WONG YUK TUNG v. WONG PO LING AND ANOTHER

HCA 899/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 899 OF 2012

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J U D G M E N T

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1.  This is an action in which a father (the plaintiff) claims against his daughter (the 1^st defendant) and a company of which the daughter is the sole shareholder and director (the 2^nd defendant) in respect of:

(1) what is left of the proceeds of sale of Apartment B on the 4^th Floor with Laundry Space No 8 on the Roof and Car Parking Space No 8 on the Lower Ground Floor Garage, Kam Fai Mansion, 68A MacDonnell Road, Hong Kong (“Kam Fai Flat” and “Kam Fai Carpark” respectively and “Kam Fai Properties” collectively) of which the daughter was one of the registered owners;

(2) the proceeds of sale of Flat D, 1/F, St Louis Mansion, 20 MacDonnell Road (“St Louis Flat 1D”) of which the company was the registered owner; and

(3) Flat C, 25/F, St Louis Mansion (“St Louis Flat 25C”) of which the company is the registered owner.

Dispute and circumstances giving rise thereto

2.  The dispute regarding these properties and their proceeds of sale and the facts and circumstances giving rise to such dispute can be stated as follows.

3.  Mr Wong Yuk Tung Philip (“Father”), the plaintiff, and his ex‑wife, Madam Hui So Nui Angela (“Mother”), have 6 daughters (“Daughters”) in the following order of seniority:

(1) Wong Po Chi Agnes (“Agnes”), born in 1968;

(2) Wong Po Ling Clara (“Clara”), the 1^st defendant, born in 1969;

(3) Wong Po Ching Karen (“Karen”), born in 1971;

(4) Wong Po San Anna (“Anna”), born in 1977;

(5) Wong Po Kwan Amy (“Amy”), born in 1981; and

(6) Wong Po Wah Jenny (“Jenny”), born in 1983.

4.  From 27 May 1976 to 18 June 1997, the Kam Fai Properties (which was the home of the Wong family in Hong Kong) were registered in the names of Father and Mother as joint tenants.

5.  It is Father’s case that the money for the purchase of the Kam Fai Properties in 1976 in his and Mother’s joint names was provided solely by him with no contribution from Mother and that as between him and Mother, they both recognised and acknowledged that the Kam Fai Properties were beneficially wholly owned by him.

6.  However, Mother who has given evidence as Father’s witness disagrees that she was just an owner in name.  She regards herself as having beneficial interest (a half share) in the Kam Fai Properties.  Indeed, she understands that as a joint tenant, she would become the sole owner of such properties if Father should predecease her.

7.  Apart from using the Kam Fai Properties as the family home, Father also used them as security to finance the operation of his shipping business.  More particularly, insofar as it is material, the Kam Fai Properties were successively charged/mortgaged to The Yien Yieh Commercial Bank Limited (“YYB”) under a Legal Charge dated 18 May 1987 to secure a loan of HKD700,000 which Father recalls was used by him to acquire a cargo ship and a Second Mortgage dated 3 January 1996 to secure banking facilities for the use of Fullwin Marine Limited (“Fullwin”), the Hong Kong company through which Father carried on his shipping business.

8.  In early January 1997, Father ran into difficulty in his said business.  One of the 3 ships beneficially owned by him through a Panamanian company (“Sunk Ship”) sank off the East China Sea. The Sunk Ship and two other ships that were also beneficially owned by Father had been mortgaged as joint collaterals to Den Norske Bank, Singapore Branch (“DNB”) for USD3,550,000 of which about USD3,100,000, secured by Father’s personal guarantee and Fullwin’s corporate guarantee, remained outstanding in early 1997 and was still being repaid by monthly instalments by Fullwin for the ship owning companies.  Although the Sunk Ship had been insured for USD2,300,000 and a claim for its total loss had been made, there was delay on the part of the insurers in settling the claim.  To ease the cash flow problems thereby created and to prevent DNB from arresting the other 2 ships in the event of default in the mortgage repayment by Fullwin, Father sold his remaining 2 ships in March and April 1997.  However, the sum realised was insufficient and left a shortfall of USD620,000 still being owed to DNB.

9.  Against this background:

(1) By a Transfer executed on 1 May 1997 (“Pinehurst Place Transfer”), Father transferred his half interest in fee simple in 9 Pinehurst Place, Carindale, Queensland, Australia, a property which he had hitherto owned in joint tenancy with Mother and the home of members of the Wong family in Australia, to Anna for a stated consideration of AUD150,000.

(2) By an Assignment dated 19 June 1997 (“Kam Fai Properties Assignment”), Father and Mother as vendors assigned the Kam Fai Properties to Mother, Agnes and Clara as purchasers and tenants in common in equal shares (ie one‑third each) for a stated consideration of HKD4,950,000.

10.  The central issue in dispute in this action is whether the Kam Fai Properties Assignment was really what it was made out to appear on paper.

11.  In this regard, as a matter of record, the Kam Fai Properties Assignment was preceded by an Agreement for Sale and Purchase dated 23 May 1997.  However, it is common ground that these 2 instruments, though bearing different dates with about one month apart, were in fact executed in one go by Father, Mother, Agnes and Clara on the same occasion on 19 June 1997.

12.  There is also no dispute that the said stated price of HKD4,950,000 did not change hands.  In fact, this figure was put down as the price because this was what the mortgagee valued the Kam Fai Properties to be worth at the time (see paragraph 18 below).

13.  Instead, by a Mortgage dated 19 June 1997 (“SPC Mortgage”), Mother, Agnes and Clara as mortgagors mortgaged the Kam Fai Properties to SPC Credit Limited (“SPC”) in return for a real estate loan of HKD2,000,000 (“SPC Loan”) of which Agnes and Clara were the borrowers.  By a letter dated 21 June 1997 from SPC to Clara, SPC informed Clara that it had on that day advanced to her HKD2,000,000 through the firm of solicitors acting for all the parties in the transaction.

14.  It is further common ground that a sum of HKD1,008,655.74 out of the SPC Loan was deposited into Fullwin’s current account with YYB on 23 June 1997, thereby settling Fullwin’s overdraft with that bank which stood at HKD990,283.13 immediately before this deposit.

