Suen Chap Lam v. Suen Kit Lin

HCA 2912/2016

[2020] HKCFI 2643

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2912 OF 2016

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Before:  Deputy High Court Judge To in Court

Dates of Trial: 17, 18, 20 and 21 August 2020

Date of Judgment:  19 October 2020

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J U D G M E N T

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A.  INTRODUCTION

Introduction

1.This action is about a dispute between two siblings over the ownership of a property in Tai On Building (the “Property”) in Shau Kei Wan.  The Property was acquired in December 1986 and held by the Defendant and their father (the “Father”) as joint tenants.  The Father passed away on 13 July 2013.  The Defendant is the sole legal owner of the Property by survivorship, but the Plaintiff is in actual possession. 

The parties’ case

2.The Plaintiff’s case is that the Property was purchased in 1986 substantially with funds from the family pool of assets under the control of the Father for use by all members of the family but held in joint names with the Defendant for convenience (ie to facilitate the Defendant in dealing with the Property as a registered owner on behalf of the Father for contingency or emergency).  The Property was held under a resulting trust or common intention constructive trust for the Father.  The Defendant only contributed a relatively negligible sum of $40,000 as renovation expenses.  Then by an oral agreement made in April 2008, the Father and all his male descendants, including the Plaintiff, the Defendant and their eldest brother (the “eldest brother”), agreed that the beneficial interest in the Property be split into three shares, one for each of the three siblings; the eldest brother gave up his share to the Plaintiff on the Plaintiff’s undertaking to maintain the Father and their mother (the “Mother”); and the Defendant agreed to sell his share to the Plaintiff for $500,000 (the “Oral Agreement”).  The Plaintiff having paid the Defendant $500,000 and having given and in due course performed his undertaking became the beneficial owner of the Property, which is now legally held by the Defendant on trust for him.

3.The Defendant’s case is that the purchase price of the Property was wholly paid by him, including a contribution of $50,000 by the Father which was intended as a gift to the Defendant.  The Property was held in joint names for convenience and with the legal advice that upon the Father’s demise, the Defendant will become the sole surviving beneficial owner.  The Oral Agreement is disputed by the Defendant.  Subject to a difference of ¥20,000, the receipt of the sum of HK$500,000 is not disputed by the Defendant.  That sum was an interest free loan given to him by the Plaintiff pursuant to a loan agreement entered into between them in June 2008 (the “Loan Agreement”).  Apart from relying on his legal title by survivorship, the Defendant actually claims that he is all along the legal and beneficial owner and that the Father was his trustee holding the legal and beneficial interest in the Property in joint names with him and on trust for him.

4.The Plaintiff seeks a declaration that he is the 100% beneficial owner of the Property and an order that the Defendant to transfer the legal title of the Property to him.  Alternatively, he seeks return of the sum of $500,000 with interest.  The Defendant claims return of the title deed held by the Plaintiff, vacant possession of the Property, mesne profit, and interest.

The major factual issues in dispute

5.The major factual issues raised in this case are:

(1)  who contributed substantially to the purchase price of the Property;

(2)  did the Father, the Plaintiff, the Defendant and the eldest brother enter into the Oral Agreement between; or did the Plaintiff and Defendant enter into the Loan Agreement; and

(3)  was the payment of $500,000 (or that amount less ¥20,000) the Plaintiff’s payment for the purchase of the Defendant’s share in the interest of the Property under the Oral Agreement or was it his loan to the Defendant under the Loan Agreement.

The parties have raised many more factual issues, which in my view are minor issues subsumed in the above major issues or are not relevant.  They have also raised a number of legal issues which are just trite law, the legal consequence of which follows the resolution of the factual issues.

Credibility of witnesses

6.The disputes in this case are purely factual. Credibility of witnesses is of paramount importance in this case.  As always, the most reliable indicator of credibility is inherent probability.  The witnesses’ evidence has to be tested against the contemporaneous documents, incontrovertible evidence, evidence of the other witnesses and the surrounding factual circumstances.

7.The Plaintiff is the youngest brother among the five siblings.  The Defendant ranked third among the siblings and is the Plaintiff’s elder brother.  The Plaintiff testified and called his first sibling, ie his eldest sister (the “eldest sister”), the second sibling, ie the eldest brother and Zhou Dongsheng (“Zhou”), a retired party secretary from the Father’s home village in Jiangsu Province (江蘇省) to give evidence in support of his case.   The Defendant alone testified.

8.The Plaintiff was born in 1970 in Jiangsu Province.  He was aged 16 at the time of purchase of the Property and 38 at the time of the Oral Agreement.  Since 2005, he worked in an air conditioning company in Shenzhen.  He made good income of nothing to ¥20,000 to ¥100,000 a month, depending on sales.  He emigrated to Hong Kong in February 2007, but continued to work in Shenzhen.  In July 2011, his wife and son emigrated to Hong Kong and lived in the Property.  His answers under cross-examination are spontaneous and crisp.  His evidence is inherently probable and supported by his siblings (other than the Defendant).  I find him credible.

9.The eldest brother was born in 1961.  He was 25 years of age at the time of purchase of the Property.  He appeared to be an unsophisticated person.  He emigrated to Hong Kong in March 2007 and lived in the Property with the Father.  He worked as a cleaner earning $2,000 a month. He had to support his family in Jiangsu Province and contributed little to the Father’s family.  His evidence corroborated the Plaintiff’s.  Though he emigrated to Hong Kong, he preferred the life in his home village and he returned to the Mainland in 2009.  He has no personal interest in this action. He gave up his share in the Property in return for the Plaintiff’s undertaking to take care of their parents.  He was emphatic when denying the Defendant’s case put to him.  His witness statement is strikingly similar to the Plaintiff’s and appears to have been prepared by the same statement taker.  This is not an unusual practice among solicitors.  Having warned myself of the need for caution, I find him credible.

10.The eldest sister is the eldest sibling.  She visited Hong Kong with the Mother in 1987 and lived in the Property.  In August 2012, she emigrated to Hong Kong and lived in the Property with the Plaintiff’s family.  She was not present at the time of the making of the Oral Agreement.  Her evidence generally supports the Plaintiff’s complaints about the Defendant’s reneging on the Oral Agreement and about the Plaintiff’s performance of his obligation under the Oral Agreement to maintain their parents.  She has no personal interest in the outcome of this litigation.  I find her credible.  

11.The witness statement of Zhou, a retired party secretary of the Father’s home village, was produced as hearsay evidence by agreement as Zhou could not come to Hong Kong to testify because of the Covid-19 pandemic.  He is the godfather of the eldest brother’s children. Despite that relationship, as the eldest brother has no stake in this litigation, I consider Zhou a non-interested witness.  He was called as a person of credibility to verify a copy of a document which is described as the Father’s will (the “ “will” ”) allegedly made by the Father.  For reasons as I shall give in my analysis of the evidence, though I find Zhou’s evidence inherently probable, I could give it little weight. 

12.The Defendant is the sole sibling fighting his case on his own.  He was born in 1964.  He emigrated to Hong Kong in 1982 or 1983 when he was 18 or 19.  He worked initially as an odd jobber in the kitchen of a restaurant and then all the way up to the position of a chef.  He appeared to be disliked by his siblings who did not speak well of him and his wife.  I do not disbelieve him for that reason, but I find his evidence is inherently improbable.  There are two principal reasons for disbelieving him.  A very crucial aspect of his evidence is that he financed the purchase of the Property with a loan of $105,000 from a chit-fund.  But his evidence is both incredible and inconsistent with the law and practice relating to such chit-funds.  Another important aspect of his evidence is his allegation that the sum of $500,000 received from the Plaintiff was a loan.  That evidence is contradicted by the loan receipt he produced which I found was fabricated by him. 

