Mui So Bing v. Wan Chi Shing and Others

CACV 177/2019

[2019] HKCA 1341

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 177 OF 2019

(ON APPEAL FROM HCA NO 1698 OF 2017)

___________________

BETWEEN

___________________

____________________

JUDGMENT

____________________

Hon Lam VP:

1.1.Presently, Yuen JA will give the main judgment in this appeal and I respectfully agree with Her Ladyship’s analysis. Speaking for my part, whilst I would endorse the observations on the desirability of pleading the legal consequences relied upon by a party, I prefer to rest the determination of this appeal on a wider basis than the plaintiff’s failure to plead a case other than resulting trust. As highlighted in the judgment of Yuen JA, the plaintiff had through her counsel disavowed any reliance on her sale and purchase agreement, and chosen instead to advance her claim solely by reference to resulting trust in the course of the trial, including the formulation of Agreed Issues, the Opening submissions, and the conduct of the evidence. It is now too late to allow her to reformulate her case based on common intention constructive trust or vendor and purchaser trust as it would be unfair to the 3^rd and 4^th defendants as they could have conducted the trial in different manners.

1.2.As explained in Re Lehmanbrown Ltd v Union Trade Holdings Inc. HCMP 977/2015, the running of a new argument on appeal may be barred not only in cases where the evidence and facts pertaining to the new argument is not exhaustively explored at the trial. It may also be barred if the new argument could affect the conduct of the case by an opponent in terms of further counter arguments or some other procedural steps to be taken or lines of cross-examination to be adopted.  In assessing whether it is fair to allow a losing party to run a new argument on appeal when substantial costs and time have been incurred on a contest based on the original legal formulation of a party’s case at trial, the Court adopted a broader approach since the Civil Justice Reform.   

1.3.Further, I agree with Yuen JA that the common intention constructive trust argument cannot get off the ground for the reasons given by her.  At the highest, the common intention was an intention to proceed with a sale and purchase.  It could not be a common intention that the plaintiff immediately acquired a beneficial interest in the properties irrespective of what happened after the making of the oral agreements.

1.4.The vendor and purchaser trust argument is in substance giving equitable effect to the plaintiff’s sale and purchase agreements which had been reduced into writing.  I agree with Yuen JA that the failure of the plaintiff to register that written agreement under the Land Registration Ordinance is a complete answer to the argument. I do not find any merit in Mr Wong SC’s submission for the plaintiff that the 3^rd and 4^th defendants were estopped from running the Land Registration point.  If the plaintiff were allowed to run the vendor and purchaser trust argument which had not been advanced at the trial, I fail to see how the 3^rd and 4^th defendants could fairly be precluded from taking the Land Registration point simply because they had objected to the admissibility of the written agreement at the trial.    

1.5.Since the Civil Justice Reform, the trial is a milestone event.  Modern litigation ethos placed greater emphasis on the proper preparation for the trial and the courts regard the trial as the main event in a piece of litigation.  Thus, it has been said in To Pui Kui v Ng Kwok Piu CACV 281/2012, 21 August 2014 regarding the proper dichotomy of roles between the trial court and the appellate court and the efficient deployment of resource in the judicial process, 

“The underlying philosophy for our judicial system is that the trial instead of the appeal should be the main event in a piece of litigation. … An appeal is not intended to afford an opportunity to the litigants to have a second round of trial.”

1.6.I therefore agree with Yuen JA that we should dismiss the appeal with costs.  There will be an order in terms of para 29 below.     

Hon Yuen JA:

2.1.This is the plaintiff’s appeal from a judgment of Ng J (“the judge”) given on 18 March 2019 in which he entered judgment for the plaintiff against the 1^st and 2^nd defendants on an unjust enrichment claim, but dismissed her claim against the 3^rd and 4^th defendants with costs. 

2.2.In this appeal, the plaintiff seeks:

(1)    a declaration that the 1^st and 2^nd defendants at all material times held certain properties on trust for her, and that the 3^rd and 4^th defendants had obtained their title to those properties from the 1^st and 2^nd defendants subject to her beneficial interest; and

(2)    an order that the 3^rd and 4^th defendants execute all necessary documents to transfer the properties to her.

