Ho Kwok Wing v. Chan Mei Mui
Read the full judgment text of CACV 243/2018 on BabelCite. This Court of Appeal judgment was delivered on 26 June 2020.
1. I agree with the judgment of Cheung JA.
Cited by 8 cases · Cites 6 cases
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CACV 243/2018 [2020] HKCA 522 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 243 OF 2018 (ON APPEAL FROM HCA NO. 2178 OF 2014) ________________________ BETWEEN
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____________________ J U D G M E N T ____________________ Hon Kwan VP : 1.I agree with the judgment of Cheung JA. Hon Cheung JA : I. Introduction 2.The appeal was scheduled to be heard on 19 February 2020 which was during the general adjournment period (‘GAP’) arising from the COVID‑19 pandemic. As a result the case was adjourned to be refixed for hearing. However due to the further extension of the GAP the Court directed and the parties agreed to have the appeal determined on paper which I will now do. II. Background 3.1The plaintiff is the second son of the defendant. The plaintiff and the defendant acquired a residential property (together with a car parking space) at Rose Street, Yau Yat Tsuen, Kowloon (‘The Primrose’). 3.2The plaintiff claimed that he is one of the co-owners of The Primrose. On the other hand, the defendant contended that she is the sole beneficial owner. The trial was heard by Chung J. He dismissed the plaintiff’s claim and found for the defendant. The plaintiff now appeals. 3.3The acquisition of The Primrose was not the only occasion when the parties acquired properties. In order to fully understand the background relating to the acquisition of The Primrose, it is necessary to go into the background of the family and the property transactions conducted by the parties. 3.4After the marriage of the defendant and her late husband (i.e. the plaintiff’s father), the latter set up a cloth trading business in 1978 (‘the family business’). He and the defendant jointly held all the shares of the family business. The defendant has four sons. Both the plaintiff and some of his brothers worked at the family business. The plaintiff started to work there when he was 16 years old but left and started his own business in January 2010. 3.5The family home was initially in Fa Po Street, Yau Yat Tsuen (‘the 1st family home’). The defendant was the registered owner of the 1st family home. 3.6The late husband passed away in 1997 leaving behind relatively huge debts. Probably as part repayment of the said debts, the 1st family home was transferred by the defendant to a creditor in 1997. 3.7The defendant then acquired in her name another residential property at Fa Po Villa, Fa Po Street (‘the Fa Po Villa’) which was used as the family home. 3.8In 2000, a residential unit at Elite Villa, Tat Chee Avenue, Yau Yat Tsuen (‘the Elite Villa’) was acquired in the plaintiff’s name for investment purpose. The defendant used her own savings to pay for the initial installment payment of the Elite Villa. The balance of the purchase price was financed by a mortgage (‘the Elite Villa Mortgage’) with the Kincheng Bank. At that time, since the defendant had already taken out a mortgage for the Fa Po Villa with the Kincheng Bank, she asked the plaintiff to hold the Elite Villa on paper for her as she considered that it would be easier to obtain a mortgage in his name based on his monthly income. She decided to ask the plaintiff instead of her other sons because at that time he was the one who spent more time at home while her two other sons were either busily dating or spending a lot of time doing business in China. 3.9In 2004, a residential unit at Grandeur Villa, Tat Chee Avenue, Yau Yat Tsuen (‘the Grandeur Villa’) was acquired in the names of the plaintiff and the defendant as joint tenants. The defendant used her own savings and personal borrowings to pay for the initial installment payment of the Grandeur Villa. The balance of the purchase price was financed by a mortgage (‘the Grandeur Villa Mortgage’) with the Bank of China (Hong Kong) Limited (‘the BoC’). 3.10The Grandeur Villa was almost twice the value of the Elite Villa. As the defendant still had the Fa Po Villa Mortgage with the Kincheng Bank (which merged with BoC after 2001), the BoC required another person with sufficient income proof to be a co‑mortgagor before it would grant the Grandeur Villa Mortgage. The defendant therefore needed one of her sons to assist her in order to satisfy the requirement of the bank. Two of her sons had in 2003 just bought their own properties and obtained mortgages from the BoC in their own names. Another son was still young and had not begun working at the family company. So the defendant asked the plaintiff to hold the Grandeur Villa together with her as joint tenants and to take out the Grandeur Villa Mortgage together. 