The factual background

13.According to the Defendant, the Father died in 2013 at the age of 96.  Turning the clock backwards, the Father was probably born in 1917.  He had two daughters and three sons. 

14.The Father left for Hong Kong in mid-1950s to make money for the family.  He worked as a custom tailor making high-end qipao (旗袍) (not cheongsams) for women. By early 1982, the Father was 65 years of age.  The first three siblings were in their adulthood, while the last two siblings, including the Plaintiff, were in their teens.  In that year, there was a change in Mainland policy which permitted adult children to leave the Mainland to come to Hong Kong on a one-way entry permit to look after their parents.  The Defendant, who was then 18 or 19 years of age, successfully obtained a one-way entry permit to emigrate to Hong Kong towards the end of 1982 or early 1983.  The Defendant started his career as an odd jobber in the kitchen of a restaurant.  He learned fast and had promotions with increases in salary. 

15.In 1986, the Property was acquired in the joint names of the Father and the Defendant.  They moved into the Property.  In the following year, the Defendant returned to the Mainland to get married.  Then he returned to live in the Property and applied for his wife to come to Hong Kong.

16.In 1990, the Mother and the Defendant’s wife emigrated to Hong Kong.  They lived in the Property with the Father and the Defendant.  The Defendant’s three children were born in 1990, 1995 and 1997.

17.In 1995, the Defendant and his wife purchased a flat in Hung Lee Building in Shau Kei Wan (the “Hung Lee unit”) for $1,080,000 with a bank mortgage.  That property was leased out for rental income.

18.In 1997, the Defendant signed a declaration that he would not maintain his parents to facilitate the Father’s and the Mother’s application for comprehensive social security assistance (“CSSA”).

19.In 2006 (according to the eldest brother) or February 2007 (according to the Defendant), the Defendant and his family moved out of the Property to rented accommodation to make room for the other siblings.  The Plaintiff, the eldest brother and his elder sister, ie the fourth sibling, moved into the Property in early 2007.  The Plaintiff and the elder sister could not adapt to the life in Hong Kong and returned to the Mainland after a month.

20.On 15 April 2008, the Defendant entered into a provisional agreement for the purchase of a property in King Fai Building (“King Fai unit”) at the price of $1,700,000.

21.The Oral Agreement was allegedly made in April 2008.  The parties are in dispute about that agreement and the events that happened subsequently.

22.In 2009, the eldest brother left the Property and returned to the Mainland.

23.In September 2010, the Father and Mother left Hong Kong to return to the Mainland for their retirement.

24.On 2 October 2011, the Mother passed away.  On 22 October 2011, the Father made the “will” setting out the three properties in the home village transferred to the Plaintiff, the Defendant and the eldest brother. The “will” also mentioned the Oral Agreement.  The authenticity of the “will” is in dispute. 

25.In the same year, the Plaintiff’s wife and son emigrated to Hong Kong and lived in the Property.

26.In August 2012, the eldest sister emigrated to Hong Kong.  She lived in the Property with the Plaintiff’s family.

27.On 13 July 2013, the Father died.  Thereafter, the Defendant started to demand the Plaintiff to vacate the Property.  There were some discussions between the Plaintiff and the Defendant about selling the Property and sharing the proceeds.  No agreement was reached.

B.  BENEFICIAL INTEREST OF THE PROPERTY FROM 1986 TO 2008

28.Having regard to the parties’ pleaded case, it would be convenient to first determine in whom was the beneficial interest of the Property vested at the time of its acquisition in 1986 and then at the time of the alleged Oral Agreement. 

29.In relation to the first issue, the single and most important factual dispute is whether it was the Father or the Defendant who contributed substantially to the purchase price of the Property.  The Father and Mother are now deceased.  The Defendant is the only sibling in Hong Kong who was with the Father when the Property was purchased.  The Plaintiff and his siblings who testified for him were in the Mainland at the material time and have no direct knowledge about the source of funds for the purchase of the Property.  On this very important issue, the Plaintiff could only rely on their hearsay evidence from the Father and the circumstantial evidence to contradict the Defendant’s direct evidence.  On the other hand, the Defendant can rely on his evidence and his legal title by way of survivorship.  The surrounding circumstances in this case are very favourable to the Defendant.  The standard of proof which the Plaintiff has to discharge is relatively high.

The Father’s family as an economic unit

30.The Father had farmland and a family house in his home village.  At the early stage of the family, the family was self-sufficient from its farming activities with the labour of the Mother and the elder siblings.  Since the mid-1950s, the Father brought in additional income from his earnings in Hong Kong.  The members of the Father’s family worked as an economic unit and contributed their combined earnings to the family pool, at least until the siblings were married and had their own families.  The family did well with their income from their farming activities and the income from the Father.  According to the Defendant, during his first four years in Hong Kong his wages were deposited into his bank account by auto-pay and he gave his bank passbook to the Father for custody.  In line with the family practice in the Mainland, the Defendant’s earnings net of his expenses were merged into the family income.  It was on that basis that the Plaintiff acknowledged that the Defendant contributed $40,000 towards renovation of the Property. 

31.The Father was a home builder.  He purchased and renovated houses in his home village for his three sons.  It is not entirely clear when he started to buy those properties because the evidence came from the Plaintiff who was too young to know.  There could be no doubt that he used funds from the family pool to renovate and buy properties.  In his discretion, he distributed the properties to his three male descendants, ie the eldest brother, the Defendant and the Plaintiff, in accordance with Chinese tradition. 

32.In 1995, the Father renovated the family house consisting of two blocks with a total building area of 393.80 square metres. He was the registered owner as at 6 June 1998.  He transferred the land use right to the eldest brother on 12 June 2006.  It has been used by the eldest brother since his marriage.  The Father and Mother also lived there in their lifetime and towards their final years.

33.In 1996, the Father bought a property in Tai Hing near the home village for ¥90,000 for the Plaintiff’s use after his marriage.  On 13 August 1997, the Father transferred ownership of the property to the Plaintiff.  It has a building area of 100.33 square metres. 

34.On 6 June 1998, the Father transferred the ownership of the old family house to the Defendant.  It was a brick house with a building area of 114.70 square metres.   The land use right was transferred to him in 2006. This transfer is supported by incontrovertible documentary evidence including ownership registration document and land use right certificate.  The Defendant denied having been given or have knowledge of this property.  Despite his denial, the Defendant offered no evidence to contradict the documentary evidence.  He said that the property is an abandoned and dilapidated brick house.  The eldest sister disagreed with him about the condition of the brick house.

35.The Father also gave ¥200,000 to the elder sister to purchase a property in Shenzhen.

36.I find that the family worked as one economic unit.  The siblings contributed to the family pool at least until they married and started their own families.  Given the poor economic condition of the Mainland in the 1950s to 1980s, the Father must be the major contributor to the family pool.  The Father as head of the family controlled the family pool.  He was in the same position as a discretionary trustee holding the family assets on trust for all members of the family and to apply them for the benefit of all members of the family at his own discretion.  The Father’s funds or payments by the Father mentioned hereunder must be understood in this sense.

Plaintiff’s case of the source of funds for the purchase of the Property

37.It is common ground that the Property was purchased in December 1986 at the price of $235,000 without mortgage.  The Plaintiff’s case is that the purchase price was paid wholly by the Father from the family pool of assets for use by all members of the family.  The Property was not in a good condition.  The Defendant’s contribution of $40,000 to the family pool was acknowledged as his contribution towards half of the renovation and decoration expenses.  The Defendant disputed the condition of the Property, saying that it was in good condition, the floor was tiled, the toilet and kitchen were in good condition and what was needed was just minor touch up.