2.3.The 1^st and 2^nd defendants were absent at the hearing of the appeal[1].

Background

3.The following facts were either undisputed or were found by the judge[2].

4.1.The 1^st and 2^nd defendants are father and son.  They are both indigenous villagers of Ho Chung Village in Sai Kung and each was entitled under the government’s Small House Policy to apply to the District Lands Office (“DLO”) for a building licence to build a village-type house on land owned by him.  It is well known that the government would insert in such building licences a clause prohibiting the owner from assigning or parting with possession of the land or the house thereon (“the non-assignment clause”) until consent is given by the DLO upon payment of a premium.   

4.2.Having inherited some land, the 1^st defendant partitioned it into two lots in 1997.  He retained one lot[3] and gave the other to his son, the 2^nd defendant[4]. The lots adjoined each other (“the lots”)[5].  There were then no buildings on the lots.  

4.3.On 26 July 2008, the 1^st and 2^nd defendants each signed a general power of attorney in favour of a friend called Chan Choi Shing (“the attorney”).  These documents were registered in the Land Registry on 5 November 2008[6].

Oral agreements

5.In July 2010, the attorney entered into an oral agreement to sell each of the lots to the plaintiff[7].  As pleaded in the Amended Statement of Claim[8], the terms of each oral agreement were as follows:

i. The plaintiff would purchase the lot;

ii. The defendant would sell the lot;

iii. The price was $4,300,000;

iv. The plaintiff was to pay:

- the construction costs of the village-type house to be built on the lot;

- the premium for removal of the non-assignment clause;

- administrative costs of the government, legal costs and various miscellaneous costs;

v. thereafter, the defendant would cause the legal title of the lot to be transferred to the plaintiff.

Building Licences

6.1.On 15 February 2011, the DLO issued for each lot a building licence containing the non-assignment clause[9]. The licence was registered against each lot on 28 February 2011. 

6.2.In the meantime, from July 2010 the plaintiff had been making payments in respect of the purchase price, legal and miscellaneous costs, and construction costs for building a house on each lot.

Written agreements

7.It was pleaded in the Amended Statement of Claim that on 2 November 2011, the plaintiff and the attorney signed two sets of agreements written in Chinese (“the written agreements”) reducing the oral agreements into writing[10]. These written agreements were not registered.  Neither were they stamped, and as a result, at trial the judge ruled that they were inadmissible[11]. However, the fact remains that on the plaintiff’s own case, the oral agreements had been reduced into writing.  This has certain ramifications which will be discussed later in this Judgment[12].

Plaintiff’s payments

8.By May 2013, the plaintiff had paid a total of $12,041,433 as the purchase price, construction costs, and legal and miscellaneous costs for the two properties. The remaining obligations were payment of the premium and related administrative costs for the DLO’s consent to assign.

Letters of Compliance

9.On 6 July 2015, the DLO issued a Letter of Compliance certifying that the house built on each lot complied with the requirements imposed under the building licence.  These Letters of Compliance were registered on 21 August 2015.  The attorney handed over the Letters of Compliance to the plaintiff’s agent who passed them to the plaintiff. 

Plaintiff’s alleged possession and occupation of the houses

10.The plaintiff alleged in an affirmation[13] that “thereafter, [the houses] had been in my possession and occupation ... I arranged the 2 houses to be renovated and briefly furbished.  Apart from securely locking the 2 houses, I also employed a watchman ... to station at the 2 houses”[14]. This allegation will be discussed later in this Judgment[15]. However, it would be noted that if the plaintiff had entered into possession and occupation, that would appear to be in breach of the non-assignment clause (which prohibited the owner from, among other things, parting with possession), which clause was still extant.

Applications for consent to assign

11.1.Some 1½ years after the Letters of Compliance were issued, on 18 January 2017 the 1^st and 2^nd defendants applied to the DLO for consent to assign.  According to the plaintiff, she was not aware of these applications.   