15.  There is however disagreement between Father and Clara as to how the balance of the SPC Loan (which should be in the amount of HKD991,344.26) was applied.  Clara insists that the whole of the SPC Loan had been paid over to Father as vendor of the Kam Fai Properties whereas Father says that he had benefited from the SPC Loan only to the said extent of HKD1,008,655.74 deposited into Fullwin’s account and surmises that Clara had kept the balance.

16.  Pausing here, according to Father, the transaction effected by the Kam Fai Properties Assignment was not a genuine sale that was intended to pass the beneficial ownership of the Kam Fai Properties.  Its sole purpose was to put the Kam Fai Properties out of his name and therefore out of reach to his business creditors (the largest of which was DNB).  More particularly, Father says he proposed to Agnes and Clara respectively in a long‑distance telephone discussion (Agnes being in the USA) and a face to face discussion at the Kam Fai Flat about one month before the Kam Fai Properties Assignment that he would procure a nominal transfer of the Kam Fai Properties to them and Mother for the purposes of securing a mortgage loan to discharge the encumbrances against the Kam Fai Properties in favour of YYB and removing his name from such properties.  Both Agnes and Clara agreed to become Father’s nominees.  He requested Agnes and Clara, and they agreed, to provide their income proofs to secure the mortgage loan.  As Clara was then working in the banking and financial sector, it was Clara who arranged for the SPC Loan.  Father however paid all the transaction costs occasioned by the transfer (and this is accepted by Clara).  Notwithstanding the conveyance, Father remained the sole beneficial owner of the Kam Fai Properties, which Mother, Agnes and Clara held on trust for him.

17.  The Pinehurst Place Transfer was likewise in name only and motivated by the same considerations.  Anna never paid Father the stated price of AUD150,000 or any part thereof.  She was then just 20 years old and still a student in Australia with no independent means.

18.  Clara gives a totally different account. According to her, the Kam Fai Properties were purchased by Father and Mother as joint tenants in May 1976 at HKD265,000 (the suggestion being, I think, that Father was not the sole beneficial owner to begin with).  In about May 1997, Father represented to her that he urgently needed cash to resolve his financial problems and asked her to purchase his interest in the Kam Fai Properties at HKD2,000,000 with Agnes.  Prior to that, Father had tried, but failed, to sell the Kam Fai Properties in the open market.  Mother wished to retain her interest in the Property but agreed to Agnes and Clara becoming her new co‑owners. With a view to raising HKD2,000,000, Clara approached SPC which valued the Kam Fai Properties at HKD4,950,000 and approved the grant of the SPC Loan to her and Agnes.  The proceeds of the SPC Loan were wholly paid over to Father to ease his financial problems including to discharge the encumbrances against the Kam Fai Properties in favour of YYB.  She and Agnes had therefore provided consideration in the form of the SPC Loan for which they had assumed personal liability to repay under the SPC Mortgage.  The Kam Fai Properties Assignment was therefore the result of “a bona fide and at arm’s length transaction with due consideration” and was genuine.  Father did not tell her that she and Agnes were just to be his trustees in holding the Kam Fai Properties.  After the Kam Fai Properties Assignment, Father ceased to have any interest in the Kam Fai Properties and the same were not held on trust, whether express or implied or otherwise, for Father.  That being the case, none of the subsequent transactions affecting the Kam Fai Properties or involving the use of their proceeds of sale had anything to do with Father and he was not involved with the same.

19.  Agnes, Clara’s witness, gives a supporting account.  According to her, Father telephoned her (which he had never done before) one day in May 1997 out of the blue.  Although Agnes cannot now recall Father’s exact words, she understood him to be asking her to buy his half share interest in the Kam Fai Properties with Clara.  He mentioned the price of HKD2,000,000 which translated to USD300,000 odd for her.  He also told her that he had attempted to, but could not, sell the Kam Fai Properties.  Agnes agreed, having assessed that she would be able to afford half of the monthly mortgage repayments.

20.  Regardless of which of these 2 versions as to the intended purpose and effect of the Kam Fai Properties Assignment is true, moves were made thereafter for the Kam Fai Flat to be rented out for rental income in order to service the monthly repayments of the SPC Loan.  By then, only Father, Clara and Karen were living at the Kam Fai Flat.   Mother, Anna, Amy and Jenny had all emigrated to and been staying in Brisbane, Australia since early 1992 after Father applied for and was granted a business migration visa to Australia for the whole family.  Agnes was then in the USA.  After the Kam Fai Properties Assignment, Father, Clara and Karen continued to reside at the Kam Fai Flat for a short while.  In late 1997, Father left Hong Kong for good to join the family in Australia.  Before that, Father, Clara and Karen had already relocated to a rented unit in South Horizons, Apleichau, Hong Kong with a view to clearing the Kam Fai Flat for letting.

21.  The tenancy agreements and related documents produced by Clara show that the Kam Fai Flat was let by her for 2 years from 1 September 1998 to 31 August 2000 at $21,500 per month exclusive of rates and management fees and for a further 1 year period from 1 September 2000 to 31 August 2001 at $25,000 per month exclusive of rates and management fees.

22.  As for the Kam Fai Carpark, it had not been, and could not be, used as such for many years as Father had converted the space into a storeroom which he filled with stuff including the books, records and documents of Fullwin after it was closed down at the end of August 1997.

23.  According to Clara, she only managed to lease out the Kam Fai Flat for the aforesaid 3 years.  Father on the other hand claims that Clara had also entered into a short-term tenancy with a lady who used the Kam Fai Flat to store furniture before 1 September 1998, which Clara denies.  Father says it would not have made sense for the family to move to South Horizons thereby incurring rent if the Kam Fai Flat had all the time been untenanted.

24.  Further, it is Father’s evidence that throughout the search for a tenant, Clara had consulted him on the terms of the tenancies.  Clara denies this.

25.  It appears from the statements provided by SPC to Clara that the rent collected under the said tenancies was insufficient to cover the monthly instalments paid to SPC.

