CHAN WAI KWOK AND ANOTHER v. LO CHUEN MUI BY HER NEXT FRIEND AND GUARDIAN AD LITEM, CHAN FUNG YEE

DCCJ 2057/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2057 OF 2014

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JUDGMENT

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INTRODUCTION

1.  The matter in dispute in these proceedings is the beneficial ownership of the property known as 7^th Floor, Bedford Factory Building, No 51 Belford Road, Kowloon, Hong Kong (“the Property”).

2.  The 1^st plaintiff (陳衛國) (“CWK”) is the son of Chan So (陳蘇) (“CS”).  The 2^nd plaintiff is the estate of CS (“the Estate”).  The defendant (盧鑽妹) (“Lo”) is the former cohabitee of CS.

3.  The Property has been registered under the names of CWK and Lo as tenants in common since 11 January 1989, each of them having ½ interest therein.  The plaintiffs contend that the beneficial ownership of the Property is same as the legal ownership, ie CWK and Lo are also the beneficial owners of the Property, each of them having 50% beneficial interest in the Property.  Lo however contends that the Property is solely owned by her beneficially, alternatively, the Property is beneficially owned by her and CWK in the percentage of 72.31% and 27.69% respectively.

4.  The parties agree that the rateable value of the Property is HK$165,000 and the respective claims of the parties are within the jurisdiction of this court.

THE AGREED FACTS

5.  I would first set out the agreed facts.

6.  In 1967, CS came to Hong Kong from Mainland China.

7.  In September 1972, a business in the name of Chung Wah Metal Works (中華金屬製品廠) (“the Business”) carrying on the trade of production of umbrella parts was set up.  The Business was then a sole proprietorship business registered under the name of CS.  At that time, Lo was cohabitating with CS.  CWK had been working as employee at the Business until 1981.

8.  In 1975, the Business moved to the Property and occupied the same as a tenant.  Since then, the Property has been used by the Business as its principal place of business.

9.  In 1988, a formal sale and purchase agreement dated 17 December 1988 (“the SPA”) was signed between the previous owner of the Property as vendor and CS as purchaser for HK$1.9 million.  The completion date was set on 7 January 1989.  Time was of the essence.

10.  A nomination dated 11January 1989 (“the Nomination”) was made and executed by CS in which he nominated CWK and Lo to take up the assignment of the Property.

11.  The assignment of the Property dated 11January 1989 (“the Assignment”) was executed by CWK and Lo as tenants in common in equal shares as assignees for the sum of HK$1.9 million.  Also executed on the same date of the assignment was a charge (signed by CWK and Lo as mortgagors, Far East Bank as mortgagee and the Business as the requesting party) in respect of a mortgage over the Property to secure general banking facilities granted to the Business.

12.  At all material times, CWK himself did not pay for the said purchase price of HK$1.9 million or any part thereof.

13.  In 1991, CS and Lo separated with each other.

14.  By a business transfer agreement dated 12February 1991 (“the BT Agreement”), CS agreed to sell and transfer his half share of the interest in the Business to Lo at the consideration of HK$525,000.  By the Business Transfer Assignment dated 12March 1991 (“BT Assignment”), CS assigned his half interest in the Business to Lo.  Lo thereafter became the sole owner of the Business.

15.  On 11April 1992, the charge over the Property was released.

16.  In 1992, CS emigrated to Canada but he returned to Hong Kong soon thereafter.

17.  In about September 2009, there was a lunch meeting in Fangcun, Guangzhou (“the 2009 Meeting”) attended by CS, CWK, CWK’s younger brother Chan Wai Hon (陳衛漢) (“CWH”), Lo, Lo’s son Pang Kam Chiu (彭鑑潮) (“PKC”), and the nurse of CS.

18.  In about August 2012, PKC called up a meeting at Guangzhou Overseas Chinese Building in Guangzhou (“the 2012 Meeting”) which was attended by CWK, CWH, PKC and a friend of PKC.

19.  In a letter of the former solicitors of Lo dated 11January 2013, Lo took the stance that she was the sole beneficial owner of the Property.

20.  In March 2013, CS passed away.

21.  CWK’s then solicitors gave a reply letter to Lo on 27 February 2014, in which the solicitors said that the mortgage payments were paid off in 1992, and the Property was owned by CWK and Lo, each of them had 50% beneficial interest of the Property.

22.  CWK commenced these proceedings against Lo on 28 May 2014.

23.  The market value of the Property is HK$11,000,000, and the market rental is HK$35,000.

THE PLAINTIFFS’ CASE

24.  The plaintiffs’ pleaded case is as follows:-

(a) The Business was set up by CS alone and Lo was never responsible for its operations.  CS himself solely owned the Business.

(b) CS signed the SPA on 17 December 1988 and fully paid the purchase price of the Property.

(c) The Property was assigned to CWK and Lo as tenants in common in equal shares.  CWK’s half share in the Property was held on trust for CS for life and thereafter for himself as a gift.  The other half share interest in the Property was a gift by CS to Lo.

25.  The plaintiffs claim a declaration that CWK, alternatively the Estate, is a beneficial owner of the Property having 50% interest in the same.  The plaintiffs further claim an order for sale of the Property under the Partition Ordinance (“PO”), an order for taking of accounts of the rent or mense profits payable to CWK or alternatively to the Estate, and an order for payment of the amount found due on the taking of the account.

