UNIONWARD INVESTMENT LTD v. YEUNG FOON TAI

HCA 136/2016

[2024] HKCFI 3684

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 136 OF 2016

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J U D G M E N T

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A. Introduction

1.  On 13 January 2004, the defendant (“D” or “Yeung”)  was assigned Lot Nos. 706, 708 and 750B all in Demarcation District No. 9 (“DD 9”), Yuen Ling Village (元嶺村), Tai Po (the “1^st Schedule Land Lots”[1]. They have since been subdivided (and sub-subdivided further in some cases).  Some of the sub-divided lots have been sold or transferred.  Those that have been sold will in this Judgment be referred to as the “2^nd Schedule Land Lots”[2]. What remain now registered in D’s name are Lot Nos. 706RP, 708RP, 750B7, 750B8, 750BRP and 750B6RP (the “3^rd Schedule Land Lots”[3]). Disputes have arisen between the plaintiff (高欣投資有限公司, “P” or “Unionward”)  and D over the ownership of the 1^st Schedule Land Lots (and hence also the interests of and proceeds derived from the 2^nd Schedule Land Lots, and the ownership of the 3^rd Schedule Land Lots).  P says that the purchase price for the 1^st Schedule Land Lots (the “1^st Schedule Land Lots Purchase Price”)  originated from P, so that D has been holding them or their proceeds on resulting trust for it.  D denies that, and maintains that she has beneficial ownership over them.

2.  This is the trial of their disputes.  Mr Stewart Wong SC leading Mr George Lam and Mr Jonathan Fung appeared for P.  Mr James Man appeared for D.

B.  Bundles

3.  For the trial, a number of agreed bundles have been placed before this Court.  They comprise [A][4], [B][5], [C][6], [D1] to [D3][7], and [E][8]. Authenticity is not in dispute.

4.  On 31 May 2022, P filed a hearsay notice covering 79 items.  They are mostly cheques and bank documents, various conveyancing documents, land search records, and divers company documents.  Mr Man confirmed that no issue of admissibility arises therefrom.

5.  In the course of his oral opening, Mr Wong tendered as an annex to his written opening a plan showing the relative locations of the relevant lots (“P/Annex Plan”).  The 4 grids thereon have been numbered Box 1 to Box 4[9] for ease of identification.  A portion of Box 2, and the entire Box 1 have been enlarged, and were produced by Mr Man during his re-examination of YH Li[10].  

C.  Pleadings and interrogatories

6.  The current set of pleadings comprises:

(a)  The re-amended Statement of Claim ((“RA-SOC”)  – Writ and Statement of Claim dated 15 January 2016 (“SOC”), amended on 15 March 2021 (“A-SOC”), and re-amended pursuant to this Court’s order of 16 August 2024[11]);

(b)  The re-re-amended Defence ((“RRA-Def”)  – Defence dated 4 March 2016 (“Defence”), and amended 3 times on 26 March 2019, 23 February 2021, and 12 April 2021);

(c)  The re-amended Reply ((“RA-Reply”)  – Reply dated 23 May 2019, amended on 13 April 2021, and re-amended on 31 May 2021).

7.  By affirmation of Mr Lee Wai Wo (李偉和, “WW Lee”)  filed on 4 July 2022 (“P/Answers to Interrogatories”), P provided answers to the interrogatories administered earlier upon it by D.  WW Lee is an accounting clerk of P and 2 other companies called Panwood Investment Limited (百和投資有限公司, “Panwood”)  and Chan Tam Wong Investment Limited (陳淡旺投資有限公司, “CTW Investment”).

D.  The lots of land involved

8.  At the centre of parties’ disputes are the 1^st Schedule Land Lots.  Resolution of those disputes will resolve their disputes over the 2^nd Schedule Land Lots, the 3^rd Schedule Land Lots and any related proceeds. 

9.  As I have said,the 1^st Schedule Land Lots have been sub-divided (and some sub-subdivided). There are 20 of such sub-divided lots.  Full details of such subdivisions and their sales are no longer important, as parties have agreed upon the value of those that had been sold for the purpose of the present claim[12].  A note should however be added in relation to Lot No. 706A.  It is one of the lots sub-divided from a lot amongst the 1^st Schedule Land Lots.  It was not sold but was, in circumstances which are in dispute, transferred.  It is hence not in either the 2^nd or 3^rd Schedules.  I will come back to Lot No. 706A.  

10.  Relevant to parties’ disputes are in addition the following lots also in DD 9, Yuen Ling Village:

(a)  Lot Nos. 761, 762, 763, 772, 776A, 793, 796, 817, 833 and 1392 all also in DD 9 (the “Yuen Ling Lot A”[13]); and

(b)  Lot Nos. 843, 845, 846, 849, 912 and 913B also in DD 9 (the “Yuen Ling Lot B”[14], and together with the 1^st Schedule Land Lots and the Yuen Ling Lot A, collectively the “Yuen Ling Lots”).

E.  The background facts

11.  The following facts are agreed or otherwise not in dispute.  It is useful to set them out at this stage as they provide the background necessary for the understanding of parties’ disputes.  They are also useful for the consideration of credibility and inherent probability.

E.1.   Parties

12.  In respect of P:

(a)  P is a Hong Kong limited company.  It carries on business as a property investor;

(b)  Chan Tam Wong (陳淡旺, “TW Chan” or “旺叔”, and his family “Chan Family”)  was its founder.  He was also a director and shareholder of P, Panwood and CTW Investment.  He passed away on 17 June 2014;

(c)  TW Chan had 2 sons: Chan Chee Ling (陳志凌, “CL Chan”)  and Chan Chi Chiu Henry (陳志超, “Henry Chan”, and collectively “Chan’s Sons” where appropriate).  Both have been directors and shareholders of P;

(d)  Lee Yuk Yee (李玉儀, “YY Lee”)  is CL Chan’s wife;

(e)  TW Chan or Chan Family owned or controlled P, Panwood and CTW Investment; and

(f)  Also relevant is Lee Chi Wai (李智偉), who is a relative of Chan Family.

13.  In respect of D:

(a)  Li Yau Hing is D’s husband (李有慶, “YH Li”, and his family “Li Family”).  He was between 1998 and 2015 a Vice-chairman of the Tai Po Rural Committee;

(b)  D and YH Li have 2 sons and one daughter: Li Sai Wa Darren (李世華, “Darren Li”), Li Sai Hung (李世雄, “SH Li”, and collectively “Li’s Sons” where appropriate)  and Li Pik Man (李碧汶, “Li’s Daughter”);

(c)  YH Li or Li Family owned or controlled the following companies:

(i)  Well Fortune Investment Company Limited (金偉投資有限公司)  (“Well Fortune”)  (save between December 2003 and December 2012 when 50% was owned by TW Chan or Chan Family);

(ii)  Sino International Investment Limited (華樂國際投資有限公司)  (“Sino International”); and

(iii)  Wifun Foundate Limited (榮豐創建有限公司)  (“Wifun”);

(d)  Well Fortune owes 3 hotels or guesthouses at Tai Po district. They are Tai Po Hotel (大埔酒店), New Tai Po Hotel (新大埔酒店)  and Tai Po Villa (大埔賓館)  (collectively the “3 Well Fortune Hotels”); and

(e)  Under cross-examination, YH Li confirmed that he, as the head of the Li Family, was in the positon to make decisions for the companies without consulting other directors and shareholders, as they would be prepared to go along with his decisions.

14.  YH Li and D were acquainted with TW Chan.  Prior to 25 September 2003, YH Li had been borrowing money from TW Chan and/or CTW Investment.  The exact amount however is in dispute.

E.2.   Acquisition of the Lung Mei Lots (the “Lung Mei Acquisitions”)

15.  On or about 9 September 2002, sale and purchase agreements were signed in respect of the following land lots in Lung Mei Village, Tai Po (collectively, “Lung Mei Lots”):

(a)  Lot No. 1614, Remaining Portion of Lot No. 1639 and Lot No. 1655 in DD 17, with CL Chan as the purchaser;

(b)  Remaining Portion of Lot No. 1641, Lot No. 1676, Lot No. 1659 and Lot No. 1682 in DD 17, with Henry Chan as the purchaser;

(c)  Remaining Portion of Lot No. 1649, Lot No. 1650, Section A of Lot No. 1651, Section A of Lot No. 1653 in DD 17, with Darren Li as the purchaser; and

(d)  Lot No. 1652, Section B of Lot No. 1653 and Lot No. 1654, with SH Li as the purchaser.  

16.  On 9 July 2003, the Lung Mei Acquisitions were completed.  The Lung Mei Lots were assigned to Chan’s Sons and Li’s Sons in accordance with the relevant sale and purchase agreements.  On or about 3 September 2007, the 4 of them assigned the Lung Mei Lots to Lanson Investment Limited (利新投資有限公司)  (“Lanson”), in which each of them held 25% shares.

17.  Lanson acquired Lot No. 1651RP in DD 17 on 24 October 2007, and Lot No. 1648RP in DD 17 on 26 May 2008 (the “Additional Lung Mei Lots”).

18.  On 26 February 2013, Li’s Sons transferred their 50% shares in Lanson to Chan’s Sons (the “2013 Lanson Transfer”).

E.3.   Acquisition of the Yuen Ling Lots (the “Yuen Ling Acquisitions”)

19.  On 1 August 2003:

(a)  YH Li signed a document[15] (“1/8/2003 Doc#1”)  which states:

“茲証明本人李有慶先生在2002年8月至2003年8月期間從陳淡旺先生得到港幣13,000,000.00元作為換取金偉投資有限公司13,750股之股權，以此為証。”

(b)  YH Li on behalf of Well Fortune, and TW Chan on behalf of CTW Investment signed another document entitled “金偉投資有限公司 – 總股權共27500股”[16] (“1/8/2003 Doc#2”, and together with 1/8/2003 Doc#1, collectively the “1/8/2003 Documents”).  It sets out the 3 Well Fortune Hotels.  It states that:

“在2003年8月1日並簽署有效之文件後起，陳淡旺投資有限公司持有金偉投資有限公司之13750股權之股東（佔之金偉投資有限公司總股權50%）。”

20.  On or about 25 September 2003:

(a)  P issued a cheque (no. 546611)[17] (“Chq 546611”)  in the sum of HK$1,300,000 in favour of YH Li, of which HK$800,000 was for the purpose of making deposit payment towards the Yuen Ling Acquisitions, and HK$500,000 for the purpose of paying a consultation fee;

(b)  Wifun issued a cheque (no. 683660)[18] (“Chq 683660”)  in the sum of HK$800,000 to Messrs. Peter W.K. Lo & Co, solicitors for the purchasers of the Yuen Ling Lots; and

(c)  YH Li and D issued a cheque (no. 686038)[19] (“Chq 686038”)  in the sum of HK$500,000.  The payee thereof was left blank.

21.  On 30 September 2003, CTW Investment issued a cheque in the sum of HK$1,000,000 (no. 562785)[20] (“Chq 562785”)  in favour of YH Li for the purpose of paying further consultation fees.

22.  I add immediately that the recipient(s)  of those consultation fees (HK$1,500,000 in total)  is (are)  in dispute.  D and YH Li say that the consultation fees were demanded by the vendor, and were paid to it.  P disputes that.  P says that they were all paid to D and YH Li as consultation fees.

23.  On 16 October 2003, 3 separate Sale and Purchase Agreements (“SPA-A”[21], “SPA-B”[22] and “SPA-SL1”[23], and collectively the “SPAs”)  were entered into.  They were respectively for the sale and purchase of Yuen Ling Lot A, Yuen Ling Lot B, and the 1^st Schedule Land Lots.  The considerations were respectively HK$1 million, HK$2 million, and HK$990,000.  In all 3, the vendor was Guangdong Materials Company Limited (“GMC”).  The purchasers differed.  Sino International andP(hence one company from each family)were named,on a tenants-in-common basis, as the purchasers in SPA-A, Wifun and Panwood (hence also one company from each family)  on that same basis in SPA-B, and D alone in SPA-SL1.  Each of the SPAs provided that completion shall take place within 3 months of the signing of the agreement, and that should GMC fail to complete the sales of the other 2 sets of lots at the same time, the Purchaser shall be entitled to terminate[24].

24.  On 12 December 2003, Li Family transferred 50% of their shareholding in Well Fortune to CTW Investment (the “2003 Well Fortune Transfer”).  3 sets of Instruments of Transfer and Sold Notes were signed by D (9,500 shares), SH Li (2,750 shares)  and Li’s Daughter (1,500 shares), and the Bought Notes signed by TW Chan on behalf of CTW Investment (collectively the “2003 Well Fortune Transfer Documents”).  On 5 December 2012, CTW Investment transferred 50% shareholding in Well Fortune back to Li Family (the “2012 Well Fortune Transfer”).

25.  Whilst the facts that the 2003 Well Fortune Transfer and the 2012 Well Fortune Transfer had taken place are not in dispute, the reasons for and purposes of the transfers are.

26.  On or about 9 January 2004, D signed nominations on behalf of Sino International and Wifun which, together with P and Panwood, nominated respectively P and Panwood to take up as beneficial owners the assignments of Yuen Ling Lot A[25] and Yuen Ling Lot B[26] (the “9/1/2004 Nominations”).

27.  The Yuen Ling Acquisitions were completed on 13 January 2004[27], with balance of all the purchase prices and legal costs paid for by P and Panwood.  In particular, the balance of the 1^st Schedule Land Lots Purchase Price was paid for by cheques issued by P.

28.  Upon assignment, the Yuen Ling Lot A and Yuen Ling Lot B were respectively registered in the name of the P and Panwood (both being, one recalls, companies of the Chan Family).  The 1^st Schedule Land Lots were registered in the name of D.

29.  On 16 January 2004, D executed the first of several Deeds Poll subdividing the 1^st Schedule Land Lots.  Between 2004 and 2011:

(a)  further Deeds Poll were signed, effecting further subdivision of the 1^st Schedule Land Lots;

(b)  D disposed of and assigned the 2^nd Schedule Land Lots to third parties without accounting to P the proceeds.  The 3^rd Schedule Land Lots remain held in D’s name;

(c)  As have been observed above, Lot No. 706A is not dealt with in either the 2^nd or 3^rd Schedules.  According to the land search records[28], it became transferred to Lee Chi Wai on 21 November 2008, a relative of the Chan Family.

30.  Around late 2005, TW Chan was diagnosed with cancer.  He had been suffering from dementia since around 2009/2010.  He passed away on 17 June 2014.