26.  There is a dispute as to the source(s) of funds used to make monthly repayment to SPC before the Kam Fai Flat was tenanted and thereafter to make up the shortfalls:

(1) On one hand, Father claims that he met these payments with his own monies and with monies left in Fullwin by leaving with Clara a handful of cheques and withdrawal slips that he had signed but otherwise left blank for such purpose.  In this regard, although Fullwin had by then practically ceased business,[1] Father points to the one page statement of Fullwin’s current account with YYB for the period from 31 May 1997 to 14 July 1997 which shows that Fullwin had continued to receive payments after 23 June 1997.  Father also claims to have remitted funds to Hong Kong in about 2002 and 2003 from the proceeds of sale of his property at 31 Regent Street, Eight Miles Plains, Queensland to help with the repayment of the loans borrowed against the Kam Fai Properties.  He further understands that Karen had also chipped in about HKD200,000.

(2) On the other hand, Clara says she and Agnes were solely responsible for repaying the SPC Loan (as well as all the subsequent loans and facilities obtained against the Kam Fai Properties to be mentioned below), though she took up a greater burden than Agnes who had her own obligations in the USA.  In support, Clara has produced customer’s receipts issued by SPC evidencing receipt of Clara’s personal cheques for the months of October 1998 and January, February, March, April, May, June and August 1999; a couple of documents evidencing the subsequent arrangement of autopay from her account with Standard Chartered Bank (Hong Kong) Limited (“SCB”) to GE Capital (Hong Kong) Limited (“GE”) (see paragraph 27 below); and statements of her accounts with SCB showing debit entries in favour of GE from November 2005 to April 2006.

(3) In this connection, Agnes’s understanding is that the SPC Loan repayment instalments were sourced from the rental income when the Kam Fai Flat was tenanted.  When such income was insufficient or when there was no tenant, Clara would from time to time send her faxes to tell her to remit funds to Hong Kong to contribute to the monthly repayments.  She estimates that she had over the years contributed more than USD50,000 but not quite as much as USD100,000.  Clara reckons that Agnes had shared about one‑third of the burden.

27.  The SPC Mortgage was subsequently redeemed by repayment.  This was made possible with a loan of HKD1,400,000 (“GE Loan”) borrowed in the names of Agnes and Clara from GE and secured by a Legal Charge of the Kam Fai Flat dated 11 May 2001 (“GE Charge”).  There is no dispute that the remortgage was to take advantage of the more favourable interest rate offered by GE (1% per annum below HSBC’s prime lending rate as opposed to 1.5% per annum above HSBC’s prime lending rate under the SPC Mortgage).  Moreover, the Kam Fai Carpark was released.

28.  This was followed shortly by the grant of a credit facility of HKD500,000 (“GE Facility”) by GE to Agnes and Clara as borrowers against the security of the Kam Fai Flat at 1% above HSBC’s prime lending rate in July 2001.

29.  Father claims, but Clara disagrees, that Clara had consulted him over, and he had agreed to, such refinancing arrangements and the further encumbrance of the Kam Fai Flat by the GE Facility for Clara’s own use in her start‑up business.

30.  Clara and Karen moved back to the Kam Fai Flat in about September 2001 following the expiry of its tenancy.  According to Clara, she was unable to find another tenant for the Kam Fai Flat for some time.  And since the lease for her rented unit in South Horizons happened to expire at about the same time, she thought they might as well return to the Kam Fai Flat to save on rent.

31.  Then, by an Assignment dated 7 October 2002 (“Kam Fai Carpark Assignment”), Mother, Agnes and Clara conveyed the Kam Fai Carpark to Karen for a stated consideration of HKD300,000, HKD210,000 (being 70% of the stated consideration of HKD300,000) of which was paid by a loan (“BOA Loan”) from Bank of America (Asia) Limited (“BOA”) secured by a mortgage of the Kam Fai Carpark (“BOA Mortgage”).

32.  According to Father, the Kam Fai Carpark Assignment was not a genuine sale that was intended to pass beneficial ownership of the Kam Fai Carpark to Karen.  It was effected with Father’s consent for the sole purpose of raising the BOA Loan for use by Clara for her start‑up business.  Indeed, Father’s evidence is that when Clara came up with the idea of carving out the Kam Fai Carpark to raise additional funds, he recommended Clara to approach Karen for assistance.  Notwithstanding such assignment, Father claims to remain the sole beneficial owner of the Kam Fai Carpark, which Karen held on trust for him.  This is disputed by Clara who puts forward the Kam Fai Carpark Assignment as a genuine and at arm’s length transaction, with Karen actually paying the price of HKD300,000.  Anyway, it had nothing to do with Father as he no longer had any interest in the Kam Fai Properties.  Karen has not been called to give evidence by either side.

33.  With effect from 1 August 2003, the GE Loan (then standing at HKD1,034,181.58) and the GE Facility (HKD500,000) were consolidated and converted into a single loan of HKD1,518,291.15 (“New GE Loan”) which carried interest at 1.5% per annum below HSBC’s prime lending rate.

34.  In about 2005, Karen got married and moved out of the Kam Fai Flat, leaving Clara as the only occupant of that property until its disposal (see paragraph 35 below).

35.  Then, by two sets of Agreement for Sale and Purchase dated 4 December 2006 and an Assignment dated 10 January 2007, Mother, Agnes and Clara disposed of the Kam Fai Flat at HKD7,900,000 and Karen disposed of the Kam Fai Carpark at HKD300,000 respectively to the same purchaser.  Upon completion on 10 January 2007, both the GE Charge and the BOA Mortgage were discharged.  Although Karen was the registered owner of the Kam Fai Carpark, Clara accepts that she decided on the sale price, and handled the sale, of the Kam Fai Carpark.

36.  It is Father’s case that the sale of the Kam Fai Properties was effected by Clara with his prior authority and consent with a view to taking advantage of the rising property market and to re‑investing the proceeds of sale.  Father reckons that the net proceeds of sale, after repaying the New GE Loan (then standing at HKD347,771 + HKD500,000) and the BOA Loan (then standing at HKD133,042), should be about HKD7,220,000,[2] which figure Clara agrees.

