HKCB FINANCE LTD v. YUEN YI WAN SANDY AND ANOTHER

cacv 355/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 355 of 2005

(on appeal from DCMP NO. 2017 of 2002)

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J U D G M E N T

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Hon Rogers VP:

1.  This was an appeal from a judgment of HH Judge To given on 29 November 2004.  The appeal was brought by leave granted by Mr Justice Tang JA given on 6 February 2006.  At the conclusion of the hearing of this appeal judgment was reserved which we now give.

Background

2.  The plaintiff was the mortgagee bank of a property namely a flat on the seventh floor of 120 Camp Street, Kowloon.  The property had been acquired by Au Chi Pang and Tse Yuk Lin in 1975.  In July 1977 Au became the sole registered owner of the property.  Two years later, on 21 August 1979, Au married the second defendant whilst she was in China.  There were two children of the marriage.  In 1994 the second defendant was granted a single entry permit to come to Hong Kong and since then she has lived in Hong Kong in the property as the matrimonial home.  The two children came to Hong Kong in 1995 and joined their mother to live in the property.

3.  Au left the second defendant in December 2000 and has not returned to live in the property since then.  As a result of a complaint made by the second defendant to the authorities in the Mainland, Au was imprisoned for bigamy on 31 March 2001 but were released shortly after his conviction on account of his poor health.

4.  Unknown to the second defendant, Au entered into an agreement dated 4 May 2001 with one Wong Lo Tim ("Wong") for the sale of the property at a price of $350,000.  On the same day Wong, as confirmor, sold the property to the first defendant for $700,000.  On the following day, the first defendant applied for a loan of $360,000 from the plaintiff to be secured by means of a legal charge over the property.  The sale and purchase was completed on 23 May 2001 with the loan obtained from the plaintiff on the security of a legal charge over the beneficial interest of property.

5.  Whilst it would appear that the second defendant was unaware of Au's transaction in relation to the property, by June 2001 an application was made on her behalf to obtain an avoidance of disposition order.  On 23 January 2003 HH Judge Gill made the following order:

"1. The deposition (sic) made by the Respondent on 4^th May 2001 by entering into an Agreement for Sale and Purchase with Wong Lo Tim in respect of the property situated at 7^th floor, No. 120 Camp Street, Kowloon, Hong Kong ("the Property") be set aside.

2. The deposition (sic) made by the Respondent in respect of the Property by an Assignment dated 23^rd May 2001 made between the Respondent as the Vendor, Wong Lo Tim as the Confirmor and Yi Wan Sandy as the Purchaser be set aside."

6.  That order was made under the provisions of section 17 of the Matrimonial Proceedings and Property Ordinance Cap. 192 ("the Ordinance").  That section reads as follows:

"1) Where proceedings for relief under any of the relevant provisions of this Ordinance (hereafter in this section referred to as "financial provision") are brought by a person (hereafter in this section referred to as "the applicant") against any other person (hereafter in this section referred to as "the other party"), the court may, on an application by the applicant-

(a) if it is satisfied that the other party is, with the intention of defeating the claim for financial provision, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim;

(b) if it is satisfied that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies and that if the disposition were set aside financial provision or different financial provision would be granted to the applicant, make an order setting aside the disposition and give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property);

(c)    if it is satisfied, in a case where an order under the relevant provisions of this Ordinance has been obtained by the applicant against the other party, that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies, make such an order and give such directions as are mentioned in paragraph (b);

and an application for the purposes of paragraph (b) shall be made in the proceedings for the financial provision in question.

(2) Paragraphs (b) and (c) of subsection (1) apply respectively to any disposition made by the other party (whether before or after the commencement of the proceedings for financial provision), not being a disposition made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any such intention as aforesaid on the part of the other party.

(3) Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application or to a disposition or other dealing with property which is about to take place and the court is satisfied-

(a) in a case falling within subsection (1)(a) or (b), that the disposition or other dealing would (apart from this section) have the consequence, or

(b) in a case falling within subsection (1)(c), that the disposition has had the consequence,

of defeating the applicant's claim for financial provision, it shall be presumed, unless the contrary is shown, that the other party disposed of the property with the intention aforesaid or, as the case may be, is, with that intention, about to dispose of or deal with the property.

(4) In this section-

"disposition" (財產處置) does not include any provision contained in a will or codicil but, with that exception, includes any conveyance, assurance or gift of property of any description, whether made by an instrument or otherwise;

"the relevant provisions of this Ordinance" (本條例的有關條文) means any of the provisions of sections 3, 4, 5, 6, 6A, 8, 11 (except subsection (6) ) and 15;

and any reference to defeating an applicant's claim for financial provision is a reference to preventing financial provision from being granted to the applicant, or to the applicant for the benefit of a child of the family, or reducing the amount of any financial provision which might be so granted, or frustrating or impeding the enforcement of any order which might be or has been made at the instance of the applicant under the relevant provisions of this Ordinance.

(5) The provisions of this section shall not apply to a disposition made more than three years before the commencement of this Ordinance."

