Fung Sau Mui Janne v. Fung Wing Tong

HCMP 798/2016

[2018] HKCFI 2247

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 798 OF 2016

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Before: Deputy High Court Judge William Wong SC in Court

Dates of Hearing: 18, 19 and 21 September 2018

Date of Judgment: 3 October 2018

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JUDGMENT

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BACKGROUND

1.The Plaintiff, a registered legal owner of Workshop 1, Ground Floor, Harry Industrial Building, Nos 49 – 51 Au Pui Wan Street, Fo Tan, Shatin, New Territories (“the Property”), applied by Originating Summons dated 5 April 2016, pursuant to section 6 of the Partition Ordinance, Cap 352 for the Property to be sold by an order of the court.  The Originating Summons was directed to be continued as if the same had been begun by writ on 13 June 2016.

2.The Plaintiff filed her Statement of Claim on 20 August 2016.  Her case is simple and straightforward.  She and the Defendant, her brother, signed an agreement for sale and purchase of the Property at the price of HK$1,002,000 on 23 October 1985.  They became the registered owners, qua joint tenants, by virtue of an assignment dated 15 May 1986, which was registered in the Land Registry in respect of the Property by Memorial No ST329664.

3.The Plaintiff is the eldest sister of the Defendant and the first child in the family.  The Plaintiff’s father, the late Mr Fung Siu (the “Father”) and mother, Lau Sze Mue (the “Mother”), have the following children:

(1) the Plaintiff born in 1957;

(2) the Defendant born in 1959;

(3) Fung Sau Chun born in 1963;

(4) Fung Sau Fun born in 1965;

(5) Fung Sau Hing born in 1966; and

(6) Fung Wing Fai Kent (the “Brother”) born in 1969.

4.The Property was purchased with the financial assistance of the Father and mortgage from a bank in 1985.  Mortgage payments were paid off in 1998.  There is a factual dispute as to who paid off the mortgage payments, viz, whether it was the Father or the Defendant.

5.The Property is presently free from any mortgage or legal charge but is subject to the following pending registration documents:

(1)   a loan agreement dated 17 December 2012 in favour of SHK Finance Limited and registered by Memorial No 13010901290077. This loan had been fully repaid.

(2)   a loan agreement dated 19 September 2013 in favour of SHK Finance Limited and registered by Memorial No 130100400820030, wherein SHK Finance Limited granted a loan of HK$480,000 to the Plaintiff and her daughter, Leung Po Yi, jointly and severally as borrowers.  This loan is still outstanding.

6.The Property is now being occupied by the Defendant for the operation of the business under the name of Hopewin Wooden Box Manufacturing Company (“Hopewin”).

7.In his Defence and Counterclaim dated 19 September 2016, the Defendant pleaded three separate defences to the Plaintiff’s claims. First, in paragraphs 6 – 10 of the Defence and Counterclaim, it is pleaded that:

“ 6. As regards the legal title of the Property, the Defendant further avers that, when and upon the acquisition of the Property:-

(a) Father only intended and decided to unconditionally give the Defendant 50% beneficial interests in the Property, whereas the Father would reserve and keep the remaining 50% beneficial interests;

(b) Owing to his old age and avoidance of inconvenience, he wished to dispense with all formalities in holding the legal title and also the future transfer of his interests to another person. Father decided to, after discussion with Mother, nominee another child as his bare trustee holding his 50% beneficial interests for his behalf and upon his directions. Brother, aged 16 or 17, was too young to hold any legal titlein, and to sign any documents about real property in 1986;

(c) After discussion amongst the Plaintiff, the Defendant and Father, Father intended to nominate the Plaintiff to act as his bare trustee, because she, the eldest child with more social experience, was the suitable person to do so. The Defendant did not have objections, as Father’s wishes were followed by children;

(d) Accordingly, it was the common intention, understanding and agreement amongst the Plaintiff, the Defendant and Father that the Plaintiff should become a joint tenant of the Property with the Defendant and hold the bare legal title thereof. At all times, the Plaintiff shall not and in fact didnot acquire or possess any beneficial interests whatsoever in the Property and shall comply with all directions and instructions given by Father from time to time. Further, they understood that the Defendant would exclusively use and enjoy the Property for the Hopewin business (‘the Common Intention’)

(e) Father represented to the Defendant that Father’s 50% beneficial interests in the Property should be transferred to Defendant via the Plaintiff in due course if the Defendant subsists in being a good son who is able to fully repay the Mortgage by his own, and should keep on working hard in the Hopewin business to the satisfaction of Father (‘Father’s Representation’)

7. Pursuant to the Common Intention:-

(a) The Property was acquired in the joint legal names of the Plaintiff and the Defendant but in fact the Plaintiff never had any beneficial interests thereof. Instead, Father and the Defendant each held 50% beneficial interests upon the acquisition of the Property and this beneficial ownership remain intact until the late 1990s or early 2000s. (as will be further particularized below).

(b) Only the Defendant and his authorized agents and servants are entitled to use and occupy the Property, which is an industrial unit where the Defendant carried on his Hopewin business from 1986 to the time being.

(c) The Plaintiff has never been entitled to use and occupy the Property. In fact, the Plaintiff never asked for using or occupying the Property, nor did she ever assert any rights therein, save and except the recent matters which will be pleaded hereinafter in paragraph 11(c);

(d) As the Plaintiff had no interests whatsoever in the Property,she did not pay, and was never asked or required to pay anyexpenses, government rates and rents, outgoings, and any repayment of the Mortgage in respect of the Property;

(e) Likewise, the Plaintiff never received any benefits or rental income from the Property.The Plaintiffs has never been entitled to and did not ask for any rental income from the Defendant who exclusively using and occupying the Property all along, save and except the recent matters which will be pleaded hereinafter in paragraph 11(c).

