WONG CHI HUNG, AUGUSTINE-MICHAEL v. TSE YUEN YEE IRENE
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HCA004864A/1995
HCA 4864/1995
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 4864 OF 1995
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| BETWEEN | ||
| WONG CHI HUNG, AUGUSTINE-MICHAEL also known as MICHAEL WONG | Plaintiff | |
| AND | ||
| TSE YUEN YEE IRENE | Defendant |
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Coram: Deputy High Court Judge S. Kwan in Court
Dates of Hearing: 20 to 23, 26 and 27 March 2001
Date of Handing Down of Judgment: 2 May 2001
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J U D G M E N T
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1. The plaintiff, Mr Wong Chi Hung Augustine Michael, brought this action against the defendant, Ms Tse Yuen Yee Irene, claiming declarations of his beneficial interest in respect of two properties on the basis of a resulting trust by virtue of his financial contributions towards the purchase price and various consequential or alternative relief. Three properties in Hong Kong are involved in this action and I shall refer to them in the same way as in the pleadings being "the 1st Property" (Flat No. 1406, 14th Floor, Block F, Healthy Gardens, No. 560 King's Road, Hong Kong), "the 2nd Property" (Flat B1, 16th Floor, Ming Fai Building, No.20-36 Wharf Road, Hong Kong), and "the 3rd Property" (Flat A, 21st Floor, Tower 18, Mei Hay Court, South Horizons, No. 18 South Horizon Drive, Hong Kong).
2. It was the plaintiff's case that he had contributed ￡52,000 towards the purchase price of the 1st Property which was bought in January 1992 in the name of the defendant, whom he had intended to marry at the time. The 1st Property was sold less than six months later at a profit and the net proceeds were used to finance the purchase of the 2nd Property in June 1992 and then the purchase of the 3rd Property in September 1992. The plaintiff claimed a beneficial interest in the 2nd and 3rd Properties, which are held in the name of the defendant, as the purchase price for these properties was derived in part from the plaintiff's contribution towards the purchase of the 1st Property and his share in the profit from the sale of the 1st Property. Alternatively, he claimed for the return of the amount he had contributed towards the purchase of the 1st Property and for his share of the profit on the sale of that property with interest thereon. In the further alternative, he claimed for repayment of the sum of ￡52,000 which he had paid to the defendant (if it should be held that this was his loan to the defendant, contrary to his contention) with interest thereon.
3. The defendant admitted that she had received ￡52,000 from the plaintiff in February 1992 but maintained that the money paid to her was not the plaintiff's contribution for the purchase of the 1st Property but was repayment of the loans she had made to the plaintiff between 1987 and 1989 when they were both living in the United Kingdom. She claimed that all three properties were purchased with her own funds and financed by mortgage loans she had obtained from various banks and that the plaintiff had nothing to do with the purchase of these properties. Furthermore, she alleged that the parties had agreed to terminate their relationship in early 1992.
4. It is necessary to go into the history of the parties' relationship in some detail. The undisputed matters may be set out as follows.
5. The parties are in their mid forties. They met in 1980 on a tour in Thailand and started dating in 1985. The plaintiff was at that time working in the U.K. on a trainee permit. They arranged to have a tour in Europe in the summer of 1986. It was then that they had an intimate relationship. After the tour, the defendant decided to stay with the plaintiff in England. She had quitted her job in Hong Kong before the tour. She applied to stay in the U.K. on a student visa and did a two-year course in business studies at the Birmingham Polytechnic, where the plaintiff was also studying part-time for a diploma. They cohabited at 10 Pavenham Drive, Pebble Mill, West Midlands, which was provided as living quarters to the plaintiff by his employer.