F.  The material accounting documents

31.  A number of accounting documents have been placed before this Court.  It is useful to group the most material ones together and introduce them at this stage.  I will discuss their significance in the latter parts of this Judgment.

32.  I have mentioned Chq 683660 and Chq 686038 above.  The following documents relating to them are material:

(a)  In her supplemental list of documents, D discloses copies of those 2 cheques.  They were copied onto a single sheet of paper[29] (the “Cheque Copies Sheet/D”).  The image of Chq 683660 in on the top half, with that of Chq 686038 under it;

(b)  On the bottom margin of the Cheque Copies Sheet/D, under the image of Chq 686038, there are the following handwritten words (underlining added for ease of presentation):

“以上款項共港幣壹佰參拾萬係由陳淡旺先生擔保借給李有慶先生的，利息由李有慶先生付，用作買地訂金。

25-9-2003

  收款人Li Yau Hing”

(c)  In P/Answers to Interrogatories, WW Lee states that the underlined characters were written by him;

(d)  In YH Li/WS2[30], YH Li states that the date and the other words (“收款人Li Yau Hing”)  were written by him.

33.  There is another version of that copy sheet[31] (“Cheque Copies Sheet/P”):

(a)  It bears the images of the same 2 cheques, with the same layout. It was produced by P as part of the documents P used in support of the O.14 Application.  YY Lee refers to it at §17 of her first affirmation filed on 14 September 2016 in support of the O.14 Application (“YY Lee/Aff1”), that:

“There is now shown to me and exhibited hereto as ‘LYY-4’ a copy of [Chq 683660 and Chq 686038] with handwritten notes made thereon by [WW Lee] on instructions of my father-in-law and [YH] Li on or about 25.09.2003.”

(b)  Those “handwritten notes” were written on the bottom margin underneath Chq 686038.  Those characters are:

“ 顧 (當丁屋A)

全數共1,300,000.-由旺叔借出。”

34.  Three sets of ledgers (together with the relevant supporting documents)  have been produced (collectively the “3 Sets of Ledgers”).  They are:

(a)  Item [D1/23][32], which bears on the index page the ledger name of “陳淡旺先生購買李有慶先生大埔酒店〈即陳淡旺投資有限公司購買金偉投資有限公司股份〉” (the “Well Fortune Purchase Ledgers”),

(b)  Item [D1/28][33], which bears on the index page the ledger name of “陳淡旺、李有慶合伙購買大尾督地〈陳志凌、陳志超、李世雄、李世華〉D.D.17 (the “Lung Mei Purchase Ledgers”), and

(c)  Item [D1/51][34], which has no index page and no ledger name, but relates to the Yuen Ling Acquisitions (the “Yuen Ling Purchase Ledgers”).  Related to the booking of the related funds also are 5 sheets of accounts which WW Lee said he input and printed from a computer[35] (the “Computer Printouts”).

35.  There is another document (the “AR Sheet”)  which D relies heavily on:

(a)  YY Lee says at §27 of YY Lee/Aff1[36] that:

“In the premises, it is clear from the documentary records coupled with the hand written margin notes written thereon left behind by my father-in-law that [P] was the one who solely advanced the purchase price of [1^st Schedule Land Lots]. For convenience sake, I have also attached a bundle of accounting records compiled by [WW Lee] which illustrates the payments settled for [the Yuen Ling Lots] …”

(b)  The AR Sheet is amongst those “accounting records” which YY Lee produced[37]. It records the payment in relation to the purchases of the Yuen Ling Lot A (set out at the top of the page under the words “高欣”), Yuen Ling Lot B (at the middle under the words “百和”)  and 1^st Schedule Land Lots (towards the bottom under “楊寬娣”). It is noted that:

(i)  in respect of Yuen Ling Lot A, YY Lee wrote inter alia:

“高欣:

…

25-9-03 旺叔交訂金 $200,000 …

9-1-2004  旺叔付尾數  $815,060 …”

(ii)  in respect of Yuen Ling Lot B, YY Lee wrote inter alia:

“百和

…

25-9-2003 旺叔交訂金 $400,000 …

9-1-2004  旺叔付尾數  $1,633,810 …”

(iii)  in respect of the 1^st Schedule Land Lots, he wrote inter alia (with emphasis added):

“楊寬娣

…

25-9-2003 旺叔代交訂金 $200,000 …

9-1-2004  旺叔代付尾數  $803,822.50 …”

(iv)  The significance lies in the contrast between his use of the words “旺叔交” or “旺叔付” in the cases of Yuen Ling Lots A and B on the one hand, and the words “旺叔代交” in the case of the 1^st Schedule Land Lots.

36.  I will come back to these accounting documents.

G.  Parties’ pleaded cases

37.  In gist, P says that YH Li and D had for fees been acting as P’s agents in P’s acquisition of land in the New Territories.  The 1^st Schedule Land Lots were so purchased.  P bore the 1^st Schedule Land Lots Purchase Price and the legal costs.  The 1^st Schedule Land Lots were registered in D’s name upon D’s representation that GMC would only be willing to sell them to her (which I will for ease of presentation refer to as the “Alleged Representation”, and which I will come back to).  For D and YH Li’s services, P on 30 September 2003 paid them HK$500,000.  P had therefore all along been the beneficial owner of the 1^st Schedule Land Lots, and D had been holding them upon trust for it.  Between 2004 and 2011, D had after subdivision and without P’s knowledge or consent sold and assigned away the 2^nd Schedule Land Lots, leaving behind only the 3^rd Schedule Land Lots.  The assignments were “grossly undervalued”.  D has also failed to account to P the sale proceeds.  P hence claims:

(a)  A Declaration that D held 2^nd Schedule Land Lots upon resulting and/or constructive trust for P’s benefit;

(b)  An Order that D shall repay to P the sum of HK$6,735,000[38] representing the market value (as at the date of the Writ)  of the 2^nd Schedule Land Lots, and with interest;

(c)  A Declaration that D has been holding the 3^rd Schedule Land Lots upon resulting and/or constructive trust for P’s benefit; and

(d)  An Order that D shall forthwith assign and transfer the title in the 3^rd Schedule Land Lots to P.

38.  I record that parties have since agreed upon the valuation of the 2^nd Schedule Land Lots as at the date of the Writ.  Any claim arising out of the allegation of undervaluation when the 2^nd Schedule Land Lots were sold is no longer live.  That is also the reason why I have observed that full particulars of the 2^nd Schedule Land Lots and their sales are no longer important.

39.  D denies liability.  Her case is that the monies used towards the purchase of the 1^st Schedule Land Lots were loans from P.  She denies the existence of any agency, trust or trusteeship.  In more details but still in gist, she avers and pleads as follows:

(a)  YH Li had had a prior strong intention to acquire the 1^st Schedule Land Lots.  He had other lands adjacent to them (Lot Nos. 707 and 749 in DD 9). A prior attempt to do so had failed;

(b)  A subsequent chance to acquire the Yuen Ling Lots came up through a middleman.  YH Li did not have sufficient funds to take the acquisition up given his earlier Lung Mei Acquisitions.  He approached TW Chan.  An agreement was reached between them (referred to as the “Original Agreement” in the RRA-Def).  TW Chan would lend sufficient money to YH Li for his purchase of the 1^st Schedule Land Lots. The total amount lent would be HK$13,000,000, of which HK$1,000,000 would be used for the purchase of the 1^st Schedule Land Lots, and balance of HK$12,000,000 to set-off against YH Li’s previous debts owed to TW Chan[39]. 50% of the shares in Well Fortune would be transferred to TW Chan as “mortgage of the entire loan”[40]. TW Chan and YH Li would each contribute 50% towards the purchases of Yuen Ling Lot A and Yuen Ling Lot B.  TW Chan would further provide sufficient loans to YH Li for that[41].  The loans[42] were interest-bearing. Given the provision of security, the interest rate would be lower than that of 1.5% which the previous loans carried.  The exact rate was not agreed upon[43]. YH Li would repay those loans when he “had sufficient money to repay the same”[44];

(c)  The SPAs were then executed.  The 2003 Well Fortune Transfer was also effected by the Li Family as security for the loans;

(d)  Shortly before completion, TW Chan and YH Li reached a further agreement (referred to as the “New Agreement” in the RRA-Def).  It was reached upon TW Chan’s proposal, on the basis that he was to provide the funds for the Yuen Ling Acquisitions.  That led to the 9/1/2004 Nominations.  It was further part of the New Agreement that in the future, if YH Li has the funds, he can purchase back the 50% interest in the Yuen Ling Lot A and Yuen Ling Lot B according to their original contribution without interest (referred to as the “Buy-Back Promise” in the RRA-Def);

(e)  Upon completion, the Yuen Ling Lot A were registered in the name of P, the Yuen Ling Lot B in the name of Panwood, and the 1^st Schedule Land Lots in the name of D;

(f)  After TW Chan’s death, the Chan Family refused to recognise the Buy-Back Promise.  In around 2012, an agreement was reached between YH Li and representatives of the Chan Family.  CTW Investment would transfer back the 50% shares in Well Fortune to the Li Family.  Li Family would transfer their interest in the Lung Mei Lots and Additional Lung Mei Lots to the Chan Family.  That was to go towards redemption of the 50% shares in Well Fortune, and in discharge of the principal and interest of the loan of HK$13 million. The Li Family would be given an option to purchase certain lots of land (referred to as the “Option” in the RRA-Def);

(g)  The 2012 Well Fortune Transfer and the 2013 Lanson Transfer were then effected.  The Li Family’s exercise of the Option has however been repeatedly rejected by the Chan Family;

(h)  P’s claim is further or in the alternative barred by the equitable doctrine of laches and/or acquiescence.

40.  P’s reply is in gist as follows:

(a)  P reiterated its case pleaded in the RA-SOC that the 1^st Schedule Land Lots were registered in D’s name upon D’s representation that GMC would only be willing to sell the same to her.  For that, D and YH Li were paid HK$500,000 as their fees;

(b)  P denies any loan under the alleged Original Agreement.  It denies that the 2003 Well Fortune Transfer was effected as security.  Its pleads that between August 2002 and August 2003, D and/or YH Li had already borrowed an aggregate of about HK$13 million from TW Chan and/or CTW Investment.  That indebtedness included the balance of YH Li’s shares for the purchase price of the Lung Mei Acquisitions, in the sum of HK$1,211,582.50, which CTW Investment had paid on YH Li or Li Family’s behalf.  The 2003 Well Fortune Transfer was effected in settlement of the 13 million indebtedness by way of set off.  That was requested by TW Chan and agreed to by YH Li.  The transfer had nothing to do with the Yuen Ling Acquisitions;

(c)  P denies the existence of the alleged New Agreement or the Buy-Back Promise;

(d)  The 2012 Well Fortune Transfer was made in exchange of the 2013 Lanson Transfer pursuant to an oral agreement between YH Li and representatives of Chan Family.  It was not for redemption of any security.  The transfer of Lot No. 706A to Lee Chi Wai was partial return by D of the 1^st Schedule Land Lots to the Chan Family.  P also denies the existence of the Option.

H.  Agreed issues

41.  Parties have been able to agree upon a list of agreed issues, as follows:

(a)  Issue #1 - Whether P is the beneficial owner of the 1^st Schedule Land Lots.  In particular, was the purchase money provided by P for its own purchase, or was it a loan by TW Chan/P to D?

(b)  Issue #2 - If the answer to Issue #1 is yes, whether D was in breach of her duty as P’s trustee that, without P’s knowledge or consent:

(i)  She had caused a subdivision of the 1^st Schedule Land Lots; and

(ii)  She had sold and assigned or wrongfully disposed of the 2^nd Schedule Land Lots;

(c)  Issue #3 - Whether P’s claim is barred by the equitable doctrine of laches and/or acquiescence;

(d)  Issue #4 - Whether D is liable to account or restore the 2^nd Schedule Land Lots to P, or, in default, D shall pay equitable compensation for the loss and damages to P;

(e)  Issue #5 - Whether D is liable to return the 3^rd Schedule Land Lots to P.

42.  Whilst parties have split up and identified the issues as above, the real ones are Issues #1 and #3.  As accepted by Mr Man in his written opening, if Issue #1 is answered in the affirmatively and Issue #3 in the negative, there can be little dispute that D has been in breach of trust, and that P is entitled to relief.  Mr Wong during his oral opening emphasized the fact, not disputed by D, that the funds for the purchase of the 1^st Schedule Land Lots originated from TW Chan.  Mr Wong framed the issue thus: what was TW Chan’s subjective intent when he provided the funds for the acquisition of the 1^st Schedule Land Lots?

I.  Witnesses

I.1.  D’s Summons to file additional witness statements

43.  By summons of 5 August 2024, originally returnable on the first day of the trial but subsequently dealt with by consent on 7 August 2024, D sought leave to adduce one additional witness statement each for herself and YH Li (“D/WS2” and (“YH Li/WS2”).

44.  In YH Li/WS2, YH Li seeks to correct certain mistakes he says he has made in his first witness statement of 23 October 2021 (“YH Li/WS1”)  – that contrary to his earlier recollection, TW Chan did pay the balance for the Lung Mei Acquisitions on behalf of his (YH Li’s)  family, that the date and the words “收款人Li Yau Hing” on the Cheque Copies Sheet/D were written by him, and that it was D but not him who attended the solicitors’ office in relation to the completion arrangement for the SPAs (the “Solicitor Firm Meeting”).  D/WS2 was filed to support the third point.  Given the nature of their contents, I regarded as fair that YH Li be given the opportunity to correct what he believes to be errors in YS Li/WS1.  On 7 August 2024, I granted, by consent, D the leave sought and made an order in terms of the summons.

I.2.  Witnesses called

45.  Parties have called altogether 4 factual witnesses:

(a)  P has called:

(i)  WW Lee, who has given one witness statement dated 24 November 2021 (“WW Lee/WS”); and

(ii)  YY Lee, who has given one witness statement of that same date (“YY Lee/WS”).  Relevant also to her evidence are her 2 affirmations filed in support of the O.14 Application, namely YY Lee/Aff1 mentioned above, and her second affirmation filed on 29 November 2016 (“YY Lee/Aff2”);

(b)  D has called:

(i)  her husband YH Li, who has given, as mentioned above, 2 witness statements, i.e. YH Li/WS1 and YH Li/WS2; and

(ii)  herself, who has given 2 witness statements, the first one dated 23 October 2021 (“D/WS1”), and the second one being D/WS2 mentioned above. D/WS1 is a short statement.  D therein only expresses her agreement to the contents of YH Li/WS1.  She says that the relevant transactions were conducted and arranged by YH Li.  Her role was confined to being the purchaser and assignee of the 1^st Schedule Land Lots.  She does not have any first hand knowledge on the background and details of those transactions. 

