LEUNG LAI KWAN v. LO KAI WING AND ANOTHER

HCA 1158/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1158 OF 2011

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D E C I S I O N

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1.  On 18 May 2015, I handed down a decision in respect of costs in this matter. The issue that gave rise to the argument in respect of costs revolved around the interpretation of Orders 22 and 62, and in particular the effect of the rules in respect of sanctioned offers.

2.  Application is now made by Madam Leung for leave to appeal against my decision.

3.  The arguments advanced are essentially a repetition of the arguments advanced by Mr Lam previously.  The finding he seeks necessarily involves a conclusion that, irrespective of the nature of a pre‑trial offer, unless the offer is made in the form of a sanctioned offer, with an appropriate payment into court, the court cannot take the offer into account at all in assessing costs. 

4.  This case graphically illustrates that there may be many situations in which a pre‑trial offer may not be capable of meeting the requirements of a sanctioned offer.  It simply cannot be the situation that in those circumstances it is not open to a party to make a pre‑trial offer with a view to protecting himself against costs.

5.  I am not satisfied that the matter is arguable at all, and accordingly leave to appeal must be refused.

6.  Madam Leung also applies for a stay of execution on the costs order pending appeal.  It is well established that a stay of execution will only be granted if there are strong grounds for the proposed appeal: see Toeca National Resources BV v Baron Capital Ltd [2013] 5 HKLRD 178. 

7.  Mr Lam has failed to satisfy me that the appeal is even reasonably arguable.  Madam Leung has been legally aided throughout these proceedings and the successful defendants have had to look to their own resources to resist the matter not only at trial but through a substantive appeal.  There is no basis at all for the successful defendants to be further kept out of their costs.

8.  The application to stay execution of the costs order is refused.

9.  There will be an order that Madam Leung must pay Mr Lo and Ms Hon’s costs of and incidental to the application on a party and party basis.  Where necessary, costs will be taxed on Legal Aid Regulations.

HCA 1158/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1158 OF 2011

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D E C I S I O N

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1.  In a reserved judgment, handed down on 31 July 2014, following a four day trial, I found for the defendants (Mr Lo and Ms Hon), in these proceedings, and dismissed the plaintiff’s (Madam Leung’s) claim entirely.  An order nisi was made that Madam Leung must pay Mr Lo and Ms Hon’s costs on a party and party basis. 

2.  Mr Lo and Ms Hon now apply to vary the costs order so that costs should be at the following rates:

(a) before 26 September 2013, on a party and party basis;

(b) from 26 September 2013, on a common fund that basis;

(c) from 18 July 2014, on an indemnity basis; and

(d) the costs of the application on an indemnity basis.

3.  The action related to property in Tai Po, registered in the name of Mr Lo and Ms Hon. Madam Leung contended that Mr Lo and Ms Hon held the property on trust for her.  That claim was comprehensively dismissed.

4.  The basis for the enhanced costs orders sought is a series of offers that were made prior to the commencement of trial.  These offers were as follows:

“(a) on 12 September 2013, Mr Lo and Ms Hon made an offer, marked ‘without prejudice save as to costs’, in the following terms (the Calderbank offer):

(i) Mr Lo and Ms Hon to remain the legal and beneficial owners of the property;

(ii) Mr Lo and Ms Hon to pay Madam Leung $178,500 within 21 days of the date of an order;

(iii) Mr Lo to pay Madam Leung the sum of $3,500 per month by way of periodicals payment from the date of an order during their joint lives;

(iv) costs of the action to Mr Lo and Ms Hon;

(v) the offer sought a response within 14 days, (i.e. by 26 September 2013).

(b) on 19 June 2014, Mr Lo and Ms Hon made an offer, marked ‘Sanctioned Offer’, in the following terms (the 1^st sanctioned offer):

(i) the property to be sold by private treaty within six months;

(ii) Mr Lo and Ms Hon to have conduct of the sale;

(iii) the proceeds of sale to be held by Mr Lo and Ms Hon’s solicitors as stakeholders;

(iv) all costs and disbursements and expenses be paid out of the proceeds of sale;

(v) one half of the net proceeds of sale to be paid to Madam Leung; the remaining half of the net proceeds of sale to be paid to Mr Lo and Ms Hon;

(vi) no order for costs.

(c) on 7 July 2014, Mr Lo and Ms Hon made an offer, again marked ‘Sanctioned Offer’, in the following terms, (the 2^nd sanctioned offer):

(i) a valuation of the property to be obtained from a bank or financial institution in Hong Kong chosen by Mr Lo and Ms Hon;

(ii) if the valuation exceeded $3,100,000, Mr Lo and Ms Hon to pay Madam Leung $1,550,000;

(iii) if the valuation did not exceed $3,100,000, Mr Lo and Ms Hon to pay Madam Leung one half of the market value as assessed;

(iv) provision was made for Madam Leung to get her own valuation;

(v)   no order to costs.”

5.  None of these offers were accepted by Madam Leung, and the matter proceeded to trial.  It is not suggested by Madam Leung that she did better than any of the offers.  Consequently the question arises as to whether or not enhanced costs should be ordered.  There is no dispute that the application to vary the costs order nisi was made within the required time.  The issue is whether or not any of the offers may be taken into account in determining the appropriate costs orders.

6.  Ms Kei accepts that neither of the offers marked “Sanctioned Offer” meet the strict requirements of RHC O 22, and cannot therefore be treated as sanctioned offers.  It is accordingly clear that the cost consequences of sanctioned offers as contained in O 22, r 20‑24 cannot apply.  She does however, rely upon the Calderbank offer.

7.  Mr Lam says that none of the offers made can have any impact at all on costs.

8.  First, he says that the Calderbank offer, involving as it does a payment of money, is barred from consideration by virtue of O 62, r 5(1)(d) which provides:

“(1) The Court in exercising its discretion as to costs shall to such extent, if any, as may be appropriate in the circumstances take into account –

…

(d) any written offer which is expressed to be ‘without prejudice save as to costs’ and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22;”

9.  Mr Lam’s argument goes this way.  By O 22, r 3(2), where an offer by a defendant involves a payment of money to the plaintiff, the payment offered must be made by way of a sanctioned payment.  It is clear that no payment was made at the time the Calderbank offer was made. 