6. In August 1987, the plaintiff entered into an agreement to purchase a property at 26 Maxted Road, New Oscott, Sutton Coldfield, West Midlands ("the Midland Property") at ￡38,750 with completion of the purchase in November 1987. In about November 1987, his employment was terminated summarily by his employer. Because of the purchase of the Midland Property and the loss of his job, the plaintiff was in a tight financial position. There was dispute between the parties as to how much he had borrowed from the defendant in December 1987 and whether the defendant had contributed to the purchase price of the Midland Property.
7. For at least six months between December 1987 and October 1988, the plaintiff was receiving unemployment benefit. After the purchase of the Midland Property and from January to September 1988, the parties cohabited in that property.
8. In the summer of 1988, the defendant completed her studies at the Birmingham Polytechnic. She was accepted by the Stirling University in Scotland for a master degree in industrial relations and human resources. At about this time, the plaintiff obtained an education grant from the Birmingham City Council to study at the University of Bradford for a postgraduate diploma course. As the parties would be studying at different places, the Midland Property was sold in the summer of 1988. The completion was on 30 September 1988 and net proceeds of ￡68,712.50 were paid into the plaintiff's bank account. On 15 October 1988, the plaintiff withdrew ￡45,712.50 from his bank account and paid it into an account opened on 21 September 1988 in the defendant's name in Stirling. There was dispute between the parties whether this was indeed the defendant's account or whether she had held it on behalf of the plaintiff as he has alleged. I shall refer to this as "the disputed account".
9. In June 1989, the defendant completed her studies at the Stirling University and returned to Hong Kong for good on 21 July 1989. The plaintiff stayed on as he was to study for a master's degree in electrical engineering at the University of Manchester Institute of Science & Technology ("UMIST") in autumn. Before the defendant returned to Hong Kong and in about July 1989, the plaintiff had signed an agreement to purchase a property at 6 Cornergate, Westhoughton, Bolton, Lancashire ("the Bolton Property") at ￡57,000 with completion on 2 October 1989. On 19 July 1989, the defendant closed the disputed account and drew a cheque in the amount of the closing balance of ￡43,693.93 which was paid into the plaintiff's bank account. This sum was used to pay for a large part of the purchase price of the Bolton Property. As in the Midland Property, there was dispute whether the defendant had contributed towards the purchase of the Bolton Property.
10. The plaintiff returned to Hong Kong for vacation in about July or August 1989. The parties arranged for their families to meet as it was expected by them that they would get married one day. The defendant found a job in Hong Kong shortly after her return. She was in employment for most of the time until 1996. The plaintiff got a sponsorship from Westinghouse Systems Limited ("Westinghouse") for the project for his master degree in mid 1990. The defendant visited the plaintiff in the U.K. in the summer vacation of 1990 and stayed two months.
11. In December 1990, the plaintiff came back to Hong Kong for vacation and to attend the wedding of his brother. In April 1991, he was offered employment by Westinghouse as a system analyst and he got a work permit to stay in the U.K. He carried on with his studies at UMIST.
12. In December 1991, the plaintiff again returned to Hong Kong for vacation. He purchased a diamond ring on 14 January 1992. He said he proposed marriage to the defendant with the ring and was accepted. This was disputed by the defendant. On 19 January 1992, the provisional agreement for the purchase of the 1st Property at HK$1,450,000.00 was signed by the defendant and she issued a cheque of HK$30,000.00 for payment of the initial deposit. The plaintiff returned to the U.K. in the evening of 19 January 1992. The circumstances in which the 1st Property was purchased and the reason why it was purchased formed the crux of this dispute.
13. Shortly after the plaintiff went back to the U.K., he made arrangements on 28 and 29 January 1992 for a loan of ￡50,000 to be raised on a mortgage of the Bolton Property with a building society and the mortgage plan was supported by an insurance policy on his life. The loan of ￡50,000 together with ￡2,000 from the plaintiff's own savings were sent by the plaintiff's solicitors in the U.K. by express international money transfer on 24 February 1992 to a pound sterling account of the defendant at the Wing Hang Bank. ￡51,988.85 was credited into the defendant's account on 27 February 1992.
