LEE KIN WAI v. LEE KIN CHUEN AND ANOTHER

HCA 212/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 212 OF 2014

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J U D G M E N T

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Introduction

1.  This case is all about a flat in Sai Wan Ho.  The dispute relates to who beneficially owns it.  The outcome of the case turns on what was agreed at the time.  The facts of the case are therefore important, and I trust that I will be forgiven for going into them in some detail.  First, though, it is necessary to set the scene with an explanation of who the parties are and their respective claims.

2.  The Plaintiff, Lee Kin Wai, and the 1^st Defendant, Lee Kin Chuen, are twin brothers.  The 2^nd Defendant, Cheong U Chan, married Lee Kin Chuen in 1993.  They had a son who was born in June 1996.  Unfortunately their marriage did not last.  They separated in December 2011. Cheong U Chan filed for divorce in December 2013, and the decree absolute was pronounced in August 2015.  For ease of reference, I shall refer to them all from now on by the given names. 

3.  The flat in question was registered in the names of Kin Chuen and U Chan.  Kin Wai says that Kin Chuen and U Chan hold the flat for him on a constructive trust, and that he is the sole beneficial owner of the flat.  Kin Chuen says the same thing.  U Chan claims that she and Kin Chuen hold the flat on a constructive trust in favour of all three of them, and that the flat is beneficially owned by the three of them in equal shares.  In this action, Kin Wai claims a declaration that he is the sole beneficial owner of the flat and seeks other relief.  Kin Chuen does not defend that claim, but U Chan does.  She counterclaims for a declaration that the flat is beneficially owned by the three of them in equal shares.

The law

4.  The applicable law is not in dispute.  There is a presumption that the beneficial title to land follows the legal title, unless that presumption is displaced by the evidence.  Both Kin Wai and U Chan seek to displace that presumption, and the burden of proof is therefore on each of them to establish their respective cases.  The things which a plaintiff must prove in a case such as this has been concisely summarised by Godfrey Lam J as follows:

“ ... (a) 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; (b) the plaintiff altered his position in detrimental reliance upon such common intention; and (c) it is unconscionable for the defendant to assert ownership in reliance on her legal title to the Property.”[1]

He added that this common 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 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.”[2]

5.  It is necessary to add two things to that.  First, this is a case in which all parties say that there was an express agreement about the beneficial ownership of the property.  That does not mean, though, that the conduct of the parties before or after that agreement becomes immaterial.  As Godfrey Lam J went on to say, in such a case, the parties’ “conduct remains relevant as a matter by reference to which their assertions about the agreement...must be gauged and tested”.[3] In deciding what was agreed, you adopt what Johnson Lam J (as he then was) has described[4] as “a holistic approach...by undertaking a survey of the whole course of dealing between the parties and taking account of all conduct which throws light on the question ...”[5]  Although he said that in the context of how you ascertain the parties’ common intention in a case where there was no express agreement, what he said applies with equal force to how you test the parties’ respective cases about what the terms of any express agreement were.  

6.  Secondly, in 1990 the House of Lords noted that

“...direct contributions to the purchase price by the partner 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...it is at least extremely doubtful whether anything less will do.”[6]

Things have moved on since then, especially in the domestic context.  As Lady Hale has said:

“In law, ‘context is everything’ and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties’ true intentions.”[7]

Lady Hale went on to set out some of those factors.  The ones she identified which are relevant for present purposes are any advice or discussions at the time of the purchase which cast light on the parties’ intentions then, the reasons why the property was acquired in joint names, the purpose for which the property was acquired, how the purchase was financed (both initially and subsequently), how the parties arranged their finances, and how they discharged the outgoings on the property and their other household expenses.

The relevant facts

7.  The flat in Ap Lei Chau. At the time of Kin Chuen’s marriage to U Chan, Kin Chuen was living in a flat in Ap Lei Chau with his mother, Lam Pui Wan.  The flat was a public rental housing unit.  It was let to Pui Wan.  It is unclear whether Kin Chuen was also a tenant or merely an “authorised occupant” of the flat as a family member, but nothing turns on that.  Either way, it was Kin Chuen who was paying the rent.  Indeed, he was paying “double rent”, ie twice as much rent as would otherwise be payable, since that was what the Housing Authority required when the family income exceeded a certain limit. After her marriage, U Chan went to live in the flat with her husband and mother‑in‑law.

