Chan Pak Hung v. Keung Lai Nor Winnie

HCA 1158/2017

[2022] HKCFI 1264

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1158 OF 2017

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BETWEEN

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J U D G M E N T

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A.  INTRODUCTION

1.The parties used to be joint owners but have become tenants-in-common in equal shares of the subject flat at Peony Height and a car parking space (collectively, “Peony Height Properties”).

2.The Plaintiff (“Mr Chan”)  seeks an order for sale, equal division of the sale proceeds and occupation rent.  His case is that he had financed the acquisition of the Peony Height Properties and given 50% interest to the Defendant (“Madam Keung”)  as a gift.

3.Madam Keung, however, claims to have fully funded the acquisition.  She asserts a pre-acquisition Oral Agreement whereby Mr Chan’s name was added as an owner to enable her to acquire a mortgage to be repaid by her; she would be the sole beneficial owner of the Peony Height Properties and Mr Chan would hold his half interest on trust for her.  She counterclaims for a declaration of trust accordingly, an order that the legal estate in Mr Chan be vested in her, and that the Notices of Severance registered against those Properties be vacated.

4.As beneficial interest follows the legal title, there is no dispute that the onus lies on Madam Keung to establish her full beneficial ownership on balance of probabilities.

B.  UNDISPUTED FACTS

5.Save where otherwise stated, the facts in this Section are undisputed or indisputable as being supported by documents.

B(1).  The parties

6.Mr Chan and Madam Keung met at a nightclub in about 1979, at a time when Madam Keung was a dance hostess there.  After the commencement of their intimate relationship in the early 1980s, Madam Keung quitted her job.  They cohabited and their relationship lasted until at least the late 1980s (according to Madam Keung)  or 1990s (according to Mr Chan).  During that period, Madam Keung remained married to another man until she obtained her decree absolute on 13 February 1984.  Mr Chan got married to another woman in August 1986.

7.By 1983, Mr Chan became a fully licensed jockey.  He had been a trainer with the Hong Kong Jockey Club from 1992 until his licence was suspended in 1997.

8.Madam Keung’s employment history was as follow:

(1)  Unemployed in the period between about 1979 and 1989;

(2)  Employed as a saleslady from 1989 to 1991;

(3)  Employed from 1992 to 31 March 2000, her last position being senior receptionist; and

(4)  Thereafter employed as a cashier office manager until 2011.

9.On 25 June 2011, Madam Keung got re-married.

B(2).  The Eden Garden Properties

10.On 15 May 1984, Mr Chan, Madam Keung, and Mr Chan’s mother became joint owners of a flat and a car parking space at Eden Garden (collectively “Eden Garden Properties”).  The flat was used as their residence.

11.The acquisition of the Eden Garden Properties was partly funded by a mortgage with the Bank of Canton (“BOC"), borne by Mr Chan.

12.There is dispute as to whether Madam Keung’s 1/3 interest was a gift from Mr Chan, or Madam Keung had used her own money to pay for 1/3 of the deposit and other outgoings.

13.In 1985, it was agreed between Mr Chan and Madam Keung that the latter would move out and assign her ownership in the Eden Garden Properties to Mr Chan and his mother. That assignment was carried out on 16 September 1985.  There is dispute as to the reason behind this arrangement and whether Madam Keung received HK$100,000 (“buy-out sum”)  from Mr Chan to buy out her 1/3 ownership.

B(3).  The Peony Height Properties

14.Madam Keung alone signed an Agency Agreement for Rental or Sale of Property dated 15 June 1985 (“Agency Agreement”)  to buy the Peony Height Flat at a price of HK$520,000.  A deposit of HK$3,000 was paid.

15.On 18 June 1985, Madam Keung alone endorsed on an Instruction Form dated 23 February 1984, whereby Madam Keung would purchase from one Yeung Siu Fung and Linda Wu (“Vendors”)  the Peony Height Flat and take over the developer’s loan of HK$452,070, to be repaid by instalments of HK$5,188.75.  At some stage, Mr Chan’s name was added at the top of the front page of this document signifying that he and Madam Keung would be the purchasers.

16.On 20 June 1985, the parties signed an agreement to purchase a car parking space at Peony Height from the developer (“Po Kwong”)  at a consideration of HK$60,000. 

17.On 21 June 1985, Mr Chan and Madam Keung attended at the office of Ip, Ku  and Stoppa to sign the Novation Agreement between them and the Vendors.

18.There is dispute as to who bore the deposits and initial payments (ie agency fees, stamp duty and legal costs).

19.The balance of the purchase price was financed by a mortgage loan of HK$380,000.00 from BOC (“the Mortgage”) to be repaid by 120 monthly instalments of HK$4,660.80. The Mortgage was extended to both Mr Chan and Madam Keung. 

20.By two Assignments dated 17 September 1985, Mr Chan and Madam Keung became joint tenants of the Peony Height Properties.  On the day before, Madam Keung’s 1/3 interest in the Eden Garden Properties was assigned to Mr Chan and his mother.

21.On 12 March 1987, the Mortgage was released as it was paid off by using winnings of bets at a horse-race meeting that took place on 7 January 1987 (“the Winnings”).

22.There is dispute as to whether Mr Chan had lived at the Peony Height Properties or contributed to the deposit or Mortgage repayment.  There is also dispute as to whose conduct led to the Winnings.

