DCCJ 5534/2020
[2024] HKDC 1699
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 5534 OF 2020
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BETWEEN |
| | CHUNG SUET WAN | Plaintiff |
| | and | |
| | CHUNG SUET HAN | 1st Defendant |
| | WONG HON CHUNG | 2nd Defendant |
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| Before: | Her Honour Judge G. Chow in Court |
| Dates of Hearing: | 3-5, 9-10 & 27 September 2024 |
| Date of Judgment: | 24 October 2024 |
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JUDGMENT
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A. INTRODUCTION
1. This action concerns a dispute of the beneficial ownership of a property known as Flat D on 2nd Floor of Block 4 (Fu Sun Building), No 36 Tit Shu Street, Fu Tor Loy Sun Chuen Stage 2, Kowloon (“the Property”).
2. The Plaintiff (“P”) is the elder sister of the 1st Defendant (“D1”).
3. The 2nd Defendant (“D2”) is D1’s husband.
4. The Property was assigned to P, D1 and D2 (collectively, “the Parties”) as joint tenants by an Assignment dated 16 May 1997 (“the Assignment”). At the time of the Assignment, D1 and D2 were not married but were in an intimate relationship.
5. In this action, P seeks:
(1) A declaration that the Property has since 16 May 1997 been held by P, D1 and D2 on trust for the benefit of P (as to two-third) and D2 (as to one-third);
(2) An order for the sale of the Property pursuant to s 6 of the Partition Ordinance, Cap 352; and
(3) An order that D1 and D2 render a true and complete account in respect of all incomes generated and expenses incurred in respect of the Property from 16 May 1997 up to the date of the sale or such date as this Court shall deem fit and to pay any sum found due to P upon the taking of such account.
6. At the trial of this action, P was represented by Mr Chong, counsel, and D1 and D2 (collectively, “Ds”) were represented by Mr Chan, counsel.
7. During closing submissions, both counsel confirmed that the Parties agreed to: (1) an order for the sale of the Property (with consequential directions in relation the sale to be agreed, or to be sought from the Court, after the handing down of this Judgment); and (2) an order that proper inquiry and account be taken in respect of all incomes and expenses in relation to the Property from 16 May 1997 up to the date of the sale of the Property. The only battleground which remained between the Parties was P’s beneficial share in the Property.
B. THE PLEADED CASE
B1. P’s Case
8. In early 1997, P intended to acquire the Property for investment purposes on her own. She had talked about investing in the property market and properties in the Tai Kok Tsui area at a Chinese New Year’s eve dinner on 6 February 1997 at her parents’ home attended by Ds.
9. After P had negotiated and agreed on the purchase price of HK$1,150,000 (“the Purchase Price”) for the Property with the vendor and before the signing of the provisional sale and purchase agreement (“PSPA”), Ds informed P that they were also interested in taking part in the investment and requested P to allow them to participate in the investment.
10. In reliance upon her belief that Ds were able to put up the relevant funds, P agreed. The Parties subsequently reached an oral agreement that:
(1) Together they would jointly make financial contribution towards the initial 30% of the Purchase Price (“the Down Payment”) and the fees and expenses to be incurred in connection with the purchase of the Property (“the Expenses”) in equal shares;
(2) The remaining 70% of the Purchase Price would be funded by way of a mortgage secured on the Property to be advanced by a bank;
(3) After the Property is purchased, the Parties would be registered as legal joint tenants in recognition of their respective financial contribution to the Down Payment and the Expenses;
(4) Since the Property was purchased for investment purposes, unless it was sold in the short term, it would be rented out and the rental income would be used to settle the monthly mortgage repayments; and
(5) The Parties would also be entitled to such share in the Property proportionate to their respective financial contribution as and when the Property is sold.
(“the Initial Oral Agreement”)
11. The following were also implied terms of the Initial Oral Agreement:
(1) Each of the Parties would be entitled to such share in the net rental income to be collected in respect of the Property proportionate to their respective financial contribution after monthly repayment of the mortgage; and
(2) Each of the Parties would also be responsible to bear the necessary expenditures to be incurred in respect of the Property in such share proportionate to their respective financial contribution.
12. Shortly before the signing of the formal sale and purchase agreement (“SPA”), P asked D1 for her monetary share of the initial and further deposit. However, D1 replied that she had no money to invest and persuaded P to let her remain as a registered owner, allegedly for the purpose of monitoring D2’s dealing in the Property and prevent P’s interest from surviving to D2 alone. Prior to that, D1 never told or indicated to P that she did not have sufficient funds.
13. In reliance on D1’s reply and in view of the then close relationship with D1, it was expressly agreed:
(1) D1 would not hold any beneficial interest in the Property as she had not contributed to any part of the Purchase Price;
(2) D1’s role as registered owner of the Property was purely to look after P’s interest in the Property;
(3) As P would need to travel frequently, D1 would assist in handling the logistics of renting out the Property and other chores such as payment of management fees and collection of rent; and
(4) In return for rendering such assistance, P would at her discretion pay to D1 a bonus as and when the Property is sold at a profit.
(“the Further Agreement”)
14. By virtue of D1 and D2’s intimate relationship, it is to be inferred that D2 was aware of and agreed to the Further Agreement.
15. In the premises, by the time of the acquisition of the Property and despite the Initial Oral Agreement:
(1) It was the common intention of the Parties that D1’s interest in the Property shall be limited to that of a trustee holding the same for the sole benefit of P and she would hold no beneficial interest on her own (“the Common Intention”); and
(2) D1 was appointed to act as agent of P in handling the logistics of renting out the Property, collection of rent and other matters such as the payment of management fees, government rates and other utilities and outgoings in respect of the Property.