8.  There is disagreement about whether Pui Wan continued to live in the flat in Ap Lei Chau.  U Chan thinks that in 1993 Pui Wan went to live with her eldest son, Lee Kin Sing, to help look after his daughters (who were born in 1993 and 1995), returning to the flat in Ap Lei Chau for festive occasions.  Kin Wai and Kin Chuen say that she remained living in the Ap Lei Chau flat until it was eventually surrendered to the Housing Authority in 1999, although she would stay with Kin Sing on occasions if his daughters needed looking after.  I think it more likely that she remained in the flat in Ap Lei Chau until its surrender.

9.  The flat in Shau Kei Wan.  Following the birth of their son, Kin Chuen and U Chan wanted a flat of their own.  In October 1996, they bought a private flat in Shau Kei Wan.  The price was $1,930,000, and it was purchased in their joint names with the help of a staff loan from the Hang Seng Bank for whom U Chan worked.  Kin Chuen’s evidence was that the down‑payment came from the proceeds of sale of a property he had previously owned, but again nothing turns on that.  The flat was renovated before Kin Chuen and U Chan moved into it in what would have been early 1997.  In the few months between purchasing the flat in Shau Kei Wan and moving out of the flat in Ap Lei Chau and moving into the flat in Shau Kei Wan, Kin Chuen was paying the “double rent” for the flat in Ap Lei Chau as well as paying (with U Chan) the instalments in respect of the mortgage loan they took out to fund the purchase of the flat in Shau Kei Wan.  Once Kin Chuen and U Chan had moved out of the flat in Ap Lei Chau, Kin Wai moved into the flat in Ap Lei Chau and took over the responsibility for paying the rent.  Although he was a family member, he did not become an “authorised occupant” of the flat.

10.  The Home Ownership Scheme.  It is here necessary to say something about the scheme under which the flat to which this dispute relates was bought.  It was the Home Ownership Scheme (“the Scheme”).[8]  The Scheme was introduced to assist people of modest means to acquire their own flat when they could not otherwise afford to do so.  The flat has to be occupied as a home by the applicant (as well as members of his or her family), though a change in the composition of the household is permitted.  The purchase price of such a flat is fixed at a discount, and the conditions for eligibility to purchase a flat under the Scheme are less onerous if the applicant is already occupying a public housing unit, in which case he or she is required to give it up in exchange for the flat under the Scheme.[9]

11.  The agreement to buy a flat under the Scheme.  We come to the heart of the case.  There are many differences between the parties about the arrangements which they entered into in respect of the purchase of a flat under the Scheme, and the first relates to whose idea it was.  Kin Wai says that he floated the idea first.  After moving into the flat in Ap Lei Chau, he decided that he wanted a flat of his own.  It was therefore he who first raised with the others the possibility of exchanging the flat in Ap Lei Chau for a flat under the Scheme, which he would live in and own.  U Chan claims that it was she and Kin Chuen who first thought of exchanging the flat in Ap Lei Chau for a flat under the Scheme.  She did not say in so many words who they initially had in mind as the owner of the flat, but she must have had it in mind for Kin Wai to live there — initially at any rate — since she says that she and Kin Chuen assured Kin Wai that he would have somewhere to live once the flat in Ap Lei Chau had been surrendered.  Either way, although no‑one said so in so many words, I have no doubt that it was the opportunity to acquire a flat at a price which was significantly less than its market value which caused them to decide that if a flat was to be bought, it would be bought under the Scheme and the flat in Ap Lei Chau surrendered.

12.  Whosever idea it was, the suggestion was discussed one day early in 1997 shortly after Kin Chuen and U Chan had moved into the flat in Shau Kei Wan and Kin Wai had moved into the flat in Ap Lei Chau.  It was agreed that an application would be made for a flat under the Scheme, and that if the application was successful, the flat in Ap Lei Chau would be surrendered.  It was also agreed that the application for a flat under the Scheme would be made in the names of Pui Wan and Kin Chuen as they were the tenants or authorised occupants of the flat in Ap Lei Chau and were therefore the ones entitled to make the application as Green Form applicants.

