CLL v. SW

FCMC 10564/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

SUIT NO. 10564 OF 2009

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Judgment

(Ancillary Relief Application)

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1.  This is the parties’ application for distribution of their marital assets, not so much as to how these assets should be shared as both agree that equal division would be fair in the circumstances of their case, but rather as to whether the Husband has in addition any interests in a property purchased in his sole name prior to their marriage which he claims was held in trust for his elder sister and in which he has absolutely no interests, but the Wife believes he has at least half if not the entire share which she argues should be included in their marital pool for distribution. That property was valued at HK$2.6 million in May 2010, of which the parties have accepted as fair indicative of its value today.       

2.  Other than that property, the parties are in fact in agreement that the only marital asset for equal distribution between them is the balance of the sale proceeds of their former matrimonial home of about HK$4.9 million paid into court earlier pending its final determination of the said issue. Before proceeding to consider the evidence of the parties over that issue, it would be necessary to first set out the relevant background.

Background

3.  As a matter of fact, details of the background of the marriage and the history of litigations in the parties’ divorce proceedings, and there were numerous, were already set out in my earlier judgment of 17^th December 2012 on what can be described as their horrific disputes over their only daughter then aged 7, hence I do not propose to repeat most of them here, suffice just to focus, where possible, on those relevant to the said property.

4.  The parties were both born in China, with the Wife coming to settle in Hong Kong with her parents at the young age of 7, and upon completing her education in both Hong Kong and Australia, she has since about 1996 been working as a registered nurse working mainly in hospitals, except for a brief period in 1999 when she was treated for a brain tumour but has since fully recovered. She is now aged 39 and has since the divorce been residing with her parents in their own property.

5.  The Husband, now aged 41, came to settle in Hong Kong in 1995 at the age of 22 under the sponsorship of his aunt whom he addresses as his adoptive mother in his evidence with whom he resided until 2001. He has since 1998 been employed as a computer programmer by the Hong Kong Polytechnic University. He now lives in a rented apartment with his parents and the daughter whose custody care and control has earlier been granted to him by this court in these proceedings.      

6.  Going back earlier in time and specifically to November 1998 and some 3 years after the Husband’s arrival in Hong Kong, the said property at Flat 11, 8/F, Block B, Kiu Shing Building, Ma Hang Chung Road, Kowloon (“Flat 811”) was purchased in his sole name for HK$1,660,000 with the assistance of a mortgage loan of about HK$1 million from Dao Heng Bank. As noted above it is his case that the property was bought and paid for by his elder sister including the mortgage payments but was put in his name only so that she could still be eligible to purchase a property later under the Home Ownership Scheme. It is not in dispute that there is no declaration of trust existed at the time of the purchase or anytime thereafter.

7.  In about February 2000 the mortgage for Flat 811 was changed to Yien Yieh Commercial Bank when the sister was made a co- guarantor with the Husband of the new mortgage.   

8.  The Husband and Wife became acquainted in the late 90s and started cohabiting together in 2001 when they purchased a property at Sham Tseng, New Territories (“The Sham Tseng Property”) for HK$2,520,000 in their joint names as tenants in common with the assistance of a mortgage loan of about HK$1,764,000 from Standard Chartered Bank repayable by monthly instalment of HK$12,234 which was shared equally between them, and shortly thereafter they registered their marriage on 20^th January 2002 and made the said Sham Tseng Property their matrimonial home.

9.  After the marriage they continued to work to jointly support the family including the monthly mortgage payments of the former matrimonial home. After their daughter was born on 4^th November 2004, and when the respective grandparents started to get involved in her care which sadly led to increasing conflicts between the parties and ultimately to these divorce proceedings which were commenced in May 2008.

10.  As noted above there were multiple disputes between the parties throughout the proceedings over various issues in particularly with their daughter, but eventually in April 2009 the parties reached an agreement to share custody of the daughter with care and control to the Husband and generous defined access to the Wife. Accordingly an order was made on those terms on 16^th April 2009. Sadly that truce did not last long.