26.  The plaintiffs have called 4 witnesses to give evidence to support their case, namely:-

(a) CWK;

(b) CWH;

(c) Yan Shek Fai (甄錫輝) (“Yan”), owned耀輝洋行and set up德發遮廠with others in Shenzhen in 1985;

(d) Lau Yiu Ming (劉耀明) (“Lau”), set up祝輝企業有限公司with others in 1989.

THE DEFENDANT’S CASE

27.  The defendant’s pleaded case is as follows:-

(a) Although the Business was registered in sole name of CS, CS in fact carrying on the Business as trustee for himself and Lo in equal shares.  This trust arrangement was recorded in the BT Agreement and the BT Assignment.

(b) Before the purchase of the Property, it was agreed between CS and Lo that the Property would be held by Lo and CWK (as nominee of CS) on trust for the Business.

(c) The down payment of the Property was paid by Lo, which was borrowed by Lo from her friend Madam Ma Liu Mui (“Ma”).  The balance of the purchase price was financed by a mortgage loan from a bank.

(d) Between 11 January 1989 to 12 March 1991, the mortgage loan was repaid by instalments by the Business.

(e) On 12 March 1991, by the BT Assignment, CS assigned all his half share interest in the Business to Lo for HK$525,000.00.  Lo then became the sole owner of the Business.

(f) After the said transfer, the Business continued to repay the remaining mortgage instalments until April 1992.

28.  It is important to note that the trust pleaded in the Defence is the following (“the Trust”):-

“[Lo] and [CS] agreed that the Property would be held by [Lo] and [CWK] (as nominee of [CS]) on trust for the Business as the beneficial owner, which in turn was registered under the sole proprietor of [CS] but was held by [CS] as trustee on trust for [CS] himself and [Lo] as beneficial owners in equal shares (i.e. the Property is beneficially owned by [CS] and [Lo] in equal shares through their beneficial ownership in the Business.” (as per §9(2) of the Defence)

29.  The defendant claims that by reason of the aforesaid, Lo is the sole beneficial owner of the Property.  Alternatively, Lo has 72.31% beneficial interest in the Property as a result of her contribution to the purchase price.  Lo is relying upon the doctrine of resulting trust, or alternatively common intention constructive trust, in support of her claim.

30.  On 8 September 2016, this court made an order appointing Chan Fung Yi (陳鳳儀) (“Chan”, PKC’s wife) as the next friend and guardian ad litem of Lo in these proceedings.  It was said that Lo was diagnosed to have dementia in August 2016.

31.  Initially, the defendant’s side was prepared to call the following 6 witnesses to give evidence in the trial:-

(a) Lo;

(b) Pang Lai Chun (彭麗珍) (“PLC”, PKC’s elder daughter);

(c) PKC;

(d) Chan;

(e) Wong Chun Pong (“Wong”), an accountant providing accounting service to the Business in the past;

(f) Yik Hung Sang (易洪燊) (“Yik”), a friend of Yan.

32.  Eventually, the defendant’s side only called PKC, Chan and Wong to give evidence.  The other witnesses have not been called to give evidence.  The explanations offered in respect of the absence of these witnesses are as follows:-

(a) Lo is suffering from dementia.

(b) PLC is residing in mainland China and is having the Parkinson’s disease.  Due to her physical condition, she has difficulties to travel to Hong Kong.

(c) Yik cannot come to court to give evidence due to timetable clash.

33.  I shall deal with the admissibility of and the weight to be given to the witness statements made by the witnesses who have not come to court to give evidence later in this judgment.

THE PRINCIPLES

34.  Mr Tim Yu, counsel for Lo, fairly accepts that unless it is shown otherwise, the legal ownership of a property is regarded as consistent with the beneficial entitlement.  In this case, Lo bears the burden to show that the beneficial ownership is different from the legal ownership.

35.  The relevant principles have been succinctly summarized by G Lam J in Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 (affirmed by the Court of Appeal, see [2015] 1 HKLRD 490), in which the learned judge said:-

“44. …… The Property being registered in the defendant’s name, the plaintiff bears the burden of showing, on the balance of probabilities, that the defendant held the Property on trust for him absolutely.

45. The plaintiff seeks to achieve that by pleading both a resulting trust and a constructive trust. However, given that both parties allege there was express discussion and actual intention as to where the beneficial interest in the Property should lie, there is little scope for the operation of resulting trust: Re Superyield Holdings Ltd [2000] 2 HKC 90, 111. At the commencement of the trial, indeed, counsel agreed that constructive trust is the real issue, and that resulting trust is not relevant except perhaps if I should decide to reject both parties’ evidence on intention.

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 favour. In the context of this case, this means that the plaintiff must prove (i) 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; (ii) the plaintiff altered his position in detrimental reliance upon such common intention; and (iii) 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 at para. 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 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.”

36.  In accordance with these principles, as the Trust as pleaded by the defendant is that there was express discussion and actual intention that CS and Lo should own the Property as beneficial owners in equal shares, the Trust should be a common intention constructive trust and not a resulting trust.  The defendant bears the burden to prove this common intention constructive trust.

37.  For the reasons set out in the latter part of this judgment, the following provisions in the Conveyancing and Property Ordinance (“CPO”) are also relevant in these proceedings:-

(a) CPO s 3

“(1) Subject to section 6(2), no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose.

(2) This section applies to contracts or other dispositions whenever made and does not affect the law relating to part performance or sales by the court.”

(b) CPO s 6

“(1) All interests in land created by parol and not put in writing and signed by the persons creating the same, or by their agents thereunto lawfully authorized in writing, have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.

(2) Nothing in section 3 or 5 or in subsection (1) shall affect the creation by parol of leases taking effect in possession for a term not exceeding 3 years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without a premium.”

