CHOI WAN SHEUNG NANCY v. CHOI SI MING DANNY
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HCA 2336/2013
[2024] HKCFI 186
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 2336 OF 2013
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BETWEEN | ||
| CHOI WAN SHEUNG NANCY (蔡雲裳) | 1st Plaintiff | |
| PIYATHAISERE CHOI HOW SHEUNG DAISY | 2nd Plaintiff | |
| (蔡巧裳) | (discontinued) | |
| LUDTKE CHOI WOON SHEUNG WENDY | 3rd Plaintiff | |
| (蔡煥裳) | (struck out) | |
| and | ||
| CHOI SI MING DANNY (蔡思明) | Defendant | |
| and | ||
| CHOY KAM SHEUNG (蔡錦裳) | Third Party | |
_____________
| Before: | Hon Mimmie Chan J in Court |
| Dates of Hearing: | 24-26 July 2023 and 1 August 2023 |
| Date of Judgment: | 24 January 2024 |
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J U D G M E N T
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Background
1. This action relates to a dispute amongst siblings who are beneficiaries of their mother’s estate, and their contest over the interests in the landed property which was registered in the name of their deceased mother, and the sale proceeds thereof.
2. Flat F on 16th floor of Shung Lim House in Hung Hom, Kowloon (“HH Property”) was registered in the name of the late Madam Tsang Sew Ung (“Mother”). She died in May 2000, leaving all her property to her 5 children, in equal shares. The children are Choi How Sheung Daisy (“Daisy”), Choy Kam Sheung Ruby (“Ruby”), Choi Woon Sheung Wendy (“Wendy”), Choi Wan Sheung Nancy (“Nancy”) and Choi Si Ming Danny (“Danny”). Danny, the youngest and only son, was named as the executor under Mother’s will.
3. Nancy is the 1st Plaintiff in these proceedings. Daisy, the eldest sibling, is the 2nd Plaintiff, whilst Wendy is the 3rd Plaintiff. Danny is the Defendant, and he joined Ruby as Third Party.
4. Daisy and Danny have discontinued the proceedings between them. Wendy’s claims had been struck out in January 2018 after she failed to attend a Case Management Conference. She has not made any application to restore her claim. However, both Daisy and Wendy gave evidence for Nancy at trial.
5. Ruby stated in her pleadings in the Third Party proceedings that she makes no claim against any of her siblings, and the trial of the action does not involve the trial of the third party proceedings. The trial is on the claims made by Nancy against Danny, and Danny’s counterclaim against her.
6. Prolix pleadings have been filed and served by Danny, who was legally represented from July 2019 until 28 February 2023. Most of the original claims made and particulars set out in his pleadings have been deleted in 2020 as irrelevant. In gist, what remains of the claims and disputed matters relate to Danny’s sale of the HH Property in October 2007, and the acquisition of the property at Flat H, 7th floor, Po Wing Building, No 69 Lee Garden Road, Hong Kong (“PW Property”) and its assignment in December 2007, from Nancy’s sole name to the joint names of Nancy and Danny. Nancy claims that the interest in the PW Property is held on trust for each of the four sisters, whereas Danny claims that he is the sole beneficial owner of all the interests in the PW Property and that Nancy’s interest is held on trust for him. Nancy further claims that the HH Property had been sold by Danny at undervalue, and that she is entitled to damages caused by Danny’s breach of duty, willful default and/or negligence as executor of Mother’s will.
7. According to the Statement of Claim, the HH Property was sold by Danny as executor and trustee of Mother’s estate (“Estate”) on 18 October 2007, at the price of $600,000, which was substantially below the then prevailing market value, estimated to be no less than $1 million. Nancy claims that Danny is liable to make good and to account for the losses suffered by each of the Plaintiffs, as a result of his negligence and/or breach of duty, which losses are the one-fifth share each of the deficiency in the sale price. Daisy and Wendy have not pursued their claim for damages to trial.
8. As for the PW Property, there is no dispute that it was purchased by Nancy and her former husband in 1996, and registered in their joint names until 2006, when the PW Property was transferred into Nancy’s sole name upon her divorce from her husband. On 7 December 2007, the PW Property was assigned to Nancy and Danny as joint tenants for a consideration of $1.9 million (“Consideration”). According to Nancy, the Consideration was financed by: (1) the sale proceeds of the HH Property at $600,000 (in which she and her siblings each had one‑fifth share); (2) a mortgage loan of $1,260,000 from the Fubon Bank (“Mortgage”) which was taken out in the joint names of Nancy and Danny as purchasers of the PW Property; and (3) the balance of $40,000 (“Remainder”) being paid by Nancy and Danny in equal shares (of $20,000 each).
9. In essence, Nancy claims that whereas initially, it had been agreed amongst Nancy, Ruby and Danny that they would jointly purchase the PW Property by utilizing the proceeds of the sale of the HH Property, procure a mortgage over the PW Property in order to raise funds to enable Nancy to pay off her own debts, and that Ruby (who was apparently the most well-off of the siblings) would be responsible for repaying the mortgage loan. It was part of this agreement that Danny was to move into the PW Property and reside there with Nancy. According to Nancy, she was informed by Ruby and Danny that there had to be a sale and purchase before any mortgage could be obtained for the purpose of raising funds for her, and she had believed and trusted Danny as he had been in the real estate agency business.
10. Subsequently, however, Ruby reneged from the agreement to purchase the PW Property jointly, and she only paid $28,000 of the Mortgage loan, and it was Nancy who continued the monthly repayments under the Mortgage. Eventually, Nancy paid a total sum of $1,232,000 under the Mortgage. On Nancy’s calculations, Danny only contributed $20,000 (which was half of the Remainder) to the Consideration, and Nancy now seeks apportionment of the siblings’ beneficial interests in the PW Property according to their respective monetary contribution, her own share being 72.2105% ($1,372,000/$1,900,000).
