CHAN SUK YEE BONNIE v. THE ESTATE OF CHAN SAU YIU AND OTHERS

HCA 1495/2017 [2022] HKCFI 633 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1495 OF 2017 _________________ BETWEEN   Chan Suk Yee Bonnie Plaintiff and   The Estate of Chan Sau Yiu (陳壽堯) 1st Defendant   Chan Tak Yin Maria (陳德硏) 2nd Defendant   Poetic Creation Limited (嵐翠軒有限公司) 3rd Defendant AND BETWEEN

	Chan Suk Yee Bonnie	Plaintiff
and
	Chan Tak Yin Maria (陳德硏), representing the Estate of Chan Sau Yiu (陳壽堯), deceased, appointed by Orders dated 24 November 2017 and 4 June 2019	1st Defendant
	Chan Tak Yin Maria (陳德硏)	2nd Defendant
	Poetic Creation Limited (嵐翠軒有限公司)	3rd Defendant

(By Order to carry on Proceedings dated 24 November 2017)

_________________

Before: Hon Ng J in Court

Dates of Hearing: 1-4, 7 and 22 June 2021

Date of Judgment: 9 March 2022

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JUDGMENT

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Introduction

1.  This is the trial of the Action.

2.  The Plaintiff and the late Mr Chan Sau Yiu (“Chan”) had been in a romantic relationship since around 1999 and cohabitated together since around late 2001 until Chan passed away on 28 June 2017.

3.  The 2nd Defendant, is the daughter of Chan and Madam Brenda Suen (“Brenda”). The 2nd Defendant has an elder half-sister, Ms Chan Tak Wai Birdia (“Birdia”).

4.  The 3rd Defendant was and is a private limited company incorporated in Hong Kong on 28 February 2001 as “Grand Hero Limited”. It changed to its present name on 26 March 2001. The 3rd Defendant’s issued share capital was and still is HK$10,000 divided into 10,000 shares of HK$1 each. Initially, 9,999 shares in the 3rd Defendant were registered in the name of Chan whereas 1 share was registered in the name of Birdia.

5.  It was not until 20 February 2012 that Birdia’s 1 share was transferred to Chan who then immediately transferred 1 share to the 2nd Defendant. On the same day, the 2nd Defendant executed a Declaration of Trust declaring that the 1 share did not belong to her but to Chan and that it was held on trust for Chan.

6.  Presently, 9,999 shares of the 3rd Defendant are registered in the name of Chan while the other 1 share is registered in the name of the 2nd Defendant.

7.  The 3rd Defendant was and is the registered owner of the property known as the Front Portion of 1st Floor, No 33 Mody Road, Kowloon (“Property”). The Provisional Sale and Purchase Agreement in relation to the sale from its former owner to the 3rd Defendant was executed on 4 March 2001, shortly after the incorporation of the 3rd Defendant. The purchase price was HK$2.05 million. Completion took place on 4 April 2001 when the Property was assigned by its former owner to the 3rd Defendant. On 17 May 2001, the Property was mortgaged to Dao Heng Bank for a HK$1 million loan (“Mortgage”)[1]. This means the purchase price of the Property was paid in full on completion without the assistance of a mortgage loan.

8.  There can be no dispute that the 3rd Defendant, being a shell company only recently incorporated with an issued share capital of HK$10,000, had no money to pay for the Property. The Plaintiff claims the Property, as well as the 3rd Defendant’s entire share capital, were paid by her. The Defendants allege they were paid by Chan himself.

9.  Chan used to run a jewellery business in the name of the 3rd Defendant on the Property. The Plaintiff claims the business belonged to her and was funded by her. The Defendants deny it. Anyway, the jewellery business was unsuccessful. Presently, the 3rd Defendant has little or no business to speak of - it is just the holding company of the Property.

10.  In this Action, the Plaintiff claims that (i) the 9,999 shares and the 1 shares of the 3rd Defendant registered in the names of Chan and the 2nd Defendant were and are held on trust for her, and (ii) the Property was since 4 April 2001 and still is held by the 3rd Defendant on trust for her.

The parties’ case and the issues

11.  The gist of the Plaintiff’s case can be summarized as follows.

12.  Prior to 1996, the Plaintiff was a private banking manager working for HSBC. In 1996, she was invited by a client, Mr Cheng (“Cheng”), to quit her job with HSBC and to manage his personal wealth. Since then, the Plaintiff has been under the employment of Cheng as his personal wealth manager.

13.  In about 2000 or early 2001, the Plaintiff decided to invest in a commercial premises in Hong Kong and try to run a jewellery business as her future retirement plan. She asked Chan to assist her to operate the intended jewellery business given his experience and so that Chan could be kept occupied during the day. Chan knew of the Plaintiff’s intention and agreed.