16. In reliance on the Common Intention, D2 contributed a total sum of HK$120,000 towards the Down Payment and the Expenses (approximately one-third thereof) and P made up the shortfall of the Down Payment and Expenses (approximately two-third thereof). The remaining 70% of the Purchase Price was funded by a mortgage from Bank of China (“BOC”), formerly known as Po Sang Limited (“Po Sang”), (“the Mortgage”).
17. Since May 1997, P contributed to the repayment of the Mortgage. This included the sum of HK$200,000 in or about December 2001, when P received share dividends from Homeast Industrial Limited (“Homeast”) which was beneficially owned by P (65%) and Ds (35%). P was entitled to HK$195,000.
18. Furthermore, since the acquisition of the Property, Ds have in their sole names but on behalf of the Parties, executed various tenancy agreements to let the Property to tenants and collected the rent, arranged for repayment of the Mortgage and other outgoings. Save for the period from 1997 to late 2000, P was not made aware of the identities of the tenants and the rent. Nor was P consulted before the tenancy agreements were entered into. Neither D1 nor D2 has paid to P her share of the rent collected after deduction of the repayment of the Mortgage and other expenses.
19. From around September 2004, P had been demanding Ds for the resolution of various financial disputes between them including the the sale of the Property in around January 2006. However, Ds have failed or refused to the sale of the Property and render a true and complete account in relation to the Property.
B2. Ds’ Case
20. On the other hand, it is Ds’ case that in late December 1996, P approached them to invest in the property market together.
21. The Parties reached an oral agreement to make a joint investment to purchase a property and agreed to hold the property as joint tenants, being entitled to the income and liable for the expenses equally, despite D1 having indicated that she did not have sufficient funds. P had responded that D1 could repay her from D1’s share of the profit after realization of the property (“the Collective and Shared Intention”).
22. In or around February 1997, the Parties found the Property.
23. Since D1 did not have sufficient funds to pay for her share of the Down Payment, P agreed to lend D1 HK$115,000 free of interest and further agreed that the sum together with the legal costs, estate agent’s commission and other miscellaneous expenses incurred in respect of the purchase of the Property could be repaid either:
(1) By way of installment if the Property was not resold in the short-run; or
(2) In one-go from D1’s share of the profit from the resale of the Property.
(“the Agreement”)
24. Acting in reliance on the Agreement, the Parties entered into the PSPA.
25. Based on the Collective and Shared Intention and the Agreement, Ds aver that D1 was still one of the registered and beneficial owner of the Property.
26. Furthermore, it was subsequently agreed that the Property be rented out to generate rental income before any joint decision to sell the Property. It was also agreed that since D1 was not able to contribute to one third of the Down Payment and one third of the Expenses or the acquisition costs of the Property (“Acquisition Costs”), P was not going to be responsible for the monthly instalments of the Mortgage after deducting the rental income and all expenses for maintenance of the Property. This was to give effect to the Agreement for D1 to repay her share of the Down Payment and Expenses or the Acquisition Costs by installment. In case of any monthly surplus from the leasing out of the Property after deducting the monthly mortgage repayments and all expenses for the maintenance of the Property, the money will be properly kept and recorded and after the sale of the Property, and the profit and those money would be distributed subject to the Agreement (“the Arrangement”).
27. Subsequent to the purchase of the Property, to give effect to the Agreement and the Arrangement:
(1) D1 and D2 have taken up responsibility for managing all matters relating to the Property;
(2) P was not responsible for the settling of all expenses in relation to the Property which included: (a) repayment of the monthly instalment of the Mortgage; (b) monthly management fees; (c) government rates and rent; (d) insurance charges; (e) money spent on decoration, repair and maintenance of the Property; and (f) utility charges;
(3) These expenses were paid by Ds. All along, the rental income was not able to fully cover the expenses. There was a deficit of HK$264,770.85 (“the Alleged Deficit”) which Ds had jointly made up.
28. In respect of the dividend from Homeast, the total dividend declared and paid in around 2001 was HK$300,000 of which P was entitled to HK$195,000 and Ds jointly entitled to HK$105,000. It was agreed that HK$200,000 was to be used as partial repayment of the Mortgage so each needed to contribute HK$66,667 (“the Repayment Agreement”).
29. Pursuant to the Repayment Agreement, HK$200,000 was deposited into the mortgage loan account (“the Mortgage Account”) on 12 December 2001 and the total sum of HK$128,333 (by way of two cheques) was paid to P on 16 January 2002.
30. Furthermore, the first time P asked for accounts in respect of the income and expenses relating to the Property was by letter dated 18 December 2008 from Messrs Kitty So & Tong. On 19 February 2009 and 6 January 2017, P was provided with copies of the relevant documents and the accounts in relation to the income and expenses of the Property. It is denied that there has been any failure or refusal to account.
31. As to the proposed sale of the Property, there has not been any decision reached by the Parties. As registered and beneficial owners, Ds are entitled to come to their own decision whether or not to sell the Property.
32. In the event that the court is minded to make an order for sale of the Property, any distribution of the proceeds should be on the basis that the Parties are registered and beneficial owners of the Property in equal shares and subject to reimbursement by P to Ds of one third of the Alleged Deficit.