11. Although Daisy and Wendy have not pursued their claims to trial, the facts and assertions contained in the Statement of Claim, including the claim of their respective equal share in Mother’s Estate, represented the case and position of all the Plaintiffs. In their witness statements, Daisy and Wendy maintain that they each have one-fifth share in the Estate, represented by the proceeds of sale of the HH Property.
12. On Danny’s case, the matter was much more complicated.
13. According to the pleadings filed on behalf of Danny, he was already the beneficial owner of 60% of the interests in the HH Property before its sale. He denies the claim made in paragraph 3 of the Statement of Claim, that each of the siblings owned one-fifth share in the Estate. According to paragraph 3(a4)(5) of the final version of the Defence (“Defence”), he had already purchased 10% of each of his sisters’ share in the Estate, and that this was around February and March 2001 (“1st Acquisition”).
14. Danny also claims in paragraph 3(a4)(10) of the Defence that he was subsequently informed by Ruby, in October 2007, that she had already acquired the 10% share of each of Daisy and Wendy, when they borrowed money from her, such that Ruby owned a total of 30% in the Estate. On Danny’s pleaded case, Ruby informed him that in order to give “urgent relief” to Nancy (who was allegedly in heavy debt at the material time), Ruby agreed with Danny that she would forfeit her 30% interest, and that Nancy would forfeit her 10% interest in the HH Property, which should be sold immediately to raise funds for Nancy. This was on about 4 October 2007, when Danny had received an offer of $600,000 for purchase of the HH Property. Danny considered that this offer was too low, as the HH Property was then worth $1 million on the market, but he reluctantly agreed to the sale of HH Property at $600,000 upon Ruby’s and Nancy’s insistence, and upon their confirmation of their forfeiture/surrender of all their interests in the HH Property. This was the “HH Property Oral Agreement” referred to in the Defence, as constituting an understanding reached and orally agreed amongst Danny, Ruby and Nancy.
15. As a result of the HH Property Oral Agreement, Danny claims to be the sole owner of the HH Property and of 100% of the proceeds upon its sale, after Ruby and Nancy had waived their respective 30% and 10% interests in the property. The proceeds of sale of the HH Property were used for the purchase of the PW Property, and on Danny’s case, the Consideration less the Mortgage loan for the PW Property had all been paid by him, and Nancy’s subsequent monthly payments into the bank account for repayment to the bank represented her payment of rent, since she had been residing at the PW Property (which belonged to Danny, on his case).
16. According to Danny, Nancy held the PW Property in name only and on trust for him. In the Defence, he relies on common intention constructive trust, and alternatively, resulting trust.
17. In the Reply, the Plaintiffs admit that the sisters had agreed that the proceeds of sale of the HH Property would be used in the purchase of the KW Property. Daisy and Wendy confirmed in their evidence that they had agreed that the HH Property should be sold, and that the proceeds of sale should be used for the purchase of the PW Property in the joint names of Ruby, Nancy and Danny, in order to help out Nancy.
18. As correctly summarized by Counsel for Nancy, there is no dispute on the face of the pleadings that the HH Property was sold at $600,000, when the then prevailing market price was $1 million.
19. Danny claims that he had sold the HH Property at $600,000 at the insistence of Ruby and Nancy, and with their agreement, even though he considered the HH Property to be worth more on the market. Nancy denies the existence and effect of the HH Property Oral Agreement as alleged by Danny, claiming that she only learnt a short time before the commencement of these proceedings in November 2013 that the HH Property had been sold below the market price. She claimed in her witness statement that when Danny informed her that there was an offer to purchase the HH Property at $600,000, she had trusted and relied on Danny’s professional judgment and knowledge, and had agreed to the sale in the belief that $600,000 was the best price. Nancy denies that she and Ruby had known that the market price of the HH Property was $1 million at the time of the sale.
20. On their part, Daisy and Wendy also claimed in their statements that they had put their trust in Danny, and had agreed to the sale of the HH Property in the belief that $600,000 was the market price.
21. The key issue in dispute is whether Danny was the sole beneficial owner of the HH Property by the time of its sale in 2007, on the basis that (1) he had purchased 40% of his sisters’ interests in 2001; and (2) his sisters had agreed in 2007 to forfeit/surrender their remaining interests in the HH Property.
22. In the determination of the issues in this case, I have to bear in mind that the disputed PW Property is registered in the joint names of Nancy and Danny as owners. As the Court explained in Stack v Dowden [2007] 2 AC 432, it should be assumed that equity follows the law and that the beneficial interests reflect the legal interests in the property. Hence, as Baroness Hale made it clear in Stack, the onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership, that the parties did intend the beneficial interests to be different from their legal interests, and in what way they are different. As Her Ladyship forewarned, it is not a task to be lightly embarked upon. In her judgment, Baroness Hale aptly observed that in family disputes where strong feelings are aroused, these often lead the parties, honestly but mistakenly, to reinterpret the past in self-exculpatory or vengeful terms.
The 1st Acquisition - Did Danny aquire the sisters’ 40% interest in the HH Property?