11.2.On 22 March 2017 (“the DLO’s March letters”), the DLO wrote to the 1^st and 2^nd defendants setting the premium for the properties at $1,893,000 and $1,806,200 respectively.  These sums were to be settled by 18 April 2017, failing which the applications for consent to assign would be deemed to have been withdrawn, and the amount set as the premiums would no longer apply.    

Inspections of the properties by the 3^rd and 4^th defendants

12.1.Meanwhile, the 2^nd defendant had become indebted to his friend Lee King Man (“Lee”) in the sum of $20 million since October 2015.  The 1^st defendant was the guarantor of this debt in the sum of $10 million.  The 1^st and 2^nd defendants told Lee they wished to sell their properties and would repay him from the proceeds, but they did not have the means to pay the premiums. 

12.2.Lee was aware that his friend Chan Tai Lang was looking for a property for the use of his son and daughter-in-law, the 4^th and 3^rd defendants respectively.  (It would appear that at some stage and definitely by the time of trial[16], the wall between the 2 houses had been demolished and they became connected). 

12.3.Lee then arranged for the 3^rd and 4^th defendants to inspect the properties.  The 1^st defendant provided the keys to Lee to access the properties.  There were a number of inspections between April 2017 and June 2017.  The evidence of Lee and the 3^rd and 4^th defendants (which the judge accepted) was that at the inspections, there was no watchman at the properties, and the interiors were in a “bare shell” state, with no furniture, lighting or electrical appliances, and no trace that they were inhabited.  This appears to be inconsistent with the plaintiff’s evidence that since August 2015, she had entered into occupation, installed a watchman, and “renovated and briefly furbished” the houses.

Consent Letters

13.1.On 18 April 2017 (the deadline for payment of the premiums), Lee caused the premiums to be paid on behalf of the 1^st and 2^nd defendants.  According to the DLO’s March letters, upon settlement of the demand for the premiums, consent to assign “shall be deemed to have been given” and the relevant conditions of the building licences no longer applied. 

13.2.The normal practice upon payment is for these letters to be called “Consent Letters”.  On 9 May 2017, the Consent Letters were registered.

Provisional Sale and Purchase Agreements

14.1.On 11 May 2017, the 1^st and 2^nd defendants each signed a provisional sale and purchase agreement for the sale of his property for $12 million to the 3^rd and 4^th defendants respectively.

14.2.The following day, solicitors for the 3^rd and 4^th defendants sent two cheques of $1.2 million each to the 1^st and 2^nd defendants’ solicitors as part payment of the purchase money.  These agreements were registered on 9 June 2017. 

14.3.On 19 June 2017, the 3^rd and 4^th defendants’ solicitors sent two cashier orders of $4.95 million to the 1^st and 2^nd defendants’ solicitors as further deposit and part payment of the purchase money.

Correspondence between the parties

15.1.According to the plaintiff, in early June 2017, she became aware of the 3^rd and 4^th defendants’ provisional sale and purchase agreements[17].

15.2.On 5 July 2017, the plaintiff’s solicitors wrote to the 3^rd and 4^th defendants’ solicitors demanding the cancellation and vacation of the registration of the provisional sale and purchase agreements.  It is noted that the plaintiff’s solicitors asserted that she had equitable interests in the properties by reference to the written agreements (dated 2 November 2011) and alleged that she had paid the purchase price and building costs “after the said two contracts”.  Subsequent letters from the plaintiff’s solicitors referred back to this letter. 

15.3.On 13 July 2017, the 1^st and 2^nd defendants’ then solicitors wrote to the plaintiff’s solicitors (with copy to the 3^rd and 4^th defendants’ then solicitors) asking among other things, why the plaintiff’s interests would rank over those of the 3^rd and 4^th defendants as “the priority of a document is lost if not registered within 30 days ...”.  There was no reply from the plaintiff’s solicitors. 

