LAI HON TIM v. LAI TSZ NANG WILSON

HCA 744/2018

[2020] HKCFI 2793

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 744 OF 2018

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J U D G M E N T

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1.  This action concerns the beneficial ownership of a landed property known as 12/F, Tower 2 of Cronin Garden, No 2 Po On Road, Kowloon (“Property”), which is registered under the joint names of the Plaintiff and the Defendant (“Wilson”). Wilson is the elder son of the Plaintiff.

Background

2.  There is a Statement of Agreed Facts which had been filed pursuant to the directions of this court.  Much of the background facts are uncontroversial and can be found in that Statement and the unchallenged evidence of the Plaintiff. 

3.  The Plaintiff is an indigenous person of Lamma Island.  He was a police officer before he retired from the service in 1997 at the rank of Sergeant.  Before his retirement, he was residing in police quarters with his wife and 3 children – eldest daughter (“Anna”), Wilson and the youngest son (“Wallace”).  Both sons were educated in England. 

4.  In 1994, the Plaintiff was approaching his retirement (he would retire at the age of 55 and he was not yet 53 at the time) and he had to look for accommodation for himself and his family because he would have to vacate the quarters upon retirement.  His position as a civil servant entitled him to take advantage of opportunity to purchase a property from the Housing Authority under the Green Form scheme.  In addition, he could apply for financial assistance from the Government for the purchase. Accordingly, he decided to purchase a property in Cronin Garden which was being built by the Housing Authority. 

5.  At the time, Wilson had returned to Hong Kong after completing his undergraduate studies (mathematics and management) in England.  He lived with his parents and Anna (Wallace was studying in England) at his father’s quarters.  Wilson had begun his working life as a sales person.

6.  I shall refer to the parties’ respective case below on why the Property was acquired in the name of the Plaintiff and Wilson.  For the present purpose, I shall confine to the uncontroversial background.

7.  The Provisional Sale and Purchase Agreement of the Property was signed on 24 May 1994.  Certain down payments were made by the Plaintiff at around that time. 

8.  On 4 July 1994, by a Formal Sale and Purchase Agreement, the Plaintiff and Wilson contracted to buy the Property at a consideration of HK$2,084,000.  Before signing the Formal Agreement, on 28 June 1994, the Plaintiff and Wilson obtained a Mortgage Loan from Hang Seng Credit Ltd (“Bank”) to finance the transaction.

9.  In August 1995, by an Assignment, the Property was registered in the names of the Plaintiff and Wilson as joint tenants.

10.  The Mortgage Loan was repaid by, inter alia, monthly government subsidies from September 1995 to April 1997 in the form of Home Purchase Allowance which was obtained by the Plaintiff as a police sergeant, and a Government Loan obtained by him under the applicable Civil Service Regulations in May 1997.  A lump sum pension was granted to the Plaintiff after his retirement in late 1997, which was used to repay the Government Loan.  The acquisition of the Property was entirely financed by the Plaintiff. 

11.  A few years after the acquisition of the Property, in around 1999, Wilson moved out from the Property due to his marriage and for which purpose he had acquired a property of his own (“Grace Court”).  Wilson has not lived with his parents ever since.  He was given a sum of HK$400,000 by his father for the purchase of Grace Court.  The parties disagree on whether the sum was a loan or a gift.

12.  There were a number of other transactions which are relied upon by Wilson in this case (see below).  The facts concerning those transactions are not in dispute, but the relevance of the same is in issue. 

13.  On 30 July 1992, whilst Wilson was at university in England, the Plaintiff transferred a piece of land known as the Remaining Portion of Lot No 1575 in DD3, Lamma Island (“Lot 1575”) to his elder son at a nominal consideration of HK$1. 

14.  In about 2004, a small house known as No 43A, Yung Shue Wan Back Street, Lamma Island (“43A”), was built on Lot 1575.  The permission to build 43A was obtained by relying on Wilson’s Ding right.  However, like the Property, the building of 43A was entirely financed by the Plaintiff. 