23. In support of his assertion that he had purchased his sisters’ 40% interests in the HH Property in 2001, Danny relies on what he considered to be “iron-cast evidence”, in the form of four transanction receipts issued by HSBC, evidencing that Danny had on 13 March 2001 and on 28 March 2001 transferred 3 separate sums of $56,362 to Ruby’s bank account, and had on 23 February 2001 and 13 March 2001 transferred to Nancy’s bank account the respective sums of $30,000 and $11,362. Danny claims that he had also paid $15,000 in cash to Nancy on about 3 March 2001, making a total payment of $56,362 to Nancy. It is Danny’s case that the second amount of $56,362.70 which he had transferred to Ruby on 13 March 2001 was for payment to Daisy, and that the $56,362.70 transferred to Ruby’s account on 28 March 2001 was for Wendy.
24. The transaction receipt in respect of the transfer of $56,362.70 to Ruby’s account on 28 March 2001 had Danny’s annotation in English, which reads:
“This fund is for Wendy Choi
CHOI KAM SHEUNG received this fund for and on behalf of Wendy Choi”
25. The transaction receipt for Danny’s transfer of $30,000 to Nancy’s account on 23 February 2001 had the following annotation in English:
“$30,000 As Partial Cash estate distributed to Nancy Choi out of $56,362.70”
26. The above notes are claimed to have been contemporaneously made by Danny, who described himself to be meticulous “to the nearest cent”. As Counsel for Nancy highlighted, Danny claimed in his witness statement that he had kept these transaction receipts in his safe deposit box for over 14 years, and that the record had been made by him for his own reference.
27. The transfers made by Danny on 13 and 28 March 2001 were to Ruby’s account. Daisy and Wendy deny receiving same and claim to have no knowledge of Danny’s payment.
28. Mr Chan, Counsel for Nancy, highlighted the fact that on Danny’s evidence given in cross-examination, he had sought to explain that the $15,000 which he had paid in cash to Nancy on 3 March 2001, which was part of the total payment of $56,362 which Danny had made to Nancy to purchase her share in the HH Property, came from the cash he had in hand, as he was at that material time in the process of renovating his own hi-fi shop or buying equipment for the shop, and had cash handy. This was to show that the $15,000 had been paid by him personally, to purchase Nancy’s interests in the HH Property, and that the money did not originate from the Estate.
29. Although Danny claimed throughout his witness statements that he had since 2001 purchased, and had in 2007 completed his purchase of all his sisters’ interests in the HH Property, Danny’s testimony in cross-examination and his final submissions at trial made a surprising turn, when he claimed that throughout the entire time of his dealings with his sisters, he had only acted in the capacity of the executor of the Estate. This was to answer Counsel’s criticisms of the inconsistencies in Danny’s evidence as to the manner of his making payments to his sisters. Danny in fact maintained in Closing that the money which he had paid to his sisters, as evidenced by the transaction receipts which he had regarded as the iron-cast evidence of his purchase of the entire interests in the HH Property, actually came from the Estate, and was not his own money. He emphasized that this was only natural, since he was acting as executor when he made the payments. He claimed that he had never asserted in his evidence that the purchase had been made by him personally.
30. As Counsel pointed out, this is clearly in contradiction to Danny’s pleadings, where the assertions made are that he had acquired and purchased the total of 80% of his sisters’ interests in and share of the Estate, including the interests in the HH Property, such that he was entitled to 100% of the proceeds of sale of the HH Property, and was in a position to decide on matters of the Estate.
31. In Closing, Danny had emphatically refuted Counsel’s submission as to the inconsistencies in his evidence and pleadings, by purporting that he had never claimed in his witness statement (with reference to Nancy’s sale “to him” in paragraph 64 thereof) that he had ever been acting personally. He attempted to clarify that he had throughout been dealing with his sisters and acting in his capacity as executor of Mother’s Estate, and that he had never mentioned in his statement that he was at any time acting in a personal capacity when he dealt with his sisters.
32. If that is indeed Danny’s position, then his defence to Nancy’s claims in this action is not understood.
33. Nor is true that in his pleadings, Danny has not put forward any position that he had been acting in a personal capacity.
34. It has to be borne in mind that it is not the function of the Court to speculate on the nature of a party’s case in the light of all the evidence put forward at trial, or to advise a party on how its case should be pleaded. The importance of pleadings has been well explained, particularly in the context of unrepresented litigants, in the judgment of the Court of Appeal in Chan Kong v Chan Li Chai Medical Factory (HK) Ltd & ors CACV 161 of 2006, 11 September 2008, where Yuen JA said at paragraphs 15 to 17:
“15. Before we deal with the draft Re-Re-Amended statement of claim, we should say a word about the importance of pleadings. It is well-established that pleadings need to be clear - because pleadings are the foundations on which the rest of the action stand. The reason why parties to litigation must ensure that the real issues in dispute are defined in advance in the pleadings is so that there is an unambiguous framework for the many interlocutory steps that follow in an action, such as discovery of documents, interrogatories and witness statements, as well as for the conduct of the trial itself. A statement of claim should make it clear to the reader what the plaintiff’s cause of action is, and it should set out the material facts which provide the basis for him to pursue that cause of action. It is not adequate for a plaintiff just to set out his story extensively and then to allege a number of breaches of rights for which he claims relief. Put another way, it should not be left to the reader to guess how the dots should be connected.
16. The more complex the facts and the more complicated the claim, the more important it is for the pleader to get it right. That is because the more obtuse the pleading, the more capacity there is for genuine misunderstanding or specious opportunism. And the more blind alleys are left in a pleading, the more expensive and time-consuming the litigation will be.
17. Although an unrepresented litigant may not be expected to use legal terminology, that does not relieve him of the need to comply with the rule that pleadings have to be clear. A litigant in person cannot simply pour out his story and ask the court to sort out his legal rights because he himself is ignorant what rights may have been breached or how. A pleading cannot be like a set of instructions to the judge as if he were the unrepresented litigant’s counsel. That is not the function of the court in an adversarial system. Having said that, a court is entitled in the exercise of its discretion to be a little more lenient to an unrepresented litigant in giving him an opportunity to get things right.”