Assignment

16.Four days later, on 17 July 2017, the 1^st and 2^nd defendants assigned their respective properties to the 3^rd and 4^th defendants. The assignments were pending registration when the plaintiff issued the writ herein on 19 July 2017. 

The plaintiff’s claim

17.In the Amended Statement of Claim, it was pleaded among other things, that:

- in July 2010, the 1^st and 2^nd defendants’ attorney and the plaintiff’s agent had entered into an oral agreement in relation to the sale and purchase of each of the lots[18],

- on 2 November 2011, the attorney signed two sets of written agreements with the plaintiff respectively reducing the oral agreements into writing[19];

- the plaintiff has made payments of the purchase price, construction costs and legal and miscellaneous costs in the total sum of $6,020,216.50 for each property[20];

- “by resulting trust”, the 1^st and 2^nd defendants each holds his respective property “as bare nominee and on trust” for the plaintiff, and “in wrongfully selling” his house to the 3^rd and 4^th defendants respectively, the 1^st and 2^nd defendants were in breach of trust, for which the plaintiff claimed “damages and equitable compensation and relief for wrongful breach of trust”[21];

- further or alternatively, the 1^st and 2^nd defendants have been unjustly enriched at the expense of the plaintiff in the respective sums of $10,107,000 and $10,193,800 (being the purchase price of $12 million for each lot under the 1^st and 2^nd defendants’ agreements with the 3^rd and 4^th defendants, less the respective premiums paid on behalf of the 1^st and 2^nd defendants).

Agreed Statement of Issues

18.1.On 27 April 2018, the parties filed an “Agreed Statement of Facts and Issues”.

18.2.In the section on Agreed Issues, under the heading “Plaintiff’s Trust Claim”, issue (2) was framed as follows:

“Whether the Plaintiff’s financial contribution justifies a proprietary claim in the 2 Houses by way of resulting trust against the 1^st and 2^nd Defendants?” (Emphasis added).

18.3.Also at issue was whether the 3^rd and 4^th defendants were bona fide purchasers without notice so as to defeat the plaintiff’s equitable title/interest in each house.

The trial

19.1.The trial took 7 days.  Oral evidence was given by the plaintiff, her former solicitor Chow Yiu Cheung (before whom the powers of attorney, which were disputed by the 1^st and 2^nd defendants, had been signed), the 1^st and 2^nd defendants’ attorney, each of the defendants and Lee.

19.2.The judge formulated the key issues in dispute in the case as follows:

(1) whether the powers of attorney were signed by the 1^st and 2^nd defendants and whether the attorney was duly authorized to enter into the oral agreements with the plaintiff and carry out their terms?  (Issue 1);

(2) the existence and terms of the oral agreements and the amount of the plaintiff’s payments, if any, under them?  (Issue 2);

(3) whether the plaintiff has any equitable proprietary interest in the houses by way of resulting trust?  (Issue 3);

(4) whether the plaintiff has prior equitable proprietary interest in the houses vis-a-vis the 3^rd and 4^th defendant, or whether the 3^rd and 4^th defendants are bona fide purchasers of the houses for value without notice of the plaintiff’s alleged interest? (Issue 4);

(5) whether the plaintiff is entitled to any remedy against the 1^st and 2^nd defendants for unjust enrichment and the amount of the unjust enrichment? (Issue 5).

The judge’s Judgment

20.1.The judge found the following.

(1) The 1^st and 2^nd defendants did sign the powers of attorney, and the attorney was authorized to enter into the oral agreements with the plaintiff and carry out their terms[22].

(2) The plaintiff has proved on the balance of probabilities her case of the oral agreements and the payments made thereunder to the tune of $12,041,433[23].