10.  It would have been possible for Mr Lo and Ms Hon to have paid into court the sum of $178,500 which was offered by way of lump sum.  But it would not have been possible for them to have paid into court the proposed monthly payment, payable for the joint lifetimes of Mr Lo and Madam Leung of $3,500 per month.  It would not have been possible because it is simply impossible to assess the amount of the payment. 

11.  It necessarily follows that Mr Lo and Madam Leung could not have protected their position in respect of that offer by making a sanctioned payment.  It follows from that, that the exception contained in O 62, r 5(1)(d) does not apply, and the offer, being a Calderbank offer, is open to be taken into account.

12.  Ms Kei, somewhat tentatively I felt, suggested that because a response was sought to the offer within 14 days and there was no response, the offer had lapsed. No authority was cited for the proposition and in the absence of a specific provision in the offer that it would lapse within 14 days, I would not hold that the offer had lapsed.

13.  Mr Lam’s argument in this respect must fail.

14.  Second, in respect of the two purported sanctioned offers, Mr Lam again contended that as both proposals involved a payment to Madam Leung, they could not constitute sanctioned offers unless the sums to be paid were paid into court as sanctioned offers pursuant to the appropriate rules.  That must be right. 

15.  Having regard to the terms contained in the offers upon which the payments were to be assessed, it was simply not possible to fix an appropriate sum which could be paid into court.  For precisely the same reasons as apply to the Calderbank offer, the two offers entitled “Sanctioned Offers” could not have constituted sanctioned offers and accordingly are not caught by the provisions of O 62 r 5(1)(d).

16.  Mr Lam further argued in the alternative that as both purported sanctioned offers contained a provision that there be no order as to costs meant that such a proposal excludes the offers from being considered sanctioned offers in terms of the rules. 

17.  O 22, r 20(1) provides that where a defendant’s sanctioned offer or sanctioned payment to settle the whole claim is accepted without requiring the leave of the court, the plaintiff is entitled to his costs of the proceedings after the date of serving notice of acceptance, unless the court otherwise orders.

18.  Mr Lam says that by virtue of that provision a defendant cannot make a sanctioned offer containing a provision that there be no order for costs.  There appears to be a strong argument arising from the reasoning of the English Court of Appeal in Mitchell & Ors v James & Ors [2003] 2 All ER 1064, that the rules as to sanctioned offers do not intend that terms as to costs be included in sanctioned offers, and accordingly the inclusion of a reference to costs would not prevent an offer, entitled “Sanctioned Offer” from being such. I do not find it necessary for the purposes of this decision to reach a conclusion on this point as in any event the offers do not constitute sanctioned offers. 

19.  Mr Lam made the bold submission that under the rules of court as they now stand the only offer that could have an impact on costs was a sanctioned offer or a sanctioned payment.  He said that with the new regime of sanctioned offers now contained in the Rules, following CJR, an offer that did not constitute a sanctioned offer or a sanctioned payment could not have any impact at all on costs.

20.  With respect to Mr Lam that cannot be right.  It is correct that an offer to settle by either a plaintiff or a defendant will not have the specified consequences contained in O 22 unless that offer complies strictly with the rules.  But Mr Lam’s submission entirely disregards O 22, r 2(4) which provides:

“Nothing in this Order prevents a party from making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with this Order, it does not have the consequences specified in this Order unless the court so orders.”

21.  It is clear from the provisions of O 22 and O 62, r 5(d), that the intent of the rules is that where an offer is to be made which constitutes a payment, usually by a defendant to a plaintiff, of a known sum of money, or an ascertainable sum of money, that sum must be paid into court if the party making the offer wishes to have the offer taken into account to his advantage in respect of costs.  There are obvious reasons why that should be so.  By insisting upon the payment being made into court, the party entitled to the payment will not have his action settled and then have to wait for funds.

22.  But when read together, O 22, r 2(4) and O 62, r 5(1) plainly recognise that there may be a myriad of situations in litigation where it is simply not possible for a party to make a payment into court in conjunction with an offer to settle.  I simply cannot accept that the Rules are designed to exclude such a party from having an offer taken into account in respect of costs, if that offer to resolve litigation is not one which enables or requires a payment into court.  Such a conclusion would be quite contrary to the spirit and intent of CJR, much of which is directed towards the resolution of disputes without the need for those disputes proceeding to trial.  Mr Lam’s submission, if accepted, would encourage litigation for the sole purpose of resolving questions of costs.

23.  Consequently, although I am satisfied that the two sanctioned offers do not constitute sanctioned offers in terms of the High Court Rules, as with the Calderbank offer, there is no reason at all why they should not be taken into account in the exercise of the court’s discretion as to costs.

24.  It is well established that an offer may be taken into account even if it does not constitute a sanctioned offer although so entitled: see Montiro Ltd & Anor v Tse Ping Shun David [2012] 2 HKC 392, upheld in Montiro Ltd & Anor v Tse Ping Shun David, (unreported, CACV 291/2011, 28 December 2012).  In that case the offer, when made, was described as a sanctioned offer but found, by reason of the Rules, not to constitute a sanctioned offer, nor, in the absence of appropriate notification that the offer was “without prejudice save as to costs”, a Calderbank offer.  The judge described the offer in those circumstances as an “open offer”.

25.  I do not think it is necessary to characterise such an offer precisely in those terms as the expression “open offer” carries with it an implication that it is an offer which contains a concession of some nature which might be put before a trial judge.  In the absence of such factor, I would prefer to characterise the offer as an “offer relevant to costs”.  It is not necessary for the purposes of this decision to determine whether an offer, inappropriately entitled “sanctioned offer”, if containing a concession, would thereby constitute an open offer which might be put before a trial judge.

26.  Mr Lam confined his argument to the technical issue as to whether or not the jurisdiction existed to vary the order to costs.  His arguments fail and I am satisfied that I do have jurisdiction to vary the order.  Mr Lam made no submission as to the level of the costs orders.