8. Relying upon Father’s Representation and out of his own commercial interests:-

(a) The Defendant has been working very hard in his Hopewin business at the Property since 1986 with the assistance of Father who provided helps to the Defendant from time to time;

(b) The Defendant was able to fully repay all repayment of the Mortgage which was fully discharged in 1998, as evidenced by the Receipt on Discharge of a Charge dated 13 May 1998;

(c) The Defendant’s performance was up to the satisfaction of Father in about late 1990s or 2000s.

9. Father agreed to honour the Father’s Representation in about late 1990s or 2000s. As a result, Father intended and decidedto further unconditionally transfer his 50% beneficial interests in the Property to the Defendant via the Plaintiff. For the purpose of this action, the Defendant avers that it was the common intention, understanding and agreement between the Father and the Defendant in around 2000 that Father’s beneficial interests should be forthwith transferred to, and so become immediately belonging to the Defendant absolutely and that the Defendant should become the sole beneficial owner of the Property. (“Father’s Intention”)

10. Relying upon Father’s Intention, the Defendant has, since about 2000, regarded the Property as his own private property whereas Father already had no beneficial interests thereof. Upon this basis, the Defendant kept and still keeps on using and occupying exclusively the Property, as he always did before.” (Emphasis added.)

8.The above is the plead of a common intention constructive trust by the Defendant, though this Court has, on day one of the trial, pointed out to Mr Wong, counsel for the Defendant, that whilst the legal effects are pleaded, the material facts in relation to the discussion as pleaded in paragraph 6(c) are not pleaded.

9.Secondly, the Defendant pleaded that since about 2000, the Defendant has been exclusively and adversely possessed the Property to the exclusion of the whole world including the Plaintiff.  The Defendant pleaded the year 2000 because “having fully repaid the Mortgage in 1998 and having entirely inherited Father’s business and clients in around 2000, the Defendant regarded the Property as part of his private assets in reliance of the Father’s Representation, whereas Father’s role and interests (if any) at the Property ceased in the Defendant’s eyes.”  (Paragraph 17(a) of the Defence and Counterclaim).  This is the Defendant’s adverse possession defence.

10.Thirdly, the Defendant has advanced a second alternative case.  In paragraph 18 of the Defence and Counterclaim, it is pleaded that:

“ Further or alternatively, the Defendant disputes, as his 2^nd alternative case of this Defence, the shares of the Plaintiff in the Property in any event, assuming that this issue requires determination at trial. The Defendant avers that the Plaintiff only has 17.564% beneficial interests in the Property, on the following grounds:-

(a) Father only used his financial resources to pay HK$352,000 being part of the purchase price, whereas the remaining balance of HK$650,000 was financed by the Mortgage. Father did not repay the Mortgage which was redeemed by the Defendant alone by monthly installments over 12 years;

(b)  Even if (which is denied) Father did intend to give a gift of 50% interests in the Property in 1985 or 1986 to the Plaintiff, Father was only able to and in fact did give 50% of his initial payment of HK$352,000, namely, HK$176,000 as the gift. In other words, the gift made by Father was no more than 17.564% beneficial interests in the Property to the Plaintiff. (HK$176,000/HK$1,002,000).”

(“The Resulting Trust Defence”)

11.Accordingly, the Defendant counterclaims a declaration that he is the 100% beneficial owner of the Property and an order for the Plaintiff to transfer her legal title of the Property to him.

APPROACH TO EVALUATION OF EVIDENCE  

12.This case basically turns on whose version of events are to be believed.  There are no contemporaneous documents evidencing the pleaded common intention amongst the Plaintiff, the Father and the Defendant.  Similarly, there is no documentary evidence about the Father’sRepresentation.  The Mother and other siblings chose not to give evidence in this case.

13.Lord Bingham in his book The Business of Judging at pp 5 – 6 insightfully said:

“ 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 appearsto be telling the truth as he now believes it to be. Credibilitycovers 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 rightthat 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 utmostimportance. 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.” (Emphasis added).

14.InLee Fu Wing v Yan Paul Po Ting [2009] 5 HKLRD 513, Deputy High Court Judge Au (as he then was) at 524 helpfully set out the well-established approach as to assessment of witnesses:

(1) whether the party’s case is inherently plausible or implausible; 

(2) whether the party’s case is, in a material way, contradicted byother evidence (documentary or otherwise) which is undisputed or indisputable;

(3) where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests.  This is relevant to the assessment of his overall credibility; and

(4) the demeanour of the witnesses.

15.I find the above guidelines helpful and will apply the same in assessing the credibility of the Plaintiff and the Defendant’s diametrically different versions of events.