(3) Having considered the two types of resulting trust set out in Westdeutsche Landesbank Girozentrale v Islington London Borough Council[24], the judge found that neither type (B)[25] nor type (A)[26] was established[27]. The judge observed:

“74. It seems to this court what Ms Chong [counsel for the plaintiff] sought to contend for at paragraphs 53 and 54 of her Closing Submissions is a hybrid form of type (A) resulting trust and common intention constructive trust, without adequately analysing the conceptual and legal requirements of the two different types of trust and without sufficient regard to whether the evidence supports either type of trust. As far as type (A) resulting trust is concerned, this court has already explained why Ms Chong’s reliance on it must fail. As far as common intention constructive trust is concerned, it was not pleaded and Ms Chong is simply not entitled to rely on it in her Closing Submissions under the Section on ‘Resulting Trust’ as if it were a specie of it”.

(4) Given the court’s ruling on Issue 3, the judge held that Issue 4 became wholly academic[28]. The judge observed:

“84. ... But since the Plaintiff has failed to establish any equitable proprietary interest in the Houses by virtue of resulting trust in the first place, it is immaterial whether [the 3^rd and 4^th defendants] had or did not have the requisite notice of the Plaintiff’s alleged equitable proprietary interest”.

(5) The judge found the 1^st and 2^nd defendants had been unjustly enriched in the sum of $6,020,216.50 and $6,021,216.50 respectively[29].

20.2.Accordingly, the judge entered Judgment in favour of the plaintiff as against the 1^st and 2^nd defendants on the unjust enrichment claim with interest and costs, and dismissed her claim against the 3^rd and 4^th defendants with costs. 

Appeal

21.1.On appeal, Mr Anson Wong SC for the plaintiff[30] no longer pursued the case of resulting trust, but argued that the plaintiff had become the beneficial owner of the properties by reason of:

(a) a trust which arose from the contract for the sale of the properties by the 1^st and 2^nd defendants to the plaintiff, which (Mr Wong argued) could be specifically performed; or

(b) a common intention constructive trust which arose from the oral agreements and the plaintiff’s payments in reliance thereon.

21.2.Mr Wong submitted that even though neither (a) nor (b) was pleaded, or made the subject of submissions at trial, the facts to support a finding of one or other of these types of trust can be found pleaded in the statement of claim, and the plaintiff was not required to plead the legal consequences arising from such facts.  He submitted that on the facts found, the judge should have concluded that (a) or (b) had been established.  Mr Wong relied on two passages in Re Vandervell’s Trusts (No.2)[31], so often the resort of appellants who had not pleaded the correct legal consequence at trial.

Discussion

22.1.In the first passage (in Lord Denning’s judgment), the rationale appears only to be the avoidance of over-technicality.

“Mr Balcombe for the executors stressed that the points taken by Mr Mills were not covered by the pleadings. He said time and again: ‘This way of putting the case was not pleaded.’ ‘No such trust was pleaded’. And so forth. The more he argued, the more technical he became. I began to think we were back in the bad old days before the Common Law Procedure Acts 1852 and 1854, when pleadings had to state the legal result; and a case could be lost by the omission of a single averment: see Bullen and Leake’s Precedents of Pleadings, 3^rd ed, (1868), p.147. All that has been long swept away. It is sufficient for the pleader to state the material facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated. He can present, in argument, any legal consequence of which the facts permit. The pleadings in this case contained all the material facts. It does appear that Mr Mills put the case before us differently from the way in which it was put before the judge: but this did not entail any difference in the facts, only a difference in stating the legal consequences. So it was quite open to him”.

22.2.In the second passage (in Lawton LJ’s judgment), the rationale appears to be Order 18 rule 7.

“As to the pleading point, it is pertinent to bear in mind what, under the Rules of the Supreme Court, should be put into pleadings. Ord. 18 r.7, provides as follows:

‘Subject to the provisions of this rule, and rules 7A, 10, 11 and 12’ (none of which are relevant in this case), ‘every pleading must contain, and contain only (emphasis from original quotation), a statement in a summary form of the material facts on which the party pleading relies for his claim or defence, as the case may be, ... and the statement must be as brief as the nature of the case admits’.

It follows, so it seems to me, that the question for decision in this case is whether the material facts have been set out in the pleadings, not whether Mr Mills made submissions before this court as to legal consequences which had not been set out ...”.