27.  A party who is in receipt of an offer which is reasonable and who goes to trial having rejected that offer is always liable to a higher level of costs if they do not do better than the offer that has been rejected.  Over a period of time three offers were made in this case each of which has proved to be worthy of acceptance by Madam Leung.  Each offer was significantly better than the total failure of Madam Leung’s litigation which was the end result.  Each offer was rejected.  The level of costs enhancement sought by Mr Lo and Ms Hon, staged as it is progressively, is reasonable and fair. 

28.  There is a further factor, not specifically relied upon by Ms Kei, which leads me to conclude that indemnity costs are appropriate, after 18 July 2014, the first day of the trial.  Part of the evidence relied upon by Madam Leung was an assertion that there had been a family meeting at which an agreement had been reached in respect of the ownership of the property, with Madam Leung and Mr Lo’s siblings being added to the title to the property.  In respect of that assertion I made the following finding at §72 of the judgment:

“I am satisfied each of the four witnesses asserting an agreement has done so falsely, in an attempt to bolster Madam Leung’s case. Accordingly little reliance can be placed upon the residents. The matter also tells significantly against Madam Leung’s credibility on any evidence she gave it was in her own favour.”

29.  It is entirely appropriate that indemnity costs should be awarded against party who propounds false evidence in support of a claim.

30.  I am satisfied that it is a proper exercise of my discretion in respect of costs having regard to the whole of the circumstances of the case to make an order in terms of §2(a), (b) and (c) above.  There is no basis to award interest on costs.  Costs on the summons will be on a party and party basis to Mr Lo and Ms Hon.  Madam Leung’s costs will be taxed on Legal Aid Regulations.

HCA 1158/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1158 OF 2011

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J U D G M E N T

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The proceedings

1. The subject matter of these proceedings is a property known as Flat B, 3^rd Floor, Block 2, Eightland Gardens, No 2 Chee On Rd, Tai Po, New Territories, Hong Kong (the “Tai Po property”), of which the defendants, Mr Lo Kai Wing (“Mr Lo”), and his wife, Ms Hon Kam Wah (“Ms Hon”), are the registered owners by way of a joint tenancy.

2. Mr Lo’s mother, the plaintiff (“Madam Leung”), seeks a declaration to the effect that Mr Lo and Ms Hon hold the Tai Po property on trust for her as sole beneficial owner, and that the Tai Po property be assigned to her, free of all encumbrances by Mr Lo and Ms Hon. Mr Lo and Ms Hon say that they are the rightful owners of the property, and they are sole beneficial owners.

The factual circumstances

3. The fact that I now set out are either not in dispute or the facts as I find them to be.  Where there is a significant area of dispute I shall indicate that area, and will deal with those disputes later in this judgment.

4. Madam Leung and her late husband, Mr Lo Chu Kai (“Mr Lo Snr”) were married in 1960.  There were five children of the marriage, sons, Mr Lo, born in 1961, Lo Wai Lok, born in 1963, Lo Yip Shing, born in 1965, a daughter, Lo May Kay, born in 1968, and another son, Lo Sai Kit, born in 1970.  Sadly, Lo Sai Kit died in 1988 as a result of illness.

5. Mr Lo Snr was a fishmonger operating a fresh fish stall at the wet market in Cheung Sha Wan.  He was extremely industrious, rising usually at 4 am to buy fish, and working seven days a week.  When she was able, Madam Leung would assist him in the fish stall.  Mr Lo Snr made some savings, although not significant amounts, as may be seen from his bank passbooks.  Madam Leung made savings, apparently from her housekeeping allowance, and was able to buy some stocks and shares and gold ornaments.

6. In the mid‑1960s the family moved to a public housing flat in Upper Wong Tai Sin Estate.  After the birth of Lo May Kay and Lo Sai Kit particularly, the living conditions were quite crowded.

7. Madam Leung is now aged 73 years.  Mr Lo Snr died in September 2011, due to illness. 

8. In July 1979, Madam Leung and Mr Lo Snr agreed to purchase, in their joint names, an uncompleted flat known as Flat 2808, 28/F, Block G, Allway Gardens, 20 On Yat St, Tsuen Wan, New Territories (the “Tsuen Wan flat”).  The purchase was completed in April 1981. There was a mortgage, which Madam Leung says she and her husband repaid in five years. 

9. There was a dispute as to just how the purchase price was provided and how the mortgage was repaid, but nothing turns on that because I am satisfied that they purchased the flat jointly and intended to own it together, jointly. It simply does not matter which of the two provided the funds for the purchase.  I place no weight on Madam Leung’s references to herself in the singular in relation to either the Tsuen Wan or the Tai Po properties. Those references do not detract in any way from the joint intention of the couple when the property was acquired.  Her references in the singular are merely a reflection of the fact that Mr Lo Snr has passed away and she is now by herself.

10. The Tsuen Wan flat was incomplete at the time of the purchase.  Two of Mr Lo Snr’s brothers made similar purchases in the same estate.  One of those brothers assisted Mr Lo Snr and Madam Leung with a loan to enable them to make the purchase.  The purchase of the Tsuen Wan flat was mainly to relieve the crowded living conditions the family was enduring in public housing, but in all probability, in part as well, an investment.

11. In 1980, Mr Lo began to work at Cathay Pacific in the cargo handling logistics division.

12. The purchase of the Tsuen Wan flat was completed on 7 April 1981.  Lo Wai Lok, who was apparently doing well at school, moved into the flat and lived there, making it his permanent home.  It provided him with a quiet place to study.  Other members of the family would come and stay at the flat during holidays and weekends using it, they described, as a vacation home. 

13. Mr Lo Snr and Madam Leung never moved into the Tsuen Wan flat as a home, although they visited it from time to time.

14. In 1987, Mr Lo left Cathay Pacific and began to work, still in cargo logistics, for a firm called Holiday and Travel Mart Limited.  In 1989, Mr Lo and Ms Hon married.  At the suggestion of Mr Lo Snr and Madam Leung, Mr Lo and Ms Hon moved in to live in the Tsuen Wan flat just after their marriage.

15. In 1990, Lo Wai Lok moved out of the Tsuen Wan flat and went to Australia for further study.  Ultimately, he was to graduate with a PhD and return to Hong Kong.  He did not live in the Tsuen Wan flat after 1990.