37.  It is common ground that out of such net proceeds of sale, a payment of AUD100,000 (approximately HK$610,000) was made to Mother.  Clara portrays this as what Mother had asked for in full settlement of Mother’s share of and interest in the Kam Fai Properties.  Father initially said in paragraph 84 of his Witness Statement dated 16 December 2013 that Clara gave Mother, from whom Father had by then been divorced for some years,[3] this sum to provide for Mother in her old age, to which he agreed. In contrast, Father’s testimony in court is that although Mother did not contribute to the purchase of the Kam Fai Properties in 1976 and he regarded her as holding her share in those properties (which was one‑third before the disposal in 2007) on trust for him, at the time of their divorce, he gave Mother everything that was under her name.  He even says that at first he did not know Mother got only AUD100,000 which was less than one-third of the proceeds of sale of the Kam Fai Properties.  In a Chinese statement dated 28 August 2012 drafted by Father and signed by Mother in front of a justice of the peace in Australia, Mother said that she received AUD100,000 only as partial settlement of her rights in the proceeds of sale of the Kam Fai Properties and that she left the balance with Clara for safekeeping and re‑investment.  She takes the same stance in her evidence in court.  She has however admittedly not asked Clara for her balance share in the proceeds of sale of the Kam Fai Properties or checked what Clara has done with the same all these years.  When pressed under cross‑examination, Mother then says she would give up her further claim to the proceeds.

38.  Father also says he instructed Clara that, if any of the Daughters had contributed towards the repayment of the loans borrowed against the Kam Fai Properties, they should be repaid, specifically mentioning that Karen had chipped in about HKD200,000.

39.  On the disbursement of the net proceeds of sale of the Kam Fai Properties, it is Clara’s evidence that in addition to the sum of AUD100,000 (HKD610,000) paid to Mother, she had also given her sisters the following amounts:

(1) Agnes: about USD80,000 odd (say about HKD640,000) which was the figure given by Agnes to Clara as representing Agnes’ contributions;

(2) Karen: HKD300,000 which was the sale price of the Kam Fai Carpark plus HKD200,000 for her contributions to the mortgage repayments in respect of the Kam Fai Properties;

(3) Anna: USD20,000 (about HKD122,000) which was purely voluntary out of sisterly love; and

(4) Jenny: AUD10,000 (about HKD61,000) which was also purely voluntary out of sisterly love.

40.  It is Father’s case that, save for the proper disbursements to Mother and her sisters, Clara received and retained the remaining net proceeds of sale of the Kam Fai Properties (“Kam Fai Proceeds”), which should be about HKD5,287,000 after deducting the distributions mentioned in paragraphs 37 and 39 above, on Father’s behalf as his trustee and/or agent pending his instructions for reinvestment.  To show that Clara treated the Kam Fai Proceeds as being at his disposal, Father recounts that after the completion of the sale of the Kam Fai Properties, Clara went to Brisbane to visit him.  While there, Clara asked if Father would like to use some of the Kam Fai Proceeds to pay off the mortgage of the property known as 313 Warrigal Road, Eight Mile Plains, Brisbane, a property purchased at AUD203,000 in the name of Anna but with the downpayment of AUD102,000 paid by Father. 

41.  These assertions regarding Father’s involvement in the sale of the Kam Fai Properties and rights over the Kam Fai Proceeds are of course denied by Clara.

42.  In the meantime, Wonggenos Enterprises Company Limited (“Company”), the 2^nd defendant, was incorporated on 28 December 2006.  Clara has always been and still is the sole shareholder and director of the Company.  Karen was the secretary of the Company from sometime during the year ended 28 December 2008 until 11 June 2012.

43.  Father claims that the Company (whose English and Chinese names were chosen by him)[4] was acquired by Clara on his instruction as a vehicle for the reinvestment of the Kam Fai Proceeds and that Clara became the Company’s sole shareholder and director and Karen its secretary upon his nomination.

44.  Clara, however, points out that she herself had on 1 March 2003 already formed an unincorporated firm called “Wonggenos Enterprises Company” (“Firm”) for trading and investment purposes. Although Father suggested the names of the Firm to her during a casual chat, Clara was the sole‑proprietor of the Firm and Father did not have any interest in it.  Clara acquired the Company of her own accord with a view to using it to hold properties.  The Company’s name came from the name of the Firm.  Father therefore had nothing to do with the Company.  He was not entitled to, and he did not, nominate Clara to be the sole shareholder and director of the Company or Karen its secretary.  Nor has he got any interest in the Company’s assets.

45.  By an Agreement for Sale and Purchase dated 12 January 2007 and an Assignment dated 27 February 2007, Clara acquired in her own name Flat A, 24/F, St Louis Mansion (“St Louis Flat 24A”) at HKD2,900,000 which was paid partly with a loan from SCB secured by an “all monies” Mortgage dated 27 February 2007.

46.  By an Agreement for Sale and Purchase dated 25 January 2007 and an Assignment dated 9 March 2007, the Company acquired St Louis Flat 25C at HKD3,250,000, which was also paid partly with a loan from SCB secured by an “all monies” Mortgage dated 9 March 2007.

47.  By a Provisional Agreement for Sale and Purchase dated 23 January 2007, an Agreement for Sale and Purchase dated 22 February 2007 and an Assignment dated 13 March 2007, the Company acquired St Louis Flat 1D at HKD2,630,000, which was likewise paid partly with a loan from SCB secured by an “all monies” Mortgage dated 13 March 2007.

48.  According to Clara, she paid a 35% downpayment on each of these 3 units in St Louis Mansion with the use of the Kam Fai Proceeds.  The total capital outlay should therefore add up to about HKD3,073,000, leaving just over HKD2,000,000 still in Clara’s hands if one allows for the payment of the incidental legal and other costs and expenses.

49.  The payment of the remaining 65% was financed by the loans secured by the SCB mortgages.  With regard to the 2 properties purchased by the Company, according to the Company’s annual return for the year ended 28 December 2007, the total amount outstanding as of 28 December 2007 on all mortgages and charges which were required to be registered under ss 80 and 82 of the since repealed Companies Ordinance (Cap 32) was HKD3,800,000.

