Law Sau Wah v. Lau Chu Mui, The Personal Representative of Lam Kwok Kum, Deceased and Another

CACV 525/2019

[2021] HKCA 422

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 525 OF 2019

(ON APPEAL FROM HCA NO 1219 of 2013)

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BETWEEN

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Before:  Hon Lam VP, Yuen and Au JJA in Court

Date of Hearing:  10 August 2020

Date of Judgment:  29 March 2021

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J U D G M E N T

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Hon Au JA (giving the Judgment of the Court):

A.  INTRODUCTION

1.This is the plaintiff’s appeal against a judgment of Recorder Eugene Fung SC (“the Recorder”) handed down on 18 October 2019 (“the Judgment”) dismissing her claims against the defendants for inter alia the outstanding balance of half of the net sale proceeds of a property known as Cockloft, No 179 Tung Choi Street, Kowloon (“the Property”).

B.  BACKGROUND

2.The plaintiff and the late Mr Lam Kwok Kum (“the Deceased”) were married in Hong Kong on 17 January 1985.  On 12 October 1987, the plaintiff and the Deceased became joint tenants of the Property, which was used as a business place of the Deceased’s company.  The plaintiff and the Deceased divorced in 1995.

3.In 1999, the Deceased married the 2^nd defendant in Mainland China.

4.In 2008, the Deceased mortgaged to a bank (“the 162 Tung Choi Street Mortgage”) a property that was registered in his sole name and located on No 162 Tung Choi Street (“the 162 Tung Choi Street Property”).

5.By a provisional agreement of sale and purchase dated 1 June 2011 (“PSPA”), the Property was sold to a third-party purchaser (“the Purchaser”) for HK$5,300,000.

6.By a letter dated 24 June 2011 and signed by the Deceased and the plaintiff, the Deceased and the plaintiff authorized the vendors’ solicitors to draw cheques for the net purchase price of the Property in the sole name of the Deceased.

7.By a cheque dated 27 June 2011, the Deceased paid the plaintiff a sum of HK$80,000.  On 27 July 2011, the Property was assigned to the Purchaser.  By a cheque dated 1 August 2011, the Deceased paid the plaintiff a further sum of HK$700,000 (collectively, together with the aforesaid HK$80,000 payment, “the Cheque Payments”).

8.On 5 September 2011, the 162 Tung Choi Street Mortgage was discharged.  About a year later, by an assignment by way of gift dated 11 September 2012, the 162 Tung Choi Street Property was assigned to the Deceased and the 2^nd defendant as joint tenants.

9.The Deceased passed away in Hong Kong on 10 November 2012.  His estate (“the Estate”), which is the 1^st defendant herein, is represented by the 2^nd defendant in this action.

C.  THE PLAINTIFF’S CLAIMS

10.The plaintiff’s main claim is against the Estate for the outstanding balance (“the Outstanding Balance”) of half of the net sale proceeds of the Property (“the Net Proceeds”) based an oral agreement made in June 2011 between herself and the Deceased (“the Oral Agreement”).

11.According to paragraph 4 of the Re-Amended Statement of Claim (“RASOC”), which was repeated in paragraph 7 of the plaintiff’s witness statement, the Oral Agreement contained the following terms:

(1)  The plaintiff and the Deceased shall issue a letter of authorization to a firm of solicitors to draw cheques for the net purchase price under the PSPA in the sole name of the Deceased in order for the Deceased to receive the Net Proceeds for himself and for and on behalf of the plaintiff.

(2)  The Net Proceeds shall be divided between them as joint tenants in equal shares and the plaintiff and the Deceased would each be entitled to receive half of the Net Proceeds.

(3)  The Deceased shall receive and hold half of the Net Proceeds on trust for the plaintiff.  The Deceased shall pay half of the Net Proceeds to the plaintiff.  The Deceased received the initial deposit of HK$150,000 from the Purchaser and the further deposit of HK$380,000 and holding half of the sum on trust for the plaintiff.

12.According to the plaintiff, the Net Proceeds amounted to HK$4,684,328.58, hence her half share of the Net Proceeds was HK$2,342,164.29.  After giving credit for the Cheque Payments, the Outstanding Balance is HK$1,562,164.29.

