LEUNG SIU MAN AND OTHERS v. LEUNG YIU TAI

HCA 713/2014

[2019] HKCFI 1971

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 713 OF 2014

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J U D G M E N T

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I. Introduction

1.  This is one of those cases in which all the parties are siblings.  The 3^rd Plaintiff, born in 1958, is the eldest of the 5.  The 2^nd Plaintiff, the 1^st Plaintiff, the Defendant and the 4^th Plaintiff were born in 1959, 1961, 1963 and 1965 respectively.  Their father passed away when the parties were very young[1] and they were brought up by their mother (“Mother”) single‑handedly.  Mother is now 86 years old.  It is unfortunate that Mother, who testified for the Plaintiffs, was in effect being accused by the Defendant of lying and being biased towards the Plaintiffs.

2.  In a nutshell, the present action, commenced on 16 April 2014, concerns the parties’ beneficial interests in a residential property situated at Flat B, 9/F, Block D, Sai Kung Town Centre, Sai Kung, New Territories (“Property”).  According to the land search record, the sale and purchase agreement was entered into on 30 September 1986 between the 1^st Plaintiff, the 2^nd Plaintiff and the Defendant as purchasers and the developer.  The purchase price was agreed at HK$429,970 (“Purchase Price”).  On 24 April 1987, the Property was assigned to and registered in the name of the 1^st Plaintiff, the 2^nd Plaintiff, and the Defendant as joint tenants.  The purchase was financed by a loan of HK$343,000 (“Loan”) from Kwangtung Provincial Bank (“Bank”) and secured by a legal charge dated 24 April 1987 in favour of the Bank.  The Loan was fully repaid in May 1999 and the legal charge was subsequently discharged.

3.  Although the Purchase Price was stated to be HK$429,970, the amount actually paid towards the purchase of the Property was slightly more.  This is because after having paid the 20% deposit and down payment, the 1^st Plaintiff had, between October 1986 and March 1987, also paid 6 monthly instalments of HK$4,357.35 to the developer at its request in the total sum of HK$26,144.10.  Most of the sum paid was allocated by the developer towards the payment of so‑called “interest”, the basis of which was actually unclear, with less than HK$1,000 counted towards payment of the Purchase Price.  Hence, by the time of the assignment of the Property in April 1987, the amount of the Loan required for completion was still almost 80% of the purchase price.

4.  In the Re‑Amended Statement of Claim (“RASOC”), the Plaintiffs claim against the Defendant for the following reliefs:

(1)   A declaration that the 1^st Plaintiff, the 2^nd Plaintiff and the Defendant hold the Property on constructive and/or resulting trust respectively in the proportions of 35.71% for the 1^st Plaintiff, 22.39% for the 2^nd Plaintiff, 20.95% for the 3^rd Plaintiff, 10.47% for the 4^th Plaintiff and 10.47% for the Defendant.

(2)   A declaration that the 1^st, 2^nd, 3^rd and the 4^th Plaintiffs and the Defendant are equitable tenants in common of the Property.

(3)   An order for sale of the Property pursuant to Section 6 of the Partition Ordinance, Cap 352.

(4)   Occupation rent and/or compensation for the Defendant’s use and occupation of the Property from 1993 to 2016 in the sum of HK$2,181,600; further or in the alternative, an account or inquiry as to what sums are due to the Plaintiffs from the Defendant by way of rent, compensation for use and occupation, profits and/or any other income arising or derived from the Property.

5.  On the other hand, the Defendant, in his Re‑Amended Defence and Counterclaim (“RADNC”), disputes the Plaintiffs’ claims and counterclaims for a declaration that the 1^st Plaintiff, the 2^nd Plaintiff and him are the only “true” owners of the Property and jointly hold it in equal shares.  The Defendant, however, does not oppose the sale of the Property but claims 1/3 of its sale proceeds.

II.   The Parties’ respective cases

The Plaintiffs’ case

6.  The Plaintiffs’ case is that prior to the purchase of the Property, Mother and the 5 siblings lived together in a very small flat within a public housing estate in Tsz Wan Shan. In around August 1986, the 1^st Plaintiff saw an advertisement in the newspapers that units in Sai Kung Town Centre were up for sale.  After viewing the units for sale, the 1^st Plaintiff became interested in buying one but could not afford it on her own.  At that time, the 1^st Plaintiff was 25 and earned about HK$4,000 a month as a clothing merchandiser.  She therefore discussed the matter with her other siblings.  After some detailed discussions, the 5 of them decided to purchase the Property together.

7.  It is the Plaintiffs’ case that in September 1986, the 5 siblings formed the express common intention (“Common Intention”) that they would acquire the Property as beneficial owners in accordance with their oral agreement (“1986 Agreement”), the material terms of which were:

(1)   The 5 siblings would purchase the Property together.

(2)   The 1^st Plaintiff, the 2^nd Plaintiff and the Defendant would become the legal owners of the Property and hold it for the 5 of them — their specific shares of the Property would be determined in accordance with their respective financial contributions towards the purchase.