11.  After an unsuccessful FDR hearing and when the parties proceeded to the PTR of their ancillary relief application, during which the parties accepted that since both were then earning similar income of more than HK$30,000 per month, there should be a clean break between them upon an equal division of their marital assets, in which the issue was whether the Husband’s alleged interest in Flat 811 should be included, and whether the Wife should contribute towards the maintenance of their daughter.

12.  However, before the ancillary relief application could proceed to trial, the Wife in February 2011 launched an application for variation of the said custody order, alleging that the Husband and paternal grandfather had sexually abused the daughter, and therefore sought her sole custody care and control. Given the nature and severity of the Wife’s allegations, and there were many, that application took almost 2 years to conclude during which both the police and Social Welfare Department also held their own investigations with the same conclusion that it was not an abuse case.     

13.  On 17^th December 2012 this court delivered its judgment after a 2 weeks trial dismissing the Wife’s application after finding that the Wife had fabricated all her allegations against the Husband with the ulterior motive to gain an upper hand or advantage in her claim for a bigger share of their assets, and penalised her with costs on indemnity basis.  

14.  This finally brought the question of ancillary relief to trial, with the Wife still disputing the Husband’s case that he was holding Flat 811 in trust for his sister and insisting that his interest therein be included in the marital pool for equal division. As for his claim for her contribution towards the daughter’s monthly expenses, the Husband has by then abandoned his application, hence the trial just proceeded with that single issue, during which both parties appeared in person and gave evidence as well as the sister as the Husband’s witness.

15.  By then their former matrimonial home had already been sold with the net sale proceeds of HK$4,953,505 paid into court pending the outcome of the trial, but from which each has earlier been allowed to withdraw HK$250,000 for their immediate use, with the balance now stands at about HK$4,453,505 in court.

Applicable Principles

16.  As noted above there is no dispute between the parties on the division of their marital assets under the principles set out by the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537, and as for the issue of the alleged trust over Flat 811, it is suffice to just state well established law that where on a purchase a property is transferred into the name of someone other than the purchaser, the trust of a legal estate results to the person who advances the purchase money, giving rise to a resulting trust by operation of law to give effect to a presumption that the transferor did not intend the transferee to take the property beneficially. This presumption of resulting trust may however be rebutted either by extraneous evidence that the transferor did intend to make a gift, or by a counter rebuttable presumption of advancement that the transferor  did intend to do so, but where the relationship between the transferor and the transferee is not such as to raise a presumption of advancement, the presumption of resulting trust will operate so that the transferor retains beneficial ownership if there is no evidence of the actual intention of the actual intention of the transferor: Snell’s Equity, 32^nd edition.

17.  Here the presumption of advancement does not arise between the sister and the Husband, and as the Wife does not argue that the sister has gifted Flat 811 to the Husband, hence it is a straight forward case of whether the presumption of resulting trust applies to the purchase of Flat 811, as set out below.  

The Issue

18.  The single issue for the court’s determination by way of facts finding is whether the Husband has or has had any beneficial interest in Flat 811, and in the absence of any proper declaration of trust, the burden of proof is on him, on balance of probabilities, to show that all the funding for the purchase of the property did not come from him but instead from the sister, and that as a result there was a resulting trust in her favour, as it is never the Wife’s case that the sister paid for the property as a gift to the Husband, nor is there any attempt on her part to try to advance such a presumption to exist between siblings.

19.  Given however that the material events during which the property was purchased and dealt with had taken place between 10 and 15 years ago and the understandably unavailability of many of the relevant documents, unlike in that earlier trial of the Wife’s application for variation of custody of their daughter, this trial essentially boils down to the credibility of the Husband and his sister, hence whatever this court had said or found about the Wife’s credibility at that earlier trial, it has by and large no direct relevancy to my determination of that single issue in the present application, save perhaps as to what the Husband says of her motive in bringing Flat 811 into the marital pool for distribution, of which no doubt I will have more to say later at the conclusion of my judgment, but for now I shall proceed to consider the evidence of the parties, starting with the Husband’s.     