35. Despite the fact that Danny is not legally represented by the time of trial, it is for each litigant to properly plead his case. Danny is bound by his own pleadings, which dictate the trial and the relevance and admissibility of the evidence. The pleadings dictate the case which Danny presents and which the Plaintiffs have come to meet at trial. The Court cannot decide on the basis of matters which are not pleaded and particularised in Danny’s Defence and Counterclaim.
36. As can be seen from paragraph 3(a3)(1) of the Defence, Danny pleads that on about 3 October 2007, Ruby had suggested to him that since Danny had already (in 2001) purchased the 10% interest of each of the 4 sisters, Danny could receive 60% of the sale proceeds of the HH Property. It makes no sense if that is to be understood as Danny having purchased 30% as executor, or Danny being entitled to 60% of the sale proceeds as executor. Danny repeats, at paragraph 3(a4)(5) of the Defence, that he owned 60% of the HH Property, and was the decision maker on matters relating to the title of the HH Property, since he had already purchased the 10% interest of each of his 4 sisters in 2001. He went on to explain how the sum of $56,000 was calculated as the value of the 10% interest in the Estate.
37. It is pertinent to note that on Danny’s case (as reflected in paragraph 3(a4)(5) of the Defence), the $56,362 paid to Nancy, Ruby, Daisy and Wendy in 2001 was arrived at by calculating the 5 siblings’ equal share of the funeral and Estate expenses which exceeded the cash and the money in the bank accounts and safe deposit box of Mother. The value of the HH Property as reflected in the Schedule of property disclosed to the Estate Duty Office on Mother’s death ($600,000) was used as the basis for calculating the value of the siblings’ 10% share in the HH Property, and for deducting the siblings’ share for the expenses from their share in the value of the HH Property.
38. Danny referred to the HH Property Oral Agreement at paragraph 3(a4)(12) of the Defence, where he pleads that as a result thereof, Danny had agreed to sell the HH Property at $600,000 and to purchase the PW Property from Nancy at $1.9 million, with Ruby and the Plaintiffs all agreeing to forfeit/surrender their remaining interests of 30% and 10% respectively in the HH Property, and Danny being entitled to 100% of the proceeds of sale of the HH Property. Danny pleads at paragraph 3(a4)(13) that the parties’ respective share in the interests in the HH Property was as follows:
Date Daisy Ruby Wendy Nancy Danny Notes 1/5/2000 20.00% 20.00% 20.00% 20.00% 20.00% Date of Mother’s death 23/2/2001-28/3/2001 10.00% 10.00% 10.00% 10.00% 60.00% Danny purchased each sister’s 10% interest at their request 4/10/2007
as advised by Ruby0 30.00% 0 10.00% 60.00% Ruby stated that she had purchased 10% from each of Daisy and Wendy Oral agreement confirmed on 4/10/2007 0 Surrendered 30% market value 0 Surrendered 10% market value Sole owner of HH Property For urgent relief of Nancy, Nancy and Ruby surrendered total of 40% of the market value
39. Consistent with the above pleading, Danny stated at paragraph 71 of his witness statement that since 28 March 2001, his ownership of the HH Property had increased from the original 20% to 60%, and that he had since then become the majority decision maker so far as property ownership was concerned.
40. Earlier on at paragraph 64 of his statement, Danny had claimed that in February 2001, Nancy had requested to sell her interest in the HH Property to Danny, pursuant to which he had paid her $30,000 (ie on 23 February 2001). He further stated at paragraph 65 that on 3 March 2001, Nancy had asked him to make her a further payment of $15,000 in cash, and confirmed that she would sell more of her interest in the HH Property to Danny, and that he had accordingly paid her the $15,000 in cash the same day. He explained in cross-examination that this came from his own, personal money.
41. If what Danny said in Closing is to be believed, then what he meant from all the above is that he had, as executor, bought the total 40% interests of his sisters, using money of the Estate. Danny as the remaining beneficiary was then entitled to 60% of the assets of the Estate, which should be represented by the proceeds of the HH Property, but Ruby and Nancy had further forfeited or surrendered their respective share of 30% and 10% of the proceeds since they wanted an urgent sale of the HH Property at $600,000 and did not want to wait. Danny has not explained how the Estate could in February and March 2001 pay $56,362 to “purchase” each of the sisters’ 10% share, without the need to look to anyone to finance the purchase. This was before the HH Property was sold. It is, in any event, not Danny’s pleaded case.
42. What is actually pleaded in the Defence is that Danny had personally purchased his sisters’ beneficial 40% interest in the Estate in 2001, and that Ruby and Nancy had forfeited their respective 30% and 10% interests at the time of the sale of the HH Property and the PW Property in 2007.
43. It is also not true, as Danny claims in Closing, that he had NOT asserted in his evidence that the payments to Nancy had been made by him personally.
44. Leaving aside what is to be understood from the contents of his witness statement, in the course of his cross-examination on Day 2 of the trial, when Danny was asked about the $30,000 payment to Nancy on 23 February 2001, he first stated that the money was from his account, before saying that it was money from Mother’s Estate. When he was asked whether the cash of $15,000 had come from him personally, he also answered yes. Danny was then questioned how there could be cash or any payment from Mother’s Estate, when he had known and had repeatedly stated that the funeral and other expenses for the Estate had exceeded the income and the cash and bank account balances, and his answer was that although there was insufficient cash, the Estate included the HH Property, which was why he stated that the payment of $30,000 to Nancy originated from the Estate, and not from his personal funds. According to his evidence in cross-examination, the $56,362 was sourced from the HH Property/Estate. However, at the relevant time of the 1st Acquisition in 2001 as he pleaded, the HH Property had not been sold.