(3)   The 1^st and 2^nd Plaintiffs would pay 20% of the Purchase Price by way of initial deposit and down payment. The remaining 80% would be financed by a mortgage loan.  The mortgage loan would be repaid by the 5 siblings in proportion having regard to each of their age, job and salary.  The proportion agreed was that the 1^st Plaintiff, the 2^nd Plaintiff and the 3^rd Plaintiff would each be responsible for 25% while the 4^th Plaintiff and the Defendant would each be responsible for 12.5%.

8.  At that time, the 5 siblings were in their 20s and did not earn a great deal.  The agreed financial contribution to the mortgage loan was arrived at after taking into account of their age, occupation and earnings as follows:

(1)   The 1^st Plaintiff — 25 years old with a monthly income of around HK$4,000 as a clothing merchandiser.

(2)   The 2^nd Plaintiff — 27 years old with a monthly income of around HK$5,000 as a garment quality controller.

(3)   The 3^rd Plaintiff — 28 years old with a monthly income of around HK$5,500 as an engineer.

(4)   The 4^th Plaintiff — 21 years old with a monthly income of around HK$1,800 as an accounts clerk.

(5)   The Defendant — 23 years old with a monthly income of around HK2,450 (according to his witness statement) or HK$3,371 (according to the RADNC) as a technician.

9.  Since the 1^stto the 3^rd Plaintiffs were older and earned more than the other two, it was agreed that they would bear a greater proportion of financial contributions towards the purchase:  

(1)   The 1^st Plaintiff paid the initial deposit of HK$5,000 in cash to the 4^th Plaintiff who then made the payment by cheque.

(2)   The 1^st and 2^nd Plaintiffs paid the down payment of HK$80,994 in cash to the 4^th Plaintiff who then made the payment by cheque.  Out of the HK$80,994, the 1^st Plaintiff contributed HK$70,994 while the 2^nd Plaintiff contributed HK$10,000. 

(3)   Between October 1986 and March 1987, the 1^st Plaintiff paid the first 6 instalments mentioned earlier in cash to the 4^th Plaintiff who issued cheques in the total amount of HK$26,144.10.   

10.  With regard to the Loan, the monthly instalments were around HK$4,000.  It is not in dispute that the Plaintiffs and the Defendant had agreed to leave the mortgage repayments for Mother to deal with.  Out of convenience, from May 1987 to May 1999, Mother would each month collect HK$4,000 from the Plaintiffs and the Defendant as follows and paid the same into the joint account of the 1^st and 2^nd Plaintiffs (“Joint Account”) for the purpose of making the monthly repayment to the Bank:

1st Plaintiff (25%)	HK$1,000
2nd Plaintiff (25%)	HK$1,000
3rd Plaintiff (25%)	HK$1,000
4th Plaintiff (12.5%)	HK$500
Defendant (12.5%)	HK$500

11.  On the Plaintiffs’ calculation, the total financial contributions by the 5 siblings towards the purchase of the Property were as follows:

	1st Plaintiff	2nd Plaintiff	3rd Plaintiff	4th Plaintiff	Defendant
Deposit	$5,000
Down payment	$70,994	$10,000
First 6 monthly  payments towards purchase price	$26,144.10
Mortgage installments	$145,000 ($1,000 x 145 months)	$145,000 ($1,000 x 145 months)	$145,000 ($1,000 x 145 months)	$72,500 ($500 x 145 months)	$72,500 ($500 x 145 months)
Total contribution (HK$)	$247,138.10	$155,000	$145,000	$72,500	$72,500
Total contribution	35.71%	22.39%	20.95%	10.47%	10.47%

12.  As noted earlier, the Plaintiffs claim against the Defendant for a declaration that the 1^st Plaintiff, the 2^nd Plaintiff and the Defendant hold the Property on trust for the 5 of them in the above percentages.

13.  It is further the Plaintiffs’ case that in reliance on the Common Intention and the 1986 Agreement, the Plaintiffs, but not the Defendant, had paid for inter alia the following expenses over the years:

(1)   Renovation expenses for the Property of HK$90,690 in around 1987‑1988.

(2)   Electrical appliances expenses of HK$21,991 in around 1987‑1988.

(3)   Management fees and miscellaneous expenses in respect of the Property from September 2002 to August 2015 in the total sum of HK$173,824.

(4)   Government rent and rates for the Property from January 2003 to September 2015 in the total sum of HK$42,921.

(5)   Electricity bills for the Property from September 2003 to August 2008 in the total sum of HK$1,066.

(6)   Expenses in respect of repair/maintenance works to the building of HK$17,690 in 2004.

14.  Further, since the acquisition of the Property, all the siblings except the 3^rd Plaintiff have resided in the Property for the following periods:

(1)   The 1^st and the 2^nd Plaintiffs — from February 1988 to March 1993.

(2)   The 4^th Plaintiff — from mid‑1988 to early 1991.

(3)   The Defendant and his family — from around December 1991 to August 2002. 