C. APPLICABLE LEGAL PRINCIPLES
C1. Common Intention Constructive Trust
33. The applicable principles on common intention constructive trust are not in dispute. I would gratefully adopt the succinct and useful summary of Deputy High Court Judge Alexander Stock SC in Leung Hang Lin and Li Kwai Fuk v Lam Mei Yung[2019] HKCFI 2819 at §8:
“In summary:
(1) The starting point is that equity follows the law. There is a presumption that the beneficial interest follows the legal interest. Where the property is registered in a defendant’s name, the plaintiff bears the burden of showing, on the balance of probabilities, that the defendant held the property on trust for him or her such that the beneficial ownership differs to the legal ownership. See: Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9, §44; Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, §5.16; Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327, §17.
(2) The burden may be discharged by showing that: (i) there was a common intention held by the plaintiff and the property owner at the time of the purchase (or exceptionally, thereafter) that the beneficial ownership was to be different to the legal ownership; (ii) the plaintiff altered his or her position in detrimental reliance upon the common intention; and (iii) it is unconscionable for the property owner to assert ownership in reliance on the legal title. The constructive trust is constituted by the plaintiff’s detrimental reliance on the common intention and the unconscionability of the legal owner departing therefrom. See: Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1, §38; Liu Wai Keung, §46.
(3) The approach to ascertaining common intention is objective. One looks to the intention of each party which was reasonably understood by the other party to be manifested by the first party’s words and conduct. See: Liu Wai Keung, §47; Mo Ying, §5.16.
(4) The doctrine is sometimes described as having two limbs. First, where at any time prior to the acquisition (or exceptionally, at a later date), there is an agreement, arrangement or understanding reached between the parties as to how the property is to be held beneficially, based on evidence of express discussions. Second, where there is no evidence to support such a finding but the court relies on the parties’ conduct as a basis from which to infer a common intention. There is some authority that under the second limb, direct contributions to the purchase price by a party who is not a legal owner will readily justify the inference. See: Mo Ying, §5.8; Primecredit, §§2.3 and 2.4.
(5) However, the modern approach is to assess the parties’ common intention by a holistic approach having regard to the context and the particular facts. The court is not constrained to consider only pure direct monetary contributions to the purchase price. In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family are not that common, the court has to pay more regard to circumstantial matters. See: Mo Ying, §§5.14 and 5.15; Primecredit, §1.6.”
C2. Duty To Account
34. Whilst there is no duty to account for rent received by one co-owners arising simply by reason of the incidence of co-ownership, a duty to account will arise in partition actions or where the court makes an order for sale as an alternative to partition: see Cheung Lai Mui v Cheung Wai Shing (2021) 24 HKCFAR 116, §§71 and 104; Chen Yu Tsui v Tong Kui Kwong [2006] 1 HKC 23, §§103 and 105.
35. There may also be such a duty where there is an agreement making a co-owner the bailiff of another: see Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286 at §46.
C3. Assessment Of Credibility
36. The court’s approach in assessing the credibility of a witness’ evidence is also not disputed. These were helpfully summarized in Hu Lan v David Golden[2023] HKCFI 873 by Deputy High Court Judge H Au-Yeung (as he then was) at §36:
“When I consider the credibility of various witnesses who had given evidence in court, I shall take into the following matters into account:
(1) Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;
(2) Importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;
(3) The court will also attach importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement;
(4) The court should consider a witness’ motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest;
(5) It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected. A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie;
(6) On the other hand, where it is shown that a witness has been discredited over one or more matters to which he has testified, this fact is relevant to the assessment of his overall credibility;
(7) While the court is entitled to take demeanour into account when assessing testimony, it should be borne in mind that demeanour can be deceptive and is therefore to be approached with care.”
37. Furthermore, I found the following quotation from Lord Bingham’s book The Business of Judging by Deputy High Court Judge William Wong SC in Fung Sau Mui Janne v Fung Wing Tong[2018] HKCFI 2247 at §13 helpful on the resolution of a conflict of evidence between witnesses:
“Let me then turn to the central questions. Faced with a conflict of evidence on an issue substantially effecting the outcome of an action, often knowing that a decision this way or that will have momentous consequences on the parties’ lives or fortune, how can and should the judge set about his task of resolving it? How is he to resolve which witness is honest and which dishonest, which reliable and which unreliable? How, as between competing experts in a field not his own, is a judge to determine where the truth lies? Is our existing way of resolving expert conflicts the best way? I shall begin by considering the resolution of issues of primary fact, the choice between first-hand eye-witnesses. Then I shall turn to expert evidence.
The normal first step in resolving issues of primary fact is, I feel sure, to add to what is common ground between the parties (which the pleadings in the action should have identified, but often do not) such facts as shown to be incontrovertible. In many cases, letter or minutes written well before there was any breath of dispute between the parties may throw a very clear light on their knowledge and intentions at a particular time ….
The most compendious statement known to me of the judicial process involved in assessing the credibility of an oral witness is to be found in the dissenting speech of Lord Pearce in the House of Lords in Onassis v Vergottis. In this he touches on so many of the matters which I wish to mention that I may perhaps be forgiven for citing the relevant passage in full:
‘‘Credibility’ involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person, telling something less than the truth on this issue, or, though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? Also, has his recollection even subsequently altered by unconscious bias or wishful thinking or by over-much discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.’
Every judge is familiar with cases in which the conflict between the accounts of different witnesses is so gross as to be inexplicable save on the basis that one or some of the witnesses are deliberately giving evidence which they know to be untrue. There are, no doubt, witnesses who follow the guidance of the Good Soldier Sveyk that ‘The main thing is always to say in court what isn’t true,’ as a matter of principle, but more often dishonest evidence is likely to be prompted by the hope of gain, the desire to avert blame or criticism, or misplaced loyalty to one or other of the parties. The main tests needed to determine whether a witness is lying or not are, I think, the following, although their relative importance will vary widely from case to case:
(1) the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred;
(2) the internal consistency of the witness’s evidence;
(3) consistency with what the witness has said or deposed on other occasions;
(4) the credit of the witness in relation to matters not germane to the litigation;
(5) the demeanour of the witness.