3.11In August 2005, the defendant sold the Fa Po Villa at HK$4,080,000.00 and purchased The Primrose at HK$12,630,000.00. The defendant intended to replace the Fa Po Villa with The Primrose as their family home. The defendant used the proceeds of the sale of the Fa Po Villa to pay for the initial installment payments of The Primrose. The balance of the purchase price was financed by a mortgage (‘The Primrose Mortgage’) with the BoC. 3.12At that time, the defendant was suffering from serious illness (verrucous squamous cell carcinoma of the left buccal mucosa and had excision done in 2002) which recurred in 2005 and 2006 resulting in further resections done on her. When the defendant applied for The Primrose Mortgage, the manager of the BoC advised her to find a trusted person to hold The Primrose together as joint tenants in view of her old age and poor health condition. She followed the bank manager’s advice and asked the plaintiff to be her joint tenant. 3.13Like the Fa Po Villa, The Primrose was let to the family business but was used as the family home occupied by the defendant, the plaintiff and the other sons. The plaintiff, however, moved out of The Primrose permanently on 27 April 2010. The defendant and her two younger sons are still living there. 3.14Like the case of the Fa Po Villa, the Elite Villa and the Grandeur Villa, the defendant was alone responsible for the mortgage repayments and all other expenses and outgoings of The Primrose which were not fully covered by the rental payments received. 3.15In 2007, the defendant decided to sell the Grandeur Villa for HK$8,880,000.00. The proceeds of sale were first used to discharge the Grandeur Villa Mortgage and the balance, together with some personal savings of the defendant, was used to pay off HK$5,000,000.00 which was part of the outstanding amount on The Primrose Mortgage. Thereafter, the defendant continued to pay the mortgage repayments until The Primrose Mortgage was fully paid off on 2 April 2013. 3.16In 2009, the plaintiff was gambling heavily and incurred quite some debts. He charged The Primrose to obtain a loan from Moral Luck without the defendant’s knowledge (‘the Second Legal Charge’). 3.17Upon discovering the Second Legal Charge, the defendant was very unhappy and expressed her disapproval to the plaintiff. However, she did not take any legal action against him because she was not in good health at the time. More importantly, the plaintiff is her son and she did not think of suing him in court. But this led to a deterioration in their relationship. The defendant’s biggest concern then was to protect the family home. Her youngest son, Ho Kwok Ching, told her to issue a notice of severance (‘Severance Notice’) in order to protect at least half of The Primrose. Ho Kwok Ching told the defendant that if she was to pass away, there is a possibility that The Primrose would become solely owned by the plaintiff and then potentially by Moral Luck if the plaintiff defaulted on the loan. The defendant took his advice and issued a Severance Notice to ensure that at least half of The Primrose would be protected in case the plaintiff failed to repay the loan and Moral Luck sought to enforce the charge against The Primrose. 3.18In June 2010, the defendant was informed by Ho Kwok Ching that the plaintiff had again without her knowledge and consent secured another loan in his name with another bank, ‘American Wilson’, by charging his interest in The Primrose (‘the Third Legal Charge’). 3.19The defendant was very unhappy and again expressed her disapproval to the plaintiff. But there was nothing else that she could do (short of taking legal action against the plaintiff) as she had already issued the Severance Notice, which she thought at the time would at least protect half of her interest in The Primrose. III. The plaintiff’s case 4.1The plaintiff’s pleaded case is a simple one. The Judge summarised his claim as follows :
4.2The plaintiff in his Reply claimed that he has five‑twelves interests in the shares of the family business. He claimed that the defendant’s financial contribution towards the acquisition of the Fa Po Villa, the Elite Villa, the Grandeur Villa and the repayment of their mortgages were sourced partly or wholly from money belonging to the family company. 4.3The plaintiff pleaded that in respect of the Grandeur Villa :
4.4In respect of The Primrose, the plaintiff pleaded that :