15.  After the Defendant and his family had moved out of the Property in August 2002, he stopped paying management fees, government rent and rates and electricity bills but continued to store his belongings including inter alia furniture, bed, washing machine, and kitchen appliances in it.

16.  Since 2008, the Plaintiffs have intended to sell the Property and raised this with the Defendant who all along did not agree to the proposal.  In addition, the 1^st, 2^nd and 4^th Plaintiffs also discussed among themselves about moving back to live in the Property.  However, owing to the Defendant’s refusal to remove his belongings, the 1^st, 2^nd and 4^th Plaintiffs could not renovate the Property for self‑use.  Nor can the Plaintiffs put it up for sale.  As a result, the Property was left at its then state in August 2002 until the trial.  The relationship between the Plaintiffs and the Defendant soured.

17.  By a letter dated 16 August 2013 to the Defendant (“2013 Letter”), the Plaintiffs, through their solicitors, pointed out that the 5 siblings had agreed to purchase the Property in around September 1986 and that they would share their beneficial interests in the Property in accordance with each of their financial contribution towards the purchase.  The letter also pointed out that the Defendant had only contributed around 10% and asked him to agree to the sale of the Property and share the sale proceeds according to each sibling’s contribution.  The Defendant did not raise any objection to the contents of the 2013 Letter, particularly his financial contribution towards the purchase was only around 10%.  In fact, the Defendant did not reply at all to the 2013 Letter.

18.  The Plaintiffs therefore commenced the present proceedings by Writ on 16 April 2014.

19.  The Plaintiffs’ primary relief is for a declaration that the 1^st Plaintiff, the 2^nd Plaintiff and the Defendant hold the Property on trust in favour of the 5 siblings and that each of their beneficial interests in the Property is as set out in paragraph 4(1) above.

20.  Concerning the claim for occupation rent in the sum of HK$2,181,600, this was based on the rental estimate of the Property from January 1993 to December 2016.  The Plaintiffs’ factual case is that the Defendant and his family had solely occupied the Property between March 1993 and August 2002. Further, after August 2002, the Defendant had continued to occupy the Property, or at least part of it, by storing his belongings there and threatened to hold responsible whoever removed them without his consent, as evidenced in a letter dated 16 July 2014 from the Defendant to the 1^st and 2^nd Plaintiffs.  The reason why the Plaintiffs’ claim stops at December 2016 was not because the Defendant had removed those belongings after December 2016 but, according to Mr Kwong, simply because the Plaintiffs’ expert has provided valuation evidence up to that year only.

The Defendant’s case

21.  As succinctly summarized in Ms Gwilt’s Opening Submissions at [13]‑[14] and Closing submissions at [18], the Defendant’s case is as follows:

(1)   Sometime in 1986, the 1^st Plaintiff, the 2^nd Plaintiff, and the Defendant agreed to jointly purchase and own a property and to make equal contribution to its purchase (“Tripartite Agreement”). 

(2)   Pursuant to the Tripartite Agreement,

i.   The 1^st Plaintiff, the 2^nd Plaintiff, and the Defendant acquired the Property as joint tenants. 

ii.   The 1^st Plaintiff, the 2^nd Plaintiff, and the Defendant each contributed 1/3 of the deposit and down payment.  All the initial payments for the purchase were first paid by the 1^st Plaintiff and the Defendant repaid his share to her sometime in late 1987. 

iii.   The 1^st Plaintiff, the 2^nd Plaintiff, and the Defendant each contributed 1/3 of all mortgage instalment payments. All mortgage repayments were made by direct debit through the Joint Account.

(3)   Mother collected the monthly contributions from each of the 1^st Plaintiff, the 2^nd Plaintiff and the Defendant and paid the amount required into the Joint Account to settle the mortgage repayments.

22.  The Defendant’s case is said to be consistent with the objective evidence ie all documentation in relation to the purchase of the Property was in the names of the 1^st Plaintiff, 2^nd Plaintiff and the Defendant only.

23.  Concerning the Plaintiffs’ claim for occupation rent, the Defendant’s case, summarized in Ms Gwilt’s Opening Submissions at [18] and her Closing Submissions at [107] is this:

(1)   The Defendant was and still is a co‑owner of the Property and had at all times the right to use and possession of the Property.

(2)   Each of the 1^st Plaintiff, the 2^nd Plaintiff, and the Defendant had keys and thus access to the Property.

(3)   At all material times, the bigger of the 2 bedrooms in the Property was assigned to the 1^st and 2^nd Plaintiffs while the other one was assigned to the Defendant.

(4)   The 1^st and the 2^nd Plaintiffs have lived in the Property from 1987 until March 1993 and paid no rent.

(5)   The 1^st and the 2^nd Plaintiffs moved out of the Property in March 1993.  Between 1993 and 2013,[2] they had kept their belongings in the Property.

(6)   The Defendant and his family have lived in the Property for the period from December 1991 to August 2002.

(7)   The Defendant and his family moved out of the Property in August 2002 and the Property has been left “vacant”.  Between August 2002 and 2016, the Defendant had only left some of his belongings in the Property.