38.The Plaintiff was only 16 years of age and in the Mainland at the time of purchase of the Property.  He has no direct knowledge or evidence of the source of funds for purchasing the Property.  According to the Plaintiff, the eldest sister and eldest brother, the Father had told them that the Property was purchased by the Father and that the Defendant contributed $40,000 renovation expenses.  The eldest sister said she was told about that by the Father during her stay in the Property in 1987.  She was an adult and has no personal interest in the Property.  The Father’s statement was a contemporaneous statement around the time of purchase of the Property.  Her evidence of what she was told by the Father has conviction.  Of course, the critical issue is whether what the Father said was true.  The sentiment of the siblings (except the Defendant) since the time of purchase is that the Property was purchased by the Father and held by the Father as family asset for use by all members of the family.  The Defendant’s contribution of $40,000 was his earnings net of his expenses during his first four years’ employment in Hong Kong which represented his contribution to the family pool.   Except for the amount, that ties in with the Defendant’s evidence that he gave his bank passbook, into which account his wages were deposited, to the Father for custody.  According to the Defendant, the amount was in fact $80,000.

39.The thrust of the Defendant’s attack on the Plaintiff’s evidence is that the Father was only a security guard earning $1,000 a month and could not have the means to pay the purchase price for the Property.  That argument wholly overlooked the fact that the Father had worked in Hong Kong for 30 years prior to the purchase and that he did not start his career in Hong Kong as a security guard.  He was a custom tailor making high-end made to measure qipao for women.  He was in his mid-30’s, a seasoned craftsman in the trade, not a factory garment worker.  In the 1950s, such craftsmen made a lot of money.  It was only when his eye sight turned poor that he worked as a security guard.  Yet, not only did he not retire at that stage, he adapted to his disability.  He worked as a security guard and made extra money mending table clothes for the restaurant he worked with.  Given the economic condition in the Mainland at the time, the other siblings at home could not have made much money.  Up until 1986, at least, the Father was the major contributor to the family pool. 

40.The Father was a hard-working and frugal person.   He must have a good income as a custom tailor.  As his children in the Mainland grew up, they depended less on his earnings.  They even contributed to the family pool, like the Defendant did.  That off-set the reduction in the Father’s income when his eyesight turned bad.  The Father must have saved much of his earnings as evidenced by the properties he owned or acquired in his home village after 1986.  To say the least, even working as a security guard in the 1990s, he was able to purchase a property to gift to the Plaintiff for his marriage and gave ¥200,000 to the elder sister to purchase a property in Shenzhen.  All these happened in 1990 after the Defendant’s marriage when the Defendant must have ceased contributing to the family pool.  These reflect that the Father must have accumulated some wealth in the 1990s and his or the family’s financial conditions in 1986 was good. 

41.The property market in Hong Kong then was not as volatile as it is today.  In fact, the property market was greatly burdened in 1986 due to the uncertainty over the future of Hong Kong.  Under those circumstances, despite the absence of direct evidence on the Father’s and the family’s income, it was highly probable that the Father could have saved sufficient funds to purchase the Property. 

Defendant’s case of the source of funds for the purchase of the Property

42.The Defendant’s pleaded case is that the Property was purchased wholly with his own funds, which consisted of a gift of $50,000 from the Father, his saving of $80,000 and two shares in a chit-fund he subscribed. 

43.In his witness statement, the Defendant said that the Father contributed $50,000 towards the purchase price, without saying that it was a gift and without giving any supporting rationale or evidence as to why the Father made him such a gift and the circumstances under which the gift was made.  In the witness box, he also said nothing about the Father having expressed that the contribution was a gift.  His assertion of gift from the Father carries no conviction.

44.The Defendant had only worked in Hong Kong for four years before the purchase of the Property.  He began as an odd jobber.  There is some dispute between the parties as to how much he earned.  The Defendant said he started with a monthly wage of over $1,000. He said he learned fast and had promotions bringing his income to over $3,000 in four years.  He was promoted to a cook responsible for staff catering.  He spent little.  He walked to work.  He had meals provided by his employer.  He only paid $200 for a bed space.  He saved $80,000 in four years.  He had to be an extremely thrifty person to make that saving.  All these are oral assertions, not supported by any documentary evidence.  That is understandable because of the lapse of time.  There is also no evidence which the Plaintiff could adduce to contradict his assertions.   All that the Plaintiff could say was he heard from his Father that the Defendant earned much less and had a gambling habit. That is not sufficient to cast doubts on the Defendant’s evidence as to his income.  The Defendant’s greatest burden is to prove the funds he obtained from the chit-fund.  

45.Chit-fund (銀會) or “hwei” is a dying institution, being phased out by reality.  It was still alive at the material time, though.  On 12 May 1972, fourteen years before the purchase of the Property, the Chit-fund Businesses (Prohibition) Ordinance, Cap. 262 (the “Ordinance”) was passed which prohibited the operation of chit-funds except in accordance with the Ordinance.  Under section 5 of the Ordinance, a chit-fund may be operated only if there are not more than 30 participants and the common fund put up for bidding each time shall not be more than $20,000.  It is a micro socio-financial institution providing short term instalment loans and saving facilities for members of small social groups who have no access to formal banking facilities.  Participants of chit-funds are usually friends and relatives who are known to each other and trust each other.  Section 5(3) of the Ordinance makes it a criminal offence to advertise a chit-fund.  That provision was designed to restrict the operation of chit-funds to a small circle of friends and relatives.  A chit-fund is formed on an ad hoc basis as and when the need for finance of a member in a social group arises.  The organiser or operator who is a respected and trusted member of the social group invites members to subscribe to the chit-fund to help a member in need.  A participant may subscribe for more than one share.  The duration of the chit-fund depends on the number of shares.  The participants meet regularly, usually once a month, to subscribe to a common fund for bidding in that month or period.   If there are 12 shares subscribed, the duration of the chit-fund is 12 months.  Participants who need financing would bid for the common fund collected during that period at a discount representing the interest for the duration of the borrowing.  The common fund collected for that month would be paid to the lowest bidder.  The participants who did not bid or were unsuccessful in bidding would have to pay his monthly contribution to the successful bidder but only at the discounted value according to the bid.  A participant may only make one successful bid per share and be paid the common fund once.  The participant who never made a successful bid would collect the last subscription in full without having to bid.  Usually the operator of the chit-fund is allowed to collect the common fund arising from the first subscription interest free.  The privilege is a reward for his organising the chit-fund and his effort in chasing after defaulting participants who fail to pay his subscriptions.

46.It is important to bear in mind that participants of a chit-fund are friends and relatives known to each other. The chit-fund operates on the basis of trust and good faith.  The borrowing from the chit-fund is unsecured.  The greater the number of participants, the bigger is the common fund collected each month and the longer is the duration of the chit-fund.  The risk that its participants may not honour their obligations after having collected the common funds increases with the number of participants, the amount of the funds and duration.  Defaults in turn create debt collection problems.  The number of participants also creates management problems.  Thus, the operation of chit-funds is restricted to small social groups of not more than 30 participants for short durations and for bidding small amounts of common funds not exceeding $20,000. The participants must be friends and relatives who are known to each other and who trust one another.

47.The Defendant’s case is that through the introduction and support of the Father, he joined a chit-fund operated by a person surnamed Yeung who came from the same home village and was familiar with the Father.  There were about 50 participants and 60 shares in the chit-fund.  The common fund put up for bidding each month was $60,000.  The subscription was $1,000 per share per month.  He subscribed for two shares.  He successfully bid for the second and third subscriptions.  His evidence about the chit-fund he participated may appear to be in line with the operation of chit-funds, but is inconsistent with the law and practice of chit-funds.  The chit-fund he described was illegal.

