Lo Man Yau v. Chiu Sung Fai and Another

DCCJ 2516/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2516 OF 2013

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DECISION

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A.   INTRODUCTION

1.In a Judgment handed down on 14 February 2017 (“the Judgment”), I dismissed the plaintiff’s claim for possession of the property situated at Flat B7 and B8 on 3^rd Floor, Tung Lee Building, Nos 1C, 1D, 1E, 1F, 1G, 1H, 1J and 1K Water Street, Nos 1-15 On Ling Lane, Hong Kong (“the Property”) and mesne profits and granted a declaration that the 1^stdefendant is the beneficial owner of the Property to the extent of 30.77% under a resulting trust.

2.By a Summons filed on 13 March 2017, the plaintiff applied for leave to appeal to the Court of Appeal against the Judgment. 

3.Unless otherwise stated, in this Decision, I shall adopt the abbreviations used in the Judgment. 

B.   LEAVE TO APPEAL: APPLICABLE LEGAL PRINCIPLES

4.It is common ground that leave to appeal shall not be granted unless the Court is satisfied that (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard: section 63A(2) of the District Court Ordinance (Cap 336).  In the present case, the second limb is not relied upon and therefore the only issue before the Court is whether the plaintiff has satisfied the Court that the appeal has a reasonable prospect of success.

5.It is also common ground that a reasonable prospect of success involves the notion that the prospects of succeeding must be reasonable and therefore more than fanciful, without having to be probable: SMSE v KL [2009] 4 HKLRD 125, at para 17 per Le Pichon JA.

C.   APPLYING THE LAW TO THE FACTS OF THIS CASE

6.In the revised draft notice of appeal, the plaintiff advanced 7 grounds in support of his application for leave to appeal.  The proposed grounds can be broadly categorised as falling under the following two heads: (a) those relating to my finding on liability, and (b) those relating to my finding on quantum.  

7.Proposed grounds 1 to 3 relate to my finding on liability.  They state:-

“1. The learned Judge erred in finding (in §§62, 68, 78 & 79 of the Judgment) that the 1^st Defendant has 30.77% beneficial interest in the Property by way of resulting trust in that there was no or no sufficient evidence to prove that the payments by the 1^st Defendant were contributions to be purchase price of the Property. The learned Judge ought to have found that the payments by the 1^st Defendant, if any, were loans to South Sea Holdings Limited which had subsequently been repaid to the 1^st Defendant by way of cheques which the 1^st Defendant accepted.

2. The trial Judge erred in holding (in §§43 & 44 of the Judgment) that the 1^st Defendant; Chiu Sung Leung (“Sung Leung”) and Lam Ching Fun (“Madam Lam”) are truthful witnesses whereas the Plaintiff was a unsatisfactory witness and that ‘where the Plaintiff’s evidence conflicts with that of the defence witnesses, he prefers the latter’ (§44 of the Judgment) in that he failed to discharge his duty to adequately explain his reasoning in coming to the said conclusion …

3. The learned Judge erred in finding (in §55 of the Judgment) that the Plaintiff took the Property subject to the 1^st Defendant’s beneficial interest in the Property by way of resulting trust in that there was no or no sufficient evidence to prove that the Plaintiff had either actual or constructive notice of the 1^st Defendant’s alleged interest in the Property.”

8.Proposed grounds 1 to 3 seek to challenge my findings of fact that Sung Fai (the 1^st defendant) contributed a sum of $461,560 towards the purchase price of the Property (see paras 45 to 50 and 60 of the Judgment), that he was entitled to a 30.77% beneficial interest in the Property by virtue of a resulting trust (see para 62 of the Judgment) and that the plaintiff is fixed with constructive notice of the 1^st defendant’s beneficial interest in the Property (see paras 51 to 55 of the Judgment). 