24.  Although the Defendant’s original case was as stated at para 23(7) above, whilst in the witness box and confronted with photos taken inside the Property, the Defendant admitted that his belongings were still there even as at the trial — apparently the Defendant considered he had the right to do so by reason of his share in the Property.

III.   Deliberation

Preliminary

25.  Given that the Plaintiffs and the Defendant have both pleaded their version of an actual common intention and an express agreement on their share of beneficial interests in the Property, it seems to this court the focus of the trial should be to ascertain what the actual intention and express agreement of the parties, if any, was.  This was agreed between counsel on both sides at the trial.  In other words, this court’s primary task is to make a finding as to whether a common intention constructive trust has been made out.  There is little room for the operation of purchase money resulting trust, or at least it is unnecessary to resort to purchase money resulting trust, unless this court rejects both parties’ cases on their alleged common intention and express agreement. 

26.  In Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at [1.3], Lam V‑P observed that:

“ 1.3 As I see it, it is ultimately a question of the intention of the 2^nd Defendant (be it presumed or presumption rebutted) at the time when the Property was acquired (under the resulting trust analysis) or the common intention of the parents and the 1^st Defendant (under the constructive trust analysis). Between the two, at least in a domestic context, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust: Drake v Whipp [1996] 1 FLR 826; Yuen Yat Shan Fiona v Sit Hin Kau [2005] 4 HKC 170 at [20]; Au Yuk Lin v Wong Wang Hin Eddy [2013] 4 HKLRD 373; Stack v Dowden [2007] 2 AC 432 at [31].” (emphasis added)

27.  Similarly, in Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9[3] at [44]‑[45], G Lam J observed:

“ 44. The principles of trust law applicable to the present case are not in dispute. The Property being registered in the defendant’s name, the plaintiff bears the burden of showing, on the balance of probabilities, that the defendant held the Property on trust for him absolutely.

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

28.  In this court’s view, the principal issues are:

(1)   What was the actual common intention and express agreement, if any, between the parties in relation to the acquisition of the Property and their share of beneficial interests in the Property?  In so far as direct contribution to the purchase price is concerned (initially or by payment of mortgage instalments), whether, and, if yes, how much each of the parties had contributed towards the purchase of the Property? (Issue 1)

(2)   Whether all the parties have a beneficial interest in the Property in the respective shares pleaded in the RASOC or whether only the 1^st Plaintiff, the 2^nd Plaintiff and the Defendant have a beneficial interest in the Property, each holding 1/3 share as pleaded in the RADNC? (Issue 2)

(3)   Whether the Defendant is liable to pay occupational rent to the Plaintiffs from March 1993 to December 2016 or for some other period and, if yes, what is the amount payable by him? (Issue 3)

Issue 1

29.  At trial, the Plaintiffs called 5 witnesses viz the 1^st Plaintiff, Mother, the 2^nd, 3^rd and the 4^th Plaintiffs, in that order.  The Defendant called 1 witness viz himself.

30.  Since the Common Intention, the 1986 Agreement and the Tripartite Agreement were not recorded or evidenced in writing, the credibility of the witnesses becomes of vital importance to the adjudication of this case.  This court has carefully considered the testimony, as well as the demeanour, of all witnesses and assessed it against such of the documentary evidence as there is and the known and undisputed surrounding circumstances of this case.  This court has also considered the inherent probabilities or otherwise of the parties’ respective contentions, and assessed the witnesses’ credibility accordingly. 

31.  This court finds the 1^st Plaintiff, the Plaintiffs’ main witness, a truthful and excellent witness.  She gave her evidence clearly and calmly and her response to questions was always direct.  Her credibility has withstood the test of cross‑examination.  Further, there is only a very minor difference between her claim to the Property ie 35.71% and what the Defendant contends is her entitlement ie 1/3 or 33.33%.  The inherent probabilities are such that it is unlikely that she would be prepared to incur the legal costs of commencing the present action, go through the stress and bear the financial risk of litigation and conspire with the other Plaintiffs to lie on oath to this court.

32.  This court finds Mother a truthful witness.  In view of her age and the fact that she was cross‑examined on events which took place decades ago, Mother’s recollection of events is understandably imperfect. But her testimony on the 2 most important aspects of this case viz the fact that all the 5 siblings had agreed to purchase the Property together and the amount she collected each month, over a period of 12 years, from each of the 5 siblings for the purpose of mortgage repayments, was firm and unwavering.  Importantly, Mother is not personally interested in the outcome of this case and does not have to testify for anyone if she does not wish to.  It is inherently improbable that she would conspire with the Plaintiffs to lie on oath against her own son.

33.  This court finds the 2^nd, 3^rd and 4^th Plaintiffs truthful witnesses.  They gave their evidence calmly and their answers to Ms Gwilt’s questions were mostly direct, although the extent of their recollection of the details differed.  Their credibility has not been shaken in cross‑examination.