38.  As to the assessment of the credibility and/or reliability of a witness’s evidence, the principles are well established.  In Star Glory Investment Ltd v Kai Tuo (HK) Tdechnology Co Ltd and Others (HCA 3523/2002, 13 August 2005), Andrew Chung J said:-

“12. The assessment of a witness’s credibility and/or reliability is a task frequently undertaken by the court in litigation (in fact, very often an essential task). I consider the following to be the appropriate test to adopt:-

“There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-

(a) whether that part of his testimony is inherently plausible or implausible;

(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest”.

(See, for example, the decisions in Chiu Chi Tong v Lau Chong Sai & Another, HCA 765/2002 (para 28) and Yu Ming Investment Ltd v Pang Ru Chuan, Richard HCA 814/2002 (para 13)).”

See also the principles set out in Hon Foo Choi v Hometek International Ltd (DCCJ 3129/2014, 31 July 2017), [26] and [27].

39.  When a party without a proper explanation fails to call a witness whom the party might reasonably be expected to call, the court may draw an adverse inference against the party that the evidence of the witness may not help the party’s case.  See the principles summarized in Hon Foo Choi, [18] and [19].  See also Telings International Hong Kong Ltd v John Ho and Others (CACV 10/2010, 2 October 2010), per Le Pichon JA:-

“77. I turn now to consider the question of the effect of the plaintiff failing to call any witnesses. In his written submissions, [counsel] took the bold stance that

“[n]o adverse inference could be drawn from the fact that the witnesses were not called.  If the witness is not called, these statements are simply disregarded.”

79. I cannot accept [counsel]’s submission. It is contrary to the well-established maxim, omnia praesumunter contra spoliatorem, sometimes referred to as the principle in Armory v Delamirie (1722) 1 Str 505. In Hong Kong and Shanghai Banking Corporation v Chan Yiu Wah [1988] 1 HKLR 457, Fuad JA expounded that principle (at 467). That passage is quoted in full in my judgment in Tullett & Tokyo International Securities Ltd v APC Securities Co Ltd [2001] 2 HKC 713 at 723B-E:-

“285. Failure to produce evidence, as indicating unfavorable tenor of evidence: (1) In general. … The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so; and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavorable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which make some other hypothesis a more natural one than the party’s fear of exposure. But the propriety of such an inference in general is not doubted.

[Armory v Delamirie] this has been a recognised principle.”

See also Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434 at 443I-444B.

80. While the judge referred (at §73) to:-

“the practice that where a litigant chooses not to call evidence, the court is entitled to be bold and can draw from the facts or reasonable inferences as to what facts may have been withheld”

and professed to have borne that in mind, it would appear that he did not find it necessary to apply the maxim by reason of his rejection of the testimony of the defence witnesses.

81. However, in thus rejecting the testimony of the defendants, the judge appears to have evaluated their evidence in isolation, without weighing it against any reasonable adverse inference to be drawn from the failure of the plaintiff to call any oral evidence on any particular matter or issue.  Using what appears to be a broad brush approach, the judge simply rejected the defendants’ evidence in its entirety. In a case such as this, where the plaintiff has failed to call relevant witnesses to give evidence notwithstanding the highly complex and at times wholly unexplained factual backdrop, such an approach serves to emasculate the evidential maxim and cannot be correct.  In my view, every reasonable inference adverse to the plaintiff and in favour of the defendants should be drawn in determining each and every disputed fact.”

40.  With all these principles in mind, I proceed to analyze this case.

THE PLAINTIFFS’ EVIDENCE

CWK

41.  CWK is an honest and reliable witness.  He is frank and straightforward.  He is able to tell the court the circumstances concerning the purchase of the Property.  His evidence is in accordance with common sense and is inherently probable.

42.  CWK’s evidence is as follows:-

(a) He had a good relationship with CS. He came to Hong Kong from Mainland China in 1972 and worked in the Business.  The Business was established by and run by CS.

(b) After he came to Hong Kong, CWK realized that CS was cohabiting with Lo.  Lo was the girlfriend of CS and would accompany CS to attend social functions.  However, Lo did not participate in making decisions for the Business.

(c) CWK worked in the Business for about 9 years (from 1972 to 1981).  After that, CWK was still working in the umbrella industry at Yau Wah (有華) and then in Tak Fat (德發) and maintained a business relationship with CS.

(d) In about mid-1988, CS discussed with him about the potential purchase of the Property.  CS told CWK that the then landlord of the Property was emigrating and asked CS either to purchase the Property or to vacate it.  CS told CWK that he was willing to purchase the Property as the removal fee would be very expensive.

(e) In about late 1988, CS told CWK (before the execution of the Assignment on 11 January 1989) that CS had already purchased the Property.  CS told CWK that he would have the Property registered in the name of CWK and Lo such that if anything untoward was to happen to CS himself, CWK could take over CS’s half interest in the Property.

(f) CS told CWK that he would fully pay the purchase price and thereafter would mortgage the Property to borrow for 50% of the purchase price to be used as the working capital of the Business.  CS told CWK that the mortgage monthly instalment was $40,000 to be repaid in about 4 years.  At that time, CS was having a prosperous business and hence should have no problem in handling the repayments.  Further, CWK’s himself was also making handsome profits in Tak Fat.  Accordingly, CWK had no worry concerning the repayments at all.

(g) In late 1990, since CS was getting old and his relationship with Lo was deteriorating, CS was prepared to emigrate to Canada with his wife (CWK’s mother).  Later, CWK learned from CS that CS had transferred the Business to Lo.  CWK did not know much about that transfer.