16. In 1992, a son was born to Mr Lo and Ms Hon.  He was the first child, and the son of the eldest son of Mr Lo Snr and Ms Hon. At Mr Lo Snr’s request, Mr Lo performed the lantern lighting ceremony (點燈), involving the lighting of a lantern on the ancestral shrine of the family to indicate to the ancestors that the first grandson of the eldest son was born and to ask the blessings of the ancestors. 

17. I have no doubt at all that Mr Lo Snr was delighted at the birth of his first grandson, to his eldest son, a particularly significant matter in the life of the traditional Chinese man that Mr Lo Snr was.

18. In 1994, Ms Hon had to cease work because she was diagnosed with thyrotoxicosis.  She and Mr Lo wanted to move to Tai Po, they said, to be near Ms Hon’s mother.  Their wish was that she would be able to help them through Ms Hon’s illness and with childcare.  As they did not have sufficient funds to buy their own flat they decided to wait until they could purchase a flat under the Home Ownership Scheme.  At that time there were no HOS flats available in Tai Po.

19. In late 1995, Mr Lo Snr and Madam Leung put the Tsuen Wan flat on the market for sale.  The circumstances in which the decision to take this step was made comprise the central issue in these proceedings and will be discussed in detail further below. 

20. In short, the case for Mr Lo and Ms Hon is that they wished to move to Tai Po where Ms Hon’s mother lived, as she would be able to assist them during Ms Hon’s illness with childcare and the like.  They said that Mr Lo Snr suggested, with Madam Leung’s acquiescence, with that the Tsuen Wan flat should be transferred into their names.  They told him of their wish to go to Tai Po, and Mr Lo Snr agreed that the Tsuen Wan flat should be to be sold and sufficient of the proceeds of sale used by Mr Lo and Ms Hon to buy a flat in Tai Po. 

21. The case for Madam Leung is that Ms Hon’s mother had been disparaging of Mr Lo because he did not own his own property.  As Mr Lo and Ms Hon wished to move to Tai Po for better schooling for their son, Madam Leung said that she and Mr Lo Snr had agreed that the Tsuen Wan flat would be sold and a flat purchased in Tai Po, which would be held in Mr Lo and Ms Hon’s name to deceive Ms Hon’s mother into believing that Mr Lo and Ms Hon owned their own property.  The case for Madam Leung was that at all times the Tai Po flat was held in trust for her and Mr Lo Snr.

22. On 17 March 1996, a purchaser was secured for the Tsuen Wan flat at a sale price of $1,790,000.  On 21 March 1996, Mr Lo sent a fax to solicitors, Jesse H Y Kwok & Co (“JK & Co”) with whom he had had contact through work.  Mr Lo requested JK & Co to handle the sale of the Tsuen Wan flat.  Mr Jesse Kwok (“Mr Kwok”) himself handled the transaction.

23. On 26 March 1996, Mr Lo and Ms Hon, after having looked at other flats in the Tai Po area for some time, located the Tai Po flat and entered into a Provisional Agreement for Sale and Purchase.  Ms Hon, from her own funds, paid an initial deposit to the vendors in the sum of $30,000.  JK & Co were instructed by Mr Lo and Ms Hon to act for them on the purchase of the Tai Po flat.

24. Although Madam Leung says that she told Mr Kwok that the Tai Po flat was being purchased in Mr Lo and Ms Hon’s names on her behalf, no steps were taken to prepare a declaration of trust.  Mr Kwok was not called as a witness.  His conveyancing file formed part of the evidence.  There were no notes, diary notes, or any record of such an instruction to Mr Kwok.  It was not suggested by, or to, Mr Lo and Ms Hon that they had given any such instructions to Mr Kwok. 

25. On 1 April 1996, Mr Lo Snr and Madam Leung, together with Mr Lo and Ms Hon, attended Mr Kwok to sign the formal Sale and Purchase Agreement in respect of the sale of the Tsuen Wan flat.  Upon signing the document Mr Lo Snr and Madam Leung received a further deposit in the sum of $149,000, which Madam Leung banked to her account.

26. On 9 April 1996, from that sum of $149,000, Madam Leung transferred $140,000 from her bank account to Ms Hon’s bank account.

27. On 10 April 1996, Mr Lo and Ms Hon attended Mr Kwok, and signed the formal Sale and Purchase Agreement in respect of the purchase of the Tai Po property.  With a cashier’s order utilising funds from the deposit to Ms Hon’s bank account, Ms Hon paid a further deposit on the Tai Po property in the sum of $108,000.

28. On 12 April 1996, Ms Hon paid the estate agent’s commission of $13,800 on the Tai Po flat purchase.  On 15 April 1996, Ms Hon paid the estate agent’s commission of $10,000 on the Tsuen Wan flat sale.  Both of these payments were made by cheque from her bank account.

29. On 17 May 1996, the sale of the Tsuen Wan flat was completed.  Mr Lo Snr authorised JK & Co to transfer the balance of the sale proceeds, a sum of $1,600,885 to Madam Leung. Madam Leung banked the cheque in her bank account, and on 20 May 1996, transferred the sum of $1,500,885 to Ms Hon’s bank account.  Madam Leung retained in her own bank account $100,000 from the proceeds of sale.

30. On 22 May 1996, Ms Hon drew a cheque on her bank account, payable to JK & Co, in the sum of $1,242,000 to enable the completion of the purchase of the Tai Po flat.  Ms Hon also drew cheques on her bank account to pay the solicitors fees for both transactions and the stamp duty on the purchase of the Tai Po flat.

31. In June 1996, Mr Lo and Ms Hon took possession of the Tai Po flat, and since that time have been in continuous and exclusive possession and control of the Tai Po flat.  Immediately after taking possession of the Tai Po flat, Ms Hon spent a sum of $164,807.40 on its renovation and the purchase of furniture and household appliances.  At no stage has Madam Leung ever asked for a breakdown of the renovation and decoration costs, nor has she requested a return of any surplus funds remaining after the completion of the purchase and redecoration of the Tai Po flat.

32. Since the purchase of the Tai Po flat in June 1996, Mr Lo and Ms Hon have paid the government rent, the government rates, the insurance, and all outgoings on the Tai Po flat.