14. On 28 January 1992, the defendant drew a cheque of HK$115,000.00 for payment of the further deposit for the purchase of the 1st Property. Completion took place on 29 February 1992. The balance of the purchase price was paid in this manner. The defendant paid HK$347,660.00 with her own money from her savings account and obtained a loan of HK$1 million with a mortgage of the 1st Property. She assumed sole liability to discharge mortgage instalments and did so up to the time when the 1st Property was sold. The amount of ￡52,000 remitted to the defendant by the plaintiff was sitting in the defendant's sterling account and no withdrawals were made until 22 June 1992, so this money was not actually utilised by the defendant for payment of the purchase price of the 1st Property.
15. At the end of May 1992, the defendant signed a provisional agreement to sell the 1st Property in the sum of HK$1.7 million with completion on 25 June 1992. On 3 June 1992, the defendant signed an agreement to purchase the 2nd Property at HK$1,160,000.00 with completion on 15 July 1992. The purchase of the 2nd Property was financed with a loan on the mortgage of that property at HK$770,000.00. On 2 September 1992, the defendant entered into an agreement to purchase the 3rd Property, which was under construction, in the sum of HK$2,487,500.00 with a loan of HK$1,741,250.00 on the mortgage of that property. The plaintiff had no prior knowledge of the sale of the 1st Property, or of the purchase of the 2nd and 3rd Properties. Throughout, the defendant has discharged the mortgage instalments for the 2nd and 3rd Properties on her own.
16. The plaintiff got a master's degree from UMIST in November 1992. He came back to Hong Kong for vacation in December 1992. He and the defendant attended the wedding of a mutual friend. There was dispute whether the plaintiff had stayed with the defendant in the 2nd Property and whether he had gone to Guangzhou with her for a few days in January 1993. The defendant claimed that their relationship had already been terminated in early 1992.
17. The plaintiff returned to the U.K. in January 1993 and handed in his resignation to Westinghouse shortly thereafter. He left the U.K. for good and came back to Hong Kong in mid February 1993. He claimed that he had agreed with the defendant they would get married in October 1993, after he had completed a new assignment for Westinghouse in Malaysia from March to September 1993. This was denied by the defendant. The plaintiff did not go to Malaysia as scheduled but had the trip delayed for a month because he had developed arthritis and was hospitalised. He claimed that the defendant's feelings towards him were changed and their relationship cooled off from this period.
18. From April 1993 to July 1994, the plaintiff worked in Malaysia. The Bolton Property was sold in August 1993. He came back to Hong Kong for vacation in February 1994. He claimed he had dinner with the defendant on 14 February 1994 in which the defendant suggested they should terminate their relationship and he agreed. He also alleged the defendant told him that she would calculate his share in the properties she had purchased. All this was denied by the defendant.
19. The plaintiff was unable to contact the defendant after he returned to Hong Kong for good in July 1994. He engaged solicitors to pursue his claim against the defendant for a share in the 2nd and 3rd Properties in March 1995 and a letter of demand was sent on 9 March 1995. As no response was received from the defendant, a writ was issued on 19 May 1995. The defendant filed her Defence and Counterclaim only in February 1996. Leave was given to her to amend her Defence at the outset of this trial in respect of the amounts of the loans allegedly made to the plaintiff. She had solicitors acting for her at one stage but was not legally represented at the trial.