7.  It is significant to note that that section gives power to the court to set aside a disposition made by "the other party" but subject to the limitation in subsection (2).  The "other party" is defined at the commencement of subsection (1) as being the person against whom relief is sought under the provisions of the Ordinance, that is somebody against whom an order for maintenance is sought.  Hence in those circumstances the order made by HH Judge Gill did not, and could not have, set aside the mortgage granted by the first defendant to the plaintiff.

8.  These proceedings arose because the first defendant ceased making the monthly instalment payments a few months after the mortgage had been taken out.  It was in those circumstances that the plaintiff instituted the present action against the first defendant and the second defendant applied to and was granted leave to join as a defendant on 4 October 2002.  The judge summarised the second defendant's defences to the plaintiff's claim for possession in paragraph 6 of his judgment where he said:

"The Plaintiff's claim in this action is based on the legal charge executed by the 1^st Defendant.  The 2^nd Defendant's defences are: (1) she is entitled to the beneficial ownership of the property by virtue of an order under section 17 of the Matrimonial Proceedings and Property Ordinance; (2) she has acquired an unregistrable equitable interest in the property because of her contribution to the family; (3) the 1^st Defendant as the purchaser of the property and the Plaintiff as the legal chargee had actual or constructive notice of the interest of the 2^nd Defendant as the wife of Au in the property and (4) the legal charge, being part and parcel of the fraudulent dispositions by Au is tainted with illegality and void.  I should note that the 2^nd Defendant's interest as pleaded in her defence is an "occupation right" in the property.  However, at the end of the trial, Ms Tsui confirmed that the 2^nd Defendant is not relying on a deserted wife's right to remain in the matrimonial home but only on her contribution to the family."

9.  At the trial of the action the only relevant evidence came from the second defendant.  Au did not appear and no evidence was sought from him.  Unfortunately, the judge was unable to accept everything that the second defendant said.  The primary purport of the second defendant's evidence had been that she had given Au altogether $230,000.  This had been done shortly after she had moved to Hong Kong.  After analyzing the evidence the judge's conclusion was summarised in paragraph 18 of the judgment where he said:

"As a result of the above finding of facts, the second defendant could only argue her case on the basis of her contribution in financially supporting the family, the upbringing of the children and her performance of the household chores and the sum of $50,000 she gave to Au."

10.  Although on this appeal Ms Tsui, who appeared on behalf of the second defendant, sought to argue that the judge should have held that at least a sum of $180,000 had been given by the second defendant to Au, there appears to be no sound basis upon which the judge's finding of fact in respect of the amount which the second defendant had given Au could be altered.

11.  The judge examined the law relating to whether a deserted wife was entitled to any share in the matrimonial home.  As regards this case, of course, it is highly material that the property in question was acquired by Au before the marriage.  In those circumstances there would have to be either an express or implied agreement that the property held in the name of one spouse was intended to be shared beneficially by both for the second defendant to have acquired an interest in the property.  In some cases such an implied agreement might be inferred from a common intention.  As the judge correctly pointed out, it was a question of fact as to whether such an intention could be imputed.  At paragraph 33 of the judgment, the judge said that he was unable to come to the conclusion that Au and the second defendant would have formed any common intention that the second defendant would, by reason of her contribution to the household expenses and the $50,000 which she had given to Au, have acquired any interest in the property.

12.  The judge then went on to consider the effect of section 17 of the Ordinance.  The judge held that the circumstances of the transaction whereby the property was sold by Au and ultimately the ownership was transferred to the first defendant were suspicious and he went on to accept that it was Au's intention to defeat any claim by the second defendant in respect of the property.  Nevertheless, importantly he held that the ownership of the property had been transferred to the first defendant.  As a result the mortgage to the plaintiff was a valid mortgage and although HH Judge Gill had set aside the conveyance, the second defendant held the property subject to the mortgage.

13.  In relation to the plaintiff's knowledge, the judge held that the plaintiff did not have any actual knowledge of Au's intention to erode whatever value there was in the property and to leave the second defendant with an incumbered property.  He said at paragraph 45:

"In my view, though suspicious in other aspects, there was nothing to put the Plaintiff on enquiry as to whether Au's wife, i.e. the second defendant, had any claim against the property for financial provision."

14.  In paragraph 48 the judge considered the question as to whether an inspection should have been made either by the plaintiff or on its behalf.  On the basis that such an inspection might have been appropriate he went on to hold that, nevertheless, even if the inspection had taken place and the plaintiff had discovered the presence of the second defendant there had been no duty on the plaintiff to inquire of her if she would be making any claim in respect of the property for financial provision.

15.  On this appeal, Ms Tsui attempted to argue that the judge should have held that the second defendant had paid far more to Au than the judge had held.  Unfortunately, as already noted, I see no basis for altering the judge's conclusion in that respect.