The first three of these tests may in general be regarded as giving a useful pointer to where the truth lies. If a witness’s evidence conflicts with what is clearly shown to have occurred, or is internally self-contradictory, or conflicts with what the witness has previously said, it may usually be regarded as suspect. It may only be unreliable, and not dishonest, but the nature of the case may effectively rule out that possibility.”
D. THE ISSUES TO BE DETERMINED
38. The following were the list of agreed issues lodged by the Parties before trial:
(1) Who are the beneficial owners of the Property by considering:
(i) Whether there was any Initial Oral Agreement as pleaded by P;
(ii) Whether there was any implied term under the Initial Oral Agreement as pleaded by P;
(iii) Whether there was any Further Agreement as pleaded by P;
(iv) Whether there was any Common Intention as pleaded by P;
(v) Whether there was any Collective and Shared Intention as pleaded by Ds;
(vi) Whether there was any Agreement as pleaded by Ds;
(vii) Whether there was any Arrangement as pleaded by Ds;
(viii) The payment and method of payment of the mortgage instalments and expenses in relation to the Property throughout the years;
(ix) How the HK$200,000 repayment of the Mortgage be attributed among the Parties and whether there was any Repayment Agreement as pleaded by Ds;
(x) What were the nature and source of the two cheques in the sum of HK$128,333;
(xi) Whether there was any deficit in the amount of HK$264,770.85 as pleaded by Ds and whether Ds had jointly made up that deficit;
(xii) Whether D1 and/or D2 informed P of the tenants’ identities or the applicable rent before the relevant tenancy agreements were entered into;
(xiii) Whether D1 and/or D2 paid P any part of her share of the rent collected from the tenants after deduction of the repayment of the mortgage and other expenses incurred;
(2) Whether D1 and/or D2 have failed and/or refused to agree to P’s proposal for the sale of the Property;
(3) Whether D1 and/or D2 have failed to render P a true and complete account of all incomes generated and expenses incurred in respect of the Property; and
(4) If the court rules in favour of P, what relief should be granted and whether the order for sale should be granted.
39. Notwithstanding the above list of issues, by the time of closing submissions, counsel agreed that most of them need not be decided by me. As already mentioned, the main issue that remained in dispute was: what is P’s proportion of beneficial ownership in the Property?
40. Both counsel accepted that the burden of proof rests upon P to establish the Common Intention as alleged by her on the balance of probabilities. Moreover, there is no burden on Ds to persuade the Court that their version of events should be accepted.
41. Ko Yin Fun v Ko Chi Hung & ors[2024] HKCFI 1608 was a case where siblings disputed the beneficial ownership of various properties registered in the name of the 1st defendant and/or 4th defendant. The plaintiff asserted that a 33.33% share was held on constructive trust for him. At §43, Ng J held:
“Lastly, this court has borne in mind that the burden of proof rests on the Plaintiff to establish the common intention especially the 2 alleged oral agreements on balance of probabilities. There is no burden on the 1st Defendant and the 4th Defendant to persuade the Court that their alternative version of events should be accepted. Hence, while it is true that the 1st and 4th Defendants have put forward positive cases that they had funded the purchase of the relevant properties for their own use, there is no burden on them to prove their positive cases. Once the critical issue identified below is resolved, the 1st and 4th Defendants’ positive cases become redundant.”
42. Accordingly, I do not need to decide Ds’ positive case on the Agreement, the Arrangement and the Collective and Shared Intention. That said, I accept in assessing their credibility, I may have to consider what they have put forward as their case and whether they have been discredited on their case in cross-examination.
43. Furthermore, it is common ground that P is relying on an express agreement, arrangement or understanding. In Yeung Chung Chak v Fu Man, the administrator of the estate of Yeung Hoi Ping, deceased and others[2023] HKCFI 2298 applying Chen Kam Nga v Lee Ho Yin[2022] HKCA 1150 at §19, Recorder Eva Sit SC at §39 held that where the plaintiff is relying on the “first scenario” in Primecredit (namely, there was an express agreement, arrangement or understanding between the parties that the property is to be shared beneficially), the court should approach the matter by:
(1) making a finding, on the facts, whether there was any agreement, arrangement or understanding as contended for by the plaintiff; and
(2) if so, whether the plaintiff can demonstrate that he has acted to his detriment or significantly altered his position in reliance on the agreement in order to give rise to a constructive trust.
44. Yeung Chung Chak was another case where siblings disputed the beneficial interest of a property registered in the sole name of their father who had passed away. The plaintiff claimed that the property was held on a common intention constructive trust for him.
45. Accordingly, I would also follow the same approach to make a finding on the facts whether there was any Further Agreement and Common Intention as pleaded by P. Only if so satisfied, would I need to consider whether P can demonstrate that she acted to her detriment or significantly altered her position in reliance on that agreement or understanding.
E. MY ASSESSMENT OF THE WITNESSES
E1. P
46. P was the only witness who testified notwithstanding two other witnesses had prepared witness statements for P. By agreement, the witness statements of those other witnesses were expunged from the trial bundles.
47. P adopted her witness statements as her evidence in chief. She was extensively cross-examined by Mr Chan for more than 2 days.