Assessment of the witnesses
20. This case turns entirely on whether I believe the evidence of the plaintiff or that of the defendant. I have had ample opportunity to assess their credibility as witnesses. The plaintiff was cross-examined by the defendant for two days. The defendant was cross-examined by the plaintiff's counsel over three days. I am mindful of the fact that this was a difficult case for the defendant to conduct in person as she had been intimately involved with the plaintiff for a number of years and it might well be difficult and distressing for her to deal with certain aspects of the case or to cross-examine the plaintiff effectively without getting emotional in the process. However, making every allowance for her in that respect, I am unable to be satisfied that the evidence she gave is credible and ought to be accepted. There are simply too many inconsistencies and irreconcilable differences in her case as reflected in the pleadings, the affirmations and the witness statement that she filed as well as in her testimony in court. As I will demonstrate below when I deal with my findings on the separate issues, her conflicting versions do not stand up to scrutiny. Her case that the remittance of ￡52,000 was the plaintiff's repayment of her loans to him (and she has put forward three versions of the amounts she had lent him) is inherently improbable.
21. The plaintiff's testimony is far more consistent and more inherently probable with the documentary evidence. On the whole, I am satisfied that he has told the truth notwithstanding that he has made a mistake as to the person who had issued the cheque of HK$30,000.00 for the initial deposit of the 1st Property. He said in evidence it was the defendant's mother whereas the cheque and the provisional agreement showed that it was the defendant who had issued the cheque. He admitted he was mistaken and that he could not remember clearly how the cheque came to be issued. I do not think that detracts from his credibility.
22. Two other witnesses were called by the defendant. They were her mother Madam Fung Sui Tin and her friend Mr Hameed Jalal. These witnesses do not advance the defendant's case because they have no personal knowledge of most of the material incidents that had happened in the course of the intimate relationship between the plaintiff and the defendant during 1987 to 1993. Furthermore, the defendant's mother did not seem to have a clear recollection of what had happened on the day when the provisional agreement was signed in respect of the 1st Property. This is hardly surprising as she was only asked to recall for the first time what had happened more than eight years after the event.
23. I turn to consider the material disputed issues of fact in chronological order.
The alleged loans to the plaintiff
24. Three versions were put forward by the defendant regarding the loans she had allegedly made to the plaintiff in the U.K. In her Defence filed in February 1996, she alleged that a total of ￡36,333.58 was lent to the plaintiff. This was made up of seven small loans between December 1987 and September 1998, a loan of ￡18,000 on 6 December 1988, a loan of ￡7,550 on 26 July 1989 and a loan of ￡9,000 on 2 October 1989. It was pleaded that the sums mentioned were advanced to help the plaintiff and to purchase the Midland Property and the Bolton Property with the intention that the parties would get married soon. It was alleged that their relationship broke up at about the end of 1991 when the plaintiff showed no intention of marrying the defendant and at the request of the defendant, the plaintiff paid her ￡52,000 on 27 February 1992 in full and final settlement of the loans with interest thereon.
25. The second version appeared in the 2nd Affirmation of the defendant filed in March 1998 as well as in her witness statement made in November 1999. She claimed that a total of ￡65,643 was lent to the plaintiff and this was made up of four loans: ￡18,000 on 2 December 1988 less a partial refund of ￡12,600 on 13 December 1988; ￡43,693 on 19 July 1989; ￡7,550 on 26 July 1989; and ￡9,000 on 2 October 1989. In addition to loans in the total sum of ￡65,643, she alleged that she had contributed ￡34,232.05 towards the purchase of the Midland Property, which was over 88% of the purchase price. It was alleged that the loan of ￡43,693 was made to assist the plaintiff to purchase the Bolton Property. Together with the loans of ￡7,550 and ￡9,000 made subsequently, the loans for the Bolton Property had amounted to ￡60,243, which was more than the purchase price of that property being ￡57,000. The second version of the loans is wholly irreconcilable with the first. Besides, the alleged repayment by the plaintiff in early 1992 in the sum of ￡52,000 was less than the total amount of the loans by ￡13,000.
26. The third version appeared in the Amended Defence which was put forward at the first day of the trial. The total amount of the loans was amended to ￡67,427.51. This was made up of the seven small loans between December 1987 and September 1988 that had been pleaded in the Defence and the other four loans in her second version. The allegation that the repayment of ￡52,000 was to cover interest as well as principal was deleted.