(h) CS emigrated to Canada in mid-1992 but returned to Hong Kong a few months thereafter.  After coming back to Hong Kong, CS would visit the Property from time to time and would collect rent concerning the Property from Lo.  CWK himself witnessed payments of rent by Lo to CS on two occasions.

(i) CS became fragile in mid-1996 and moved back to live in Mainland China in 1997.  At that time, CWK learned from CS that Lo had stopped paying rent to CS.

(j) In 2002, CWK accompanied CS to go to the Property to find Lo.  CWK asked Lo to continue to pay rent to CS, but Lo was unwilling to do so.  At the end, Lo agreed to allow CWK to store some goods in the Property.  CS decided not to chase Lo to pay rent again since Lo had looked after him in the past. Further, CS did not want to stir up any dispute which might affect the Property, as there were rumours saying that some developers were considering of purchasing the properties on Belford Road at that time.

(k) In 2009, Lo and PKC went to Mainland China to visit CS.  In the 2009 Meeting, Lo proposed to CS that she was willing to purchase CS’s interest in the Property by paying CS HK$1 million.  CS told Lo that she should discuss the matter with CWK.  CWK rejected Lo’s offer and counter-proposed to purchase Lo’s interest in the Property by paying Lo HK$1 million.  No agreement concerning the Property was reached in the meeting.

(l) In the 2012 Meeting, PKC asked CWK to sell CWK’s interest in the Property to him.  CWK said if PKC was really interested in purchasing CWK’s interest in the Property, CWK was willing to sell it to PKC at a price equivalent to 95% of the market price. However, no agreement was reached at the end.

(m) In about December 2012, Lo had a meeting with CWK in a restaurant in Mong Kok.  In that meeting, Lo told CWK that someone was willing to purchase CWK’s interest in the Property at HK$1.2 million.  She hoped that CWK would accept this offer, and pay her HK$500,000 as the introduction fee at the same time.  CWK agreed. However, there was no development in the matter after the meeting.

43.  Notwithstanding the skillful and lengthy cross examination conducted by Mr Yu, CWK’s evidence remains unshaken.

44.  I bear in mind that CWK has a personal interest in these proceedings, ie if he succeeds in these action, he would be declared to have 50% beneficial interest in the Property.  I also bear in mind that there is no clear documentary evidence showing CS’s financial ability at the time of the purchase of the Property in 1988.  However, there are some documents from the Inland Revenue Department showing that the Business had to pay profits tax in the years of assessment of 1987-88, 1989-89, and 1989-90.  These are evidence showing that the Business was making profits in these years.  I also accept the evidence of Yan (see below) who said that CS had a good business.  On the other hand, Lo’s case is that the down payment of the Property was paid by her by getting a loan from Ma.  There is not a shred of reliable evidence proving this alleged loan from Ma.  Lo herself has not given any evidence.  There is no evidence from Ma.  There is also no documentary evidence on this alleged loan. In respect of the payment of the purchase price, the plaintiffs’ version is clearly more probable.

45.  I accept CWK’s evidence.

CWH

46.  CWH’s evidence is focusing on the 2009 Meeting and the 2012 Meeting.  He was present in these 2 meetings.  He frankly tells the court that he does not know much about this case, and he only says what is within his personal knowledge.

47.  In respect of these 2 meetings, his evidence corroborates with CWK’s evidence.  CWH’s evidence is clear and cogent.  I accept his evidence.

Yan

48.  Yan was a friend of CS.  He came to know CS in about 1971 because of business.  He and CS were good friends and they had business dealings with each other from time to time.  CS introduced Lo to him.  CS told Yan that Lo was not his wife.  Yan saw Lo accompanying CS in social functions.  However, CS told Yan that he did not allow Lo to make decisions in the Business.

49.  Yan tells the court that when CS was considering to purchase the Property in 1988, CS told Yan that he was worried about the cash flow of the Business if he paid the purchase price by cash.  CS asked Yan for advice.  Yan suggested to CS that he might consider to mortgage the Property to a bank to get funds as the working capital of the Business.

50.  Yan also tells the court that there was another episode before CS finally decided to have CWK and Lo to be registered as the owners of the Property.  CS told Yan that initially he intended to have CWK as sole owner, but he could not stand the pestering of Lo so he finally gave in and agreed to have the Property registered in the name of both CWK and Lo.

51.  Yan further tells the court that in the mid-90s, CS told him that Lo had not paid anything in respect of the purchase of the Property, and hence should pay rent to CS for the occupation and use of the Property.  Lo agreed to pay rent to CS initially, but was unwilling to do so after some time.  As there might be some developers considering purchasing the properties on Belford Street at that time, CS did not want to have any dispute with Lo concerning the Property and hence did not chase Lo for the outstanding rentals.

52.  Yan is an independent witness and has no interest in these proceedings. His evidence is clear and straightforward.  I accept his evidence.

Lau

53.  Lau started 祝輝企業有限公司 in 1989, the business of which was to provide the wires to manufacturers of umbrellas.  From 1989 to 1991, the main customer of Lau’s company was CS.  In the business dealings with CS, the one in charge of the Business was CS himself.  Lau would only contact CS and had no contact with Lo.

54.  In 1992, Lau’s company ceased operation and stored some goods in the Property.  He saw there were some other goods stored in the Property, and a worker in the Property told Lau that those goods belonged to CWK.

55.  Lau is an independent witness and has no interest in these proceedings. His evidence is clear and cogent.  I accept his evidence.