48.The Defendant said he did not know about the legal restrictions under the Ordinance.  My concern is not about illegality as such but inherent probability of the existence of a chit-fund with such flagrant breaches of the Ordinance.  The chit-fund he described was in such a gross violation of the Ordinance as to make its existence practically improbable.  The number of participants was 20 more than the permitted number of 30.  The duration of the chit-fund was increased by almost two years.  Of great significance is that the amount of common fund put up for bidding was three times the limit.  When his evidence is tested against the background of Hong Kong in 1986 and the Ordinance, I consider the existence of such a chit-fund absolutely improbable.

49.According to the Defendant, the common fund put up for bidding was $60,000 which was a substantial sum for participants within his or his Father’s social group.  It was sufficient to purchase 25% interest in a flat in Shau Kei Wan, or probably one storey of a village house in the New Territories or outlying islands.  It was a really large sum of money in 1986.  Its buying power is in excess of $1 million today.  The number of participants was 50.  It was unlikely to be able to recruit such a large number of participants from the same home village or nearby villages, or such a large number of common friends, relatives or colleagues who were known to each other and who would repose trust and confidence on one another for that sum of money and duration.  Those participants had to make monthly subscriptions of $1,000.  It was not a small sum to spare. It was equivalent to a month’s wages for a security guard or one-third of a month’s wages of a cook like the Defendant.  That commitment was for a duration of five years.  The participants would have to be reasonably well off.  The duration of the chit-fund was five years, a long time for changes to occur. The loans, ie the monthly common fund for bidding, were large sums.  They were unsecured.  Some participants were strangers.  Temptation was great.  Return was low.  Risk of absconding was high.  I rhetorically ask, how many people in their right mind would make such a commitment and to run such a risk for such a long duration and for such a low return?  As the Ordinance amply demonstrates, chit-funds are not intended for such financing.  They are intended for small social groups of not more than 30 people who are known to and trust one another, for duration of not more than two and half years and for loan amounts of not more than $20,000.  People who need the level financing required by the Defendant would go to banks and financial institutions.

50.On the Defendant’s case, he had saving of $80,000 and a gift of $50,000 from his Father.  That was more than 50% of the purchase price.  He had good income of over $3,000 a month.  His wages were paid into his bank account by his employer.  He has good proof of income.  He could have no difficulties obtaining bank financing, just as he did in his purchase of the Hung Lee unit nine years later.   His evidence of his funds for purchase of the Property is not only inherently improbable, but incapable of belief.

Some indicators as to the source of funds for the purchase of the Property

51.Under cross-examination, the Defendant admitted that the conveyancing costs, inclusive of stamp duty and agency commission were paid by the Father.  If the purchase price was wholly paid by the Defendant, he must have regarded himself as the real purchaser and would have paid the conveyancing costs.  The fact that the Father paid those costs suggests that the Father was the real purchaser.

52.There is also no dispute that the Father paid the management fees and outgoings of the Property since he and the Defendant moved into the Property.  The Defendant had said in his witness statement that before the Plaintiff’s wife and son came to reside in the Property in 2011, it was the Father who paid the management fees and outgoings of the Property.   He then attempted to cut back some of his evidence by asserting that prior to 2007, ie before he and his family moved out to make room for the other siblings, it was he who paid those expenses.  He said he demanded the Plaintiff and the siblings who subsequently lived in the Property to pay, but they ignored him and the Father paid through auto-pay.  His assertion was disputed by all the siblings.  I also reject his evidence as it is so inconsistent with what he had written in his witness statement.  I think he was only seizing on the fact of his moving out of the Property in 2007 to try to cut back on what he had said in his witness statement to improve his case.  The fact that the Father paid those expenses when he and the Defendant first moved into the Property strongly suggests that both of them regarded the Father as the owner of the Property which in turn suggests that it was the Father who paid the purchase price.

53.What is most telling is the Father’s and the Defendant’s conduct in relation to the Property after its purchase.  It was the Defendant’s own evidence that upon learning that his siblings would be emigrating to Hong Kong in 2007, he discussed with his parents about their accommodation arrangement.  He decided that his family of five would move out to rented accommodation to make room for the siblings as they were unfamiliar with Hong Kong.  At the time, the Defendant had a heavy financial burden.  He had a mortgage to pay and a wife and three children, two of whom were handicapped, to feed.  On the other hand, the Plaintiff was working in Shenzhen making a good income ranging from nothing to ¥20,000 to ¥100,000 a month, depending on his sale.  Even accepting that what he did was out of good intention, if he were the true owner and the person who alone had paid the purchase price of the Property, it was inexplicable why he would have allowed his siblings, particularly the Plaintiff, free accommodation at his sole expense without, at the very least, demanding a contribution from them for his rental payments and why his Father would have allowed that iniquity to the Defendant to happen.  This arrangement reflects that most probably the Father was the person who called the shots because he was the person who had paid the purchase price of the Property.

The purchase price of the Property was substantially paid by the Father

54.The Plaintiff’s evidence about the source of funds for the purchase of the Property is weak.  He and his witnesses do not have personal knowledge about the source of funds.  Their evidence is basically what they heard from the Father almost forty years ago.  The Father is not available for cross-examination.  The circumstances under which the conversations with the Father took place were unknown.  However, accepting the Plaintiff’s, the eldest sister’s and the eldest brother’s evidence of what they heard from their Father, that evidence was contemporaneous at or about the time of the purchase of the Property.  The overall sentiment in the family was happy because of the good news that the Father bought a property in Hong Kong with a contribution of $40,000 from the Defendant.  If it were the Defendant who alone paid the purchase price, the Father would no doubt have been proud to spread that good news that his son was able to purchase a property in Hong Kong within just four years.  Though little weight could be given to the hearsay evidence, it is at least capable of belief and ought not be readily discarded.

55.The thrust of the Defendant’s attack on the Plaintiff’s case as to the Father’s means is premised on the Father’s income as a security guard in 1986.  That completely overlooked the fact that Father began his career in Hong Kong as a seasoned custom tailor making good income in the 1950s.  Though there is no evidence about the Father’s income, the Father was a home builder.  During the 1990s, he renovated the family home and transferred or bought a property in his home village for each of his sons.  He gave the elder sister ¥200,000 to purchase a property in Shenzhen.  The circumstantial evidence suggests he must have accumulated sufficient wealth over the 30 more years prior to pay the purchase price of the Property.

56.When testing the parties’ case against one another, the factual background and the parties’ conduct at the time of the purchase and thereafter, I find the Plaintiff’s case plausible but the Defendant’s case incredible and even incapable of belief.  Even accepting the Defendant’s evidence about his income which by reason of the circumstances the Plaintiff was unable to challenge, the Defendant has to prove financing from the chit-fund.  That is the Achilles heel in the Defendant’s case.  Given the nature of chit-fund, it is absolutely incredible that a chit-fund in such flagrant breaches of the prohibition of the Ordinance existed.  In particular, one cannot overlook the very important features of the chit-fund described by the Defendant: that the loans were huge but unsecured, the participants were strangers and the duration was five years.  Further, the conduct of the parties at the time of the purchase and thereafter is consistent with the Father, not the Defendant, being the true owner, the person who paid the purchase price of the Property and the person who called the shots.  Accordingly, I am driven to the conclusion that the purchase price of the Property, the conveyancing costs, stamp duty and estate agency commission were all paid by the Father from the family pool, which included the Defendant’s contribution of $40,000.

Beneficial ownership of the Property between 1986 and 2008

57.It is trite law that where a person purchases property with his own, or substantially his own, funds and directs that the property be transferred to the name of another, in the absence of evidence to the contrary, there is a presumption that the property is held by the person to whom it is transferred under a resulting trust in favour of the person who provided the funds for its purchase.  The law imputes a common intention in the parties to hold the property under a resulting trust even in the absence of such express intention.  This presumption may be rebutted by proof of the actual common intention of the parties: see Dyer v Dyer[1].