50.  It is Father’s case that Clara acquired St Louis Flat 25C and St Louis Flat 1D in the name of the Company using the Kam Fai Proceeds after consulting him and obtaining his agreement.  And the Company held these 2 properties on trust for Father.  More particularly, Father says Clara had asked him if he would like to purchase one big flat of over 1,000 square feet or 3 smaller properties such as those in St Louis Mansion, which is also on MacDonnell Road not far from their old home.  Father indicated preference for the latter, believing that smaller units would fetch higher rental.  He further advised Clara to use the Kam Fai Proceeds to pay so much of the prices of such properties that the rental income would cover the mortgage repayments.

51.  In this connection, Father has further said in his Supplemental Witness Statement that he was under the impression until a few weeks before he made that statement on 9 June 2015 that Clara had only bought 2 units in St Louis Mansion, i.e. those acquired in the Company’s name.  He did not become aware of the purchase of St Louis Flat 24A by Clara in her own name until he received an investigation report dated 22 May 2015 on the property transactions entered into in the name of “Wong Po Ling / Wong Po Ling Clara” and “黃寶齡”. Father has even made the point in paragraph 28 of his Supplemental Witness Statement that he believes that Clara has separated her own personal investment (ie St Louis Flat 24A) from the investments that she has made and holds for Father (ie St Louis Flat 25C and St Louis Flat 1D).  Despite such written testimony, Father has then said, in my view somewhat inconsistently, in his evidence in court that he told Clara to put one of the 3 flats to be purchased into her own name and this would be her reward for looking after the Kam Fai Properties for him all those years.

52.  Clara regards St Louis Flat 25C and St Louis Flat 1D as her own investments through the Company and says that she has always been the person solely responsible for servicing the mortgage loans used for their purchase and other outgoings and expenses relating to these properties.

53.  In the meantime, the relationship between Father and the Daughters began to deteriorate in about 2006 or 2007 after Father developed a romantic relationship with a woman from Shanghai, a Miss Cai.  Both Father and Clara have recalled a confrontation between them at Clara’s office in 2009 at which, Father claims, Clara told him to consult a lawyer before talking to her again on matters concerning the Kam Fai Properties.  Father however says that his relationship with Clara had gradually calmed down afterwards.

54.  By an Agreement for Sale and Purchase dated 21 January 2011 and an Assignment dated 28 February 2011, the Company disposed of St Louis Flat 1D at HKD4,380,000, yielding a profit which Father estimates to be about HKD1,750,000 (ie HKD4,380,000 less HKD2,630,000) on a gross basis, which Father says is held by the Company on trust for him.  According to Father, his plan at the time was to use the net proceeds of sale of St Louis Flat 1D (“St Louis Flat 1D Proceeds”) to buy a property in Australia for his own use as he had since May 2010 been evicted from 313 Warrigal Road by Anna and was then renting a room in a multi‑room apartment on the same street and he had reached an understanding with Clara in January 2011 that she would remit the money to Australia after completion of the sale of St Louis Flat 1D.  He started to look for such a property in Brisbane in mid January 2011.  Such purchase however did not materialise.  By November 2011, Clara was only offering to subsidise Father AUD350 – 360 per week for rent on a townhouse.

55.  In mid November 2011, the relationship between Father and Clara changed for the worse.  According to Father, two things happened to bring about this.

56.  First, Anna circulated an email dated 8 November 2011 about Father’s request to her to sponsor his girlfriend Miss Cai for a visit to Australia to spend Christmas there with Father, which request Anna adamantly rejected.  Clara followed up with an email on the next day, saying that Father had become a completely different person and had created so much trouble since the sale of the Kam Fai Properties because he could not get what he wanted.  She warned her sisters not to sign any lease, mortgage or other legal documents “whether he kneels before you or beg you”.

57.  Second, Karen proposed at about the same time on 4 November 2011 that her friend’s townhouse could be rented at around AUD310 per week to be Father’s residence.  According to Father, Clara somehow perceived this to be a plan to rip her off and wrote back in terms that were very harsh and critical against Father on 7 and 8 November 2011.  This also caused the relationship between Clara and Karen to chill.  On 9 November 2011, Clara told Anna, Amy and Jenny that there was no need for them to continue to look for a townhouse to rent for Father.

58.  After November 2011, Father and Clara had stopped talking to each other.

Father’s claims

59.  By this action which was commenced on 28 May 2012, Farther claims against Clara and the Company for:

(1) accounts and inquiries as to:

(a) the Kam Fai Proceeds and what is left of it; and

(b) the St Louis Flat 1D Proceeds; and orders for payment of the sums found to be due; and

(2) an order for the transfer of St Louis Flat 25C by the Company to Father.

60.  In support of these claims, Father asserts a resulting trust or alternatively a constructive trust of successively the Kam Fai Properties, the Kam Fai Proceeds, the St Louis Flat 1D Proceeds and St Louis Flat 25C, arising from a common intention shared between Father and the various transferees which was express or alternatively to be inferred.

Real issue and relevant legal principles

61.  Given the allegations by both parties of express discussion and actual intention as to the incidence of beneficial ownership in the Kam Fai Properties after the Kam Fai Properties Assignment (from which the claims to the Kam Fai Proceeds, the St Louis Flat 1D Proceeds and St Louis Flat 25C are derived), I see no scope for the operation of resulting trust: Re Superyield Holdings Ltd [2000] 2 HKC 90 at 111 and Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at [45].  As it will be seen below, I do not propose to reject both parties’ evidence on intention.

62.  Hence, the real issue for me is whether the constructive trusts asserted by Father arose.

63.  For this purpose, it is sufficient for me to refer to Godfrey Lam J’s formulation in Liu Wai Keung at [46] of the elements that a plaintiff has to prove in order to establish a constructive trust in his favour:

(1) that there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the property claimed despite that it was to be registered in the defendant’s name;

(2) that the plaintiff altered his position in detrimental reliance upon such common intention; and

(3) that it is unconscionable for the defendant to assert ownership in reliance on his legal title to the property.