13.  It is common ground that it was also agreed that that the flat to be purchased under the Scheme would be “re‑registered” in the names of Kin Chuen and U Chan.  There is a dispute as to why that was to be done.  U Chan says that it was because she and Kin Chuen were to have an interest in the flat.  Kin Wai says that this could not have been the reason since it was never intended that they would have an interest in the flat.  He says that it made sense for the flat to remain registered in Kin Chuen’s name as he had previously been an authorised occupant of the flat which the new flat was to be exchanged for.  When he was asked why the flat was to be re‑registered in the name of U Chan as well, he said that it was because both she and Kin Chuen had stable jobs and steady incomes, and that it would be easier for them to get a mortgage loan, and a sizeable one at that, than it would have been if the flat had been registered in Kin Chuen’s name alone.  That is what Kin Chuen says as well.  He was working for the MTR Corporation at the time earning about $17,000 a month, and U Chan was earning about $8,000 a month.  Indeed, Kin Chuen says that it was at his suggestion that it was agreed that the flat should be re‑registered in the name of his wife as well as him.  He did not think that it could be re‑registered in Kin Wai’s name because Kin Wai had been neither the tenant nor the authorised occupant of the flat in Ap Lei Chau, and he believed that a flat purchased by a Green Form applicant under the Scheme could only be re‑registered in the name of someone who had been the tenant or authorised occupant of the public housing flat.

14.  The critical difference between the parties relates to who would own the flat and who would be responsible for the initial down‑payment, the mortgage repayments and any other expenses relating to the flat.  Kin Wai says that the flat was to be his home, and although the flat was to be in the names of Kin Chuen and U Chan, he (Kin Wai) was to be the 100% beneficial owner of the flat, and he would be responsible for the initial down‑payment, the mortgage repayments and all the expenses associated with the flat.  Kin Chuen says the same thing.  U Chan, on the other hand, says that the agreement was for the three of them to have an equal interest in the flat, ie that the interest of each of them would be one‑third, even though Kin Wai would be living there.

15.  U Chan’s case on what was agreed about who would be responsible for all the outgoings changed significantly in the course of her evidence.  In her witness statement, she said that the agreement had been that she, Kin Chuen and Kin Wai would all “contribute to the expenses relating to the Home Ownership Scheme flat as and when our respective financial conditions permit”.[10]  It struck me as unlikely that there had not been a more precise agreement about who was going to pay for what, and when U Chan came to be cross‑examined, her position changed.  She accepted, in effect, that it had been agreed that Kin Wai would pay the legal costs of acquiring the flat and any costs involved in applications for mortgage loans, and that Kin Wai would also be responsible for the mortgage repayments until such time as her finances and those of Kin Chuen permitted them to contribute to the mortgage repayments.

16.  The purchase of a flat under the Scheme.  I shall return later to what the terms of the agreement really were, but the flat which was purchased from the Housing Authority under the Scheme pursuant to this agreement was Flat 12, 4^th Floor, Block B, Tung Yan Court, 68 Yiu Hing Road, Sai Wan Ho (“the Flat”).  The purchase price was $1,117,000 compared with its true market value of $2,331,000.  Kin Chuen and Pui Wan were named as the purchasers in the sale and purchase agreement dated 11 April 1997.  Kin Chuen paid the initial deposit of $58,850 from his bank account. Both he and Kin Wai said that such a sum had previously been deposited into Kin Chuen’s account by Kin Wai, but there was no documentary evidence to support that, and they were effectively put to proof that this was what had happened.  Having said that, Kin Wai said that he had tried to get proof from his bank that he had paid the $58,850 into Kin Chuen’s account, but the bank could no longer provide that proof as it had happened so long ago.  As it was, U Chan accepted in her evidence that Kin Wai had paid the initial costs associated with the acquisition of the Flat, and I am sure that he did indeed pay Kin Chuen the necessary sum to enable Kin Chuen to make the initial down‑payment.