58.The principle equally applies where the person who provided the funds for the purchase directs the property to be transferred to his joint name with another.  The law presumes that the joint owners hold the property on trust for the one who provided the funds for the purchase.  As the property is held on trust, in the absence of a contrary common intention, the law of survivorship has no application.  In the event of the death of the person who funded the purchase, the property will not pass to the other joint owner by survivorship.  That surviving joint owner would continue to hold the property for the estate of the deceased. 

59.Having found that it was the Father who provided the funds for the purchase of the Property, the presumption of resulting trust arises.  There is no evidence of any contrary common intention.  I therefore find that the Defendant and the Father held the Property on trust for the Father for the Father’s convenience (ie to facilitate the Defendant to deal with the Property as a registered owner on behalf of the Father for contingency or emergency).  The Property was entirely at the Father’s disposal as a discretionary trustee for his family members.  The Defendant shall act in relation to the Property in accordance with the Father’s direction as the beneficial owner of the Property.  Even in the event of the Father’s death, the Property will not pass to the Defendant by survivorship.  The Defendant would continue to hold the Property for the Father’s estate.  But that scenario never happened because of the subsequent events.

C.  THE ORAL AGREEMENT OR LOAN AGREEMENT

The Plaintiff’s case of the Oral Agreement

60.The Plaintiff’s case about the Oral Agreement is as follows.  In 2008, the Father was 91 years old.  He was contemplating retiring back to his home village in Jiangsu Province.  All his sons were in Hong Kong then.  He wanted to discuss with them about the disposal of the Property.  One morning in April 2008, in the presence of the Mother, the Father discussed about the disposal of the Property with the eldest brother, the Plaintiff and the Defendant.  The Father had in mind to distribute the Property to all his male descendants in accordance with Chinese tradition.  He proposed to divide the interest in the Property into three equal shares and each son is to be given one share on condition that they shall provide for his and the Mother’s future maintenance.

61.The eldest brother was unable to adapt to life in Hong Kong and his wife’s application to come to Hong Kong had not been approved.  He planned to return to the Mainland.  He was desirous to give his share to the Plaintiff in exchange for the Plaintiff’s undertaking to maintain the Father and Mother and to allow him to stay in the Property in his future visits to Hong Kong.  The Plaintiff accepted the offer.

62.At the time, the Defendant had entered into an agreement to purchase the King Fai unit for $1,700,000 and was short of $500,000 for completion.  At his initiative, the Father asked if the Defendant would sell his share to the Plaintiff for $500,000.  The arrangement would enable the Plaintiff to acquire the entire interest in the Property and save the Defendant the trouble of having to apply for mortgage to complete his purpose of the King Fai unit.  At the time, according to advertisements from the neighbouring estate agencies, the market value of the Property was about $1,200,000.  Having regard to the Defendant’s contribution of $40,000 in renovating the Property and the appreciation in value of the Property attributable to that contribution, it was agreed to treat the value of the Property as $1,500,000 which was the basis on which the value of the Defendant’s share was assessed.  The Defendant agreed.

63.As there was exchange control in the Mainland, the Plaintiff could not remit the entire sum of $500,000 from the Mainland to the Defendant in Hong Kong.  On 13 June 2008, the Plaintiff remitted $350,000 to the Defendant’s bank account with Bank of China (Hong Kong) Limited in Hong Kong.  On the following evening, he brought ¥130,000 in person from the Mainland and gave it to the Defendant as representing the balance of the consideration for his one-third interest in the Property.  That evening, the Father handed over the deeds of the Property to the Plaintiff in the presence of the Mother, the eldest brother and the Defendant.

The Defendant’s case of loan agreement

64.Except for the receipt of $350,000 and ¥110,000 as a loan from the Plaintiff, the Plaintiff’s case of the Oral Agreement is denied by the Defendant.  The Defendant’s case of Loan Agreement is as follows.  The Defendant and his wife entered into a provisional agreement for the purchase of the King Fai unit for $1,700,000 on 15 April 2008.  In May 2008, they sold the Hung Lee unit for $1,268,000.  Together with their saving, they were short of $300,000 to complete the purchase of the King Fai unit.  As banks offer preferential mortgage rate for loans exceeding $500,000, they applied for a mortgage loan of $500,000.

65.In the same month, the Plaintiff and the parents returned to the Property after a trip to the Mainland.  The Defendant went to the Property to pay the parents a visit.  It was about 11 pm.  The Father asked him about the progress in his mortgage application.  A discussion ensued in which the Plaintiff offered to lend the Defendant $500,000 and to make the funds available in mid-June 2008.  There was no discussion about interest or repayment date.  The Defendant’s understanding was that the loan was interest free as the Father mentioned about no need to pay interest.  The Defendant returned home and discussed with his wife about the Plaintiff’s offer.  His wife was of the view that as they were purchasing their own property, they would only borrow from the Plaintiff if the mortgage was not approved.  But the Defendant neglected to inform the Plaintiff about their decision.

66.The mortgage was approved in early June 2018. Then on 13 June 2008, the Plaintiff telephoned the Defendant and told him that a sum of $350,000 had been remitted to his bank account and that the balance would be brought to him in cash because of foreign exchange control. The Defendant told the Plaintiff that he had no need for the loan as the mortgage had been approved.  But the Plaintiff insisted that he kept the loan for cash flow purpose as he might need money for decoration and other expenses.  In view of their good relationship, the Defendant accepted the Plaintiff’s loan and good intention. The Defendant said that the Plaintiff made it clear that the money was a loan. That was how the Loan Agreement was entered into.

67.On the following evening, the Defendant went to the Property after work to pick up the balance of the loan.  The Plaintiff gave him ¥110,000 cash (not ¥130,000) in the presence of the eldest brother.  There was no mention about interest and repayment date.  The Plaintiff told him not to worry about repayment, just repay when he was well off.  Upon hearing the Defendant’s presence, the Father came out from his room.  The Father said he had to return to the Mainland for medical consultation.  The Defendant gave the Father ¥20,000 from the money given to him by the Plaintiff.  Except as to the amount, the payment and receipt of the money is not in dispute.  The Plaintiff and the eldest brother had a vague recollection that the money given to the Father was related to renovation of a building in the home village.  They did not pay attention to that discussion as it was a matter between the Father and the Defendant. 

68.The Defendant disputed the Plaintiff’s evidence that the Father gave the Plaintiff the title deeds of the Property that evening.  His evidence is that the title deeds were all along kept in the Father’s room.  He suspected that the Plaintiff’s wife had taken them away when clearing up the Mother’s personal belongings in her room after the Mother’s death.

69.In the morning of 9 July 2008[2], the Plaintiff asked the Defendant to go to the Property to discuss some family business.  He arrived and met the Plaintiff.  The eldest brother was not there.  The parents were resting in their bedroom.  The Plaintiff suggested to divide the interest in the Property equally among them and the eldest brother.  He further proposed that if the eldest brother agreed to give his share of the Property to the Plaintiff, the Defendant need not repay the loan if he would also give his share to the Plaintiff.  The Defendant rejected the proposal saying that the Property would be his after the Father’s demise as he was the joint owner. Then the Plaintiff asked how his loan of $500,000 would be secured.  The Defendant offered to give him a loan receipt.  Then at the dictation of the Plaintiff, the Defendant wrote and signed a loan receipt and gave it to the Plaintiff.  The Defendant said he was not given a copy.  These allegations are all denied by the Plaintiff.

70.Then, two years later, in the Easter of 2010, the Defendant visited the Plaintiff in the Mainland.  At the time, he had to undergo some kind of asset review in connection with his daughter’s application for financial assistance for her university education.  He asked the Plaintiff for a copy of the loan receipt as evidence to explain the funds in his bank account.  The Plaintiff’s father-in-law made ten photocopies of the loan receipt and gave them to him. 