13.The plaintiff further claims that:

(1)  the Deceased used the Outstanding Balance to discharge the 162 Tung Choi Street Mortgage and made the assignment in bad faith and with intent to defraud creditors when the Deceased was insolvent, thereby rendering the assignment voidable under section 60 of the Conveyancing and Property Ordinance (Cap 219); and

(2)  the 2^nd defendant acted dishonestly in assisting the Deceased’s breach of trust, and the Deceased made the assignment in breach of trust such that it was unconscionable for the 2^nd defendant to retain any interest in the 162 Tung Choi Street Property, and therefore the 2^nd defendant is liable to account to the plaintiff for the Outstanding Balance as a constructive trustee on the grounds of knowing receipt and dishonest assistance.

D.  THE JUDGMENT

14.After a 3-day trial in which the Recorder heard the testimonies of the plaintiff and the 2^nd defendant, he found that the Oral Agreement did not exist for the following reasons:

(1)  According to the plaintiff’s testimony at trial, the Deceased had told her (at the same time when the Oral Agreement was made) that the plaintiff’s share of the Net Proceeds would only be given to her after the Deceased had sold the 162 Tung Choi Street Property (“the Further Statement”).  However, the Further Statement is directly inconsistent with the terms of the Oral Agreement pleaded by the plaintiff and mentioned in her witness statement.  Nor has the plaintiff provided any cogent explanation for not mentioning the Further Statement in her witness statement.

(2)  Moreover, there are other parts of the plaintiff’s oral testimony which were contradicted by the contemporaneous documents and/or inherently implausible: see the Judgment [29] - [30].

15.As recorded in [22] of the Judgment, counsel for the plaintiff accepted that the plaintiff’s claims stood or fell with her ability to establish the existence of the Oral Agreement.  Accordingly, having rejected the existence of the Oral Agreement, the Recorder went on to dismiss all of the plaintiff’s claims.

E.  THE PLAINTIFF’S GROUNDS OF APPEAL

16.In the Notice of Appeal dated 14 November 2019, the plaintiff advanced three grounds of appeal.

17.First, it is said that the Recorder erred in rejecting the existence of the Oral Agreement because (a) in arriving at such finding, the Recorder failed to take into consideration or had given manifestly inadequate weight to the fact of the Cheque Payments which represented partial performance of the Oral Agreement, and (b) the Recorder had misunderstood the evidence in that there was in fact no inconsistency between the Further Statement and the plaintiff’s pleading or witness statement.

18.Secondly, it is said that even if the Oral Agreement did not exist, the Recorder should have found that the Deceased held the Outstanding Balance on resulting and/or constructive trust for the plaintiff.

19.Thirdly, it is said that the Recorder should have found that the Deceased made the assignment in breach of trust and that the 2^nd defendant acted dishonestly in assisting the Deceased’s breach of trust, hence the 2^nd defendant is liable to account to the plaintiff for the Outstanding Balance as a constructive trustee.

F.  DISCUSSION

F1.  Ground 1

20.Mr Hectar Pun SC[1], counsel for the plaintiff, submits that it was plainly wrong for the Recorder to hold that the Further Statement was directly inconsistent with the terms of the Oral Agreement.  This is because in the plaintiff’s witness statement, the terms of the Oral Agreement only dealt with the plaintiff’s entitlement to half of the Net Proceeds, but did not touch upon the timing for payment; the Further Statement supplemented the Oral Agreement and dealt with the timing at which the plaintiff’s entitlement to half of the Net Proceeds was to be distributed.  Thus, counsel argues that the Further Statement merely had the effect of supplementing, not contradicting, the Oral Agreement.

21.We do not accept this argument.  Contrary to Mr Pun SC’s submissions, the plaintiff has mentioned the timing for payment in her pleading.  At paragraph 4(2) of the Amended Reply, the plaintiff pleaded that “The Plaintiff and the Deceased agreed that the Deceased would pay half of the Net Proceeds to the Plaintiff upon receiving the same from the firm” (emphasis added).  It is therefore the plaintiff’s pleaded case that the Deceased should pay her immediately.  When this was pointed out by Yuen JA, Mr Pun SC rightly accepted at the hearing that the Further Statement is inconsistent with this plea.

22.Mr Pun SC’s next argument is that the Recorder had overlooked the Cheque Payments, which counsel says are incontrovertible and important evidence of the parties’ subsequent conduct which supports the existence of the Oral Agreement. According to Mr Pun SC, the Cheque Payments unequivocally negate any suggestion that the Estate was wholly entitled to the Net Proceeds, and that they are indicative of an intention of the Deceased to distribute the Net Proceeds.  He therefore submits that the existence of the Cheque Payments should have compelled the Recorder to reach a different conclusion as the finding that the Oral Agreement did not exist left the Cheque Payments unaccounted for.