34.  As far as the 2^nd Plaintiff is concerned, if it is inherently improbable that the 1^st Plaintiff would incur the legal costs of commencing the present action, go through the stress and bear the risk of litigation and conspire with the other Plaintiffs to lie on oath to this court, it is even more improbable in her case.  This is because she has adopted a position which is against her own personal interest — the 2^nd Plaintiff is only claiming 22.39% of the beneficial interest in the Property whereas on the Defendant’s case, she would be entitled to 1/3.  Since the 2^nd Plaintiff’s evidence is tantamount to an admission against her own interest, it should be given considerable weight: Wong Tak Yue v Kung Kwok Wai (No 2) (1997‑98) 1 HKCFAR 55, at 69C (Li CJ); Cheung Lai Mui v Cheung Wai Shing & Ors unrep, HCA 1652 of 2012, 10 April 2017, Wilson Chan J at [91].

35.  As for the Defendant himself, this court does not find him a reliable witness.  Detailed reasons can be found later in this Judgment when this court examines his case of Tripartite Agreement.

36.  All the Plaintiffs and Mother have come up to proof and their testimonies corroborate each other in relation to the terms of the Common Intention and the 1986 Agreement as well as the Plaintiffs’ respective financial contribution towards the acquisition of the Property.  Further, the reasons given by the Plaintiffs as to why their contributions differed are entirely sensible and reasonable.

(1)   The 1^st Plaintiff started working at the early age of 12 and had sufficient savings to pay for the bulk of the 20% deposit/down payment, as well as the 6 monthly instalments to the developer.  The 1^st Plaintiff said she was prepared to do that since she would get a bigger share of beneficial interest in the Property.

(2)   The 2^nd Plaintiff also started working at a young age[4] but she had little savings and could only contribute HK$10,000 towards down payment, even though she earned slightly more than the 1^st Plaintiff per month.

(3)   The 3^rd Plaintiff was the eldest brother and earned the most among the 5 siblings but he started work much later than the 1^st and 2^nd Plaintiffs.  He received more education than the two largely because his two younger sisters started working much earlier.  He was prepared to contribute HK$1,000 per month towards the mortgage repayments even though he did not intend to live in it and has not lived in it.

(4)   The 1^st, 2^nd and 3^rd Plaintiffs were older and earned more than the other 2 siblings.  They were able and prepared to contribute HK$1,000 per month towards mortgage repayments.  The 4^th Plaintiff and the Defendant were younger and earned less — hence their monthly contribution was only HK$500.

37.  Given that the 5 siblings agreed to purchase the Property together but made different financial contributions towards the purchase, it seems to this court wholly natural and reasonable for them to agree to have different beneficial interests in the Property according to their respective contributions.

38.  As submitted by Mr Kwong, since the acquisition of the Property, the Plaintiffs' conduct has been consistent with the Common Intention and the 1986 Agreement.

39.  First, the 1^st, 2^nd and 4^th Plaintiffs, as well as the Defendant, had resided in the Property for various periods without paying rent while the 3^rd Plaintiff had indicated from the outset that he would not live in it.  The reason given by the 3^rd Plaintiff was that he preferred to stay in Tze Wan Shan with Mother since travelling to and from Sai Kung was inconvenient to him.

40.  The fact that the 3^rd Plaintiff was prepared to contribute to the mortgage repayments without ever living in the Property is a fairly strong indication in support of the Common Intention and the 1986 Agreement — if he did not live in the Property and was not going to have a share of the beneficial interests in the Property, why would he have contributed towards the mortgage repayments, as corroborated by Mother’s and all the other Plaintiffs’ testimony?  To a lesser degree, the same can be said of the 4^th Plaintiff.  She had only lived in the Property for about 3 years but she had continuously contributed to the mortgage repayments even for periods when she did not reside in it.

41.  Second, in around 1987 and 1988, the Plaintiffs have contributed to renovation expenses and electrical appliance expenses totaling over HK$100,000.  It is not in dispute that the Defendant has not contributed to such expenses.

42.  Third, the Defendant moved out of the Property in around August 2002.  Since then, he stopped paying for (i) management fees and related contributions, (ii) government rent and rates, and (iii) electricity bills in respect of the Property.  In this regard, this court accepts the Plaintiffs’ evidence and finds that at least a substantial portion of the aforesaid expenses were paid for by the Plaintiffs, albeit the Defendant claims he had paid for a few months’ management fees in 2015 and 2016 (which is disputed by the Plaintiffs).  Even if the Defendant’s claim were true, the bulk of the said expenses were paid for by the Plaintiffs.  Importantly, there is no plausible explanation for the 3^rd Plaintiff to contribute to these expenses when he had never resided in the Property unless he was also a beneficial owner of it.  Again to a lesser degree, the same can be said of the 4^th Plaintiff.

43.  Fourth, on 16 August 2013, the Plaintiffs issued the 2013 Letter to the Defendant in which they made clear that the 5 siblings had agreed that their beneficial interests in the Property should be shared according to their financial contributions towards the purchase, and that the Defendant has only contributed about 10%.  The Defendant did not raise any objection to the contents of the letter — he simply did not respond to it.  If the Defendant indeed had made 1/3 financial contribution to the purchase of the Property in accordance with the Tripartite Agreement, his inaction would have been inexplicable.  When asked about this in cross‑examination, the Defendant’s answer was to the effect that why he should have to respond to the letter since the title documents already showed he had 1/3 share of the Property.  In this court’s view, that answer is at best a complete non sequitur.