COMMON INTENTION CONSTRUCTION TRUST

16.It is common ground that the Defendant bears the burden of proving that the Plaintiff albeit a registered owner of the Property is nevertheless not a beneficial owner of the same.  In Erwiana Sulistyaningsihv Tsui Yun Ban Barry [2018] 1 HKLRD 487, Recorder Stewart Wong SC at paragraphs 28 – 29 said:

“ 28. First, on the question of the beneficial ownership of the Property, it is a matter of the parties’ (namely the defendants as the joint registered owners) shared intention, actual, inferred or imputed, with respect to the Property in the light of their whole course of conduct in relation to it. But the starting point is that where there is joint legal ownership there is joint beneficial ownership, and the burden is on the party asserting otherwise (the 2^nd defendant in this case) to show otherwise …

29. In other words, unless there is evidence on which the Court makes a finding of contrary intention (actual, inferred or imputed), and the burden is high, equity follows the law and the beneficial ownership follows the legal ownership (Stack v Dowden at [54], per Baroness Hale). As stated in Snell’s Equity(33^rd ed., 2015) at para.24-049:

Where an express trust has not been declared, then the starting point is that equity follows the law, and the beneficial ownership of the property is held in the same way as the registered legal estate in the property.  If the property is registered in the name of one party only, then they will be presumed to be the sole beneficial owner.  If it is registered jointly in the names of both parties, then it is presumed that they hold for themselves as beneficial joint tenants.  This will be the case even where one party has made no financial contribution at all to purchasing the property.”

The Defendant’s own evidence

17.It is of critical importance that the Defendant when being questioned about his evidence on the Common Intention as set out in paragraph 19 of his witness statement admitted that there were no discussion amongst the Father, the Plaintiff and himself about the distribution of beneficial ownership of the Property at the time of the acquisition of the Property.  His evidence was that he never thought about shares of property rights prior to 2007.

18.The Defendant also admitted that the Father never expressly told him that the Father’s business would belong to the Defendant from 1985 onwards.  There were never any express discussion between him and the Father to the effect that the Father would gift him 100% beneficialownership of the Property if he had performed up to the standard of a good son. His evidence was that between father and son, they never expressly discussed things like the ownership of property or business.

19.The above admissions are central to the factual disputes in this case.  As I pointed out on day one of the trial, there are no material facts pleaded in relation to the discussion as pleaded in paragraph 6(c) of the Defence and Counterclaim.  There are no particulars as to when, where, between whom and what precisely were discussed during the pleaded discussion.  As the evidence unfolded during trial, in fact there was simply no such discussion at all amongst the parties, contrary to the Defendant’s pleaded case to which he signed a statement of truth.

20.In the circumstances, the only inevitable conclusion is that the Defendant fails to discharge his burden of proof that “[a]fter discussion amongst the Plaintiff, the Defendant and Father, Father intended to nominatethe Plaintiff to act as his bare trustee, because she, the eldest child with more social experience, was the suitable person to do so.  The Defendant did not have objection, as the Father’s wishes were followed by children.”

21.Mr Hui, for the Plaintiff submitted that the alleged Common Intention is actually a complicated plan requiring a lot of thought and planning.  It is impossible that the Defendant could have guessed that such was the Father’s true intention in 1985 without a direct and express conversion amongst the Plaintiff, the Defendant and the Father.  I agree.

22.Similarly, absence any discussion, there could not be any representation from the Father to which the Defendant could rely on.  Accordingly, the Defendant also fails to prove that “Father represented tothe Defendant that Father’s 50% beneficial interests in the Property shouldbe transferred to Defendant via the Plaintiff in due course if the Defendant subsists in being a good son who is able to fully repay the Mortgage by his own, and should keep on working hard in the Hopewin business to the satisfaction of Father (‘Father’s Representation’).”

23.There was simply no such representation from the Father.  The Defendant’s own evidence is that between father and son, they would not discuss such matter.

24.The Defendant also admitted that there was no discussion between him and the Father in about late 1990s or 2000s about the Property.  According to the Defendant, the first time they ever discussed about the Property was in 2007.  The Defendant said that there was an episode in 2007 where the Father allegedly demanded the Plaintiff to transfer the legal title of the Property to the Defendant.  The Defendant said that the Father even suggested the Defendant to pay the Plaintiff some tens of thousands of dollars as consideration.  Not only that these allegations were not stated in the Defendant’s witness statement, but importantly it fails to prove the Father’s Intention as pleaded in paragraph 9 of the Defence and Counterclaim.  There was simply no agreement of the Father in about late 1990s or 2000s to unconditionally transfer his 50% beneficial interests in the Property to the Defendant through the Plaintiff as pleaded and alleged.

25.Indeed, if there were demands from the Father, it is difficult first to see how and why the Plaintiff would not follow as it is common ground that the children always followed the Father’s directions. More importantly, it is surprising that the Defendant had not personally demanded for the transfer of the legal title given that the 100% beneficial ownership of the Property was so important to him at the material time.

26.In the circumstances, the Defendant fails to prove the Common Intention, the Father’s Representation and the Father’s Intention which are critical to his claim for a 100% beneficial ownership in the Property.

27.Mr Hui, for the Plaintiff, also took the point that the Defendantdid not directly answer the question of whether he knew about the Father’salleged “good son” plan back in 1985.  At one point, the Defendant seemed to be suggesting that the “good son” concept only dawned on him in 2007 when the Father allegedly demanded the Plaintiff to transfer the legal title of the Property.  At another point, the Defendant sought to stress that he never thought about property rights in the Property as he only thought about helping the Father to continue the Father’s business.  It was only in 2007 that he started to look into it, as he thought that comparatively speaking he was a good son then.

28.Mr Wong, for the Defendant invited this Court to look into the overall circumstances, the conduct and the character of the Father to infer a common intention.  The Defendant’s case is that it is unlikely that as the Father purchased the Property for his business purposes, he would have gifted 50% of the beneficial interest of the Property to her daughter, the Plaintiff in 1985.  However, first, that is not the Defendant’s pleaded case.  Secondly, the same consideration could be applied to the Defendant as well.  It could also be said there was no reason why the Father would have gifted 50% of the beneficial ownership of the Property to the Defendant who only joined the Father’s business in 1985 and there was no guarantee that the Defendant would be a “good son” in 1985.