B(4).  Subsequent events

23.In February 1986, Mr Chan opened a joint name account with Madam Keung at American Express Bank, Switzerland “AEB/SW” (now known as Union Bancaire Privee “UBP”)  (“the AEB/SW Joint Account”). Mr Chan also caused Madam Keung to open a USD account and an AUD account at American Express Bank, Hong Kong (“AEB/HK”), although the date of opening of these accounts was not clear.

24.The bank records disclosed by Mr Chan showed that money was transferred from the AEB/SW Joint Account to Madam Keung’s AEB/HK Account every 3 months during the period from 1991 to 1997.

25.In 1997, Mr Chan was under investigation by the ICAC on a suspected case of corruption.  He made a Statutory Declaration dated 24 April 1997, purportedly setting out his assets.  The AEB/SW Joint Account was closed in December 1997 and US$100,000 and AUD100,000 were transferred to Madam Keung. 

26.Mr Chan filed two Notices of Severance of Joint Tenancy both dated 28 November 2016 (“Notices of Severance”), which were registered at the Land Registry on 1 December 2016. As a result, the parties now hold the Peony Height Properties as tenants in common in equal shares.

27.Upon receipt of the Notices of Severance, Madam Keung asserted that Mr Chan held the Peony Height Properties on trust for her, as he had never paid anything for them.  She asked for re-transfer of the Peony Height Properties to her.

28.Mr Chan’s solicitors issued a demand letter dated 19 December 2016to Madam Keung.

29.On 17 May 2017, Mr Chan issued the writ in this action, seeking an order for sale and occupation rent to be assessed. Madam Keung denies the claim and makes her counterclaim.

C.  PARTIES’ RESPECTIVE CASE

30.It is Mr Chan’s case that during the time when the parties had an intimate relationship, he had financially supported Madam Keung.  The acquisitions of properties were solely financed by him.  Madam Keung’s interests in Eden Garden Property and, later, Peony Height Properties were gifts from him. 

31.Mr Chan claims that the decision for Madam Keung to move out of Eden Garden Properties was that she could not get along with Mr Chan’s mother. In addition, she stole HK$50,000 from Mr Chan although she later returned HK$20,000.  In consideration of Madam Keung giving up her 1/3 interest in Eden Garden Property, Mr Chan agreed to include her name as a joint tenant in the new property to be purchased.

32.After completion, the parties moved in the Peony Height Flat and it became Mr Chan’s second home.  Mr Chan was responsible for payment of the mortgage instalments and all expenses of the Peony Height Properties.  He gave information to Madam Keung to bet for a Mr Yeung and later, Mr Yeung told Mr Chan to keep the Winnings.  Mr Chan applied the Winnings to discharge the Mortgage.

33.Apart from his demand letter, Mr Chan had made several prior requests to Madam Keung to sell the Peony Height Properties and split the proceeds between them:

(1)  At the time when the parties fell out in late 1980s or early 1990s: to facilitate the sale, Mr Chan procured a valuation report dated 2 August 1990 from A.G. Wilkinson & Associates (“Valuation Report”)  which valued the   Peony Height Properties at HK$1,250,000.  However, Madam Keung requested postponement of the sale as she was optimistic that the property market would continue to rise.

(2)  In late 1997: however, Madam Keung again requested a postponement having regard to the financial crisis which caused the property market to collapse.

(3)  In 2016 when the property market was booming: as the requests to Madam Keung for sale failed, Mr Chan issued the Notices of Severance. 

34.On the other hand, Madam Keung claims that she had to move out of Eden Garden Property because family members of Mr Chan came to reside there, which made the accommodation uncomfortable.  There was clash between her and Mr Chan.  Mr Chan also had an affair.  

35.Madam Keung says that a common intention constructive trust was created by the Oral Agreement at or about the time of acquisition of the Peony Height Properties.  She claims to have solely borne the deposits and initial payments using her savings.  That comprised the buy-out sum and HK$150,000 which she had received upon her divorce.  She repaid the mortgage instalments with money from her HSBC account. She placed bets herself to earn the Winnings.  Alternatively, if Mr Chan had made contribution to the purchase price, such was a gift from him (“Alternative Case”).

36.Madam Keung claims to have asked for transfer of the Peony Height Properties to her in about 1987-88 and 1997 but Mr Chan put her off.

D.  ISSUES

37.The issues are as follows:

(1)  Whether the Oral Agreement existed?

(2)  Who financed the acquisition of the Peony Height Properties?

(3)  Whether Mr Chan is entitled to occupation rent?

38.The core issue is really the first one.  Answers to issues 2 and 3 merely manifest the intention of the parties as joint owners or execution of the Oral Agreement (if existed).  The Alternative Case is subsumed in Issue 2.

39.There has been a long lapse of 30 years since redemption of the Peony Height Properties before each party asserts his/her rights by litigation.  Meanwhile Madam Keung has had 30 years of undisturbed possession, with Mr Chan using the Peony Height Flat as a second home only for a few years.  As there is no plea on laches, any delay in asserting each party’s right to the Peony Height Properties is relevant only in assessing his/her credibility but would not bar him or her from relief.

E.  LEGAL PRINCIPLES

40.The principles on common intention constructive trust are not in dispute and have been set out in the case of Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §§46-50, Godfrey Lam J (as he then was), approved in WML v LCK, CACV 82/2014 and HCMP 3011/2014, 27 February 2015 at §41.