15.  As mentioned in para 11 above, in 1999, the Plaintiff gave his elder son a sum of HK$400,000 to pay for the deposit of a matrimonial home which was acquired for his first marriage.

16.  In 2004, when Wilson started a pet shop business in Shamshuipo, the Plaintiff gave him a sum of HK$200,000.

17.  Later, when the pet shop moved to Camp Street, the Plaintiff again gave HK$50,000 to Wilson.

18.  In 2009, when the pet shop moved to Castle Peak Road, Plaintiff gave another HK$100,000 to Wilson.

19.  In September 2016, upon the Plaintiff’s request, Wilson agreed to sell one floor each of 43A to his brother and sister at the prices of HK$2,000,000 and HK$1,800,000 respectively.  The ground floor and garden were assigned to Wallace, whereas the 1^st floor was assigned to Anna.  However, neither the brother nor the sister had made any payment to Wilson for the property.

20.  In 2017, in a series of properties transactions, the Plaintiff transferred and procured the transfer of various landed properties to Wallace :

(1)  On 3 January 2017, the Plaintiff assigned RP of Lot No 415 in DD3, Lamma Island to Wallace;

(2)  In February 2017, upon the Plaintiff’s request, Anna transferred the 1/F of 43A to Wallace; and

(3)  On 9 June 2017, the Plaintiff assigned an the Ancestral House at Lot No 1935 in DD3, Lamma Island to Wallace.

21.  On 10 September 2017, there were 2 meetings at Wilson’s pet shop which took place in receptively the morning and afternoon (“Meetings”), it is common ground that the exchange of Wilson’s ownership of the 2/F of the 43A (to be transferred to Wallace) with the Plaintiff’s interest in the Property was the subject matter of the Meetings. However, there is much controversy concerning the other aspects of those Meetings, which the Plaintiff says is irrelevant to the issues in these proceedings.

Plaintiff’s case

22.  The Plaintiff’s case is that the Property was intended to be used as the retirement home for himself and his wife for an indefinite period of time. 

23.  The Plaintiff needed a mortgage to purchase the Property.  For that purpose, he was given to understand by the Bank that he needed one of his children to become a co-mortgagor because he was approaching retirement age. 

24.  Therefore, the Plaintiff told the Defendant that it was difficult for him to secure a mortgage to finance the purchase of the Property, and the Defendant’s name had to be added as a co-owner of the Property and a co-mortgagor to satisfy the requirement of the Bank.  The Defendant confirmed his agreement with the arrangement, upon the mutual understanding and agreement that the Property would in fact be entirely owned by the Plaintiff as the purchase would be entirely funded by the Plaintiff. 

Defendant’s case

25.  Wilson disputes the existence of the alleged discussion between him and his father.  His case is that he was told by his father that the Property would be held by them jointly as he was the elder son of the family, and his father intended to leave the entire interest in the Property to him after he passed away. 

Issues

26.  There is a List of Agreed Issues filed pursuant to the directions of this court.  The one agreed issue is a factual question: “… whether the Plaintiff and the Defendant had by express agreement commonly intended that the Property would be purchased with the arrangement that the Defendant’s interest in the Property would be held on a constructive trust for the Plaintiff”. 

27.  As I understand it, the constructive trust is the legal effect of the arrangement between the father and son.  This factual question is the heart of the dispute in these proceedings.

28.  I do not believe that in deciding the agreed issue the court will have to resort to the presumption of resulting trust and presumption of advancement respectively contended by the parties: see Primecredit Ltd v Yeung Chun Pang [2017] 4 HKLRD 327, §1.3. 

29.  The issues of estoppel and lack of clean hands had been abandoned by Wilson. 

Law

30.  In Re Yip Yam Yu Alex [2019] HKCFI 75, Au-Yeung J had summarised the principles of common intention constructive trust as follows :

(1)  A constructive trust arises in connection with the acquisition by one party of a legal title to property whenever that party has so conducted himself that it would be inequitable to allow him to deny to another party a beneficial interest in the property acquired.  Detriment remains a requirement (§43);

(2)  Common intention constructive trust arises in two situations.  First, where at any time prior to acquisition, or exceptionally at some later date, there was an agreement, arrangement or understanding reached between the parties on how the property was to be held beneficially.  Second, where there is no evidence to support a finding on an agreement or arrangement on beneficial ownership, and the court must rely entirely on the conduct of the parties to infer a common intention on the beneficial ownership and as the conduct giving rise to a constructive trust. In such a 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 (§44, citing Primecredit, supra).