27. Leaving aside the seven small loans which do not take the defendant's case any further, there is evidence of transfers of money from the defendant's account to the plaintiff's account in the amounts of the four loans as alleged by the defendant. The plaintiff denied that they were loans from the defendant and gave an explanation as to why the amounts were transferred. The plaintiff admitted he had borrowed from the defendant on one occasion only and that was in late 1987 when he was out of work and receiving unemployment benefit. The loan was for ￡12,000 and he was told by the defendant that the money came from her mother. He repaid the loan with ￡6,000 as interest by a cheque of ￡18,000 to the defendant issued on 15 October 1988 out of the proceeds of sale of the Midland Property.
28. I propose to deal with the defendant's allegation of contributions to the purchase of the Midland Property before I come to the findings on the four loans.
The purchase of the Midland Property
29. As mentioned earlier, the completion of the purchase of this property was in November 1987. It was alleged in the Defence that the loans were used by the plaintiff for the purchase of this property and the Bolton Property. Of the loans pleaded in the Defence, only the first loan in the small sum of ￡365.01 made on 3 December 1987 could possibly have been made in connection with the purchase of this property. The other loans as pleaded were made well after the purchase. This was the first version alleged by the defendant.
30. The alleged contribution of the defendant was increased to ￡15,000, almost 40 % of the purchase price in her 1st Affirmation filed in January 1998. She claimed that the Midland Property was registered in the sole name of the plaintiff for the sake of convenience and alleged that the plaintiff did not repay any part of her contribution when the property was sold at a substantial profit a year later. This was her second version.
31. The third and last version as alleged in the defendant's 2nd Affirmation and her witness statement was that she had contributed ￡34,232.05 towards the purchase. The defendant relied on the bank statement of an account in her name which showed that on 12 November 1987, two sums of ￡22,181.94 and ￡12,046 were credited into her account and on the same date, a withdrawal of ￡34,232.05 was made. As for her previous allegation that the plaintiff did not repay any part of her contribution when the property was sold, she has now alleged the opposite and said that the plaintiff had repaid her ￡45,712.50 out of the proceeds of sale on 15 October 1988 and that the excess over her contribution was her share of the profit.
32. The defendant's explanation as to why she had changed her allegations in this respect was that her bank statements were not available to her before she made her 2nd Affirmation. I do not accept this. The changes she made to her allegations were just too drastic. She started off with having contributed ￡365 and ended up with a contribution of ￡34,232 with a full repayment of her contribution with profit in the sum of ￡45,712. This is not something that one would forget, even if one may not be able to recall the exact figures without any record from the bank.
33. For the above reason, I reject the defendant's evidence on this entirely. I accept the plaintiff's evidence notwithstanding that he was not able to produce the relevant bank statements (except for one bank statement showing that he had ￡22,000 in his account in August 1987) and find that the money for the purchase of the Midland Property had come from the plaintiff and that he had deposited the two sums of ￡22,181.94 and ￡12,046 into the defendant's account on 12 November 1987 for the purpose of paying the balance of the purchase price. The reason why he did that was because he had grouped all his funds in the defendant's account for a cashier order to be purchased as the defendant's account was at a branch close to the solicitors' office and because he did not want his former employer to know about the movement of funds in his account as he was afraid that his boss might do something to his disadvantage after his dismissal. The sum of ￡45,712.50 transferred on 15 October 1988 from the plaintiff's account to the disputed account which was in the defendant's name came from the proceeds of sale of the Midland Property. I find that the reason for the transfer was not as alleged by the defendant but because all the monies in the disputed account had belonged to the plaintiff beneficially and the disputed account was held by the defendant on the plaintiff's behalf. The disputed account and another account in the plaintiff's name were opened in September 1988 because the plaintiff needed to apply for a student visa to stay in the U.K. after his employment was terminated (he would be required to show his bank statement to the authorities) and because he had applied for an education grant (he had to maintain the balance in his account below a certain limit).