“46. … the plaintiff must prove (a)  there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the Property despite that it was acquired in the defendant’s name; (b)  the plaintiff altered his position in detrimental reliance upon such common intention; and (c)  it is unconscionable for the defendant to assert ownership in reliance on her legal title to the Property.

47. In ascertaining whether there was a common intention, it is the objective intention of each party “which was reasonably understood by the other party to be manifested by that party’s words and conduct” that one must examine ...

48. In the present case it is the parties’ common intention at the time of the acquisition of the Property that is relevant, there being no suggestion from anyone that the intention had changed.

49. Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned based on evidence of express discussions. It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention …

50. Even where, as in this case, reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.”

41.The modern approach in conducting the assessment is to adopt a holistic approach having regard to the context, which is a “fundamental consideration”: Chan Hin v Chen Bai Dyi, HCA 680/2014, 25 July 2017, Anthony Chan J at §25.

42.If, unfortunately, the Court finds both sides’ assertions about beneficial entitlement to be suspect, the Court will rely on the undisputed or incontrovertible evidence and may have to go back to the starting point, which is that beneficial ownership follows the legal title: Lun Kwai Har v Hung Ying Yi(HCA 1164/2013, 22 March 2016)  at §55, G Lam J (as he then was).

F.  ASSESSING THE CREDIBILITY OF WITNESSES

43.In assessing credibility, the Court will consider the inherent probabilities and logicality in a party’s case, whether the party’s case is contradicted in a material way by other undisputed or indisputable evidence, and whether it is shown that a witness has been discredited over one or more matters to which he had given evidence using the above tests.  See Lee Fu Wing v Yau Po Ting Paul [2009] 5 HKLRD 513, at §53, DHCJ Au (as he then was). 

44.It will not be a satisfactory approach to assess the credibility and reliability of witnesses by reference to their demeanour or solely with regard to how they respond to questions and behave in the witness box. The appropriate approach is to assess their evidence in terms of their inherent probabilities or improbabilities.  See Chin Nai Man v Chin Kay Keung Alex [2020] HKCFI 403 at §15, Recorder Winnie Tam SC.

45.Memory may be fallible.  If the relevant events have happened a long time ago, the Court will place more weight on contemporaneous documents: Sarah Sally Chan-Kent v Chim Sau Ching [2019] HKCFI 3066 at §§43-45; Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923 at §§53-62.

46.The parties have made endeavours to obtain bank records evidencing each party’s financial contribution to the acquisition of the properties, but due to the long lapse of time, bank documents are not fully available.  Such evidential gap, together with her starting position of being unemployed at the time of acquisition of the Peony Height Properties, do pose difficulties to Madam Keung who carries the burden of proof.

47.Mr Chan did not seem to be able to catch long, complex questions.  At times he required questions to be repeated to him.  That should not be taken against him.  However, his evidence was full of contradictions.  He was evasive in the witness box at times.  He would not even admit that Madam Keung was a married woman at the time the assignment in relation to the Eden Garden Property was signed.  This Court had to, on several occasions, ask him why he was not answering questions or why he was staying silent for so long.  He was totally shaken when cross-examined as to how the Winnings came about.  He claimed that the AEB/SW Joint Account was closed by Madam Keung without his knowledge when the bank records showed that he had signed at the time of the closure and AEB verified his signature. 

48.Further, he had only taken out the present action about 27 years after the parties separated (in 1990, on his case).  His requests for sale were far and few in between.  In his Statutory Declaration to the ICAC, he did not even mention his interest in the Peony Height Properties.  These could cast doubt on the veracity of his claim. 

49.However, the matters on which he was shaken were really peripheral.  There are some indisputable documents and circumstances which support his case on the core issue, as explained below.

50.Madam Keung appeared to be calm and straightforward, but her evidence could not bear scrutiny and was illogical/implausible on material aspects.  She initially denied having a joint account with Mr Chan at the AEB but admitted it when documents were produced by Mr Chan.  She also asserted for the first time in the witness box the existence of a second BOC joint account and that her parents would support her in repaying the Mortgage.  These changes in evidence were material to the issue of her means to bear the purchase price and overall credibility.  Similar to Mr Chan, her alleged demands for transfer of the Peony Height Properties to her over the years were far and few in between even though she possessed the telephone number of Mr Chan.

51.Overall, I do not find both parties to be reliable witnesses, as shall be explained under each issue below. 

G.  WHETHER THE ORAL AGREEMENT EXISTED

52.Madam Keung probably sourced for properties and decided to buy the Peony Height Flat on her own before requesting Mr Chan to add his name as owner, otherwise she would not have signed the Agency Agreement alone.  On her testimony, she went to BOC to ask about a mortgage right after signing the Agency Agreement on 15 June 1985 and before signing the Instruction Form on 18 June.

53.For this issue, I shall assume that the deposit and initial payments were borne by Madam Keung alone.

G(1).  Circumstances before or at the time of the acquisition

54.The circumstances before or at the time of the acquisition reflect the inability of Madam Keung to bear the full cost of acquisition and her need for Mr Chan to bear the Mortgage.