14.  In January 2001, the Plaintiff asked Cheng for a low interest loan of HK$5 million (“Capital”) as a bonus or incentive scheme for her long service. Cheng agreed.

15.  On 12 January 2001, the Plaintiff received the HK$5 million by a cheque. Upon receiving the Capital, the Plaintiff decided to and eventually did (i) use around HK$2,000,000 to purchase a commercial property ie the Property, (ii) inject part of it into and set up the 3rd Defendant as her investment, and (iii) together with the monies obtained from the Mortgage, spend about HK$3 million to purchase jewellery and to cover other expenses for the intended jewellery business.

16.  Although Chan was the registered shareholder of the 3rd Defendant, he had not paid any financial contribution towards the purchase of the Property, which was all paid for by the Plaintiff out of the Capital.

17.  Since the Plaintiff did not wish to mix up her own investment with Cheng’s funds which were managed by her and she also wished to keep a low profile of her own investment, she decided to purchase the 3rd Defendant as a shell company to acquire and hold the Property.

18.  On 15 January 2001, three days after receiving the Capital from Cheng, the Plaintiff issued a cheque for HK$5 million in favour of Chan (“Cheque”), thus transferring the Capital to him so that he could be ready for the purchase of the Property, the jewellery and the setting up of the jewellery business.

19.  Sometime in March 2001, the Plaintiff and Chan went to Tony Kan & Co to sort out the incorporation of a new company ie the 3rd Defendant. They were advised of the then requirement that a company had to have 2 shareholders. That was why Chan was given 9,999 shares while Birdia was given 1 share in the 3rd Defendant.

20.  It was the common agreement, intention and understanding (“Common Agreement, Intention and Understanding”) of the Plaintiff and Chan, prior to the purchase of the 3rd Defendant and the purchase of the Property by the 3rd Defendant that:

(1) All the 10,000 issued shares of the 3rd Defendant would be held by Chan on trust for and on behalf of the Plaintiff. Since Birdia was given 1 share for the reason aforesaid, Birdia’s 1 share would be held by her on trust for and on behalf of the Plaintiff while Chan’s 9,999 shares would be held by him on trust for and on behalf of the Plaintiff.

(2) The Plaintiff would be the full beneficial owner of the Property.

(3) The jewellery business to be run in the name of the 3rd Defendant would be fully owned by the Plaintiff.

21.  In detrimental reliance on the Common Agreement, Intention and Understanding, the Plaintiff paid for the purchase price of the Property, consented to and arranged the Property to be registered in the name of the 3rd Defendant instead of her own, and did not become a shareholder or director of the 3rd Defendant herself. In the circumstances, it was and is unconscionable for Chan to depart from the Common Agreement, Intention and Understanding.

22.  Further, since the 2nd Defendant was transferred 1 share in the 3rd Defendant by Chan on 20 February 2012, it is also the Plaintiff’s case that at no times was it intended or agreed by the Plaintiff, Chan and the 2nd Defendant that the 2nd Defendant would have any beneficial interest in the 1 share or in the Property.

23.  In support of the the Common Agreement, Intention and Understanding, apart from the Cheque, the Plaintiff also relies heavily on a memorandum of the 3rd Defendant (“Memorandum”) in Chinese dated 16 April 2002. The Memorandum was signed by Chan on behalf of the 3rd Defendant in the presence of Mr Wong Chun Kwong Ivan (“Mr Wong”). In the Memorandum, Chan made it clear that:

(1) On 15 January 2001, he received a HSBC cheque no. 951761 for HK$5 million for the purposes of purchasing the Property and renovating it for the purpose of sales, trading and office, with the balance to be used for setting up a company, purchasing stock and as operational capital.

(2) That his 99% share and his daughter[2]’s 1% share in the company and the aforesaid Property were in fact wholly owned by the Plaintiff.

(3) He and his daughter voluntarily acted as unremunerated directors of the company and would under any circumstances unconditionally resign from the board as requested by the Plaintiff.

(4) This Memorandum should be relied upon in the future without objection.

24.  In the prayer for relief of Statement of Claim, the Plaintiff seeks against the Defendants a large number of declarations and consequential orders. Mr Law SC has since fine-tuned his client’s claims and submitted a Draft Order dated 24 June 2021 (“Draft Order”) to this court setting out the relief that he invites this court to grant as follows:

(1) A declaration that the 9,999 shares in the 3rd Defendant registered in the name of the late Mr Chan Sau Yiu were and are held on trust for the Plaintiff;

(2) A declaration that the 1 share in the 3rd Defendant registered in the name of the 2nd Defendant was and is held by the 2nd Defendant on trust for the Plaintiff;

(3) A declaration that the property, namely, the Front Portion of 1st Floor, No 33 Mody Road, Kowloon, Hong Kong was and is held by the 3rd Defendant on trust for the Plaintiff since 4 April 2001;

(4) An order that the 1st and 2nd Defendants do forthwith transfer to the Plaintiff respectively the aforesaid 9,999 shares and 1 share in the 3rd Defendant;

(5) An order vesting all title, interest and benefit of the Property to the Plaintiff by the 3rd Defendant;

(6) Liberty to apply for the purpose of carrying out the order;

(7) Costs of this action, including all costs reserved, be paid by the 1st and 2nd Defendants to the Plaintiff, to be taxed if not agreed, with a certificate for two counsel.