33. No mortgage was required to complete the purchase of the Tai Po flat.  At the time of the sale of the Tsuen Wan flat, it was debt free and the title deeds had been held for some time in Madam Leung’s safe deposit box at a bank.  In order that the sale may be completed, Madam Leung had uplifted the title deeds from her safe deposit box, and delivered them to JK & Co. When the purchase of the Tai Po flat was completed, JK & Co delivered the title deeds to Mr Lo and Ms Hon.  Other than two periods during which there were mortgage securities over the Tai Po flat, Mr Lo and Ms Hon have kept those title deeds in their own physical possession, in the Tai Po flat. 

34. At no stage has Madam Leung ever asked Mr Lo and Ms Hon to deliver the title deeds to her.

35. Throughout the whole of the time since the completion of the purchase of the Tai Po flat both Mr Lo and Ms Hon have had keys to that flat.  Madam Leung has never had a key to the flat.

36. In September 1996, Mr Lo’s employer was offered the opportunity of a sole agency in respect of the cargo business of a Spanish airline.  I accept Mr Lo’s evidence that the offer of the business rose only two weeks prior to the acceptance of the business.  Banking facilities were required by the business as letters of credit would be used.  At his employer’s suggestion, Mr Lo agreed that the Tai Po flat could be used as a security for the bank, HSBC, and Mr Lo then became a 15% shareholder in the company.  An inference arose in cross examination on this aspect of the case that the need to mortgage the property for business finance was behind a desire by Mr Lo and Ms Hon to get the property in their names.  Sensibly, the inference, for which there was no proper foundation, was not pursued in argument at all.

37. In 2007, Mr Lo left the employment of Holiday & Travel Mart Ltd, and began to work with a firm, still in the airline business, called WAI Asia Limited.  In July 2008, the HSBC security was released, and the title deeds were returned to Mr Lo and Ms Hon.

38. In December 2008, because of water leakage in the Tai Po flat and the deterioration of the interior, Mr Lo and Ms Hon spent a sum of $110,100 to change all the water pipes and to renovate the interior of the flat.  Because the flat was uninhabitable during the period of the renovation work, Mr Lo and Ms Hon and their son moved to a staff quarter provided by Mr Lo’s employer, and lived there for a period of six months.  Members of the Lo family apparently became aware that Mr Lo and Ms Hon were no longer living in Tai Po flat, but they do not appear to have made any particular enquiries as to the circumstances, or the length of time, in which Mr Lo and Ms Hon were away from the Tai Po flat.

39. In January 2009, Mr Lo and Ms Hon paid a sum of $4,500 to the owner of the flat directly below the Tai Po flat as compensation for damage caused by the water leakage from the Tai Po flat to that flat.

40. In 2010, Mr Lo left the employment of WAI Asia Ltd and began his own business with other partners through a company called World Aviation Limited.

41. On 14 August 2010, after the funeral of Madam Leung’s mother (Mr Lo’s grandmother), there was a family gathering at Madam Leung’s home in Upper Wong Tai Sin Estate.  There is a dispute as to what took place during that gathering, and I shall deal with that dispute in due course.  Solicitors’ letters, to be discussed further below, were exchanged shortly after that gathering.

42. In December 2010, in order to provide working capital for World Aviation Ltd, Mr Lo and Ms Hon mortgaged the Tai Po property for the sum of $1.2 million to a company called Get Nice Finance Co Ltd.  That mortgage was discharged on 30 March 2012.  As with the earlier HSBC mortgage, they did not consult with Madam Leung prior to mortgaging the property.

43. In March 2011, Mr Lo and Ms Hon paid a sum of $6,023 to the management company of the estate in which the Tai Po property is situated for the maintenance of lifts of the estate. 

44. In April 2011, Mr Lo and Ms Hon spent $2,800 to repair one of the water pipes inside the toilet of the Tai Po flat.

The dispute arises

45. It is not clear precisely how or when disharmony in the family came to exist.  In the usual way, the family, honouring their filial obligations, were supporting Madam Leung financially.  There is a suggestion that the siblings other than Mr Lo were paying $2,000 a month each, on a monthly basis, annually a total of $24,000 each, but that Mr Lo paid his mother $5,000 every three months, a total of only $20,000.  It may have been that the family members, not being close to Mr Lo and Ms Hon, did not appreciate the reason for their temporary move from the Tai Po flat to the quarters provided by Mr Lo’s employer, or the fact that Mr Lo and Ms Hon had only been there for 6 months.  They appeared to believe that the staff quarters were more spacious, and that in those circumstances the Tai Po flat should be rented out for the benefit of Madam Leung.  Sensibly, neither matter was explored in detail because neither was relevant to the decision had been made in 1995 to sell the Tsuen Wan flat and purchase the Tai Po flat.

46. The family disharmony came to a head on 14 August 2010, following the funeral of Madam Leung’s mother (Mr Lo’s grandmother). There was a family gathering at Madam Leung’s flat at Upper Wong Tai Sin Estate.  At that gathering were Mr Lo’s two brothers, their spouses, and his sister and her spouse.  Demands were made that Mr Lo and Ms Hon should pay rent of $5,000 a month in respect of their occupation of the Tai Po flat or that the flat should be sold and the proceeds distributed.  It was suggested in the meeting by Lo May Kay and her husband, and Lo Yip Shing and Lo Wai Lok’s wife, that the names of Mr Lo’s mother, brothers and sister should be added to the title to the Tai Po flat.

47. The gathering was extremely acrimonious.  The evidence of Mr Lo, not disputed, was that he, his wife and son, were not allowed to leave the flat for some 3 hours, and it was only when Mr Lo said he had an appointment with a friend who would call the police if Mr Lo did not arrive that they were permitted to leave.

48. Two days later, on 16 August 2010, Mr Lo and Ms Hon instructed solicitors, Kwongs, to issue a letter to Lo May Kay, her husband, Lo Yip Shing, and Lo Wai Lok’s wife.  Mr Lo gave instructions that the letter was to be issued to those persons, because they were the ones who made demands of Mr Lo and Ms Hon in the meeting.

