Wym v. Lyw and Another
Read the full judgment text of FCMC 14114/2015 on BabelCite. This Family Court judgment was delivered on 4 May 2022 before His Honour Judge G. Own.
Matrimonial property – beneficial ownership – constructive trust – resulting trust – proprietary estoppel – bona fide mortgagee – constructive notice – preliminary issue – District Court – FCMC 14114/2015 – WYM v LYW – Intervener GFL – Property at Tsuen Wan – W claimed beneficial interest via common intention constructive trust, resulting trust, proprietary estoppel – Court found W failed to prove beneficial interest – Intervener failed to prove bona fide mortgagee without notice due to failure to make usual and proper inquiries – Intervener acquired interests subject to constructive notice of W's interests – W's counterclaim dismissed – No order as to costs between parties.
Legal issues: Beneficial Interest Claim · Bona Fide Mortgagee Defence
Outcome: Intervener's beneficial interests subject to constructive notice of W's beneficial interests; W's counterclaim dismissed; No order as to costs between parties.
Cited by 2 cases · Cites 11 cases
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FCMC 14114/2015 [2022] HKFC 95 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 14114 OF 2015 -----------------
----------------- Coram: His Honour Judge G. Own in Chambers (Not Open to Public) Date of Hearing: 4 May 2021 Date of Closing Submissions: 25 May 2021 Date of Decision: 4 May 2022 ------------------------------------------------------ D E C I S I O N (Preliminary Issue: Beneficial Ownership) ------------------------------------------------------ Introduction 1.This is the trial of the Intervener’s claim for beneficial interest over a landed property situated at Flat 11 on 5th Floor & Corresponding Roof of xxxx Building, Nos. xxxx Sha Tsui Road, Tsuen Wan, New Territories, Hong Kong (“the Property”). The Petitioner wife (“W”) opposed the application and put in a counterclaim also for beneficial interest over the Property under different grounds. The Respondent husband (“H”) took a neutral stance in this matter. 2.At the time of this trial, the Property was registered under the sole name of H. The Property was purchased back in March 1971 under the name of H and H’s mother (“Madam Leung”) as joint tenants. W had never appeared on the title of the Property as the owner whether solely or jointly with others. There is no dispute that the Property was used as the parties’ matrimonial home for nearly half a century since their marriage in May 1971, which is 2 months after the Property was purchased. 3.There are 2 children of the family who are at the age of 46 and 49 at the time of this trial. H was aged 77 and W at the age of 75. 4.Given the application is to determine the beneficial interest (if any) of the Intervener vis-a vis W over the Property, parties were directed to file and exchange pleadings for the purpose of this trial in line with the often cited decision of deputy High Court Judge Mr Mostyn Q.C. (as he then was) in the case of TL v ML [2006] 1 FLR 1263 where it was said:
The Pleadings 5.The Intervener filed the Points of Claim[1] seeking, inter alia :-
6.At the commencement of trial, Counsel for the Intervener confirmed in writing that for determination of the preliminary issue, they would only pursue the declaration under (1) and not pursuing (2) and (3). 7.W filed her Points of Defence and Counterclaim[2] seeking, inter alia :-
8.As said, H adopted a neutral stance and had not filed any Points of Defence. Further, H had not filed any Affirmation in opposition or witness statement for this trial. 9.All parties were legally represented. Both the Intervener and W engaged Counsel for the trial. H was granted legal aid without assignment of Counsel. Background of the Case 10.On 28/8/2019, this Court handed down its Decision in respect of the Intervener’s application for setting aside various case management directions granted on the Joinder application and to stay these proceedings pending determination of another set of proceedings in the Court of First Instance under HCMP No.499/2016. The background of this case had been set out in that Decision which I do not intend to repeat here[3]. The Main Issues for this Trial 11.Counsel for the Intervener in his Closing Submissions had succinctly set out the 2 main issues before the Court, which I fully agree, are :-