25.  The Defendants’ case as summarised in Mr Chung’s Closing submissions is one of “vigorous denial” of the existence of the Common Agreement, Intention and Understanding asserted by the Plaintiff, that any part of the 3rd Defendant’s shares held in the names of Chan and the 2nd Defendant are being held on trust for the Plaintiff or that the Property is being held by the 3rd Defendant on trust for the Plaintiff. The denials, in the words of Mr Chung, “form the vital core” of the Defendants’ case.

26.  The Defendants’ pleaded case is that Chan used his own money to pay for the 10,000 shares in the 3rd Defendant and for the purchase price of the Property. It is also the Defendants’ case that the Plaintiff was guilty of prolonged, inordinate and inexcusable delay in bringing this action and, in the premises, she has by conduct waived her right to claim any relief against the Defendants (“Waiver”): see paragraphs 26 and 27 of the Re-amended Defence. However, laches as a defence has not been specifically pleaded - only Waiver has.

27.  At this juncture, it is pertinent to refer to the proposed re-amendments to 2 paragraphs in the original Defence.

28.  First, paragraph 9 of the proposed Re-amended Defence which reads:

“Paragraphs 7, 8, and 9 are not admitted denied. It is averred that the 1st Defendant had never been financially supported by the Plaintiff for the alleged period or any at all. It is further averred that the 1st Defendant had no financial problem as alleged or any at all. Beside incomes generated from his business, the 1st Defendant possessed not less than HK$3 million of fixed deposit that generate stable income for him at that material time.”

29.  The amendment was allowed on Day 1 of the trial. The significance of this amendment is that the Defendants no longer put forward a positive case that (i) Chan had no financial problems and was not financially supported by the Plaintiff, and (ii) Chan had not less than HK$3 million of fixed deposit. The deletion thus accords with the Plaintiff’s own case that Chan had no income and was financially dependent on the Plaintiff. Further, by pleading a non-admission to paragraph 7 of the Amended Statement of Claim, the Defendants are simply putting the Plaintiff to proof that Chan had no income and the Plaintiff was the main financial supporter of his daily life and expenses.

30.  Second, paragraph 14(A) of the proposed Re-amended Defence which reads:

“14(A) If the 1^st Defendant used part of the Capital for the purposes of the purchase of the Property, which is denied, the Defendants aver that the Capital was an inter-vivos gift or in the alternative, the Capital was a loan extended to the 1^st Defendant.”

31.  The amendment was disallowed on Day 1 of the trial. Not only was the proposed amendment made very late in the day, which undermines the credibility of this plea, Mr Chung also very frankly accepted that there was no direct evidence from his only witness ie the 2nd Defendant, who has made 5 witness statements, to prove that the $5 million was either a gift or a loan. The significance of this is that the Defendants do not have a positive case to run to explain the issuance of the Cheque by the Plaintiff to Chan. This is in line with the Defendants’ unexplained failure to plead to paragraph 10A of the Amended Statement of Claim which refers to the issuance of the Cheque to Chan on 15 January 2001.

32.  The following are the issues which fall for determination by this court:

(1) Whether the purchase price of the Property and the funds to pay for the 10,000 issued shares of the 3rd Defendant originated from the Plaintiff. (“Issue 1”)

(2) Whether the 9,999 shares of the 3rd Defendant held by Chan and the 1 share of the 3rd Defendant held by the 2nd Defendant were and are held on common intention constructive trust in favour of the Plaintiff. (“Issue 2”)

(3) Whether the Property was and is held by the 3rd Defendant on common intention constructive trust in favour of the Plaintiff. (“Issue 3”)

(4) If the answers to the above are “yes”, whether the Plaintiff is debarred from lodging her claims against the Defendants on the basis of waiver. (“Issue 4”)

33.  At trial, the Plaintiff has called the following witnesses:

(1) The Plaintiff herself.

(2) Ms Chan Sau Chu (“Sau Chu”), the elder sister of Chan.

(3) Mr Wong, a long-term friend of Chan.

(4) Mr Tang Man Wai (“Mr Tang”), another old friend of Chan.

(5) Ms Wong Mo Lin (“Mo Lin”), the daughter of Sau Chu and one of the executrices of the Will of Chan.