THE DEFENDANT’S EVIDENCE

Lo’s witness statement

56.  Lo signed a witness statement on 20 January 2016.  By the order made in the pre-trial review on 25 September 2017 (“the PTR Order”), Lo’s witness statement is admitted as evidence in the trial on a provisional basis.  I have to make a final determination on the admissibility of that witness statement. The crucial issue here is the mental capacity of Lo at the time of this witness statement.  Mr Yu accepts that the defendant’s side bears the burden to prove that Lo was of a sound mind when she signed the witness statement on 20 January 2016.  Mr Yu also accepts that if that burden has not been discharged, Lo’s witness statement would not be admissible evidence.

57.  PKC tells the court that at the time of this witness statement, Lo had a clear mind and was able to tell her lawyers everything.  Lo was admitted to a nursing home from 6 April 2016 to 11 May 2016.  She had an accident in the nursing home and was admitted to hospital.  After that incident, PKC took Lo back to home and retained a nurse to take care of her.  Lo was diagnosed of suffering from dementia on 23 August 2016.

58.  I am of the view that there is no reliable evidence showing that at the time of the witness statement, Lo was having a sound mind and could understand the contents of that witness statement:-

(a) Lo was diagnosed of suffering from dementia on 23 August 2016.  The witness statement was only signed by Lo a few months before this diagnosis.

(b) No medical evidence has been produced by the defendant’s side to show that Lo had the necessary mental capacity to understand and to confirm the witness statement on 20 January 2016.

(c) Lo was sent to a nursing home on 6 April 2016.  Obviously, somethings must have happened and led to this move.  Chan tells the court that Lo has forgotten to switch off the stove after finishing cooking at home.  PKC tells the court that Lo became of suspicious of everything (“疑神疑鬼、見到鬼又見到乜” and “怕怕地黑”) after the Chinese New Year in February 2016.  The witness statement was only signed shortly before the occurrence of these events.

(d) The last paragraph of Lo’s witness statement is as follows:-

“本人在錄取本證人陳述書時彭鑑潮亦在場”

Mr Ross Yuen, counsel for the plaintiffs, makes the point that the purpose of this paragraph is clearly to pave the way to enable PKC to say that Lo was having a sound mind at the time of the witness statement.  This paragraph itself in fact indicates that Lo’s mental capacity was doubtful when she signed the witness statement.  I agree.

(e) Further, PKC is not a reliable witness and I reject his evidence (see below).  In the circumstances, there is no reliable evidence before me proving the mental capacity of Lo at the time of this witness statement.

59.  Since it is not clear whether Lo has the necessary mental capacity to understand and to confirm this witness statement when signing the same on 20 January 2016, I exercise my discretion to exclude this witness statement from the evidence. 

60.  Even if this witness statement is admissible evidence, as Lo has not come to court to confirm this witness statement under oath and has not been subject to cross examination, I would not attach any weight to this witness statement.

PLC’s witness statement

61.  PLC signed a witness statement on 19 January 2016.  By the PTR Order, this witness statement is admitted as evidence in the trial on a provisional basis.  Again I have to make a final determination on the admissibility of this witness statement, and again the crucial issue here is the mental capacity of PLC at the time of this witness statement.  Mr Yu accepts that the defendant’s side bears the burden of showing that PLC was having a sound mind when she made the witness statement on 19 January 2016.  Mr Yu concedes that there is no evidence on this point.  In my view, the concession is fairly and correctly offered.  In the circumstances, I must exclude this witness statement from the evidence.

62.  Even if the witness statement is admissible evidence, since PLC has not come to court to confirm this witness statement under oath and has not been subject to cross examination, I would attach no weight to this witness statement.

Yick’s witness statement

63.  The defendant’s side has filed a witness statement made by Yick, but at the end Yick has not come to court to give evidence in the trial.  Mr Yu concedes that the explanation offered, ie due to timetable clash, is not a proper explanation, and as a result, Yick’s witness statement should not be admitted as evidence and no weight should be given to that witness statement. In my view, this concession is fairly and properly offered.  This trial is in the fixture list.  Each party has to check the availability of each of his or her witnesses before fixing the trial dates.  Timetable clash cannot be a proper excuse in these circumstances. 

64.  Apart from excluding Yick’s witness statement from the evidence, an adverse inference should be drawn against the defendant’s case.  In his witness statement, Yick says that he came to know CS and Lo in 1984, and the Business was jointly owned by CS and Lo, and Lo was in charge of many important matters in the Business.  Yick is not the family members of Lo and has no personal interest in these proceedings.  The matters mentioned in his witness statement, if true, would no doubt provide valuable support to Lo’s case.  The defendant’s side however fails to call Yick to give evidence without a proper explanation. In these circumstances, I draw an adverse inference against the defendant’s case that all the matters concerning the Business mentioned in Yick’s witness statement are not the truth.

Chan

65.  Chan tells the court that Lo was the person in charge of the Business. She believes that the Business was beneficially owned by CS and Lo jointly. Chan says that CS did not have much money but Lo was financially capable.  Lo was able to purchase a property in Yaumatei in 1981 by using the income from the Business.  Chan learned from Lo that the down payment of the Property (HK$200,000) was borrowed by her from Ma.  Chan also says that after transferring the Business to Lo in 1991, CS still visited Lo at the Property from time to time, but she has never seen Lo paying any rent to CS.