The loan of ￡43,693
34. I have set out the different versions by the defendant relating to the loans she had allegedly made to the plaintiff. I am unable to accept that she would have genuinely forgotten about this loan if it were indeed made when she gave instructions to her former solicitors to prepare the Defence and her 1st Affirmation because she did not have the relevant bank statements or because the Defence was done in a rush. I reject the defendant's evidence on this.
35. The amount of ￡43,693 was the closing balance in the disputed account. I have found that the monies in that account were held by the defendant on the plaintiff's behalf. The disputed account was closed in July 1989 a few days before the defendant left the U.K. to return to Hong Kong and all the monies in that account were returned to the plaintiff.
36. The amount of ￡43,693 then remained in the plaintiff's account until 2 October 1989 when the plaintiff withdrew ￡54,150 to pay the balance of the price of the Bolton Property. The sum of ￡43,693 did not represent the defendant's contribution towards the purchase of the Bolton Property.
The loan of ￡18,000
37. The defendant's evidence on this was utterly confusing and it was impossible for me to make sense of it. It was alleged that this loan was made for the subscription by the plaintiff of shares in British Steel plc. in a public offer. She had initially relied on a debit of ￡18,000 in the disputed account on 2 December 1988. Then she changed her story when she was cross-examined and said that the loan was made by a cheque of ￡18,000 drawn on another account in her name on 3 February 1989, which was contrary to her case in the witness statement and the Amended Defence.
38. I have found that the monies in the disputed account had belonged to the plaintiff beneficially. I reject the defendant's evidence that she had made the alleged loan. I find that ￡18,000 was withdrawn from the disputed account on 2 December 1988 and credited to an account in the plaintiff's name the same day and from the latter account the plaintiff drew a cheque for ￡18,000 on 6 December 1988 to subscribe for British Steel shares in his name. He received a refund when he was allotted a lesser number of shares and the refund of ￡12,600 was credited into the disputed account on 13 December 1988. I also find that the subsequent withdrawal of ￡18,000 from the disputed account on 31 January 1989 was for also for the subscription of British Steel shares but this time the application was made in the defendant's name on behalf of the plaintiff. A refund of ￡12,600 was received when the shares were allotted to the defendant and the refund was credited to the disputed account on 13 February 1989.
The loans of ￡7,550 and ￡9,000
39. It was alleged by the defendant that these loans were made to the plaintiff on 26 July 1989 and 2 October 1989 to assist him to purchase the Bolton Property apart from the substantial loan of ￡43,693 on 19 July 1989. She claimed that the plaintiff had told her he needed further loans to complete the purchase because he had invested part of the loan of ￡43,693 in the stock market.
40. As I have already stated and this was established by the bank statement of the plaintiff's account, the amount of ￡43,693 which came from the disputed account had sat in the plaintiff's account until he withdrew ￡54,150 on 2 October 1989 to pay the balance of the purchase price. I reject the defendant's allegation that the plaintiff had made up a pretext to borrow from her. I accept the plaintiff's evidence on this. I find that the sum of ￡7,550 was a repayment by the defendant to the plaintiff as the plaintiff had given her ￡8,000 for her expenses when she went to the Stirling University in September 1988. As for the sum of ￡9,000, I find that this was the price agreed between the parties for the British Steel shares which the defendant was allotted in the subscription she made on the plaintiff's behalf and it was agreed between them subsequently that the defendant was to keep the shares for herself at the price of ￡9,000 which she agreed to pay to the plaintiff.
The purchase of the 1st Property
41. Having rejected the defendant's case that the plaintiff's remittance to her of ￡52,000 in February 1989 was for repayment of various loans, I turn to the plaintiff's case as to the circumstances in which the 1st Property was purchased.