46.  In terms of expert witnesses, though expert reports have been exchanged and included in the trial bundles, parties have agreed that the 2^nd Schedule Land Lots are to be valued at HK$6,735,000 as at the date of the Writ.  The valuation experts hence were not called.

J.  Credibility and reliability of witnesses

47.  On the principles applicable to assessment of credibility and reliability, I have been cited Hui Cheung Fai v Daiwa Development Ltd. (HCA1734/2009, 8 Apr 2014)  at §§77-83.  I have also been reminded of the “especial caution” with which this Court should approach the witnesses’ memory on events distant in time, and the importance of contemporaneous documentation in such cases, as explained by Stock JA in Esquire (Electronics)  Ltd v Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at §135.  I bear those matters in mind. 

J.1  YY Lee

48.  On the whole, I do not find YY Lee to be a reliable witness.  I have also concern about the evidential value of aspects of her testimony, and the reliability of her memory:

(a)  She admittedly has no direct and personal knowledge of the relevant transactions.  Specifically in respect of the Lung Mei Acquisitions, she says that “在所有關鍵時刻，本人得悉這單交易，然而並沒有參與龍尾村的土地買賣的交易過程細節。”[45] In respect of the Yuen Ling Acquisitions, she says that “在所有關鍵時刻，本人沒有參與元嶺村土地買賣。本人在元嶺村的土地買賣交易完成後才知道這交易。” [46];

(b)  In YY Lee/WS, whilst in various paragraphs she claims that she has knowledge of various matters (“本人知悉”), she has not stated in her witness statement the sources of her knowledge;

(c)  In so far as her source of knowledge being the accounting documents, the reliability of her evidence is dependent upon the reliability of those documents.  She was not their author.  Nor was she in the position to verify their truth;

(d)  In so far as her source of knowledge being what TW Chan had allegedly told her, they are hearsay.  The time when TW Chan made those statements to her is either not clear, or after the events.  There is no written record of such conversations.  She has interest in the outcome of the proceedings.  There are also inconsistencies in her evidence (as explained below); 

(e)  In so far as her source of knowledge being discussions and negotiations between TW Chan and YH Li which she claims to have overheard, again there is no written record of the same.  It is noted that some of the alleged discussions involved quite some details[47], and I have serious reservations as to whether she could have remembered them correctly without records.  In any event, those discussions were at best piecemeal, and may not be representative of the full picture;

(f)  She was the person who signed the Statements of Truth for all of P’s pleadings, original and amended included;

(g)  In the RA-SOC at §2(b), P pleads that D and YH Li “acted as the agents of [P] in the latter’s acquisition of land in the New Territories.” That is not correct in the case of the Lung Mei Acquisitions.  The involvement of the Li Family was clearly beyond that of agents;

(h)  In the RA-SOC at §4, P pleads the Alleged Representation, that:

“Through [D’s] service, in 2003, [P] acquired/purchased the 1^st Schedule [Land Lots] at a consideration of $990,000 from one [GMC], the mortgagee in exercise of its power of sale, and have the same registered in the name of [D] upon the latter’s representation (and [P] believed)[48] that GMC would only be willing to sell the same to her.”

(i)  The Alleged Representation is an important averment.  P says that it was because of that that the 1^st Schedule Land Lots became registered in the name of D;

(j)  YY Lee’s evidence in respect of the Alleged Representation is conflicting, and suffers from material inconsistencies:

(i)  She made no mention of it in YY Lee/WS, claiming during cross-examination that “係冇寫到，唔記得咗”;

(ii)  When asked about the source of her knowledge in respect of the Alleged Representation, she first said that she could not remember.  She claimed that whilst she remembered the source when the SOC was filed, she had since forgotten about it due to the long lapse of time;

(iii)  But the words“and [P] believed” in the A-SOC were only added in March 2021.  That was not too long ago.  When cross-examined on this, she only repeated the answer that she forgot;

(iv)  In fact the Alleged Representation is also pleaded in §13 of all 3 versions of the Reply, with the RA-Reply only filed in May 2021;

(v)  At some stage during cross-examination, she claimed that TW Chan said that it was only through D and YH Li’s relationship that the Yuen Ling Lots could be acquired.  That is different from the specific and positive statement which D is said to have made via the Alleged Representation;

(vi)  Upon further cross-examination, she then claimed to remember that it was TW Chan who told her about the Alleged Representation;

(vii)  That has opened up further inconsistencies as to who allegedly made the Alleged Representation:

(1)  According to all versions of the SOC, it was D;

(2)  According to all versions of the Reply, it was YH Li;

(3)  When asked about the inconsistency, YY Lee first said in fact both made it, then changed it to YH Li;

(4)  Then she claimed under further cross-examination that she remembered that it was TW Chan who told her about that, and that what TW Chan said was that both YH Li and D had made the Alleged Representation;

(5)  But in YY Lee/Aff1 at §10, she said on oath that according to TW Chan, it was YH Li who made the Alleged Representation;

(6)  When that was pointed out to her, she maintained the version that both YH Li and D made it;

(7)  But another version of “Li/Yeung”, presumably meaning YH Li or Yeung, was given by her in YY Lee/Aff2 at §11, that “[TW Chan] understood from Li/Yeung that the Vendor … were only willing to deal with Li/Yeung”;

(8)  When pressed further during cross-examination, yet another version was provided, that YH Li and D are “一體”, “即係楊寬娣同埋佢先生係一齊同我老爺傾㗎嘛”;

(viii)  I have considered the lapse of time between the events and the trial.  But an honest and reliable witness who could no longer recall an event could easily and simply have said so, and would not have given inconsistent and conflicting answers as YY Lee has;

(ix)  At §11 of YY Lee/Aff2, YY Lee in fact says this:

“… [TW Chan] understood from Li/Yeung that the Vendor of [the Yuen Ling Lots] were only willing to deal with Li/Yeung. So [TW Chan] would have been unsuccessful if he wanted to leave out Li/Yeung and directly deal with the Vendor. Therefore, Li/Yeung agreed with [TW Chan] that they would arrange and procure the sale of [the Yuen Ling Lots] in return for a consultancy fee so that the end purchaser would be [TW Chan]. This explains why there were two nominations executed for [Yuen Ling Lots A and B] to remove [Sino International] and [Wifun] from the respective assignments. As to why [the 1^st Schedule Land Lots were] first registered under Yeung’s name, this arrangement was orchestrated from Li/Yeung. [TW Chan] did not interfere, he paid their consultancy fee and had no doubt of not trusting Yeung that she would not transfer [the 1^st Schedule Land Lots] back to him.”

(k)  When asked how YH Li and/or D could have “orchestrated” the “arrangement” when the 9/1/2004 Nominations had in fact been made, and when TW Chan was the one who was paying the prices, YY Lee could not give any sensible explanation or detail;

(l)  I remind myself that when assessing reliability and credibility, I have to consider the totality of the evidence.  I remind also myself that the unreliability of specific aspects of a witness’s evidence may not necessarily affect his overall credibility or reliability.  I also remind myself of the lapse of time involved.  But having considered all the evidence in the round, I form the view that YY Lee’s conflicting evidence, and the wavering manner in which she gave them, bear adversely upon her overall credibility and reliability.

J.2.  WW Lee

49.  For the following reasons, I have concern about WW Lee’s reliability as a witness, and as to the weight which I can give to his evidence:

(a)  Whilst there is no suggestion that he has any interest in the outcome of the proceedings, he has been a long term, and quite clearly loyal employee of the Chan Family;

(b)  As said, WW Lee is the accounting clerk of P and other related companies.  The value of his evidence lies principally in the way he treated the transactions and the notations he wrote thereon.  They, if accurate, can be probative of the nature of the transactions;

(c)  Their accuracy, however, is dependent upon the basis and accuracy of WW Lee’s understanding of the transactions, and the reasons why he wrote down those notations; 

(d)  WW Lee was not personally involved in the transactions.  His knowledge on them was dependent upon what TW Chan told him, and what TW Chan required him to record.  That opens up at least two issues: the accuracy of what he was told, and the completeness of what he was told.  Specifically in respect of the latter, WW Lee said that after any purchase, upon TW Chan showing him the documents involved, he would know that the purchase had taken place.  TW Chan would not however explain to him matters like for what purpose or what business the purchases were made.  TW Chan would not require him to record everything.  In particular, WW Lee said he did not take care of TW Chan’s personal matters (佢家族嗰啲嘢，我就唔理嘅).  He said that TW Chan only informed him for record purposes the important ones.  This Court has no means of knowing what transactions TW Chan had told WW Lee, and what criteria TW Chan adopted when deciding what were important transactions which he would require WW Lee to record;

(e)  The accounting documents before this Court are not comprehensive;

(f)  Except isolated pages, the ledger “TW Chan current account” is not before the court;

(g)  WW Lee during his evidence said variably that the accounting records after 7 years had been discarded, or that no attempts had been made to locate those (like the P’s audited reports during the relevant period), or that no instructions had been given to him to do so;

(h)  I have introduced the material accounting records that have been placed before this Court;

(i)  The 3 Sets of Ledgers do not appear to be official ledgers of the companies, but were kept inside the room at the office of P which TW Chan used to occupy.  Other documents inside that room have apparently been discarded sometime after TW Chan’s death;

(j)  No ledgers recording the personal loans made by TW Chan to others had been kept.  The Well Fortune Purchase Ledgers are not ledgers recording the loans between TW Chan and YH Li, and are not a complete set of records of those loans;

(k)  In respect of the Yuen Ling Purchase Ledgers, the index page (present for the Well Fortune Purchase Ledgers and Lung Mei Purchase Ledgers)  is missing, and has no ledger name.  In relation to the Computer Printouts, when it was pointed out to him during cross-examination that he grouped Yuen Ling Lot A and Yuen Ling Lot B together but only set out the 1^st Schedule Land Lots under D’s name individually at the end, WW Lee said that those were prepared when computer was first started to be used, and that he made the input casually (任意, 隨意, 無規律性);

(l)  I have explained above the contents of the Cheque Copies Sheet/D:

(i)  I have set out above the notations WW Lee has written thereon.  D relies on the same in support of her case that the 1^st Schedule Land Lots Purchase Price was loaned to her;

(ii)  WW Lee was cross-examined on it.  He talked about one meeting he recalled TW Chan and YH Li had inside TW Chan’s room and how they agreed upon the items of set-off.  He said that the copies were made by YH Li, that the cheques copied were not issued by TW Chan or his companies, that they were not important, and that he just wrote down whatever YH Li asked him to write down;

(iii)  He was not able to tell this Court whether what he said YH Li asked him to write down were said within the hearing of TW Chan.  He said further that he wrote those words down without checking with TW Chan.  I find that evidence inherently improbable.  The implication of YH Li lying to him at that stage is inherently even more improbable;

(m)  I have also explained above the contents of the Cheque Copies Sheet/P:

(i)  WW Lee was cross-examined on this.  He accepted that those words were written by him.  He claimed that he so stated because the sum was a loan from TW Chan to P;

(ii)  But as submitted by Mr Man[49], which is borne out by the evidence, and I accept, in the 3 Sets of Ledgers, no distinction was drawn between monies paid by TW Chan’s companies and those paid by TW Chan.  Nor was such distinction drawn in the AR Sheet.  I accept Mr Man’s further submissions in this regard that WW Lee’s suggestion that a distinction was being drawn between TW Chan and his company at the Cheque Copies Sheet/P is contrived;

(n)  In respect of the AR Sheet:

(i)  WW Lee accepted that the AR Sheet was written by him.  He claimed during cross-examination that it was only a draft, and that he had not thought it through carefully;

(ii)  The AR Sheet was in fact produced by YY Lee as part of the accounting records.  It has indeed been kept.  Even if it were a draft, it does not necessarily mean that its contents do not accurately reflect parties’ intention. Further, contrast with the Cheque Copies Sheet/P mentioned above, he drew no distinction between TW Chan and P.

J.3.  YH Li

50.  For the following reasons, I do not find YH Li to be a reliable witness:

(a)  Existence of material conflicts and inconsistencies in respect of the purpose of the 2003 Well Fortune Transfer:

(i)  Both in the RRA-Def and in YH Li/WS1, D’s case in this regard is clear.  I have summarised it above.  She and YH Li aver that the 2003 Well Fortune Transfer was carried out to effect a security over the loans (the “Alleged Security Purpose”);

(ii)  In particular, in §§23(1)  and 24 of YH Li/WS1, YH Li says in clear terms that he and TW Chan (emphasis added):

“23. …

(1)  購入元嶺村土地組合1[50] 的所需資金由陳淡旺向本人借出，元嶺村土地組合1會由本人或本人所指定的人持有。本人會以本人家人持有的金偉的股權，合共13,750股（已發行股本之50%）轉名作抵押，共借HK$13,000,000，當中HK$1,000,000借款作為購買元嶺村土地組合1之用餘下部分則就本人之前欠陳淡旺的款項作對數。陳淡旺當時亦承諾將來本人有錢後可隨時贖回金偉的股權。

…

24.  我和陳淡旺同意本人需就上述借款支付利息。由於本人願意以金偉的股權作抵押，因此雙方的共識是利率要比之前的每月1.5%低，但由於本人與陳淡旺稔熟，加上有生意上的往來（包括上文提及的元嶺村和龍尾村地段的合作），是相熟的生意夥伴，我們當時沒有仔細確定有關利率，實際該付的利息留待本人日後有錢償還後再計數。”

(iii)  The Alleged Security Purpose is an important plank of D’s case.  It is put forward in support of her main defence that the funds provided by TW Chan were in the nature of loans;

(iv)  The assertion and maintenance of the Alleged Security Purpose are inconsistent with contemporaneous documents, contemporaneous conduct, and has ultimately in effect been abandoned by YH Li in the course of his oral evidence;

(v)  The Alleged Security Purpose is inconsistent with the contents of the 1/8/2003 Documents.  I have sent out their contents above;

(vi)  That Alleged Security Purpose is inconsistent with parties’ contemporaneous conduct of appointing YY Lee, after the 2003 Well Fortune Transfer, as a signatory of the Well Fortune’s bank accounts.  YH Li also accepted that Chan Family had in effect received dividends for those shares in the form of expenses incurred for the Lung Mei Acquisitions (on the fencing of lands);