29.In view of the above evidence, in particular, the admissions by the Defendant during cross-examination, this Court has no difficulties in ruling that the Defendant has failed to prove his case of a common intention construction trust as pleaded.  

Inconsistency with contemporaneous documents

30.It is also of great importance that the Defendant’s version of events of what happened in 2007 is directly contradicted by his own Form Estatements.  The Defendant underwent a divorce proceeding with his wife, Pun Yuet Ha Daisy in 2007 under FCMC 1491/2007.  In those proceedings, he filed a Form E financial statement.  When questioned, the Defendant confirmed that he knew the importance of accuracy in filling in that statement.  He knew that he had a duty to the court to give a full, frank and clear disclosure of all his financial assets and if he were found to have been deliberately untruthful, criminal proceedings for perjury might be taken against him.

31.In item 2.2 of the Form E to which he filled in, in respect of the Property, he ticked the box that the Property was jointly owned.  He stated his share of the ownership or beneficial interest to be 50%. The name of the co-owner was stated to be Fung Sau Mui Janne, the Plaintiff. The estimated market value of the Property was stated at HK$5,000,000 and the Defendant stated that he had a net value of HK$2,500,000.

32.The above contemporary document directly contradicts with the Defendant’s version of events in 2007.  When being questioned, the Defendant attempted to shift the blame to his then divorce lawyers.  The Defendant said that the information in Form E as set out in paragraph 31 above were filled in by his divorce lawyers who obtained the information from their own research, including records from Lands Registry, without confirming the accuracy with him.  I do not find the Defendant’s evidence on this credible at all.  It is very unusual and improbable for his divorce lawyers not to have gone through the Form E with him and had his confirmation before filing the same.  I also find it unbelievable that the Defendant’s divorce lawyers would come up with a figure of HK$5,000,000 without confirming the same with the Defendant.  It must be remembered that Form E is an important document about distribution of assets.

33.In 2008, the Defendant had another divorce proceedings with his wife under FCMC 4613/2008.  Again he filled in another Form E.  In relation to the Property, he once again confirmed that he co-owned the Property with the Plaintiff and he only had 50% of the ownership or beneficial interest in the Property.  He estimated that his half share of the Property worth HK$2,500,000.

34.In this 2008 Form E, he also provided information in relation to down payment (HK$500,000), mortgage charge (HK$502,000) and otherexpenses (HK$65,000).  It was pointed out to him that it is impossible for his divorce lawyers to obtain such information from public records and he must have supplied the same to them and also confirmed that the content of his Form E to be correct before filing the same.  The Defendant had no direct answer.  Indeed, at one stage, the Defendant suggested that it was the wife who supplied the information and his lawyers just relied on it.  I do not find this explanation credible at all.  In fact, the Defendant’s explanations in relation to these two Form E financial statements seriously affected this Court’s assessment of his credibility.

35.I am of the view that the two Form E financial statements are the most important and reliable contemporaneous documentary evidence in the present case:

(1) The two Form E financial statements were signed and sworn by the Defendant in legal proceedings, with legal advice, under the warning of perjury and other penal consequences.

(2) They were signed well before the disputes between the Plaintiff and the Defendant arose.  At the material time, the Defendant had no motive in those Form E financial statements to confirm anything to suit his purposes in this action.

36.I agree with Mr Hui’s submission that the Defendant could say nothing to gainsay his admission twice in these Form E financial statements that he is only a 50% beneficial owner of the Property and the other co-owner is the Plaintiff.

37.The Defendant’s explanation that his then divorce lawyers did not discuss or ask him for information concerning the Property before filling the said Forms is unbelievable.  I found that the Defendant’s lawyers took instructions from the Defendant and was only able to fill in the details about the Property with the Defendant’s inputs, especially in the 2008 Form E financial statements containing details about the down payment, mortgage payments and other expenses.

38.The date of these Form E financial statements also more or less coincides with the Defendant’s evidence that he did not care too much about the property rights in the Property before 2007.  Hence, from the documentary evidence, at least up to the date of these Form E financial statements, the Defendant positively confirmed that the Plaintiff was the 50% legal and beneficial owner of the Property.  This evidence goes against the Defendant’s case of the Common Intention in 1985 and the Father’s Intention in late 1990s or early 2000s.

Two loan agreements

39.It is also an agreed and incontrovertible fact that the Plaintiff had used the Property to raise two loans and created two legal charges overthe Property.  A first loan agreement was entered with SHK Finance Limited and a legal charge in favour of SHK Finance Limited was registered by Memorial No 13010901290077.  This loan was subsequently fully repaid through a second loan agreement dated 19 September 2013.

40.The second loan agreement was also with SHK Finance Limited and a legal charge was also granted in its favour and registered by Memorial No 130100400820030, wherein SHK Finance Limited granted a loan of HK$480,000.00 to the Plaintiff and her daughter, Leung Po Yi jointly and severally, as borrowers.

41.The above conduct sits well with the Plaintiff’s position that she is a legal owner and a 50% beneficial owner of the Property.  There is no contemporaneous document to show that the Defendant had objected to the same or had taken action to object to the same.  If indeed the Property is 100% beneficially owned by the Defendant as alleged, it is difficult to see why the Defendant did not take any action to vacate the registration of the said legal charge or at least inform SHK Finance Limited that the Plaintiff had no beneficial interest in the Property.