42. The plaintiff's evidence on this appeared credible and was supported by documentary evidence. He produced an invoice for the purchase of a diamond ring on 14 January 1992, five days before the provisional agreement was signed. I accept his evidence he had proposed marriage to the defendant and was accepted. He also gave evidence of the size, layout and interior of the 1st Property which he had viewed twice before the provisional agreement was signed. Other than disagreeing with the plaintiff that the living room and kitchen were quite dim, the defendant did not challenge the description given by the plaintiff. The documents disclosed by the plaintiff showed that he had arranged for a loan of ￡50,000 on the mortgage of the Bolton Property shortly after his return to the U.K. and he had made a remittance to the defendant of ￡52,000 five days before the completion date of the 1st Property. These actions of the plaintiff supported his case that he was materially interested in the purchase of the property. Last but not least, the plaintiff produced a birthday card which the defendant sent him on 15 February 1992. If the parties had broken up at the end of 1991 or in early 1992 as alleged by the defendant, it would be most unlikely that the defendant would have sent him a card meant for a close and intimate friend. I reject the defendant's explanation why she had sent the plaintiff the birthday card notwithstanding the alleged breaking up of their relationship. Further, the defendant's allegation that the parties had broken up by the time the 1st Property was purchased could not be reconciled with the plaintiff's evidence, which I accept, that he had continued to see the defendant on an intimate basis when he visited Hong Kong on his vacation at the end of 1992.
43. I find that there was a common understanding between the parties that the 1st Property was to be purchased in contemplation of their marriage, that the plaintiff was to raise money on the Bolton Property to make a down payment of about 30% of the purchase price for the 1st Property, that 70% was to be raised by a mortgage of the 1st Property and that the defendant would be responsible for paying the mortgage instalments as she had a steady job in Hong Kong. I further find that the 1st Property was only registered in the name of the defendant for the sake of convenience because the plaintiff had left Hong Kong by the time the documents were signed in a solicitors' office.
44. I do not regard it as relevant that the plaintiff's remittance of ￡52,000 had remained in the defendant's sterling bank account and no withdrawals were made until June 1992 and that the defendant had in fact utilised her own funds to pay 30% of the purchase price of the 1st Property. What mattered was that there was a prior agreement or understanding that the 1st Property was to be acquired by the parties jointly, that the plaintiff was to contribute to 30% of the purchase price and that he had altered his position by acting on it and had in fact given his contribution to the defendant. In my judgment, that is sufficient to invoke the doctrine of a constructive trust in the plaintiff's favour.
The relief sought
45. It is unnecessary for me to make findings regarding the purchase of the 2nd and 3rd Properties because in the closing submissions of Mr Andrew Cheung for the plaintiff, he abandoned the reliefs sought in the Statement of Claim for declarations of beneficial interest of the plaintiff at such ratios as may be determined by the court in respect of the 2nd and 3rd Properties or to trace the plaintiff's share of the proceeds of sale of the 1st Property into the 2nd and 3rd Properties. I understand that the 3rd Property had been re-possessed by the mortgagee bank in late 2000. That has made my task much simpler. The plaintiff only seeks repayment of his contribution towards the purchase of the 1st Property, payment of his appropriate share in the net profit on the sale of the 1st Property and compound interest, alternatively simple interest, on the aforesaid sums.
46. The contribution made by the plaintiff was ￡52,000. The exchange rate on 27 February 1992, which was the date when the amount was received by the defendant, was HK$13.46 to ￡1. Thus, the plaintiff's contribution in Hong Kong dollars at the time of the remittance was HK$699,920.00.
47. It was accepted by Mr Cheung that the defendant's contribution towards the purchase of the 1st Property was HK$1 million because the defendant was solely responsible for the discharge of the mortgage she had taken out in her own name and she had in fact discharged the mortgage instalments on her own up to the time the 1st Property was sold.