9.In relation to appeals against findings of fact, I bear in mind the well-established principle that the question for the Court of Appeal was whether, even though it did not have the advantages enjoyed by the trial judge who received the evidence first hand, it was nevertheless satisfied that his conclusion on the facts was plainly wrong: Ting Kwok Keung v Tam Dick Yuen & Others (2002) 5 HKCFAR 336.  I am not satisfied that the plaintiff has discharged that burden.

10.I now deal with each of proposed grounds 1 to 3. 

11.Proposed ground 1 can be broken down into the following two contentions: (a) There was no or no sufficient evidence to prove that the payments by the 1^st defendant were contributions to the purchase price of the Property; and (b) The payments by the 1^st defendant were loans to South Sea which has subsequently been repaid to the 1^st defendant by way of cheques which the 1^st defendant accepted.

12.With respect, none of the contentions is reasonably arguable. 

13.With respect to para 11(a), the evidence in support of the 1^st defendant’s case that he contributed to the purchase price of the Property is overwhelming and uncontradicted.  Such evidence has been summarised in paras 45 to 50 of the Judgment.  The evidence consists of the 10 cheques drawn on the Joint Account at around the time the Property was purchased, the Police Statements in which the 1^st defendant stated that the sum of $558,534 was paid from the Joint Account towards the purchase of the Property, the one-page 12.05.2014 PSPA on which Daniel Ng wrote down the 1^st Defendant’s payments towards the purchase of the Property, and Daniel Ng’s admission in the meeting held on 25 September 2009 that the payment was the 1^st defendant’s investment in the Property.

14.With respect to para 11(b), as I found in para 49 of the Judgment, there is no evidential basis for the plaintiff’s submission at closing that the payments by the 1^st defendant were not contributions towards the purchase price of the Property but were loans to South Sea which had been repaid.  As I also found in that paragraph:-

“As fairly accepted by Mr Shum, it was not suggested to Sung Fai (i.e., the 1^st defendant) in cross-examination that the sum was a loan.”

15.At the hearing on 13 June 2017, Mr Shum accepted that the above is a correct summary of what occurred at the trial, but he submitted that it was not necessary for him to put his case to the 1^st defendant because the burden is on the 1^st defendant to prove his case and the plaintiff has no positive case to put to him.  With respect, I do not agree.  As was held by the Court of Appeal in Aspial Investment Ltd v Mayer Corp Development International Ltd [2013] 3 HKLRD 276 at 299 per Barma JA, important aspects of a party’s case should be specifically put to the witnesses on whose evidence they may impact.  Phipson on Evidence, 18^th Ed., also states at para 12-12 that:-

“In general a party is required to challenge in cross-examination the evidence of any witness of the opposing party if he wishes to submit to the court that the evidence should not be accepted on that point. The rule applies in civil cases as it does in criminal.

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This rule serves the important function of giving the witness the opportunity of explaining any contradiction or alleged problem with his evidence.  If a party has decided not to cross-examine on a particular important point, he will be in difficulty in submitting that the evidence should be rejected.”

16.In the present case, I failed to see how the plaintiff could submit in closing that the relevant sum was not the 1^st defendant’s contribution to the purchase price of the Property but was a loan from the 1^st defendant to South Sea which had been repaid, when the plaintiff had failed to cross-examine the 1^st defendant on the point at trial.  In any event, as I found in para 49 of the Judgment, there is no evidential basis for Mr Shum’s submission that the relevant sum was a loan.  As there is no evidential basis for Mr Shum’s submission that the relevant sum was a loan, it follows that there is no question that the relevant sum has been repaid.

17.I do not think that ground 2 would have any reasonable prospects of success.