64.  It should be reasonably apparent from the above summary of the dispute that, of these 3 elements, the existence or otherwise of a common intention that Father should remain the beneficial owner of the Kam Fai Properties is the real bone of contention.  If such common intention is established, I do not see any room for Clara to dispute the detrimental reliance by Father and the unconscionability of an assertion of ownership by her.  Nor would it be possible for her to contest the constructive trusts of the Kam Fai Proceeds, the St Louis Flat 1D Proceeds or St Louis Flat 25C to which the Kam Fai Properties can be traced.

65.  And given Father’s and Clara’s reliance on an express unambiguous agreement, arrangement or understanding that been reached between them before the Kam Fai Properties Assignment, the question for me is whose version is true on the balance of probabilities, which is essentially an issue of fact.  In this connection, what Godfrey Lam J said in Liu Wai Keung at [50] is also instructive:

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

66.  Since I am able to find in favour of the express agreement, arrangement or understanding put forward by one party, I need not seek to infer from the parties’ conduct the existence or otherwise of an implied common intention.

Findings and reasoning

67.  Much depends on my assessment of the credibility, or rather relative credibility, of Father and Clara and their respective witnesses namely, Mother and Agnes.

68.  The two sides contradict each other on numerous points.  However, I do not think it is necessary for me to resolve all the conflicts and I do not propose to do so in order to maintain the focus of this judgment.

69.  On Father’s side, I do not think I can give any or any meaningful weight to Mother’s evidence.  Many of the matters alluded to by her in her said Chinese statement dated 28 August 2012, upon which she has been closely cross‑examined, are based on hearsay or assumptions that she seems unable to satisfactorily explain.

70.  As for Father, although there are aspects of his evidence that I find less than satisfactory (see for example paragraph 37 above regarding Mother’s interest in the Kam Fai Properties and the sum of AUD100,000 received by her out of proceeds of sale of the Kam Fai Properties and paragraph 51 above concerning the purchase of St Louis Flat 24A by Clara in her own name), in general and relative terms, I do find Father to be the more forthcoming and reliable witness.

71.  In contrast, Clara strikes me as being unduly guarded (sometimes bordering on the evasive) and defensive and argumentative (answering questions with questions and debating with Counsel).  Her answers are at times vague and at times obtuse (I believe, deliberately so).  Many of them are inconsistent with other parts of her evidence.

72.  For example, when questioned about what she had done with the Fullwin documents left by Father at the storeroom at the Kam Fai Carpark,[5] she says that she had never set foot inside the storeroom and had caused the structure to be cleared and the contents inside thrown away before the sale of the Kam Fai Properties in 2007.  Then, later, in answer to the question why Karen would want to buy the Kam Fai Carpark when that space could not be used by herself or let to others to park cars due to the obstruction of the storeroom, Clara claims that she had reinstated the Kam Fai Carpark by demolishing the storeroom erected there before the Kam Fai Carpark Assignment to Karen which is dated 7 October 2002.

73.  Another matter canvassed in the cross‑examination of Clara is how she found the 5 Fullwin documents that she has disclosed in this action, in particular, the YYB statement mentioned in paragraph 26(1) above.  Clara initially says that those documents including the said bank statement were contained in a yellow paper folder that was moved by Father from the Kam Fai Flat to the South Horizons flat after the Kam Fai Properties Assignment.  After Father left for Australia, the folder then followed Clara and Karen around when they moved once within South Horizons and then back to the Kam Fai Flat in September 2001.  When Clara vacated the Kam Fai Flat upon its sale in 2007, the folder was removed with everything else by the movers to her new home.  The folder had been lying in the bottom of a drawer in a wooden cabinet in her living‑room.  She stumbled upon it between April and June 2015 when she was asked by the solicitor who previously acted for her in this action to see if she could produce more relevant documents.  She duly disclosed them by a supplemental list of documents filed in June 2015.  In fact, Clara had disclosed the said bank statement on 5 August 2013.  Upon being confronted with this fact, Clara is forced to say that the said bank statement was not kept together, or found by her at the same time, with the other Fullwin papers disclosed by her.  However, she has not really been able to explain the circumstances in which she located this single page of document that belonged to Fullwin and Father.

74.  In short, I feel that I need to scrutinise Clara’s evidence with greater care.

75.  The doubt that Clara has left on my mind is not allayed by Agnes.   Even giving allowance for the long lapse of time, I find Agnes’ evidence to be too vague and reticent to be of any help.  Mostly importantly, I find the conduct that she describes not what I would expect from someone in the position of a 50% investor having a one‑third interest in a valuable property.

76.  That said, I have not based, to any significant degree, my choice of the version to believe on the impression that I have formed as to the general credibility of the witnesses from the manner in which they have testified.  I prefer to be guided by the inherently plausibility of the witnesses’ accounts and the congruity of such accounts with the undisputed/indisputable facts and circumstances of the case, of which there is no shortage.

77.  On this note, I turn to the inherent probabilities having regard to all the circumstances.

78.  Firstly, to buttress up her case that what Father wanted was to sell his interest in the Kam Fai Properties, Clara claims that Father had, prior to approaching her and Agnes, put the Kam Fai Properties on the market but to no avail.  Agnes has also given evidence that Father had told her the same in the course of their telephone conversation in May 1997. However, Clara has testified, and indeed put to Father who agrees, to the effect that the local property market was very active in the first half of 1997.  To explain why Father should be unable sell in such market, Clara says his asking price was too high.  This suggestion does not sit well with Clara’s case that Father asked for only HKD2,000,000 from Agnes and Clara for the Kam Fai Properties Assignment.  See paragraph 82(1) below.

79.  Secondly, the Kam Fai Properties Assignment was not an isolated transaction but occurred at about the same time as the Pinehurst Place Transfer.  Father’s evidence that the latter was a voluntary transfer that did not involve the actual payment of the stated consideration of AUD150,000 by Anna to him is easy to accept.  As noted above, Anna was at the time just 20 years old and still a student in Australia with no independent means.  This lends credence to Father’s evidence of a scheme on his part to keep the two family homes out of reach of his business creditors by removing them from under his personal name.