(vii)  Importantly, YH Li has materially changed his evidence in the cause of his oral testimony.  He adopted his witness statement as his evidence in chief.  When under cross-examination, he initially maintained the Alleged Security Purpose.  It was only upon further cross-examination when he ultimately agreed that the 2003 Well Fortune Transfer was not for that purpose. He accepted that 50% of the shares in Well Fortune had been sold and transferred.  TW Chan was the beneficial owner, and that there was no security (是實質擁有人, 無扺押);

(viii)  He agreed to the first sentence of §20 of YY Lee/WS[51] when the same was put to him.  While he maintained that TW Chan orally allowed him to buy back, he accepted that any buy back would require TW Chan’s consent.  This conflicts with the Buy-Back Promise pleaded;

(ix)  The nature of the 2003 Well Fortune Transfer impacts upon the purpose of the 2012 Well Fortune Transfer.  In respect of the latter, D pleads in clear term that the 2013 Lanson Transfer was “to redeem the 50% shareholding in Well Fortune and in discharge of the principal and interest of the loan of HK$13,000,000.”[52]  With the acceptance that the 2003 Well Fortune Transfer was not conducted to effect any security, the 2013 Lanson Transfer and 2012 Well Fortune Transfer could not have been carried out to effect any redemption;

(b)  Existence of material conflicts and inconsistencies on the question of interest:

(i)  Both in the RRA-Def and in YH Li/WS1 (in particular §§23-24 set out about), D’s case and YH Li’s evidence is that the loans were interest-bearing;

(ii)  In the course of his cross-examination, YH Li/WS1 however said that the loans were in fact not interest-bearing, though he would give TW Chan “打賞” if there were to be any successful redemption.  He said that he had said wrongly in §24, and that they were not concerned about interest, not a lot of money was involved, it was not a big deal, and that they were not insistent upon it;

(iii)  The bottom line however is that with the acceptance that the 2003 Well Fortune Transfer was an outright sale, no question of interest would have arisen, and the 2013 Lanson Transfer could not have been for discharge of “the principal and interest” as alleged;

(c)  YH Li’s evidence on the intended development plans over the 1^st Schedule Land Lots changed in the course of his evidence, and the different versions he gave are conflicting and contradictory;

(d)  The terms of the agreement which YH Li claimed to have reached with TW Chan were vague and uncommercial to start with (interest rate not fixed, repayment date open, to be repaid only when he had sufficient money to do so (which may be never), and the right to buy back his 50% shares in the Yuen Ling Lot A and Yuen Ling Lot B pursuant to the Buy-Back Promise “according to their original consideration without interest”).  Those terms were inherently most improbable.  That is so even with the relationship between him and TW Chan factored in.  The incredibility and unreliability of his evidence become worse when the inconsistent evidence he has given is taken into account;

(e)  I remind myself of the same matters which I have reminded myself when considering the reliability of the other witnesses.  I have also taken into account YH Li’s age and the lapse of time, which Mr Man urges this Court to do.  In my view, neither factor may explain the inconsistencies and conflicts highlighted above, and they bear most adversely upon YH Li’s overall credibility and reliability as a witness.

J.4.  D

51.  For the following reasons, I do not find D to be a reliable witness. Her evidence in any event is of little weight:

(a)  Admittedly, D has no first hand and personal knowledge of the relevant transactions.  She herself says so at §3 of D/WS1;

(b)  She claims that she agrees with the contents of YH Li/WS1 and believes them to be accurate.  No basis of such belief has been stated. Clearly, she does so only because YH Li is her husband.  She herself said so during cross-examination;

(c)  YH Li himself accepted that quite some parts of YH Li/WS1 are incorrect.  One such area relates to the Solicitor Firm Meeting.  It concerns D.  D has nonetheless confirmed the truth of those parts of YH Li/WS1;

(d)  Another of such area concerns importantly the Alleged Security Purpose.  D again has confirmed it;

(e)  In relation to the Alleged Security Purpose, D has in fact gone further than just confirming the contents of YH Li/WS1.  During cross-examination, she claimed that TW Chan told her not to be worried in relation to both the 2003 Well Fortune Transfer and the Buy-Back Promise, and that they could redeem or buy back when they had the money.  She claimed that TW Chan said so during the occasions when they had tea in the restaurant, and that when he said so, YH Li was also present;

(f)  Neither she nor YH Li has mentioned such assurances in their statements.  YH Li is no longer maintaining the Alleged Security Purpose;

(g)  She claimed that the 1^st Schedule Land Lots were acquired by YH Li as gifts to her.  But that allegation is inconsistent with contemporaneous conduct.  Some of the lots were very soon after acquisition sub-divided and sold.  Lot No. 706A was also subsequently transferred. She had no knowledge of those dealings, did not receive the proceeds specifically from them, but only claimed that her husband gave him money from time to time;

(h)  I have factored in D’s education standard.  I have factored in the lapse of time.  In my view, the matters highlighted above, her obvious reliance upon her husband, and YH Li’s unreliability as a witness (as discussed above)  all bear adversely upon D’s overall reliability as a witness.

J.5. Conclusion on credibility  

52.  For the above reasons, I am not able to rely in general on the evidence of any particular witness.  I am not able to prefer any particular witness’ evidence in case of difference.  I am not able to accept the evidence of any particular witness unless specific aspects of which are otherwise supported by independent or reliable documentary evidence.  In reaching my factual findings below, I will consider the evidence in the round.  I place primary reliance upon contemporaneous documents[53]. I draw inferences on the basis which I am able and permitted to draw[54]. I rely also on and have regard to the important consideration of inherent probabilities – as explained by the Court of Appeal in Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327[55].

K.  Issue #1

K.1.   Resulting trust - the applicable legal principles and considerations

53.  Prima facie, equity follows the law.  As explained by To J in Lee Tso Fong v Kwok Wai Sun [2008] HKLRD 270 at §23 which Mr Man cites:

“… If a plaintiff seeks to divorce the beneficial ownership from legal ownership and to claim the beneficial ownership in the property which he purchased and transferred to the name of another, he must bear the burden of proving his equitable right which is inconsistent with the undisputed legal title. He may discharge that burden by proving an express trust. Or, he may be assisted by the presumption of resulting trust by proving that he paid the purchase price of the property. …”

54.  In the present case, P relies on “purchase price resulting trust”.  P says that as the 1^st Schedule Land Lots Purchase Price came from it, a result trust has arisen in its favour.  D and YH Li accept that the funds came from TW Chan or P, but say that it was in the nature of a loan, so that the 1^st Schedule Land Lots belonged to them.

55.  In general, and I see no exception in this case, the “relationship of resulting trust and loan … was inconsistent”[56].  In Big Island Construction (HK)  Ltd v Wu Yi Development Co Ltd (2015)  18 HKCFAR 364:

(a)  Tang PJ explained at §§43 and 44 as follows:

“43. As Lord Browne-Wilkinson explained in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 a resulting trust is not imposed by law against the intentions of the trustees but gives effect to them and it could arise:

(A)  where A makes a voluntary payment to B or pays (wholly or in part)  for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money)  or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer

44.  Thus, it is only when a payment is voluntary that a resulting trust may arise.  If money is provided as a loan, no resulting trust will arise.  Since the payments would be at the disposal of the borrower and there would be no identifiable trust fund.”

(b)  At footnote 36, Tang PJ explained that “voluntary” in the term “voluntary payment” is used in the sense as denoting the obtaining or giving of something without anything being obtained in return;

(c)  The observations of Sir Anthony Mason NPJ, made also with reference to Westdeutsche Landesbank Girozentrale, are to the same effects, that:

“94. … when A makes a voluntary payment to B or pays (wholly or in part)  for the purchase of property which is vested in B alone or in the joint names of A and B, there is a presumption A did not intend to make a gift to B; the money or property is held on trust for A (if he provides all the money)  or in the case of a joint purchase by A and B in shares proportionate to their contributions.

95. Lord Browne-Wilkinson, with reference to this first category of resulting trusts, stressed:

… this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer.

96. His Lordship, having referred to the second category of resulting trusts, namely express trusts where the trusts declared do not exhaust the whole beneficial interest, then said:

Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust)  but gives effect to his presumed intention.

His Lordship then added:

As the article by William Swadling, ‘A new role for resulting trusts?’ 16 Legal Studies 133 demonstrates, the presumption of resulting trust is rebutted by evidence of any intention inconsistent with such a trust …

97.  Thus the presumption will be displaced if the person who provides the money intended only to make a loan of money which was to be repaid.  In such a case there would be no resulting trust because the common intention is inconsistent with the person who provides the money taking an equitable interest.”

56.  When deciding whether the money or property was a gift by A (continuing with the example used by Sir Anthony Mason NPJ), or was held on resulting trust for A, the Court’s task was to ascertain A’s subjective intention at the time of the transfer – Leung Wing Yi Asther v Kwok Yu Wah (2015)  18 HKCFAR 605, at §50.  A resulting trust is not imposed by law against the intention of the trustee, but gives effect to it.  The presumption of resulting trust may be invoked in aid, though only as a last resort when there is insufficient evidence (direct or inferential)  on intention.  As explained by Stock NPJ in Leung Wing Yi at §53:

“53. There was no need in the circumstances for the Judge to invoke the presumption of a resulting trust or to look to the presumption of advancement and he did not do so. The presumptions of resulting trust and advancement arise as a matter of default; in other words, where there is otherwise insufficient evidence of subjective intention. That is the point made in the passage cited by the Judge from Lavelle v Lavelle that:

Normally there will be evidence of the intention with which the transfer is made. Where there is not, the law applies presumptions.

and summarised thus, that:

Even where this [an express declaration of trust] is absent, the court aims to arrive at the parties’ real intentions by considering direct evidence of the entire transaction.  This requires an objective inference drawn from the parties’ words and conduct.  As a result, the presumptions of resulting trust or of advancement are only relied upon as default rules where there is no sufficient evidence to displace them.”

57.  I refer also to the modern holistic approach explained and summarised by Deputy High Court Judge Alexander Stock SC in Leung Hang Lin and Li Kwai Fuk v Lam Mei Yung[2019]HKCFI2819at§§7-8[57].

58.  On the question as to what has to be proved to trigger the operation of the presumption of resulting trust and the related issue of onus of proof:

(a)  Counsel differ as to the onus of proof, in the following sense: that upon proof that it was P who paid for the 1^st Schedule Land Lots Purchase Price, whether the burden remains on P to prove, vis-à-vis P and D, the voluntary nature of the payment so as to trigger the operation of the presumption of resulting (as D contends), or whether D then has the evidential burden to prove that the payment was a loan and hence not voluntary (as P contends);

(b)  Mr Wong argues that the requirement of being “voluntary” applies only to “voluntary payment resulting trusting”.  He submits that Mr Man has conflated “voluntary payment resulting trusting” and “purchase price resulting trust”, which Mr Wong submits are different.  He points to §§43 and 94 of Big Island where both Tang PJ and Sir Anthony Mason NPJ, with reference to Westdeutsche Landesbank Girozentrale, talked about (emphasis added)  “A makes a voluntary payment to B or pays (wholly or in part)  for the purchase of property”.  He submits that (his emphasis)  “proof of a voluntary payment or payment for the purchase of property vested in another are alternative conditions for the invocation of the presumption of resulting trust”[58];

(c)  I do not accept those submissions.  In my view, as is clear from the observations of Sir Anthony Mason NPJ at §§94 to 97 in Big Island, “voluntary payment” and “payment of purchase price” are both within the first category of resulting trust.  The requirement of being voluntary equally applies.  It is just that in the case of payment of purchase price, the trust got traced from the payment to the property.  The nature is the same;

(d)  My view is reinforced by Sir Anthony Mason’s observations at §§92 and 93 of Big Island, as follows (with emphasis added):

“92. As the Editors of Jacobs’ Law of Trusts in Australia point out the presumption of resulting trust does not apply where A lends money to B and B uses the money to buy property from X. As Jacobs goes on to state:

B is not an implied trustee of the land for A because A has not acted as purchaser.

In Australia, these principles are well established by a series of cases in the High Court of Australia; Charles Marshall Pty Ltd v Grimsley; Napier v Public Trustee (Western Australia) and Calverley v Green.

93. In England, the law with respect to purchase price resulting trusts (the first category)  is no different. Browne-Wilkinson J in Re Sharpe at 223B said:

In my judgment, if, as in this case, moneys are advanced by way of a loan there can be no question of the lender being entitled to an interest in the property under a resulting trust.  If he were to take such an interest, he would get his money twice: once on repayment of the loan and once on taking his share of the proceeds of the sale of the property.”

(e)  I am aware of Sir Anthony Mason’s observations at §97, where the learned NPJ said that that “the presumption will be displaced if the person who provides the money intended only to make a loan of money which was to be repaid.”  In my view, the learned NPJ did not mean there that the presumption has got triggered and rebutted.  It simply means that the operation of the presumption is displaced;

(f)  On the authorities before me, and in particular Big Island (per Tang PJ and Sir Anthony Mason as cited and discussed above)  and Cyberland (China)  Ltd v Zhang Wei Bing (HCCL 3/2014, 10 November 2015, per Chow J (as he then was)  who applied Big Island), my view is that for the presumption to be triggered, the onus is on P to prove both payment of the 1^st Schedule Land Lots Purchase Price and the voluntary nature of the payment;

(g)  Whilst the above is my view, I respectfully agree with the following observations made by Tang PJ in Big Island at §64, that:

“… Disposal of a claim on the burden of proof should be rare and exceptional. I believe a judge should resolve conflicting versions of fact by deciding which is more probable uninfluenced by any consideration of who has the burden of proof. One should look to the burden for help as a last resort. In practice, it is difficult to conceive of a case where there is no evidence apart from the payment. Indeed, when a defence of gift is pleaded it suggests that evidence is available to prove it. Ditto, a claim that it was a loan. In a case where the contest is between a loan and a gift, it is difficult to conceive a case where the court has nothing more than the evidence of payment and receipt. …”

K.2.   Issue #1 properly understood

59.  With the law discussed above in mind, I come back to analyze Issue #1 further.

60.  D was the registered owner of the 1^st Schedule Land Lots.  The 1^st Schedule Land Lots Purchase Price, the related consultation fee and legal costs originated from TW Chan via P.  These are the starting points.  But they are the starting points only.  The core issue remains TW Chan’s subjective intention when the monies were advanced.  In deciding that core issue, one is aided by considering whether the advancements were loans to YH Li or otherwise.  That is the means.  But that is not the ends.  This is not a claim for repayment of loans.  We are not concerned with the precise terms of any loan agreement.  We are concerned with the subjective intent of TW Chan, and in particular whether he intended to retain beneficial ownership in the 1^st Schedule Land Lots.  A resulting trust is imposed to give effect to the parties’ intention, not against it.