16.  Neither do I consider that the argument that the judge should have found that there was a common intention that the second defendant should acquire an interest in the property had been established.  Ms Tsui sought to argue that that such payments as the second defendant made, had been made in order to dissuade Au from selling the property.  In support of that she referred to paragraph 5 of an affirmation of 13 June 2001 made by the second defendant in the course of matrimonial proceedings.  What was said, however, does not establish that the second defendant made any payments on the basis that she would acquire an interest in the property.  What it shows is that the husband was a bully and mistreated the second defendant but no more.

17.  In the absence of the second defendant establishing that she had any equitable proprietary interest in the property I see no basis for disturbing the judge's conclusions.  Even if it could be said that the plaintiff should have inspected the property prior to accepting a mortgage on it, it would have not have been put on notice of any proprietary claim by the second defendant because the second defendant had no proprietary claim.  Any claim for maintenance would, at the stage that the mortgage was created, not have created any equitable interest in the property in favour of the second defendant.  Indeed, it could not be known that the property was the only source of any finance for the second defendant until that had been found by the court dealing with any application for maintenance by the second defendant.

18.  Since completing the foregoing part of this judgment, I have had the advantage of reading in draft the judgment of Cheung JA.  I regret that although I consider it may be attractive for other reasons to accord the second respondent a measure of interest in the property, I am unable to see that it would be right to do so.  The two cases which were relied upon were special cases on their facts.  Both cases concerned the distribution of assets between former partners who had never been married.  There were no applicable statutory provisions whereby a transfer of assets could be ordered as in matrimonial proceedings.  In the New Zealand case, Richardson and Casey JJ observed that some form of legislation would be desirable.  What is clear however is that there are statutory provisions in Hong Kong that cater for the transfer of assets between spouses where that is appropriate.  Indeed that was precisely what the order of HH Judge Gill did.

19.  The case in the Supreme Court of Canada of Catherine Peter v William Beblow [1993] 1 S.C.R. 980 involved what might best be described as a discretionary judicial declaration of a constructive trust.  The discretion in question was one where the court decided whether to award monetary compensation or an interest in property.  In so far as the property was relevant, again it was said that if there had been a number of properties there would have been a discretion as to which might be made the subject of a constructive trust.  Not only was the trust created by judicial intervention, but the discretion was exercised after the break up of the relationship.

20.  Importantly, the imposition, by judicial intervention, of a discretionary constructive trust of the type envisaged in the Canadian case could not affect the acquired rights established before any such declaration had been made.  There is no suggestion in the Canadian case that that could have happened and, indeed, it would not have been relevant since the case was simply between the two former partners and there was no third party involvement.

21.  There was a division between the approach of the majority: La Forest, Sopinka, McLachlin and Iacobucci JJ and the remainder of the court namely L'Heureux-Dube, Gonthier and Cory JJ.  The majority were of the view that there should be a direct link between the contribution and the property for a constructive trust to arise.  Even so, it would appear that the value of the interest in the property remained to be calculated by the court.  The remainder of the court approached the matter on the basis that it was a discretionary remedy as to whether the claiming party would be held to be entitled to an award of a monetary sum or to the imposition of a constructive trust in respect of the property.  As already noted, if there were more than one property there might be a discretion as to which property would be subject to a constructive trust.

22.  The New Zealand case of Gillies v Keogh 2 NZLR 327 was a case in which a couple, who were never married, lived together and both found work and put most of their earnings into a joint account.  That joint account was used for household expenses and outgoings in connection with a house which had been purchased in the name of the defendant with the purchase price coming from funds from the defendant's previous matrimonial property settlement, from loans from her father and a friend and from other borrowings.  That house was extended, substantially improved and the gardens developed.  It was found that the plaintiff had made the greatest physical contribution in that respect.  That property was sold and another purchased again in the sole name of the defendant.

23.  The Court of Appeal in that case allowed the defendant's appeal and held that she was entitled to the property.  The various arguments of constructive trust and unjust enrichment failed.  Cheung JA has cited the passage from the judgment of Cooke P where he said that it made no practical difference in the result whether one talks of constructive trust, unjust enrichment, imputed common intention or estoppel because it was necessary to take into account the same factors.  Importantly, of course, it is the facts of the case which are important.  In the penultimate paragraph of his judgment Cooke P said:

"The case thus emerges as one in which it is substantially common ground in the evidence that, as well as taking title in making the contractual and financial arrangements in her own name, the appellant made it clear to the respondent at all times that she was asserting that the house was hers and hers alone.  He was content not to argue.  In these circumstances, applying the principles discussed earlier, in my opinion one cannot say that the reasonable person in his shoes would have understood that he was acquiring an interest; or that there was unjust enrichment; or that it is unconscionable on her part to repudiate his claim; or that she is in any sense estopped."

24.  In every case the facts are different.  But in the present case the second respondent's contribution of financially supporting the family and upbringing the children and her performance of the household chores over the six years in which she was in Hong Kong and living with Au even taken together with the sum of $50,000 are so distinct from any right in respect of the property that I cannot see how any claim to an interest in the property arises.  The second respondent's evidence, as already indicated, does not establish that it was her expectation to receive an interest in the property.  Still less was there any evidence that Au ever had any intention that the second respondent would have any interest in the property.