18.In finding that Sung Fai, Sung Leung and Madam Lam are truthful witnesses, I have adopted the test laid down by DHCJ Thomas Au (as he then was) in Lee Fu Wing v Yan Po Ting Paul [2009] 5 HKLRD 513, which was approved by the Court of Appeal in Ageas Insurance Company (Asia) v Lam Hau Wah Unneo, CACV 65/2014 (unreported, 9 January 2015) at para 38 per Kwan JA.  I have also paid due regard to what the Court of Appeal said in Esquire (Electronics) Ltd v Hong Kong & Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at para 158 per Stock JA (as he then was), that where there exists a wealth of contemporaneous documents, credibility is to be tested by reference most particularly to them.  See paras 39 to 44 of the Judgment.  I cannot see how it can be contended that this approach is wrong.

19.As was held in World Food Fair Ltd v Hong Kong Island Development Ltd (2006) 9 HKCFAR 735, at §37 at pp 748C-D per Ribeiro PJ:-

“…the role of a Judge is precisely to decide, as a matter of primary fact, whether to accept or reject the evidence of a witness.”

I cannot see how it can be said that I was wrong in holding that Sung Fai, Sung Leung and Madam Lam are truthful witnesses whereas the plaintiff is an unsatisfactory witness or that where the plaintiff’s evidence conflicts with that of the defence witnesses, I prefer the latter.

20.Furthermore, in stating that “where the plaintiff’s evidence conflicts with that of the defence witnesses, I prefer the latter”, I have taken into account the fact that in the present case, there was not much direct conflict between the evidence of the plaintiff’s witnesses and the defence witnesses: the purchase of the Property by South Sea and the 1^st defendant’s contribution towards the purchase price of the Property in 2004 is not something which the plaintiff has direct personal knowledge, and similarly the plaintiff’s purchase of the Property from South Sea (through Daniel Ng) in 2012 is not something which the defence witnesses have direct personal knowledge. The limited area in which the evidence of the plaintiff’s witnesses and the defence witnesses can be said to be in conflict is whether Mr Lo is fixed with constructive knowledge of the 1^st defendant’s beneficial interest in the property.

21.In respect of this limited area, I have in para 51 of the Judgment listed out 6 factors to explain why I found that Mr Lo was fixed with constructive notice of Sung Fai’s beneficial interest in the Property.  In the present application, whether in the revised draft notice of appeal or the skeleton submissions, the plaintiff does not seek to challenge any of the 6 factors set out in para 51 of the Judgment.  In these circumstances, I fail to see how proposed ground 2 or the “duty to explain” has any relevance to any intended appeal.

22.Proposed ground 3 refers to para 55 of the Judgment, but it is advanced without any reference to para 51 of the Judgment.  As noted in para 21 above, in the present application, whether in the revised draft notice of appeal or the skeleton submissions, the plaintiff does not seek to challenge any of the 6 factors set out in para 51 of the Judgment.  In my view, without any challenge to para 51 of the Judgment (which the plaintiff does not seek to do in this application), proposed ground 3 is plainly unarguable. 

23.At the hearing on 13 June 2017, I asked Mr Shum what the plaintiff’s stance is on the findings set out in para.51 of the Judgment.  Surprisingly, Mr Shum said that he made no submissions on those findings.  However, he informed the Court that the plaintiff includes proposed ground 3 in the draft revised notice of appeal because the plaintiff wants to preserve his position if this case goes further.  With respect, I do not think that is a proper way to approach an application for leave to appeal. Either the plaintiff has a ground of appeal or he has not.  If he has one, he should put it forward for the trial judge to consider when he applies to the trial judge for leave to appeal.  The plaintiff’s approach is contrary to the cards-on-the-table approach in modern litigation.

24.Proposed grounds 4 to 6 seek to challenge my findings in relation to quantum.  They state:-

“4. Further or alternatively, the learned Judge erred in finding (in §§60 & 62 of the Judgment) that the numerator of the equation to calculate the 1^st Defendant’s percentage of shares of and in the Property by way of resulting trust, i.e. the 1^st Defendant’s contribution to the acquisition of the Property, was HK$461,560 (i.e. HK$450,000 deposits and balance of purchase price + HK$11,560 stamp duty in §60 of the Judgment). The above calculation is contradicted by the undisputed fact that a while the purchase price of the Property was HK$1.5 million, a mortgage loan was applied for and obtained from DBS Bank (Hong Kong) Limited such that at the most the 1^st Defendant need to and would have (which is denied) contributed HK$300,000 towards the acquisition of the Property.