61.  The parties have made extensive submissions on the operation of the presumption of resulting trust, how it is triggered, who has to prove what facts so as to trigger it operation or to rebut the effects.

62.  But this court should guard against approaching the presumption of resulting trust (including whether it has been triggered, or whether it otherwise applies)  as if it were the first, starting and primary issue.  It is not.  The first and primary task is for this Court to look at all facts and circumstances holistically to decide what TW Chan’s subjective intention was when he made the advancements.  It is only when everything fails when the presumption needs to be resorted to, and when this court needs to consider the triggering facts that have to be proved.

K.3.   Consideration of the evidence

63.  I have considered the totality of the evidence.  I have considered all matters in the round and holistically.  I set out my considerations and findings of facts below.

64.  YH Li is a new territories indigenous villager.  He had been a Vice-chairman of the Tai Po Rural Committee.  He had connections in that area.

65.  YH Li first knew TW Chan in about 1975.  They became acquaintances. Prior to the Yuen Ling Acquisitions, they had had prior personal and business dealings.

66.  YH Li had admittedly borrowed monies from TW Chan.  YH Li says that they operated on mutual trust, on the basis of oral agreements.  There is no evidence against that.  In respect of those loans that admittedly existed, no written loan agreements have been produced.  Indeed, WW Lee said that TW Chan did not require him to record personal loans, and the Well Fortune Purchase Ledgers are not ledger of such loans to YH Li.  Those loans were also not secured.

67.  YH Li and his family had interest in Lot Nos. 707RP and 749. According to the relevant land search and company records[59] :

(a)  YH Li first become the registered owner of Lot No. 707 in 1997. That lot was subsequently carved out into 5 sub-lots.  4 of them had been sold.  YH Li has remained the registered owner of Lot No. 707RP;

(b)  YH Li obtained a charging order over Lot No. 749 in 2002.  It was subsequently assigned to Easybase Investment Limited in 2010.  According to the annual return of Easybase made up to 17 September 2015, SH Li (one of Li’s Sons)  was its sole shareholder.

68.  According to the P/Annex Plan, Lot Nos. 707RP and 749 adjoin respectively Lot No. 706 and Lot No. 750B (2 of the 1^st Schedule Land Lots).  This in my view clearly supports D’s case that YH Li had interest in acquiring the 1^st Schedule Land Lots.

69.  Contemporaneous documents show that prior to the Yuen Ling Acquisitions, YH Li, Li’s Sons and Wifun had indeed tried to acquire the Yuen Ling Lots. That took place sometime in July and August 2002[60]. The attempt failed when the price was raised at the last minute.  The documents also show that the vender demanded payment of consultation fees[61].

70.  The above provide the backdrop which supports YH Li’s evidence that he had an interest in acquiring the 1^st Schedule Land Lots during the Yuen Ling Acquisitions.

71.  Then came the Lung Mei Acquisitions.  According to the contemporaneous documents, they took place between about September 2002 and July 2003.  The 2 families first each borne and paid HK$500,000[62]. YH Li’s share of the balance were loaned to him by TW Chan.  I have set out above how Li’s Sons and Chan’s Sons signed as purchasers and then assignees.  I have set out also how subsequently all the lots were assigned to Lanson, with each family, until the 2013 Lanson Transfer, holding 50% of the shares.  There is no basis to suggest that Li’s Sons held any of those lots or any shares in Lanson on trust for TW Chan or any member of his family.

72.  At §2 of its RA-SOC, P pleads that (with emphasis added):

“2. At all material times,:-

(a)  … [D] and [YH Li] jointly acted as land agents in the introduction and/or procurement of sale and purchase of land in the New Territories in return for a fee; and

(b)  [D] and [YH Li] acted as the agents of [P] in the latter’s acquisition of land in the New Territories.”

73.  P’s pleaded case is not supported by the Lung Mei Acquisitions.  On the facts, I specifically find that YH Li and D’s business was not just acting as agents for fees.  They and TW Chan together invested in the Lung Mei Lots.

74.  TW Chan was further prepared to loan YH Li monies to finance his shares of the balance of the purchase price for the Lung Mei Lots.  Again, in respect of the loan by TW Chan to YH Li in relation to the Lung Mei Acquisitions, there was no formal agreement between them.

75.  The Yuen Ling Acquisitions followed.  The exact agreement between TW Chan and YH Li is hotly disputed.  But what cannot be disputed is the objective time proximity between the Lung Mei Acquisitions and Yuen Ling Acquisitions. The 1/8/2003 Documents were dated 1 August 2003.  Chq 546611, Chq 683660 and Chq 686038 were dated 25 September 2003.  Chq 562785 was dated 30 September 2003. The SPAs were dated 16 October 2003.  The 2003 Well Fortune Transfer Documents were dated 12 December 2003.  The 9/1/2004 Nominations were dated 9 January 2004.  The Yuen Ling Acquisitions were completed on 13 January 2004.  The time proximity shows that the Yuen Ling Acquisitions took place at a time when the relationship between YH Li and TW Chan were good and trusting, when they had been investing together, when TW Chan was prepared to loan monies to YH Li for the purpose of investment, and when such loans came with no formality.  This is in my view an important context.

76.  One important facet of P’s case is that Yeung and YH Li were its agents for a fee:

(i)  I have considered the Lung Mei Acquisitions in which YH Li and TW Chan invested together with monies advanced by the latter;

(ii)  Specifically in respect of the Yuen Ling Acquisitions, there are the following documents and events;

(iii)  I have set out details of the several cheques in section E.3 above;

(iv)  Chq 546611 (dated 25 September 2003)  of HK$1,300,000 is admitted to be for settlement of deposits (HK$800,000)  and payment of consultation fee (HK$500,000)  in relation to the Yuen Ling Acquisitions;

(v)  YH Li was the payee of that cheque;

(vi)  That sum of HK$800,000 corresponds with the amount on Chq 683660 (dated 25 September 2003)  which Wifun issued to the D/YH Li’ solicitors for payment of deposits;

(vii)  On the same date, YH Li issued Chq 686038 covering the balance of HK$500,000;

(viii)  If that balance of HK$500,000 were intended to be consultation fee to be received by YH Li or D, YH Li would have had no reason to issue Chq 686038;

(ix)  Any suggestion that YH Li had in fact pocketed that sum but issued Chq 686038 nonetheless to create the impression that he had not but would pay it to a third party is in my view inherently most improbable;

(x)  I have considered Mr Wong’s submissions[63] in relation to D’s original case in this regard before amendment, the fact that the payee on Chq 686038 was left blank, the timing of the same, and YH Li’s otherwise inability to provide details of the payment;  

(xi)  In my views, those are details.  The core and important fact is the existence of Chq 686038, which cannot be explained if D or YH Li had pocketed the consultation fee.  I further bear in mind the context which the Lung Mei Acquisitions provide.  I am able to draw the inference that YH Li and D did not pocket the consultation fee of HK$500,000, but paid it to the vendor;

(xii)  It is not in dispute that CTW Investment issued Chq 562785 (in the amount of HK$1,000,000)  in favour of YH Li for the purpose of paying further consultation fees.  Despite requests having been made to the banks[64], YH Li was not able to retrieve the bank documents in relation to the flow of this sum.  But from the above in relation to the earlier sum of HK$500,000, I am able to draw the inference that YH Li and D also did not pocket that further sum, and that they paid the same to a third party.

77.  Another important facet of P’s case is the Alleged Representation which P pleads had been made to TW Chan, and that he believed in that:

(i)  There was no documentary record of or reference to the Alleged Representation;

(ii)  I have discussed YY Lee’s hearsay and inconsistent evidence in this regard.  I reject the same;

(iii)  The contents of the Alleged Representation are also inconsistent with the objective facts that P and Panwood were from the outset amongst the purchasers in SPA-A and SPA-B respectively.  The vendor was willing to proceed despite that.  That shows that the vendor was not willing to sell the Yuen Ling Lots only to D or YH Li.  This in turn raises the further queries as to whether TW Chan in any event believed in the Alleged Representation;

(iv)  During cross-examination, it was suggested to YH Li that:

“問: 呢一百五十萬從來一路以嚟都係旺叔畀你或者你同你太太作為呢單交易穿針引線嘅顧問費，同唔同意？

答： 加我一--一啲都唔同意。

問： 因為只係你先至係有呢個關係可以幫旺叔買到呢啲土地返嚟？

答：   唔係，當時我去接洽嘅，如果係唔買，我可以即刻pass畀第二個人買嘅。”

Despite my finding on YH Li’s reliability, I accept his evidence in this regard.  I find that it is supported by the objective facts and contemporaneous documents and conduct discussed above.

78.  The manner in which the Yuen Ling Acquisitions were structured and effected, as demonstrated by contemporaneous documents, also supports YH Li and D’s case that they did not only act as agent, but intended to have interest in the 1^st Schedule Land Lots:

(a)  I have described Li Family’s pre-existing interest in Lot Nos. 707RP and 749, and YH Li’s prior attempt to acquire the Yuen Ling Lots;

(b)  Specifically in respect of the Yuen Ling Acquisitions, whilst one company from each of the Chan Family and Li Family were named in SPA-A and SPA-B as purchasers, D was the sole purchaser for SPA-SL1;

(c)  Further, while the 9/1/2004 Nominations had been signed in respect of Yuen Ling Lot A and Yuen Ling Lot B, none had been pursued or executed in respect of the 1^st Schedule Land Lots.  There is no credible explanation for this difference in treatment had all 3 lots of the Yuen Ling Lots been meant to be acquired by TW Chan;

(d)  The 9/1/2004 Nominations were both signed by TW Chan on behalf of P and Panwood.  He must have knowledge that none had been signed in relation to SPA-SL1.  An inference can be drawn that he was content with leaving the matters as they were, allowing D to proceed with the assignment of the 1^st Schedule Land Lots as the assignee.

79.  Soon after completion of the Yuen Ling Acquisitions, YH Li started to sub-divide the 1^st Schedule Land Lots.  A lot of the sub-divided lots had subsequently been sold.  All these are matters of public records, which TW Chan could easily have found out.  These facts also reflect YH Li’s perception of TW Chan’s knowledge and subjective intention.

80.  No formal written demands for return of the 1^st Schedule Land Lots had been made until 25 July 2014, about a month after TW Chan’s death.  I do not accept the evidence of YY Lee and WW Lee that oral demands had been made.  There is no documentary records of or reference to such alleged demands.  When the relationship was good and trusty, parties might have been happy dealing with matters orally and informally.  But if the relationship had turned bad, as would have been the case if YH Li had failed despite demands to return the 1^st Schedule Land Lots, things would have been different.  If prior oral demands had in fact been made, the inherent probability is that written demands would have been made, and written records would have been kept.  There has been none. 

81.  I have considered the accounting records:

(a)  As I have observed above, the accounting documents before this court are not comprehensive.  What TW Chan had told WW Lee were not full. WW Lee also did not take care of TW Chan’s personal matters;

(b)  In so far as they being used in any attempt to show a full picture of the loans and transactions between TW Chan and YH Li, their use is limited;

(c)  I consider the accounting documents with the above caveat in mind;

(d)  I have set out the details of the Cheque Copies Sheet/P and Cheque Copies Sheet/D.  The material parts of the handwritten notes thereon were written by WW Lee;

(e)  In so far as the Cheque Copies Sheet/P is concerned:

(i)  It was a document kept and produced by P.  I reiterate what YY Lee has said in §17 of YY Lee/Aff1.  In particular, she says that the handwritten notes thereon were made by WW Lee “on instructions of my father-in-law and [YH] Li…”;

(ii)  I do not accept WW Lee’s evidence that he wrote down those notes because the sum was a loan from TW Chan to P.  It is inherently most improbable that TW Chan and YH Li would have drawn such a distinction between P and TW Chan;

(f)  In so far as the Cheque Copies Sheet/D is concerned:

(i)  I do not accept WW Lee’s evidence that he wrote down the handwritten notes without checking with TW Chan.  I find that he must have.  It makes no sense that he on the one hand received instructions from inter alio TW Chan in respect of the Cheque Copies Sheet/P but not in respect Cheque Copies Sheet/D;

(ii)  In any event, even if those words represented what YH Li had told WW Lee[65], they in my view reflected YH Li’s understanding of the nature of the sum, which would in turn have derived from his discussions, dealings and agreement with TW Chan.  Any suggestion that he (YH Li)  lied deliberately to WW Lee at that stage is in my view inherently most improbable;

(g)  Mr Wong submits that the notations are not accurate on either parties’ case[66]. I have considered those submissions.  But it remains important that they reflect TW Chan and YH Li’s understanding of the nature of the payments via Chq 683660 and Chq 686038, and that there was no outright payment of any consultation fee to D or YH Li as TW Chan’s agent;

(h)  In respect of the AR Sheet:

(i)  I have sent out above its contents.  It is amongst the “accounting records” produced by YY Lee;

(ii)  Mr Wong relies on WW Lee’s oral evidence, to the effect[67] that when he (WW Lee)  wrote the words “代付”, he was thinking that TW Chan would pay on D’s behalf but that D would hold the 1^st Schedule Land Lots on his behalf.  He did not make equivalent notations for Yuen Ling Lots A and B because those were held directly by TW Chan’s companies and were not outsiders;

(iii)  I do not accept those explanations.  The material words are “代付”.  The meaning is clear.  There are no words like “代持”[68], which in all inherent probabilities would have been there if WW Lee’s explanations were correct, and if D were in fact holding the 1^st Schedule Land Lots as P’s nominee as alleged;

(iv)  I accept Mr Man’s submissions[69] that “代付” in the context of the AR Sheet suggest that D, on whose behalf the payments were made, was intended to be the real owner, and that those words suggest the existence of loan arrangements;

(i)  In respect of the Computer Printouts, I note WW Lee’s evidence that he made the input casually.  But the way they (in particular [D1/551])  was presented again suggests that there exists a difference between D’s holding of 1^st Schedule Land Lots and the other 2 lots;

(j)  In respect of the 3 Sets of Ledgers, and the nature of the 2003 Well Fortune Transfer:

(i)  I have set out above D’s case and YH Li’s evidence on the Alleged Security Purpose;

(ii)  Mr Wong has made extensive submissions criticizing them.  I have considered them;

(iii)  Mr Wong has also, with reference to the 1/8/2003 Documents and the 3 Sets of Ledgers, extensively cross-examined YH Li as to the extent of his pre-existing debts owed to TW Chan, whether the HK$13,000,000 could have included any loan for the 1^st Schedule Land Lots Purchase Price, the question of interest and interest rate, and parties’ development plans.  I have also considered them, and Mr Wong’s submissions arising therefrom.  Mr Man also accepts that YH Li has “conceded that the deal was an outright purchase by the Chan Family”[70];

(iv)  YH Li’s evidence in the above regards is indeed unsatisfactory.  That form the main reasons why I do not regard him as a reliable witness;

(v)  However, as analyzed above, this is not a claim for repayment of loans. I am not concerned with the detail terms of any loan or mortgage.  I appreciate that the vagueness or uncommercial nature of any suggested terms may reversely suggest that those terms, or even the alleged loans, did not exist.  Those considerations, in a claim for repayment of loans, would be important.  Whilst they remain relevant in this the present case, the central issue remains TW Chan’s subjective intent at the time when the monies were advanced, which I have to consider holistically with regard to the totality of the evidence;

(vi)  I have considered YH Li’s evidence.  I have also considered the matter in which he changed his evidence in relation to the 2003 Well Fortune Transfer.  Whilst I have taken them into account, they do not alter all the other objective evidence and facts which I have discussed above.  Those objective facts, and the inherent probabilities which they point to, are not affected by YH Li’s credibility, and not by the way he chose to characterize the transactions;

(vii)  Nor is any pleading point involved, as Mr Wong suggests.  No matter how YH Li’s characterized the transactions, the issue as to the TW Chan’s subjective intention remains live, which have to be decided on the totality of the evidence.  I do not accept any submissions that if YH Li’s characterization of the transactions is to be rejected, the Court has to decide the issue in another particular way.  This is not a binary exercise.

