WONG FU CHEUNG v. WONG PUI HUNG PETER

HCMP 170/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 170 OF 2011

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JUDGMENT

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1. This is very much a family dispute. The plaintiff and the defendant are father and son. By an assignment dated 31 March 2006, they purchased the property known as Shop E, Ground Floor, New Man Lee Building, No. 7 Kam Fong Street, Kowloon, Hong Kong (“the Property’) in joint names. In this action, the plaintiff seeks a declaration that he is the sole beneficial owner of the Property.

2. The action was first commenced by way of originating summons.  On 25 October 2011, Au-Yeung DHCJ ordered the proceedings to continue as if the same have begun by writ.

THE AGREED FACTS

3. The parties submitted the following agreed facts to the court at the commencement of the trial:

(i) the plaintiff is and was at all material times the sole owner of the business known as “Wan Kee” (“Wan Kee”);

(ii) the defendant is and was at all material times the owner of Hung Lee Metal Company (“Hung Lee”);

(iii) the Property was purchased with the money provided by the plaintiff on 31 March 2006 in the following manner:

(a) the down-payment paid by the plaintiff or Wan Kee; and

(b) the balance by way of a mortgage loan;

(iv) all the repayments of the mortgage loan were made by the plaintiff;

(v) the plaintiff repaid all the mortgage loan in 2008 and the mortgage relating to the Property was discharged on 28 February 2008;

(vi) the Property was never occupied or used by the defendant;

(vii) the defendant did not have the key of the Property;

(viii) the title deeds of the Property have all along been kept by the plaintiff;

(ix) except for the Property, the plaintiff does not have any property held under joint names with the defendant;

(x) the plaintiff has 2 properties held under joint names with his wife;

(xi) in or about 2008, the plaintiff found an intended purchaser for the business of Wan Kee who was willing to offer a purchase price of $20,000,000;

(xii) by that time, the defendant and his wife showed their intention to buy the business of Wan Kee at the same price, and for that purpose, the defendant’s wife went to check the operation and the accounts of Wan Kee for about 3 months;

(xiii) after that, the plaintiff asked the defendant and his wife to proceed with the purchase of the business of Wan Kee, but the latter refused which led to the deterioration of the relationship between the parties;

(xiv) in or about February 2010, the plaintiff decided to sell the Property and had found an intended purchaser who was willing to pay a purchase price of $6,000,000, but the defendant refused to sign the provisional sale and purchase agreement; and

(xv) the parties had an argument over the sale of the Property, the defendant claimed that the plaintiff had intimidated him and as a result the plaintiff was prosecuted in criminal proceedings.

PRESUMPTION OF ADVANCEMENT

4. Because the defendant is the natural son of the plaintiff, the presumption of advancement is applicable in the present case.

5. Despite such presumption, the modern approach of the court is to focus on the intention of the parties at the relevant time.  Both parties agree with such modern approach which is best summarised in the following passage in Snell’s Equity, 32 ed, at §25-007:

“The evidential weight attached to the formal presumption of advancement is now less definite than it once was and it varies from case to case. ... ... ... In general, the court strives to determine the real intentions of the parties. It may only resort to the formal presumptions where the direct evidence of those intentions is absent and a default rule is needed. Where modern experience indicates that the presumption does not provide any firm rational basis for presuming an intention to make a gift between parties in the position of A and B, then it may only be of slight probative value.”

6. There is no dispute that prior to the purchase of the Property in 2006, there was no express discussion between the parties as to whether the Property was conveyed to the defendant by way of gift or on trust for the plaintiff.  However, the court has the evidence of the plaintiff who claims that the Property was not conveyed to the defendant by way of gift. Since the court has before it evidence about the actual intention of the plaintiff, Mr Sze, counsel for the defendant, agrees that if the court were to accept the evidence of the plaintiff as the truth, then the presumption of advancement is rebutted and the defence must fail.  Hence, the main issue in this case is whether, as a question of fact, at the time of the purchase of the Property in March 2006, the plaintiff intended to make a gift of the Property to the defendant or for the defendant to hold the Property on trust for him.