4.5At the trial below the plaintiff put forward a case that the Severance Notice constituted a disposition of the defendant’s equitable interest in the plaintiff’s favour. IV. The defendant’s case 5.1The defendant stated that she had never told the plaintiff that she was to give any share of the beneficial interest of the Elite Villa, the Grandeur Villa and The Primrose to him. She only asked the plaintiff to hold these properties either in his sole name or as joint tenants with her for the reasons she had explained. In the case of the Elite Villa and the Grandeur Villa, they were intended to be her own personal investments. In the case of The Primrose, it was purchased as her family home and she had no intention to single out any of her sons to benefit. She has never intended that the plaintiff alone would inherit The Primrose and become its sole beneficial owner to the exclusion of his brothers. 5.2In gist, the defendant’s claim that she is the sole beneficial owner and the plaintiff has only been holding his interest on trust for her is based on, first, the parties’ understanding that The Primrose (at the time of acquisition) was the ‘family home’ of the defendant when it was acquired and, second, the purchase price (and other expenses) was paid for by the defendant only. 5.3The defendant’s pleaded case on her interest in The Primrose is as follows :
5.4The defendant denied that the plaintiff acquired any interest from the Severance Notice and she stated that the plaintiff’s claim on it is based on an unpleaded case. V. The Judge’s decision 6.The plaintiff and the defendant gave evidence. The defendant also called other witnesses including her other three sons. The Judge found the defence witnesses to be truthful and reliable but did not consider the plaintiff’s testimony to be credible or reliable. The Judge found that The Primrose was acquired with the intention (shared by both parties) that the defendant is to be the sole beneficial owner and The Primrose was paid for by the defendant from her own funds. The Judge accepted the defendant’s contention that the plaintiff was attempting to run an unpleaded case based on the Severance Notice. The Judge made the following findings on the Severance Notice :
VI. Grounds of Appeal 7.Ms Eu SC (together with Mr Lee) for the plaintiff advanced the following grounds of appeal :
VII. My view Common Intention Constructive Trust 8.1The defendant’s case is based on common intention constructive trust. The first three grounds are related to this issue. I will address them together because some of the arguments overlapped. 1) Principles 8.2Ms Eu outlined the following principles in this area of the law. The starting point or the presumption is that equity follows the law. Where there is joint legal ownership, there is joint beneficial ownership. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. This replaces the presumption of resulting trust or advancement. Ms Eu argued that the Judge failed to apply these principles and that he had not even referred to any of the authorities for these principles. 8.3In my view the fact that the Judge had not referred to these principles does not mean that he was not aware of them in the assessment of the parties’ case. These principles are well established and there was no dispute by the parties of these principles which would require an exposition by the Judge. In fact there were discussions on these principles in the defendant’s written submissions in the court below. 2) Basis of the Judge’s decision 8.4Ms Eu contended that the Judge did not analyse the case from the starting point that where there is joint legal ownership, there is joint beneficial ownership. The onus is on the person seeking to show the beneficial ownership is different from the legal ownership. 8.5In my view this is precisely what the Judge had done. The Judge found that The Primrose was acquired with the common intention that the defendant was the sole beneficial owner. This clearly displaced the starting point of the enquiry. Although the Judge did not refer to the issue of onus, looking at the judgment as a whole, he clearly had not wrongly imposed any onus on the plaintiff to show that he has a beneficial interest in The Primrose. The Judge had clearly accepted that the plaintiff had already done so by reason of the fact that he is one of the registered co-owners of The Primrose. The Judge’s analysis of the evidence clearly showed that he accepted that the onus was on the defendant and she had discharged it and the common intention was not of joint beneficial ownership but a beneficial ownership belonging to her only. 8.6Further the Judge gave five reasons for rejecting the plaintiff’s evidence and accepting the defendant’s evidence. Apart from the first reason which deals with the motive of the plaintiff in instituting this action, the remaining four reasons are relevant to the common intention of the parties in the acquisition of The Primrose. These reasons amply support the defendant’s case that she is the sole beneficial owner.