82.  On the totality of the evidence, which I have considered in the round, I form the view on balance that at the time when he advanced the monies for the Yuen Ling Acquisitions, TW Chan did not intend to retain any beneficial interest in the 1^st Schedule Land Lots.  I find that TW Chan and YH Li were in the Yuen Ling Acquisitions together as investors.  YH Li and D were not TW Chan’s agent for consultation fees.  TW Chan did not provide the 1^st Schedule Land Lots Purchase Price for his own or P’s purchase.  I find that there existed arrangements between YH Li and TW Chan on an informal and trusty basis whereby TW Chan made available to YH Li’s use funds for the purchase of the 1^st Schedule Land Lots.  The 1^st Schedule Land Lots Purchase Price was not voluntary payment provided by him.  On the evidence, I am not able to reach any findings on the precise terms of those arrangements.  But I am not required to reach any findings on those precise terms.  I have considered the failure on YH Li’s part to prove them.  I have considered that such failure may reversely suggest the non-existence of those arrangements.  But on the objective facts discussed above, I form the view as I have, that TW Chan did not intend to retain any beneficial interest in the 1^st Schedule Land Lots.

83.  For completeness, I record also the following:

(a)  Mr Man urges this Court to made adverse inference on the basis that P has failed to call a number of witnesses, including Chan’s Sons and Lee Chi Wai;

(b)  I am able to reach my findings without the need for any of such adverse inferences.  I find in any event that what had happened to Lot No. 706A years after the event is of little value in determining the subjective intent of TW Chan in 2003 and 2004.  In any event, I cannot discount YH Li’s evidence that that was part of certain co-operation arrangements with Chan Family to development Yuen Ling Lot B;

(c)  I reach my findings from appraisal of the objective facts and consideration in inherent probabilities.  I do not see any need to resort to the presumption of resulting trust;

(d)  If I had seen the need to resort to the presumption of resulting trust, I would hold that the onus is on P to prove the voluntary nature of the 1^st Schedule Land Lots Purchase Price, which P has failed to, so that the presumption does not apply;

(e)  Even if the presumption may apply, I would hold on the totality of the evidence as discussed above that it been rebutted.

K.4.   Conclusion on issue #1

84.  For the above reason, I hold that P is not the beneficial owner of the 1^st Schedule Land Lots.

L.  Issue #2

85.  In the light of my Conclusion on issue #1, Issue #2 is not engaged.

M.  Issue #3

86.  In the light of my Conclusion on issue #1, Issue #3 is also not engaged.

87.  But in deference to submissions, I make the following observations in relation to Issue #3 (though not to such detail as I may otherwise do).

M.1.  Laches – The Applicable Legal Principles

88.  Both parties have cited to me the statement of principle given by Lord Selborne LC[71]Lindsay Petroleum Co v Hurd (1874)  LR 5 PC 221 at pages 239-240, that:

“Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances always important in such cases are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.”

89.  Mere delay is not sufficient (and to be fair, Mr Man is not contending the contrary).  The important considerations are the length of the delay, and the nature of the acts done during the interval.  As explained in Snell’s Equity (34^th ed, 2022)  at §5-011:

“That doctrine is not based, however, on the mere fact of delay. Something more than mere delay, more even than extremely lengthy delay, is required before B will be denied equitable rights under the doctrine of laches, as the question is whether the lapse of time has given rise to circumstances that now mean it would not be inequitable to deny relief to B.”

90.  In Fisher v Brooker [2009] 1 WLR 1764 at §64, Lord Neuberger of Abbotsbury expressed his opinion that whilst “detrimental reliance” is not an immutable requirement, some sort of detrimental reliance is usually an essential ingredient of laches.

91.  The operation of the doctrine is hence not black and white.  As explained by Lord Blackburn in Erlanger v New Sombrero Phosphate Co(1878)  3 App Cas 1218 at 1279:

“I think, from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change, which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it. The determination of such a question must largely depend on the turn of mind of those who have to decide, and must therefore be subject to uncertainty; but that, I think, is inherent in the nature of the inquiry.”

92.  Delay resulting in the loss of evidence and witnesses can ground laches leading to equitable rights being denied:

(a)  Watt v Assets Co Ltd and Bain v Assets Co Ltd [1905] AC 317 (heard together)  are one example which Mr Man relies on.  In that case, the claimant under a private Act of Parliament took over the assets and rights of a bank.  In 1901 and 1902, it brought actions against trustees and beneficiaries of two contributories who had in 1879 been discharged of their liabilities to the bank on compromise with the liquidator.  It asked for a reduction of the compromises on the ground that the contributories in negotiating with the liquidator concealed or failed to disclose portion of their property.  On the effects of the delay, Earl of Halsbury observed at page 329 that:

“It appears to me that the matter rests, not upon any question of technical law, but upon broad common sense, and especially upon these two principles—that at this distance of time every intendment should be made in favour of what has been done as being lawfully and properly done, and that the persons who are now insisting upon these rights have lain asleep upon their rights so long that as a matter of fact we know that witnesses have perished, and the opportunities which might have been had if the question had been earlier raised have passed away. We are asked at a distance, in the one case of twenty years, and in the other case of twenty-two years, to rip up a transaction which had apparently been completely disposed of.”

(b)  Beijing Hantong Yuzhi Convention Centre Ltd v Lao Yuan Yi[2018] HKCFI 1030 at §§119-123 is another example which Mr Man has cited.

93.  What could have happened had the evidence not been lost can be speculative.  This issue was considered by Wilson, Toohey and Gaudron JJ in Orr v Ford (1989)  167 CLR 316 at 330.  The issue is not loss of evidence per se, but whether evidence which may have cast a different complexion on the matter has been lost.  The learned judges explained:

“The substance of the respondents’ case in relation to laches was that of prejudice in defending the appellant’s claim by reason that evidence which might earlier have been available was lost to them. Prejudice is a consideration properly to be taken into account in relation to laches, although the respondents were not able to point to any authority where such a consideration had defeated the claim of a beneficiary to specific property the subject of an express trust. However, where entitlement depends on factual matters which are fairly open to dispute we see no reason why prejudice occasioned by the loss of evidence as a result of delay on the part of the claimant might not be raised in answer to such a claim.

The question of prejudice resulting from unavailability of evidence necessarily involves some degree of speculation, but it is not a question of pure speculation.  The issue is not whether evidence may have been lost but whether evidence which may have cast a different complexion on the matter has been lost.  Thus in Crago v. McIntyre a defence of laches was successful because a different conclusion may have been reached ‘if all of the witnesses, including the doctors, who could have given first-hand accounts of the plaintiffs behaviour, and of other relevant circumstances, had been available to be called as witnesses’.”

M.2.  Discussion on Laches

94.  In §12B.3 of the RRA-Def, 2 specific matters are pleaded and relied on, that:

“(1)  [TW Chan], a key witness for the present dispute, was diagnosed dementia in around 2009 and passed away on 17 June 2014. He can no longer give evidence before the court.

(2)  [D] and [YH Li] are unable to obtain bank statements from the relevant banks (which only keep the same for 7 years)  to show that [YH Li] had discharged part of his previous debts owed to [TW Chan] (which [P] says in [YY Lee/Aff2] to be in an aggregate amount of HK$13,118,082, exclusive of interest).  This is relevant to the credibility of [D’s] case that [TW Chan] agreed to lend HK$13 million to [YH Li] in or around mid to late July 2003, out of which HK$12 million was to clear off [YH Li’s] previous debts owed to [TW Chan], and HK$1 million was for the acquisition of the [1^st Schedule Land Lots].”

95.  Mr Wong submits that there is no detrimental reliance alleged in the present case.  But as is clear from the authorities, that is not an immutable requirement.

96.  In respect of the unavailability of TW Chan, Mr Wong’s principal submission is that it is inconceivable that TW Chan would have said anything to D’s benefit.  In respect of the unavailability of bank statements, Mr Wong submits that any prejudice is speculative, as YH Li has agreed to the amount of his indebtedness.  I have also considered his submissions at §§67 to 73 of his written closing.

97.  In the present case, the delay has been very substantial.  WW Lee’s evidence, if believed, is that TW Chan immediately after completion of the Yuen Ling Acquisitions requested D to transfer back to him the 1^st Schedule Land Lots.  Yet, there had been no written demand until 25 July 2014, very shortly after TW Chan’s death, and the present action started even later, only on 15 January 2016.

98.  In the meantime, TW Chan first had dementia in about 2009, and passed away in June 2014. 

99.  TW Chan’s evidence is clearly relevant.  In particular:

(a)  For consideration of Issue #1, this court has to consider and decide his subject intent in 2003 and 2004.  His direct evidence would have been important;

(b)  As is obvious from the discussion above, YY Lee relies on her alleged conversations with TW Chan as the sources for various matters she states in YY Lee/WS; and

(c)  In respect of WW Lee’s evidence and the accounting records he produced, he relied on TW Chan for information and instructions.

100.  The accounting records are also clearly relevant to the overall consideration of D’s case.  YH Li might have during cross-examination agreed upon the sums set out in the Well Fortune Purchase Ledgers.  But they were not the full records.  They in particular do not record personal dealings between YY Lee and TW Chan, or all repayments by him.

101.  Given the clear relevance of TW Chan’s evidence and the bank records, I am of the view that they are clearly evidence which may have, if not would have, cast a different complexion on the case.

102.  The delay was caused by P.  The unavailability of TW Chan and the bank records have flowed therefrom.  In the circumstances, it would not have been inequitable to deny remedy to P.

M.3.  Conclusion on Issue #3

103.  For the reasons set out above, even if I had answered Issue #1 in P’s favour, I would have denied P remedy.

N.  Issues #4 and #5

104.  Given my conclusions on Issues #1 and #3, Issues #4 and #5 are not engaged.

O.  Overall disposition

105.  For all the reasons set out above, I dismiss P’s claim.

P.  Costs

106.  I make a costs order nisi, absolute within 14 days, that P shall bear the costs of the action, including all costs reserved (if any).

Mr Stewart KM Wong SC leading to Mr George Lam and Mr Jonathan Fung, instructed by Chin & Associates, for the Plaintiff

Mr James Man, instructed by Robertsons, for the Defendant

HCA 136/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 136 OF 2016
________________________

________________________

________________________

DECISION

________________________

A. Introduction

1.  There are two summonses before me:

(a) the plaintiff’s application for summary judgment; and

(b) the defendant’s application to amend her defence.

2.  In short, the plaintiff claims that it purchased some pieces of land in the New Territories, which were put under the name of the defendant. Hence, the defendant has been holding the lands on resulting trust for it, and is obliged to account for profits that the defendant has made by selling some of the lands. In contrast, the defendant claims that she and her husband merely borrowed monies from the plaintiff to purchase those lands; and therefore, she was and is the beneficial owner thereof.

B.  The plaintiff’s claim

3.  The plaintiff is a Hong Kong company carrying on business as, inter alia, a property investor.

4.  Its claim against the defendant may be summarized as follows:

(a) The defendant is the wife of Li Yau Hing (“Li”).

(b) They acted as land agents in the introduction and/or procurement of sale and purchase of land in the New Territories in return for a fee, and they acted as the plaintiff’s agents in its acquisition of land in the New Territories.

(c) On a day before 25 September 2003, upon the defendant’s introduction, the plaintiff agreed to acquire a piece of land set out in 1^st Schedule of the statement of claim (“the 1^st Schedule land lots”) through the service of the defendant and Li. The 1^st Schedule land lots consist of Lot No 706 in DD No 9, Lot No 708 in DD No 9 and Section B of Lot No 750 in DD No 9, Tai Po.

(d) In 2003, the plaintiff acquired the 1^st Scheduled land lots at $990,000 from Guangdong Materials Co Ltd (“GMC”) and have the same registered in the name of the defendant upon the latter’s representation that GMC would only be willing to sell the same to her.  The particulars of the payment of the purchase price are as follows:

(i) On 25 September 2003, an initial deposit of $200,000 was paid by the plaintiff to the defendant by cheque No 546611 drawn upon the Bank of China (Hong Kong) Ltd (“BOC”) and made payable to Li, which was cashed upon presentation.

(ii) On the same date, the defendant, through one Wifun Foundate Ltd, a company controlled by her, paid Messrs Peter W K Lo & Co, solicitors for the defendant, by cheque No 683660 the said initial deposit.

(iii) On 9 January 2004, a receipt was issued by Messrs Peter W K Lo showing that by a cheque the plaintiff had paid $803,822.50 being the outstanding purchase price and legal costs for the acquisition of the 1^st Schedule land lots.