17.  In due course, the Flat was “re‑registered” in the names of Kin Chuen and U Chan as had been agreed.  The “re‑registration” took the form of Kin Chuen and Pui Wan nominating Kin Chuen and U Chan as the assignees of the Flat. That was on 22 June 1998, and that nomination was duly approved by the Housing Authority.  Eventually, the legal title to the Flat was assigned to Kin Chuen and U Chan by an assignment dated 22 January 1999, and some time later in 1999 the flat in Ap Lei Chau was surrendered to the Housing Authority.

18.  The Flat was purchased with the help of a mortgage loan of $1,000,000 from the Dah Sing Bank.  The interest rate was 8.375%.[11]  Kin Wai and Kin Chuen both accept that it was U Chan who applied for the loan, though both she and Kin Chuen were named as the borrowers.  That, of course, was consistent with them both being named as the assignees of the Flat.  The balance of the purchase price, after deducting the initial down‑payment and the mortgage loan, came to $124,150 including legal fees of $6,000.  Kin Chuen paid that sum from his bank account.  Again, both he and Kin Wai said that such a sum had previously been deposited into Kin Chuen’s account by Kin Wai, but there was no documentary evidence to support that either, and once again they were effectively put to proof that this was what had happened.  As before, in the light of Kin Chuen’s evidence, I am sure that Kin Wai did indeed pay Kin Chuen the necessary sum to enable Kin Chuen to pay the legal fees and the balance of the purchase price.

19.  I should mention two other matters in this connection.  First, management and other fees amounting to $3,946 were payable on the completion of the assignment.  Kin Wai’s evidence was that he gave this sum to Kin Chuen who paid it over to the management company.  Neither Kin Chuen nor U Chan gave evidence about this, and there is no reason to doubt Kin Wai’s evidence on this topic.  It is entirely consistent with him having paid the initial costs associated with the acquisition of the Flat. Secondly, the Flat was renovated before Kin Wai moved into it.  He says that he paid about $50,000 for the work.  Although U Chan did not know how much was spent on the work, she accepts that the work was done at Kin Wai’s expense.

20.  Where everyone has been living.  Kin Wai moved into the Flat when the renovation had been completed.  He has lived there ever since.  He is still there today.  Pui Wan moved out of the flat in Ap Lei Chau when it was surrendered to the Housing Authority, and went to live with Kin Sing.  As for Kin Chuen and U Chan, they continued to live in the flat in Shau Kei Wan until 2002.  They then decided to rent it out, and they went to live in a flat belonging to U Chan’s uncle in Sha Tin.  They left that flat in 2005. Kin Chuen went to live in the Flat with Kin Wai, and U Chan went to live with relatives of hers.  In 2006 Kin Chuen and U Chan sold the flat in Shau Kei Wan at a loss for $1,400,000, and in 2007 U Chan joined Kin Chuen at the Flat. They lived there together until 2011.  By then their marriage was on the rocks, and she moved out to live with her mother in a flat in Sham Shui Po.  That is where she is still living.

21.  The evidence of what happened while Kin Chuen and U Chan were living with Kin Wai at the Flat is highly instructive.  Kin Chuen says that they did not pay any rent to Kin Wai.  That is what Kin Wai says as well.  Indeed, he says that, so far as he can recall, they did not contribute to the monthly expenses of running the Flat either, such as management fees, rates or utility bills.  For her part, U Chan claims that when she moved into the Flat in 2007, she told Kin Wai that she would contribute to the mortgage repayments.  She says that he told her that there was no need for her to do that as he had been paying the mortgage instalments all along.  Her response to that, she says, was to offer to pay for their food and their other living expenses as well as to do the cooking.  She acknowledged that none of this had been in her witness statement.  When she was asked why that was, she initially said that it was because she had not kept any receipts, but she then went on to say that she had not thought it important.  That is a little difficult to understand.  Since her case is that it had been agreed that she and Kin Chuen would contribute to the mortgage repayments when their finances permitted it, she ought to have realised that this was highly relevant to that contention. She accepted that she had not repeated this offer in 2008, even though that summer her finances had improved with the sale of shares which she had been able to buy at a discounted rate over the years.  She claimed that that was because she needed the funds to pay for her son who was studying in Australia.