25.  Finally, the point was taken that the mortgage contract was tainted with illegality.  This argument was not pursued with any vigour during the hearing.  Although there were what have been referred to as suspicious circumstances regarding the sale by Au to Wong and the first respondent, those suspicious circumstances do not make the sale illegal.  The sale was effective to pass title in the property to the first respondent until it was set aside by the order of HH Judge Gill.  Once it is appreciated that transfer of title to the first respondent was not illegal it is not possible to say that the creation of the mortgage was itself illegal.

26.  I would, therefore, dismiss this appeal and make an order nisi of costs in favour of the plaintiff.  The second defendant's costs would also need to be taxed on a legal aid basis.

Hon Cheung JA:

The facts

The relationship

27.  Wong Chiu Mui ('Wong') was 26 years of age when she married Au Chi Pang ('Au') in the Mainland in 1979.  Au who was then 49 years of age was living in Hong Kong while Wong was living in the Mainland.  After the marriage Wong continued to live and work in the Mainland while Au returned to live in Hong Kong and visited her from time to time.  Eventually Wong came to Hong Kong to join Au in 1994.

28.  Between 1979 and 1994 Wong came to Hong Kong twice.  Once in 1986 where she lived for one and half months.  The other occasion was in either 1991 or 1992 when she came to Hong Kong for about 10 odd days.  This arrangement was not out of choice.  Her application for permission to come to Hong Kong was only approved by the authorities in 1994. 

29.  Wong and Au have two children.  One was born in 1980 and the other one was born in 1982.  They lived in the Mainland and were only able to join their parents one year after Wong had come to Hong Kong. 

30.  Before Wong left the Mainland in 1994 she looked after the children.  She also did sewing work at home.  Au provided her with maintenance during this time. 

31.  In December 2000 Au left Wong.  Wong discovered that he had an extra marital relationship in the Mainland.  She complained to the Mainland authorities and as a result Au was convicted of an offence related to his adultery and was imprisoned in the Mainland.  He was then 71 years of age.

The matrimonial home

32.  At the time of the marriage Au already owned a property in Hong Kong which is situated at 7^th floor, No. 120, Camp Street, Kowloon ('the property').  According to the Land Office record this property has been in existence since 1961.  Au together with another person called Tse Yuk Lin ('Tse') became the joint tenant in 1975.  The consideration paid by Au and Tse for the property in 1975 was $40,000.  In 1977 Au acquired the half share of Tse.  By 1978 the property had become mortgage free.  The property was the matrimonial home when Wong came to Hong Kong in 1994 where she lives up to now.  It was also the home where Wong lived with Au when she came to visit him in the early years.  It is a modest place.  According to the valuation in 2001, it was worth between $520,000 to $700,000.

The dispositions 

33.  In June 2001 Wong was granted legal aid and commenced divorce proceedings against Au.  She made a claim of the property in the ancillary relief proceedings.  It was then discovered that Au had already disposed of the property in May 2001.  What happened was that on 4 May 2001 Au entered into an agreement to sell the property to Wong Lo Tim for $350,000.  On the next day i.e. 5 May 2001 Wong Lo Tim entered into an agreement as a confirmor to sell the property to Yuen Yi Wan Sandy ('Yuen') for $700,000.  Yuen applied for a loan of $360,000 from HKCB Finance Limited ('HKCB') to be secured by means of a legal charge over the property.  The two sales were completed on 23 May 2001 with the loan granted by HKCB.

Setting aside the dispositions

34.  Upon discovering the transaction Wong issued proceedings under section 17 of the Matrimonial Proceedings and Property Ordinance (Cap. 192) ('MPPO') on 9 July 2001 to set aside the disposition made by Au to Wong Lo Tim and that of Wong Lo Tim to Yuen.

35.  On 19 December 2002 H H Judge Gill made an order setting aside the dispositions made by Au by way of the sale and purchase agreement and assignments of the property.  He also ordered Au to transfer all his interest in the property to Wong.  The transfer was to take effect on the granting of the decree absolute of the divorce.

36.  Counsel informed this Court that a divorce order was pronounced by the court although we were not provided with the date of the order.

The present action

37.  On 15 July 2002 HKCB commenced mortgagee action (i.e. the present action) in the District Court pursuant to Order 88 of the District Court Rules against Yuen for her failure to pay the monthly instalments under the loan.  Wong was granted leave to join as a 2^nd defendant on 4 October 2002.  On 14 November 2002 HKCB obtained judgment against Yuen. 

38.  HKCB's claim against Wong was for possession of the property.  Wong counterclaimed for a declaration that the assignment from Au to Wong Lo Tim and Yuen were null and void and were not enforceable against her.  She also sought a declaration that HKCB's interest and Yuen's interest in the property are subject to and rank after her interest in the property. 

39.  On 29 November 2004 H H Judge To granted judgment in favour of HKCB for possession of the property and dismissed Wong's counterclaim.  Wong now appeals against that decision.