23.We are unable to accept these arguments.  The Recorder was plainly aware of the Cheque Payments; he mentioned them in [14] and [15] of the Judgment.  Furthermore, in the plaintiff’s written closing submissions, the Recorder was asked to take the Cheque Payments into account when determining the existence of the Oral Agreement.[2]  This submission must be fresh in the Recorder’s mind when he penned the Judgment: the trial concluded on 9 October 2019 and the Judgment was handed down on 18 October 2019.

24.Mr Pun maintains that the Recorder had overlooked (or had given manifestly inadequate weight to) the Cheque Payments because he failed to mention this factor at all in his assessment of the evidence under Section E2 of the Judgment.  With respect, this is to adopt a blinkered view.  As has been said repeatedly by this Court, a judge is not obliged to set out every argument or point taken or case cited by counsel or every fine detail considered in the process of determination in the reasoned judgment.  One would naturally expect the judgment to discuss important issues whilst omission to address minor details or obvious matters are unlikely to form a valid basis for disturbing the judgment: see Tsang Wing Kwai v Tsang Wing Fai [2019] HKCA 163 at [36] - [38].

25.In the present context, the Cheque Payments are no more than a neutral factor since their existence is equally consistent with the defendants’ pleaded case, ie, the plaintiff and the Deceased only agreed to distribute part of the Net Proceeds in the amount of HK$780,000 to the plaintiff whereas the remainder would be for the benefit of the Deceased as medical expenses (“the Alternative Agreement”).  We disagree that the existence of the Cheque Payments should have compelled the Recorder to find that the Oral Agreement existed.  In the premises, there is nothing in the complaint that the Recorder was plainly wrong as he failed to take this factor into account in the Judgment.

26.At the hearing, Mr Pun SC also submits that since it was common ground that there was an agreement to split the Net Proceeds, the question before the Recorder should simply be how the Net Proceeds should be divided.  The Recorder should have determined which version to accept (ie, the Oral Agreement versus the Alternative Agreement) and he erred in rejecting the existence of the Oral Agreement without determining the existence of the Alternative Agreement.  In failing to do so, Mr Pun says the Judgment is also tainted with an obvious error.

27.We do not accept this argument.  First, as Yuen JA indicated at the hearing, this argument is not mentioned in the Notice of Appeal and therefore not open to the plaintiff.  Second, in any event, this complaint is without merit.   Mr Pun SC has mischaracterised the Recorder’s task.  The question before the Recorder was whether the plaintiff’s claims should be allowed.  Since the plaintiff’s claims were premised upon the Oral Agreement, the Recorder was entitled to dismiss the plaintiff’s claims after rejecting the existence of the Oral Agreement.  Indeed, it was accepted by the plaintiff’s counsel at the trial that the plaintiff’s claims stood or fell with her ability to establish the existence of the Oral Agreement.  It therefore did not matter, and the Recorder had no need to find, whether the Alternative Agreement existed.

28.For all the above reasons, we see no valid basis for us to interfere with the Recorder’s factual finding that the Oral Agreement did not exist.  Ground 1 is accordingly dismissed.

F2.  Ground 2

29.By this ground, Mr Pun SC contends that the plaintiff’s claims do not stand or fall together with the existence of the Oral Agreement.  He submitted that even if the Recorder was correct in finding that the Oral Agreement did not exist, he should have found that the Deceased held the Outstanding Balance on resulting trust for the plaintiff.  According to Mr Pun SC, the resulting trust arose in the following manner:

(1)  The starting point is that since the plaintiff and the Deceased were joint tenants of the Property, upon the sale of the Property and in the absence of any severance, they would become joint tenants of the Net Proceeds.

(2)  The joint tenancy was severed when (a) the Deceased signed the PSPA alone on 1 June 2011 or (b) the Deceased divided the Net Proceeds by making the first of the Cheque Payments on 27 June 2011.

(3)  Upon the severance, the plaintiff and the Deceased became tenants in common and each was entitled to 50% of the Net Proceeds.

(4)  By receiving the whole of the Net Proceeds in his sole name, the Deceased was presumed to be holding the plaintiff’s share on resulting trust, and the defendants have not adduced sufficient evidence to rebut this presumption of resulting trust.