48. P had a tendency to give very long answers and to take every opportunity to repeat her pleaded case and/or to slip-in her apparent grievances against D1, including on matters counsel were agreed were irrelevant to the present proceedings. The impression created was that she was not answering the question directly. That said, this is not a matter upon which I would assess P as not a truthful witness. Furthermore, demeanour may be deceptive.
49. Rather, P’s evidence must be tested against the contemporaneous documents and incontrovertible facts. This is particularly in a case such as the present when the facts took place over many years ago. As experienced and eminent judges remind, a witness may not be dishonest but her recollection of the events and memory retention may subconsciously be altered or clouded by her subjective feelings or bias, especially those who believes she is morally in the right. I also should consider the inherent likelihood or apparent logic of her version of the events and the internal consistency of her evidence.
50. Firstly, there were a number of internal inconsistencies in P’s evidence which undermined her credibility. The materials ones were:
(1) It is P’s pleaded case and as stated in her witness statement that between the signing of the PSPA (which was on 14 February 1997) and the signing of the SPA (which was on 28 February 1997), D1 told her that she had no money to contribute but requested P to let her name remain as registered owner. However, in her oral testimony, on the first day, she said it was just before the signing of the Assignment at the solicitor’s office (i.e. 12 May 1997) that D1 said that she didn’t have money. On the second day, she said between the signing of the PSPA and 12 May 1997, she had been chasing D1 for her contribution. Even on the date of signing of the SPA, P still believed D1 had money to contribute. In others words, it is not as pleaded that on or before the signing of the SPA D1 first told P that she had no money to contribute. Mr Chong submitted that as a layman P may have mixed up SPA with the Assignment. However, given her self-professed experience in investing in property and her prior acquisition of a flat in Maple Gardens, all of which was not disputed, I do not accept this explanation;
(2) It is P’s pleaded case that she informed D1, and D1 agreed, that by being only an owner in name, P would at her discretion give D1 a bonus. In her witness statements, she said she thought she would give some money to D1 as bonus. In her oral testimony, her case transformed again. She said that she would certainly give D1 a bonus depending on the size of the profit upon the sale of the Property but could not say how much;
(3) It is P’s pleaded case that D1 was to handle the renting out and payment of expenses in relation to the Property. However, in her oral testimony, P said that all along she wished to be involved and was willing to pay the expenses but could not because she was not informed of those expenses and/or was not allowed to be involved;
(4) As for the 35% beneficial interest of Homeast, it was P’s pleaded case that Ds are the beneficial owners. However in P’s supplemental witness statement, she said D1 was not a shareholder. In her oral testimony, she explained that because D2 did not transfer the legal title back to D1 under their trust agreement, the 35% shares in Homeast belonged beneficially to D2; and
(5) P’s pleaded case concerning the two cheques issued to her in the amount of HK$28,333 and HK$100,000 (“the Two Cheques”) were that they were reimbursements to P by Homeast and irrelevant to the repayment of the Mortgage. However, in her evidence, she casted doubts on whether those cheques, whilst issued, were deposited by her as she could not locate any such entries in her bank passbook.
51. Secondly, P also purported to give evidence on matters which was never pleaded but one would have expected her to if they were true which again undermined her credibility:
(1) Apart from the HK$200,000 for repayment of the Mortgage, P says that she also contributed HK$36,000 in total (HK$20,000 on 9 May 1998, HK$8,000 on 17 June 1998 and HK$8,000 on 22 July 1998) into the Mortgage Account in D1’s name from which monthly mortgage repayments were paid; and
(2) P first mentioned one of the excuse that was offered by D1 to P for keeping her name as registered owner was to create a 2 to 1 situation i.e. P and D1 together against D2 (“the 2:1 situation”).
52. Thirdly, whilst it is not fatal that the Further Agreement and Common Intention were not supported by any written contemporaneous document (which perhaps is understandable in a family context), there are a number of aspects of it which is inherently unlikely or illogical and/or were contradicted by the available contemporaneous documents:
(1) According to P, she was first introduced to D2 on 6 February 1997. On 13 February 1997, when they were viewing properties, it was only her second time meeting D2. Yet, less than 2 weeks after having first met D2, P was willing to jointly purchase the Property with D2 by signing the PSPA. From her evidence it is evident that she understood joint ownership meant that on her passing away, her interest in the Property would pass to D1 and D2;
(2) The 2:1 situation which P purportedly believed could be created by allowing D1 to remain a registered owner does not make much sense. According to her, the Parties agreed or understood that D1 was only an owner in title. There could never be a 2:1 situation on P’s case as it was always P vs D2. On the other hand, it demonstrates that P accepted that D1 was one of the beneficial owners in order for there to be a true 2:1 situation;
(3) If D1 had no beneficial interest in the Property, it was inherently unlikely that she would be the sole borrower for the Mortgage and bear full legal liability. Her explanation that there was no risk for D1 given P’s claimed financial resources and D2’s background is not convincing because over the long tenure of the Mortgage there must always be a risk of default for which D1 would be legally liable;
(4) Furthermore, it is unlikely that D1 would have taken up the risk of any default in repayment of the Mortgage for a discretionary bonus to be paid by P (which may or may not be paid) and only upon the sale of the Property at a profit (the time and price unknown);
(5) It is undisputed that D1 had been paying for the monthly mortgage repayments and expenses of the Property all along, which on P’s case, P should be responsible for two-third. Yet Ds never demanded from P her contribution. It is more likely that, as according to Ds’ case, it was agreed or understood that P would not be responsible for monthly mortgage repayments and other expenses not covered by the rental income because P had lent to D1 her share of the Down Payment;
(6) Whilst P maintained that she paid HK$200,000 from her dividends from Homeast, according to the Board Minutes of Homeast, only HK$195,000 was payable to Stanley on her behalf; and
(7) Whilst P complained that D2 had not paid his share of HK$105,000 from his dividend, from the contemporaneous documents, HK$200,000 was paid into the Mortgage Account, and as Ds’ total share was HK$133,333 and D2’s entitlement to dividend was only HK$105,000, the shortfall was made up by the cheque in the sum of HK$28,333 issued by D1 to P.