66.  Chan and PKC came to Hong Kong from Mainland China in 1980.  After arriving Hong Kong, she worked in the Business for about ½ year and then left. She does know much concerning the Business, and she has no direct knowledge concerning the purchase of the Property in 1988.  She is very uninformed about Lo’s finances, and as such there are significant internal inconsistencies in her evidence.  In trying to give evidence in support of the defendant’s case, Chan says that Lo contributed much to the purchase of the Property. Chan says that Lo was financially capable and CS was impecunious.  However, when she explains the source of income of Lo, Chan says Lo’s income was from the Business.  If the Business was so profitable, CS would not be impecunious since, even in accordance with the defendant’s case, CS was having 50% interest in the Business before the transfer in 1991.

67.  Under cross examination, Chan admits that she had quarrels with Lo from time to time.  She also admits that she only visited Lo twice during the period between 1981 to 1987.  Further, despite PKC was of the view that it would not be good to send Lo to a nursing home, Chan and PKC eventually made a decision and sent Lo to a nursing home in April 2016.  All these show that Chan and Lo did not have a good relationship.  In the circumstances, Chan would have little knowledge of Lo’s personal affairs.

68.  Mr Yuen suggests to Chan that she and PKC would be benefited most if judgment is entered in favour of Lo in these proceedings.  Chan disagrees and says that it has never come upon her that she could profit from the rental income of the Property.  Given that Chan is the guardian ad litem of Lo in these proceedings and is conducting these proceedings on Lo’s behalf, I do not believe that Chan has never considered the implications of the outcome of this trial.  Lo is now 90 years old and the Property is a piece of valuable asset which may generate substantiate rental incomes, and PKC and Chan are Lo’s son and daughter-in-law respectively.  I do not accept that it has never occurred to Chan that she and PKC may have benefits if Lo succeeds in these proceedings at the end.  I do not accept Chan’s answer as genuine and true.

69.  I do not regard Chan as an honest and reliable witness.  I reject her evidence.

PKC

70.  PKC’s evidence mainly concerns the 2009 Meeting and the 2012 Meeting. He also says that he has never seen Lo paying any rent to CS.  PKC admits that he does not know much about the Business and the purchase of the Property.

71.  I am of the view that PKC is an untruthful and evasive witness. 

72.  In respect of the 2009 Meeting, PKC has given 3 different versions at different times:-

(a) In his witness statement dated 20 January 2016, PKC said that Lo and him went to Guangzhou to visit CS in 2009, because at that time Lo learned that CS was not in good health.  There was no discussion concerning the Property in the 2009 Meeting.

(b) In his supplemental witness statement dated 6 May 2016, PKC said that in the 2009 Meeting, Lo demanded CS to explain why CWK’s name was still on the title documents of the Property after her purchase of the Business in 1991. There were heated arguments in the restaurant.  PKC did not participate in these exchanges.

(c) Under cross-examination, PKC’s evidence is that when Lo started to query CS on the ownership of the Property in the meeting, PKC left the scene.  Lo was very agitated at that time.  PKC left the scene for about half an hour and then went back to the restaurant.

73.  PKC’s evidence on the 2009 Meeting is untrue:-

(a) Had there been such a big quarrel concerning the Property in the meeting, this would have been a special incident and PKC would not forget the same at the time of preparing his witness statement for this case.  There is no satisfactory explanation for not mentioning this at all in his 1^st witness statement.

(b) It is inherently improbable that Lo would have interrogated CS on the ownership of the Property in the meeting as suggested by PKC.  If the ownership question was really a question troubling Lo, Lo would seek clarification from CS at a time shortly after the transfer of the Business in 1991.  It is inherently improbable that Lo would only ask CS this question 18 years after the transfer and had a quarrel with CS in a visit occasioned by genuine care and concern of CS’s health.

74.  PKC’s evidence on the 2012 Meeting is also untrue:-

(a) PKC is clearly evasive when he is talking about this meeting.  He is repeating the same words（“我問佢原因，係因為佢地先清楚”，“我母親已經買左中華，全權買左物業” and “我只係想知道來龍去脈”）irrespective of what is really the question posed at him.

(b) PKC says that he arranged this meeting for the purpose of knowing the details concerning the Property.  However, apart from repeating the aforesaid words, he has not really told the details of the exchanges in the meeting. Bearing in mind that PKC himself was the convener of this meeting, he must intend to achieve something in this meeting.  PKC has never given clear evidence on (i) whether the purpose of the meeting had been achieved; (ii) if not, whether he had taken any follow-up actions.  

(c) PKC denies that he proposed to purchase CWK’s interest in the Property in this meeting.  However, no doubt the ownership of the Property was touched upon in the meeting.  It is unnatural that the parties have never exchanged any view on how to resolve their differences concerning the ownership of the Property in the meeting. 

75.  The 2009 Meeting and the 2012 Meeting are two important episodes in this case.  Since PKC’s evidence on these issues are untrue, his evidence as a whole cannot be counted as reliable.  I reject his evidence in its entirety.

Wong

76.  Wong is the accountant providing accounting service to the Business during most of the time in the period from about 1984 to about 1993.  He is a factual witness and not an expert witness.  Accordingly, the opinion as well as the arguments contained in his witness statements are inadmissible evidence.

77.  Wong’s himself does not have personal knowledge of the respective interests of CS and Lo in the Business.  Wong also does not have personal knowledge of the circumstances concerning the purchase of the Property.

78.  I note that Wong has made some comments on the accounting records of the Business produced by the defendant’s side.  Those accounting records are the records covering the period from 1983 to 1988.  Mr Yu tells the court that these are all the accounting records which can be found.  Mr Yu cannot say that these are all the accounting records of the Business from 1983 to 1988.  Since there is no way to ensure that the accounting records produced are a complete set of the records for those years and the accounting records before and after this period are not available, Wong’s evidence built upon these limited accounting records cannot be treated as reliable evidence.