55.Firstly, at the time of purchase, she hardly had means to repay the mortgage instalments on her own. She was unemployed.  After payment of the deposit and initial payments, her alleged savings dropped to HK$100,000, which was not enough to sustain repayments for 10 years plus her own livelihood. It was never her case that she expected to get a job or had other sources of income (such as from betting).  Mr Chan’s alleged promise to marry her and the setting up of the AEB/SW Joint Account only came a few months after completion, even on her case.

56.Secondly, the Alternative Case is factually inconsistent with Madam Keung’s primary case that she alone repaid the mortgage instalments.  It is impermissible: Hong Kong Civil Procedure 2022, Vol 1, §18/7/12.  The Alternative Case makes her case equivocal.  She has never committed herself in evidence as to whether Mr Chan had or had not contributed to anything towards the deposit or mortgage instalments.  The closing submission of Mr Remedios, counsel for Madam Keung, contains a deafening silence as to how she herself had repaid the mortgage instalments.

57.Thirdly, on her own case, it was illogical for Madam Keung to have invited Mr Chan to be an owner even in name.  The parties’ relationship was then strained.  Mr Chan had an affair (which he initially denied but eventually admitted in the witness box).  When Madam Keung confronted him, Mr Chan even assaulted her. 

58.There was also no reason why Mr Chan would need to help her out with the Mortgage since he had already promised to pay her the buy-out sum (denied by Mr Chan).

59.On the other hand, Mr Chan’s explanation was that Madam Keung could not get along with his mother.  That was why the parties decided to buy another property.  He discovered her theft of HK$50,000 in 1984 but she returned HK$20,000 to him.

60.The truth probably lay between the 2 versions.  The relationship had not completely broken down.  Even according to Madam Keung’s witness statement, she was to live apart for a cooling off period.  After Mr Chan’s financial situation had improved, he would marry her.  She had hopes of reconciliation. 

61.The inference that one can draw is that their relationship was not as bad as Madam Keung described.  Otherwise, she would not have taken another half a year to locate the uncompleted Peony Height Flat.  She could continue to rely on Mr Chan to repay the Mortgage, as he did for the Eden Garden Properties.

62.Fourthly, Madam Keung simply did not need to add Mr Chan’s name at all, if her intention was to pay the balance of the purchase price by instalments.  This was because Po Kwong, as developer, had offered finance to purchasers.

63.Clause 1 of the Novation Agreement provided that:

“The New Purchaser [Mr Chan and Madam Keung] hereby undertakes and agrees to perform all the terms of and in the Principal Agreement and to be bound by such terms thereof in every way as if the New Purchaser were a party to the Principal Agreement in lieu of the Original Purchaser.”

64.The Principal Agreement referred to in Clause 1 was the agreement dated 12 April 1984, between Po Kwong as seller and the Vendors as original purchasers of the Peony Height Flat. The Vendors would pay the deposit of HK$90,414 and settle the balance of the purchase price by paying monthly instalments of HK$5,188.75 to Po Kwong.  See First Schedule to the Principal Agreement.

65.Hence, by stepping into the shoes of the Vendors, Madam Keung could simply have continued paying the monthly instalments to Po Kwong without the need for a mortgage.

66.In re-examination, Mr Remedios sought to extract the answer from Madam Keung that she had not obtained legal advice of the Novation Agreement and the Principal Agreement in respect of taking up the loan from Po Kwong.  He also submits that Madam Keung was not a lady of sophistication.  She had only received secondary education in Chinese and might have failed to grasp the legal effect of those documents.

67.I agree with Mr Chiu that it was not a matter of legal advice.  Developers providing finance for the purchase of uncompleted property was common in Hong Kong.  The terms on which Po Kwong provided finance were set out in the Instruction Form signed by the Vendors and endorsed by Madam Keung. She admitted in the witness box that she was aware of the Vendors paying monthly instalments to Po Kwong for uncompleted property (供緊樓花).  She also agreed that Po Kwong’s loan could be extended to her without income proof from her.  She plainly knew she could have stepped into the shoes of the Vendors.

68.Mr Remedios also submits that given her experience that the Eden Garden Property had been purchased with the assistance of a mortgage, it was not surprising that Madam Keung assumed that a mortgage was what was required to finance the purchase of the Peony Height Properties. With respect, that was not Madam Keung’s evidence.

69.For the reasons given in this sub-section.  Madam Keung is not credible.  The events before or at the time of the acquisition show that she needed to add Mr Chan’s name so that the Mortgage could be taken out and would be borne by him.

G(2).  Circumstances after the acquisition

70.Events subsequent to the purchase assist in testing whether or not the Oral Agreement existed.

71.Firstly, there was no reason why Mr Chan would have commissioned the Valuation Report unless he had interest in the Peony Height Properties.  His career was booming and there was no reason for him to fabricate a case in respect of properties that he had no beneficial interest in.  The timing of that report tallied with the time when the parties fell out, in late 1989 or early 1990.  The fact that Madam Keung had not received that report was irrelevant to ascertaining Mr Chan’s understanding of his own rights.

72.Secondly, it was strange that Mr Chan has not listed the Peony Height Properties as his assets in the Statutory Declaration.  This may be an indication that he did not believe that he had interest in those Properties.

73.Thirdly, indisputably, Mr Chan and Madam Keung opened the AEB/SW Joint Account in February 1986.  There were also 2 AEB/HK Accounts opened in Madam Keung’s name. Bank records showed that between 1991 and 1997, sums of money were transferred every quarter from the AEB/SW Joint Account to Madam Keung’s AEB/HK Account. 