34.  The Defendants has called 1 witness viz the 2nd Defendant.

Deliberation

Issue 1

35.  On this issue, the evidence is overwhelmingly in support of the Plaintiff’s case.

36.  First and foremost, the Plaintiff’s case is strongly supported by the Cheque and the Memorandum.

37.  As far as the Memorandum is concerned, in his Closing Submissions, Mr Chung submits that the Court should not attach any weight to the Memorandum and the entire testimony of Mr Wong ought to be disregarded.

38.  Essentially, the basis of that submission is that in his first witness statement, Mr Wong had purportedly annexed a copy of the Memorandum and a copy of Chan’s ID card as exhibit. Whereas, during cross-examination, Mr Wong said he only found a copy of the Memorandum after the date of the witness statement ie 6 November 2008 and he did not provide a copy of it to the Plaintiff’s solicitors at the time of making the statement. Mr Chung submits that if Mr Wong could not even remember a simple fact such as the proper date of showing a copy of the Memorandum to the Plaintiff’s solicitors, there are other issues he could also have been mistaken about.

39.  This court does not agree. This court has looked at the original witness statement of Mr Wong and a copy of the Memorandum and a copy of Chan’s ID card were annexed to it. What happened is clearly that during cross-examination, Mr Wong was confused as to when he found the Memorandum and passed it to the Plaintiff’s solicitors. This is an innocuous mistake by Mr Wong and, in this court view, does not impinge on his credibility at all. What is important is that (i) the Defendants have not pleaded a case that the Memorandum was a forgery, and (ii) at the end of the cross-examination, it was put to Mr Wong that the Memorandum was not signed by Chan and that Chan did not ask him to draw it up - both suggestions were vehemently denied by Mr Wong.

40.  Second, the testimony of the Plaintiff is corroborated by all the Plaintiff’s independent witnesses whom this court finds to be straightforward and truthful. They are consistent and ad idem in that (1) Chan had no money and could not afford to pay for the Property, and (2) Chan had told them on various occasions that the 3rd Defendant belonged to the Plaintiff and it was the Plaintiff who paid for the purchase of the Property such that the Property also belonged to the Plaintiff and not him.

41.  According to Mr Tang,

(1) for many years, he knew Chan had no money and his businesses[3] invariably flopped;

(2) Chan had told him from time to time that the money sent to the US in support of his children’s education there was funded by the Plaintiff;

(3) he knew Chan’s credit card(s) was/were given to him by the Plaintiff and when they dined together, it was him who paid the bills;

(4) importantly, Chan had told him from time to time that the Property belonged to the Plaintiff and not him.

42.  According to Mr Wong,

(1) Chan had for many years asked him to invest in all kinds of business in Hong Kong, including jewellery shops, snooker clubs, guesthouses and a noodle restaurant. Those businesses always flopped and were eventually closed down;

(2) as far as he knows, Chan had not much savings or income;

(3) Chan’s financial condition significantly deteriorated upon the cessation of operation of the Treasure Restaurant Group (敦煌酒樓集團) (“Group”) in around 2002, as Chan and his family member[4]’s business supplied floral decorations and provided carpet cleaning services for the Group. Since then, Chan had no income. It was the Plaintiff who was the main financial supporter of Chan’s daily life and expenses and bore all the outgoings of the premises in which they cohabitated;

(4) Chan had told him that the Plaintiff was the one who paid for the purchase of the Property;

(5) It was Chan who asked Mr Wong to draft the Memorandum for him to sign.

43.  According to Sau Chu,

(1) Chan had told her that it was the Plaintiff who paid for the purchase of the Property and also its renovation costs;

(2) Chan’s living expenses were all paid for by the Plaintiff, by cash and a supplemental credit card of the Plaintiff;

(3) about half a year before his death, Chan told her that he had asked the 2nd Defendant to transfer her 1 share back to him so that he could transfer all the shares in the 3rd Defendant to the Plaintiff; that the accountant had prepared all the documents and delivered them back to the company; at the end of the year, when the tax return was to be filed, all the shares would be transferred back to the Plaintiff;

(4) she had reminded Chan to transfer back to the Plaintiff all the assets under his name which belonged to the Plaintiff to which Chan replied that he had already told Sally to transfer the 3rd Defendant back to the Plaintiff.

44.  As pointed out by Mr Chung, it is true that during cross-examination, Sau Chu appeared to suggest that, for the 3 years prior to 2002, Chan’s net income from the Group should be around HK$130,000 to HK$140,000 per month after paying expenses, albeit the income was not regular. But in response to this court’s questions, Sau Chu also qualified her testimony by saying Chan had not told him the details of his expenses and the figures of HK$130,000 to HK$140,000 were only her rough estimate. Further, these figures must be seen in the light of Sau Chu’s statement[5] that the Group owed him over HK$1 million when it closed down in 2002. In this court’s view, not even a tentative view can be formed from Sau Chu’s aforesaid testimony, in view of the testimony of the other Plaintiff’s witnesses, as to Chan’s income or savings in 2001.