22.3.However, with respect, it is clear from the heading of the rule “facts, not evidence, to be pleaded” that the purpose of Order 18 rule 7 is to state that evidence should not be put into pleadings.  The rule does not refer to legal consequences, and Order 18 rule 11 provides that a party may raise any point of law in the pleading (although it should not be turned into a legal submission or skeleton argument): Civil Justice Reform final report para.206.

23.1.In any event, it is clear that legal practice has changed significantly in the 45 years since those passages in Re Vandervell, and the notion that a legally qualified pleader may plead only the facts (or plead the facts with a specific legal consequence), leaving his opponent and the court to have to second-guess what legal consequence (or what other legal consequences) he may choose to argue at trial or on appeal, is in my view inimical to the underlying objectives of the Civil Justice Reform.  These objectives include ensuring that a case is dealt with as expeditiously as is reasonably practicable, to promote a sense of procedural economy in the conduct of proceedings, and most importantly, to ensure fairness between the parties[32].

23.2.The earlier the case is more thoroughly thought-out and unambiguously articulated, the more cost-effective the proceedings would be for the parties, and the fewer the cases where an appellate court would be required to undertake the “state of the evidence bar” exercise which requires it to hypothesize, if not speculate, whether there is “no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at the trial”[33].

23.3.As was noted in paragraphs 205-6 of the Civil Justice Reform final report, “a reference [in the pleadings] to the legal point helpfully conveys the nature of the party’s case”.  The final report also noted the “pragmatic virtues” of setting out the legal consequences so that the other side (and the court) would not be taken by surprise.  As the court’s primary aim in exercising its powers is to secure the just resolution of disputes in accordance with the substantive rights of the parties[34], and to further these objectives by actively managing cases[35], it seems to me to be high time that consideration should be given to requiring legal representatives to plead not only material facts, but also all the legal consequences to which those facts validly lead[36], with the effect that the parties would be barred from contending different legal consequences on appeal. 

24.1.Coming back to the present case, the plaintiff had made it clear beyond doubt in the Amended Statement of Claim exactly what was the specific legal consequence that she asserts from the pleaded facts.  In §§27-28, the plaintiff clearly pleaded that the legal consequence she asserts is resulting trust, and nothing else. 

24.2.Further, in the Agreed Statement of Facts and Issues, under the heading “Plaintiff’s Trust Claim”, the issue was agreed to be whether the plaintiff’s financial contribution justified a proprietary claim in the houses “by way of resulting trust”.  That was how both parties had elected to proceed[37]. It was not, as Mr Wong suggested, simply an erroneous concession of a point of law, or a situation where the parties had agreed on an erroneous understanding of a point of law.

24.3.Even down to the closing submissions, the plaintiff’s sole case on trust was that “the Plaintiff claims against the 1^st and 2^nd Defendants equitable interests in [the houses] by way of resulting trust”[38]. The references to “common intention” in those submissions at §§53(ii) and §54 (iv) - (v) were, as the judge noted[39], a misunderstanding of the concept and requirements of a resulting trust, not a submission that the plaintiff was also asserting a common intention constructive trust. 

Common intention constructive trust?

25.In any event, it is difficult to see how a common intention constructive trust could arise on the facts.  Whilst it is possible for a common intention constructive trust to arise in a commercial context[40], the starting point must still be that there was a common intention of the parties regarding the sharing of the beneficial ownership of a property where the legal title is in one party’s name.  Here the plaintiff’s own case was that the parties made a contract whereby the 1^st and 2^nd defendants, who already owned the lots, would sell their properties to her after she has fulfilled various obligations under the contract.  There was no express agreement, and none could be inferred or imputed from the facts found by the judge, that there was in fact a common intention reached by the plaintiff and the 1^st and 2^nd defendants to share the beneficial ownership while the 1^st and 2^nd defendants held the legal title.

Vendor/purchaser trust?

26.1.Mr Wong also submitted that the oral agreements gave rise to a vendor/purchaser trust.  This was contrary to the plaintiff’s submissions at trial that she relied only on the payment of money to establish a beneficial interest by way of resulting trust. 