74.Madam Keung claimed that the parties had separated and she lived alone at the Peony Height Properties, but Mr Chan dated her and promised to marry her.  The AEB/SW Joint Account was opened in anticipation of their marriage and as security for their future needs. 

75.I note that Madam Keung initially denied the existence of the AEB/SW Joint Account until bank records were produced by Mr Chan.  She may have forgotten about details of the AEB Accounts but she could not have forgotten that substantial money had been put under her name and money had regularly passed into her hands.  She was plainly trying to deny Mr Chan’s financial contribution to her.

76.Mr Chan had no reason to put such substantial sums under joint names unless the parties had all along maintained their relationship even after Madam Keung moved out of the Eden Garden Property.  Madam Keung admits that Mr Chan had been bringing her to the races even in 1986.  They probably only separated at the end of 1989/1990, which tallied with the time Madam Keung re-entered the job market.

77.Mr Chan said that the US dollar deposits generated high interest.  He transferred interest earned every 3 months to Madam Keung’s AEB/HK Account to pay the mortgage instalments. Madam Keung never claimed that the interests had been forwarded to him.  If he had transferred such sums to Madam Keung in 1991-1997 (well after their alleged separation), the probabilities are that he had been doing the same between February 1986 until the release of the Mortgage.

78.On the other hand, it can be seen that Madam Keung has not withdrawn any part of the capital from the AEB/SW Joint Account to her AEB/HK Account for those 6 years until that Joint Account was closed.  There was nothing to show that she shared the withdrawn sum with Mr Chan or that Mr Chan chased for it despite falling into financial difficulties due to suspension of his licence.

79.Madam Keung’s case that the money in the AEB/SW Joint Account was based on Mr Chan’s promise to marry her could not be dismissed as entirely fanciful, but I find that it was not inconsistent with Mr Chan’s case that he had been financially supporting her throughout their relationship, including the time when the Mortgage was subsisting.

80.Fourthly, the most logical time for Madam Keung to have asked Mr Chan to transfer the Peony Height Properties to her was upon redemption of the Mortgage in March 1987 but that was not done.

81.Madam Keung claims that she had asked Mr Chan for a transfer in 1987/88 but Mr Chan put her off. I disbelieve her as I see no logical reason why Mr Chan would have refused the transfer if he had not paid anything, when his annual income had just tripled to HK$2,500,000 million for the year 1986/87 and he had generously deposited at least US$50,000 into the AEB/SW Joint Account in February 1986. The Oral Agreement (if existed)  was made less than 2 years before release of the Mortgage and it would not have escaped his memory.

82.Fifthly, at about the end of 1997, Mr Chan claims to have asked Madam Keung to sell the Peony Height Properties and divide the proceeds between them, whilst, Madam Keung also claims to have asked for a transfer of Mr Chan’s interest to her.

83.I find Mr Chan’s evidence to be more credible because the property market did collapse due to the Asian financial crisis then and he would have been in need of money because of suspension of his licence.  Madam Keung’s evidence was most illogical, because, on her evidence, ICAC’s investigation was precisely the reason why Mr Chan asked her to close the AEB/SW Joint Account and have a clean financial break between them.

84.Sixthly, this Court asked Madam Keung whether Mr Chan had had the same telephone number in 1997 and 2016.  She evaded the question by saying that she did not really know his number.  However, she had not expressed any surprise when she received the whatsApp messages in 2016.

85.It was established by the Court’s questioning, that in fact she has had his telephone number (still in use)  all through 19 years from 1997 to 2016.  Despite that, she had never asked Mr Chan for a transfer of the Peony Height Properties to her except in response to his request/demand in 2016.  Such attitude on her part indicated that she did not believe she had more than 50% interest in the Peony Height Properties.

86.Madam Keung’s behaviour after acquisition did not support a belief that Mr Chan had no beneficial interest in the Peony Height Properties.

87.For the reasons in this Section, there is simply no ring of truth to Madam Keung’s case that there was the Oral Agreement.  I find that it had all along been the common intention (as reflected by the legal ownership)  that the parties would be co-owners of the Peony Height Properties.

H.  WHO FINANCED THE ACQUISITION

H(1).  Deposits and initial payments

88.I repeat paragraph 52 above.  However, that alone was not enough to exclude the beneficial ownership of Mr Chan because it was equally consistent with Mr Chan, who had to work, having tasked Madam Keung to source for a flat whilst he would provide the purchase price. The Agency Agreement was to instruct the agent and promise to pay the agency fee.  The Vendors were not parties to that agreement.  On Madam Keung’s case, she had obtained Mr Chan’s agreement to add his name and be a mortgagor before endorsing the Instruction Form for purchase.

89.Madam Keung claims to have paid to the deposit from her own resources, the main components being: (i)  a lump sum of HK$150,000 from her ex-husband; and (ii)  the buy-out sum (denied by Mr Chan).

90.There was no documentary proof of the HK$150,000 after such long lapse of time.  I shall assume in Madam Keung’s favour that she had received that sum upon divorce. 

91.There was no paper trail of the buy-out sum.  The significance of this sum is that Madam Keung had allegedly contributed HK$76,200, being 1/3 of the deposit, towards purchase of the Eden Garden Property and thus this buy-out sum would, in turn, represent her contribution towards deposit of the Peony Height Properties.