45. Having considered the pleadings and the evidence as a whole, I have to agree with Counsel for Nancy, that Danny’s assertions are self-contradictory, inconsistent with the documentary evidence produced by him, and hence totally unreliable to be accepted.
46. As Counsel pointed out, Danny’s claim of his having purchased his sisters’ interests in the HH Property is unbelievable.
47. First, Danny’s own documentary evidence, in the form of the transaction receipts and his contemporaneous notes made thereon, do not support his allegation of a purchase of his sisters’ shares, and is more consistent with the payments made in February and March 2001 being in the nature of partial cash distributions to the sisters from the Estate (as Nancy claims in paragraph 26 of her witness statement). Danny’s own notes refer to the transfer of $30,000 to Nancy as “partial” payment of the “cash” distributed from the Estate to Nancy. Objectively and reasonably read, the notation on the transaction receipt for Nancy is understood as, and more consistent with, a partial distribution from the Estate of a contemplated sum of $56,362.70 as stated, which sum is consistent with the amounts paid to Ruby on 13 March 2001 and to Ruby on 13 and 28 March 2001 allegedly for Daisy and Wendy.
48. On Nancy’s case, she had only received partial cash distribution of a total of $41,362.70, as she denies that there had been any cash payment of $15,000 made to her by Danny as he alleges.
49. If the transaction receipts truly evidence Danny’s purchase of the 10% interests of each of Nancy, Daisy, Ruby and Wendy, it is not credible that he would not have so expressly stated and recorded this important fact, of the sale of the respective beneficiary’s interests in, and in turn Danny’s own entitlement to an additional 40% of, the Estate. As Counsel pointed out, this is totally inconsistent with the fact of Danny being meticulous to the nearest cent, as he himself admits.
50. Secondly, the claim of Danny’s purchase of his sisters’ 10% interest under the 1st Acquisition in 2001 contradicts his testimony and admission in cross-examination, that he had not in fact personally paid for their share, since he claimed that the transfers to them had been made from the money in the Estate. That itself supports Nancy’s assertion, that the payments she had received in 2001 represented cash distributions from the Estate. On Danny’s own pleading, the $56,362 he calculated already took into account the sisters’ share of the funeral and Estate expenses. Having received money in partial distribution of the Estate property/assets does not mean that Nancy, or any of the sisters who had received any partial distribution, had foregone or would forego any further interests in or right to distribution of any remaining assets of the Estate.
51. In summary, I reject Danny’s incongruous claim that he had in 2001 purchased his sisters’ 40% in the Estate and that he was consequently the owner of 60% of the HH Property comprising the Estate. This, and all the other claims which Danny has made and pursued at trial in this action are (as Lady Hale described in Stack v Dowden) his own reinterpretation of past events, to make out a case which is to his own advantage. I do not consider him to be a reliable or truthful witness at all.
Any agreement in 2007 for the forfeiture of the sisters’ 40% of the Estate?
52. On Danny’s case, by the time of the sale of the HH Property in October 2007, Ruby owned 30% of the interests in the Estate, Nancy owned 10% and he owned the remaining 60% (by virtue of the 1st Acquisition). On his pleaded case and according to his evidence, this was because Ruby informed him in October 2007 that she already owned 30% because Daisy and Wendy had borrowed money from her, and the 10% interest which each of Daisy and Wendy owned in the Estate could be treated as their repayment to Ruby, and Danny could be “subrogated” to Ruby’s rights in the loan she had made to her sisters. Subrogation was the term Danny used in testimony when describing Ruby’s conversation with him, which is unnatural for laymen and smacks of embellishment after the event.
53. No particulars had ever been provided by Danny as to how much Daisy and Wendy allegedly owed Ruby, when such loans had been made, and how Daisy, Wendy and Ruby had amongst themselves agreed that the loans would be discharged by setting them off against their 10% interests each in the Estate. On Danny’s evidence, he had wanted to call Daisy and Wendy to seek their confirmation, but Ruby had informed him that there was no such need, that Daisy and Wendy owed her money, and that if they should disagree, she would bear all responsibility. In cross-examination, Danny acknowledged that he never did seek confirmation from Daisy or Wendy as to whether they had sold their 10% interests each to Ruby, but he knew that his sisters all owed Ruby money. He also alleged that he was too busy, and that Ruby had claimed that there was no time to waste as Nancy needed the urgent relief proposed under the HH Property Oral Agreement. As Counsel for Nancy highlighted, Danny never contacted Wendy or Daisy to seek their confirmation, despite the fact there was an interim of 2 months between 4 October 2007 (the alleged time of the HH Property Oral Agreement) and the completion of the sale and purchase of the PW Property in December 2007.
54. I have rejected Danny’s claim of the 1st Acquisition, finding that there was no purchase by him of his sisters’ 40% share in the Estate. I also find his evidence on Ruby’s assertion and representation of her entitlement to 30% of the Estate by virtue of Daisy’s and Wendy’s indebtedness to her, and the sisters’ waiver of their right to the market value of the HH Property, to be totally unsubstantiated and inherently improbable. There is simply no evidence to support any reasonable or purported reliance on Danny’s part in relation to Ruby’s alleged representations. Even if Ruby had at any time made any form of loans to her sisters, there was no basis for her to unilaterally authorise Danny to look to her sisters’ shares in the Estate for repayment. As Danny himself recognized and acknowledged, he was at all material times not merely one of the beneficiaries of Mother’s Estate, but the executor thereof. He had the duty to act in good faith, in the best interests of the beneficiaries and to exercise care in the administration of the Estate, and not to act for his own advantage, nor for the advantage of others to the detriment of the Estate or any of the beneficiaries. Before purporting to extinguish Wendy’s and Daisy’s interests in the Estate, including their interests in and right to the market value of the HH Property, Danny as executor had the duty to at least take reasonable steps to make inquiries with Wendy and Daisy, as to whether they had indeed agreed with Ruby to use their interests in the Estate to discharge or set-off their indebtedness to Ruby, and seek their confirmation to the sale of the HH Property below market value, and any waiver of their rights. Danny acknowledged that he had failed to contact Wendy and Daisy, but had simply accepted Ruby’s word (if indeed she had made the alleged representation), sold the HH Property at a price below what he considered to be the market price, and used the proceeds to acquire the PW Property from Nancy in their joint names.