30.We will refer to this argument as the “severance point”.  In our view, there are three reasons why the plaintiff should not be allowed to advance the severance point in this appeal.

31.First, the severance point is not only unpleaded but also inconsistent with the plaintiff’s pleaded case:

(1)  It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial.  Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round.  It will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced: Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 at [21].

(2)  In this case, while the plaintiff has mentioned in the RASOC the execution of the PSPA[3] and the existence of the Cheque Payments[4], she did not plead that these acts had the effect of severing the joint tenancy.  Nor has she pleaded that she had, by virtue of these acts or otherwise, become a tenant in common of the Property or the Net Proceeds.

(3)  Mr Pun SC submits that the material facts (being the execution of the PSPA and the existence of the Cheque Payments) have been pleaded; that there was no need to expressly plead the word “severance” since there was no requirement to plead legal consequences; and that the severance point was in any event adequately pleaded in paragraph 14 of the RASOC which reads:

“Further or alternatively, the Plaintiff as the joint tenant of the Property is entitled to the Outstanding Balance as a beneficiary under an express trust by virtue of the [Oral Agreement] and/or a resulting trust and/or constructive trust and/or proprietary estoppel of which the 1^st Defendant holds the Outstanding Balance on trust on behalf of the Plaintiff.”

(4)  In our view, this plea undermines rather than supports the plaintiff’s position.  While the phrase “resulting trust” was pleaded, there is no explanation in the pleading as to how such a trust arose.  More importantly, in paragraph 14 of the RASOC, the plaintiff was said to be entitled to the Outstanding Balance as a “joint tenant” of the Property, which is inconsistent with the severance point.

(5)  While there is no requirement in the Rules of the High Court for a party to plead the legal consequences of particular facts, it is obviously impermissible for a party to assert an unpleaded legal consequence that is inconsistent with his pleaded case: Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd (2020) 23 HKCFAR 138 at [9] - [10].  Accordingly, and given Mr Pun SC’s confirmation that the plaintiff has no intention to amend her pleadings, it is not open to the plaintiff to argue the severance point.

32.Second, the severance point is caught by the “state of the evidence bar”:

(1)  A party would be barred from seeking to raise on appeal a point which was not taken at the trial “unless there is no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at trial”: Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356 at [38].

(2)  In the present case, the severance point was not taken at the trial.  The argument did not feature in either side’s written submissions, whether opening or closing.  The question of whether (or to what extent) the joint tenancy was severed was not one of the issues formulated by the parties.  Looking at the plaintiff’s pleadings and written submissions, it is clear that her claims are premised solely upon the existence of the Oral Agreement.  Indeed, during oral closing submissions, counsel for the plaintiff expressly confirmed that the plaintiff (a) would not pursue the severance point; (b) would rely only on the Oral Agreement; and (c) would fail in her claims if she could not establish the existence of the Oral Agreement (“the Concession”).

(3)  Pausing here, we hasten to add that the plaintiff’s decision not to pursue the severance point at the trial is all the more inexcusable given that G Lam J had already alerted the plaintiff to these arguments at the Pre-Trial Review on 9 July 2019.  On that occasion, the learned Judge told the plaintiff’s counsel that the Oral Agreement might not be an essential part of the plaintiff’s case because the plaintiff, being a joint tenant of the Property, might be entitled to part of the Net Proceeds if the joint tenancy were severed before the Deceased’s death.  The learned Judge suggested to the plaintiff’s counsel that, in between then and the trial, he should consider this point by conducting further legal research and carrying out some “rigorous legal analysis”.  Despite this indication from G Lam J, the plaintiff had neither amended its pleading nor raised the point at the trial. Quite to the contrary, as mentioned above, the plaintiff’s counsel confirmed with the Recorder that the plaintiff’s claims stood or fell together with the finding of the Oral Agreement[5].

(4)  In response, Mr Pun SC says that even if the severance point is a new point, the plaintiff should be permitted to raise it since it is purely a point of law.  Further, he argues that the “state of the evidence bar” is not engaged since the course of evidence or conduct of the trial could not have been affected.  This is so because the defendants would simply have relied on the Alternative Agreement to answer the severance but the defendants had already put forward all they had to prove the existence of the Alternative Agreement.

(5)  We do not accept these arguments.  We disagree that the severance point is purely a point of law.  We also disagree that the defendants could only have answered the severance point with the Alternative Agreement.  Our reasons are as follows.