45.  According to Mo Lin,

(1) Chan all along did not have much money and had no income since around 2002;

(2) Since 2001, Chan had told her more than 10 times during their meals together that the Plaintiff had given him HK$5 million to set up the 3rd Defendant, to purchase the Property and for its renovation and to buy a Mercedes Benz. The remaining amount was to buy jewellery stock;

(3) Chan told her he had asked Birdia to hold 1 share in the 3rd Defendant because of the then legal requirements.

(4) Several months before Chan passed away, he had told her and Sau Chu about 2 to 3 times during meals that the 2nd Defendant had already signed the relevant documents to transfer the 1 share back to Chan, that the documents were kept in the Property and would be submitted to the Companies Registry together with the annual return at the end of the year; Chan also said that he had instructed his accountant to transfer all the shares in the 3rd Defendant back to the Plaintiff because the 3rd Defendant in fact belonged to the Plaintiff.

46.  These 4 witnesses for the Plaintiff are independent witnesses with no particular connection with her other than through Chan. Nor can the Defendants demonstrate they have any incentive to lie on oath for the benefit of the Plaintiff. This court has no reason to doubt the truthfulness of their testimony.

47.  As far as Sau Chu is concerned, she is a retired person in her late 70s. She has nothing to gain or lose in testifying for the Plaintiff. According to her testimony, she seldom met the Plaintiff after knowing her relationship with Chan - not more than 2 or 3 times and usually when Chan and the Plaintiff went to Sau Chu’s flower shop to buy some flowers. Every time, Sau Chu and the Plaintiff just greeted each other at a distance and said hello. This was the case until Chan’s hospitalisation when the two met more often and started to have some personal chats.

48.  As for Sau Chu’s daughter, Mo Lin, she said in her statement that she was not close to the Plaintiff and whenever they met, they only greeted each other without more. Importantly, Mo Lin is one of the executrices and beneficiaries of the last Will of Chan. In answer to this court’s question, Mo Lin confirmed that, the Property aside, the only valuable estate of Chan consisted of a property in Belair Gardens, Shatin which was registered in Chan’s own name and that there was not much money left in Chan’s bank accounts. Her testimony in support of the Plaintiff’s case means she is testifying against her own interest as a beneficiary of Chan’s estate. Her testimony should be given considerable weight.

49.  In his Closing Submissions, Mr Chung submits that Sau Chu and Mo Lin obviously have reasons to give evidence against the 2nd Defendant as a result of inter alia the disagreement, bitterness and acrimony between Sau Chu and Mo Lin on the one hand and the 2nd Defendant and her mother Brenda on the other, in connection with Chan’s funeral arrangements, eventually leading to their absence from the funeral. It seems to this court that even if it is true that Sau Chu, Mo Lin, the 2nd Defendant and Brenda are not particularly fond of each other, it is a quantum leap to insinuate that Sau Chu and Mo Lin would be prepared to perjure themselves in court. Given the seriousness of the allegation, this court would require much stronger evidence from the Defendants before it will make such a finding against Sau Chu and Mo Lin. The alleged disagreement, bitterness and acrimony in connection with Chan’s funeral arrangements is hardly sufficient for Mr Chung’s purpose.

50.  As for Mr Wong and Mr Tang, they are very good friends of Chan and appear to be fairly well to do. They do not stand to gain or lose in testifying for the Plaintiff. As good friends of Chan, there is no sensible reason why they would state on oath about Chan’s own miserable financial position and his dependency on the Plaintiff to support his living all those years if that were not true.

51.  This court has carefully considered the manner in which the Plaintiff and the 4 other witnesses testified including their demeanour and assessed it against the contemporaneous documentary evidence and the known and undisputed circumstances of this case. This court has in particular considered the inherent probabilities or otherwise of the witnesses’ testimony and assessed their credibility accordingly.

52.  This court finds all 5 witnesses are truthful and accept their testimony.

53.  As far as the Plaintiff is concerned, she gave her testimony clearly and her response to questions was direct. Her credibility has withstood the vigor of cross-examination. Importantly, her testimony is corroborated by those of the independent witnesses and supported by contemporaneous documentary evidence ie the Cheque, her bank statement which showed the cheque deposit of HK$5 million into her bank account on 12 January 2001 and the issue of the Cheque 3 days later, as well as the Memorandum.

54.  This court also finds the Plaintiff’s case is inherently probable. She had the means to purchase the Property as part of her retirement plan and intended to set up the 3rd Defendant to hold it. There is no sensible reason why, when setting up the 3rd Defendant to hold the Property, she would not use her own funds to pay for the share capital of the 3rd Defendant which was a meagre HK$10,000. As it was her retirement plan, there was also no sensible reason why she should give away the HK$5 million and hence the 3rd Defendant, the Property and the jewellery stock and business to Chan. After all, she had already been paying for Chan’s living expenses as well as the expenses of Chan’s wife and children in the US.