EVIDENCE OF THE WITNESSES AT THE TRIAL

7. The following 3 persons testify at the trial: the plaintiff, the defendant and the defendant’s wife.

(i) The evidence of the plaintiff

8. The plaintiff is now 79 years of age.  According to him, the Property was purchased as a storage place for the business of Wan Kee.  However, as he is a man of advance age, the banks refused to offer any mortgage loan to the plaintiff in his sole name.  The plaintiff had actually made enquires with a few banks, and they all requested the plaintiff to add another mortgagor who was younger.  The plaintiff has 3 sons.  Apart from the defendant, one was staying in the Mainland, one was born mentally handicapped, and so the defendant became an obvious choice as a co-mortgagor.  Under such circumstances, the Property was purchased in the joint names of the plaintiff and the defendant.  Under the mortgage loan arrangement, they were the mortgagors and Wan Kee was the borrower.

9. The plaintiff agrees that he supported the defendant financially by contributing the capital for the setting up of the business of Hung Lee.  However, he only helped the defendant to start up his business.  After the establishment of the defendant’s business and in the period from 2000 to 2008, the defendant had from time to time asked the plaintiff to provide him with some short-term loans and to loan some stocks to him for business of Hung Lee.  The plaintiff did provide such loans and stocks to the defendant about 10 to 20 times.  On each of these occasions, the plaintiff would ask the defendant to issue a cheque as security for the loan or the stock advanced to the defendant.  When the defendant repaid the loan or return the stock concerned, the plaintiff would return the cheque to the defendant.  According to the plaintiff, these were not gifts.  He only helped the defendant to set up his business.  As the defendant was an independent person with his own business, income and family, he could not ask for financial assistance from his father all the time.

(ii) The evidence of the defendant

10. The defendant also testifies at the trial.  According to him, he finished his studies in Canada and came back to Hong Kong in 1994. By that time, the plaintiff helped the defendant to set the business of Hung Lee by providing the initial capital investment and stocks.

11. For the next 15 years or so, the defendant continued to rely on the plaintiff for financial support.  In December 1997, the plaintiff provided him by way of gift the down-payment for the purchase of 2 shops for the business of Hung Lee.

12. In 2006, the defendant’s mother called him and asked him to go to a law firm to sign some documents for the purchase of the Property.  By that time, he did not find it surprising as he had all along regarded it as a gift from his father.

13. For the cheques issued by him in favour of the plaintiff, the defendant maintains that these were contributions he made for his father as “pocket money” in light of all the things that he had received from the plaintiff throughout the years.

(iii)   The evidence of the defendant’s wife

14. The evidence of the defendant’s wife is more of less the same as that of the defendant.

15. Further, according to the defendant’s wife, she had quite a number of conversations with the plaintiff at the time when she worked in Wan Kee in 2008.  During those conversations, they talked about the intended purchase and transfer of business of Wan Kee from the plaintiff to the defendant and his wife.  On one occasion, the plaintiff tried to persuade them to take over the business of Wan Kee by telling her that: as the plaintiff had already given the Property to the defendant by way of gift and the name of “Hung Lee” was put down on the signboard at the front of the Property, it would be better for them to take over the business of Wan Kee rather to pay rent on other premises for the business of Hung Lee.

ASSESSMENT OF THE EVIDENCE

16. Having carefully considered the evidence of the plaintiff, I find him to be an honest and truthful witness.  Despite his advance age, he is able to tell the court clearly the circumstances under which he purchased the Property, and the reason why he had added the name of the defendant as one of the purchasers despite the fact that the whole purchase was financed by the plaintiff himself.  I accept his evidence as the truth.