(6)  As recognised by Mr Pun SC[6], before the plaintiff can claim to be a tenant in common as to half of the Net Proceeds, it must be shown that she was a beneficial joint tenant of the Property in the first place.  In this regard, although the starting point is that equity follows the law, the nature and extent of a party’s beneficial interest in a property is ultimately a question of intention.  As recently stated by the Privy Council in Marr v Collie [2018] AC 631 at [53] - [54]:

“If what Baroness Hale described as a ‘starting point’ (that joint legal ownership should signify joint beneficial ownership) is to be regarded as a presumption, is it in conflict with the presumption of a resulting trust where the parties have contributed unequally to the purchase of property in their joint names? … The Board considers that, save perhaps where there is no evidence from which the parties’ intentions can be identified, the answer is not to be provided by the triumph of one presumption over another. In this, as in so many areas of law, context counts for, if not everything, a lot. Context here is set by the parties’ common intention – or by the lack of it.” (Emphasis added)

(7)  The question of intention is obviously a fact sensitive issue. Factors that are relevant to divining the parties’ intention include how the purchase was financed; any advice or discussions at the time of the transfer; the nature of the parties’ relationship etc: Stack v Dowden [2007] 2 AC 432 at [69].  This Court also recently reiterated that the common intention of parties should be determined by a holistic approach having regard to the context and circumstantial matters: Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at [1.6]; Ho Kwok Wing v Chan Mei Mui [2020] 3 HKLRD 548 at [8.9].

(8)  Thus, in the present case, if the plaintiff had taken the severance point at the trial, the defendants could have adduced evidence on, for example, how the Property was financed initially, which would have shed light on the beneficial ownership of the Property and rebutted the severance point.  The state of the evidence would have been materially different.

(9)  Mr Pun SC has submitted that the defendants had never suggested in this action that the beneficial ownership of the Property differed from its legal ownership.  For example, in the defendants’ pleading, it was admitted that the plaintiff and the Deceased were joint tenants of the Property.  With respect, however, this is precisely why the plaintiff should not be allowed to take the severance point, because it shows that had the plaintiff pursued the severance point at trial, the beneficial ownership of the Property would have been put in issue and the defendants would have (or at least could have) conducted their case differently.  This kind of prejudice should be taken into account when deciding whether to allow a party to take a new point on appeal[7].

33.Third, the severance point involves the withdrawal of the Concession:

(1)  In Chan Chi Wai v Chan Sau Wah [2019] 3 HKLRD 330 at [29], Kwan VP set out the principles for determining whether a party should be allowed to withdraw a concession on appeal:

“The relevant principles are as stated by Mann J in BT Pension Scheme Trustees Ltd v British Telecommunications Plc [2011] EWHC 2071 (Ch) at [44]:

i)  The resiling party has the burden of establishing that the previous forgone point should be raised.

ii)  It will be harder to raise a point which has been expressly conceded.

iii)  If taking the point would risk causing prejudice to the other party, in the sense that it might have been deprived of the opportunity of dealing with the case differently in the court below, then it is unlikely that the resiling will be allowed. The greater the risk, the less likely it is that it will be allowed.

iv)  There is a low threshold of risk for these purposes…

v)  The burden of establishing no risk is on the party who wishes to withdraw the concession, and the other party should have the benefit of any doubt in this area.”

(2)  Mr Pun SC submits that the Concession was wrong in law and should not have been accepted by the Recorder.  We disagree.  As discussed at [31] above, the severance point is inconsistent with the plaintiff’s pleaded case.  Since issues are defined by pleadings, the plaintiff’s counsel was right to make the Concession.

(3)  Mr Pun SC has sought to contend that the defendants have suffered no prejudice because there is no risk or possibility that they could have conducted the trial differently.  For the reasons stated at [32] above, we disagree.

