive trust.

99.  It is shown that the 1^st Intervener has altered his position in detrimental reliance upon such common intention by making the entire contribution; and it is unconscionable for the Husband to assert ownership in reliance on his legal title to the property.

100.  As regards whether resulting trust should operate, it appears to have no substantive difference to a finding of the common intention constructive trust.

The 1/F Property

101.  As discussed in paragraphs 64 to 75 and 83 to 87 above, I find that there was an express arrangement between the Deceased and the Husband that the 2^nd Intervener is the sole beneficial owner of the 1/F Property subject to the life interest of the 1^st Intervener and Madam Wong; and the Husband is holding the 1/F Property on trust for the 2^nd Intervener. Further, as the Husband has voluntarily undertaken fiduciary duties, it gives rise to a fiduciary duty trust. 

Conclusion

102.   In the premises, I grant the following reliefs:

(1)  A declaration that the 1^st Intervener is the sole beneficial owner of the G/F Property; and the Husband holds his half share in the G/F Property on trust for the 1^st Intervener;

(2)  A declaration that the 2^nd Intervener is the sole beneficial owner of the 1/F Property subject to the life interest of the 1^st Intervener and Madam Wong; and the Husband is holding the 1/F Property on trust for the 2^nd Intervener; and

(3)  A declaration that the 1^st Intervener and Madam Wong are entitled to exclusive occupation of the 1/F Property during their lifetime.

Costs

103.  Costs shall follow the event.

104.  The 2^nd Intervener seeks costs against the Wife on common fund basis (if not on indemnity basis) pursuant to Section 17 of the Legal Aid Ordinance. It was submitted that the Wife upon reading the evidence of Chan (whose evidence should carry particular weight), and despite HH Judge Grace Chan’s repeated indication of the Court’s observation on merits, still unreasonably insisted to proceed to defend.

105.  Unless there are unreasonable conducts on the part of the Wife, I do not think costs should be on common fund or indemnity basis simply because she lost her case on merits. Although her case is shaky, an assessment on merits and evidence which turned out to be bad and poor does not amount to unreasonable conduct.

106.  I therefore make a costs order nisi that the Wife do pay the costs of the 1^st Intervener, the 2^nd Intervener and the Husband (including all reserved costs), on party and party basis, with certificate for Counsel, to be taxed if not agreed. The Wife’s own costs to be taxed in accordance with the Legal Aid Regulations.

107.  Unless there is an application within 14 days to vary, the nisi order shall become absolute.