55. Danny’s assertions of the 1st Acquisition, and of the sisters’ alleged sale and/or surrender of their interests in the Estate in October 2007 are all denied by Nancy, Daisy, and Wendy in their pleadings and in their evidence, and by Ruby in her Defence to the Third Party Notice. In their evidence, Daisy and Wendy deny that they had sold their interests to either Ruby or Danny, at any time. It is noted that Ruby denies that she had purchased any of the interests of Daisy and Wendy, and further denies that she had sold any interest in the HH Property to Danny. She further denies that she had approved or consented to the sale of the HH Property below market value, as Danny alleged.
56. Being put to strict proof of his assertions, Danny has simply failed to establish to my satisfaction his claim that he had in October 2007 acquired 100% of the interest in the Estate. Danny’s evidence on his discussion and understanding with Ruby was simply fabricated to build up his case of “subrogation”, on the basis of what may or may not have been existing loans between the sisters.
The beneficial interests in the PW Property
57. The HH Property Oral Agreement is claimed by Danny to have been made amongst Nancy, Ruby and himself on 4 October 2007 for the acquisition of the PW Property from Nancy, and its transfer into the joint names of Nancy and Danny. According to Danny, the purpose was to raise a mortgage loan which Nancy can use to discharge her allegedly pressing and large debt (which is denied by Nancy, claiming that there was no urgency to settle the debts). There is no dispute that the proceeds of sale of the HH Property were agreed by all the sisters to be used for this purchase of the PW Property, and that Ruby had initially agreed to finance all the mortgage repayments. According to Daisy, the sisters agreed that the proceeds of the sale of the HH Property (in which they all had a share) would be used to buy the PW Property in the joint names of Ruby, Nancy and Danny, using a mortgage loan to finance the acquisition and to help Nancy out on her debts. As Danny’s income proof was used to obtain the Mortgage, his name was put in as one of the registered owners, but Ruby had agreed to pay for the Mortgage monthly repayments.
58. When Ruby reneged and dropped out of the purchase, and paid only $28,000 for the monthly mortgage payments, Nancy claims that the rest of the Mortgage loan was financed by herself since Danny refused to pay, whereas Danny claims that he had personally financed the entire purchase, and that Nancy had agreed to hold her share on trust for him.
59. On the authorities, it is for Danny to prove that that the beneficial ownership of the PW Property does not follow the legal ownership, which is in the joint names of Nancy and himself. On his case, Nancy had agreed to hold the PW Property on trust for him, since he had paid for the entire purchase price with the proceeds from the sale of the HH Property which he solely owned, as a result of the HH Property Oral Agreement. Although Nancy had, on the documentary evidence, been making monthly payments corresponding to the monthly Mortgage instalments due, Danny claims that these were only Nancy’s payment of rent to him.
60. The PW Property was sold at $1,900,000 (“Consideration”) and transferred from Nancy’s sole name to the joint names of Danny and Nancy. The purchase was financed in part by the Mortgage loan of $1,260,000. Of the unfinanced balance of $640,000, $600,000 was from the sale of the HH Property, leaving the Remainder of $40,000, which was to be shared between Nancy and Danny. On the evidence, Nancy issued a cashier’s order to Danny for the sum of $51,780 on 11 December 2007. Nancy explained that the breakdown of this sum included the $20,000 as her half share of the $40,000, her half share of the legal costs incurred in the sale of the HH Property and the sale and purchase of the PW Property, and her half share of the mortgage and insurance expenses. It further included a repayment of a loan of $16,000 to Danny and the costs of acquiring furniture for the PW Property. According to Nancy, the breakdown of the legal and insurance expenses was in fact supplied to her by Danny himself. Nancy also produced in evidence her manuscript notes containing the relevant figures, including the name given by Danny for the purpose of purchasing the cashier order.
61. It seems to be Danny’s case that the sum of $51,780 had indeed been received by him, but that it had been paid by Ruby. That remains a bare assertion on his part, without any substantiating evidence, from Ruby or otherwise. Ruby has made no claim to the PW Property, and has not been called as a witness. It is to be highlighted that this is not the trial of Danny’s claims made against Ruby in the Third Party Proceedings.
62. There is clear documentary evidence to show that Nancy had made monthly payments for the Mortgage instalments, in the total sum of $1,372,000. Apart from the admitted sum of $28,000, there is no evidence to show that Ruby had made further contributions to the Mortgage repayments.
63. On his part, Danny has produced no evidence in support of his bare assertion that the Consideration was paid for by him, apart from the claim that he was the beneficial owner of the proceeds of sale from the HH Property. He claimed that Nancy paid him $20,000 in December 2007, but he had no idea why she had made that payment and simply treated it as her repayment of a loan. He relied on evidence of his payment of the solicitors’ fees incurred in relation to the Mortgage and the purchase, but on Nancy’s evidence, she had paid her half share of these expenses, which was included in the cashier order for $51,780 issued to Danny. Danny highlighted the fact that the Mortgage had been obtained from the bank on the basis of his income proof, but this goes nowhere to showing that he had made financial contributions to the payment of the Mortgage loan.