5. The learned Judge erred in finding (in §§59 & 62 of the Judgment) that the denominator of the equation to calculate the 1^st Defendant’s percentage of his beneficial interest in the Property was HK$1.5 million only. The learned Judge erred in failing to add to the said denominator interests of the said mortgage loan which were agreed and became accrued liability at the time of the completion of the acquisition of the Property, which was direct contribution to the acquisition price of the Property.

6. The learned Judge erred in finding (in §63 of the Judgment) that the 1^st Defendant was authorized by his brother, Chiu Sung Leung to make the counterclaim for and on the latter’s behalf and that the 1^st Defendant would hold half of the resulting trust in turn on trust for Chiu Sung Leung when such a case was not pleaded by the 1^st Defendant.  By reason of the evidence of the 1^st Defendant to the effect that only half of the money he contributed to the acquisition price of the Property belonged to the 1^st Defendant, the learned Judge should have found that the 1^st Defendant is at the most entitled to a resulting trust of the Property with reference to the said half of the money contributed by the 1^st Defendant.”

25.With respect, none of the above proposed grounds would have any reasonable prospect of success. 

26.Under proposed ground 4, the plaintiff seeks to argue that “at the most” the 1^st defendant need to and would have (which the plaintiff denies) contributed $300,000 towards the acquisition of the Property because the mortgage loan was $1.2 million.  This is not a point which was taken by the plaintiff at the trial.  After the evidence was completed on 10 May 2016, the parties filed their respective closing submissions and I heard oral closing submissions on 20 June 2016 relating to liability.  At that hearing, I specifically directed the parties to file written closing submissions on quantum should I found in favour of the 1^st defendant on liability.  In the plaintiff’s supplemental closing submissions on quantum dated 8 August 2016, no submission on this issue was ever made by Mr Shum.  In the oral submissions on quantum heard by me on 11 August 2016, Mr Shum also made no submission on the point.

27.I fail to see why the plaintiff should be allowed to raise this issue for the first time on appeal when he had failed to make any submission on it at the trial.  It would not be appropriate for me to speculate why no submission was made on this issue by the plaintiff at the trial, but I note that on the 1^st defendant’s unchallenged evidence, the mortgage to DBS to finance the purchase of the Property by South Sea in 2004 was solely handled by Daniel Ng.  In the premises, it is not correct for the plaintiff to argue that because the mortgage loan was $1.2 million, the whole of the $1.2 million would have been paid by Daniel Ng towards the purchase price of the Property.  There is simply no evidence that Daniel Ng had in fact done so.

28.I am of the view that proposed ground 5 is not reasonably arguable. 

29.Proposed ground 5 refers to paras 59 and 62 of the Judgment, but is advanced without any reference to para 58 of the Judgment, where the relevant legal principles are set out.  In particular, as I said in para 58(c) of the Judgment (which the plaintiff does not seek to challenge), Mr Shum accepted that mortgage repayments at later dates do not constitute a direct contribution to the purchase price.  The plaintiff’s concession can be found in para 6 of the plaintiff’s supplemental submissions on quantum, which is also referred to in para 58 of the Judgment.

30.At the hearing on 13 June 2017, Mr Shum sought to argue that although mortgage repayments at later dates do not constitute a direct contribution to the purchase price, for a property purchased with a mortgage, not only the principal borrowed under the mortgage, but also the interest payable under the mortgage, should be considered as the mortgagor’s contribution to the purchase price so that the denominator of the equation or the purchase price (see paras 56 to 62 of the Judgment) would include both the principal borrowed and the interest payable by the mortgagor under the mortgage.  This means that for a property purchased with a mortgage, the purchase price would not be the one stated in the relevant agreement for sale and purchase or the relevant assignment but would be much higher because the interest payable by the mortgagor under the mortgage would have to be added thereto. 