22.  The successive mortgages. The mortgage loan on the Flat was paid off and replaced by another mortgage on three subsequent occasions.  That was to obtain a more competitive interest rate.  It is common ground that it was U Chan who arranged the redemption of each of the mortgages and their replacement.[12]    

23.  The emergence of the dispute.  Kin Wai’s evidence was that in 2013 he wanted to sell the Flat.  Since the Flat was in the names of Kin Chuen and U Chan, it had to be sold in their names.  They informed the Housing Authority of their intention to sell the Flat, but initially U Chan was not prepared to sign the relevant documents.  She only did so after a week or so.  Eventually, her solicitors claimed that the Flat had been the matrimonial home, and Kin Wai instructed his solicitors to write to Kin Chuen and U Chan reminding them that he was the beneficial owner of the Flat. That prompted U Chan’s solicitors to allege that U Chan had a one‑third interest in the Flat.  None of this was disputed by U Chan in her evidence, and I have no reason to doubt its accuracy.

The true nature of the agreement

24.  Against this background, I turn to the true nature of the agreement which the parties reached early in 1997.  There are three key points. First, when the flat in Ap Lei Chau was to be surrendered, Kin Wai would have nowhere to live.  If he wanted a place of his own, the chance to buy a flat at a substantially discounted rate was his opportunity to have somewhere of his own to live, as well as getting on the property ladder.  Indeed, the Flat has been his home since 1999, and U Chan only lived there between 2007 and 2011.  On the other hand, Kin Chuen and U Chan had just bought the flat in Shau Kei Wan.  Although they may have welcomed the chance to invest in another flat, they did not have to buy another flat to meet their housing needs.  In any event, it would have been quite a financial burden for them to take on another mortgage.  I accept U Chan’s evidence (which was not disputed) that the flat in Shau Kei Wan was bought with the assistance of a staff loan from U Chan’s employers, the Hang Seng Bank, at a discounted interest rate of 2%.  But she did not challenge Kin Chuen’s evidence, which I have no reason to doubt, that the repayments amounted to about $9,000 a month.  When you factor in the management fees, the salary of their domestic helper and the premiums payable on the savings policies which Kin Chuen had taken out for his wife and son, there would not have been that much left from their combined income of $25,000 a month — to say nothing of the cost of renovating the flat before they moved into it.  All in all, on these facts alone, the account of Kin Wai and Kin Chuen that the Flat was intended to be Kin Wai’s alone makes more sense than an intention that it be owned by the three of them in equal shares.

25.  Secondly, it was Kin Wai who it is now agreed made the initial down‑payment, who paid the legal fees and the balance of the purchase price, and who paid all the mortgage instalments up to the present time.  This is obviously a very telling point.  Indeed, U Chan does not suggest that he ever asked either her or Kin Chuen to help in any way.  Moreover, when in 2007 she claims that she offered to help with the mortgage repayments, she accepts that he declined her offer of help.  If it really had been agreed that the Flat should be owned by them in equal shares, I would have expected Kin Wai at some stage to suggest to them that they help out.

26.  Thirdly, it is difficult to see why Kin Wai would have agreed to Kin Chuen and U Chan having a share in the Flat on the basis of what she now claims was the agreement about their respective contributions — namely that Kin Wai would be paying all the costs associated with the Flat until such time (which might never come) when her finances and those of Kin Chuen permitted them to contribute to those costs themselves.  With no certainty that Kin Chuen or U Chan would ever pay anything, it is highly unlikely that Kin Wai would have been prepared to let each of them have a one‑third interest in a flat which was to be his home and which he would be paying for — merely because U Chan was going to arrange the initial mortgage and the flat was going to be in her name and that of Kin Chuen.  It is claimed on behalf of U Chan that the agreement reflected the time and effort she would spend on arranging the later mortgages as well, but that could not have been part of Kin Wai’s alleged willingness for her to have an interest in the flat (a) because no‑one knew at the time of the agreement that there would be any subsequent mortgages and (b) because the time and effort she spent on arranging the mortgages would be minimal. So I ask rhetorically: what were she and Kin Chuen going to do for Kin Wai to be content to be left with only a one‑third interest in the Flat when he had made all the payments for it?