(4)  Mr Pun SC’s next argument is that since the Concession was made at the very end of the parties’ oral closing submissions, it did not affect how the parties ran their case in terms of evidence or submissions.  But this argument ignores the fact that the Concession plainly influenced the way in which the Recorder dealt with the case.  It is clear that as a result of the Concession, the Recorder dismissed all of the plaintiff’s claims after rejecting the existence of the Oral Agreement, without making any determination on the other issues such as the existence of the Alternative Agreement.  As Mr Pun SC has rightly accepted at the hearing, the Alternative Agreement would have been an answer to the severance point.  This means that had the plaintiff properly pleaded and run the severance point at trial, the Recorder would have made a determination on the existence of the Alternative Agreement.  It also follows that if we are to permit the plaintiff to withdraw the Concession now and take the severance point, we must remit the case back to the Recorder (or another trial judge) to make that determination.  Accordingly, allowing the plaintiff to resile from the Concession will cause the defendants substantial prejudice at least in the form of wasted costs and time.  The plaintiff has not offered to bear the wasted legal costs occasioned by the Concession, but in any event we do not think such an offer (or a costs order to that effect) can fully remedy the prejudice that will be caused to the defendants.

(5)  Lastly, Mr Pun SC submits that the plaintiff should be allowed to withdraw the Concession because the severance has a good prospect of success.  We disagree.  As explained above, the strength of the severance point depends on, among other things, the beneficial ownership of the Property and the existence of the Alternative Agreement.  The former question has not been explored in evidence while the latter question has not been determined by the Recorder.  It would be premature to assess the merits of the severance point.

(6)  For these reasons, and given that the plaintiff’s counsel has not offered any explanation for making (and now withdrawing) the Concession, we are not satisfied that the plaintiff should be allowed to resile from the Concession and run the severance point.

34.Lastly, Mr Pun however contends that on the undisputed facts of the present case, there is no question that there was severance in the joint tenancy upon the sale of the Property (or at the latest upon the Cheque Payments) and there should be equal share of the sale proceeds between the plaintiff and the Deceased.  In the premises, the plaintiff should be permitted to run the severance point in this appeal and should indeed succeed.  Counsel’s arguments can be summarized as follows.

35.Mr Pun says it is well established that upon the severance of a joint tenancy, the starting position is an equal share of the proceeds (as it is presumed that there is an equal share of beneficial interests between the joint tenants), and the burden is on the party who says otherwise to prove a contrary position.  In support, Mr Pun relies on Wilson v Wilson [1963] 1 WLR 601 at 607 and 609 per Donovan LJ and at 609 per Russell LJ; Davis v Smith [2012] 1 FLR 1177 at [14] per Lord Neuberger MR (as he then was); Re Allingham [1932] VLR 469 at 472 per Lowe J (of the Supreme Court of Victoria); Neilson-Jones v Fredden [1975] 1 Ch 222 at 228D per Walton J; Goodman v Gallant [1986] Fam 106 at 118H-119D per Slade LJ.

36.Mr Pun further emphasizes that this starting point can be said to be the result of the maxims that equality is equity: Stack v Dowden [2007] 2 AC 432 at [109] per Lord Neuberger, and this applies not only in pure domestic context but also where there is a commercial aspect to the parties’ personal relationship: Marr v Collie [2018] AC 631 at [39] - [40] per Lord Kerr.

37.Relying on the above, Mr Pun then submits that in the present case, there is no dispute that the plaintiff and the Deceased held the Property as joint tenants.  Given the above starting position, in the absence of evidence to satisfy the high burden to prove a contrary intention, equity follows the law and they should be regarded as equal beneficial joint tenants: Stack v Dowden, [54], [56] and [58] per Baroness Hale.

38.Mr Pun then says there is a clear case of severance here because of the following.

39.First, it was pleaded[8], and found by the Judge at [14] - [15] of the Judgment, that the Cheque Payments were made by the Deceased to the plaintiff on 27 June 2011 and 1 August 2011 respectively.  As a matter of principle, division of the proceeds of sale amounts to a severance of the beneficial joint tenancy: see Burgess v Rawnsley [1975] Ch 429 at 440C, per Lord Denning MR; Re Allingham at 472, per Lowe J.

40.Second, as the evidence revealed, the plaintiff and the Deceased’s joint tenancy of the Property had in fact been severed into beneficial tenancy in common at an even earlier point of time upon the signing of the PSPA on 1 June 2011 by the Deceased alone.  The proceeds of sale must therefore be divided equally:

(1)  during cross-examination[9], the plaintiff’s evidence was that she was only notified of the sale after the 1^st defendant had sold the Property and received the down payment:

“Q: All right. so when did your ex-husband have the idea to sell the property?

A: I was not – in September – sorry in June 2011, I got a notification from him that his business was not good and his health was poor and he would – he had already received the large deposit – down payment, sorry, the down payment for the sale of this property.

Q: So was it the case that before the flat was committed to or were commissioned to the property agent that your ex-husband had agreed with you?