49. The letter recorded that a demand had been made that Mr Lo should pay rent in respect of the occupation of the Tai Po flat or that the flat should be sold and the proceeds distributed.  The letter asserted that Mr Lo and Ms Hon were the legal owners of the premises and the demands that had been made were without any grounds.  It requested that the recipients refrain from making demands for either rent or the sale of the property and distribution of the proceeds of sale. 

50. On 27 August 2010, solicitors, Christopher Li & Co, instructed by the recipients of the letters and Madam Leung, replied to the letter.  It was asserted:

“We are instructed that on or about 20^th May 1996, our client trusted a sum of HK$1,500,885 to your client's wife, namely [Ms Hon] for purchase of [the Tai Po flat] in the name of your client and his wife. Our client never intended to give [the Tai Po flat] to your client and his wife as a gift. Therefore, this arrangement was in effect a resulting trust in which our client was a beneficial owner of [the Tai Po flat].”

51. The letter demanded that Mr Lo and Ms Hon transfer legal title of the Tai Po flat to Madam Leung within 21 days.  The demand was made at the premises should be kept in good condition and not be sold.  It was stated that the allegation that a demand for rent or the sale of the property had been made was wrong.  Reference was made to acrimonious words exchanged in the course of the gathering.

52. On 17 September 2010, Kwongs, for Mr Lo and Ms Hon, responded to that letter.  The suggestion that there was a resulting trust was rejected and the solicitors stated that any dispute over the ownership would be resisted.

53. There is no evidence as to anything taking place between the parties until 28 October 2011, when new solicitors instructed by the Director of Legal Aid to act for Madam Leung informed new solicitors for Mr Lo and Ms Hon that a writ had been issued.

The relevant law

54. The law on resulting trusts in circumstances such as the present circumstances has recently been comprehensively reviewed by the Court of Appeal in Suen Shu Tai v Tam Fung Tai (unreported, 4 July 2014, CACV 187/2013). It is not necessary for me in this judgment to further review the law.  I have applied the principles as they are stated in that decision.

55. Both parties were agreed that the court must first seek to determine, if possible, from the evidence, the intention of Mr Lo Snr and Madam Leung, in 1996, when they sold the Tsuen Wan flat, and gave the proceeds of sale to Mr Lo and Ms Hon enabling them to acquire the Tai Po flat in their name.  If, from the evidence, it can be determined that Mr Lo Snr and Madam Leung intended that Mr Lo and Ms Hon should hold the Tai Po flat for Mr Lo Snr and Madam Leung, a resulting trust would exist.  If on the other hand, from the evidence, it can be determined that Mr Lo Snr and Madam Leung intended that the proceeds of sale should be a gift to Mr Lo and Ms Hon, to enable them to acquire the Tai Po flat, then that flat will belong to Mr Lo and Ms Hon outright.

56. It is only if the intention of Mr Lo Snr and Madam Leung cannot be determined from the evidence that it would be necessary to have recourse to questions of the presumption of a resulting trust or the presumption of advancement: see Au Yuk Lin v Wong Wang Hin, Eddy [2013] 4 HKLRD 373, per Lam VP at 380.

57. It is well established, and needs no authority, that acts or statements made by persons at or after the relevant time that are inconsistent with a position advanced by that person, may be relied upon to reject that person’s assertions as to their position.

58. Mr Lam accepts that that Madam Leung carried the burden of proof of establishing that, notwithstanding that the title to the Tai Po property was with Mr Lo and Ms Hon, they held the property on a resulting trust for her.  That obligation arises from the plain inference to be drawn from the fact that title to property is with the true owner of the property.

The evidence as to the decision to sell and buy

59. Madam Leung’s evidence was that prior to the decision to sell the Tsuen Wan flat, Mr Lo had told her and Mr Lo Snr that they wished to have their son study in a school in Tai Po as the schools there were more desirable.  She said he suggested that the Tsuen Wan flat should be sold in order to get the money to buy a flat in Tai Po.  She said also that Mr Lo told her that his mother-in-law had complained that he lacked property and he had lost face because of that.  Consequently, she said, Mr Lo told her that the flat in Tai Po should be purchased in Mr Lo and Ms Hon’s name in order to deceive the mother-in-law into believing that Mr Lo and Ms Hon were the true owners of the flat.  She said:

“As a mother upon hearing that I sold the Tsuen Wan flat and use the money to buy in Tai Po.”

60. She said that her intention was that Mr Lo would be able to prove to his mother-in-law that he had a property and to deceive his mother-in-law and give him face.  She said that she trusted him and listened to his words and nothing else.  She said that Mr Lo Snr was not present at the time, and that she later told him about the proposal and that he did not respond in any particular way, because he trusted her.  She said he knew that the proposal was that the Tai Po property would be in the name of Mr Lo and Ms Hon.

61. The evidence of Mr Lo and Ms Hon was that during the latter part of 1995, on a Sunday visit by Mr Lo Snr and Madam Leung to see their grandson, Mr Lo Snr, quite unexpectedly, suggested that the Tsuen Wan flat should be put in the name of Mr Lo and Ms Hon.  He offered no particular reason for that at the time, and, Mr Lo said, Madam Leung who was present, did not oppose the suggestion.

62. Mr Lo said that he explained that they would prefer to live in Tai Po because of Ms Hon’s illness, because there they would have the assistance of Ms Hon’s mother-in-law both through the illness and with childcare.

63. He said that Mr Lo Snr agreed to the proposal to sell in Tsuen Wan and buy in Tai Po, and so Mr Lo and Ms Hon set about putting the Tsuen Wan flat on the market, and viewing flats in Tai Po.

64. He said that there was little discussion about the proposal at the time but that later, in small talk, his father explained that he very much loved his grandson, particularly as he was the first son of his eldest son, so the Tai Po flat would be given to the eldest son and the father of the grandson he so loved.

The credibility of the witnesses

65. Neither Lo Wai Lok, Lo Yip Shing, nor Lo May Kay were present in the Tsuen Wan flat in 1995 when the discussion took place between Mr Lo Snr and Madam Leung on the one hand, and Mr Lo and Ms Hon on the other hand, which led to the sale of the Tsuen Wan flat and the subsequent acquisition of the Tai Po flat. None of them gave evidence of any discussions, either before or after the events of 1995 and 1996, in which anything was said by Mr Lo Snr or Madam Leung concerning the sale of the Tsuen Wan flat and the acquisition of the Tai Po flat.  In those circumstances their evidence added little to the central issue, although all gave evidence which assisted me on the narrative set out in §§3‑44 above.