The Husband’s Case

20.  The Husband’s case has been set out in several of his affirmations, firstly on 23^rd January 2010 and 18^th November 2010,  and more recently on 7^th May 2013 and 25^th October 2013, which can be summarised as follows:

(a) Upon his graduation from university in China in 1994, he came to settle in Hong Kong in March 1995 to join his elder sister who had come to Hong Kong earlier in 1991 to stay with their aunt at her property at Flat 306 in the same Kiu Shing Building;

(b) 2 months later in May 1995 he found his first job at the computer department of Hong Kong News Association Hong Kong Branch earning a monthly salary of HK$8,000, which was later raised to HK$9,785 in 1996 and HK$10,545 in 1997, from which he would contribute at least HK$5,000 per month to his aunt for his room and board expenses at her place;

(c) In April 1997 he changed his job to work for Hong Kong Polytechnic University as a computer programmer at a much higher salary of HK$16,000 per month, which was increased to HK$17,000 by 1998 when his sister decided to purchase Flat 811 for her own growing family including a new born child and her domestic helper;

(d) As his sister wanted to preserve her eligibility to purchase a property under the Home Ownership Scheme, he therefore agreed to purchase Flat 811 in his name only in trust for her, and that she was the one who paid for the down payment and all the costs and expenses for the purchase from her own savings and financial assistance from their parents and the aunt, as well as the subsequent mortgage repayments of some HK$9,400 per month;

(e) He insists to have absolutely no beneficial interests in Flat 811 as at that time he neither had the need to purchase his own home for himself as he was still single, nor the financial means to do so, at least not for that kind of down payment and expenses of almost HK$700,000, as he had only just changed his job to Polytechnic University for a higher pay and could not have saved up much money;

(f) In February 2000 his sister decided to speed up her mortgage repayments by switching her mortgage to Yien Yieh Commercial Bank, but as his then income could not meet the bank’s requirements, her sister therefore joined in to become a co-guarantor of the new mortgage, the monthly repayments of which again were all paid by her;

(g) In April 2001 he and the Wife decided to move in together and to jointly purchase the said Sham Tseng property for their cohabitation, for which it was agreed that they would be equally responsible for the down payment, but as the Wife did not have sufficient fund at that time, he therefore contributed about HK$517,000 while the Wife contributed HK$317,000 towards the down payment, the purchasing costs and expenses as well as renovation and furnishing expenses totalling over HK$834,000, with the Wife agreeing to repay him her shortfall of HK$100,000 later, while the monthly mortgage payment of HK$15,600 would also be shared equally by them. As a result he moved out of his aunt’s place to cohabit with the Wife in the said Sham Tseng property, which later became their matrimonial home when they registered their marriage the following year on 20^th January 2002;

(h) In early 2003 his sister’s husband who was a doctor in China arrived in Hong Kong to reunite with his sister and found a job at the Hospital Authority, and with their combined income his sister was no longer eligible under the Home Ownership Scheme, hence she gave up on her plan to purchase under that scheme and asked him to transfer Flat 811 back to her, which he did in June 2003, but they were advised by the solicitors that to enable the sister to apply for a new mortgage, it was necessary to treat the transfer as a genuine transaction with proper consideration for which it was suggested that HK$1 million would be an appropriate figure taking into account of its then market value, which was of course never actually received by him;

(i) He could not have been able to afford that property in the first place, let alone to own it together with their matrimonial home at the same time from 2001 to 2003 which was financially impossible, of which the Wife all along well knew, but in order to achieve her ulterior motive to get a bigger share of the sale proceeds of their former matrimonial home, in particularly after she had been ordered to pay him substantial costs on indemnity basis for the earlier custody trial, she was prepared to do anything to twist the truth and to tell all sorts of lies against him, as she had done in that custody trial;                          