27.  There are two things which troubled me initially.  First, I understand, of course, why the Flat had to be purchased in the names of Pui Wan and Kin Chuen: as I said in [12] above, they had been the tenant and authorised occupant of the flat in Ap Lei Chau, and they were therefore the only people entitled to apply for a flat as Green Form applicants under the Scheme.  Nor was it suggested on behalf of U Chan that Kin Wai could subsequently have been nominated as the assignee of the flat.  That was presumably because the assignee had to have been the tenant or authorised occupant of the flat which had been surrendered or their spouse.  That was Kin Chuen’s evidence, and it was not disputed.  But why were Kin Chuen and U Chan subsequently nominated to be the assignees of the Flat?  If Kin Wai was to be the sole owner of the Flat, why was Kin Chuen not nominated as the sole assignee?  Could it be that U Chan was nominated as an assignee because it had been agreed that she should have an interest in the Flat?

28.  I have already said in [13] above what Kin Wai had to say about why U Chan as well as Kin Chuen was subsequently nominated as an assignee of the Flat.  U Chan’s salary, though about half that of Kin Chuen, would nevertheless have qualified the two of them for a significantly larger mortgage loan.  In view of my observations in [23]‑[25] above, that explanation seems to me to be far more credible than the suggestion that U Chan was included as an assignee because it had been agreed that she was to have an interest in the Flat.

29.  Secondly, Kin Wai said something which was rather surprising.  He was asked about U Chan’s delay in signing the documents to enable the Flat to be sold.  In the course of his cross‑examination on that topic, he acknowledged that he did not tell her that he was the sole owner of the Flat (which was something he might be expected to have reminded her of to get her to sign the documents), but told her instead that when he got the proceeds of sale, he would give her some of the money.  Why do that, so it is said, if it had not been agreed that U Chan would have an interest in the Flat?

30.  The difficulty is that Kin Wai was never asked why he had told her that he would give her some of the money when the Flat was sold.  For all I know, he might have told her that just to get her to sign the documents, and he had no intention of honouring what he had said.  That, of course, would just be speculation on my part, but assuming that he told her what he did because she had an interest in the Flat would be no less a matter of speculation.  It would not therefore be appropriate for me to rely, one way or the other, on what he had told her.

31.  A number of other points were made about what was said to be Kin Wai’s and Kin Chuen’s lack of credibility.  For example, Kin Wai’s evidence about his employment history was not as clear as it might have been, and he gave different accounts about whether he had been told about the replacement of the Bank of Communications mortgage by the last mortgage before its replacement or afterwards.  I have not regarded these as significant in the overall scheme of things, and they have not caused me to doubt the overall correctness of their evidence.

32.  For these reasons, I think that it is much more likely that the agreement reached between the parties early in 1997 was that Kin Wai would be the sole owner of the Flat, and that he alone would make the initial down‑payment, that he alone would pay the legal fees associated with the acquisition of the Flat and the balance of the purchase price, and that he alone would pay the monthly mortgage instalments.  That is why I think that it is more likely than not that it was Kin Wai’s idea to acquire a flat under the Scheme and surrender the flat in Ap Lei Chau.  Indeed, even if it had been U Chan’s idea, that would not have begun to mean that she hoped to get anything out of it herself: this was family, after all, and if it enabled Kin Wai to acquire a flat at a heavily discounted price, so be it.  The same is true of the arrangements she made for the initial mortgage and the later ones.  Making those arrangements could hardly be described as a particularly onerous task, and I find that she was content to make them.  Why should she not do a favour for her brother‑in‑law?

Two particular features of the evidence

33.  I have not overlooked two particular features of the evidence, one of which took quite a time to explore in the course of the trial.  I deal with them in turn.

34.  The insurance premiums on the final mortgage.  The final mortgage on the flat (see footnote 12 above) was secured by a staff loan with the Hang Seng Bank.  The bank required U Chan to take out an insurance policy for the mortgage instalments to protect the bank in the event of default.  The premium was $679.70 a year.  It was paid every year by U Chan.  It is common ground that she never asked Kin Wai to reimburse her, though he says that had she asked him to, he would have done so, as he paid all the outgoings on the Flat.  So why did she not ask him to reimburse her?  She says that this was one of the ways she contributed to the outgoings on the Flat and supports her claim to have had an interest in the Flat.  However, the amounts involved were very small in comparison to the monthly mortgage repayments which Kin Wai paid over the years, and although I see the force of U Chan’s claim, the point pales into insignificance when set against the observations in [23]‑[25] above.