31.  Whilst the presumption of resulting trust has over the past decades gradually given way to the modern approach of ascertaining the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct relating to the property, the resulting trust approach has not been completely emasculated by the common intention constructive trust principles (§§43 and 45).

32.  There is disagreement between the parties on whether acts and/or declarations made in recent years may be admissible in proving the intention of the father and son at the time of acquisition of the Property.  On behalf of the father, Mr Law (with Mr Ho) submitted that such acts or declarations may only be admissible as evidence against the party who made them, and not in his favour, citing Snell’s Equity, 34^th edn, [25-013].  On the other hand, Mr To, who appeared with Ms Kung for Wilson, relies on the following passage in the said citation:

“The preferable approach nowadays may be to treat the parties’ subsequent conduct as admissible even in their own favour, and to leave the court free to assess its probative weight. This approach would be consistent with the looser significance attached to the presumption of resulting trust and of advancement in the modern authorities.”

33.  For the purpose of resolving disputed evidence, inherent probabilities based on uncontroversial or incontrovertible surrounding circumstances are of primary importance: see Primecredit, §1.4.

Witnesses

34.  The Plaintiff gave evidence and called as witnesses his wife and Wallace.  Wilson was the only witness for his case.

Credibility of the witnesses

35.  The factual issue here depends primarily on the evidence of the father and son.  According to the Plaintiff and his wife, the latter was present at the discussion between the father and son.  To that extent, the wife’s evidence is relevant.  Wallace was in England at material time.  The evidence outside the agreement reached between the Plaintiff and Wilson back in 1994 is, at best, of questionable relevance and/or probative value.  This reservation applies to much of the mother’s evidence and the entirety of Wallace’s evidence. 

36.  The Plaintiff was 78 years old at the time of trial.  The court was informed that he had an operation recently.  He clearly was not a fit elderly man.  His movement was slow.  He started his evidence early in the morning.  In the afternoon, the Plaintiff appeared tired and less focused in the witness box, and he clearly had difficulty following the questions in cross-examination. 

37.  There were 2 areas of the Plaintiff’s evidence which I find unsatisfactory.  Firstly, in relation to the transfer of the 1/F of 43A to Wallace by Anna at his request (the undisputed evidence of the Plaintiff was that there was a consensus between him and Anna that if she did not have any children the property would be returned to one of descendants who carried the surname Lai), the Plaintiff was ambiguous as to the beneficial ownership of the property.  He first said that Wallace helped him to look after the property, and later said that it was not held on his behalf and that Wallace wholly owned it. 

38.  When he was asked in cross-examination whether he agreed with Wallace’s statement contained in his witness statement that the property was held on behalf of his father and that he might inherent it in the future, the answer given was that the property was not held on his behalf as it was transferred to Wallace.  When pressed further, the Plaintiff then agreed that Wallace’s statement was correct.  He went on to agree with the cross-examiner that for properties distributed or gifted to his children the beneficial ownership of the same remained with him because they were built and funded by him.

39.  The evidence may suggest that the Plaintiff might not have a clear distinction in his mind between an outright gift and a property held on his behalf even though it was transferred to another person. On the other hand, the Plaintiff’s evidence that 43A was held on his behalf is consistent with his evidence that he would use 43A for rental income during his life time.  Indeed, the undisputed evidence is that the Plaintiff had been receiving all the rental income from 43A.  The only exception is that the rent of the 2/F had been received by Wilson since November 2017 (see para 63 below).

40.  Secondly, the Plaintiff’s evidence concerning the discussion with Wilson over the purchase of the Property was unsatisfactory because: (a) such evidence is not entirely consistent with his pleading; (b) when he was asked how he told his son to hold the Property on trust for him, he started the answer with “I can’t remember …”; (c) there was no mention in his witness statements of the presence of his wife; and (d) his evidence did not come out in a simple answer. 