31.Mr Shum sought to derive support for this contention from Calverley v Green (184) 155 CLR 244 (discussed in para 58(a) of the Judgment) at pp 262-263, but it is clear that those passages do not support his contention.  In fact, the relevant principle derived from that case has been correctly summarised in holding no.1 of the headnote in the following terms:-

“… the fact that the balance of price was raised by a mortgage under which both parties were liable to the mortgagee constituted a contribution by the woman to the price and the arrangement between them that the man would make the repayments did not establish that he alone provided the whole of the purchase price”,

but the above in no way supports Mr Shum’s submission. 

32.As Lewin on Trusts (19^th Ed) states at para 9-086:-

“…Where a resulting trust analysis applies, the beneficial interest crystallises at the time of acquisition, even though it is not ascertained until later. The value of the property for this purpose must be taken at the date of purchase, not when one party decides that they wish for the property to be sold.”

In my view, the “value of the property” is clearly a reference to the purchase price of the property, which is a constant and is in no way dependent upon the interest payable or the interest rate at the time the mortgage was taken out. I do not see how the “value of the property” at the date of purchase would fluctuate depending on the interest payable or the interest rate at the time the mortgage was taken out. 

33.Finally, Mr Shum submitted that as I have found that stamp duty at the sum of $11,560 paid for the purchase of the Property should be included in the numerator, the purchase price of the Property should also include the said sum so that it is not $1.5 million but should be at least $1,511,560.  This point is not even raised in the revised draft notice of appeal.  When this was pointed out to Mr Shum at the hearing on 13 June 2017, he said he would seek leave to amend the revised draft notice of appeal.  In my view, there is no merit to this contention because there is a clear distinction between the costs incurred for the purchase of a property and the purchase price.  The fact that the sum of $11,560 should be included in the numerator does not mean that it should also be added to the denominator or the purchase price.

34.As to proposed ground 6, I have specifically dealt with the plaintiff’s submission on the point in para.63 of the Judgment.  Proposed ground 6 simply repeats the plaintiff’s submissions at the trial.  I fail to see how it can be suggested that para 63 of the Judgment is wrong.

35.Proposed ground 7 relates to the costs order I made in para 80 of the Judgment and it states:-

“The learned Judge wrongly exercised his discretion to award costs of the Action to the 1^st Defendant and erred to dismiss the Plaintiff’s application for variation of costs order nisi when the 1^st Defendant lost two out of three issues in the case and the Plaintiff had won the other two issues which add substantially to the time and costs of the whole action. The learned Judge ought to have exercised his discretion on issue based consideration and awarded the Plaintiff one third of the costs of the claim and counterclaim.”

36.I have dealt with this ground in the Decision on Costs dated 12 May 2017.  As fairly accepted by Mr Shum, my decision on costs is an exercise of my discretion.  As such, it is only subject to challenge on appeal on the normal limited grounds applicable to an appeal against such exercise.^[1] For the reasons stated in the Decision on Costs, I am of the view that proposed ground 7 has no reasonable prospect of success.

37.To conclude, none of the grounds raised by the plaintiff has any reasonable prospect of success.  The plaintiff’s summons is dismissed with a costs order nisi that the 1^st defendant’s costs be paid by the plaintiff to be taxed if not agreed with certificate of counsel and that the 1^st defendant’s own costs are to be taxed in accordance with the Legal Aid Regulations.

38.Last but not least, I thank counsel for their assistance.

Mr Erik Shum and Mr Victor C F Cheung, instructed by Simon C W Yung & Co, for the plaintiff

Ms Jennifer Tsui, instructed by Cheung & Choy, assigned by the Director of Legal Aid, for the 1^st defendant

The 2^nd defendant was not represented and did not appear