21.  The Husband also claims that the Wife has never repaid him the shortfall of her half share of the purchase price of their former matrimonial of HK$100,000, for which he is prepared to ignore but she has also stopped paying her half share of the monthly mortgage payments, the management fees and the quarterly rates and government rent since 20^th December 2012 after the court’s dismissal of her custody variation application, and which had been paid by him on her behalf totalling HK$57,121.84 and should be repaid to him from her share of the sale proceeds made up as follows (Exhibit “R-2”):

(a) Her share of mortgage payment from December 2012 to May 2013 (6 months) at HK$7,826.14 per month = HK$46,956.84;

(b)Her share of the management fees during that period = HK$8,045.00;

(c) Her share of the rates and government rent during that period = HK$2,120.00.    

The Sister’s Evidence

22.  The Husband’s case is essentially corroborated by his sister’s evidence contained in 2 affirmations, first on 2^nd July 2010 and later on 24^th October 2013, in which she gave a detailed background of events leading to the purchase of the property in the Husband’s name and later transferred to her which can be summarised as follows:

(a) Upon graduating from college in China, she went to work for Bank of China before settling in Hong Kong in January 1991 to reside with her aunt whom she addresses as adoptive mother at her home at Flat 306 of the same Kiu Shing Building;

(b) She then held various jobs in Hong Kong starting from being a clerk at Yien Yieh Commercial Bank earning HK$4,000 per month in 1991 to a department manager of a private company earning HK$16,800 per month in 1997 when she married her husband who was a doctor then working in a hospital in China;

(c) In 1995 when the Husband was allowed to settle in Hong Kong, he also came to stay with her at the aunt’s home, and after he had found a job, he would pay several thousand dollars per month to their aunt for his room and board expenses;  

(d) In 1998 she gave birth to her daughter and had to hire a domestic helper to take care of the child while she worked, and hence she found it too crowded at Flat 306 and started looking for alternative accommodation for her own family, while waiting to become eligible for the Home Ownership Scheme which would normally take years. When Flat 811 on the same building became available and while at HK$1,660,000 it appeared too expensive for her, she decided to purchase it as it was close to her aunt’s place by getting financial assistance from her family for the down payment;

(e) To fund the purchase she obtained a mortgage of about HK$1 million from Dao Heng Bank, and used her savings of almost HK$500,000 plus HK$100,000 from her parents and HK$100,000 from her aunt to meet the balance of the purchase price of HK$660,000 as well as the legal costs and agency commissions;

(f) To preserve her eligibility under the Home Ownership Scheme, she therefore asked the Husband to be the registered owner of Flat 811in name only,  and that she was to be solely responsible for the monthly mortgage repayment of HK$9,400, but with the additional expenses of raising her child including the costs of the domestic helper, she soon found it difficult to manage her budget, and having discussed with her family and the aunt, the latter agreed to help ease her financial burden by requesting the Husband to instead pay his monthly contribution for his room and board into the sister’s mortgage repayment account until her financial means improved;

(g) Upon the purchase she then moved out of Flat 306 with her daughter and domestic helper into Flat 811. By February 2000 as her income had improved, she decided to speed up the mortgage repayments by asking the Husband to change the mortgage loan to Yien Yieh Commercial Bank at a higher repayment rate, but as his then income was not high enough to satisfy the bank’s requirement by himself, she was therefore joined in the mortgage loan as a co-guarantor for the mortgage repayments, and again it was she who made all the new mortgage payments;

(h) By July 2003 her husband had joined her in Hong Kong and found a job working for the Hospital Authority, and as their combined income would have made them ineligible for Home Ownership Scheme, she decided that the legal title of Flat 811 should be transferred back to her, but she was advised by solicitors that to do so it was necessary to state the consideration at HK$1 million and used it to discharge the outstanding mortgage, hence she used her savings and also borrowed from her family to discharge the mortgage before the property was transferred to her, whereupon she obtained a new mortgage and repaid her family. She insists that she has never paid any money to the Husband for the transfer.                                 