Wong's claim

40.  In order to defeat HKCB's claim and establish her counterclaim, Wong must show that

(1) she has a beneficial interest in the property;

(2) HKCB had notice of her interest in the property before it became the legal chargee.

41.  In my view Wong is able to discharge the burden on these issues.

The principles

42.  The following principles are relevant for this case :

1) Where issues arise as to the existence and extent of joint interests in property or other assets, the principles are derived from the law of trusts and are to be applied regardless of whether the dispute arises between husband and wife, cohabitants or strangers, see Rayden and Jackson on Divorce and Family Matters 17^th Ed. Vol. 1 para. 30.2.

2) The underlying question is one of intention.  Is there a common intention or design to share in the beneficial ownership of the property? Such intention may be expressly declared on the documents relating to the property, arise by way of pre­sumption under a resulting trust, or be established by way of common inten­tion expressly agreed or inferred from the parties' conduct by way of a constructive trust: Pettitt v. Pettitt [1970] AC 777, Gissing v. Gissing [1971] AC 886.

3) Where the legal estate is vested in one party only, the other will establish a beneficial interest, strictly classified as aris­ing under a constructive trust, by showing that it would be inequitable for the legal owner to claim sole beneficial ownership. The claimant will succeed where he or she can demonstrate two matters: (a) a common intention that both should have a beneficial interest; and (b) that the claimant has acted to his or her detriment on the basis of that common intention: Gissing, Lloyds Bank PLC v. Rosset [1991] 1 AC 107 and Grant v. Edwards [1986] Ch 638.

4) Common intention may be established by express agreement of the parties or inferred from their conduct including relevant contribution: Pettitt.

5) Under English law, non-financial contribution by a spouse in looking after the house or caring for children will not suffice to impute a common intention to share in the property the parties made their home: Burns v Burns [1984] Ch 317.

6)        On the other hand, in Canada, non-financial contribution in terms of household and childcare services are regarded as sufficient for the purpose of entitling a spouse to a share in the family assets: Peter v. Beblow [1993] 1 SCR 980.  McLachlin J (as she then was) of the Supreme Court of Canada stated that :

'The notion that household and childcare services are not worthy of recognition by the court fails to recognize the fact that these services are of great value, not only to the family, but to the other spouse.  As Lord Simon observed nearly 30 years ago: "The cock-bird can feather his nest precisely because he is not required to spend most of his time sitting on it" ("With All My Worldly Goods," Holdsworth Lecture (University of Birmingham, March 20, 1964, at p. 32).  The notion, moreover, is a pernicious one that systematically devalues the contributions which women tend to make to the family economy.'

7) Likewise in New Zealand contributions which entitle a spouse to a share in the property can be both direct or indirect contributions. Cooke P. of the Court of Appeal of New Zealand stated in Gillies v. Keogh [1989] 2 NZLR 327 at 332 approved of the statement that

'no one should expect, in general, spousal services for free'.

The contribution by Wong

43.  In this case Wong had no doubt provided contribution to the family in the traditional sense by looking after the children and taking care of the family.  On top of that she had also contributed financially to the family.  She said this contribution took two forms :

1) After she came to Hong Kong, she worked in various jobs such as a hawker, cleaner, domestic helper and babysitter and gave Au her earnings.

2) She had given a total of $230,000 to Au.  This was made up of $110,000 of her own savings which she brought with her when she came from the Mainland to Hong Kong in 1994 and the balance being the proceeds of an investment that she and Au jointly made in the Mainland.

44.  The judge rejected her evidence that she had brought along her savings of $110,000.  He also found that the proceeds of the joint investment was $100,000 and that she had given her half share i.e. $50,000 to Au.  The judge did accept that Wong had contributed to the family expenses.  He held that 'she probably contributed partially to the family expenses as Au but neither solely nor substantially'.  At para. 18 of the judgment, he stated that :

'As a result of the above finding of facts, the 2nd Defendant could only argue her case on the basis of her contribution in financially supporting the family, the upbringing of the children and her performance of the household chores and the sum of $50,000 she gave to Au.'

Property acquired before marriage

45.  The present case is of course not concerned with acquisition of a matrimonial home at or shortly before marriage.  When Wong and Au married in 1979, Au already had the property which was mortgage free.  In my view, this would not by itself operate to defeat the claim by Wong.  Even under the existing English law, although Lord Bridge in Lloyds Bank PLC regarded it as exceptional, he did not restrict the application of the principle of constructive trust only to matrimonial properties acquired at or shortly before marriage.

46.  In my view one really has to look at the history of the relationship to ascertain whether a spouse acquires a beneficial share in a property which was already acquired by the other spouse before marriage.  A person may marry late.  At the time of marriage he may already have acquired a place which may be mortgage free and which is then used as the matrimonial home.  Or a person may marry again after divorce by which time he may already have a property of his own which is then used as the matrimonial home.  In Hong Kong, we also have this special social phenomenon of older men marrying younger Mainland wives.  It would be too inflexible to exclude situations like these from being considered. 