53. Having regard to the various internal inconsistencies in P’s evidence, the shifting of her case, the inherent improbabilities and the undisputed or undisputable facts based on the contemporaneous documents as well as her motives (given her obvious interest in these proceedings), in all, I am of the view that P’s evidence was not credible and reliable.
E2. D1
54. D1 also adopted her witness statements as her evidence in chief. She was extensively cross-examined by Mr Chong over 2 and half days. I did not find her much shaken in cross-examination. On the whole, I found her evidence credible and reliable being consistent with the contemporaneous documents and undisputed facts.
55. Mr Chong submitted that D1 was not a credible and reliable witness and that she was evasive during cross-examination. In particular, he relied upon the following “credibility issues”:
(1) Ds’ pleaded case was that D1 was not able to and made no financial contribution to the Down Payment and miscellaneous expenses. However in her oral testimony, D1 maintained that as she obtained a loan from P of the Down Payment and expenses she had therefore contributed;
(2) According to the contemporaneous documents, it was not the situation as was stated in Ds’ witness statements that the HK$300,000 dividend was deposited by Stanley and D2 into D1’s personal bank account with BOC;
(3) According to Ds’ pleaded case and witness statements, all along P never showed interest in the affairs of the Property. However, in D1’s witness statements and cross-examination, she accepted that the Parties decided to renovate the Property after taking possession and in or about July and August 1997 the Parties decided to rent out the Property;
(4) It is Ds’ pleaded case that D1 had all along consulted and obtained the consent of P for the leasing of the Property and informed P of the identities of the tenants and the rent. However, in cross-examination she admitted that after March 2005, Ds rarely met P and did not have the contacts of P; and
(5) D1 was evasive about the existence of another bank account for the collection of rent.
56. However, I do not find the above were material discrepancies and/or were not credibly explained by D1:
(1) Ds’ pleaded case was that as D1 did not have sufficient funds to pay her share of the initial deposit, P had agreed to lend the sum of HK$115,000 together with D1’s share towards the legal costs, commission for the estate agent and other miscellaneous expenses incurred in respect of the purchase of the Property (paragraph 5 of the Amended Defence). Whilst at paragraph 9(2) of the Amended Defence, D1 admitted that she made no financial contribution, in the same sentence she repeated the Agreement and Arrangement pleaded therein;
(2) There is no dispute that Stanley and D2 were the directors of Homeast and agreed to the distribution of the dividends. I do not consider this as a material discrepancy or inconsistency in D1’s evidence;
(3) The two matters relied upon by Mr Chong would only show that P had participated immediately after or soon after taking possession of the Property but do not materially deviate from Ds’ case;
(4) At most there was some exaggeration in Ds’ pleaded case but D1 frankly admitted that after relationship had soured between Ds and P in 2005, she was not able to consult and obtain P’s consent. Her oral testimony is generally consistent with what she stated in her witness statement that from 1997 to 31 March 2005 she often reported to P about the affairs of the Property. Further, after demands were made by P’s solicitors, she accounted to P by provision of information through her solicitors in 2009, 2017 and 2018;
(5) I did not find D1 was evasive but perhaps rather guarded and cautious in answering Mr Chong’s questions. In any event, I do not see the materiality between there being two accounts or three accounts for the collection of rent by D1.
57. In Mr Chong’s closing submissions, he also submitted that Ds’ case is “inherently impossible” which affected the credibility of Ds in putting forward that case.
58. Firstly, he submitted that there was a material discrepancy between the pleaded case and the witness statements as to when the Agreement was reached. In the Amended Defence at paragraphs 4 and 5, it was pleaded that in around February 1997, the Parties found the Property and P agreed to lend D1 her share of the Down Payment together with the Acquisition Costs which could be repaid by way of installments if the Property was not sold and in one go from D1’s share of the profit if the Property was resold. According to D1’s witness statement, the “Investment Agreement” was reached before the Property was identified in late December 1996. Mr Chong submitted that it is clear that the “Investment Agreement” was in fact “the Agreement” as pleaded in the Amended Defence. Therefore there was a fatal discrepancy in Ds’ case.
59. However, I do not agree it is clear that the two are the same. The Investment Agreement was a defined term in D1’s witness statement following these words, “Based on the promises made by the Plaintiff to me, I agreed to invest in the property market together with the Plaintiff and the 2nd Defendant, and further agreed that the required expenses and profits of the investment should be equally distributed amongst the three of us”. The Investment Agreement plainly relates to the agreement between the Parties to invest in properties jointly. Whereas the Agreement concerned the loan from P to D1 which had nothing to do with D2.
60. Secondly, it was submitted that with many uncertainties over which property would be purchased, whether mortgage loan can be secured and what would be the monthly instalment and rental income and whether it would be sufficient to cover expenses as well as whether the property could be sold in the short term, it was impossible to have reached the Investment Agreement.
61. I do not agree that it was impossible or improbable for there to be the Investment Agreement because as explained by Ds during cross-examination, the Parties had a rough idea on those matters based on their discussions. Whilst these details were not stated in their witness statements, I do not think the witnesses could have nor need to anticipate this line of cross-examination in their witness statements.