42.The Defendant merely said in paragraph 26 of his witness statement that “[w]ithout my knowledge and consent, the Plaintiff made use of her mere legal owner of the Property to borrow money on two different occasions from a money lender and that the Property was charged as security for the loans.  The loans agreements were dated 17^th December 2012 and 19^thSeptember 2013 respectively.  I never gave consents to such loans which are made without my authority at all.  Most importantly, the Plaintiff as a bare trustee has no rights to use the Property as security for any loans for her own benefits.”

43.The absence of any documentary evidence and indeed oral evidence as to what protest, if any, the Defendant had taken against the Plaintiff, in my view, points to the fact that the Plaintiff indeed had the right to use her interest in the Property to raise loans and the Defendant knew about it.  Otherwise, it is inexplicable why SHK Finance Limited was not even notified of the beneficial interest of the Property.  Indeed, if the Plaintiff and her daughter defaulted on the loan, SHK Finance Limited would have a right to enforce its security over the Property to which the Defendant, in this action, claims to have 100% beneficial interest.

Pre-action letters

44.The present dispute arose because in 2013, the Plaintiff demanded the Defendant to pay rent for the occupation of the Property but the Defendant refused.  On 20 November 2013, the Plaintiff’s former solicitors, Messrs Gallant Y T Ho & Co., issued a letter to the Defendant demanding the Defendant to account for half of the rental value of the Property in the sum of HK$1,490,000.

45.On 2 December 2013, the Defendant’s solicitors, Messrs Wongand Partners, replied.  It is important to note that as late as December 2013, it was the Defendant’s case, as set out in the said letter that:

(1) “Your client has never paid one single cent for the purchase, mortgage and upkeep of the Property.  She is nothing but a mere trustee for our respective clients’ parents or LSM alone.”

(2) “About two to three years before FS’s death on 18^th December 2008, FS demanded your client to vest her interest in the Property back to FS or his nominee(s).  Your client has turned a deaf ear thereto and ignored such demand.”

(3) the Plaintiff was demanded to “transfer or revest all her beneficial interest in the Property as trustee to LSM or her nominee(s).”

(4) the Defendant “will jointly with LSM commence legal proceedings” against the Plaintiff.

(Emphasis added.)

46.The position as set out in the said letter does not sit well with the Defendant’s claim that he was the 100% beneficial owner of the Property as from late 1990s or early 2000s.  The Defendant did not in the said letter made any claim that he was the 100% beneficial owner of the Property.  This is strange because the Plaintiff was then claiming for 50% of the outstanding rental value of the Property in the sum of HK$1,490,000 which is not a small sum of money.  If the Defendant were the 100% beneficial owner of the Property, there is no reason why he would not say so.  

47.When being questioned on this, the Defendant’s answer was that he thought that the Mother had some influence over the Plaintiff and by using the name of the Mother, he thought that the Plaintiff would accede to the demand to deliver up the 50% beneficial interest.  I do not find this convincing at all.  If indeed the Defendant had 100% beneficial interest, there is no reason why he would have demanded the Plaintiff to hand overher 50% beneficial interest to the Mother.  There is also no reason why he threatened to commence any legal proceedings in the name of the Mother.

48.All these are to be analysed against the agreed fact that both parties were then represented by lawyers.

49.I also note that the version of events as set out in the said letter is inconsistent with the Defendant’s statements in the two Form E financial statements where he clearly stated that the Plaintiff had 50% beneficial ownership of the Property in 2007 – 2008.

50.Further, the said letter also reveals another important inconsistency in the Defendant’s case.  The Defendant alleged at paragraph 6(b) of his Defence and Counterclaim that that the reason why the Father designated the Plaintiff to be one of the legal owners was: “[o]wing to his old age and avoidance of inconvenience, he wished to dispense with all formalities in holding the legal title and also the future transfer of his interests to another person”.

51.However, in stark contrast, the Defendant alleged in the letter dated 2 December 2013 that:

“ At first, our respective clients’ father, the said Mr. FUNG SIU (馮紹) (‘FS’) might purchase the Property in his and/or his wife’s name(s) (i.e. LSM). However, he had not done so since he was at the material time the tenant of a public housing estate at Wong Tai Sin. He was afraid that the purchase of the Property in his and/or his wife’s name(s) might affect his interest as tenant in the said public housing unit. FS finally decided to purchase the Property in the joint names of our respective clients since our respective clients are the eldest children of the family who were over 18 years of age at the material time …”

52.Moreover, this Court has not lost sight of the fact that the Defendant’s pleaded case is also different from his position as set out in the said letter.  The Mother did not join in these proceedings as threatened.  The Mother did not claim for any beneficial interest.  The Father’s estate also did not claim for any beneficial interest in the Property.  Yet when theDefendant filed his Defence and Counterclaim, he claimed for 100% of the beneficial interest relying on the Common Intention in 1985, the Father’s Representation and the Father’s Intention in late 1990s or early 2000s.

53.By reason of the matters analysed above, I do not find the Defendant to be a credible witness.  His explanations in face of documentary evidence unfavourable to him simply defy belief.  According, I rule that the Defendant fails to discharge the burden of proof, on a balance of probabilities, on the existence of the Common Intention, the Father’s Representation and the Father Intention.

54.I am of the view that the position in the Form E financial statements is the correctposition and the Plaintiff was and is a 50% beneficial owner of the Property.

RESULTING TRUST

55.It is not at all clear how the Defendant’s second alternative case can assist him.  This is an alternative case based on inconsistent factual allegations.  It is also inconsistent with the Defendant’s own sworn statements in the two Form E financial statements which positively acknowledged that the Plaintiff was at the material time a 50% beneficial owner of the Property.  It must be remembered that by 2007 and 2008, the Property was already mortgage free.