79.  In my view, Wong’s evidence does not assist the defendant’s case.

DOCUMENTARY EVIDENCE

80.  I would spend some time to discuss the documentary evidence in this case.

Land search showing the purchase of a property by Lo in Yaumatei in 1981

81.  As shown in this land search, Lo purchased a property in Yaumatei in about September 1981.  However, there is no evidence showing the source of the down payment and the subsequent mortgage repayments.

82.  The following have to be borne in mind:-

(a) There is no evidence showing in what way Lo might have been able to accumulate wealth on her own before 1981.

(b) In 1981, CS had been cohabiting with Lo for several years.

(c) CS was the sole proprietor running the Business.  CS had the necessary skills in manufacturing umbrellas.  Such skills would be essential to the business.

(d) On the other hand, there is no evidence showing that Lo had any expertise which was essential to the Business.

83.  Putting all these together, it is more probable than not that in respect of this purchase, the down payment and the subsequent mortgage repayments were from CS.

Settlement Agreement between the Business and Lo dated 15 March 1982

84.  There is a settlement agreement between the Business and Lo concerning an industrial accident occurred on 23 December 1981.  It is recorded on this document that Lo was a machine worker in the Business at the time of the Accident.

85.  This document at most can only show that Lo had worked in the Business as a worker, and certainly does not show that Lo was a boss of the Business.

The SPA

86.  The SPA is the beginning of the purchase of the Property.  CS signed the SPA as the purchaser.

The nomination

87.  In the Nomination, CS nominated CWK and Lo to take up the assignment of the Property.  CS in which also stated that the deposit was paid by CWK and Lo.

88.  Mr Yu relies upon this nomination to support the defendant’s case.  Mr Yu submits that since CWK has confirmed in his evidence that he has never paid anything in the purchase of the Property, the deposit should be entirely from Lo.

89.  With respect to Mr Yu, I am unable to accept this submission.

(a) In reading the Nomination, the close personal relationship between the parties at that time must be borne in mind.

(b) At that time, CS was the sole proprietor running the Business and had the necessary skills which were essential to the Business.  On the other hand, there is no evidence showing that Lo had any expertise which was important to the Business.

(c) There is no evidence in support of the alleged loan from Ma to Lo in relation to the purchase of the Property.

(d) There is no evidence showing that at that time, Lo by her own resources was able to pay the deposit.

(e) Bearing all these in mind, it is more probable than not that all the deposit in fact was paid by CS, but CS intended to make the Property as a gift to CWK and Lo.

The Assignment

90.  CWK and Lo took up the assignment and became the registered owners of the Property.  Nothing essential turns on this assignment.

The BT Agreement and the BT Assignment

91.  In the BT Agreement, it is recorded that half of the capital of the Business was put up by Lo and CS was holding the Business as trustee for himself and Lo in equal shares.  Mr Yu relies upon this and submits that the Business in fact was beneficially owned by CS and Li in equal shares.  For the reasons stated in paragraph 89(a) and (b), I am of the view that this statement in the BT Agreement should not be taken at its face value.

92.  In any event, the ownership of the Business is not the subject matter of these proceedings.  The subject matter in this case is the ownership of the Property.  It is important to note that (which is accepted by Mr Yu) the Property or any interest therein is not mentioned in the BT Agreement and in the BT Assignment.

Mortgage repayments

93.  There are documents and it is also undisputed that the mortgage over the Property was released on 11 April 1992.  The defendant’s case is that after the transfer of the Business in February 1991, Lo caused the Business to make mortgage repayments and redeemed the mortgage in April 1992.

94.  The documents produced by the defendant shows that in fact there was only 1 mortgage repayment by the Business during this period.  That mortgage repayment was made on 4 October 1991.  The amount of that mortgage repayment is relatively a small amount, ie HK$37,864.31.  Obviously, it cannot be said that Lo’s beneficial interest in the Property is more than 50% by reason of this small contribution.

95.  As to whether Lo has made any other contribution(s) in relation to the purchase of the Property and the repayment of the mortgage loan, for the reasons set out in the above, there is no cogent and reliable evidence on these.

BENEFICIAL OWNERSHIP OF THE PROPERTY

96.  By reason of the aforesaid, I accept the plaintiffs’ case and reject the defendant’s case.  I find that:-

(a) the Property was beneficially owned by CWK and Lo equally during the lifetime of CS, with CWK holding his 50% beneficial interest on trust for CS; and

(b) after the death of CS, the Property is beneficially owned by CWK and Lo, each of them having 50% beneficial interest therein.

97.  Even if there is any blemish in the plaintiffs’ case and I am wrong in accepting the plaintiffs’ case in its entirety, since there is no reliable evidence produced by the defendant showing that the beneficial ownership of the Property should be different from the legal ownership of the same, the defendant would still fail in these proceedings.

98.  In the further alternative, even if the defendant is correct on all the factual issues as suggested by her, her case would still fail for the following reasons:-

(a) In accordance with the defendant’s pleaded case, at the beginning, the Property was beneficially owned by CS and Lo equally.  See Defence §9(2).