41.  On the other hand, this part of the cross-examination took place in the afternoon when the Plaintiff was, visibly, getting more and more tired with the large number of questions over details of events which took place many years ago.  I agree with Mr Law’s submission that the Plaintiff was confused over the concept of trust which was deployed in the questions put to him. Indeed, at one point the Plaintiff said that he wanted to know what the cross-examiner meant by “holding on trust”.

42.  It must also be borne in mind by the court that the discussion between the father and son took placed some 26 years ago.  It was only to be expected that the Plaintiff would have difficulty recalling the details of the event.  For instance, he was unable to recall when the discussion took place (save that it took place before the purchase of the Property) or where they were at the time of discussion.

43.  However, the Plaintiff maintained firm in cross-examination that he told Wilson that the Property was purchased as the retirement home for him and his wife.  Due to the bank’s refusal to grant a mortgage for the purchase, Wilson’s name would be included for the purchase as it was required by the bank.  The Property was not gifted to Wilson.  It was held by him on behalf of the Plaintiff.  The Plaintiff thought that he could at any time ask Wilson to transfer the Property back to him.

44.  Despite the above reservations, it will be seen below that the inherent probabilities are clearly in favour and supportive of the Plaintiff’s case.

45.  The Plaintiff’s wife was 71 at the time of trial.  She was a housewife and had received limited education.  Although she showed annoyance with the cross-examination, which covered many details of events long passed and with which she had difficulty remembering, she made a good impression as a witness.  I see no obvious fragility in her evidence. 

46.  Wallace’s demeanour in the witness box demonstrated that he had a fiery personality.  He was a combative witness. However, his evidence is of little relevance. 

47.  Wilson was a poor witness.  His evidence must be assessed in light of the fact that he is a sophisticated person.  However, there were long embarrassing silences on his part in the course of his evidence in cross-examination.

48.  In respect of the most important part of Wilson’s evidence, the discussion he had with his father regarding the purchase of the Property, Wilson’s evidence was that before signing the Provisional Sale and Purchase Agreement for the Property his father said to him that he would add his name to the purchase because Wilson was the eldest son and would inherit the Property when his father pass away, so the father wanted to add his name. 

49.  Wilson said that his father only told him once about adding his name.  The conversation took place whilst they were on the way to the Housing Authority to make a choice of the property to be purchased. 

50.  Wilson was cross-examined on para 26 of his witness statement dated 21 February 2019, which stated as follows:

“樂年花園以聯權共有的業權 (俗稱長命契) 登記在父親和我的名下的原因是因為父親曾經告訴我，作為家庭的長子，他是想該物業在他百年歸老之後給我 (全權擁有) 的。”

51.  When Wilson was asked whether there was any discussion about the mother, he said that his father had a habit of referring to “he (他)” when in fact he meant “they” [both passed away].

52.  Wilson was then asked to tell the court what was said to him to the best of his recollection.  In response, he said that: “I was the eldest son of the family.  He intended to include my name.  He thought that when he and mother pass away the Property would be passed to me.”

53.  Wilson was confronted by the cross-examiner that there was no reference to the mother anywhere in the documents filed on his behalf with the court.  To that question, there was a long silence. Eventually, Wilson agreed with the suggestion made to him to move onto the next question. 

54.  Whilst the court would bear in mind that the discussion took place many years ago and it is natural that witnesses would have difficulty in remembering the details, Wilson’s suggestion of loose language by his father contradicted his own evidence that mother was mentioned in the conversation.  Such evidence provides little confidence to the court. 

Analysis

55.  The material circumstances were as follows.  The Plaintiff was not yet 53 years old but he would retire in less than 3 years. Upon retirement, he and his family would have to move out of the quarters in which they had been residing for many years.  As a 52 years old serving officer, although pass his physical peak, he must be a fit and healthy man. His wife was only about 45 years old.  In all likelihood, the Plaintiff was looking forward to having more time for himself and his family.  Further, in the words of Wilson, the Plaintiff never had financial problem.  The Plaintiff was likely looking forward to a leisurely retirement for many years to come.  I do not believe that a person in such position would be thinking about the distribution of his asset when he passed away.  