The Defendant’s visit to the Plaintiff’s home in the Mainland

71.The Defendant said in his witness statement that after he wrote out the loan receipt, the Plaintiff took it away without giving him a copy.  That paved the way to his visit to the Plaintiff in 2010 when he obtained ten copies of the receipt.  However, under cross-examination he said that after writing out the receipt he had in fact been given a copy.  His evidence is contradicting.  The Plaintiff accepted that there was a visit by the Defendant during which the Defendant mentioned to him about the need to have a receipt to evidence a loan so as to reduce the value of his financial resources to facilitate his daughter’s application for financial assistance. The Plaintiff said that visit took place in 2009, not 2010, and that he did not participate in the making of the loan receipt.  He did not have a copy.  Thus, there was a visit in which a receipt for the purpose of facilitating the Defendant’s daughter’s application for financial assistance was mentioned. That receipt may be related to the loan as alleged by the Defendant or to the Plaintiff’s payment for the Defendant interest in the Property which the Defendant wished to be covered up as a loan to facilitate his daughter’s application for financial assistance.  For reasons as I shall develop below, I find it was related to the latter purpose.  Thus, the visit was only a fortuitous event which has no bearing to this issue.

The Father’s “will”

72.The Plaintiff sought to draw support for his case of the Oral Agreement by adducing the Father’s will.  In September 2010, the Father vacated the Property and moved back to the home village with the Mother.  They stayed with the eldest brother in the family house.  The Mother passed away on 2 October 2011.  On 22 October 2011, the Father made his “will”.

73.According to the eldest brother, the Father worried that dispute would arose among the siblings over the ownership of the Property after his death.  To ease his mind, the eldest brother suggested the Father to confirm his distribution of the properties in writing in the form of a will.  Making of a will is a solemn matter in the home village.  At the Father’s request, Zhou arranged for the party secretary and some respectable members of the village to witness the making of the “will”.  On 22 October 2011, Zhou, the party secretary and five respectable neighbours met in the eldest brother’s home.  After lunch, the party secretary wrote down the “will” at the Father’s dictation.  He then read out the “will” and asked if the Father understood its contents.  Upon the Father’s confirmation that he understood, the Father, Zhou, the party secretary and the five neighbours signed on the “will”.   

74.The “will” was not an actual will made for the disposal of a testator’s property after his death.  It was a statement of the Father’s intention when disposing of his properties in the home village and the Property under the Oral Agreement during his lifetime.  The purported signature of the Father appears to the untrained eyes to be very similar to the Father’s signature on the assignment of the Property in December 1986 and in the Defendant’s application for building maintenance loan for the Property in November 2004.  The Defendant also accepted that signature was similar to his Father’s.

75.The “will” mentioned the disposal of three properties in the home village to all of the Father’s male descendants, ie the Plaintiff, the Defendant and the eldest brother.  The properties stated to be given to the Plaintiff and the eldest brother accorded with their evidence. The Defendant denies having been given or have knowledge of what the “will” alleged to have given to him.  He said that the property is an abandoned and dilapidated brick house.   The eldest sister disagreed with the Defendant’s evidence about the condition of the brick house.  The Father’s distribution of the three properties is supported by ownership registration documents and land use rights certificates.  I have no doubt that the distribution as stated by the Father is true.  The brick house may not be in good condition because the Defendant did not attend to it but is not dilapidated.  I accept Zhou’s and the eldest brother’s evidence about the making of the “will” and that the “will” was a genuine record of what the Father dictated.

76.The sole purpose of calling Zhou is to adduce the Father’s “will” as evidence in support of the Oral Agreement.  In relation to the Property, the Father stated that after consultation the Property was given to the Plaintiff in 2008 upon the Plaintiff paying the Defendant $500,000. At the highest, this statement corroborates the Plaintiff’s evidence about some discussion about the disposal of the Property and the payment of $500,000 to the Defendant.  Particulars are missing.  The Father is not available for cross-examination.  The evidence is already covered by the testimony of the eldest brother and the Plaintiff.  The “will” is of little evidential value.

77.Zhou also asserted in his witness statement that the Property was purchased by the Father.  His evidence is based on what he was told by the Father.  There is no evidence of what the Father had told him and the circumstances.  Zhou is not available for cross-examination.  Thus, although I am satisfied that Zhou is a truthful witness and that the “will” was made under the circumstances he described, no weight could be given to the matters stated in the “will” and in Zhou’s witness statement.

The title deeds

78.According to the Plaintiff, having given the Defendant the balance of the price for his share in the Property in the sum of ¥130,000 in the evening of 14 June 2008, the Father gave him the title deeds of the Property.  That is disputed by the Defendant.  He suspected the Plaintiff’s wife of having taken them away when clearing up the Mother’s belongings in the Property after her death.

79.If the Defendant was the person who had solely paid the purchase price of the Property, he must have been very keen to have custody of the title deeds.  He did not take them away with him when he moved out of the Property to rented accommodation in 2007.  Again, after he had acquired and moved into the King Fai unit in June 2008, he did not care to retrieve the title deeds and to bring them to his home for safe custody.  On his own evidence, there was threat to his ownership of the Property.  On 9 July 2008, the Plaintiff suggested to acquire his share in the Property in exchange for the loan.  He refused claiming to have paid the full purchase price and asserting his right as a joint owner to succeed to the Property upon the Father’s death.  At that stage, he must have been alerted to the importance and need to retrieve the title deeds from his parents.  Not only did he not retrieve them from his parents then, when they vacated the Property in September 2010 to return to the Mainland, he did not ask them for the title deed either.  As the Property must be a very valuable asset to him, I discount the possibility that he has forgotten about the title deeds.  His failure to secure custody of the title deeds lends weight to the Plaintiff’s evidence about the Oral Agreement and the Father giving him the title deeds as indicia of title to the Property upon his paying the balance of the sum of $500,000 to the Defendant on 14 June 2008.

The parties’ conduct before the Father’s death

80.According to the Plaintiff, after paying the Defendant the sum of $500,000, he requested the Defendant to transfer the Property to him.  He repeated his request in September and October 2008 and again in 2010.  Every time, the Defendant told him that a transfer at that time would result in their parents losing the right to claim CSSA.  The Defendant also told him to put his mind at ease as he had the title deeds.  At the time, the Father and Mother were in fact receiving CSSA.  The Plaintiff was new in Hong Kong.  He took the Defendant’s words and did not press further.  In fact, there is some truth in what the Defendant is alleged to have told the Plaintiff. Possession of real property may not necessarily disqualify a person from claiming CSSA, though it may result in a reduced allowance.  But, if the Property was transferred from the Father and the Defendant to the Plaintiff for valuable consideration, the Social Welfare Department would assume the Father had cash asset from the transfer of such an amount as would disqualify him and his wife from CSSA.  The Social Welfare Department would also view a transfer for natural love and affection with grave suspicion.  I accept the Plaintiff’s explanation for not pressing for transfer of the Property.

81.Between 2010 and July 2011, the Property was kept vacant as the Plaintiff had to work in Shenzhen.  It was only until July 2011 that the Property was occupied again by the Plaintiff’s wife and son when they emigrated to Hong Kong.  In 2012, the eldest sister also moved into the Property when she emigrated to Hong Kong.  This is consistent with the Plaintiff treating himself as the owner of the Property and the siblings, including the Defendant, regarded him as owner.

82.On the other hand, the Defendant’s case is that he was the person who solely paid the purchase price of the Property and that the Oral Agreement never existed.  With that mindset, it is difficult to explain why after the Father and Mother vacated the Property in 2010 the Defendant did not do anything to affirm his right as owner.  He may reasonably believe he would survive his Father and acquire full title to the Property by survivorship without doing anything.  However, at the time, the Property was occupied by the Plaintiff.  On his own case, the Plaintiff had made a hostile suggestion to “buy him out” for only $500,000.  In the circumstances, it would be in his interest to seek a confirmation from the Father in the presence of his siblings that he was the person who wholly provided the funds for the purchase of the Property and that the Property was held in joint names with the Father just for his convenience.  But he did not.