80.  Thirdly:

(1) If the parties had really intended a sale and purchase of just Father’s interest in the Kam Fai Properties at HKD2,000,000, I see no reason why the conveyancing documents could not have been prepared in a way that accurately reflect this.

(2) As it was, they show a sale and purchase of the whole of the Kam Fai Properties at HKD4,950,000.  In particular, the agreement for sale and purchase was backdated, purported to evidence receipt of deposits that were never paid and included terms that were never agreed or even discussed or raised.

(3) And SPC was misled in that Clause 11(a) of its facility letter dated 24 May 1997 expressly stated that the commitment of the SPC Loan was given on the borrowers’ and mortgagors’ representation and undertaking that the Kam Fai Properties were being purchased by the mortgagors at HKD4,950,000 which was the true price paid by them to the vendors thereof.

(4) On the other hand, Father, being motivated by a desire to evade creditors, would have every reason to want to create the false appearance of a complete disposal of the Kam Fai Properties at market price.

81.  Fourthly, the fact that Agnes and Clara were on paper made the owners of two‑thirds of the Kam Fai Properties is inconsistent with Clara’s case that it was agreed that she and Agnes would acquire just the half beneficial interest in the Kam Fai Properties that belonged to Father.

82.  Fifthly, if the Kam Fai Properties Assignment were the result of a genuine sale and purchase as suggested by Agnes and Clara, then none of the players involved had behaved in a manner that one would expect of parties to such a transaction:

(1) There is some evidence of the open market value of the Kam Fai Properties in the form of SPC’s valuation, i.e. HKD4,950,000.  A two‑third interest should proportionately be worth about HKD3,300,000.  It is difficult for me to understand why Father who was supposedly in dire financial circumstances would ask for only HKD2,000,000 from Agnes and Clara, especially when he had, according to Clara, previously listed the property for sale at an asking price that was above the market.

(2) On Mother’s case, her interest in the Kam Fai Properties shrank from that of one of 2 joint tenants with the right of survivorship to a one‑third share.  Yet she received no part of the sum of HKD2,000,000 said to have been paid by Agnes and Clara.

(3) Agnes and Clara were supposed to be equal investors.  Yet, Father approached them separately and they appeared to have made up their minds on the purchase separately.  There was apparently no discussion between the sisters on the wisdom of the transaction, their ability to afford the SPC Loan or how they were going to share the burden of ownership and as borrowers of the SPC Loan etc.

(4) Even allowing for the fact that they are sisters, Agnes was unrealistically contented in leaving everything to Clara throughout the years with the result that:

(a) Clara obtained the GE Facility by further encumbering the Kam Fai Properties without reference to Agnes or Mother or accounting to them for the drawings that had been made by her under such facility or the increases in mortgage repayments caused thereby.

(b) Clara supposedly received from Karen HKD300,000 for the Kam Fai Carpark.  Yet she did not appear to have shared this sum with Agnes or Mother or accounted to them for it.

(c) Clara was able to occupy the Kam Fai Flat for more than 5 years from September 2001 to December 2006, apparently rent free at the expense of Agnes and Mother because the apartment could have been let for rental income which would have reduced the contributionsrequired from Agnes towards the repayment of the borrowings obtained against the property.

(5) What strikes me as most absurd is the manner in which Clara disbursed the Kam Fai Proceeds (approximately HKD7,220,000) among those who supposedly had interests in the same:

(a) Mother, who was on paper a one‑third owner, was given just AUD100,000 (about HKD610,000) which was less than one‑tenth of the Kam Fai Proceeds.  In this regard, I am inclined to disbelieve Mother’s evidence that the said sum of AUD100,000 was accepted by her as partial settlement only.

(b) Agnes, another one‑third owner, received more than USD50,000 and less than USD100,000 according to Agnes and about USD80,000 (HKD640,000) according to Clara. Whatever the exact figure may be, both Clara and Agnes give evidence that it was Agnes who provided to Clara the amount that she would like to receive out of the Kam Fai Proceeds.  And Agnes worked out the figure by adding up what she had contributed over the years.  In other words, Agnes herself only aimed to recoup her outlay and not partake in the capital gain.  This is hardly how a true owner/‌investor would approach the final distribution process.  In a way, Agnes was worse off than Mother who at least did not have to put up any money on account of the Kam Fai Properties.

(c) In contrast, Clara, who was supposedly also just a one‑third owner, was able to amass more than HKD5,000,000 out of the Kam Fai Proceeds (see paragraph 40 above).

(6) This brings me to the way in which Clara applied the Kam Fai Proceeds.  The question arising is what caused her to put one of the St Louis Mansion units into her personal name and the other two under the Company if the whole Kam Fai Proceeds belonged to her and the Company was also beneficially wholly owned and controlled by her.  What was the point of segregating the two lots of investment?

83.  Sixthly, the Kam Fai Carpark Assignment is likewise peculiar as a sale and purchase:

(1) It is puzzling what Karen bought the Kam Fai Carpark for.  Though Clara claims that it had by the time of the conveyance to Karen been reinstated as a carparking space, the fact is that Karen did not appear to have made any gainful use of the Kam Fai Carpark at all while under her ownership.

(2) Clara, instead of, Karen named the price for the Kam Fai Carpark and handled its sale.

(3) Karen bought the space for HKD300,000 and sold it for exactly the same price 4 years later, which made the Kam Fai Carpark not much of an investment in the hands of Karen.  Meanwhile, she would have to pay interest on the BOA Loan if she were indeed the real borrower.

84.  None of the matters set out in paragraphs 82 and 83 above would have made any sense if the Kam Fai Properties Assignment or the Kam Fai Carpark Assignment had vested equal beneficial ownership of the Kam Fai Properties in Mother, Agnes and Clara or sole beneficial ownership of the Kam Fai Carpark in Karen.

85.  However, everything could have been explained and would have fallen into place if Clara had just been a caretaker and treasurer answerable to Father as the beneficial owner.

