HON PO SUN v. LAU NGAI

IN THE COURT OF APPEAL

1994, No. 131
(Civil)

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J U D G M E N T

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Power, Acting C.J. :

1. I will ask Godfrey J.A. to give the first judgment.

Godfrey, J.A. :

2. This is an appeal from an order of Mr. Justice Michael Wong made on 21 July 1994. The dispute between the parties concerns Flat E, 4th Floor, Pak Po Mansions, Nos. 155-163 Sai Yee Street, Kowloon, Hong Kong, assigned to the plaintiff and the defendant by an assignment dated 11 September 1990.

3. The plaintiff in the proceedings before the judge claimed a declaration that he was the owner of the entire beneficial interest in the property. The judge thought that the defendant also was claiming to be the owner of the entire beneficial interest in the property. But the defendant made it clear, at the hearing of the appeal before us, that she was content to claim only one half of the beneficial interest in the property.

4. Both parties appeared in person in the court below. The trial judge must have found the case extremely difficult to try. The duty of the court, in this sort of case, is to search for the common intention of the parties at the time of the acquisition of the property, and if necessary in the absence of other evidence, by reference to their subsequent conduct. "The process is detailed, time-consuming and laborious": see Hammond v. Mitchell [1991] 1 WLR 1127 per Waite J. at p. 1130A.

5. The judge came to the conclusion that he ought to declare that the plaintiff and the defendant were beneficial joint tenants of the property. However, it is clear from his judgment that, in coming to this conclusion, he was not relying on any finding as to the common intention of the parties (for he made none). He relied solely on payments of mortgage instalments made by the defendant since November or December 1991, after the parties had fallen out. His judgment cannot be supported on this ground. The fact that at that late stage the defendant put up money to prevent the bank (which had assisted the plaintiff and the defendant in the purchase) from repossessing the property (as was the case) is equivocal. As one of the two joint owners of the legal estate in the property, the defendant was obliged to pay the mortgage instalments anyway. The fact that she did so after the parties had fallen out is not a pointer to a common intention at the time of acquisition of the property that she should take a beneficial interest in it.

6. There is no doubt that some sort of relationship was formed between the plaintiff and the defendant which led to the purchase of the property in their joint names. The plaintiff regarded the purchase as made exclusively for his own benefit, and for the purposes of his jewellery business. He bore, he said, all the expenses himself; his relationship with the defendant, he claimed, was purely a business relationship. The defendant, on the other hand, regarded the purchase as a joint venture between herself and the plaintiff under which she would take some beneficial interest in the property; the relationship, she claimed, was an intimate as well as a business relationship.

7. The judge did not address his mind to the question of common intention. He was dissatisfied with the evidence of both the plaintiff and the defendant. He regarded the plaintiff's evidence as unreliable and the defendant's evidence as unimpressive. He accepted the defendant's case, denied by the plaintiff, that an intimate relationship had existed between the two. On the other hand, the judge rejected her claim, as he appears to have understood it, that the property was a gift to her by the plaintiff and also her alternative (inconsistent) claim that it was purchased by her entirely out of her own money. He accepted (and regarded as "crucial") the evidence of WONG Sik Kwong, an officer of the bank, who confirmed that it was the defendant who approached him first regarding the loan; that subsequently both the defendant and the plaintiff came to see him; and that he told the plaintiff that, since (as was the case) the plaintiff was a United States citizen, it was necessary for him to have a Hong Kong resident to join in the application. But this, too, is equivocal; it sheds little if any light on the parties' common intention. Finally, the judge did not mention a declaration made, or said to have been made, by the defendant in a paper writing dated 30 September 1990 which read as follows:

(I quote from the translation):

"I, LAU NGAI, declare that I have no interest at all in FLAT E, 4/F, PAK PO MANSION, 82 BUTE STREET, MONGKOK, KOWLOON stated in the bank statements as Flat E, 4/F., Pak Po Mansion, 155-161 Sai Yi Street, Kowloon. The said property has been registered under the names of Hon Po Sun and I because we have to use my name to borrow money from the Bank of America. I am only helping Mr. Hon Po Sun to buy the said property administratively. The purchase money is entirely paid by Mr. Hon Po Sun.

I promise that I will take my name out of the title deed of the said property and transfer all interests and rights in relation to the property back to Mr. Hon Po Sun."

8. The defendant denied that she signed this declaration, and alleged that the plaintiff had forged her signature. The judge, surprisingly, made no reference to this declaration at all in his judgment. On its face, if genuine, it would make it difficult or even impossible for the defendant to claim any beneficial interest in the property, so a finding as to its authenticity would resolve the whole matter one way or the other.

9. The judge failed to ask himself the crucial question as to what was the common intention of the parties at the time of the acquisition of the property. He failed to make any finding on the authenticity of the declaration relied on by the plaintiff. He held that the defendant was entitled to half the beneficial interest in the property on a ground which cannot be supported. These were serious errors. They cannot be corrected, if justice is to be done between the parties, without a new trial. I would therefore allow this appeal and, not without reluctance, order a new trial.

Mortimer, J.A. :

10. The judge, at page 7 of his judgment, said that this was a case where both the plaintiff and the defendant had made contributions towards the purchase of the property. Following the equitable principles mentioned in Chapter 3 of Snell's Equity, 29th Edition and the decision in Diwell v. Farnes [1959] 2 All ER 379, he made a declaration that the plaintiff and the defendant were equal joint tenants of the property and that each was entitled to a beneficial interest of 50%. I am unable to support this conclusion, and for the reasons given by Godfrey, J.A. I would allow this appeal and order that there be a new trial.

Power, Acting C.J. :

11. I agree with the judgment delivered by Godfrey, J.A. For the reasons which he has given I also would allow the appeal; quash the order made by the judge; and order a new trial.