3) Agreement versus Inference 8.7The finding that the common intention of the parties was that the defendant was to be the sole owner of The Primrose is a finding of fact. In order to upset this finding the plaintiff must show that this finding is plainly wrong. 8.8Ms Eu submitted that the Judge has not specified any particular word or conduct of the parties and how such word or conduct gave rise to a common intention. At most it can be said that the Judge believed the defendant when she claimed she never told the plaintiff that she was making a gift of half of The Primrose to him. Or that she thought he understood. But silence is insufficient to give rise to a common intention constructive trust. There must be some manifestation of word or conduct that has to be reasonably understood by the other party. Without that, unilateral thoughts cannot turn into common intention. And this cannot give rise to any reliance or detriment on the part of the defendant, nor any unconscionability of the plaintiff to rely on the legal position. 8.9In my view it is clear from the defendant’s pleaded case that she was not relying on express agreement but rather on inference to be drawn from the surrounding circumstances to show that she is to be the sole beneficial owner of The Primrose. To establish common intention constructive trust by inference from surrounding circumstances is clearly permissible. As Lam VP stated in Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 :
4) Test to challenge findings based on inference 8.10Ms Eu then argued that if the finding of the common intention is based on inference then this appeal does not involve overturning primary fact findings. She referred to Singh Harjit v Determination Business Ltd (unrep., CACV 68/2015) and submitted that where inference is drawn entirely or almost entirely from undisputed primary facts, the appeal court is in just as good as position as the trial judge to make the decision. In Pang Ketian Sally v Tam Yuk Hung Annie (unrep., CACV 147/2013, Cheung CJHC (as he then was)) stated:
8.11The findings in the present case is not based solely on inference. As Cheung CJHC explained :
8.12Likewise, in the present case the drawing of inference from surrounding circumstances does not preclude in the first place an assessment of the credibility of the parties. The findings of fact by the Judge in this case involves both an assessment of credibility and drawing of inference from the primary facts. Therefore the plainly wrong test in Ting Kwok Keung applies. 5) Consideration of the evidence 8.13Mr Wong SC (together with Mr Phang) for the defendant submitted that the objective circumstances relied upon by the defendant include :
8.14Accordingly, he submitted that the common intention found by the trial judge was evidently inferred from disputed primary facts which he resolved in the defendant’s favour. It was not based ‘purely on inference’ drawn from undisputed primary facts. The plaintiff must therefore show that the findings by the trial judge were ‘plainly wrong’. 8.15Ms Eu submitted that circumstances 2) and 3) were never ‘common’. They were never communicated to the plaintiff at the time. As for circumstance 1), it is plainly a misdirection to find that ‘it is unlikely the defendant would ‘share’ The Primrose with the plaintiff’ when it was intended to be a family home. There is no reason to assume and it is not substantiated by any evidence that a single parent cannot intend to beneficially co‑own a ‘family home’ with one of her children. In short, none of the fact or circumstance as found give rise to a common intention constructive trust. 8.16I disagree. The argument on circumstance 1) goes only to weight and the arguments on circumstances 2) and 3) lose their force once it is recognised that the common intention in this case is not established by agreement or discussion but rather by inference from the surrounding circumstances of the case. 8.17Ms Eu then argued that since the defendant’s case is that the intention was formed at the time of acquisition and never changed, the material time is to consider the parties’ intention at that time and the following contemporaneous conduct being a more reliable guide :
8.18Mr Wong submitted that these factors had already been advanced and considered by the Judge. As stated by this Court in China Gold Finance Limited v CIL Holdings Limited and others, CACV 11/2015 the mere assertion that the finding of the Judge is against the weight of the evidence or that the Judge should have reached another conclusion because of points advanced in the closing submissions below are not palpable errors which warrant intervention from this Court. 8.19Ms Eu also argued that the Judge misdirected himself as to the effect of certain circumstantial evidence which he held to be supportive of the defendant’s case when in fact such evidence is at most neutral or equivocal, or even against the defendant’s case, namely her pre-acquisition conduct of using the plaintiff’s name to hold or partly hold investment properties; her financial assistance of other children; her post‑acquisition conduct that she ‘looked around for a suitable accommodation for the plaintiff for more than once’; her alleged fear of the plaintiff’s gambling problems apparently at the time of acquisition and her intention that The Primrose was to be a ‘family home’. 8.20Again the arguments are all related to the weight to be attached by the Judge to the evidence. The question of weight is a matter for the trial judge. The Judge having considered the whole of the circumstances of the case was entitled to come to the findings that the common intention of the parties was that the defendant is to be the sole owner of The Primrose. In my view the plaintiff has failed to show that the findings on common intention constructive trust is plainly wrong. 6) Severance Notice 8.21Ms Eu first argued that the Judge failed to find that the Severance Notice confirmed the starting point and declared to the rest of the world including the plaintiff, that the plaintiff does and did have half of the beneficial interest. Such voluntary and unilateral conduct was inconsistent with the defendant’s ‘trust case’ that she was and is at all times entitled to the entirely of the beneficial interest. 