92.To show that she contributed to deposits of the Eden Garden Property, Madam Keung produced her passbook with the Chartered Bank (“CB”)  for the period from April 1983 to November 1984, which showed withdrawals of 3 sums close to the time for paying the deposit for the Eden Garden Property:

9 March 1984  HK$10,000

13 March 1984  HK$10,000

15 March 1984  HK$55,000

There were other entries showing that Madam Keung had ample funds available to pay for outgoings.

93.I do not find Madam Keung’s evidence convincing:

(1)  It was put to Mr Chan that Madam Keung had made 5 withdrawals from her CB account between 9 and 30 March 1984 for the deposit.  However, in her witness statement and in the witness box, she claimed to have made just 3.

(2)  Why did she have to make 3 withdrawals, instead of 1, from the same account?  Her testimony was that it was thought that the deposit would be 10% of the purchase price, ie HK$76,200, so 1/3 would be HK$25,400. It was later decided that a deposit of 30% would be paid.  Even so, that could not explain why the initial 2 withdrawals were in the sum of HK$10,000 each, falling short of HK$25,400.

(3)  The CB account had small balances of only a few thousand dollars in the year 1983.  From and including 24 December 1983, there had been 5 big sums deposited into that account:

24 December1983  HK$50,000

08 March 1984  HK$75,000

30 March 1984  HK$32,000

10 August 984  HK$103,731.55

30 November 1984  HK$103,101.26

Save in respect of the deposit of HK$32,000, one can see that, following on each deposit, there would be withdrawals soon afterwards that had exhausted those deposits. Madam Keung’s evidence was that she could not recall whether those sums related to any fixed deposit, or explain the consistent pattern.  She could not remember the source of the HK$50,000 and HK$32,000 but could say that the other 3 came from deposits in CB that had matured.  She could not explain why she could remember some entries but not others.

(4)  The day before the 3 withdrawals of the sums of HK$10,000, HK$10,000 and HK$55,000, there was an equivalent deposit of HK$75,000, which Madam Keung described was a direct deposit into the account as a result of her fixed deposit investment.  That deposit and withdrawals followed the pattern described in sub-paragraph (3). That pattern was too regular for her not to recall the reasons for it. To suggest that there were 3 withdrawals for deposits of the Eden Garden Property within this regular pattern was not convincing. 

94.For the reasons given in the preceding paragraph, I do not believe that Madam Keung had contributed to the deposit for the Eden Garden Property or that she had been promised the buy-out sum.

95.In respect of the deposit for the Peony Height Properties, Madam Keung claims in her witness statement to have withdrawn HK$200,000 from her CB account and deposited it into the BOC joint account. Out of that, a sum of HK$173,434 was deposit for the Peony Height Flat and HK$20,000 was for the parking space.

96.The CB passbook entries of 1984 were far from showing balances close to HK$200,000.  Madam Keung had to say in the witness box that some money came from her HSBC account.

97.However, Madam Keung’s evidence was incredible for the following reasons:

(1)  The cheques used to pay for the deposits and initial payments were all  issued by BOC as evidenced by (i)  the copy receipt for payment of HK$1,650 and HK$173,434; and (ii)  the copy Instruction Form for the purchase of the car parking space.  It was Mr Chan who had accounts at BOC. 

(2)  It was all along Madam Keung’s case that the parties had opened one BOC joint account (the existence of which Mr Chan denied), and payments of the monthly instalments for the Mortgage came from that joint account.  Under cross-examination, Madam Keung admitted that that BOC joint account was only opened in around September 1985 when the Mortgage was executed.  It was pointed out to her that the cheques in sub-paragraph (1), which were issued in June 1985, could not have been paid from that BOC joint account. Madam Keung then suggested, for the first time in the witness box, that there was another joint account with BOC.  It was plainly her afterthought.  If she had meant a joint account to repay the mortgage of the Eden Garden Property, it was Mr Chan who had been funding that account.

(3)  If she had been wholly responsible for payment, there was simply no need for her to first deposit money into a BOC joint account at all for the deposits.

(4)  The only documentary evidence relatively close to the material time was Mr Chan’s Statutory Declaration, which  confirmed, amongst others, that Mr Chan had a sole-named current account and joint accounts (as well as accounts held via companies)  with BOC[1].  The ICAC could have easily verified with BOC in 1997 and exposed any inaccuracy with regard to that part of the Statutory Declaration, but ICAC did not and Madam Keung has never contradicted the contents.

98.Consequently, I am not satisfied that Madam Keung had contributed to the deposit and initial payments of the Peony Height Properties.  She was simply making up evidence to deny Mr Chan’s financial contributions towards the purchase.

99.On the other hand, Mr Chan’s evidence that he funded the purchase of the Peony Height Properties was inherently credible.  He was a fully licensed jockey at the material time.  His income during the seasons of 1984/85, 1985/86 and 1986/87 were substantial (in the region of HK$0.4 to HK$0.5 million, HK$0.6 to HK$0.7 million and HK$2.5 to 3 million respectively).  There was simply no need for Madam Keung to use her own savings.  He paid for Eden Garden Property and made a gift to Madam Keung.  It was not surprising that he did the same as regards the Peony Height Properties.