47.  Ms Lan, counsel for HKCB, did not argue otherwise.  She only argued that there must be an exceptionally large contribution before a spouse in the situation like this one can acquire an interest in the property. 

48.  In my view, the amount of contribution is not determinative because the amount has to be viewed in the light of the social background of the couple and the value of the property.

Authorities from our jurisdiction

49.  After 1997, the English authorities are no longer binding on this jurisdiction.  They, of course, remain to be highly persuasive.  I really cannot see any objection in principle if Hong Kong adopts approaches from other common law jurisdictions particularly in areas of judge made law like equitable principles.  This can only enrich our legal system.  In fact, this has been the approach in Hong Kong in the past few years in other areas of the law as well. 

Canada

50.  The Canadian approach in conferring a benefit on a spouse in a matrimonial property is based on the operation of the equitable principles of unjust enrichment and constructive trust.  The principle is that a constructive trust arises when a person who holds title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it: see Peter.  In terms of unjust enrichment, three elements are required.

1) an enrichment;

2) a corresponding deprivation by the person who supplied the enrichment; and

3) the absence of any juristic reason for the enrichment. 

51.  In Peter the Supreme Court of Canada held that the three elements were made out :

'The appellant's housekeeping and child-care services constituted a benefit to the respondent (1st element), in that he received household services without compensation, which in turn enhanced his ability to pay offhis mortgage and other assets. These services also constituted a corresponding detriment to the appellant (2nd element), in that she pro­vided services without compensation.  Finally, since there was no obligation existing between the parties which would justify the unjust enrichment and no other arguments under this broad heading were met, there is no juristic reason for the enrichment (3rd element). Having met the three criteria, the plaintiff has established an unjust enrichment giving rise to restitution.' per McLachlin J.

52.  The restitution is by way of the operation of the constructive trust principle. 

New Zealand

53.  The New Zealand approach is based on the ground that there is a reasonable expectation that contributions will carry rights.  As Cooke P. observed in Gillies

'Whatever legal label or rubric cases in this field are placed under, reasonable expectations in the light of the conduct of the parties are at the heart of the matter.  It can be said that a party is unjustly enriched if he or she retains the entire fruits of contributions made by the other, notwithstanding that the other has suffered detriment or made a sacrifice and has reasonably expected from the conduct of the first party and all the circumstances that the contributions will carry rights.  Similarly, to retain the sole benefit can be labelled unconscionable or contrary to equity or manifestly unfair. Or the conduct of the first party may be said to give rise to an estoppel, proprietary or otherwise.

These ideas may be seen as but applications in a particular field of the equitablejurisdiction to interfere where the assertion of strict legal rights is found by the Court to be unconscionable, underlying inter alia the various categories of estoppel (discussed in this Court in Burbery Mortgage Finance & Savings Ltd v Hindsbank Holdings Ltd [1989] 1 NZLR 356) and the setting aside of agreements for unconscionability or "equitable fraud" (discussed in this Court in Nichols v Jessup [1986] 1 NZLR 226).'

54.  In reconciling the different approaches, Cooke P. stated that

'....several of the doctrinal bases used by the Courts or proposed judicially for determining whether one party has a valid claim against the other after the union has ended seem ultimately to come to much the same.  Normally it makes no practical difference in the result whether one talks of constructive trust, unjust enrichment, imputed common intention or estoppel.  In deciding whether any of these are established it is necessary to take into account the same factors.'

The issues

55.  In deciding whether Wong has a beneficial interest in the property, I will consider four issues.  First whether the contribution by Wong must be by way of financial contribution.  Second whether the contribution must be referable to the property.  Third the position under the traditional approach.  Fourth the amount of interest that arose as a result of the contribution.

Contribution

56.  In terms of contribution, I do not regard it to be restricted to financial contribution only.  In Peter McLachlin J held that the recognition of the value of a service provided by a spouse is both logical and in accordance with authority.  The same reasoning applies to Hong Kong.  In terms of logic what she said about the value of a spousal service cannot be faulted.  In terms of authority one only needs to turn to section 7 of the MPPO,which listed the various factors that the Court should take into account in considering the financial provisions for the parties, to see that contributions can be in terms of  'contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family' (section 7(1)(f)). 

57.  In this case Wong had obviously contributed towards the family in terms of her role as the wife of Au and the mother of the two children of the family.  In my view that by itself is sufficient contribution for the purpose of establishing an interest in the property.   As Cory J observed in Peter,

'In marriages or marriage-likerelationships commercial matters and a great deal more will be involved. Clearly, parties to a family relationship will, in a commercial sense, share funds and financial goals. More importantly, couples such as the parties to this case will strive to make a home. By that I mean a place that provides safety, security and love and which is as well frequently the place where children may be cared for and nurtured. In a relationship that involves living and sleeping together, couples will share their worst fears and frustrations and their fondest dreams and aspirations. They will plan and work together to achieve their goals.