66. The circumstances surrounding the exchange of solicitors letters is highly relevant to the credibility of the witnesses.

67. In the first place, each of Madam Leung, and the three children who gave evidence on her behalf, asserted in their witness statements the following:

“To my surprise, during the meeting the attitudes of the three members of Mr Lo’s family were hostile and they scolded all our family members. His son was only 17 years old at that time but his speech did not show any respect to his seniors. He even said he would not recognise (me/my mother) as his grandmother and claimed to commit arson which were horrible speech. His wife declared herself an upper-class person and falsely accused (me/my mother) of suffering from psychosis. She also accused and despised other family members as degraded persons. During the meeting, Mr Lo agreed to fulfill the following promises: 1) provide HK$2000.00 to parents as monthly living expenses; 2) pay monthly rent of HK$5,000.00 as a condition for continuance of living in the Tai Po Property; and 3) Add (Madam Leung, Lo Wai Lok, Lo Yip Shing, and Lo May Kay) as co-owners of the Tai Po property. In that conclusion, that family meeting was ended in an extremely unpleasant way.” [1]

I have inserted the reference to Mr Lo’s son’s statement of recognition, and the names to be added as co-owners in brackets.  The only difference between the four witness statements was that each witness used the expression “me” for their own name.

68. First, I find it highly unlikely that, in the highly charged atmosphere of the gathering, any agreement at all would have been reached by those present.  I have no doubt that there was abuse, acrimony, and insults being traded by all present.  Such an atmosphere is not at all conducive to the precise terms of agreement that have been suggested in the evidence.  That the gathering ending in agreement as is suggested, is quite inconsistent, with the statement by the by the four witnesses that:

“…. the family meeting was ended in an extremely unpleasant way.”

69. Second, it is simply unbelievable that four witnesses, separately giving evidence of an event such as this family gathering, involving as it did a relatively long period of time, and considerable disharmony, would use identical language to describe what took place.

70. I am left in no doubt at all that these witness statements have been prepared by solicitors, without proper consultation with the witnesses, who have, without question, simply adopted the language of the solicitor.  It is difficult in those circumstances to place any reliability on a witness who gives evidence in that way.  Sensibly, Mr Lam recognised the situation, and did not seek to argue otherwise.

71. In §50 above I have set out the family’s solicitors response to Kwong’s letter on behalf of Mr Lo and Ms Hon.  It is highly significant that no suggestion at all is made in that letter of the three points of agreement said by the four witnesses to have been reached at the family gathering.  I have no doubt at all that if such an agreement had been reached, the solicitors for the family would have been so instructed, and a letter in response to Kwong’s letter would have set out, in comprehensive terms, the three matters of agreement.  Instead, a quite different conclusion to the gathering is set out.

72. I am satisfied that each of the four witnesses asserting an agreement has done so falsely, in an attempt to bolster Madam Leung’s case.  Accordingly little reliance can be placed upon their evidence.  The matter also tells significantly against Madam Leung’s credibility on any evidence she gave that was in her own favour.

73. In so far as the family members purported to support Madam Leung by asserting that the move to Tai Po was in order to satisfy Ms Hon’s mother that Mr Lo owned his own property, I am unable to place any weight upon their evidence.  I reject Madam Leung’s assertion of that reason for the sale and purchase.  For the same reasons I reject the family assertion that the move to Tai Po was for better schooling opportunities for Mr Lo’s son.

Assessment of the evidence of Mr Lo and Ms Hon:

74. There was little direct independent evidence to corroborate the evidence of Mr Lo and Ms Hon as to the reasons they understood a gift was being made to them.

75. It is right, as Mr Lam submits, that their description of the conversation in which they said Mr Lo Snr offered the Tsuen Wan property as a gift was brief in the extreme.  It is right too, that it was not until giving evidence that either Mr Lo or Ms Hon offered any direct explanation for the gift.  It is only implied in Mr Lo’s third witness statement that the reasons surrounded Mr Lo Snr wish, as a traditional Chinese man, to benefit his eldest son and his grandson. 

76. Mr Lam submits that it was “unreal and unnatural” that Madam Leung said nothing on the occasion when Mr Lo Snr offered the Tsuen Wan flat as a gift.  I do not accept the submission.  It does not surprise me at all that the wife of a traditional Chinese man would accept without question her husband’s assertion.

77. In the absence of other evidence, and having rejected the evidence of Madam Leung and her family members, I would be obliged to simply say that I prefer the evidence of Mr Lo and Ms Hon to that of Madam Leung as to the conversations in 1995, leading to the sale of the Tsuen Wan flat and the acquisition of the Tai Po flat.

The evidence contradicting Madam Leung

78. However, there are a number of aspects of the evidence which contradict Madam Leung’s assertion of a resulting trust, and support the assertion of Mr Lo and Ms Hon of a gift.

79. First, there was no need to put title to the Tai Po property in Mr Lo’s and Ms Hon’s name in order to deceive Ms Hon’s mother-in-law about the ownership of the property.  It would have been quite sufficient to have agreed to simply tell her that Mr Lo owned the property.  She would reasonably expect there to be a mortgage on the property and would not see the title deeds.  There would be no need for her ever to see government rent or rates demands with someone else’s name.  The deception would have been simple.

80. Next, if a name was to be put on the title as part of the deception of the mother-in-law, there was no need at all that Ms Hon’s name should be included.  Madam Leung said that she wished to have the title in their joint names as a form of protection for herself.  Madam Leung said in her first witness statement:

“At that time, I also indicated that both of them that the Property should be held by them in the form of joint names (long life deed/joint tenancy) as Hon Kam Wah is only (my) daughter-in-law and is still regarded as an outsider. At that time, I believe the couple hold the Tai Po property in joint names, then they need to sign together all documents relating to the type of property in future to give them the effect. This arrangement could make the couple monitor each other and so my beneficial interest in the property can be safeguarded.”