H(3). Monthly repayments of the Mortgage

100.As a matter of law, incurring of liability under a mortgage loan on the part of a person for the purpose of the acquisition of the Property could be viewed as a financial contribution: Lun Kwai Har v Hung Ying Yi at §52, where G Lam J (as he then was).

101.If the Property could not be bought without Mr Chan incurring liability, that would be some ground for inferring that he was beneficially interested: The Joint and Several Trustees of the Property of Yip Yam Yu Alex v Yip Yam Yu Alex and another [2019] HKCFI 75, §78, Au-Yeung J.  That was precisely the situation in the present case with Mr Chan.

102.Section G(1)  above as to circumstances before or at the time of the acquisition is applicable here.  Madam Keung made a bare assertion that she used funds in her HSBC account to repay the monthly instalments.  Understandably she could not produce her HSBC bank statements.

103.Her evidence in the witness box about how the Mortgage was arranged completely discredited her.  She said she went to BOC to inquire about taking out a mortgage on the same afternoon after she signed the Agency Agreement, but it was a Saturday when banks were closed.

104.Madam Keung said she had told Mr Chan that a mortgage of HK$380,000 was needed but she was not sure if he knew the amount of monthly repayment.  As she claimed to have arranged the Mortgage herself, Mr Chan could not have known of the monthly amount earlier than her. She claimed not to know the amount that Mr Chan was earning as a jockey at that time; she only knew it was very little money.  So, if Madam Keung’s evidence is to be believed, Mr Chan had agreed to lend his name to a mortgage without knowing whether his (little)  income could afford to meet the monthly instalments (whilst the fresh Eden Garden Property mortgage was subsisting). Such was incredible.

105.Further, the facility letter from BOC dated 11 August 1985 already stated the monthly instalment to be HK$4,660.80.  And yet, Madam Keung claimed to know about the monthly instalment only on the date of execution of the Mortgage.  I query how she could have known that she could afford to repay the Mortgage at the time she acquired the Peony Height Properties.

106.I find it hard to believe that it was Madam Keung (instead of Mr Chan)  who had arranged for or borne the Mortgage.

107.On the other hand, Mr Chan claims to have solely borne the mortgage instalments, and his income could plainly afford it.

(1)  Prior to February 1986, Mr Chan would periodically give cash to Madam Keung for the monthly instalments and expenses of the Peony Height Properties.

(2)  Indisputably on 27 February 1986, he opened the AEB/SW Joint Account.  The initial fixed deposit of US$50,000 was sufficient to pay off the Mortgage.  The deposit was increased to US$100,000 on an unknown date.

(3)  Between 1986 to 1997, Mr Chan continuously transferred the returns of the fixed deposits of US$100,000 and AUD100,000 to Madam Keung’s AEB/HK Account every 3 months for Madam Keung to draw on and thereby settle the mortgage instalments and daily expenses of the Peony Height Properties.

108.Mr Remedios challenged Mr Chan’s evidence.

109.Firstly, in cross-examination, it was suggested to Mr Chan that there were in fact no transfers prior to 1991 as the earliest account records for the AEB joint account disclosed by Mr Chan only started in 1991 (See Annex D to Mr Chiu’s opening submission).  This was denied by Mr Chan, although he could not produce the full set of bank records, as the bank (by this point known as UBP)  only had an obligation to retain copies of a client's file for 10 years only.

110.More importantly, Mr Remedios’ question begs another question: why would Mr Chan have suddenly entrusted Madam Keung with such substantial sums of money for 6 years?  By 1991, on Madam Keung’s case, they had separated.  The irresistible inference is that their relationship had never broken down and he had been financially supporting her throughout the years.  That was why she did not have to work right up to 1989 and could afford to pay the Mortgage instalments. 

111.Secondly, Mr Remedios submits that it was inexplicable why Mr Chan would not have simply given standing instructions for the mortgage payments to be made directly from the AEB fixed deposit accounts instead of repaying through the BOC joint account.  With respect, I do not see anything peculiar with that.  The Mortgage and the fixed deposits were with different banks.  AEB provided higher interest returns.

112.Thirdly, Mr Remedios points out that, during cross-examination, Mr Chan could not even remember if the mortgage instalments had been made from the AEB/SW Joint Account as he alleged.  With respect, even if Mr Chan is disbelieved, it does not remedy the inadequacy of Madam Keung’s own evidence.

113.Fourthly, Mr Chan claimed that it was only upon commencement of this action that he became aware that the AEB/SW Joint Account was closed.  He was caught lying because the parties had signed a letter to AEB giving instructions to close the account and AEB had done a signature check, but he still denied signing it. The timing tallied with his investigation by the ICAC. Mr Chan’s evidence was also incredible because he had lost his livelihood as a result of suspension of his trainer’s licence and yet he never took over control of the significant balances (being US$100,000 and AUD100,000)  in the AEB/SW Joint Account.

114.Mr Chan had no doubt lied.  However, this fact alone could not point to who contributed to the Mortgage repayments.

H(4).  Redemption of the Mortgage

115.It is not in dispute that the redemption was achieved by using the Winnings.  The only issue is how the placing of bets came about.  In my view, this issue is completely irrelevant to whether the Oral Agreement existed or where the beneficial ownership lay, because the Winnings occurred totally by chance, 16 months after completion of the Peony Height Properties. It was neither party’s case that he/she anticipated using winnings to meet the mortgage instalments.  Even accepting Madam Keung’s evidence, still without employment, she had dared to use money for 2 months’ mortgage instalments to bet.  I find it incredible.