This remedy should be granted despite the fact that family will seldom keep the same careful financial records as business associates.  Nonetheless, fairness requires that the constructive trust remedy be available to them and applied on an equitable basis without a minute scrutiny of their respective financial contributions. Indeed, in a situation such as the one presented in this case, it may be very difficult to assess the value of making a house a home and of sharing the struggle to raise children to become responsible adults.'

58.  He further stated that

'However, in today's society it is unreasonable to assume that the presence of love automatically implies a gift of one party's services to another. Nor is it unreasonable for the party providing the domestic labour required to create a home to expect to share in the property of theparties when the relationship is terminated. Women no longer are expected to work exclusively in the home. It must be recognized that when they do so, women forgo outside employment to provide domestic services and child care. The granting of relief in the form of a personal judgment or a property interest to the provider of domestic services should adequately reflect the fact that the income earning capacity and the ability to acquire assets by one party has been enhanced by the unpaid domestic services of the other.'

59.  In any event Wong had contributed financially towards the family.  This also satisfies the traditional requirement of financial contribution.  This issue must be decided in favour of Wong.

60.  In this case the judge rejected Wong's evidence that the parties had discussed about their shares in the property.  An agreement to have a share in the property is not necessary to establish such an interest even under the traditional English principles.  The rejection of this evidence does not mean that the parties could not have this intention.  The intention of Wong could easily have been inferred : after all she had made a claim on the property.

Contribution referable to the property

61.  On the second issue there is a division of views in Canada.  McLachlin J held that

'I hold the view that in order for a constructive trust to be found, in a family case as in other cases, monetary compensation must be inadequate and there must be a link between services rendered and the property in which the trust is claimed.'

62.  On the other hand, Cory J held that while a link between the contribution and the property is essential in commercial cases for a constructive trust to arise, it may not be required in family cases.

63.  The adequacy or otherwise of monetary compensation is not an issue in this case as the property is apparently the only known asset of the family.  As to the question whether the contribution must be referable to the property, I prefer the approach of Cory J.  When parties enter into a long term relationship it is most unlikely that they will ever discuss whether they have a share in the family assets or how much each of them would be entitled to at the end of the day.  I agree with the view of Cory J that it is just and reasonable that the situation be viewed objectively and that an inference be made out, in the absence of the evidence establishing a contrary intention, the parties expected to share in the assets created in the matrimonial relationship should it end.  He stated that,

'If they were specifically asked about their expectations, I would think that mostcouples would probably state that they did not expect to be compensated for their contribution. Rather, they would say, if the relationship were ever to be dis­solved, then they would expect that both parties would share in the assets or wealth that they had helped to create. Thus, rather than expecting to receive a fee for their services based on their market value, they would expect to receive, on a dissolution of their relationship, a fair share of the property or wealth which their contributions had helped the parties to acquire, improve, or to main­tain. The remedy provided by the constructive trust seems to best accord with the reasonable expectations of the parties in a marriage or quasi-marital relationship.'

Special circumstances

64.  In any event, McLachlin J expressly agreed with the view of Cory J that the courts should exercise flexibility and commonsense when applying equitable principles to family law issues with due sensitivity to the special circumstances that can arise in such cases.

Common features

65.  In my view this is a special case.  In any event, my view is that the contribution is referable to the property.  They shared common features in this case. 

66.  In the usual situation of a property acquired at the time of marriage which is subject to mortgage one can readily say that the contribution by one spouse can easily be referable to the property because the contribution is used either directly or indirectly towards the payment of the property or as mortgage repayment.  This is not such a case.  But this does not mean that the contribution is not referable to the property.  The contribution made by Wong to Au could also be used by him either directly or indirectly in the keeping or maintenance of the property.  The contribution made by Wong would result in a corresponding saving by Au in terms of payment of maintenance to her.  The money so saved could be used for the maintenance of the property.   The contribution must be referable to the property. 

67.  Unlike many households in western countries where it is usual for the occupiers to carry out the maintenance of the property themselves, in Hong Kong very often the maintenance and improvement of the property are taken care of, not by members of household, but by outside commercial contractors.  Nonetheless the service has to be paid for and such payment could come from the joint resources of the parties. 

68.  This is also a case where there is a long marriage of over 20 years.  Although for a substantial part Wong was living in the Mainland she had taken care of the children during that time.  Certainly in the last six years of marriage, in addition to the spousal and material contribution, she also contributed financially to Au.  As a couple is approaching old age in a long marriage, is it so unreasonable to say that they could not have intended that each of them should have a share in the assets of the family which in one form or another they have helped to acquire or maintain? 

69.  Although Au had eventually disposed the property to a third party this was done after he had left the family.  The judge certainly did not make any finding that Au's intention throughout the marriage was to exclude Wong from a share in the property.  Viewed objectively the common intention is that Wong and Au will each have a share in the property.

70.  The earlier joint investment of the parties in the Mainland lends further support to a common intention of pooling resources and sharing the family assets because this is not something that is alien to this couple.