64. Danny does not dispute that Nancy had made monthly payments into his bank accounts, equivalent to the amount payable for the monthly Mortgage repayments, but his explanation is that these represented Nancy’s payment of rent for her occupation of the PW Property, and were not for repayment of the Mortgage loan.
65. I find all of Danny’s assertions to be disingenuous.
66. According to Danny, he had become the sole owner of the Estate property and was entitled to 100% of the proceeds of sale of the HH Property. His sisters therefore had no further beneficial interest in or claim to the $600,000 which was applied towards the Consideration for the purchase of the PW Property. Since he had financed the purchase of the PW Property entirely, Nancy had no right to remain or reside at the PW Property and was liable to pay him rent.
67. Danny’s case is that after Ruby had backed out of the agreement to acquire the PW Property, he had intended to prepare an agreement for him to purchase the PW Property in his own sole name, but Nancy had beseeched him, and he had finally agreed, to retain Nancy’s name in the purchase on the basis that she was to hold the PW Property in name only, and on trust for him.
68. I have found that Nancy, and the other sisters, had not surrendered or sold to Danny but retained their respective share in the Estate and the proceeds of sale of the HH Property. It follows that they are entitled to one-fifth share each in the interests in and ultimate proceeds of sale of the HH Property, namely $120,000 each. It also means that each of the sisters had contributed $120,000 to the purchase price of the PW Property.
69. On my finding that Nancy had never agreed or offered to surrender her share in the Estate, there was no reason to agree and it is improbable that she would have agreed, either to hold her beneficial interest in the PW Property on trust for Danny; or to pay rent for the PW Property, which was (at the material time in October 2007) to be acquired with the sale proceeds from the Estate.
70. Counsel for Nancy also pointed out the inherent inconsistency and improbability of Danny’s assertion that Nancy had agreed to hold the PW Property on trust. Counsel referred to the Defence, where Danny pleads at paragraph 3(a7)(6) that after Ruby had reneged on the joint purchase agreement, Nancy had (to the point of threatening suicide) beseeched him to give her “property right” (“權益”) in the PW Property to be acquired, rather than for Danny to purchase the PW Property in his sole name. If, as Danny alleged, Nancy had thus been pleading for property right or title in the PW Property, it was illogical and inherently improbable that she would have accepted and agreed to hold her interest on trust for Danny, as opposed to being given actual title and beneficial interest. There is persuasive force in Counsel’s argument.
71. On the entirety of the factual evidence and on Danny’s own pleading, my conclusion is that there is simply no common intention constructive trust, or resulting trust, as Danny claims. It is not credible that Nancy would have had any intention in 2007 to hold the PW Property on trust for Danny.
The claim for rent
72. For the purpose of his claim for rent, Danny seeks to rely on the evidence of his wife, Elsa. Elsa claimed in her testimony at trial that she had overheard Danny talking to Ruby/Nancy on the telephone, with the speaker on, and had heard Danny chasing Nancy for payment of rent, with figures of $15,000 and $8,000 mentioned. She claimed that this had happened during the time from May to September 2010. She explained that she could remember these dates because she started her relationship with Danny in May 2010, and then the “rent chasing incident” occurred, around Nancy’s birthday in September 2010.
73. As Counsel for Nancy pointed out, this was the first time Elsa had mentioned rent in her evidence. In her witness statement dated 9 September 2015, Elsa had referred to various minute and irrelevant details, such as her own divorce in 2009, how she had met Danny in 2010, and her encounters with Ruby and Nancy in July and August 2010. However, she had made no mention whatsoever of the alleged telephone conversations on rent which she had overheard, despite the fact that the claim for rent had been made by Danny since the filing of the original Defence in December 2014, and was one of the key issues in dispute.
74. Elsa’s testimony also contradicts the evidence contained in her own witness statement. At paragraph 7, Elsa had stated that in mid‑June 2010, she had not seen Danny talking to his 4 sisters on the telephone at all. At paragraph 21, Elsa further stated that Danny had not been in contact with Nancy and Ruby since September 2010.
75. I agree that overall, Elsa’s evidence is more in the nature of tailored embellishment than actual facts, which I consider to be unreliable. Even Danny himself did not mention these alleged telephone calls of rent-chasing. In any event, any claim or demands made by Danny for rent is not equivalent to or evidence of Nancy having agreed to pay rent.
76. Apart from Elsa’s testimony, there is no other evidence which can support Danny’s claim for rent. As co-owner, Nancy was entitled to share occupation of the PW Property with Danny, and there is no mention in either the pleadings or the witness statements of any agreement specifically reached between Danny and Nancy, that the latter would have to pay rent for residing at the PW Property, at $7,500 as Danny claims, or at any other amount.
77. As Counsel rightly pointed out, the pleading at paragraph 3(a7)(5) of the Defence only stated Ruby’s request made to Danny, to let Nancy occupy half of the PW Property after their joint purchase, and that Danny had finally agreed. At paragraph 4(a)(8), Danny referred to the fact that Ruby had stopped paying for the Mortgage, whereupon he notified Nancy that she had to revert to her original agreement to pay $7,500 rent for occupying half of the PW Property. There was no plea of Nancy having initially agreed to pay rent of $7,500. In any event, Danny’s own pleading went on to state that Nancy had claimed that she was a joint owner and should not have to pay rent.