116.In summary, I disbelieve that Madam Keung had paid the deposits and initial payments, or arranged the Mortgage, or repaid any part of it herself.  I find that it was Mr Chan who had funded the acquisition.

117.Ultimately, even if the Court were to find Mr Chan a liar unworthy of belief, that would not improve Madam Keung’s case.  She has made up evidence as well.  Her case was inherently improbable. Applying Lun Kwai Har v Hung Ying Yi, Madam Keung would still fail in her case.

I.  WHETHER MR CHAN IS ENTITLED TO OCCUPATION RENT

I(1).  Legal principles

118.Section 2 of the Partition Ordinance, Cap 352 (“PO”)  provides that where the property is held by 2 or more persons, the Court may make an order for sale under section 6 of the Partition Ordinance.

119.Section 6(1)  of the PO provides that:

“(1)  In any proceedings under this Ordinance, where it appears to the Court that a partition of the property would not be beneficial to all the persons interested by reason of –

(a)  The nature of the land to which the proceedings relate;

(b)  The number of the persons interested or presumptively interested;

(c)  The absence or disability of some of the persons interested; or

(d)  Any other circumstances, the Court may make an order for the sale of the property.”

120.A co-owner has a basic right to rid himself of the shackles of co-ownership and, if he has no other remedy, to ask for an order for partition or sale.  The burden is on the opposing co-owner to demonstrate that if the court makes an order for sale, such order would not be beneficial to all the co-owners or result in very great hardship to one owner. Whether an order for sale is beneficial to all the co-owners is not determined by the descent of the opposing co-owners or the assertion by them.  It is to be determined by the Court objectively. See Wong Chun Kei v Poon Vai Ching [2007] 1 HKLRD 825, §§18-19, Recorder Fok, SC (as he then was).

121.In respect of occupation rent:

(1)  In the absence of agreement, where land is held by several co-owners, they are all entitled to possession of the whole as between themselves. Where one ousts the other, he will be liable for occupation rent;

(2)  Occupation rent may be charged against an occupying co- owner where this is necessary to do broad justice or equity as between co-owners;

(3)  A court of equity will order an inquiry and payment of occupation rent, not only in the case where the co-owner in occupation has ousted the other.  The fact that there has not been an ouster or forceful exclusion is far from conclusive; and

(4)  Whether occupational rent would be payable on the facts of each case is a matter of discretion.

Leung Siu Man v Leung Yiu Tai [2019] HKCFI 1971 at §§61-64, Ng J.

I(2).  Order for sale

122.Mr Chan is plainly entitled to rid himself of the shackles of co-ownership.  However, Mr Remedios raises a procedural objection, in that there has been a failure on the part of Mr Chan to serve the Director of Lands (“Director”)  of these proceedings as required by section 3 of the Partition Ordinance and rule 4 of the Partition Rules.  That matter has been remedied by 7 June 2021 when papers of this case were served on the Director.  The Director has no objection to the application for partition.  To deny Mr Chan relief would be disproportionate to his fault (or that of his legal representatives)  arising out of procedural oversight.

I(3).  Occupation rent

123.I take the date of the writ for the purpose of computing the occupation rent.

124.There is no valuation report on the market rent for the Peony Height Properties.  Mr Chan relies on extracts from the valuation lists prepared by the Rating and Valuation Department for assessing rateable value as proof of the market rent between 2016 and 2020. His reasoning is that the rateable value of a tenement is ascertained on the market value of a statutory hypothetical tenancy: sections 7 and 7A of the Rating Ordinance, Cap 116.  Mr Chan invites the Court to order half of the amount of rent under hypothetical tenancies to him as 50% owner:

125.I reject that approach as it is a departure from the usual practice of seeking the Court’s leave to adduce expert evidence.  There was simply no opportunity for Madam Keung to adduce her own expert evidence in rebuttal.  Accordingly, I only make a nominal award of HK$1,000 per month for occupation rent.

J.  CONCLUSION

126.For the foregoing reasons, I order that:

(1)  There be an order for sale of the Peony Height Properties, with half of the net proceeds to be distributed to the Plaintiff;

(2)  By 30 June 2022, the Defendant shall deliver vacant possession of the Peony Height Properties to Mr Chan for the purpose of the sale;

(3)  Parties shall endeavour to agree upon the consequential directions for sale, failing which the Court shall determine the same on paper;

(4)  In respect of occupation rent, I order the Defendant do pay to the Plaintiff HK$1,000 nominal rent per month for the period from 17 May 2017 until the date of delivery of vacant possession;

(5)  On a nisi basis, there be interest at judgment rate from the date of judgment to the date of payment;

(6)  The counterclaim is dismissed; and

(7)  There be liberty to apply.

127.On costs, I make an order nisi that the Defendant do bear the Plaintiff’s costs, to be summarily assessed on the papers. The Plaintiff do lodge and serve a costs statement by 13 May 2022.  The Defendant do lodge and serve her grounds of objection by 20 May 2022.

128.I thank counsel for their assistance.

Mr Byron Chiu and Ms Karen Chan, instructed by Bobby Tse & Co, for the Plaintiff

Mr Jose D’Almada Remedios, instructed by John Ip & Co, for the Defendant