81. It is entirely unclear to me how it can be said that the couple monitoring each other would safeguard Mr Lo Snr’s and Madam Leung’s interest.  Madam Leung was quite unable to explain how placing the title in joint names would afford any protection.  In fact the opposite occurs.  It would be open to Mr Lo and Ms Hon to conspire together to deprive Mr Lo Snr and Madam Leung of their interest in the property.  The presence of Ms Hon on the title does nothing to restrict Mr Lo’s dealing with the property. With the title in the joint names of Mr Lo and Ms Hon, on the death of Mr Lo, Ms Hon would become the sole proprietor and, on the face of it, would be free to deal with the property.  That would be no protection for Madam Leung and her husband. 

82. Placing title in Ms Hon’s name as well as Mr Lo’s name is inconsistent with Madam Leung’s description of Ms Hon who was “still regarded as an outsider.”  Placing title in the name of an outsider can hardly be described as protection for Madam Leung.

83. Madam Leung surrendered the title deeds to the solicitors and never sought herself to hold them.  If, as she now says, the property was in reality always hers, then the most natural step would be for her to have held the title deeds.  She knew that they were valuable, she said so in evidence. She kept a safe deposit box at the bank in which she kept the title deeds.  Her delivery of the title deeds first to the solicitors, then allowing them to be given to Mr Lo and Ms Hon, is entirely inconsistent with a resulting trust, but is consistent with a gift.

84. Madam Leung asserted that she had told the solicitor, Mr Kwok, that Mr Lo and Ms Hon were to hold title to the property on her behalf.  It is highly unlikely that a solicitor receiving such an instruction would not, at the least, record that instruction in a diary note, or preferably, prepare an appropriate trust document recording the transaction.  There was no such note or trust document.

85. Madam Leung’s instruction to the solicitors was to pay the purchase price proceeds to her, which they did.  She then transferred sufficient funds from her bank account to Ms Hon’s bank account, to enable the completion of the purchase.  If, as she now says, Madam Leung instructed Mr Kwok that Mr Lo and Ms Hon were to hold title to the property on her behalf, there would be no need for the solicitors to pay funds out of the client account to Madam Leung.  The acquisition of the new property, to be held on behalf of Mr Lo Snr and Madam Leung, would be made with funds from Madam Leung’s client account thereby recording that Madam Leung provided for the whole of the purchase price.

86. The retention by Madam Leung in her own bank account of $100,000 from the proceeds of sale of the Tsuen Wan property, and the transfer of $1,500,885, is more consistent with a gift than it is with an intention to create a resulting trust.  Mr Lam submitted that it was highly unlikely that Mr Lo Snr and Madam Leung would dispose of the only asset they had, which would provide them with income in retirement.  But in 1995 Mr Lo Snr was still working, and as a traditional Chinese family, both Mr Lo Snr and Madam Leung would reasonably anticipate that their children would observe their traditional filial duty, and provide for their parents in retirement.  The $100,000 retained by Madam Leung would also be available to Mr Lo Snr and Madam Leung if they required funds for a particular purpose.

87. Madam Leung’s evidence as to the inspection of Tai Po Flats was that her inspection took place in early May 1996.  She purported to describe feeling a headache when she viewed the first property that was looked at, and that the second property’s purchase price was too high and was not to her liking.  She said:

“Only until I viewed the Tai Po property, the owner was willing to complete the transaction with a purchase price of HK$1,380,000 and I like the lucky sign (of the purchase price) so I decided to choose and purchase the Tai Po property. I finally instructed the couple to purchase the Tai Po property on my behalf.”

88. Madam Leung was quite unable to explain how she could have given such instructions, or negotiated a reduction in the purchase price, when the evidence indisputably established that Mr Lo and Ms Hon had signed the provisional agreement for sale and purchase of the property some six weeks earlier on 26 March 1996.  That Mr Lo and Ms Hon were left to locate a property, and make a decision on a purchase in Tai Po without the involvement of Madam Leung, is quite inconsistent with an assertion by Madam Leung that the property was in reality hers.  If that were the case I have no doubt that she would have wished to have inspected the proposed property before any purchase was made.

89. Madam Leung took no part at all in making arrangements or any decisions in relation to the decoration of the Tai Po property.  She left that entirely to Ms Hon.  If, as Madam Leung now asserts, the Tai Po property was in reality hers, one would expect that she would have taken an active interest in the decoration of the property, making it ready for occupation.  At no stage did Madam Leung ask for any accounting in respect of the funds surplus to the requirements of the purchase that had been available for the redecoration.  If, as she now says, the property was in reality hers, one would have expected her to have sought such an accounting.

90. If the property was in reality hers, she could reasonably be expected, at the least, to be informed of the need for any subsequent repair or renovation work that might be required.  She might even be expected to contribute to such costs.  Madam Leung acknowledged that she did not involve herself in any of those matters and that Mr Lo and Ms Hon never sought a contribution from her.

91. When Ms Hon’s mother-in-law died in 2000, the need to deceive her as to the ownership of the Tai Po property no longer existed.  That being the case, there was no longer any need to leave the property in the name of Mr Lo and Ms Hon.  Madam Leung was aware of the death of Ms Hon’s mother-in-law, but took no steps to retrieve title to the property to herself.  That she did not do so at that time is entirely inconsistent with her assertion of a resulting trust, and consistent with outright ownership on the part of Mr Lo and Ms Hon.

Conclusion

92. For the foregoing reasons I am satisfied that Madam Leung has failed to discharge the burden of proof upon her to displace the inference arising from title to the Tai Po property being in the names of Mr Lo and Ms Hon, that they are the true owners of the property.  I reject the contention that Mr Lo and Ms Hon hold the property by way of a resulting trust in favour of Madam Leung.

93. There will be judgment for the Mr Lo and Ms Hon.  Madam Leung’s claim is dismissed.

94. It being established from the evidence that Mr Lo and Ms Hon are the true owners of the property, it is not necessary for me to have recourse to either the presumption of advancement or the presumption of a resulting trust.

Costs

95. There will be an order nisi that Madam Leung must pay Mr Lo and Ms Hon’s costs of and incidental to the proceedings on a party and party basis.  Where necessary, costs will be taxed on Legal Aid Regulations.