44.  By contrast, this court finds the Defendant’s case of a Tripartite Agreement inherently improbable.  This court has already noted above the Defendant’s failure to respond to the 2013 Letter and to assert the existence of the Tripartite Agreement and his 1/3 financial contribution to the purchase of the Property.  Even more incredible is the fact that the alleged Tripartite Agreement was not pleaded in the original Defence filed on 9 June 2014.  Rather, it was pleaded only by way of an amendment in November 2015, 1½ years after the commencement of the present action and more than 2 years after the Defendant had received the 2013 Letter.  Mr Kwong submits this alleged Tripartite Agreement is a mere afterthought.  There is force in Mr Kwong’s submission.

45.  Importantly, this court does not find the Defendant a reliable or truthful witness.  This court will give a few illustrations to explain why.

46.  First, the Defendant was asked why the alleged Tripartite Agreement was not pleaded in the original Defence.  His answer was that he had already told his lawyer about it and he did not know why the lawyer failed to put it down in the original Defence.  This is very hard to believe since the Tripartite Agreement was an important, if not the most important, element of his defence to the Plaintiffs’ claim.  If he had indeed told his lawyer about the Tripartite Agreement, there is no plausible explanation for the lawyer to have omitted it from the Defence.  And even if the lawyer, through incompetence or otherwise, had failed to plead it in the Defence, the Defendant would have noticed it by the time he was asked to sign the statement of truth attached to the Defence and would have instructed his lawyer to rectify the omission.

47.  Second, the Defendant stated in paragraph 11 of his witness statement filed on 30 September 2016 to the effect that the 20% deposit was paid by the 1^st and 2^nd Plaintiffs first.  He then made repayment of 1/3 of the 20% deposit, 1/3 of the legal fees and 1/3 of the first 6 monthly payments ie from October 1986 to March 1987 totaling HK$40,535.50 in cash to the 1^st Plaintiff at about the end of 1987.  When asked in cross‑examination by Mr Kwong how he could remember the very specific sum of HK$40,535.50, he claimed to have paid in cash to the 1^st Plaintiff in late 1987, the Defendant insisted he had “quite a recollection in my memory regarding this figure” since it was the first time he bought a property and it was a big event.  Given that the Defendant no longer keeps the passbook or statement of his savings account from which the HK$40,535.50 was allegedly drawn out, it is disingenuous for the Defendant to claim to be able to remember such a specific figure so long after the event.  More probably than not, the Defendant was simply making that up when he prepared his witness statement to embellish his case of Tripartite Agreement and his alleged 1/3 contribution towards the 20% deposit, legal fees and the first 6 monthly payments.

48.  Third, at paragraph 12 of his witness statement filed on 30 September 2016, the Defendant appeared to be able to recollect very specifically how much he gave to Mother each month from April 1987 to December 1999 ie HK$1,400, HK$2,000 and HK$3,000 respectively.  The sums included his supposed 1/3 contribution to the mortgage repayments while the surplus was said to be for Mother’s use.  Again, the Defendant was not able to adduce the passbook or statement of his savings account in support of the said cash payments but he again insisted he could remember it clearly.  Importantly, the Defendant was asked about it in cross‑examination by Mr Kwong who contradicted him by referring to his pleaded case at paragraph 6 of the RADNC.  In that paragraph, the Defendant stated that “As to the particulars of the alleged mortgage instalments, the Defendant could not recall the same”.  

49.  Fourth, when the Defendant was asked about the 1^st and 2^nd Plaintiffs’ relationship with the 3^rd and 4^th Plaintiffs back in 1986, his answer was that he did not pay attention to it.  This is rather hard to believe given that the 5 siblings had grown up together in a flat of merely 200 square feet for more than 20 years by 1986.  Mr Kwong, in his Closing Submissions, suggested that the Defendant refused to confirm the good relationship amongst the Plaintiffs since it did not sit well with the alleged Tripartite Agreement which excluded the 3^rd and 4^th Plaintiffs.  Again, it seems to this court there is force in that submission.

50.  For all the above reasons, this court has no difficulty accepting Mother’s and the Plaintiffs’ testimony and rejecting the Defendant’s.

51.  This court also has no difficulty finding as a fact that the Common Intention and 1986 Agreement did exist and the material terms were as claimed by the Plaintiffs.  It naturally follows that the Defendant’s testimony and his case that he is entitled to 1/3 of the beneficial interests in the Property pursuant to the Tripartite Agreement must be rejected.

52.  This court further finds as a fact that, in accordance with and in reliance of the Common Intention and the 1986 Agreement:

(1)   The 1^st Plaintiff paid for the initial deposit of HK$5,000.

(2)   The 1^st and 2^nd Plaintiffs paid for the down payment of HK$80,994 out of which the 1^st Plaintiff contributed HK$70,994 while the 2^nd Plaintiff contributed HK$10,000.