17. Mr Sze attacks the creditability of the plaintiff’s evidence mainly on two fronts.  Firstly, the plaintiff alleged in his 2^nd affirmation that the defendant had, at one stage after the purchase of the Property, pasted a piece of paper with the name of “Hung Lee” on it at the front of the Property.  However, the photographs produced by the defendant show that it was actually a signboard with the name of “Hung Lee” on it which was put up at the front of the Property.  There is also some confusion in the plaintiff’s evidence as to who put up the signboard of “Hung Lee”.  Secondly, the plaintiff had in his 2^nd affirmation exhibited the records showing the occasions when the defendant had borrowed money from him.  However in his oral testimony, the plaintiff says that these are not the complete records and claims that there were some other occasions that the defendant had borrowed money or stocks from him.  For those transactions that the defendant had repaid the loans or returned the stocks to the plaintiff, the plaintiff would return the cheques to the defendant and so he might not have the records for such transactions.  According to Mr Sze, such inconsistencies cast doubt on the creditability of the plaintiff’s evidence.

18. I disagree.  If one looks at the records produced as “WFC-6” and the cheques produced as “WFC-7” to the 2^nd affirmation of the plaintiff, it is clear that the records in “WFC-6” do not purport to contain all the loan transactions between the parties.  There were 3 HSBC cheques each in the sum of $100,000 issued by the defendant as exhibited in “WFC-7”.  These cheques do not appear in the records in “WFC-6” (at least not all the cheques appear in the records), which can only mean that the records in “WFC-6” are not supposed to be the complete records.  It was also reasonable for the plaintiff not to keep any records for those transactions where the defendant had repaid the loans, and so I do not accept that the lack of records for some other transactions undermine the creditability of the plaintiff’s evidence.

19. Neither is the confusion about the evidence relating to the signboard affect the creditability of the plaintiff’s evidence.  It is common ground that the plaintiff had all along wanted the defendant to succeed his business.  In order to persuade the defendant to take over or to buy the business of Wan Kee, it would only have been natural for the plaintiff or someone to put the name of the defendant’s business, Hung Lee, on the signboard at the front of the Property which was only a storage place and not the main shop of Wan Kee.  This is also consistent with the fact that the defendant and his wife had already indicated their intention to purchase the business of Wan Kee.  What is most important is that the plaintiff has kept the title deeds and the key of the Property.  Further, the plaintiff provides an explanation in his 3^rd affirmation as to why he had described the signboard as “paper” in his 2^nd affirmation.  Taking into account the age of the plaintiff and the possible difficulty in expressing himself, I accept that the description in the 2^nd affirmation was a genuine mistake caused by the miscommunication between the plaintiff and his solicitors.

20. Further, Mr Sze submits that if the plaintiff’s intention was for the defendant to hold the Property on trust for him, he should have asked the defendant to confirm such arrangement in writing or by some other means.  In all the previous occasions when the defendant requested for loans and stocks, the plaintiff would have insisted the defendant to issue the cheques as some kind of securities.  Why did the plaintiff not ask for the same kind of protection when he joined the name of the defendant in purchasing the Property?

21. I do not find that such argument would undermine the creditability of the plaintiff’s evidence.  As testified by the plaintiff himself, he is not an educated person.  He is also an illiterate old man.  In such circumstances, it is not surprising that he had not thought about such way of protecting his right when he purchased the Property in 2006.  One must bear in mind that the plaintiff had already obtained protection of some kind: there is always documentary evidence to show that the plaintiff had paid the full purchase of the Property and he has all along kept the title deeds and the key of the Property.  Hence, it may well be the case that the plaintiff did not consider it necessary to obtain other kinds of protection or security.

22. Hence, I accept the plaintiff’s evidence as the truth.  Based on his evidence, I find that the plaintiff’s intention at the time of the purchase of the Property was for the defendant to hold the Property on trust for him, and he had no intention whatsoever to convey the Property to the defendant as a gift.  This would have been sufficient for the plaintiff to rebut the presumption of advancement and to obtain judgment against the defendant.