A: Well, he – well, only after he had got the – he had received the down payment when he notified me that he would like to sell it.

Court: I think there was a ‘No’ at the beginning of the answer. I think she said, ‘唔係.’” (emphasis added)

(2)  this is also consistent with the PSPA that only the 1^st defendant put a signature on it.[10] It follows from both oral and documentary evidence that the 1^st defendant had unilaterally dealt with the Property. This would have the consequence of severing the joint tenancy: see Gray & Gray, Elements of Land Law (5^th Ed, 2008) at [7.4.25]; and

(3)  thus, on the evidence, it was at the time of the signing of the PSPA by the Deceased alone, that the plaintiff and the Deceased had become beneficial tenants in common and each is entitled to 50% of the proceeds of sale.

41.In the premises, Mr Pun submits the Recorder was plainly wrong to have concluded that the plaintiff, as joint tenant of the Property, could have no entitlement to the Net Proceeds save to the extent of the Cheque Payments and except with the aid of the Oral Agreement.  Mr Pun says given the above clear acts of severance and the well-established legal principles, and given that the defendant has failed to prove with any evidence why she (through the Deceased) should be entitled to more than the presumed equal interest in the proceeds, this is a clear case where the plaintiff must as a matter of principle be entitled to half of the Net Proceeds even in the absence of the Oral Agreement.  It is unnecessary to remit the matter back for retrial.

42.For the following reasons, we disagree.

43.As pointed out by Yuen JA at the hearing, the authorities clearly show that whether or not the joint tenants share an equal beneficial interest in a joint tenancy (whether the property is a matrimonial or investment one) is all a matter of intention.  This has been made clear by Lord Kerr in Marr v Colie at [40] - [45] and [49] after reviewing Baroness Hale and Lord Neuberger’s respective dicta in Stack v Dowden as follows:

“40  At para 56 of her opinion in Stack v Dowden [2007] 2 AC 432 Baroness Hale expressed the fundamental principle in commendably clear and simple terms: ‘the starting point where there is joint legal ownership is joint beneficial ownership’. Although that statement was made in a case where the dispute between the parties was in relation to property which was a family home, there is no reason to doubt its possible applicability to property purchased by a couple in an enterprise reflecting their joint commercial, as well as their personal, commitment. When Baroness Hale said, in para 58, that, ‘at least in the domestic consumer context, a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved’, it is clear that she did not intend that the principle should be confined exclusively to the domestic setting. Of course, when the conveyance occurs in circumstances where the parties are involved only in a personal relationship, the fact that they have elected to have the property in their joint names may make it easier to infer an intention that they should share the beneficial ownership. But that does not mean that where there is a commercial dimension to the acquisition of the property, the decision to have the legal ownership declared to be jointly shared is bereft of significance. The intention of the parties will still be a crucial factor.

41  In para 59 et seq Baroness Hale addressed the question of how the prima facie position (that the legal and beneficial interests should be joint and equal where a domestic property was conveyed into the joint names of cohabitants) could be displaced. She posed the question whether the starting point was the presumption of resulting trust, reflecting the financial contributions made by the respective parties to the acquisition of the property or whether one should look at all the circumstances in order to discern the parties’ intention. She pointed out, at para 60, that the presumption of resulting trust was not a rule of law and concluded that the ‘search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it’. (The words ‘inferred’ and ‘imputed’ have taken on a greater significance more recently, particularly in Jones v Kernott; [2012] 1 AC 776 , which is discussed below. They are not of particular importance in Stack v Dowden, however.)

42  So far as concerns the present appeal, passages from paras 68-69 of Baroness Hale’s opinion encapsulate the essential reasoning:

‘68. The burden will therefore be on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests, and in what way. This is not a task to be lightly embarked upon. In family disputes, strong feelings are aroused when couples split up. These often lead the parties, honestly but mistakenly, to reinterpret the past in self-exculpatory or vengeful terms …

‘69. … Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties’ true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; … the purpose for which the home was acquired; the nature of the parties’ relationship; … how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses. When a couple are joint owners of the home and jointly liable for the mortgage, the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. The parties’ individual characters and personalities may also be a factor in deciding where their true intentions lay. In the cohabitation context, mercenary considerations may be more to the fore than they would be in marriage, but it should not be assumed that they always take pride of place over natural love and affection. At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.’