55.  On the other hand, Mr Law SC submits that the Defendants’ case, relying solely on the evidence of the 2nd Defendant, that it was Chan who paid for the purchase of the Property must be rejected. This court agrees.

56.  On her own evidence, the 2nd Defendant moved to the US with her mother and brother in late 1997 when she was merely 14 years old. In 2001, when the 3rd Defendant was set up to acquire the Property, she was still studying in the US - she only came back to Hong Kong in March 2008 after graduating from university. In cross-examination, the 2nd Defendant frankly admitted that she had no personal knowledge of the various matters in relation to the acquisition of the Property set out in her first statement at paragraphs 31 to 40. It is reasonably obvious that the 2nd Defendant was simply reciting the events based on the documents shown to her.

57.  In her statement at paragraphs 41 to 44, the 2nd Defendant attempted to set out what she considered to be Chan’s assets in around 2001 including inter alia an apartment and carparking space in Belair Gardens in Shatin, 7.5% shareholding in Canadian Education Foundation (China) Limited etc. But she stopped short of suggesting that Chan had sufficient cash assets to pay for the acquisition of the Property. Rather, when the 2nd Defendant was cross-examined on the Re-amended Defence at paragraph 9 in which the assertions that Chan had no financial problem and that he had no less than HK$3 million fixed deposit were deleted, she frankly admitted that the assertions were incorrect.

58.  The 2nd Defendant was also cross-examined on paragraph 10(1), 11(1) from 3rd line onwards, 11(2) and 14(1) of the Re-amended Defence. The long and short of it is that she admitted that she had no personal knowledge of the matters pleaded ie Chan purchased the Property and paid for the entire purchase price with his own money and Chan caused the 3rd Defendant to be set up by purchasing a shelf company in February 2001.

59.  Further, the Defendants could not put forward any plausible reason as to why the Plaintiff transferred the HK$5 million to Chan other than pursuant to the Common Agreement, Intention and Understanding. If Chan himself had sufficient cash assets to set up the 3rd Defendant and to purchase the Property, what was the purpose of the transfer? There is simply no answer to that from the Defendants. Indeed, the short time gap between the transfer of the HK$5 million to Chan on 15 January 2001 and the signing of the preliminary sale and purchase agreement on 4 March 2001 strongly suggests that the purpose of the HK$5 million was to fund the acquisition of the Property by the 3rd Defendant.

60.  Lastly, this court has considered the submission made by Mr Chung in his Closing submissions at section F that although the Defendants do not dispute that the Plaintiff had transferred the HK$5 million to Chan, whether Chan had subsequently used the money to set up the 3rd Defendant and to purchase the Property is very much questionable. A number of points are made in support of that submission. For instance, at paragraph 22, Mr Chung appears to be suggesting that the HK$5 million could have been used for purposes other than the purchase of the Property or that the money could even have been returned to the Plaintiff. Mr Law SC submits and this court agrees that such argument is nothing but speculation. As for the other points made in Section F which are too tedious to be repeated here, suffice it to say that this court does not find any of them sufficient to query the Plaintiff’s case that the HK$5 million were used to set up the 3rd Defendant and to purchase the Property.

61.  To conclude, this court finds the Plaintiff’s case is fully supported by evidence and is inherently probable. For these reasons, this court shall decide Issue 1 in favour of the Plaintiff and hold as a fact that the purchase price of the Property and the funds to set up the 3rd Defendant and pay for the 10,000 issued shares of the 3rd Defendant originated from the Plaintiff.

Issues 2 and 3

62.  These 2 issues can be dealt with together as the answers to them almost necessarily follow from this court’s findings that the purchase price of the Property and the funds to set up the 3rd Defendant and pay for the 10,000 issued shares of the 3rd Defendant originated from the Plaintiff.

63.  The starting point where there is sole legal ownership is sole beneficial ownership, and the onus is on the non-owner to show that he has any interest at all: Stack v Dowden [2007] 2 AC 432 at [56].

64.  In Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at [2.3] - [2.4], Cheung JA identified two situations where a common intention constructive trust may arise.

“ 2.3 The first situation where common intention constructive trust may arise is where at any time prior to acquisition, or exceptionally at some later date, there is an agreement, arrangement or understanding reached between the parties on how the property is to be held beneficially.

2.4 The second situation is where there is no evidence to support a finding of an agreement or arrangement on the beneficial ownership of the property and the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention on the beneficial ownership of the property and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the party who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. …”

65.  At [1.6], Lam VP (as he then was) emphasised that the modern approach to constructive trust is to assess the common intention of the parties by a holistic approach having regard to the context. Further, as between resulting trust and constructive trust, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust: per Lam VP at [1.3].