26.2.In any event, it will be seen below that the facts found by the judge do not enable this court to find that a vendor/purchase trust has been established.  

27.1.As for the law, Mr Wong relied on the following passage in Shaw v Foster[41]:

“By the contract of sale the vendor in the view of a Court of Equity disposes of his right over the estate, and on the execution of the contract he becomes constructively a trustee for the vendee, who is thereupon on the other side bound by a trust for the payment of the purchase-money; or, as Lord Westbury has put it in Rose v Watson (2): ‘when the owner of an estate contracts with a purchaser for the immediate sale of it, the ownership of the estate is in Equity transferred by that contract’. This I take to be the rudimental doctrine, although its generality is affected by considerations which to some extent distinguish the position of an unpaid vendor from that of a trustee. Thus, as it is stated by the Master of the Rolls in Wall v Bright (3): ‘The vendor is not a mere trustee; he is in progress towards it, and finally becomes such when the money is paid, and when he is bound to convey. In the meantime, he is not bound to convey; there are many uncertain events to happen before it will be known whether he will ever have to convey, and he retains for certain purposes his old dominion over the estate’”. (Emphasis added).

27.2.The law in the passage emphasized above was explained by Lord Walker in greater depth in Jerome v Kelly (Inspector of Taxes)[42]. After examining a number of authorities, he concluded:

“32. It would therefore be wrong to treat an uncompleted contract for the sale of land as equivalent to an immediate, irrevocable declaration of trust (or assignment of beneficial interest) in the land. Neither the seller nor the buyer has unqualified beneficial ownership. Beneficial ownership of the land is in a sense split between the seller and buyer on the provisional assumptions that specific performance is available and that the contract will in due course be completed, if necessary by the court ordering specific performance. In the meantime, the seller is entitled to enjoyment of the land or its rental income. The provisional assumptions may be falsified by events, such as rescission of the contract (either under a contractual term or on breach). If the contract proceeds to completion the equitable interest can be viewed as passing to the buyer in stages, as title is made and accepted and as the purchase price is paid in full”. (Emphasis added).

27.3.The availability of specific performance is therefore material to a purchaser’s acquisition of beneficial ownership by way of the vendor/purchaser trust. Specific performance is of course a discretionary remedy and fact-sensitive. 

27.4.In the present case, had the issue of vendor/purchaser trust been raised at trial, the judge would have had to examine the following factual issues when considering whether specific performance would have been ordered in favour of the plaintiff, given in particular the involvement of third parties (the 3^rd and 4^th defendants) who had changed their position: e.g. what was the reason for the plaintiff not procuring the 1^st and 2^nd defendants to apply for consent letters when some 1 ½ years had passed after the compliance letters had been issued; whether the plaintiff herself was ready, willing and able to pay the premiums to enable the properties to be transferred; what was the state of her alleged possession and occupation of the properties; how the 1^st defendant could have provided access for Lee and the 3^rd and 4^th defendants to inspect the properties on a number of occasions when the plaintiff was supposed to have been in possession and occupation, etc. 

27.5.The 3^rd and 4^th defendants’ counsel did not need to cross-examine the plaintiff on these questions because the plaintiff relied only on resulting trust.  The impact of this election by the plaintiff was explained in Re Lehmanbrown Ltd v Union Trade Holdings Inc. and ors by this court[43]

“Whilst the Court of Appeal obviously has power to entertain new points in an appeal, it is also clearly and firmly established that new points which are fact sensitive or otherwise affect the course of evidence or conduct of the case at the hearing below should not be allowed. Though this principle is usually applied in situations where the new points necessitate further evidence to be adduced, it is not confined to such scenarios. Very often, the raising of new point by one party may lead to the other party raising counter arguments and the consideration of such counter arguments may involve factual assessment in a different light from that undertaken by the court below. Sometimes, it may involve a different weighing of factors in the exercise of discretion. Alternatively, the other party may embark on a different course of forensic conduct if the new point were taken earlier. The appellate court, in considering whether the new point would be entertained, is entitled to take these matters into account in order to avoid unfairness to the other party”.