56.In any event, such alternative case depends on whether the Defendant can prove that it was him and not the Father who paid for all themortgage payments.  Indeed, a lot of the evidence and submissions went to the dispute as to whether the business of Hopewin belonged to the Father or the Defendant, whether the Defendant inherited the Father’s business and if so when.

57.In my judgment, the critical issue is who paid for the mortgage payments, the Father or the Defendant.  If it was the Father rather than the Defendant, then that is the end of the Defendant’s alternative case, irrespective of who was the real owner of Hopewin.  On this very issue, once again this Court has no hesitation in finding that it was the Father who paid for all the mortgage payments and thereby dismisses the Defendant’s second alternative case.

The Father’s ability to use the funds of Hopewin

58.First, it is important to note that the Defendant had admitted that the Father did continue to work, at least, alongside with the Defendant, in Hopewin from to 1985 at least to 2005 when the Father was not physicallyfit to go back to work at the Property.  The Defendant admitted that during the said period, he would follow the Father’s instructions and would not disobey him.

59.Secondly and importantly, Hopewin’s income was deposited into bank accounts in Yien Yieh Bank, Kincheng Bank and later, Standard Chartered Bank.  These bank accounts were opened and operatedin the joint names of the Father and the Defendant.  The Defendant admitted that the Father could freely withdraw money from the said joint accounts for his own purposes.

60.Thirdly, the Defendant said during cross-examination that the Father was not paid a salary for working for Hopewin.  In re-examination, the Defendant further confirmed that the Father was free to withdraw money from Hopewin’s accounts.  There was no need for the Father to obtain the Defendant’s consent.  The Father drew money from Hopewin’s accounts for the family’s living expenses (家用).  The Defendant also admitted that the Father could decide on the amount of living expenses as he wished and the Defendant had never refused Father’s withdrawal of cash from their joint names accounts.

61.The Plaintiff’s evidence was that she attempted to pay one mortgage instalment for the Property but was stopped by the Father because the Father said that he would take care of the mortgage payments.  This aspect of the Plaintiff’s evidence was not challenged.

The Father’s purchases of other properties

62.As a matter of agreed facts, the Father has also used the money earned from Hopewin’s business to fund the purchase of other properties for his children:

(1) On 1 March 1990, a property in Jubilee Garden was acquired in the names of the Defendant (then aged 31) and the fifth child (then aged 24) as joint tenants for HK$968,000 (the “Jubilee Garden Property”).

(2) On 23 December 1991, a property in New Town Plaza was acquired in the names of the fourth child (then aged 26) and the Brother (the other male descendant, then aged 22) as joint tenants for HK$2,825,000 (the “New Town Plaza Property”). 

(3) On 21 May 1999, a property in Belvedere Garden was acquired in the names of the fourth child (then aged 34) and the Brother (the other male descendant, then aged 30) as joint tenants for HK$2,870,000 (the “Belvedere Garden Property”).

63.There was also the unchallenged evidence of the Plaintiff that Hopewin’s income was applied to buy two columbaria places in Po Fook Hill for the Father and the Mother.

64.Additionally, there is also the agreed fact that the Father withdrew money from Hopewin’s accounts to fund the education of her daughter in France.

65.Whilst at some point, the Defendant said that the Father’s withdrawals to buy properties had to be met with his consent, it is difficult to see how that can in any way affect the undeniable fact that the Father was free to withdraw money from the accounts of Hopewin and to pay for the mortgage payments. 

66.In view of the above evidence, including admitted and agreed facts, I have no difficulties in finding that all the mortgage payments were paid by the Father and thereby dismiss the Defendant’s second alternative case. 

Whether Father retired and passed on his business to the Defendant in 1985

67.In view of the above finding, there is strictly speaking no need for this Court to make further findings on whether the Father retired and passed on his business to the Defendant in 1985, but since the parties have fully argued on it, this Court proceeds to rule on it.

68.It is the Defendant’s evidence, during cross-examination, that there was in fact not a particular point of time that there was a discussion between him and the Father to the effect that the Father would formally retire and pass his business to him.  As the Defendant was the only son that was working with the Father, it is understandable for the Defendant to assume that the Father would pass on the business to him.  He was the only and natural successor.  All those were very legitimate assumptions.  But the fact was that the Father simply carried on with his work and business after 1985 and only stopped coming to the Property in about 2005 which means that he continued to work full time for another 20 years.  That, on any view, could not be counted as a retirement.  Indeed, the Defendant’s evidence was that even after 2005, and before his death in December 2008, the Father still phoned in every day to check on the business of Hopewin.

69.As discussed above and admitted by the Defendant, from the year 1985 onwards, the Father was able and indeed entitled to have free access and use of the earnings or profits of Hopewin to pay for the mortgage payments of the Property, to purchase new properties for his children including the Defendant, to withdraw cash for the household expenses of the family, to pay for the education of his daughter, Fung Sau Chun, in France.  I find that the Father just carried on his business as usual but with the Defendant helping him out and no doubt, with the passage of time, the Defendant played a more important role in the business.  Ultimately, when the Father passed away in 2008, the Defendant naturally succeeded the business of Hopewin.  But prior to the Father’s death, there was no evidence that there was a specific occasion where the Father and the Defendant discussed about the Father’s retirement from the business and the Defendant’s succession.  Up to the time of the Father’s death, he could have free access to Hopewin’s cash in its bank accounts and the Defendant followed the Father’s instructions.