48. I accept Mr Cheung's submissions that the parties' respective shares in the proceeds of sale of the 1st Property should be calculated by reference to their contributions. The arithmetic is as follows.
The plaintiff's share in the 1st Property:
HK$699,920 x 100% = 41.17% HK$699,920 + HK$1,000,000
The defendant's share in the 1st Property:
HK$1,000,000 x 100% = 58.83% HK$699,920 + HK$1,000,000
49. As for the net proceeds of sale upon the resale of the 1st Property in June 1992, the calculations are as follows:
Resale price: HK$1,700,000 Less Purchase price: (HK$1,450,000) Gross profit: HK$250,000 Less Purchase costs Agency fee (HK$14,500) Stamp duty (HK$29,000) Registration fee (HK$1,060) Land search (HK$350) Solicitors' fees (HK$12,250) Mortgage interest of 4 instalments (HK$34,041.92) Penalty for early repayment of mortgage loan (HK$30,000) Management fees (HK$2,200) Renovation (HK$30,000) Rates for 4 months (HK$2,800) Resale solicitors' fee (HK$7,000) (HK$163,201.92) Net profit: HK$86,798.08
50. The plaintiff's share in the proceeds of sale of the 1st Property is made up of his contribution plus his share in the net profit on resale. The calculation is like this:
HK$699,920.00 + HK$86,798.08 x 41.17% = HK$735,654.77
51. I hold that the plaintiff is entitled to recover the sum of HK$735,654.77 from the defendant.
52. Mr Cheung seeks compound interest on the aforesaid sum under the equitable jurisdiction of the court on the basis that the defendant as a trustee had made a profit by improperly employing the proceeds of sale of the 1st Property, being trust money, in trade or speculation. I was referred to Vol.48 Hals. (4th ed.) para. 1005 and Wallersteiner v. Moir (No. 2) [1975] Q.B. 373 at 387E-388H, 397A-399B, 406A-G. Assuming that the proceeds of sale were used to finance in part the purchase of the 2nd and 3rd Properties, I am not satisfied that the evidence is sufficiently cogent to indicate that these two properties were purchased for the purpose of trade or speculation even if I were to treat investment as a form of trade for this purpose. I find that the primary reason for the purchase of the 2nd Property was as a residence for the defendant. I further find that the main reason for the purchase of the 3rd Property was also as a residence for the defendant and probably for a family of her own in the event of her marriage notwithstanding that she had denied telling the plaintiff she had bought the property with the intention that it was to be their future matrimonial home. In my judgment, the purchase of these properties as a form of investment was but a subsidiary reason. I decline to award compound interest with yearly rests. I will award simple interest on the amount that the plaintiff is entitled to recover.
53. As for the rate of interest, Mr Cheung has proposed an average rate of 12% per annum as from 25 June 1992 being the date when the 1st Property was sold to the date of judgment for ease of calculation instead of seeking interest at the fluctuating commercial rates over that period. Having considered the interest rates on judgment debts from June 1992, I agree it would be appropriate to award interest at that rate.
54. Accordingly, I give judgment to the plaintiff in the sum of HK$735,654.77 with interest thereon at 12% per annum from 25 June 1992 to the date of judgment and thereafter interest at the prevailing judgment rate, which is 12.08% per annum as of today, until full payment.
55. I dismiss the defendant's counterclaim for the alleged loss and damage in that she was unable to sell the 2nd and 3rd Properties due to the registration of the writ herein against these properties. As the plaintiff has abandoned his claim for a beneficial interest in these properties and I have given a monetary judgment in his favour, I order that the registration of the lis pendens against these properties be vacated.
56. There will be an order nisi that the defendant is to pay the plaintiff's costs of this action, to be taxed if not agreed.
| (S. Kwan) | |
| Deputy High Court Judge |
Representation:
Mr Andrew K.N. Cheung, instructed by Messrs Leung, Chan & Pang, for the plaintiff.
The defendant, appearing in person.