(e) On 13 January 2004, upon completion, the 1^st Scheduled land lots were registered in the name of the defendant with the plaintiff’s consent.

(f) On 30 September 2003, the plaintiff paid the defendant and Li a sum of $500,000 as their fees for service rendered in the acquisition; it formed part of the $1million being the amount of the cheque No 562785 issued by Chan Tam Wong Investment Co Ltd, the plaintiff’s agent, drawn upon BOC and made payable to Li.  The cheque was deposited into the joint account of the defendant and Li.

(g) Hence, the defendant has been holding the 1^st Scheduled land lots on trust for the plaintiff;

(h) Between 2004 and 2006, without the plaintiff’s knowledge or consent, the defendant, by a number of deed polls, subdivided the 1^st Schedule land lots into subdivisions set out in the 1^st Schedule to the statement of claim.

(i) Further, between 2004 and 2011, without the plaintiff’s knowledge or consent, the defendant sold and assigned part of the 1^st Schedule land lots set out in the 2^nd Schedule to the statement of claim (“the 2^nd Schedule land lots”) to third parties at a total sum of $3,150,000 without accounting the proceeds of sale to the plaintiff.

(j) As a result, the land lots remain registered in the name of the defendant as trustee are those set out in the 3^rd Schedule to the statement of claim (“the 3^rd Schedule land lots”).

5.  On 15 January 2016, the plaintiff issued the writ herein.  On 13 September 2016, it applied for summary judgment for, inter alia, the following remedies:

(a) an order that the defendant doth repay to the plaintiff the sum of $3,150,000 being the proceeds of sale of the 2^nd Schedule land lots;

(b) a declaration that the defendant held, and still holds, her legal title and in the 3^rd Schedule land lots upon a resulting trust and/or constructive trust for the benefit of the plaintiff;

(c) an order that the defendant doth forthwith transfer her bare legal title of and in the 3^rd Schedule land lots pursuant to paragraph 9 of the statement of claim to the plaintiff or at its order and direction; and

(d) damages.

C.  The defendant’s defence

6.  On 4 March 2016, the defendant filed her defence.  She claimed that:

(a) Li and her are husband and wife.  However, they were not land agents, or the plaintiff’s agents in its acquisition of land in the New Territories.

(b) Li and Chan Tam Wong (“Chan”) were business partners.  Li was born in Tai Po and carries on investment business in respect of lands in the New Territories, in particular, Tai Po. Chan was a money lender before his death in about June 2014.

(c) In about mid-2003, Li intended to acquire the following lands for investment purpose: 1^st Schedule land lots; Lot Nos 761, 762, 763, 772, Section A of 776, 793, 796, 817, 833, 1392 all in DD 9, Tai Po (“1^st Portion Land Lots”); and Lot Nos 843, 845, 846, 849, 912, Section B of 913 all in DD 9 (“2^nd Portion Land Lots”).

(d) Due to lack of funds, Li approached Chan who agreed to lend money to Li in the main terms as follows:

(i) Chan would lend sufficient money to Li to buy the 1^st Scheduled land lots and would not charge Li for any interest.

(ii) Li would use his relationship and influence to procure the purchase of the 1^st Portion Land Lots and the 2^nd Portion Land Lots so that Chan or his nominee and Li or his nominee could jointly develop the 1^st Portion Land Lots and the 2^nd Portion Land Lots.

(iii) Chan can Li would each contribute 50% of the purchase price and legal costs as well as disbursements of acquiring both the 1^st Portion Land Lots and the 2^nd Portion Land Lots so that each of them or their nominees would hold 50% of the beneficial interest in the said lands.

(iv) As Li did not have the necessary funding to contribute his 50% of the funds in acquiring the 1^st Portion Land Lots and the 2^nd Portion Land Lots, Chan would further provide sufficient loans to Li to cover the cost of acquiring the said lands and would not charge Li for any interest.

(v) Li would repay the loans to Chan when Li had sufficient money to repay the same.

(e) Pursuant to such agreement, Chan advanced at least $1,003,822.50 to the defendant (being Li’s nominee) as a loan for the purchase of the 1^st Scheduled land lots.

(f) Further, Li, his servants or agents, approached the vendors of the 1^st Portion Land Lots and the 2^nd Portion Land Lots and eventually led to the completion of the sale and purchase of the said names to the nominees of Chan, ie the plaintiff and Panwood Investments Ltd (“Panwood”) and the nominees of Li ie Sino International Investment Ltd and Wifun Foundate Ltd (“Wifun”).

(g) Shortly before the completion of the sale and purchase of the 1^st Portion Land Lots and the 2^nd Portion Land Lots and after negotiations between Chan and Li, they agreed that Chan would cause his nominee, ie the plaintiff and Panwood, to be the legal owners of the 1^st Portion Land Lots and the 2^nd Portion Land Lots whilst Li would still hold 50% of the beneficial interest in the said lands.

(h) Hence, the plaintiff and Panwood were registered as the legal owners of the 1^st Portion Land Lots and the 2^nd Portion Land Lots upon completion of the sale and purchase thereof.

(i) The plaintiff did not pay the defendant or Li any service fee regarding the purchase of the 1^st Schedule land lots. The payment of $500,000 was made by Chan, through Chan Tam Wong Investment Co Ltd, to Li on 30 September 2003 as a loan in carrying out other investment businesses which were unrelated to the transaction in issue.

(j) In the circumstances, the defendant was the beneficial owner of the 1^st Scheduled land lots, and is still the beneficial owner of the 3^rd Scheduled land lots.  She was never a trustee of the plaintiff in respect of the 1^st Schedule land lots.

7.  After the defendant and Li filed affirmations in opposition to the plaintiff’s summary judgment application, on 27 March 2017, the defendant applied to amend her defence.  The amendments may be summarized as follows:

(a) Chan was the plaintiff’s chairman and was in control thereof.

(b) Li was born in Yuen Ling Village, Tai Po.  Apart from investing in New Territories lands, he runs business in operating guesthouses or hotels through Well Fortune Investment Co Ltd.  On the other hand, Chan was a businessman in addition to money lender.

(c) In about mid-2002, Li learned the opportunity of acquiring the lands in Yuen Ling village ie the 1^st Scheduled land lots, the 1^st Portion Land Lots and the 2^nd Portion Land Lots (collectively “the Yuen Ling Lots”) through a middleman, Mr Cheung.

(d) Li had a strong intention to acquire the 1^st Scheduled land lots because of his then existing interest in the adjacent lands lots, namely, Lot Nos 707 and 749 in DD9.

(e) However, the deal with the vendor ultimately fell through.

(f) In about mid-2003, Li learned the opportunity to acquire certain lands in Lung Mei Village (collectively “the Lung Mei Lots”) for investment purposes. As the vendor was only willing to sell the Lung Mei Lots as a whole and lack of funds of Li, Li approached Chan.  Li and Chan orally agreed to jointly contribute to the purchase of the Lung Mei Lots to be held by their sons.  As a result, on about 9 July 2003, Li and Chan respectively contributed $1,675,000 to purchase the Lung Mei Lots which were put under the names of the sons of Chan and Li.

(g) In about mid-late July 2003, the said middleman, Mr Cheung approached Li again in respect of the acquisition of the Yuen Ling Lots.  The price had decreased due to the outbreak of SARS.

(h) However, due to lack of funds after the purchase of the Lung Mei Lots, Li approached Chan in about mid-late 2003.

(i) Chan orally agreed to lend money to Li in the following terms (“the Original Agreement”):

(i) Chan would lend sufficient money to Li or his nominee for his purchase of the 1^st Schedule land lots and would not charge Li for any interest.

(ii) The total amount of the loan would be $13,000,000 of which $1,000,000 would be loaned for the purpose of acquiring the 1^st Schedule land lots to be held by Li or his nominee, and the remaining balance would be set-off against Li’s previous debts to Chan.  Li would procure transfer of 13,750 shares in Well Fortune held by him or his family to Chan or his nominee as mortgage of the entire loan.

(iii) Chan and Li would each contribute 50% of the purchase price and legal costs as well as disbursements of acquiring both the 1^st Portion Land Lots and the 2^nd Portion Land Lots so that each of them or their nominees would then hold 50% of the beneficial interest thereof.

(iv) However, as Li did not have sufficient funds to contribute his 50% of the funds in acquiring the 1^st Portion Land Lots and the 2^nd Portion Land Lots, Chan would further provide sufficient loans to Li and would not charge any interest.

(v) Li would repay the loans to Chan when Li had sufficient money to repay the same.

(vi) Li would use his relationship and influence in Yuen Ling village to facilitate the purchase of the Yuen Ling Lots, and Li and Chan could thereafter co-operate and jointly develop the lands.

(j) After that, Li approached the vendor of the Yuen Ling Lots ie GMC and it was agreed that the considerations for the 1^st Schedule land lots, the 1^st Portion Land Lots and the 2^nd Portion Land Lots should be $990,000, $1,000,000 and $2,000,000 respectively. The purchaser would also pay $1,500,000 consultation fees, of which $500,000 should be paid at the time of signing the sale and purchase agreement and $1,000,000 should be paid within one week after that.

(k) At the same time, it was orally agreed that (i) Chan should be responsible for the consultation fees of $1,500,000 and the transactions fees until further arrangement; (ii) Li’s company, Sino International Investment Ltd (“Sino International”) and Chan’s company, the plaintiff, should be the legal owner of the 1^st Portion Land Lots; (iii) Li’s company, Wifun and Chan’s company, Panwood, should be the legal owners of the 2^nd Portion Land Lots; and (iv) the defendant should be the legal owner of the 1^st Scheduled land losts.

(l) Pursuant to the Original Agreement:

(i) On 25 September 2003, the plaintiff issued the cheque No 546611 in the sum of $1,300,000 to Li, of which $800,000 was for the deposit of buying the Yuen Ling Lots, and $500,000 was for the first instalment of the consultancy fees.

(ii) On the same date, Wifun issued a cheque of $800,000 (No 683660) to Messrs Peter WK Lo for paying the deposit to the vendor.

(iii) On the same date, Li issued a cheque of $500,000 (No 686038) to pay the first instalment of the consultation fees to the vendor or its nominees.

(iv) On 30 September 2003, Chan’s company, Chan Tam Wong Investment Co Ltd, issued a cheque (No 562785) in the sum of $1,000,000 to Li for paying the balance of the consultancy fees.

(v) On 16 Octobr 2003, GMC and the plaintiff and Sino International signed a sale and purchase agreement for the 1^st Portion Land Lot at $1,000,000; GMC and Panwood and Wifun signed another agreement for the 2^nd Portion Land Lot at $2,000,000; and GMC signed another agreement with the defendant for the 1^st Scheduled land Lot at $990,000.

(vi) On 12 December 2003, the defendant and Li’s son and daughter transferred a total of 13,750 shares in Well Fortune to Chan Tam Wong Investment Co Ltd.

(m) Before the completion of the sale and purchase of the Yuen Ling Lots, Li and Chan reached a new oral agreement (“the New Agreement”).  Chan would cause his nominees, the plaintiff and Panwood to be the legal owners of the 1^st Portion Land Lots and the 2^nd Portion Land Lots. If Li had capital in the future, Li could purchase back the 50% interest in them according to the original considerations without interest (“the Buy-back Promise”).  The New Agreement was proposed by Chan as he was to provide the funds for the Yuen Ling Lots; Li accepted as he did not want the entire deal to fall through and believed that Chan would not renege on the Buy-back Promise.

(n) Pursuant to the New Agreement, the plaintiff and Panwood were registered as the legal owners of the 1^st Portion Land Lots and the 2^nd Portion Land Lots.

(o) The plaintiff paid the outstanding balance, being the sum of $803,822.50 for the purchase of the 1^st Schedule land lots.  After completion, Li paid back $3,800 cash to Chan.  Hence, a total sum of $1,000,000 was advanced by Chan through the plaintiff to Li for the purchase of the 1^st Schedule land lots.

(p) Chan was diagnosed to have cancer in about 2005 and dementia in about 2009. Since then, his family members in particular, his son Chan Chee Ling and his wife Lee Suk Yee were in charge of the dealings with Li.

(q) Despite repeated request, the Chan’s family refused to recognize or perform the Buy-back Promise.

(r) In about 2012, it was orally agreed between Li and the representative of the Chan’s family that 50% of the shareholding in Well Fortune held by Chan Tam Wong Investment should be transferred back to Li’s family; Li’s family should transfer some lands in Lung Mei to the Chan’s family; the Li’s family should be granted an option to buy some lands in the 1^st Portion Land Lots.

(s) Pursuant to such agreement, Li transferred its interest in the lands in Lung Mei to the Chan’s family.  But the Chan’s family refused to allow the Li’s family to exercise the said option.

(t) In about mid-October 2013, the Chan’s family reported to the police that the defendant verbally harassed them when she was merely trying to contact Henry Chan in respect of the ownership of the 1^st Portion Land Lots.  Bad blood was developed between the two families.

(u) Before the letter date 25 July 2014 from the plaintiff’s solicitors to Li and the defendant, the plaintiff or the Chan’s family had never alleged that the plaintiff should be the beneficial owner of the 1^st Schedule land lots.

D.  The applicable legal principles

8.  The legal principles concerning Order 14 application are well established and not in dispute.  However, in the present context, it is pertinent to highlight the principle propounded by Ribeiro J (as he then was) in Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262 at 268C-D:

“With respect, this was not the correct approach to the exercise of the judge’s discretion. The importance of there being doubts or suspicion as to the validity of the plaintiff’s case is that such doubts detract from the plaintiff’s right to summary judgment. It was not to the point to dismiss them on the basis that they did not improve the quality of the defence and ‘raise it’ beyond the category of ‘shadowy’. If possibly genuine weaknesses were exposed in the plaintiff’s case, this casts doubt on the plaintiff’s right to invoke the summary procedure in the first place.”

9.  In Li Mingren v Questex Development Inc and another CACV 141/2014 (18 November 2015, unreported), §13, before citing the above passage in Billion Silver, Yuen JA held that:

“The principles guiding the court in deciding whether to give summary judgment are well-known. All that the defendant needs to show is a triable issue. But before the court looks at the defence, one must look at the plaintiff’s case first.”