70.It is inherently improbable for the Father to have retired in about 1985.  The Defendant said in his oral testimony that but for his agreement to join the Father’s business, the Father would have retired and closed his business altogether.  This is not credible at all and does not sit well with the factual situation at the material time.  In 1985, the Father sold the matrimonial home in order to raise finance to purchase the Property precisely in order to secure a permanent premise to carry on his business and not to retire from his business.  It is common ground that the Father was the breadwinner of the family.  The Mother was a housewife.  She took care of all her children.  In around 1985, many of the children were still at a relatively young age:

(1) The Brother was only 16 years old and still in secondary school.

(2) Fung Sau Chun, the third child, went to France to receive education.  It is common ground that the Father withdrew cash from Hopewin’s accounts to finance Fung Sau Chun’s education for a few years.

Under such circumstances, it is not believable that if the Defendant were not to join the Father’s business, the Father would have retired and closed his business.

71.Further, it is hard to believe that the Father having purchased the Property which carried with it mortgage obligations would have retiredfrom his business in 1985 when the Defendant who was then about 26 years old and was relatively inexperienced in the wooden box manufacturing business.  The Defendant admitted that the customers in the few years after 1985 were still predominately the Father’s customers.  The risk of failure in the business which might have led to failure to meet mortgage payments and family expenses in around 1985 was too great to imagine that the Father would have decided to retire in 1985 and passed the entire business to the Defendant.

72.The Defendant further admitted that he “did not really count” with the Father as to who remained as the boss (“我哋冇計”) and that the Father never expressly told him that the business was handed over to him.  Indeed, it is fair to conclude that the Father simply carried on with his business as usual after 1985 but with the benefit of the Property as a permanent place of operation and the Defendant as his son helping him out.

73.I am of the view that Father’s role in Hopewin remained an important one after 1985/1986:

(1) After 1985, the Defendant admitted that the Father continued to manage labourers in the factory, participated in the deconstruction of wooden boxes and arranged materials for constructing wooden boxes.

(2) During the period between 1985 and 2005, the Defendant admitted that he would follow the Father’s instructions and would not disobey them.

(3) The Defendant agreed that although he was the one suggestingthe use of the name “Hopewin”, “Hopewin” was only adopted because of the Father’s non-objection (“冇反對”).  Had the Father expressed objections to the use of “Hopewin”, the name would not have been adopted.

(4) The Defendant also accepted that the client-base of Hopewin, at least for the first two years after 1985/1986, was based on the Father’s existing connections.

74.Further, as discussed above, from 1985 until the Father’s death, the Father could withdraw any amount he wished for his personal expenses, for family expenses, for his children’s education and for purchase of other properties for his children.

75.The Plaintiff was asked about the content of Messrs Gallant Y T Ho & Co’s letter dated 20 November 2013 which stated that “[s]ince late 1980s, the said Mr. Fung Siu let you take over his business”. However, such sentence has to be read with what was also stated in the following paragraph of the same letter which reads:

“ Our client also did not object to you using and occupying the Property as you were helping Mr. Fung Siu to operate his business at the Property.”

76.The Plaintiff also explained that by the words “take over”, she meant the taking over of the management, as opposed to the ownership of the Father’s business.

77.All in all, taking into account all the circumstantial evidence as analysed above, I am of the view that the Father was very much the true owner of Hopewin’s business after 1985 but gradually played a lesser role in or about 2005 when his physical condition deteriorated.  Hopewin’s business was passed to the Defendant upon the Father’s death but prior to the Father’s death the Father was very much in control of the business including an absolute control over the use of income generated from Hopewin’s business.

ADVERSE POSSESSION

Applicable legal principles

78.The law on adverse possession is well established.  Put simply, three elements have to be satisfied for a successful claim in adversepossession (see generally Wong Tak Yue v Kung Kwok Wai David & Another [1998] 1 HKLRD 241):

(1) First, factual possession.  The adverse possessor must show a sufficient degree of physical control of the land:Buckinghamshire Country Council v Moran[1990] Ch 623.  In this connection, enclosure is probably the strongest possible evidence of adverse possession: Seddon v Smith(1877) 36 LT 168.

(2) Second, animus possidendi, in other words an intention to possess the land to the exclusion of all other persons including the paper owner.  Clear and affirmative evidence is required to show that such an intention to dispossess has been made sufficiently clear to the world, and particularly to the attention of the paper owner.

(3) Third, the requisite time period.  For non-Government lands, the time period is 12 years: section 7(2) of the Limitation Ordinance, Cap 347 (“LO”).

79.The combined effect of the common law, together with sections 7, 8, 13 and 17 of the LO, is that for non-Government lands, the paper owner’s title to the land would be extinguished vis-à-vis the adverse possessor after 12 years of continuous exclusive possession with the requisite animus possidendi.

80.However, the burden for showing adverse possession is higher when it comes to co-owner dispossessing co-owner (as opposed to complete stranger dispossessing an owner of the property).  In order for a co-owner to establish adverse possession, actual ouster or dispossession of the other co-owner has to be shown.

81.Importantly, in respect of possession by the paper title owner, the slightest acts done by him will be found to negative discontinuance of possession because an owner who has the right to possession of land will be readily assumed to have the requisite intention to possess, unless the contrary is clearly proved: Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286, paragraphs 34 and 39 per Cheung JA; see also Lo Kau Kun v Cheung Yuk Yun, HCA 152/2013 (unreported, 24 February 2015); Wong Chow Yun v Qwok Leung Mah,DCMP 1752/2015 (unreported, 1 March 2017), paragraphs 43 – 62; Lai Wai Kuen v Wong Shau Kwong [2004] 4 HKC 528, paragraph 7 per Lam J (as he then was).