Traditional approach

71.  Even if one applies the traditional principles of ascertaining the common intention of the parties and whether the claimant has acted to his detriment on the basis of that common intention, I have no difficulties in coming to the same conclusion.  The continuous contribution by Wong clearly shows that she has acted to her detriment on the basis of the common intention.  She has been living in the property since she joined the husband in 1994. 

The same result

72.  Whether one describes the approach as ascertaining the common intention of the parties or an application of the principles of unjust enrichment or reasonable expectation, the result is the same.  In my view Wong has clearly established a share in the property by reason of her contribution.  This entitles her to have a share in the property. 

Amount of interest

73.  As to the amount of the interest, my view is that Wong is entitled to a half share considering the length of the marriage, the amount of her contribution and the value of the property itself. 

74.  The value I have assessed is not in conflict with the order of H H Judge Gill who ordered the property to be transferred to Wong.  After all the judge was dealing with the question of financial provisions for Wong.  He might have regarded it appropriate to make such an order after he had considered the circumstances of the case.  This does not in any way conflict with the valuation of Wong's interest in the property itself.

75.  I also appreciate Au is not a party to this proceedings.  I do not consider he is being prejudiced by my decision.  He has chosen not to defend the earlier proceedings relating to the MPPO in which H H Judge Gill had already ordered the property to be transferred to Wong.  A further order in the present proceedings on the exact share of Wong in the property is necessary so that the rights between Wong on the one hand and HKCB and Yuen on the other hand could be properly defined.

Position of HKCB

76.  The next question to be considered is, of course, the position of HKCB.  HKCB would only be able to take the property free from any interest of Wong by reason of the legal charge if it is a mortgagee in good faith for value without notice.  In my view HKCB clearly is not.  The transaction in relation to the sale and sub-sale tells the story.  There were contemporaneous transactions in which a confirmor was able to sell the property at double the price he paid one day earlier.  HKCB has not called any evidence about market condition in 2001.  In the absence of such evidence, it is reasonable to infer that the sale by Au to Wong Lo Tim was at a substantial undervlaue.

77.  Further the judge found that the mortgage loan for the purpose of financing the sub-purchase was paid directly by Yuen to Au and not to Wong Lo Tim.  The judge himself recognized the transactions were carried out under very suspicious circumstances. 

78.  HKCB had not carried out any inspection of the property before it was prepared to provide the mortgage to Yuen.  I fully agree with the view of Tang JA who granted leave to appeal to Wong.  He said that

'It was obvious that Au's sale to Wong Lo Tim was at a gross undervalue.  It is commonsense that very often sales at gross undervalues were made because the vendors were hoping to defraud somebody, usually their creditors or spouses'. 

79.  It was insufficient for HKCB to say that Au had confirmed that there were no other occupiers in the property.  A reasonably prudent banker in the circumstances would not have relied on the answer of the possible fraudster himself.  The transactions cried out for an inquiry to be made by HKCB.  Having been put on enquiry it should have inspected the property in which the presence of Wong would have been discovered and she would have undoubtedly tell HKCB that she has an interest in the property and that she would make a claim in respect of the property. 

80.  In Wong Chim Ying v. Cheng Kam Wing [1991] 2 HKLR 253 where the plaintiff had actual notice before the assignment of the residence in the property by the defendant who was the spouse of the vendor.  However, the plaintiff had made no enquiry regarding the rights of the defendant in the property.  It was held by this Court (Clough, Penlington JJA and Mayo J) that the plaintiff took the property subject to the beneficial interest of the defendant.  Clough JA stated that

'We were pressed, as was Godfrey, J., with arguments based on National Provincial Bank Ltd. v. Ainsworth [1965] AC 1175 (H.L.) but we derive no assistance from that case which was concerned with the fatally nebulous rights formerly claimed for the deserted spouse in the matrimonial home and not a claim, by a spouse, as in the present case, to a recognised beneficial interest in land based on resulting trust.'

81.  Although the facts of this case is different, the same principle applies.  HKCB chose not to make any enquiry when the transactions demanded a reasonably prudent banker to make an enquiry.  If it chose to conduct its activities in this manner then it must bear the consequence of its own approach. 

Illegality

82.  Having reached this view, it is not necessary for me to deal with the issue of illegality which was also relied upon by Ms Tsui, counsel for Wong.

Conclusion

83.  I would allow the appeal and grant the following relief to Wong :

1) A declaration that she has a half share in the property;

2) The plaintiff's interest and the 1^st defendant's interest in the property are subject to and rank after Wong's half share in the property.

 

Hon Sakhrani J:

84.  I have had the advantage of reading in draft the judgments of Rogers VP and Cheung JA.  I agree entirely with the reasons given by Rogers VP in his judgment.  I agree that the appeal should be dismissed for the reasons given by Rogers VP and that there should be an order nisi of costs in favour of the plaintiff.  There is nothing that I can usefully add.

Hon Rogers VP:

85.  The appeal will therefore be dismissed with an order nisi of costs in favour of the plaintiff.