(b) The defendant’s primary case is that by reason of the transfer of the Business in 1991, the defendant became the sole beneficial owner of the Property.  However, as said in the above, the Property or any interest therein has not been mentioned in the BT Agreement and the BT Assignment.  Mr Yu has confirmed with this court that there is no written instrument concerning the transfer of CS’s 50% beneficial interest to Lo.  No part performance or estoppel has ever been pleaded.  In the circumstances, by reason of CPO, ss 3 and 6, it would not be possible for Lo to mount an action to claim that she has acquired CS’s 50% beneficial interest and is a sole beneficial owner of the Property.

(c) The defendant’s alternative case is that by reason of her contributions to the purchase price, including the mortgage repayments, she has acquired 72.31% beneficial interest and is a 72.31% beneficial owner of the Property. The problem of this alternative case is that the starting point of the defendant’s case is that it was agreed between CS and Lo that each of them would be a 50% beneficial owner of the Property at the beginning, and each of them was indeed a 50% beneficial owner initially.  That being the case, in the absence of any written instrument, part performance or estoppel, it would not be possible to say that some beneficial interest (ie 22.31%) has been transferred from CS to Lo.  On the basis of the case pleaded by Lo, merely paying more than 50% of the purchase price, without anything more, would not give more than 50% beneficial interest to Lo.

THE RELIEFS

99.  Mr Yu fairly accepts that if the court is with the plaintiffs on the issue of the beneficial ownership of the Property, there should be a declaration to that effect, an order for sale, and an order for taking of the accounts of rent or mesne profits payable to the 1^st and/or the 2^nd plaintiff since 5 March 2013.  Further, costs of these proceedings should be to the plaintiffs, with a certificate for counsel, to be taxed if not agreed.

100.  I have held that after the death of CS, CWK personally owns the 50% beneficial interest in the Property.  Accordingly, the declaration and the order for sale would be made in favour of CWK.  Further, since the occupation of the Property is without CWK’s consent, there should be payment of mesne profits by the defendant to CWK as from 5 March 2013. 

101.  There should be a declaration that since 5 March 2013, the Property is owned by the 1^st plaintiff and the defendant beneficially as tenants in common in equal shares.

102.  In respect of the order for sale, Mr Yu submits that the defendant’s side would need 3 months to deliver vacant possession of the same to the plaintiffs’ side.  While I appreciate that the defendant’s side would need reasonable time to make arrangements, I am of the view that 12 weeks would be sufficient and reasonable.  I would order that vacant possession of the Property be delivered by the defendant to the 1^st plaintiff within 12 weeks.

103.  Having considered Mr Yuen’s submissions and Mr Yu’s submissions, the terms of the order for sale would be as follows:-

(1) The defendant do deliver vacant possession and all the title deeds of the Property to the 1^st plaintiff within 12 weeks;

(2) The Property be sold in vacant possession by way of private treaty at a price not less than HK$11,000,000 no later than 3 months after the delivery of vacant possession of the same by the defendant to the 1^st plaintiff, failing which the Property be sold in vacant possession by way of public auction at a price not less than HK$11,000,000;

(3) The plaintiff’s solicitors herein, namely Chong & Partners, shall have the conduct of the sale of the Property and, pursuant to s 8 of the Partition Ordinance and s.51 of the Trustee Ordinance, Chong Ling Wan (莊凌雲), a partner of the said firm, be appointed to execute the agreement, assignment and all other necessary documents (if any) as vendor to convey the Property and all interest therein to the purchaser;

(4) The proceeds of sale of the Property be applied in the following orders of priority:-

(a) in discharge of all government rent, rates and other outgoings due and affecting the Property, if any;

(b) in discharge of all incumbrances, if any;

(c) in satisfaction of legal costs of the sale of the Property up to HK$12,000 and in the event of sale by private treaty, estate agent commission provided that the commission shall not exceed 1% of the sale price of the Property; in the event of sale by public auction, action fees provided that the total of which shall not exceed 1% of the sale price of the Property;

(d) 50% of the remaining sum be paid to the 1^st plaintiff;

(e) the following amounts be deducted from the other 50% of the remaining sum and released to the 1^st plaintiff and/or the 2^nd plaintiff:-

(i) all the sums found due and payable to the 1^st plaintiff after taking of the account pursuant to the order provided in this judgment;

(ii) all the costs payable to the plaintiffs;

(f) after deducting all the aforesaid, the balance be released to the defendant; and

(5) Liberty to apply.

104.  As to the mesne profits due to the 1^st plaintiff, Mr Yuen has handed up a table showing all the calculations, and Mr Yuen submits that the amount due to the 1^st plaintiff is a certain sum, but Mr Yuen is willing to claim a smaller sum (“Sum X”).  Mr Yu is bound by instructions and cannot agree with the calculations set out in Mr Yuen’s table.  However, Mr Yu is unable to lodge any specific objection to any item on the table at the same time.  In the circumstances, I would direct that there be taking of accounts of mesne profits due from the defendant to the 1^st plaintiff as from 5 March 2013 before a master.  I further direct that Sum X should not be revealed to the master in charge of the substantive hearing for the taking of the accounts until after the conclusion of that hearing.  After the master reaching a final view on the sum due to the 1^st plaintiff in that accounting exercise, the master may compare that sum with Sum X and take the comparison into consideration in determining the costs of the accounting exercise.

105.  There should be an order dismissing the defendant’s counterclaim.

106.  There should also be an order that costs of these proceedings (including all costs reserved, if any) be to the plaintiffs, with a certificate for counsel, to be taxed if not agreed.

CONCLUSION

107.  I make the declaration and orders as set out in paragraphs 101 to 106 above.

108.  Last but not the least, I must record my gratitude to both Mr Yuen and Mr Yu for the fair presentation of their respective cases and the helpful assistance provided to this court.