86.  This view is, to my mind, reinforced by the following emails from Clara to Father:

(1) First, by an email dated 8 November 2011 from Clara to Father and copied to the other Daughters, Clara confirmed that she had asked Father during her visit to Brisbane after the completion of the sale of the Kam Fai Properties if she could pay off the mortgage on 313 Warrigal Road, although the point that Clara was trying to make was that Father told her not to do so out of selfishness as he wanted Anna to continue to repay such mortgage like she was paying rent for the property and that putting money into 313 Warrigal Road would mean that Father would get less from Clara whose money Father treated as his.

(2) Second, Father and Clara had in a series of emails in January and February 2011 discussed the pros and cons of certain properties in Brisbane that Father had looked at with a view to buying with the use of the St Louis Flat 1D Proceeds.  In particular:

(a) By an email dated 22 January 2011, Father set out the particulars of 2 investment options involving 2 different properties and asked Clara, “Currently, how is the state of progress for the 28/2 closing?” and “which option you think more appropriate?  The defensive or the riskier one?”  28 February 2011 was the scheduled completion date for the sale of St Louis Flat 1D so the first question was a reference to completion of such sale.

(b) This becomes apparent from Clara’s reply email dated 24 January 2011 by which she informed Father, “1d is progressing smoothly.  Nothing extra should happen.  The deposit of 10% is stakeheld in the solicitor’s account until they have confirmed with the bank the loan balance, then they will release it.  28/2 is the settlement date.”  In answer to the second question, Po Ling advised, “defensive first and invest later.  I don’t want you to loss (sic) a place to live in when the investment is not smooth or fail”.

(c) Clara followed up with another email 18 minutes later, asking Father what the costs say agent’s commission percentage, conveyance fee, stamp duty etc would be and when the lease of his then residence would expire.

(d) On 26 January 2011, Clara emailed Father again, cautioning him to take time in finding the right house and concluding with this sentence: “The money won’t fly away.  So, don’t rush.”  Father reads “money” to be a reference to the proceeds of sale of St Louis Flat 1D.  Clara confirms this in her evidence in court.

(e) By an email dated 31 January 2011 to Father, Clara said, “Once you have identified a house, let me know the address and the detail, and I will have the bank do a valuation and arrange the financing and documents.  There are also other expenses, and the AUD is high too.  There are no reasons rushing to buy a property immediately like there is no tomorrow. I’d rather do it right.”

(f) On 31 January 2011, Clara wrote, “I will come most likely in March and after the completion of 1D.  Still need to buy AUG and clear up other costs in conveyance.  So can’t bid in Feb when nothing is ready.  In the meantime, look around and check the prices.”

87.  Clara deals with these emails on the basis that she offered to buy a house for Father in Australia out of her love for him and Anna as friction had been escalating between those two and Clara did not think they should continue to live together at 313 Warrigal Road.  Such explanation might be capable of belief if the emails were viewed in isolation.  However, I believe I should read them against the matters I have considered in paragraphs 82 to 85 above.  So viewed, these communications from Clara are consistent with Father having, and being regarded by Clara as having, an interest in the Kam Fai Proceeds and the St Louis Flat 1D Proceeds.  Anyway, by the time of the January and February 2011 emails, Father was no longer living with Anna.

88.  None of the points made by Clara in evidence and in submissions, which I have carefully reviewed and weighed in the balance, detract from my above analysis.

89.  The only significant matters that have caused some initial hesitation in my assessment of Father’s and Clara’s competing accounts of the express common intention, agreement or understanding behind the Kam Fai Properties Assignment are the facts:

(1) that Father did enjoy the benefit of the SPC Loan at least to the extent of HK$1,008,655.74 (see paragraph 14 above);

(2) that Agnes and Clara did assume personal liability vis‑à‑vis SPC for the repayment of the SPC Loan;

(3) that Agnes and Clara must have over the years made some contributions to the repayment of such loan, which I am prepared to accept.

90.  In this connection, I should make it clear that I am unable, on the evidence presently available to me, to resolve the dispute as to the source(s) of funds used to make monthly repayments of the loans/facilities obtained against the Kam Fai Properties or quantify anyone’s contribution.  And I make no such finding.  It is not necessary that I do so, this not being a case in which the court is asked to infer an initial or changed common intention to share beneficial ownership from financial contributions.

91.  In the final analysis, I do not believe that these 3 matters are sufficient to displace the preference that I have, on the balance of probabilities, gained for Father’s case on the express common intention, agreement or understanding behind the Kam Fai Properties Assignment, as analysed in paragraphs 78 to 87 above.

92.  Further, although Agnes and Clara were on paper liable to repay the SPC Loan, I see some force in Father’s observation that their real exposure was minimal.  The Kam Fai Properties were to some extent self‑sufficient in that they could generate rental income.  The worst‑case scenario in the event of default was for SPC to foreclose and sell the security. Given that their market value exceeded the amount of the SPC Loan by quite a margin, neither Agnes nor Clara was at any real risk of having to make good any or any substantial shortfall.

93.  Anyway, insofar as Clara is concerned, she has been rewarded with the CE Facility, the consideration under the Kam Fai Carpark Assignment or the BOA Loan relating thereto, free use of the Kam Fai Flat from September 2001 to December 2006 and the downpayment on St Louis Flat 24A, to which Father had all agreed.

94.  For the above reasons, I find the existence of an express common intention, agreement or understanding between Father and Clara that Father should remain the beneficial owner of the Kam Fai Properties which Clara held on constructive trust for him.

95.  It also follows that the Kam Fai Proceeds, the St Louis Flat 1D Proceeds and St Louis Flat 25C, to which the Kam Fai Properties can be traced, are likewise held on constructive trusts by Clara and the Company (as the case may be) for Father.

Orders

96.  I order that judgment be entered for the Plaintiff on his claim as follows:

(1) that Clara should account for the Kam Fai Proceeds;

(2) that Clara and the Company should account for the St Louis Flat 1D Proceeds;

(3) that Clara and the Company should pay Father the sums found to be due on the taking of such accounts;

(4) that the Company should transfer St Louis Flat 25C to Father.

97.  I also make a costs order nisi that Clara and the Company should pay Father’s costs of this action on a party and party basis, to be taxed if not agreed.  Father’s own costs should be taxed in accordance with the Legal Aid Regulations (Cap 91A).