(3)   Between October 1986 and March 1987, the 1^st Plaintiff paid the first 6 instalments mentioned earlier to the developer in the total sum of HK$26,144.10.

(4)   Between May 1987 and May 1999, the 1^st to the 3^rd Plaintiffs each contributed HK$1,000 per month towards mortgage repayments, while the 4^th Plaintiff and the Defendant each contributed HK$500.

(5)   The parties’ contributions towards the purchase of the Property in terms of dollars and cents as well as percentages were as set out in paragraph 11 above.

(6)   The Plaintiffs have contributed, to varying degrees, to the payment of expenses as set out in paragraph 13 above.

Issue 2

53.  This court’s determination of Issue 2 necessarily follows from the findings set out above.

54.  In Primecredit Ltd v Yeung Chun Pang Barry at [2.3]‑[2.4], Cheung JA explained how the 2 situations in which common intention constructive trust might 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. See the judgment of Lord Bridge of Harwich in Lloyds Bank Plc v Rosset [1991] AC 107, 132.” (emphasis added)

55.  In Liu Wai Keung v Liu Wai Man at [46]‑[50], G Lam J further elaborated on the elements that a party must prove in order to establish a constructive trust in his favour:

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

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

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

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

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

56.  This court has found as a fact that the Common Intention and 1986 Agreement did exist and the material terms were as claimed by the Plaintiffs.  This court has also found as a fact that the parties’ direct contributions towards the purchase of the Property in terms of dollars and cents as well as percentages were as set out in paragraph 11 above and they had contributed to the expenses in connection with the Property as set out in paragraph 13 above.

57.  Since the other 2 elements for establishing a common intention constructive trust ie detrimental reliance and unconscionability on the part of the Defendant are self‑evident from this court’s findings, whether or not the first situation or the second situation as explained by Cheung JA in Primecredit Ltd v Yeung Chun Pang Barry applies, a common intention constructive trust among the Plaintiffs and the Defendant has arisen over the Property and this court will so find.

58.  As to the quantification of the parties’ beneficial interests in the Property, where the defined shares have been agreed by the parties, the court will give effect to that agreement: Mo Ying v Brillex Development Ltd [2014] 3 HKLRD 224 at [44].

59.  In the present case, the parties have agreed a certain formula for the calculation of their respective beneficial interests in the Property and as such this court would give effect to that agreement.  Taking into account their respective contributions towards the purchase of the Property, this court hereby quantifies that each of the Plaintiffs and the Defendant has beneficial interests in the Property in the following proportion:

(1)   1^st Plaintiff:    35.71%

(2)   2^nd Plaintiff:    22.39%

(3)   3^rd Plaintiff:    20.95%

(4)   4^th Plaintiff:     10.47%

(5)   Defendant:      10.47%

Issue 3

60.  This court shall first remind itself of the legal principles which should be uncontroversial.

61.  First, the common law position is that, in the absence of agreement, where land is held by several co‑owners, they are all, as between themselves, entitled to possession of the whole.  For this reason, there is no remedy in trespass against an occupying co‑owner unless he has ousted or excluded the other.  There is no exclusion if one merely stays away, allowing the other to solely occupy the land.  Where one ousts the other, he will be liable for occupation rent: Snell’s Equity 33^rd Ed at para 20‑081.

62.  Second, whereas the common law position is as aforesaid, the approach of the Court of Chancery is more flexible.  The position adopted in modern cases is that occupation rent may be charged against an occupying co‑owner where this is necessary to do broad justice or equity as between co‑owners: Snell’s Equity at para 20‑085; Re Byford (deceased) [2004] 1 P & CR 12 159 at [40]. 

63.  Third, a Court of Equity will order an inquiry and payment of occupation rent, not only in the case where the co‑owner in occupation has ousted the other, but in any other case in which it is necessary in order to do equity between the parties that occupation rent should be paid. The fact that there has not been an ouster or forceful exclusion therefore is far from conclusive: In Re Pavlou (A Bankrupt) [1993] 1 WLR 1046, 1050D‑F, per Millett J (as he then was). 

64.  Fourth, whether occupational rent would be payable on the facts of each case is “ultimately a matter of discretion”: French v Barcham & Anr [2009] 1 WLR 1124 at [43].

65.  The following are facts as admitted by the parties and/or as found by this court which are pertinent to the question of occupation rent.

(1)   The 1^st and 2^nd Plaintiffs resided in the Property from February 1988 to March 1993.

(2)   The 4^th Plaintiff resided in the Property from mid‑1988 to early 1991.

(3)   The Defendant and his family resided in the Property from around December 1991 to August 2002. 

(4)   Since 2008, the Plaintiffs have raised their proposal to sell the Property with the Defendant who all along did not agree to it.  Nor did the Defendant agree to remove his belongings from the Property despite repeated requests — see, for instance, the letter dated 10 July 2014 from the 1^st and 2^nd Plaintiffs to the Defendant.  Hence, the Plaintiffs were unable to renovate the Property either for sale or, in the case of the 1^st, 2^nd and 4^th Plaintiffs, for self‑use.  According to the 1^st Plaintiff’s testimony, the relationship between the siblings slowly turned bad but she stopped short of saying the relationship had completely broken down in 2008.