Intervener’s Case and their Evidence 12.The Intervener’s case is those typical run of the mill situation and straightforward. 13.By a Loan Agreement dated 11/6/2015[4] between the Intervener as lender and H as borrower, a sum of HK$1,800,000 was advanced as loan to H. By a Deed of Mortgage[5] on the same date, H as the legal and beneficial owner of the Property created a legal charge over the Property in favour of the Intervener for securing all sums of money and interest due from H to the Intervener. 14.In default of repayment, the Intervener commenced a mortgagee action in the Court of First Instance under HCMP No.499/2016[6] for full payment of the outstanding loan with interest and seeking possession of the Property. 15.On 14/10/2016, an Order was granted by Master Lai[7] in HCMP No.499/2016 in favour of the Intervener against H for recovery of the sum of HK$1,989,829.68 with interest on the sum of HK$1,764,719.20 due under the said Loan Agreement as secured by the Deed of Mortgage from 23/7/2016 until payment. 16.Hence, the Intervener’s case was based upon their status as the legal chargee under the terms of the Deed of Mortgage entered by H as the sole legal and beneficial owner of the Property. 17.The Intervener arranged their Account Manager Miss Yeung to testify at this trial. Miss Yeung made a witness statement dated 26/3/2020 which she “adopted” the contents of it as her evidence in chief. However, it was noticed that such witness statement had not been filed with the Court but, for reasons unknown, included in the Trial Bundle[8]. Neither H nor W took issue on the non-filing of such witness statement, for it to be included in the Trial Bundle and “adopted” as Miss Yeung’s evidence in chief in this trial. This was uncommon and extraordinary. In any event, as parties did not take on such technicality flaw, I decided to “let-go” the witness statement in order not to delay the trial since it caused no prejudice to any party. 18.Further, there was produced in the Trial Bundle the Loan Application Form and related documents for the 1st loan[9] but not the 2nd loan. Same again, nowhere could be seen that these documents were produced or filed as exhibits in these proceedings and neither H nor W took issue on this technicality flaw. 19.In any event, Counsel for W raised several questions with Miss Yeung during his cross examination over her witness statement and the Loan Application Form since she was the person who attended H on 15/5/2015 for signing the said Loan Application Form and related documents. There was no issue that Miss Yeung also attended H for the 2nd loan application. W’s Case and her Evidence (a) Common Intention Constructive Trust 20.W alleged that it was the common intention of H, H’s mother Madam Leung and her that the Property was purchased for H and her as their matrimonial home after their marriage. As a matter of fact, they then registered their marriage 2 months later in May 1971 and started to live in the Property for nearly half a century since 1971. The 2 children of the family were also born whilst they were living there. 21.The evidence in support of the contention of common intention came from W’s own testimony. (b) Resulting Trust 22.W said whilst she was pregnant with the younger child around mid 1974, H’s mother Madam Leung came to her and raised the idea of redeeming the then outstanding mortgage of the Property so that W could be relieved from financial stress arising from the birth of the younger child. She was happy with the idea and gave Madam Leung a sum of HK$8,000 for the purpose of redeeming the then outstanding mortgage. It was W’s case that Madam Leung told her the amount needed for redemption was HK$8,000. W referred to a debit entry of $8,000 on the date of 2/7/1974 which appeared in her bank passbook record as supporting evidence[10]. 23.It is common ground that the Property had 3 rooms where 2 of them were leased out for about 3 years in return for receiving a total rental income of around $270 per month. The rental income was used for repayment of the mortgage of the Property. There was a shortfall of around $20 to $30 a month for the mortgage repayments which W said she would pay from her salary income[11]. The mortgage term was for 60 months at the flat rate of HK$294 per mortgage repayment, starting from 10/3/1971 and thereafter on the 10th day of each calendar month[12]. 24.W said she was a registered nurse since around 1964 until her retirement in 2001. She started with a net income of around $520 a month which gradually increased to $37,500 a month before her retirement. In addition, she had overtime work or shift duties at hospitals. Over the years, she had accumulated savings from her salary income[13]. 25.W said all over the years it was her who paid the mortgage repayments of the Property before the mortgage was redeemed. Whenever the rental income was insufficient, she would make up the deficit from her savings. Her case was that H had not paid any of the mortgage repayments. (c) Proprietary Estoppel 26.W alleged that over the years, apart from making all the mortgage repayments, she also paid for refurbishment, maintenance and utilities of the Property which include :-