The parties’ conduct after the Father’s death

83.A few months after the Father’s demise in July 2013, the Defendant asked the Plaintiff to vacate the Property and to deliver up the title deeds.  The Plaintiff refused.  There were negotiations between the Plaintiff and the Defendant.   There is no need to delve into details of those negotiations.  According to the Defendant, in August 2016, the Plaintiff agreed to purchase the Property for $2,680,000, but later reneged.  A month later, there was an offer to purchase the Property from the old age home in the same building for $3,200,000.  The Plaintiff demanded $1,600,000 as a condition for delivering up possession.  The Defendant refused.

84.The Plaintiff has no dispute that since the Father’s death the Defendant has been seeking to recover possession of the Property.  Initially, the Defendant suggested him to apply for public housing. The Plaintiff refused.  In 2016, the Defendant sought to recover the Property for sale so as to change to better accommodation with wheelchair access for his handicapped children.  Again, the Plaintiff refused.  Then, through the mediation of their brother-in-law, the Plaintiff and Defendant agreed to split the proceeds of sale to the old age home.  However, the Defendant reneged and demanded $100,000 more.  That was the last straw.  The Plaintiff refused and commenced this action.  Their agreement to equal share in the proceeds and the Defendant’s demand for an extra $100,000 are evidenced in the WeChat messages produced by the Plaintiff. 

85.These events took place after the Father’s death which was eight years after the Oral Agreement or the Loan Agreement.  The Plaintiff produced some WeChat messages exchanged with the Defendant in September 2016 about their discussions and particularly about the proposed sale to the old age home.  The Defendant said the messages were incomplete but did not produce his alleged missing messages.  He excused himself saying that the messages were irrecoverable.  The tenor of the messages disclosed is more supportive of the Plaintiff’s case of Oral Agreement than the Defendant’s case of Loan Agreement.  The loan and the amount of $350,000 and ¥110,000 was mentioned by the Defendant in the messages.  Though the Plaintiff did not specifically respond, his rhetoric questions, repetition that the money was exchange for the Defendant’s interest in the Property and suggestion that the Defendant was crazy, were spontaneous denials of the Defendant’s assertion of Loan Agreement.  However, as the messages were not contemporaneous with the Oral Agreement or the Loan Agreement, I would not draw any inference from those messages.  I would not draw any adverse inference against the Plaintiff by reason of his agreement to split the proceeds of sale as it was a compromise made as result of mediation.

Oral Agreement or Loan Agreement

86.I now turn to the real issue of whether the Plaintiff gave $500,000 to the Defendant as consideration for his one-third interest in the Property under the Oral Agreement or as a casual loan of a slightly less amount.  The date of the loan receipt is a convenient starting point for ascertaining the truth.  In paragraph 4(d) of the Re-Re-Amended Statement of Claim, the Plaintiff pleaded payment of $500,000 to the Defendant for his one-third interest in the Property.  In paragraph 4(c) of the Re-Re-Amended Defence and Counterclaim, the Defendant pleaded that the payment was a loan and asserted the loan receipt dated 30 June 2008. Subsequently, he disclosed a photocopy of the receipt.  In his witness statement dated 26 January 2018, the Plaintiff asserted that he was not in Hong Kong on the date of the receipt and produced his travel records.  Presumably, as a result, the Defendant amended his pleading asserting that the loan receipt was written on 9 July 2008 instead.  His explanation for the mistake was failure of memory due to lapse of time.

87.The Plaintiff argued that the Defendant’s case of Loan Agreement was a concoction.  The Defendant explained the error of the date on the receipt on the basis that it was dictated to him by the Plaintiff, including the date and he did not notice the error as he wrote on the Plaintiff’s dictation.  On the Defendant’s own case, the receipt was a contemporaneous document, written on the very day when the Plaintiff proposed to divide the interest in the Property and to exchange the Defendant’s share for the loan.  If what the Defendant asserted is true, the Plaintiff would have dictated the date “9 July 2008” to the Defendant.  The date on the receipt bears no resemblance whatever to “9 July 2008”.  It was wrong on the date and on the month.  It could not have been dictated by the Plaintiff on the receipt.  Most probably, the date was blindly picked by the Defendant which turned out to be one when the Plaintiff was not in Hong Kong.  The pleading and witness statement could be amended, but not the date on the receipt disclosed. The receipt is probably a fabrication made by the Defendant for the purpose of this litigation.  It must necessarily follow that the alleged proposal by the Plaintiff and that the amount stated on the receipt are also fabrications.  The receipt which the Defendant fabricated betrayed him. 

88.The above reasons apart, the surrounding circumstances suggest that the Loan Agreement is a fabrication.  The Loan Agreement is by itself inherently incredible.  There was no provision for payment of interest, duration and date for repayment.  The loan was almost like a gift.  According to the Defendant, the Plaintiff told him to keep the money practically for as long as he wished interest free and only to repay when he was well off.  The Defendant never repaid.  Up until this litigation commenced, he had kept the money for eight years.  Plainly, he treated the money as his and not a loan.  He said in cross-examination that he had offered to repay a number of times, but every time the Plaintiff declined.  That is incredible, because according to the Plaintiff, he had only come to Hong Kong for a year and was not very well off then.  He had to borrow from his friends to make up the total sum of $500,000.  If offered to be repaid, it is incredible that the Plaintiff would have refused.  The parties’ conduct is more consistent with the Plaintiff’s case than with the Defendant’s.  The Plaintiff never demanded repayment. The Defendant never offered to repay.  Their conduct is more consistent with the payment being consideration for the Defendant’s interest in the Property than a loan.  The offer of repayment ventilated under cross-examination was just a recent concoction in the witness box. 

89.The alleged proposal of the Plaintiff is inherently improbable when tested against the incontrovertible background.  The Father was a joint owner of the Property.  To the Plaintiff’s knowledge, he was also the true owner and person who paid the purchase price for the Property. On the Defendant’s case, the Father was in the bedroom.  In the circumstances, it was absolutely bizarre that the Plaintiff would have sought to dispose of the Father’s Property while the Father was asleep, without prior consultation with him or without making him a party to the discussion.

90.The Loan Agreement is also inherently improbable when tested against the Defendant’s own case.  The Defendant said he only needed $300,000 to complete the purchase of the King Fai unit and he applied for a mortgage of $500,000 because of the preferential rate.  With the mortgage, he had more funds than what he needed.  There was no need for the loan from the Plaintiff.  Though the Plaintiff had remitted $350,000 into his bank account and the Defendant might find it difficult not to oblige, he could still have asked the Plaintiff not to bring him the balance of ¥130,000 the following day.  He did not.  Not only that, when the Plaintiff made the hostile proposal of acquiring his share of the interest in the Property for just $500,000, there was no reason why the Defendant did not there and then offer to repay the loan, but instead chose to keep the money and write out the receipt as a security.

91.The Defendant argued that the Father was 91 years old, suffering from diabetes with obvious signs of dementia and could not have participated in the discussion leading to the Oral Agreement.  His argument is inconsistent with his own evidence that it was the Father who initiated discussion about the loan and asked him to accept the loan rather than to apply for mortgage in May 2008.