(5)   After the Defendant and his family had moved out of the Property in August 2002, no one else lived in the Property but (i) the 1^st and 2^nd Plaintiffs left some of their belongings in the Property until sometime in 2011; (ii) the Defendant and his family left some of their belongings in the Property even up to the trial.

66.  At paragraph 60 of his Closing Submissions, Mr Kwong submits that an order for the Defendant to pay occupation rent to the Plaintiffs would be a fair order which would do broad justice or equity between the parties.  Mr Kwong further proposes 3 different commencement dates for the calculation of occupation rent as follows:

(1)   From April 1993, when the Defendant became the sole occupant of the Property.

(2)   From 2008, when the Plaintiffs began to request the Defendant to remove his belongings from the Property and the relationship between the parties had broken down.

(3)   From 2011, when the 1^st and 2^nd Plaintiffs had removed all their belongings from the Property. 

67.  During his oral closing submissions, Mr Kwong proposed to this court that the second commencement date should run from June 2008 whereas the last one should be December 2011.

68.  As far as the ending date is concerned, the only available and undisputed expert evidence on the estimated rental value of the Property comes from the Plaintiffs and ends in December 2016.  Hence Mr Kwong invites this court to adopt December 2016 as the ending date.

69.  In this court’s view, given that the 1^st and 2^nd Plaintiffs had left behind some of their belongings in the Property until 2011, they cannot be regarded as having been ousted or excluded from 1993 or 2008, even though they did not reside in it.  Nor can the Defendant be regarded as the sole occupant of the Property until then.  However, given the fact that the Plaintiffs have repeatedly requested the Defendant to remove his belongings from the Property from 2008 and given his unexplained (save perhaps out of animosity towards the Plaintiffs, as the latter suggest) and unjustified refusal to do so, this court agrees that an order for the Defendant to pay occupation rent to the Plaintiffs would be a fair one.

70.  Doing the best this court can to do broad justice or equity between the parties and in the exercise of its discretion, this court considers it appropriate to order the Defendant to pay occupation rent to the Plaintiffs from December 2011 to December 2016.  On the evidence and on Mr Kwong’s revised calculation submitted to court during his oral closing submissions, the total amount of occupation rent is HK$639,800, and this court shall so order.

Order for sale of the Property

71.  In the RASOC, the Plaintiffs claim against the Defendant for inter alia an order for sale of the Property pursuant to Section 6 of the Partition Ordinance, Cap 352.  The Defendant is agreeable to an order for sale but the parties are unable to fully agree on the terms.  The 2 major areas of contention are (i) the appropriate reserved price and (ii) which side’s solicitors should have the conduct of the sale.

72.  This court has no doubt that the Plaintiffs’ solicitors shall have the conduct of the sale since the Plaintiffs have almost 90% of the beneficial interests in the Property.

73.  However, in the absence of valuation evidence, this court has indicated to the parties at the trial that it is inappropriate to make a determination on the reserved price.  In any event, since the property market is not stagnant, the parties should be given an opportunity to agree on a reserved price for the sale of the Property, failing which they should separately put forward an updated reserved price, supported by valuation evidence, and argue the matter, as well as other consequential directions, if any, before this court.

IV.   Disposition, costs order nisi and consequential directions

74.  There shall be judgment in favour of the Plaintiffs against the Defendant as sought in the RASOC as follows:

(1)   A declaration that the 1^st Plaintiff, the 2^nd Plaintiff and the Defendant hold the Property on constructive trust in the proportion of 35.71% for the 1^st Plaintiff, 22.39% for the 2^nd Plaintiff, 20.95% for the 3^rd Plaintiff, 10.47% for the 4^th Plaintiff and 10.47% for the Defendant.

(2)   A declaration that the 1^st, 2^nd, 3^rd and 4^th Plaintiffs and the Defendant are equitable tenants in common of the Property.

(3)   An order for sale of the Property pursuant to Section 6 of the Partition Ordinance, Cap 352.

(4)   Occupation rent in the sum of HK$639,800 for the Defendant’s use and occupation of the Property from December 2011 to December 2016, to be paid by the Defendant to the Plaintiffs, with interest at the rate of Prime plus 1% from the end of each year beginning December 2011 to judgment and thereafter at judgment rate until payment, within 56 days or after the sale of the Property (in which case the occupation rent shall be deducted from the Defendant's share of the sale proceeds).

75.  The Defendant’s Counterclaim is hereby dismissed.

76.  There shall be an order nisi that costs of the Action, including all costs reserved, if any, be to the Plaintiffs, to be taxed if not agreed, and paid by the Defendant forthwith, with certificate for two counsel.

77.  In the absence of agreement between the parties on the reserved price and other consequential directions, if any, for the sale of the Property within 14 days, they shall come back to this court for argument.