43  Although Lord Neuberger of Abbotsbury disagreed as to the approach to be taken to ascertaining, whether what he described as ‘the resulting trust solution’ should be applied, under the rubric, beneficial ownership in acquisition in para 109, he said:

‘In the absence of any relevant evidence other than the fact that the property, whether a house or a flat, acquired as a home for the legal co-owners is in joint names, the beneficial ownership will also be joint, so that it is held in equal shares. This can be said to result from the maxims that equity follows the law and equality is equity. On a less technical, and some might say more practical, approach, it can also be justified on the basis that any other solution would be arbitrary or capricious.’

44  Under the rubric, ‘Beneficial ownership on acquisition: differential contributions’, however, Lord Neuberger in para 113 adumbrated a number of ‘practical reasons’ which, he said, favoured rejection of the equality approach and supported the resulting trust solution:

‘The property may be bought in joint names for reasons which cast no light on the parties’ intentions with regard to beneficial ownership. It may be the solicitor’s decision or assumption, the lender’s preference for the security of two borrowers, or the happenstance of how the initial contact with the solicitor was made …’

45  It is important that these observations are seen in light of the prefatory words in para 110:

‘Where the only additional relevant evidence to the fact that the property has been acquired in joint names is the extent of each party’s contribution to the purchase price, the beneficial ownership at the time of acquisition will be held, in my view, in the same proportions as the contributions to the purchase price.’ (Emphasis supplied.)

…

49  The Board does not consider, therefore, that Laskar’s case is authority for the proposition that the principle in Stack v Dowden (that a conveyance into joint names indicates legal and beneficial joint tenancy unless the contrary is proved) applies only in ‘the domestic consumer context’. Where a property is bought in the joint names of a cohabiting couple, even if that is as an investment, it does not follow inexorably that the ‘resulting trust solution’ must provide the inevitable answer as to how its beneficial ownership is to be determined. Lord Neuberger did not intend to draw a strict line of demarcation between, on the one hand, the purchase of a family home and, on the other, the acquisition of a so-called investment property in whatever circumstances that took place. It is entirely conceivable that partners in a relationship would buy, as an investment, property which is conveyed into their joint names with the intention that the beneficial ownership should be shared equally between them, even though they contributed in different shares to the purchase. Where there is evidence to support such a conclusion, it would be both illogical and wrong to impose the resulting trust solution on the subsequent distribution of the property.” (emphasis added)

44.Hence, in the present case, whether or not the plaintiff and the Deceased were equal beneficial joint tenants of the Property depends on their intention.  It is in this respect that Mr Pun is wrong to say that it must be clear in the present case given the starting presumed position heavily relied on by him.

45.As further pointed out by Yuen JA at the hearing, and also explained above, the plaintiff has not pleaded in her claim that, if there is no Oral Agreement, alternatively it could in any event be inferred that the Property, and thus its proceeds, would be held equally.  Since she has not pleaded the alternative case, the defendant was deprived of the opportunity to plead (and then raise evidence in support) matters which would support a contrary intention, for example the plaintiff and the Deceased’s respective contributions to the purchase price and/or matters in relation to the financial arrangements (including property arrangements therein) reached in the divorce in 1995.  See also the matters mentioned at [32(7)] above.

46.Given this lack of a plea on the alternative case based on equal joint tenancy and severance (and thus the potential lack of evidence in this respect that could be raised by the defendant to show a contrary intention), the starting presumption of equal beneficial interest relied on by Mr Pun cannot assist the plaintiff in this appeal.  Thus, even if there is clear severance as submitted, it still cannot be said (as Mr Pun has further sought to submit) that it is clear in the present case that the plaintiff should succeed in her claim on this basis.  We have in the above also explained why it would be undesirable to remit the matter back for retrial, in particular in light of Mr Pun’s confirmation at the hearing that he would not seek to amend the pleading even if the matter is to be remitted back.

47.In the premises, for all the above reasons, we also dismiss Ground 2.

F3.  Ground 3

48.This ground of appeal concerns the plaintiff’s claim against the 2^nd defendant as a constructive trustee on the ground of dishonest assistance and/or knowing receipt.  Since we have dismissed Grounds 1 and 2, there is no basis to conclude that the Deceased was a “trustee” in respect of the Outstanding Balance.  It follows that Ground 3 must also be dismissed.

G.  DISPOSITION

49.We dismiss the appeal and make an order nisi that the plaintiff shall pay the costs of the defendants in this appeal.