92.There was a mention of the loan receipt by the Defendant in one of his WeChat messages after he and the Plaintiff agreed to sell the Property and split the proceeds equally.  He reminded the Plaintiff to bring along the receipt and title deeds to the solicitors’ office for the purpose of completing the sale.  That suggests the existence of the Loan Agreement, a loan receipt and that the payment was a loan.  The Defendant might have given a copy of the receipt to the Plaintiff at some stage, probably when he visited the Plaintiff’s home in 2009 or 2010 and hence wanted to retrieve it.  In any event, his case about the receipt is so incredible that I am unable to draw any inference from his mentioning about the receipt in this WeChat message.

93.For the above reasons, I reject the Defendant’s case of Loan Agreement as a pure concoction.  Following on from my finding that the Father provided the funds for the purchase of the Property and that the Property was held in joint names with the Defendant for the Father’s convenience, I find the Plaintiff’s case of Oral Agreement inherently probable.  The Father was 91 years old in 2008.  He was going to return to his home village for the rest of his retirement.  It was natural that he planned for the disposal of the Property, which probably was the most valuable family asset, before he left Hong Kong.  In accordance with Chinese traditional thinking, he wanted to leave the Property with his sons.  He was a fair man. He had given his sons one property each in the home village.  Though the eldest brother received the larger family house, it is understandable as he is the eldest son with whom the Father intended to live when he returned to the Mainland.  Thus, he split the interest in the Property into three equal shares and gave one share to each son.  The eldest brother intended to return to the Mainland.  He had the biggest slice of the family properties in the home village.  He was happy to give his share of the Property in Hong Kong to the Plaintiff on condition that the Plaintiff would provide for the parents’ maintenance.  It was credible for the eldest brother in his filial piety to make such an offer to secure the maintenance of his parents and reasonable for the Plaintiff to accept.  The Defendant had his own property in Hong Kong.  Hence, it would make a sensible arrangement to have the Property transferred to the Plaintiff if the Defendant was adequately compensated.  The market value of the Property was $1,200,000.  A sum of $500,000 would be a fair compensation and would include a fair return for the Defendant’s contribution of $40,000 towards renovation of the Property when it was acquired.  The arrangement would relieve the Defendant of the burden of paying a mortgage and would give the Plaintiff a property in Hong Kong where he intended to stay.  The Father’s proposal was absolutely fair and reasonable.  It was inherently probable that it was accepted by all the three siblings.  Accordingly, I accept the Plaintiff’s evidence of the Oral Agreement.

Performance of the Oral Agreement

94.Pursuant to the Oral Agreement, the Plaintiff remitted $350,000 to the Defendant’s bank account on 13 June 2008 and delivered him ¥130,000 on the following evening.  The total amount paid was equivalent to $500,000.

95.The Plaintiff performed his undertaking to maintain the parents.  He paid $3,000 to $4,000 a month to the parents, purchased a ventilator, paid their medical expenses and hospital bills and settled overpayment of CSSA.  The other siblings (except the Defendant) corroborated the Plaintiff’s evidence.  They also gave their parents pocket money and gifts on festive occasions as gesture of their affection.  The Defendant disputed their evidence arguing that the Plaintiff failed to perform his undertaking. In my view, the Plaintiff’s and the siblings’ evidence is incontrovertible.  I am satisfied that the Plaintiff had performed his obligations under the Oral Agreement.

Applicable legal principles on common intention constructive trust

96.The Defendant became the sole legal owner of the Property by survivorship after the Father’s demise; but refused to transfer the legal title of the Property to the Plaintiff pursuant to the Oral Agreement. The Plaintiff argues that the Property is now being held by the Defendant under a common intention constructive trust for him.  Common intention constructive trust was concisely explained by Ribeiro PJ in Luo Xing Juan Angela v The Estate of Hui Shui See, Willy, deceased and Ors[3] as follows:

“38. Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom.”

97.There are three constituents in a common intention constructive trust: common intention, detrimental reliance and unconscionability.  The intention must be commonly held between the parties; must be detrimentally relied on by one party ie the beneficiary; under circumstances which makes it unconscionable for the other party, ie the trustee, to depart from that intention.   As a result, ownership in property is split into legal ownership and beneficial ownership.  The trustee holds the legal title on trust for the beneficiary.  The burden of proof of common intention, detrimental reliance and unconscionability is on the person seeking to show that the beneficial ownership is different from the legal ownership: see Mo Ying v Brillex Development Ltd & Anor[4].  This burden is on the Plaintiff.

98.Common intention can be express or implied.  It can be deduced or inferred objectively from the parties’ conduct: see Mo Ying[5]; Stack v Dowden[6]; and Halsbury’s Laws of England : Trust and Powers[7].  As a matter of common sense, it is easier to infer such an intention prior to the acquisition of property which results in an obvious change in legal ownership than after such acquisition in which there is no change in legal ownership, but just a change in beneficial ownership which is not apparent: see Chan Chui Mee v Mak Chi Choi Nelson & Ors[8]. The standard of proof which the Plaintiff has to discharge is very high and can only be discharged by cogent evidence. 

Beneficial ownership of the Property after April 2008

99.The Plaintiff bears the burden of proving common intention, detrimental reliance and unconscionability.  There has been no change in legal ownership of the Property.  Accordingly, the standard of proof of common intention and change of beneficial ownership is a very high one.

100.Having accepted the Plaintiff’s evidence of the Oral Agreement, it must necessarily follow that the Father, the eldest brother, the Defendant and the Plaintiff share the same common intention that the Plaintiff was to become the legal and beneficial owner of the Property and that the Father and the Defendant would in due course transfer the legal and beneficial title of the Property to the Plaintiff.  The inference of this common intention is most compelling.  On the other hand, the Plaintiff paid the Defendant $500,000 obviously in detrimental reliance on the promise to be transferred the Property.  It would be unconscionable to allow the Defendant to depart from that common intention.  The Plaintiff’s position is similar to that of a purchaser of property.  A purchaser obtains an immediate equitable interest in the property contracted to be sold: Lysaght v Edwards[9].  By operation of law, he became the owner in equity.  Equity looks upon that as done which ought to be done.  From the date of the Oral Agreement, the Plaintiff became the owner of the Property in the eyes of equity.  It matters not that the sum of $500,000 was not paid at that time and that there was no agreement as to when the legal interest is to be transferred.  The Father and Defendant became trustees holding the Property for the Plaintiff until it is properly conveyed to him.  The Plaintiff has adequately discharged the burden of proving a common intention constructive trust.  With effect from the date of the Oral Agreement, the Father and the Defendant became joint trustees of the Property holding it on behalf of the Plaintiff pending proper conveyance of the legal title to the Plaintiff.

101.The same facts also support an alternative case of proprietary estoppel against the Defendant.  The Plaintiff was given a representation or assurance by the eldest brother, the Father and the Defendant that he shall become the sole owner of the Property.  By actually paying the Defendant a sum of $500,000 and providing maintenance for the parents, the Plaintiff suffered detrimental reliance on the Father’s and Defendant’s promise to transfer the legal and beneficial interest in the Property to him.  It would be unconscionable for the Defendant, now as the sole surviving legal owner of the Property, to renege on the promise.  The Defendant is estopped from denying the Plaintiff’s legal and beneficial interest in the Property.

Conclusion

102.I am satisfied that by reason of the Oral Agreement, the Defendant is holding the legal and beneficial interest in the Property as trustee under a common intention constructive trust for the Plaintiff. Accordingly, I enter judgment in favour of the Plaintiff and order the Defendant to transfer the legal and beneficial title of the Property to the Plaintiff forthwith.  Having made that order, it would not be necessary to grant the declaration sought by the Plaintiff.  I also make a costs order nisi that the Defendant shall pay the Plaintiff’s costs with certificate for two counsel.  Such costs are to be taxed, if not agreed.

Mr. Adrian But and Mr. Avery Chan, instructed by Messrs. Chan & Ho for the Plaintiff

Ms. Flora Cheng and Mr. Anson Tso, instructed by Messrs. Carol Lam & Co. for the Defendant