56.  The Plaintiff needed a post-retirement home. Anna was 26 at the time and Wilson was 23.  They were both working and had a boyfriend and girlfriend respectively.  Given his traditional thinking, more likely than not the Plaintiff was expecting his children to get married and have families of their own.  Therefore, the property he was looking to buy would primarily be the home for him and his wife. 

57.  The fact that the Plaintiff obtained a mortgage for the purchase is not open to doubt.  Wilson agreed that his father had told him about getting a mortgage, although he was not told about the details.  The Plaintiff’s evidence that the Bank required one of his children to co-own the Property and thus became one of the mortgagors is inherently probably bearing in mind that the Plaintiff was about to retire and the mortgage term was 20 years. 

58.  There were much criticisms made on behalf of Wilson over the Plaintiff’s decision to mortgage the Property.  Such criticisms are difficult to understand because it was an undisputed fact.  Further, the Plaintiff’s evidence was that he would not have received a monthly subsidy under Government’s Home Purchase Scheme if there was no mortgage (the subsidies were used to pay off part of the mortgage instalments).

59.  In these circumstances, the inherent probabilities are plainly in favour of the Plaintiff’s case.  It is common ground that the father and son had a mutual understanding about the ownership of the Property.  I find that the Plaintiff did not have any intention of giving Wilson any beneficial interest in the Property.  Wilson knew, as he was told, that his name had to be added for the purchase due to mortgage requirement and he understood that the beneficial interest in Property would belong to his father entirely. 

60.  I do not find that the moneys given to Wilson by the Plaintiff over the years are of assistance in resolving the beneficial ownership of the Property.  Clearly, despite the Plaintiff’s evidence that he did not have a close relationship with Wilson, he loved him and was happy to assist him financially when there was a need.  Even if these were gifts (I am inclined to accept the Plaintiff’s evidence that these were loans, although he made no stipulation to his son as to when they should be repaid and had made no demand for repayment), I am unable to see why they render it more likely for the Plaintiff to gift half of his retirement home to Wilson in 1994.

61.  Equally, I find no real assistance in respect of what was or was not said during the Meetings by the family members.  It is plain from the transcript that they were unhappy incidents where heated exchanges were made.  There was an undercurrent of tension between the 2 brothers due to the discovery by Wilson that much of his father’s assets had been transferred to Wallace.  I am unable to understand why things said in such circumstances can shed any light on an event which took place 23 years ago.

62.  For completeness, firstly, the high watermark of this part of Wilson’s case is the reference by his father to a choice given to him, ie, he could choose between the 2/F of 43A and half of the interest in the Property[1]. Thus, implying that Wilson already owned half of the interest in the Property. In this regard, the Plaintiff’s explanation was that he intended to pass the entire interest in the Property to Wilson for the exchange but given that his son already held 50%, he only needed to pass the remaining 50% to him.  Such explanation, in the context of the Meetings, is neither inherently improbable nor unreasonable.

63.  Secondly, it should be mentioned that the evidence of what was said during the Meetings is a double-edged sword.  If it were relevant to evaluate what was said by the Plaintiff, the court would have to do likewise in respect of what was said by Wilson[2], which the Plaintiff contends to be inconsistent with Wilson’s case.

64.  It is clear that after the Meetings, the relationship in the family had broken.  After sending a solicitors’ letter to his father, Wilson began to receive the rent for 2/F of 43A.  The writ in this action was issued on 3 April 2018.

Disposition

65.  For these reasons, judgment is given in favour of the Plaintiff.  I grant the declaration and transfer order sought in paras (1) and (2) of the Statement of Claim herein.  I make an order nisi that the costs of this action be paid by the Wilson.  I decline the request for a certificate of 2 counsel because the case is relatively straight forward. 

66.  I am grateful for the assistance provided by counsel.