35.  The handwritten note. One of the documents disclosed on discovery was a handwritten note.  It is common ground that part of the note is in U Chan’s handwriting.  The part in her handwriting lists various sums payable when the Bank of Communications mortgage was replaced by the staff loan from the Hang Seng Bank.  Those sums were legal costs of $4,000, interest of $1,427.59 due to the Bank of Communications as at May 2008, and the sum of $1,400 payable to the Housing Authority.  Ignoring the cents, these sums add up to $6,827.  U Chan had then written “$6,827 ‑ $5,700 = $1,127”.  Underneath that she had written her name and the number of her bank account.  Kin Wai claims that U Chan gave this note to him so that he could reimburse her these sums which it was accepted she had paid.  The sum of $5,700 was deducted, says Kin Wai, because he had paid her $5,700 in cash (though whether he had handed her the cash or he had deposited the cash into her bank account he could not recall).  The fact that he had paid her $5,700 is supported by an entry in her bank statements which shows that $5,700 was deposited into her account in cash on 19 May 2008. The argument advanced on behalf of Kin Wai is that if it had been agreed that U Chan was to have an interest in the Flat, she is unlikely to have asked Kin Wai to reimburse her these sums: she would have treated her payment of the sums as part of her contribution to the outgoings on the Flat.

36.  U Chan does not dispute that she sought to be reimbursed the sum of $6,827.  She claims, though, that she gave the note to Kin Chuen for him to reimburse her, not Kin Wai, and that when Kin Chuen did so, he only gave her $1,127 because that was all he had in his wallet at the time.  So she gave him the number of her bank account — in case he had forgotten it — so that he could pay the balance of $5,700 into it.  It is said that the fact that Kin Chuen was prepared to reimburse her supports her case.  Why would Kin Chuen be prepared to do that unless he had an interest in the Flat?

37.  I am very sceptical about U Chan’s evidence on this topic.  She did not put any of this in her witness statement, and it came out in her cross‑examination.  In any event, it does not sit well with the fact that the note was disclosed on discovery by Kin Wai, not Kin Chuen, nor with the terms of the note: if U Chan’s account was correct, one might have expected her to have written: “$6,827 ‑ $1,127 = $5,700”.  In the circumstances, I prefer Kin Wai’s evidence on this topic.  Having said that, the really important point is that whoever she asked to reimburse her the $6,827, the fact is that she asked someone to reimburse it to her.  So even if she had asked Kin Chuen to reimburse her, her wish to be reimbursed her outlay was not really consistent with her claim that it had been agreed that she would have an interest in the Flat.

38.  I turn to the other handwriting on the note.  There is a date — 18 June 2008 — and some calculations: “$5,333.60 + interest of $89.42 + 1,428 = $6,850”.  U Chan says that this part of the note was not in her handwriting, and Kin Wai accepts that apart from the date he wrote it.  The $5,333.60 represented the monthly mortgage instalment due to the Hang Seng Bank for that month.  The $89.42 represented the interest due on it.  And the $1,428 represented the interest due to the Bank of Communications as at May 2008 rounded up to the nearest dollar.  U Chan accepts that the $1,428 was included in the $6,827 which she was reimbursed, but she claims that she never asked Kin Wai to reimburse her the sums of $5,333.60 and $89.42 which she had previously paid herself.  That is said, therefore, to amount to a contribution which she made to the outgoings on the Flat, and therefore to support her claim that it had been agreed that she would have an interest in the Flat.

39.  That is some support for Kin Wai’s case that contrary to her evidence U Chan was reimbursed the $5,333.60.  Her bank statements show $5,334 being transferred to her account by ATM on 24 July 2008, and $5,333.60 being withdrawn from her account the following day for “instalment loan repayment”. It may be, of course, that the payment into her account represented an instalment for a different month from the one in the note, but even if it did, and therefore even if U Chan never sought reimbursement of this sum from Kin Wai, it is hardly significant when set against the factors which indicate so strongly that it was never agreed that she would have an interest in the Flat.