66.  Although in the Plaintiff’s original list of issues, the existence or otherwise of a resulting trust is stated as an issue, Mr Law SC very sensibly submits in his Opening submissions, reconfirmed in his oral Closing submissions, that there is no need to resort to resulting trust in this case on the strength of the evidence in favour of the Plaintiff. The court is therefore invited to resolve the matter by reference to common intention.

67.  Given this court’s acceptance of the testimony of the Plaintiff as a whole as truthful, and in particular given this court’s finding that the purchase price of the Property and the funds to acquire the 3rd Defendant originated from the Plaintiff’s HK$5 million, there must be some purpose of the Plaintiff in giving the HK$5 million to Chan. The question of gift or a loan having been ruled out, the Defendants simply do not have a positive case as to what that purpose might be.

68.  On the Plaintiff’s testimony, the purpose is the Common Agreement, Intention and Understanding of the Plaintiff and Chan. This Common Agreement, Intention and Understanding is amply corroborated by the terms of the Memorandum and the independent witnesses’ testimony summarized above.

69.  This Common Agreement, Intention and Understanding is also supported by a number of audio recordings in 2017 stored in and retrieved from two Samsung mobile phones previously used by Chan. There is also 1 audio recording relating to a conversation on 15 June 2017 between the Plaintiff and Sally, the company accountant of Chan / his family stored in the Plaintiff’s own mobile phone.

70.  Of those recordings stored in Chan’s mobile phones, the most important conversation is the one dated 22 March 2017 between the Plaintiff and Chan (“22 March conversation”). Mr Chung objected to the admissibility of this recording on the ground that it was an incomplete recording of the 22 March conversation. Mr Chung however stopped short of suggesting the conversation did not exist or the recording was a fabrication. The objection was eventually overruled by this court after hearing submissions from both parties on Day 5.

71.  As submitted by Mr Law SC, the relevance of the 22 March conversation is two-fold.

(1) First, it reflects the complaint made by the Plaintiff to Chan that he should not have allowed his nephew to have the key to the Property as the Property belonged to her. The Plaintiff demanded Chan to get back the key to which Chan agreed.

(2) Further, it shows that the Plaintiff demanded Chan to assign the Property back to her. Again, Chan did not refuse and suggested that he would ask Sally to sort it out.

72.  In the 12 May 2017 recording of a conversation between Chan and Sally, there were discussions as to how best to transfer the share of Chan’s daughter viz the 2nd Defendant to the Plaintiff. Sally’s suggestion was to transfer the share from the 2nd Defendant to Chan and then from Chan to the Plaintiff. The factual context of the conversation strongly suggests that the two were talking about the 2nd Defendant’s 1 share in the 3rd Defendant as there is no evidence that the 2nd Defendant was holding any share in any other company for Chan which could be transferred back to him.

73.  In the 7 June 2017 recording of a conversation between Chan and Sally, Chan requested Sally to arrange the transfer his and his daughter’s shares. The factual context of the conversation strongly suggests that they were talking about shares in the 3rd Defendant and the transferee was the Plaintiff.

74.  Lastly, as far as the 1 share in the 3rd Defendant previously held by Birdia and presently by the 2nd Defendant, the Plaintiff’s case is bolstered by the 2nd Defendant’s frank admission in cross-examination that the share did not belong to Birdia or herself but instead was held on behalf of Chan. There is thus no question of the 2nd Defendant having any beneficial interest in the 1 share in the 3rd Defendant.

75.  Lacking a positive case to put forward, Mr Chung seeks to discredit the Plaintiff’s case on Common Agreement, Intention and Understanding in his Closing Submissions by inter alia (i) attacking the credibility of the Plaintiff eg querying why a professional like the Plaintiff would have entrusted her future financial well-being and retirement plan on a failure like Chan and (ii) criticising the Plaintiff’s case for lacking in particulars on what conversations had taken place between the Plaintiff and Chan or what statements had been made by either of them. Regarding (i), this court is not concerned with the wisdom or otherwise of the Plaintiff’s trust in Chan - this court is here to adjudicate on whether the Plaintiff and Chan had reached a common intention on the shareholding of the 3rd Defendant and the ownership of the Property. Regarding (ii), Mr Law SC is right in pointing out that the relevant events took place in 2001 when the two were in a romantic relationship and it is unrealistic to expect the Plaintiff to recall the fine details such as the exact date(s) and occasion(s) when the Plaintiff and Chan reached the Common Agreement, Intention and Understanding. In any event, the Common Agreement, Intention and Understanding is amply and clearly reflected in the Memorandum executed by Chan himself.