8.22It is a question of weight as to how one should consider the Severance Notice. This is again within the province of a trial judge. In this case the Judge has considered all the circumstances relating to the acquisition of The Primrose and he has also considered the events leading to the service of the Severance Notice. He accepted the evidence of the defendant and attached no importance to the Severance Notice. As Mr Wong has submitted, the Judge found that the Severance Notice was prepared and registered by reason of what in effect was an erroneous suggestion of Ho Kwok Ching and there was no evidential basis to assert that it was prepared with the benefit of legal advice. Based on these findings of primary fact against which there is no appeal, the Severance Notice could not have been a confirmation by the defendant that the plaintiff and the defendant were holding The Primrose as beneficial joint tenants when the Judge also made express findings that the defendant is the sole beneficial owner. The Judge cannot be faulted. 8.23Ms Eu then argued that it is well established that, except for a claim of rectification, the legal implication and the intention of a severance notice are determined by an objective construction of the terms of the notice itself, and the defendant’s express declarations of subjective intent as to the meaning or purpose of the Severance Notice are inadmissible in aid of construction, see Mannai Investment v Eagle Star Life Assurance [1997] AC 749 at 779F‑780G. The Severance Notice itself provides sufficient factual basis for the Judge to make the finding that the plaintiff has been a beneficial tenant‑in‑common since the date of that notice. 8.24In my view the principle on construction is well established but the issue at this stage is not on the construction of the nature of the document but rather on how the Severance Notice came into the being in the first place. 8.25Ms Eu argued that in the absence of any plea of mistake or rectification on the part of the defendant, neither the defendant’s evidence nor the Judge’s finding provides any viable basis for setting aside the Severance Notice. Reference is made to Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334 and Ms Eu submitted that the Judge ought to have asked, but had failed to ask :
8.26I have already stated that the Severance Notice did not have the legal effect of constituting a ‘confirmation’ that she and the plaintiff were beneficial joint tenants of The Primrose. As the Judge had found the defendant is the sole beneficial owner of The Primrose, he was correct to hold that that the Severance Notice, ‘insofar as it purported to sever any beneficial joint tenancy of The Primrose’, was null and void. The Judge’s decision was on the premises that the plaintiff never had any beneficial interest in The Primrose. His decision must be understood in that context. 8.27Ms Eu then argued that irrespective of whether there was a ‘common intention’ when The Primrose was purchased in 2005, the Judge ought to have found that the plaintiff shall from the date of the Severance Notice become a beneficial tenant‑in‑common. There is no basis for setting aside or declaring that the Severance Notice to be null and void. 8.28The argument of Ms Eu is that the Severance Notice can have the dual legal effect of both severing a joint tenancy, whether legal or beneficial and further transferring the beneficial interest to a tenant‑in‑common as in Singla v Brown [2008] Ch 357. In Singla, a property was initially held by Mrs M‑B and her partner Mr B as joint tenants. Later Mrs M‑B signed and gave Mr B a severance notice which stated that ‘the property would thereafter be held by them as tenants‑in‑common in unequal shares, 99% for her and 1% for him’. Despite the lack of words such as ‘transfer’ in such notice, the judge held that the notice shall take effect as it stands, transferring 49% of the beneficial interest held by Mr B to herself. 8.29This is part of the argument raised by the plaintiff in the court below which the Judge described as being based on an unpleaded case. Ms Eu submitted that this argument is not based on an unpleaded case. She submitted that the Judge failed to have regard to the plaintiff’s pleading of estoppel and his alternative case that he had become a beneficial tenant‑in‑common since the date of the Severance Notice. 8.30I disagree with the submission of Ms Eu in respect of the pleading point. The common ground of the parties was that the relevant time for ascertaining the intention of the parties is at the time of the acquisition of The Primrose. The plaintiff’s case as pleaded is that he has been a beneficial joint owner of Primrose since it was acquired by reason of the fact that he was a registered co‑owner and the joint tenancy was covered by the Severance Notice. There was never any pleaded case that in any event he acquired a beneficial interest after the Severance Notice was served. The Judge was clearly right when he held that this was an unpleaded case. Further, Singla does not assist the plaintiff because Mrs M‑B and Mr B were already the beneficial owners of the property and the transfer of interest in that case must be considered in that context. 8.31The Severance Notice in this case is in these terms :
8.32The wordings of the Severance Notice are clear. It is simply a notice to sever the joint tenancy into tenancy‑in‑common between the plaintiff and the defendant. But as there was no joint tenancy in the first place, the Severance Notice could not have the effect of severing any beneficial joint tenancy or transfer any interest to the plaintiff. VIII. Conclusion 9.In my view, there is no merits in the appeal and I would dismiss the appeal. IX. Costs 10.I would make an order nisi that the defendant is to have the costs of the appeal with certificate for two counsel. Hon Au JA : 11.I agree.
Ms Audrey Eu SC and Mr Lee Siu Him, instructed by Dominic Y. K. Lai & Co., for the plaintiff Mr Horace Wong SC and Mr Roger Phang, instructed by K. B. Chau & Co., for the defendant |
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