23.  In addition, she claimed in her evidence that her aunt did inform the Wife about this arrangement between her and the Husband over Flat 811 after their marriage, that the Wife had accepted this as her own family’s arrangement and never raised any question about this property throughout the marriage until these proceedings, for which she could not imagine why except that it was part of  her plot to get a bigger share of her marital assets with the Husband.

The Wife’s Case

24.  The Wife does not dispute that whatever arrangement the sister may have with the Husband over Flat 811 at the time of its purchase was before she had even met the Husband and therefore not within her personal knowledge, but she denies ever been told by anybody during the marriage that the Husband was merely holding the property in trust for the sister, and that in any event she challenges the Husband’s assertion that he was holding it in trust for his sister essentially on the following 3 main grounds based on what I can make out of her rather convoluted and confusing affirmation of 11^th October 2013, and ignoring those many other obviously irrelevant points:

(a) By allowing himself registered as the legal owner of Flat 811 with the intention of holding it in trust for his sister, the Husband was in effect giving up his own chance of becoming  eligible under the Home Ownership Scheme which she argues as both unreasonable and suspicious;

(b) Notwithstanding the onus was on him, the Husband has failed to provide all or sufficient documentary evidence to show that all the purchase price and mortgage payments either did not come from him, or that they came from his sister as alleged;

(c) She believes the Husband did at the time of the purchase have the means and ability to pay for the property, as he had told her that he was then earning more than HK$30,000 per month.       

25.  In her said affirmation the Wife also referred to various legal principles such as her understanding of those concerning legal ownership, property and mortgage, which is clearly not correct in many areas but given it was obviously made on layman terms, and since I have already set out the correct law above, I do not propose to deal any more with those other points of hers which I find irrelevant.

Discussion

26.  As noted above there was no declaration of trust that the Husband was holding Flat 811 in trust for his sister, the court must therefore consider whether there is any evidence to indicate or suggest that the funding came from the sister, and failing which whether the Husband could have the means to purchase the property.

27.  In support of his case that it was his sister who paid for the purchase of the property, the Husband has exhibited to his affirmations of 23^rd January 2010 and 18^th November 2010 copies of bank records of various payments by his sister for the down payment and other expenses ancillary to the purchase as well as the monthly mortgage payments, and those produced at the trial (Exhibits R-1a and R1b), which understandably may not be the complete record of all the payments given the long lapse of time of those events, but nevertheless quite clearly show that many of them came from the sister, or at least not come from the Husband. 

28.  If they were not enough to convince the Wife that the funding for the purchase came from the sister, then the next obvious question must be whether the Husband had had the means to do so. Since there is no evidence to suggest that he had brought large sums of cash with him when he came to Hong Kong in 1995, or that he had other financial resources or had resorted to borrowing, the only logical basis which the Wife could rely on must be that the funding came from his income earned upon settling in Hong Kong.        

29.  However, on the evidence before the court, even if the Husband were to do the impossible of not spending a single cent of his income on his living expenses by saving up all his income during the intervening 3 ½ years from May 1995 when he found his first job earning HK$8,000 per month to November 1998 when he was making HK$17,000 per month at the time the property was purchased, his total accumulated income of no more than HK$500,000 would still come up well short of the HK$700,000 required to meet the down payment and the costs and expenses of the purchase. Taking into account of the reality that he would have to spend the bulk of his income every month to pay for his room and board for staying at his aunt’s home as well as his own personal expenses, it is clear that it could not have been possible for him to purchase Flat 811 at that stage of his career.

30.  If somehow indeed he was able to afford that property, the next obvious questions must be why would he want to buy it after having arrived in Hong Kong for just some 3 years when he already had a place to stay at his aunt’s home, and if it was because he wanted to own his own home, why then did he not move in there himself but remained in his aunt’s home and instead allowed his sister to use it as her home? Even if it were his joint purchase with his sister in the first place, which was never suggested to be the case by the Wife, but let’s assume it were, again why then did he not move in with his sister to share the place with her family? His action after the purchase clearly supports his case that the property had nothing to do with him.