78. Danny’s plea at paragraph 4(c) of the Defence is that he had notified Nancy to pay monthly rental of $15,000, but again, there is no plea of any agreement ever having been reached between Danny and Nancy. Eventually, Danny had moved out of the PW Property on his own accord, as he no longer wished to reside there with Nancy. It is not a case of Nancy evicting Danny and claiming possession to Danny’s exclusion.
79. Accordingly, there is no case disclosed on the pleadings as to the existence of any agreement made between Danny and Nancy, whereby the latter had agreed that she would pay rent to Danny for her occupation of half of the PW Property, so as to entitle Danny to claim for the rent allegedly due.
80. In any event, any counterclaim for rent before 3 June 2009 is time barred under section 4(1) of the Limitation Ordinance.
81. Danny’s claim for rent/mesne profit is dismissed. I also reject all the other convoluted claims of conspiracy made against Nancy and Ruby, which have not been established. I fail to see what damage Danny has sustained as a result of any alleged conspiracy between Nancy and Ruby in relation to the issue of the cashier order, when he admits to having received the sum of $51,780. Nancy’s purpose for adducing evidence of the cashier order was to show that she had made payment to Danny of her share of the Remainder, of $20,000.
Apportionment of beneficial interest in PW Property
82. I accept that the payment of the Consideration for the PW Property comprised and included in part the siblings’ contribution of their share in the proceeds of sale of the HH Property, of $120,000 each (“Contribution”). Hence, each sibling’s contribution to the Consideration is as follows:
(1) Daisy’s Contribution = $120,000;
(2) Ruby’s Contribution + $28,000 repayment of the Mortgage loan = $148,000;
(3) Wendy’s Contribution = $120,000;
(4) Nancy’s Contribution + repayment of the Mortgage loan and interest ($1,232,000) + $20,000 of the Remainder = $1,372,000;
(5) Danny’s Contribution + $20,000 of the Remainder = $140,000.
83. I accept the submissions made for Nancy, that the beneficial interest of each sibling should be in proportion to their respective contribution to the Consideration. On Counsel’s submissions, which I accept, Nancy’s beneficial interest on the basis of her total contribution is 72.2105% (1,372,000/1,900,000), and the beneficial interest of Danny, Wendy, Daisy and Ruby in the PW Property should be respectively: 7.3684%, 6.3158%, 6.3158% and 7.7895%.
Breach of trust
84. Danny admits that the market price of the HH Property at the time of its sale was $1 million.
85. I have already rejected his claim of the HH Property Oral Agreement, that the sisters would waive and forfeit their share in the HH Property comprising the Estate in return for a quick sale of the HH Property, and that they had agreed to waive the difference between the market price and the sale price of the HH Property. Even if, for the sake of argument, it was true that Ruby and Nancy had agreed to the quick sale and to waive any claim, it was incumbent on Danny as executor to make reasonable inquiries and to seek confirmation from Daisy and Wendy, as to whether it was true that they had sold their 10% share in the Estate to Ruby, and/or that Ruby was entitled to forfeit/surrender their share on their behalf. On Danny’s case, he had not done this and had simply accepted Ruby’s alleged assurance and representation.
86. Daisy and Wendy have denied that they had disposed of or surrendered their respective interests in the Estate. Daisy, Wendy and Nancy deny knowledge of the market price of the HH Property being $1 million. Nancy claims that she had placed trust in Danny’s knowledge and experience in the market. Daisy and Wendy claim that they had throughout left matters relating to the Estate to Danny, particularly since they were not in Hong Kong. There is no satisfactory evidence adduced, that Danny had informed Daisy, Wendy or Nancy that the HH Property was worth more than $1 million on the market, and that $600,000 was below market value.
87. None of the provisions of section 54(4), section 55, and section 57 of the Probate and Administration Ordinance cited by Danny is relevant to the issues raised in this action. The validity of the grant of probate and the powers of an executor are not in dispute. The question in issue is whether Danny, as executor, was in breach of his duties of care.
88. In my judgment, there is no defence to the sisters’ claim, that Danny was in breach of his duty as executor to act in the best interests of the beneficiaries and to exercise skill and care in the discharge of his duties. If he had voluntarily assumed the risk of accepting Ruby’s assurance and representation of her ownership of 30% of the interests in the Estate, without taking any steps to verify her claim, he would have to bear the consequences if Ruby’s representation turned out to be false.
89. I therefor allow Nancy’s claim that Danny should indemnify her for the loss she sustained as a result of Danny’s breach of duty. Such damages are assessed at 20% (her one-fifth share) of the difference between the market price of $1 million and the sale price of $600,000 for the HH Property, in the sum of $80,000.
Disposition
90. The orders made on the claims between Nancy and Danny are:
(1) Danny shall pay Nancy $80,000, as compensation for his breach of executor’s duty arising from the sale of the HH Property;
(2) There be a declaration that Nancy and Danny hold the PW Property on trust for the benefit of its beneficial owners, in proportion to the owners’ respective contribution to the Consideration of $1,900,000, as follows: Nancy: 72.2105%; Danny: 7.3684%; Wendy: 6.3158%; Daisy: 6.3158%; Ruby: 7.7895%;
(3) Danny shall execute an assignment at his own costs so that the legal title of PW Property would match that of (2) above;
(4) There be liberty to apply for any further and necessary directions;
(5) Danny’s counterclaim be dismissed;
(6) Danny shall pay Nancy’s costs of this action, to be taxed if not agreed; and
(7) Nancy’s own costs be taxed according to Legal Aid Regulations.
| (Mimmie Chan) Judge of the Court of First Instance High Court |
Mr Chan Shek-wah, instructed by Sit, Fung, Kwong & Shum (assigned by the Director of Legal Aid), for the 1st plaintiff
The defendant appeared in person