62. Thirdly, it was submitted that D1 tried to mix up instalment repayment of P’s loan to her with the instalment repayment of the Mortgage which was not stated in D1’s witness statement.
63. However, at paragraph 5 of D1’s witness statement she stated that P, “would allow me to amortize the initial loan and miscellaneous expenses for the purchase of the joint property by instalments…”. Further on, at paragraph 10, she stated, “Since I was unable to make contribution towards the Down Payment, the Plaintiff requested me to be the sole borrower when making an application for a mortgage loan. In addition, the Plaintiff requested me to pay for her the monthly mortgage repayment and other miscellaneous expenses for the management of the Property. These payments would be deducted from the sum of HK$115,000 loaned to me and from the Miscellaneous Expenses until they were completely offset.”
64. Fourthly, in respect of the second repayment method under the Agreement, Mr Chong submitted that it would be contrary to common sense for D1 to share in the profit when she made no initial contribution.
65. However, on Ds’ case and as explained by D1 in cross-examination, although the money did not come from her pocket, because P agreed to lend her the money, she had contributed to her share of the Down Payment and the acquisition costs of the Property. When being cross-examined that it would not make sense for her to share in the profit when she borne no risk (she obtained an interest-free loan on Ds’ case), she disagreed and said she shared in the risk of the Mortgage and expenses payments as well as any drop in the property market. I agree.
66. Fifthly, it was submitted that contrary to Ds’ case that P wished to diversify her risk by having Ds join in the purchase of the Property, if P had entered into the Agreement, there was an increase in her risk given D1’s lack of stable income.
67. However, in cross-examination, D1 said that P had carefully balanced the risk and benefits in letting Ds join in the investment. As to why P would take the risk to lend money to D1 she explained she thought it was because she was P’s sister, with her participation in the investment she would help manage the Property and P could diversify her investment. I find these were all valid and credible explanations.
68. Sixthly, it was submitted that the Arrangement was not mentioned in D1’s witness statements.
69. Whilst the details as to who would keep the monthly surplus from renting out of the Property after deduction of the monthly mortgage payment and expenses were not mentioned in the witness statements, I am satisfied that the crux of the Arrangement were explained. At paragraph 7 of D1’s witness statement, it was stated that, “the required expenses and profits of the investment should be equally distributed amongst the three of us” and at paragraph 15 of D1’s supplemental witness statement it was stated that “according to the Agreement reached between the three of us at the time when we purchased the Property, any profits generated by the Property will only be equally distributed after the Property is sold and the related expenses deducted.” In cross-examination, she explained that it was common sense and understood by the Parties that Ds would be keeping the surplus and proper records kept.
70. Seventhly, in relation to Ds’ case and evidence that P had requested her to be the sole borrower when applying for the Mortgage, it was submitted that this was not pleaded. In cross-examination, D1 maintained that this was pleaded in the Amended Defence at paragraph 4 which mentioned a mortgage would be obtained and at paragraph 5 mentioned repayment by installment which meant the Mortgage was paid by D1.
71. Although I would accept that it was not explicitly pleaded that P requested D1 to be the sole borrower of the Mortgage, nonetheless Ds’ case is consistent with the undisputed fact that D1 was the “requesting party” of the Mortgage which was understood as being the “sole borrower”. I would put more weight on the contemporaneous document and agreed understanding of that document.
72. Eighthly, it was submitted that D1’s evidence concerning the repayment of the Mortgage and the Two Cheques were suspicious in the following respects: (1) the HK$300,000 dividend was not paid out by Stanley and D2 as alleged; (2) HK$128,333 could have been paid directly by Homeast to P rather than by two cheques; (3) the HK$300,000 dividend was paid out to D1 on 2 November 2001 and there is no valid reason why D1 took two months to issue the two cheques; (4) D1 could not provide any evidence that the HK$100,000 cheque was cleared; (5) as for the HK$28,333 cheque, there was insufficient funds in D1’s bank account when it was issued; and (6) the written note to explain the calculations and contributions amongst the Parties (“the Note”) was hand-written and a self-serving evidence created by Ds.
73. As to (1), I have already explained that I did not consider this a material discrepancy.
74. As to (2), as explained by D1 in cross-examination, the shortfall between Ds’ share of the dividends and their contribution to the Mortgage repayment, should be paid by D1 or else there would be a mixing with the funds of Homeast with Ds’ personal funds which would not be permissible.
75. As to (3), D1 had explained the reason why the Two Cheques were issued two months after the HK$300,000 was paid out. She explained that she first had to make the repayment of the Mortgage Loan which was done on 15 December 2001 to avoid penalty for early redemption and only then after doing the calculations issued the Two Cheques.
76. As to (4), given that P never denied receipt of the Two Cheques in her pleadings, there was no need for D1 to provide such evidence.
77. As to (5), it is neither here nor there that there was insufficient funds in D1’s account since it is clear from the documents that the cheque was cleared after overdraft charges were imposed.
78. As to (6), I see no reason to doubt the authenticity of the Note given on Ds’ evidence it was a contemporaneous document not created subsequently when these proceedings arose and this was not challenged in cross-examination by Mr Chong. Furthermore, D2 started working in Homeast only after the declaration of the dividends and the Two Cheques i.e. before the Parties’ relationship turned sour.
79. In all, I am satisfied that credible explanations have been given and there is no basis to cast doubt on this aspect of Ds’ case.