31.  Furthermore, when the parties decided to cohabit together in 2001, if Flat 811 were his property, why did the Husband not reclaim possession from his sister so that he and the Wife could move in, or to sell it to fund their purchase of the Sham Tseng property, as either way would no doubt be the most natural thing to do under the circumstances. Instead, and putting the Wife’s case at the highest, they each had to come up with some HK$400,000 for their Sham Tseng property, which was again clearly something that the Husband could not afford so soon after having paid for Flat 811. On the evidence before the court of his means and income during that period, clearly the Husband could not afford to purchase 2 properties within 3 years.

32.  The Wife claims that she has always thought that Flat 811 belongs solely to the Husband or at least jointly with his sister, in which case one must ask the obvious question: If it were his sole property, why did she find it so suspicious when he transferred it to his sister in 2003 for the stated consideration of HK$1 million, as after all, as pointed out by the Husband, they were then still happily married and there was simply no reason for him to dispose of the property for any ulterior motive?

33.  If on the other hand he were a joint owner with his sister, then there is again no reason for the Wife to suspect any fraudulent intent on his part when he sold his half share in the property to his sister if he desired to liquidate his investment if indeed it was the case. The most that she could argue, and again it was not her case, that he had to account for that HK$1 million, which would certainly not assist her case given the intervening period of more than 10 years during which the money could have all been spent.

34.  There is of course the sister’s evidence which wholly corroborated the Husband’s case. Having seen and heard her in evidence in court, I do not get the impression that she came to court just to help her own sibling or to have any axe to grind against the Wife after all she had done against her family in particularly her father in their custody dispute,  surprisingly without even uttering a single word against the Wife or showing any hostility towards her during her cross-examination, but simply to explain the truth of how and why she bought Flat 811 in her brother’s name and how subsequently it was reverted back to her with nil consideration.

35.  Unlike her brother she clearly at that time had more financial ability to purchase her own property, having come to work in Hong Kong much earlier, and also with joint income from her husband and financial assistance from the family. Above all, and again unlike her brother, she obviously had good reason and in fact the need to purchase her own home for her family of 4. I have no difficulty finding her evidence and explanation about the purchase of Flat 811 sensible, logical and ultimately convincing.

Conclusion

36.  For the reasons explained above, I am satisfied that on the evidence before the court that when Flat 811 was purchased in the name of the Husband, it was for the reason that his sister required it as of necessity for her own growing family and to be held in trust for her, that it was all bought and paid for by her as she had the financial means to do so while he had not, none of which has been properly or validly challenged by the Wife. As a matter of fact, many of their evidence were not even cross-examined or at most barely touched upon by her at the trial.  

37.  In his evidence the Husband maintained that the Wife was in fact all along aware of the fact that Flat 811 belongs to his sister, but still chose to run her case that he has beneficial interests in it for her ulterior motive to gain a bigger share in their former matrimonial home. Given the extents she was willing to go in the parties’ earlier custody dispute, I can see why the Husband would think so, and I agree that she was certainly capable of doing so again here, especially after being penalised by this court to pay substantial indemnity costs to the Husband in that custody trial, I can certainly see the possible motive of trying to recoup back as much money as possible from him in this application, by making use of the opportunity which presented itself, i.e. that Flat 811 happened to be purchased in the Husband’s name, rather than the need to resort to fabricating a case against him as she did at the custody trial.

38.  Either way, she has demonstrated absolutely no credibility in her evidence, but as noted above, on this occasion her credibility was not relevant to the issue before me, but rather that of the Husband, and that of his witness the sister, and for all the reasons discussed above, I have no difficulty coming to my conclusion that both of them have told the truth that he has no beneficial interests at all in Flat 811, and that the only marital asset for distribution between the parties is the sale proceeds of their former matrimonial home, and that as suggested by both parties it should be divided equally between them, subject to certain adjustments to be agreed or argued at a short hearing to be fixed and to be notified to the parties including the question of costs upon the delivery of this judgment.    

 

(District Judge) Bruno Chan