10.  In Ju Yan Di Emperory Genesisy v Yan Wai Han [2015] 1 HKLRD 822 at 827, §14, Cheung JA held that:

“It is well established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence. However, this does not mean that once the plaintiff invokes the application and irrespective of the strength of his case, the defendant bears all the burden of showing that there are triable issues in the case. This is because the starting point in a summary judgment application is that it should only be invoked when there is no defence to the claim. This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence. This requirement is further recognized in the procedural rules which mandate the plaintiff to state his belief in the verifying affidavit that there is no defence to the claim. This requirement must be kept in proper perspective when assessment is made of the strength of the application, otherwise there is a danger that the attention will be focused solely on what the defendant has said without consideration at the same time of the basic premise of the plaintiff’s claim or its inherent strength and weakness. …”

E.  Analysis

11.  Mr Chong submitted that the plaintiff’s case is clear and indisputable, and that the defendant’s defence is unbelievable.  I shall start by considering the plaintiff’s case.

12.  I agree that there is indisputable documentary evidence showing that the purchase money for the 1^st Schedule land lots came from the plaintiff:

(a) In respect of the deposit in the sum of $200,000, it came from the cheque (No 546611) dated 25 September 2003 drawn by the plaintiff and payable to Li in the total sum of $1,300,000. There is no serious dispute that, after Li received this sum, on the same day, he procured his company Wifun, to draw a cheque (No 683660) payable to Messrs Peter W K Lo in the sum of $800,000.  And out of this sum of $800,000, $200,000 was used to pay the deposit for the 1^st Schedule land lots.

(b) According to the receipt issued by Messrs W K Lo & Co (No 111355) dated 9 January 2004, they received a sum from the plaintiff for the account of the defendant regarding the purchase of the 1^st Schedule land lots by a cheque (No 546636) in the sum of $803,822.50.  On the copy receipt among the accounting records produced by the plaintiff, there are the following handwritten manuscripts “由旺叔付款”.

13.  Although the prayer for relief in the statement of claim refers to both resulting trust and constructive trust, for the present purpose, the plaintiff relies on resulting trust only.  Mr Chong submitted that this is a clear case of resulting trust, and he cited Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 at 708A-B where Lord Browne-Wilkinson held that:

“Under existing law a resulting trust arises in two sets of circumstances: (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone …, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money…”

Mr Chong submitted that, as there is no suggestion that the plaintiff intended to make a gift of the 1^st Schedule land lots to the defendant, there is nothing to rebut the presumption of resulting trust.

14.  While Mr Chong’s submission appeared to be attractive at first sight, on reflection, I take the view that the matter is not that simple or straightforward.  The critical point is that a resulting trust will only come into existence if the payment by A to B is “voluntary”.  This is the point stressed by the Hong Kong Court of Final Appeal in Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd (2015) 18 HKCFAR 364 at 382, §44 where Tang PJ, after citing the above passage in Westdeutsche Landesbank Girozentrale v Islington LBC, held that:

“Thus, it is only when a payment is voluntary that a resulting trust may arise. If money is provided as a loan, no resulting trust will arise. Since the payments would be at the disposal of the borrower and there would be no identifiable trust fund.”

In §47 at p 383, Tang PJ added that:

“Here, the plaintiff’s case that the moneys were provided as loans (thus at the disposal of the defendants) was incompatible with any resulting trust. They were not voluntary payments in the sense used by Browne-Wilkinson so no resulting trust could arise…”

Sir Anthony Mason NPJ explained in detail, with the support of authorities from England and Australia, why the relationship of resulting trust and loan is inconsistent and incompatible at pp 394-396, §§91-97, of the judgment. He concluded in §97:

“Thus the presumption will be displaced if the person who provides the money intended only to make a loan of money which was to be repaid. In such a case there would be no resulting trust because the common intention is inconsistent with the person who provides the money taking an equitable interest.”

15.  In Underhill and Hayton, Law Relating to Trusts and Trustees (19^th ed., 2016), the authors state in §25.13 at p 481:

“Where the purchase money is provided by a third party at the request of and by way of loan to the person to whom the property is conveyed there is no resulting trust in favour of the third party, for he did not advance the purchase-money as purchaser, but merely as lender.”

16.  In this case, although the indisputable documentary evidence shows that the purchase money was advanced by the plaintiff, it does not, by itself, shows whether it was advanced by the plaintiff “as purchaser” or “as lender”.  The gist of the defendant’s case is that the money was paid by the plaintiff as a loan.  In the circumstances, I take the view that summary judgment should only be granted if it is clear that the money was paid by the plaintiff “as purchaser”, but not “as lender”.

17.  In respect of the plaintiff’s case that it paid the money as purchaser, the natural and immediate question is why, if that was the case, the Property was not acquired in its own name; and why the defendant was named as the legal owner.  Lee Yuk Yee, the daughter in law of Chan, said that it was Chan’s understanding from Li and the defendant that the vendor of the 1^st Scheduled land lots, the 1^st Portion Land Lots and the 2^nd Portion Land Lots were only willing to deal with Li and the defendant. Such explanation is doubtful:

(a) According to the plaintiff’s own pleaded case, the vendor, GMC, was a mortgagee exercising its power of sale.  It is difficult to understand why GMC would be concerned about the identity of the purchaser.

(b) As a matter of fact, in respect of the 1^st Portion Land Lots, Sino International and the plaintiff were named as the purchasers in the sale and purchase agreement dated 16 October 2003; and, as a result of a nomination dated 9 January 2004, the plaintiff became the sole assignee.

(c) Similarly, in respect of the 2^nd Portion Land Lots, Wifun and Panwood were named as the purchasers in the sale and purchase agreement dated 16 October 2003; and, as a result of a nomination dated 9 January 2004, Panwood became the sole assignee.

18.  Second, although the plaintiff has produced voluminous accounting records and documents, there is no express written declaration of trust, or any document indicating that the defendant has been holding the 1^st Scheduled land lots on trust for the plaintiff.

19.  Among the documents produced by the plaintiff is a one-page document which contains copies of two cheques:

(a) the above-mentioned cheque drawn by Wifun (No 683660) payable to Messrs Peter W K Lo in the sum of $800,000; and

(b) a cheque drawn by Li and the defendant jointly with the payee left blank dated 25 September 2003 in the sum of $500,000.

The total amount of these two cheques is $1,300,000, which is exactly the amount of the above-mentioned cheque (No 546611) drawn by the plaintiff in favour of Li on the same day.  These two cheques purport to show how Li made use of the sum of $1,300,000 after receiving it from the plaintiff.  What is noteworthy is that at the bottom of that one-page document, one can see the following handwritten manuscripts in Chinese:

“全數共$1,300,000,- 由旺叔借出” (emphasis added)

20.  There is no dispute that “旺叔” is a reference to Chan.  Mr Chong submitted that this sentence should be construed as meaning that Chan lent $1,300,000 to the plaintiff.  In constrast, Mr Man submitted that it means Chan lent $1,300,000 to Li and/or the defendant.  I am unable to resolve what the proper construction of this sentence is on affirmation evidence only for the following reasons:

(a) The interpretation contended by Mr Chong is not supported by evidence given by the plaintiff.  Lee Yuk Yee said that the handwritten manuscripts were made by one Mr Lee, an accounting staff member working for the plaintiff, on the instructions of Chan and Li.  However, that Mr Lee has not given any evidence; and Lee Yuk Yee does not purport to have any personal knowledge of the matter.

(b) It was plausible that no distinction was drawn between Chan on the one hand, and companies related to him, such as the plaintiff, on the other hand so that monies lent by those companies were simply described as monies lent by Chan in the internal records of the plaintiff.  I note that, in respect of a cheque dated 30 September 2003 issued by Chan Tam Wong Investment Co Ltd (a family company related to Chan) drawn in favour of Li in the sum of $1,000,00, Mr Lee simply wrote down “旺叔出”.

21.  There is also another one-page accounting record produced by the plaintiff, which casts a doubt on the nature of payment made by the plaintiff.  That document purports to set out the particulars of payment in respect of the purchase of the 1^st Scheduled land lots, the 1^st Portion Land Lots and the 2^nd Portion Land Lots.  In respect of the deposit and the balance of the purchase price concerning the 1^st Scheduled land lots, it was stated that “旺叔代付訂金” and “旺叔代付尾數”.  The Chinese character “代” was not used regarding the payment of price for the 1^st Portion Land Lots and the 2^nd Portion Land Lots.  In my view, while this character means “on behalf” literally, it is capable of being used to describe a loan in the context.

22.  The above-mentioned cheque drawn by Li and the defendant jointly with the payee left blank dated 25 September 2003 in the sum of $500,000 is also of some significance.  The plaintiff’s case is that the sum of $500,000 represented consultancy fee paid to Li and/or the defendant as its land agents. However, this cheque suggests that Li and/or the defendant did not actually pocket the sum of $500,000 by themselves; instead, it was paid over to an unknown person.  This casts doubts on whether the role of the defendant and Li was merely land agents as claimed by the plaintiff.

23.  There are the following evidence casting further doubts on the plaintiff’s assertion that the defendant and Li were merely acting as land agents in the acquisition of the 1^st Scheduled land lots and other lands mentioned above:

(a) Li and Easybase Investment Ltd (a company relating to Li) were the owners of the lands adjacent to the 1^st Scheduled Land Lots, namely, Lot Nos 707 and 749 in DD9.  There are documents supporting that, in 2002, there was an unsuccessful attempt by Li (and his associates) to acquire the 1^st Scheduled land lots, as well as the 1^st and 2^nd Portion Land Lots.

(b) In respect of the 1^st and 2^nd Portions Land Lots which were acquired at the same time as the 1^st Scheduled land lots, companies belonging or relating to Li and/or the defendant were purchasers in the sale and purchase agreements (ie Sino International in relation to the 1^st Portion Land Lots, and Wifun in relation to the 2^nd Portion Land Lots), although they did not become the registered owner of the lands at the end.

(c) Li and Chan jointly acquired the Lung Mei Lots.

24.  Lee Yuk Yee said that she had accompanied Chan to meet Li and the defendant on several occasions to demand the defendant to assign the 1^st Scheduled land lots back to the plaintiff but the defendant refused to do so.  However, it was only on 25 July 2014 that the plaintiff made a written demand through its solicitors.  One needs to bear in mind that the 1^st Schedule land lots were acquired back in 2003.  Further, among the lands subdivided out of the 1^st Schedule land lots, one of them was sold to a nephew of Lee Yuk Yee called Chan Chi Wai in about 2008.  Lee Yuk Yee said that the transfer was made after the repeated demands for return of the 1^st Scheduled land lots though it was not accepted as full and final settlement.  The land registry record suggests that the transfer was at a consideration of $150,000.  Nevertheless, if the defendant merely transferred a small portion of the 1^st Schedule land lots in accordance with Lee Yuk Yee’s direction and consent, it is puzzling why, apparently, no formal action was taken to recover the remaining portions until July 2004.

25.  I note that the defendant did not reply to the plaintiff’s demand letter dated 25 July 2014.  One would have thought that the absence of any response should have made the plaintiff more confident in its claim against the defendant.  Yet, the plaintiff only commenced these proceedings on 15 January 2016.  Mr Chong submitted that it took time for the legal team to prepare the legal documents as a large number of lands are involved.  Mr Chong’s submission is however not supported by any evidence.

26.  I also note that Li had stated overtly that Chan lent him the money to acquire the 1^st Scheduled land lots before the plaintiff made the written demand on 25 July 2014 and the commencement of these proceedings. In a police statement made by Li on 23 October 2013, he stated that:

“喺2003年至2004年左右, 我老婆楊寬娣同陳淡旺喺律師樓去一齊買左大埔元嶺村…10多幅約10萬尺既地, 而因為當時我喺鄉事關係, 所以陳淡旺同我地協議買地既錢無需要出先, 先由佢借俾我代我出先…” (emphasis added)

27.  For the sake of completeness, I must of course consider the defendant’s case.  I agree with Mr Chong that there are compelling features suggesting that the defendant’s case that the $1 million loan used to purchase the 1^st Schedule land lots came from the $13 million loan should not be believed.  Suffice for me to highlight the following problematic features:

(a) In the Chinese document dated 1 August 2003 signed by Li, it was stated that Li received “得到” $13,000,000 from Chan between August 2002 and August 2003 as the consideration for 13,750 shares in Well Fortune.

(b) The purchase price for the 1^st Schedule land lots was paid after August 2003.  And this document did not refer to any loan in any event; it referred to an outright transfer.  (I note, however, that the 13,750 shares were transferred back to Li’s family members on 5 December 2012.)

(c) Assuming that $13 million represented a loan, the document does not support that it was related to any of the purchase money for the 1^st Scheduled land lots at all.

28.  I also agree that the defendant’s case contains other curious features as submitted by Mr Chong.  For example, why would Chan agreed to lend money to Li and/or the defendant without any interest? Why was there no repayment of the alleged loan for so many years?

29.  If the defendant’s case is considered in isolation, I may well be tempted to conclude that the defendant’s case is unbelievable.  However, as stated above, this is not the correct approach.  After considering all evidence and submissions, I have come to the conclusion that this is a case where both parties’ cases contain doubts or curious features which call for explanations and cannot be resolved on affirmation evidence only.  As I have decided that this case should go to trial, although I have already highlighted a number of doubtful features in both parties’ cases above, it is inappropriate and unnecessary for me to deal with or consider the merits of these features in detail or exhaustively.

30.  I am under a distinct impression that neither party’s case as set out in their pleadings and affirmation evidence has revealed the whole truth.  The following observation made by Watkins LJ in Extraktionstechnik Gesellschaft Fur Anlagenbau MbH v Oskar (1984) 128 SJ 417 seems apply equally in the present context:

“What is … abundantly clear is that justice cannot possibly be said to be done until the acute issues which have been raised upon the affidavits have been resolved in a contested action. There appears to be ammunition available to both parties capable of inflicting serious wounds. We would not presume to be capable of assessing the chance of success for one as opposed to the other…”

F.  Conclusion and orders

31.  For the above reasons, I take the view that there is a triable issue as to the true nature of the money paid by the plaintiff to the defendant for the purchase of the 1^st Schedule land lots; in particular, whether it was intended to be the purchase price paid by the plaintiff, or merely a loan advanced by the plaintiff to the defendant and/or Li.

32.  I am not satisfied that this is a suitable case for summary judgment.  In respect of the plaintiff’s Order 14 summons, I shall give unconditional leave to defend with costs in the cause.

33.  As to the defendant’s summons to amend her defence, although, as mentioned, I have serious doubts about the facts pleaded in the draft amended defence, as the matter will go to trial, I should leave it to the defendant to decide on how she would like to run her case.  I shall make an order in terms of the defendant’s summons dated 27 March 2017. The defendant has agreed to pay the costs of this summons, which shall be taxed if not agreed.