Applying the law to the facts

82.I have again no hesitation to come to the view that the Defendant’s claim for adverse possession should be dismissed.  First, there is the absence of the requisite animus possidendi.  Mr Wong, for the Defendant, fairly accepted that if this Court accepts that the matters stated in the two Forms E financial statements accurately reflected the Defendant’s actual state of mind in 2007 and 2008, then there is simply no basis that the Defendant could have possessed the requisition intention then for adverse possession.  The Defendant’s open admission and acknowledgment of the Plaintiff’s 50% beneficial interest in the Property completely defeats any claim for adverse possession.  That should really be the end of this defence.

83.In any event, I agree that there is no evidence of any actual ouster or dispossession of the Plaintiff by the Defendant.  In fact, the Plaintiff actually used the Property as the registered address of two of her companies.  On the Defendant’s evidence, advertisement leaflets were posted to the Property for the attention of the Plaintiff.  Of course, significantly, the Plaintiff had used the Property as security to raise loans from SHK Finance Limited to the knowledge of the Defendant.

84.Mr Hui, for the Plaintiff, also submitted that the Plaintiff had given consent to the Father to use the Property for his business, therefore, on a derivative basis, the Plaintiff had also had usage of the Property.  It is also the Plaintiff’s evidence that bank statements and other documents of her two companies were sent to the Property and she had used the Property as temporary storage for her goods there for a short duration.  In general, I find the Plaintiff to be a credible witness.  She was unshaken despite extensive cross-examination by Mr Wong, for the Defendant.  Her answers were straightforward and coherent.   

ORDER FOR SALE

85.Under sections 2 and 6 of the Partition Ordinance, Cap 352 (“PO”), a joint tenant has the locus standi to apply for an order for sale.

86.In Wong Chun Kei Johnny & Ors v Poon Vai Ching & Ors [2007] 1 HKLRD 825, Recorder Joseph Fok SC (as he then was) at paragraphs 18 – 19 summarised the principles, after reviewing a number of helpful authorities, as to how the Court should exercise that discretion as follows:

“ (a) A co-owner has a basic right to rid himself of the shackles of co-ownership and, if he has no other remedy, ask for an order for partition or sale;

(b) When it is impracticable to make an order for partition, the court should make an order for sale unless it is persuaded (the burden being on the opposing co-owner(s)) that such an order will not be beneficial to all the co-owners; and

(c) Whether an order for sale is beneficial to all the co-owners is not determined by the dissent of the opposing co-owners or the assertion by them that it is not beneficial.  It has to be determined by the court objectively.”

87.A pre-requisite for invoking sections 2 and 6 of the PO is that the applicant must demonstrate that he or she has a beneficial interest in the property in question.  As an illustration, see Ng J’s decision in Re Tsang Yin Hong, HCB 4387/2007 (unreported, 27 June 2016), paragraph 22:

“ … [T]his court concludes that Madam Yiu and Mr Tsang did not intend a joint beneficial tenancy of the Property. In other words, this court is satisfied that Madam Yiu has discharged the burden of showing Mr Tsang had and has no beneficial interest in the Property. That is sufficient to dismiss the Trustees [of the property of Mr Tsang]’ application.”

88.In view of this Court’s finding that the Plaintiff has 50% beneficial ownership in the Property, the Plaintiff has the requisite locus standi to apply for an order for sale of the Property.

89.I am of the view that this is an appropriate case that an order for sale should be made for the following reasons:

(1) The Property has no utility value to the Plaintiff since the Plaintiff is not involved in any business and/or commercial activity that requires the use of the Property.

(2) The relationship between the Plaintiff and the Defendant has turned sour so that it would be impracticable for them to share the Property even after partition.

(3) In any event, the Defendant has never suggested it is possibleor desirable to physically partition the Property into two halves.  Doing so will no doubt greatly devalue the Property.

(4) A clean break is desirable to all “persons interested”.

90.However, I am aware that the Property is still being used bythe Defendant for his business and there is no benefit to anyone for causing unnecessary disruption to the Defendant’s business.  I will make an order that the orders that I am going to make below are not to be sealed within 28 days so that the parties can see if there are possibilities for the Defendant to buy, whether by raising a mortgage over the Property or otherwise, the Plaintiff’s 50% beneficial interest in the Property.  Of course, the price has to take into account the legal charge created by the Plaintiff over the Property.

DISPOSITION

91.By reasons of the matters stated above, I make an order in terms of paragraphs 1, 2, and 4 of the Originating Summons dated 5 April 2016 which are the same as paragraphs 1, 2 and 4 of the prayer of the Statement of Claim dated 20 August 2016.

92.Parties are at liberty to apply for further directions in relation to the sale of the Property and the distribution of the proceeds if necessary.

93.The Defendant’s counterclaims are dismissed.

94.I will also make a costs order nisi that costs are to be paid by the Defendant to the Plaintiff, on a party to party basis and according to the Legal Aid Regulations.  Unless the parties make an application to vary the above costs order nisi within 14 days from the date of this order, the costs order nisi will be made absolute after the expiry of the said 14 days.

95.The above orders are not to be sealed until after the expiry of 28 days from the date herein.

96.Finally, it remains for me to thank Mr Hui for the Plaintiff and Mr Wong for the Defendant for their effective and helpful assistance rendered to this Court.  Their assistance made this trial focused and efficient.

Mr John Hui, instructed by W K To & Co, assigned by Director of Legal Aid, for the plaintiff

Mr Paul Wong, instructed by Wong and Partners, for the defendant