76.  Taking a holistic approach to the evidence in assessing the common intention of the Plaintiff and Chan, this court is satisfied that the Plaintiff has made out her case on the Common Agreement, Intention and Understanding. Since the other 2 elements for establishing a common intention constructive trust ie detrimental reliance and unconscionability on the part of Chan are self-evident from this court’s findings, and no argument to the contrary has been advanced by Mr Chung on these 2 elements, a common intention constructive trust has arisen in the present case either on the basis of what Cheung JA described at [2.3] or at [2.4] in Primecredit Ltd v Yeung Chun Pang Barry and this court shall so find.

77.  Issues 2 and 3 are therefore decided in favour of the Plaintiff.

Issue 4

78.  This issue can be dealt with briefly.

79.  According to Mr Chung’s Opening and Closing Submissions, the argument runs like this. The Plaintiff took no action to procure the transfer of the 1 share in the 3rd Defendant held by Birdia after she had become aware of Birdia’s financial difficulties in August / September 2010. Nor did the Plaintiff take any action to recover the shares in the 3rd Defendant when Chan’s health deteriorated significantly or after she was told by Chan in 2016 that 1 share in the 3rd Defendant had been transferred to the 2nd Defendant. The loss of evidence caused by the delay, especially the loss of Chan’s viva voce evidence and his bank records, amounts to a serious prejudice. In the premises, the Plaintiff has by her conduct waived her right to claim relief against the Defendants and it would be inequitable and unjust to grant relief to the Plaintiff.

80.  In so far as the Defendants purport to rely on the defence of laches, Mr Law SC submits and this court agrees that their reliance is misplaced, for the simple reason that equitable defence must be specifically pleaded and full details given: Hong Kong Civil Procedure 2022 para 18/8/13. As apparently from paragraphs 26 and 27 of the Re-amended Defence, laches as a defence has not been pleaded - only waiver has.

81.  As far as waiver is concerned, Mr Law SC’s answer is that there is no question of the Plaintiff being guilty of “prolonged, inordinate and inexcusable delay” in bringing this Action in 2017 because:

(1) The Plaintiff and Chan had been living as de facto husband and wife for years and there was no urgency for her to recover the Property and the shares in the 3rd Defendant - while Chan’s health had begun to deteriorate since 2010, it was only in 2016 that he was admitted to hospital on and off for more than 10 times that year.

(2) The Plaintiff only knew about the transfer of 1 share in the 3rd Defendant from Chan to the 2nd Defendant in 2016.

(3) As evidenced by the audio recordings, when the Plaintiff requested Chan to transfer the shares in the 3rd Defendant back to her, he never refused.

82.  Further, a party would only be held to have elected to waive a right which has become available to him if inter alia he has so communicated his election to the other party in clear and unequivocal terms: Large Land Investments Ltd v Cheung Siu Kwai [2003] 1 HKLRD 313 at [15], per Yuen JA. There is no evidence that the Plaintiff has so communicated to the Defendants.

83.  In the present case, while the Defendants have pleaded that the Plaintiff’s alleged delay in bringing this Action had caused them to believe that the Plaintiff did not intend to make any claim against them and in this belief they had acted to their prejudice, the same is but a bare assertion unsupported by evidence.

84.  To conclude, the defence of waiver is wholly unmeritorious and must be rejected. That disposes of Issue 4.

Disposition and costs order

85.  There shall be Judgment in favour of the Plaintiff against the Defendants for:

(1) A declaration that the 9,999 shares in the 3rd Defendant registered in the name of the late Mr Chan Sau Yiu were and are held on trust for the Plaintiff.

(2) A declaration that the 1 share in the 3rd Defendant registered in the name of the 2nd Defendant was and is held by the 2nd Defendant on trust for the Plaintiff.

(3) A declaration that the property, namely, the Front Portion of 1st Floor, No 33 Mody Road, Kowloon, Hong Kong was and is held by the 3rd Defendant on trust for the Plaintiff since 4 April 2001.

(4) An order that the 1st and 2nd Defendants do forthwith transfer to the Plaintiff respectively the aforesaid 9,999 shares and 1 share in the 3rd Defendant.

(5) An order vesting all title, interest and benefit of the Property to the Plaintiff by the 3rd Defendant.

86.  Liberty to apply for the purpose of carrying out the Orders granted above.

87.  The parties having made submissions on costs on the last day of trial, there shall be an Order that costs of the Action, including all costs reserved if any, be to the Plaintiff, to be taxed if not agreed, and paid by the 1st and 2nd Defendants forthwith, certificate for 2 counsel.

 

 

	(Peter Ng)
	Judge of the Court of First Instance
	High Court

 

Mr Man-chung Law SC and Ms Deanna Law, instructed by Poon Lawyers, for the Plaintiff

Mr Hylas Chung and Mr Ubaid-Ur Rehman, instructed by Rowdget W Young & Co, for the 1st, 2nd and 3rd Defendants