28.1.Further in this regard, the plaintiff submitted that the judge should have ruled on the facts that the 3^rd and 4^th defendants were not bona fide purchasers without notice because the plaintiff’s solicitors wrote to these defendants’ solicitors asserting the plaintiff’s interests before completion. Since the judge decided against the resulting trust argument, which was the only legal consequence asserted by the plaintiff at trial, he held it became academic and it was not necessary to make any findings.  This illustrates the importance of a party identifying at trial all the legal consequences it asserts.  It would be a waste of time and costs for the judge to determine all the factual disputes thrown up by the evidence, irrespective of the parties’ pleaded cases, just in case a party were to wish to advance a different legal consequence on appeal. 

28.2.I am not persuaded that simply because the plaintiff’s solicitors had written to the 3^rd and 4^th defendants’ solicitors before completion, that would have adversely affected the title obtained by the latter.  As noted earlier, the plaintiff had herself alleged that the oral agreements had been reduced into writing.  It matters not that they were held inadmissible at trial as they had not been stamped.  The fact remains that the plaintiff had asserted that the oral agreements had been reduced into writing, and that in the correspondence before completion, the plaintiff’s solicitors stated categorically that she had equitable interests in the properties by reference to the written agreements.  Then, when the 1^st and 2^nd defendants’ solicitors wrote to the plaintiff’s solicitors (with copy to the 3^rd and 4^th defendants’ then solicitors) asking why the plaintiff’s interests would rank over those of the 3^rd and 4^th defendants as “the priority of a document is lost if not registered within 30 days ...”, there was no reply from the plaintiff’s solicitors.  It was in those circumstances that completion took place.

28.3.In my view, had the matter been put in issue at trial, the 3^rd and 4^th defendants would have been entitled to argue that they rank in priority to the plaintiff as her written agreements had not been registered.  Whatever unwritten equities the plaintiff might have had by way of resulting trust, they had been subsumed when she entered into a written agreement with each of the 1^st and 2^nd defendants which she could have registered, at the latest when the consent letter was issued.  She was aware of the provisional sale and purchase agreements in early June 2017.  To adopt the rationale in Li Sze Fat v Cheng Ka Leung Tommy[45]:

“The mother cannot have the best of both worlds. An unwritten equity such as a resulting trust is unregistrable and thus not subject to the Land Registration Ordinance, but there may be difficulties with proof and it would be defeasible by ‘equity’s darling’ - the bona fide purchaser of the legal estate for value without notice.

Having traded those insecurities attending an unwritten equity for a written declaration of trust – a registrable instrument, she subjected herself to the regime of the Land Registration Ordinance. As she did not register the trust document until after the purchaser’s registration of the agreement, the purchaser’s lien takes priority”.

28.4.In other words, it was a race for registration between the plaintiff’s documents and the 3^rd and 4^th defendants’ documents, and notice became irrelevant. It was held by the Privy Council in Markfaith Investment Ltd v Chiap Hua Flashlights Ltd[46] that because of the statutory regime under s.4 of the Land Registration Ordinance, “no notice actual or constructive of any prior unregistered instrument in writing shall affect the priority of any registered instrument”.  The 3^rd and 4^th defendants registered their provisional sale and purchase agreements, and the plaintiff did not.  The plaintiff therefore had to resort to her remedies against the 1^st and 2^nd defendants, and the judge has given judgment in her favour against them. 

Order

29.For the reasons set out above, the appeal should be dismissed with costs (the parties having agreed that costs would follow the event) and I would make an order nisi that there be certificate for two counsel.

Hon G Lam J:

30.I agree with both the judgments of Lam VP and Yuen JA.

Mr Anson Wong, SC, Ms Sezen Chong and Mr Terrence Tai, instructed by Fung & Fung, for the Plaintiff

Mr Kenny C.P. Lin and Mr Devin Sio, instructed by Wai & Co. Solicitors, for the 3^rd and 4^th Defendants