Conclusion

40.  For all these reasons, I find that the agreement between Kin Wai, Kin Chuen and U Chan was that Kin Wai would be the sole owner of the Flat.  He altered his position in detrimental reliance on the agreement by paying for the Flat himself.  Because U Chan made no contributions to the Flat to speak of, it would be unconscionable for her to assert that her legal ownership of the Flat should entitle her to a share in the Flat.  I therefore declare that Kin Chuen and U Chan hold the Flat on trust for Kin Wai, and that Kin Wai is the sole beneficial owner of the Flat, and I dismiss U Chan’s counterclaim for a declaration that the Flat is owned by her, Kin Wai and Kin Chuen in equal shares. 

41.  However, I decline to make an order under section 45 of the Trustee Ordinance (Cap 29) vesting the Flat in Kin Wai.  I acknowledge that it might have been expedient to do that to make it less likely that Kin Wai’s title to the Flat as its sole owner will be disputed when he comes to sell the Flat.  But I do not know whether there are any restrictions in the Scheme relating to the transfer of the legal title of a flat acquired under the Scheme.  In any event, it would not be right to make a vesting order until such time as it is known whether the Housing Authority will take any steps to unpick things on the basis that it was misled.  I refer to that possibility in the postscript to this judgment. 

Costs

42.  At present, I see no reason why costs should not follow the event, and I therefore make an order nisi that U Chan must pay to Kin Wai his costs of the action, to be taxed if not agreed.  However, since she is legally aided, that order may not be enforced without the leave of the court.  I also make an order nisi that U Chan’s own costs be taxed in accordance with the Legal Aid Regulations.

43.  At one stage, I was minded to think that different considerations applied to Kin Chuen’s costs.  Kin Chuen never disputed Kin Wai’s claim to be the sole owner of the Flat.  He did not need to be a party to give his account of the agreement. Kin Wai’s legal team could have called him to give evidence as a witness. In those circumstances, could it not be said that Kin Chuen was only made a defendant to U Chan’s counterclaim because he was already a defendant to Kin Wai’s claim?  He would not have been made a defendant to U Chan’s counterclaim if he was not already a party.  In the circumstances, I was minded to think that U Chan should not have to bear Kin Chuen’s costs since he was unnecessarily brought into the action by Kin Wai.  However, the better view is that Kin Wai had to join Kin Chuen as a defendant.  Kin Chuen was one of the legal owners of the Flat, and if a declaration was to be made to the effect that, despite that, Kin Wai was the sole beneficial owner of the Flat, he had to be a party to the action for such a declaration to be made.  I therefore make an order nisi that U Chan must pay to Kin Chuen his costs of the action, to be taxed if not agreed, though that order may not be enforced without the leave of the court.

Postscript

44.  When you apply for a flat under the Scheme, you have to disclose who will be occupying the flat.  In this case, the plan was, as I have said, for it to be Kin Wai’s home.  Neither Pui Wan nor Kin Chuen were going to be living there.  Yet the Housing Authority might have been told that either Pui Wan or Kin Chuen would be living in the flat since the application had to be made by them.  That raises the question whether the Housing Authority might have been misled.  I make no findings about that, of course, since there would need to be more evidence on the topic, but I asked all counsel whether such a finding might have an impact on the case.  I had in mind what Litton NPJ said recently[13], that such a circumstance might “have brought into play the principle that a resulting or a constructive trust cannot be enforced by a contributor if he or she had to rely on such an arrangement to succeed”.  All counsel agreed that it should not affect the relief I should give.

45.  I mention this only in case the Housing Authority was to allege subsequently that it had been misled.  I am neither encouraging nor discouraging it to take any action, but should it choose to do so, and if Litton NPJ’s concerns were to apply, it is necessary for me to state that this judgment only affects the rights of the parties as between themselves and any subsequent purchaser of the Flat.  The declarations I have made must be subject to any action which the Housing Authority may choose to take.