80. Lastly, it was submitted the inaccuracies in the accounts prepared by D1 affected her credibility. Given counsel agreed that there should be an order for account and inquiry and it is not an issue I have to decide, I will not have regard to this matter in my assessment of credibility. In any event, P’s challenge to the documents was not supported by any contemporaneous documents or records.
E3. D2
81. D2 also adopted his witness statements as evidence in chief. He was cross-examined by Mr Chong for about 2 hours. I found that he answered questions in a direct and straight-forward manner.
82. Mr Chong submitted that given his witness statement was almost identical to D1, D2’s evidence should be given no weight. Reliance was placed on Ngan In Leng v Chu Yuet Wah[2022] HKCFI 558 at §40 where Anthony Chan J explained:
“Mr Barlow submitted that witnesses who signed witness statements which merely replicated the version of events of a party to the litigation or of a primary witness should be treated with special caution by the court. Such replicated evidence should not be regarded as the witness’s own evidence. He simply sang in unison from the same song sheet and had jettisoned the opportunity to provide his evidence on the subject. In such circumstances, unless corroborated by contemporaneous documents, the ‘contributions’ of the minor singers in the choir carry no evidential weight.”
83. It is clear to be that in Ngan In Leng, the learned judge did not reject the witnesses’ evidence simply because their witness statements were almost identical to the defendant’s in that case. Before the quoted passage, the learned judge referred to the incredibility of Jenkin’s evidence in light of the contemporaneous document (§113), inconsistency with common sense (§113), inexplicable features of his evidence (§114) and the evasive manner of the answers in cross-examination (§115).
84. Similarly, in the present case, I would need to assess D2’s evidence in light of the contemporaneous documents, the inherent probabilities and how he answered questions under cross-examination.
85. Mr Chong also raised the following “credibility issues” in respect of D2’s evidence:
(1) In cross-examination, he agreed that as a director of Homeast he had the power to make decision. This was inconsistent with the pleaded case that D2 was just responsible for the execution of instructions given by P for the administration and management of Homeast; and
(2) According to the contemporaneous documentary record, the dividend of HK$300,000 was deposited into D1’s personal account not by Stanley and D2 but by Homeast.
86. Again I do not find that the above to have seriously dented D2’s credibility. Sub-paragraph (1) above is hardly material to any issues that I have to decide. As for sub-paragraph (2), as already mentioned, it is not a material discrepancy when there is no dispute at the relevant time, Stanley and D2 were the directors who approved the payment out as dividends.
87. I find that D2 was generally a credible and reliable witness.
E4. Overall Assessment
88. Overall, I would prefer the evidence of D1 and D2 over that of P in the case of inconsistency.
F. FINDINGS
89. Taking a holistic approach, I find that P has failed to discharge her burden of proof on a balance of probabilities that there was the Further Agreement and Common Intention.
90. Firstly, given there is no contemporaneous document in support of the Further Agreement and Common Intention, P’s case is based on her assertions only. As I have found for the reasons in the previous section that she is not a credible and reliable witness, there is no evidentiary support for P’s case.
91. Secondly, as mentioned above, there are aspects of the Further Agreement and Common Intention which are inherently incredible and defies common sense. Whilst it is not necessary for me to find so, I should indicate that Ds’ case is inherently more likely.
92. Thirdly, the existence of the Further Agreement and Common Intention is inconsistent with the undisputed facts and background including that D1 was the sole borrower under the Mortgage and P made no contributions to the monthly repayment and other expenses in relation to the Property all these years. It is also indisputable that Ds never asked P for any contribution. As for P’s alleged contribution to HK$36,000 into the Mortgage Account and HK$200,000 as repayment of the Mortgage, I am not satisfied that there were such contributions on the balance of probabilities. In respect of the HK$36,000, leaving aside that this was never P’s pleaded case, there is no contemporaneous documentary support that these sums were paid by her into the Mortgage Account. As for the HK$200,000, as already mentioned, the contemporaneous documents do not support her case. I have found there is no basis to challenge the authenticity of the Note as a contemporaneous document.
93. For completeness, if I had accepted P’s case on the Further Agreement and Common Intention, I would have found P acted to her detriment or significantly altered her position in reliance on that agreement or understanding by her contribution to the Down Payment and other expenses including repayment of the Mortgage.
94. Nonetheless, P’s case on constructive trust fails because I find that she has failed to discharge her burden of proof that there was a common intention between the Parties that she should own two-third of the beneficial interest of the Property. Therefore the beneficial interest follows the legal interest, i.e. P’s beneficial interest is one-third.
G. CONCLUSION AND DISPOSITION
95. Accordingly, P’s case on constructive trust fails and is dismissed. I will not grant the declarations sought by P.
96. As agreed by the Parties, I will order that there is to be a sale of the Property and for account and enquiries be taken in respect of all incomes and expenses in relation to the Property from 16 May 1997 up to the date of the sale of the Property. There is liberty to apply for further directions in relation to the sale of the Property and distribution of the proceeds of the sale, if necessary.
H. COSTS
97. I see no reason why costs should not follow the event. I will make a costs order nisi that P do pay Ds’ costs of this action (including all reserved costs) to be taxed, if not agreed, with certificate for counsel.
98. Unless there is any application to vary the above costs order nisi within 14 days from the handing down of this Judgment, the costs order nisi will be made absolute after expiry of the said 14 days.
| | ( G. Chow )
District Judge |
Mr Gilbert HW Chong, instructed by Gallant, for the plaintiff
Mr Chan Chung, instructed by Kwong & Lee, Solicitors, for the 1st and 2nd defendants