23. For the sake of completeness, I would also assess the creditability of the evidence of the defence case.

24. I myself have grave reservation about the creditability of the evidence of the defendant and his wife.  Firstly, the evidence (exhibit “WFC-7” of the plaintiff’s 2^nd affirmation) shows that the defendant had issued at least 3 cheques each in the sum of $100,000 to the plaintiff.  2 of the cheques were dated 16 September 2005.  If the purpose of issuing the cheques was to pay “pocket money” to his father (as alleged by the defendant), why did the defendant have to issue 2 separate cheques on the same day?  The issue of 2 separate cheques is certainly more consistent with the plaintiff’s evidence that the defendant was experiencing some sort of financial difficulty.

25. In order to provide an explanation, the defendant claims that these were in fact post-dated cheques, and so these 2 cheques might not have been issued on the same day.  As to why he had to issue post-dated cheques to give some “pocket money” to the plaintiff, the defendant testifies that he actually had insufficient money in his bank account and he was betting on his luck that the plaintiff would not present the cheques for payment.  In my judgment, such explanation does not sit well with the defendant’s evidence that he was just giving “pocket money” to his father.  If the defendant had no spare money in his account, why did he have to give “pocket money” to his father?  At least, he could wait until he had the means to do so, and so the defendant’s explanation does not make very much sense.  Again, this is more consistent with the plaintiff’s case that the defendant was experiencing some short-term financial difficulty by that time. 

26. Further, there is a remarkable discrepancy between the evidence of the defendant and that of his wife, which relates to an important conversation between the plaintiff and the defendant’s wife. According to the defendant’s wife, when the plaintiff talked with her about the purchase of the business of Wan Kee, the plaintiff told her that he had already given the Property to the defendant by way of gift (see paragraph 15 above).

27. However, the version given by the defendant is very different. The defendant was not present during such conversation and his knowledge of the conversation had to come from his wife.  But according to the defendant, the plaintiff by that time said that: sooner or later, the Property would belong to the defendant, and so the defendant should come back to succeed the business of Wan Kee.  This version may suggest that the gift had not been effected in 2006.

28. Obviously, there is a remarkable inconsistency between the defendant’s and his wife’ accounts of the same conversation.  The contents of the conversation may be important for the court to ascertain the intention of the plaintiff by that time, and it is very difficult to explain why the defendant and his wife have given two quite different versions about such important conversation.

29. Finally, there are some inconsistencies between the defendant’s evidence and the facts agreed by his counsel on his behalf. Firstly, the agreed facts have set out in details as to how the plaintiff had financed the purchase of the Property himself, and yet the defendant claims at the trial and in the criminal proceedings that part of the purchase price of the Property was paid from the proceeds of sale of a property jointly owned by the plaintiff and his wife.  The two versions are quite different.  Secondly, according to the agreed facts, the defendant and his wife did show their intention to purchase the business of Wan Kee at a price of $20,000,000.  However, under cross-examination, the defendant’s wife testifies that they had not shown the intention to buy Wan Kee in the sum of $20,000,000.  In my judgment, such inconsistencies also undermine the creditability of the defence case.

30. Based on these observations, I reject the evidence of the defendant and his wife on the balance of probabilities.

31. At the trial, Mr Chan, counsel for the plaintiff, relies heavily on the alleged “admissions” made by the defendant in the criminal trial of the plaintiff, when the defendant said: (i) he considered himself as a trustee of the Property and he would give his half share of any proceeds of sale of the Property to his mother; and (ii) he considered that the plaintiff was adding his name as one of the purchasers to facilitate the borrowing of mortgage loan from the bank.

32. Despite the submission of Mr Chan, I attach very little weight to these “admissions” on the part of the defendant.  One must bear in mind that there was no discussion between the parties before they purchased the Property in 2006.  In such circumstances, whatever said by the defendant about his role in the purchase of the Property was only speculation on his part.  In any event, it is quite unnecessary for the plaintiff to rely on these “admissions” in establishing the claim against the defendant.

33. By reason of the aforesaid, the plaintiff succeeds in his claim and I make an order in terms of paragraphs 1 and 2 of the prayer for relief in the Statement of Claim.  I also make an order nisi that the costs of the action be to the plaintiff, which shall be made absolute 14 days after the date of the handing down of this Judgment.