27.W produced the receipts[14] for the above payments as documentary proof of evidence. H’s Case and his Evidence 28.H did not file any pleadings or affirmations in opposition. He only filed his Financial Statements (Form E)[15]. 29.Nonetheless, H was cross examined by Counsel for the Intervener and Counsel for W on his income disclosed in his Form E. He was also asked about his personal information which appeared in his Loan Application Form signed with the Intervener. The Law 30.In the case of Mo Ying v. Brillex development Ltd [16], Deputy Judge Eugene Fung S.C. set out the legal principles on common intention constructive trust which I find them useful and informative. The learned deputy judge said :
31.This Mo Ying case went on appeal but was dismissed. In the Court of Appeal, Hon Cheung JA at paragraph 7.14 of the Judgment said :
32.Counsel for the Intervener has helpfully cited the case of Luo Xing Juan v. Estate of Hui Shui See (2009) 12 HKCFAR 1, where Riberio PJ said :
33.The need and importance of proving expenses that was referable to the acquisition of a property under a common intention constructive trust was illustrated by the case of Burns v. Burns [1984] Ch. 317 in the words of Fox L.J. at 328H to 329C :
34.Guided by these cases and authorities, I will now proceed with analysis of the parties’ evidence. 35.I must emphasize that whatever conclusion arrived at or decision made in this trial would be restrictively confined to beneficial ownership (if any) of the Intervener over the Property. It should not be taken as the Court’s finding or indication of W’s beneficial interests (if any) over the Property within the matrimonial regime (emphasis added) which must be resolved in due course through the substantive trial of the parties’ ancillary reliefs. The Court’s Views 36.There was no issue over the validity of the Loan Agreement(s) and the Deed(s) of Mortgage signed by H in favour of the Intervener. H, as the sole legal owner on title of the Property, was entitled to enter into those instruments assigning his interests to the Intervener, subject of course to any prior encumbrances on title. For the Intervener’s case, H assigned both his legal and beneficial interests[17] by virtue of the instruments he entered into with the Intervener. The starting point is that beneficial interest goes hand-in-hand with the legal interest unless it could be proved that there existed any other contrary intention or some form of trust arrangement. The party who asserts bears the burden of proof. 37.In the words of Baroness Hale of Richmond in the often cited UK Court of Appeal case of Stack v. Dowden [2007] 2 AC at 454 A :
38.W’s first contention of common intention constructive trust lacks evidence in support. As rightly submitted by Counsel for the Intervener, it was not pleaded anywhere in W’s pleadings as to any express discussion of the alleged “common intention” raised as her defence. Any express agreement, arrangement or understanding between all 3 parties (emphasis added), namely, H, H’s mother and W, must be pleaded however imperfectly remembered and however imprecise on the terms both as to language and as to circumstances. This had not been done by W. 39.As a matter of fact, even taking W’s evidence to the highest, it only covered the idea of H’s mother about redeeming the then outstanding mortgage of the Property made to W who vehemently accepted. Had H been informed about such idea ? And if so, had H conceded to the alleged idea of his mother or what was H’s response ? In the absence of H’s evidence in consonance, how could W say that there existed a “common intention” between all 3 of them (emphasis added) that she would have beneficial interest in the Property either alone or together with H and H’s mother ? W was completely silent, both in her pleadings and oral testimonies, on this matter. In the absence of H’s mother’s evidence, H as the other joint legal owner, whose evidence was important. However, such evidence from H was wanting. H in the witness box had, however, refuted W’s case. 40.W’s second contention of resulting trust rests upon the withdrawal of $8,000 made on 2/7/1974 allegedly for redeeming the then outstanding mortgage of the Property and also upon her alleged mortgage repayments of the Property over the years. However, there are a number of fallacies on such contention. 41.W in her evidence admitted that her Hang Seng Bank account, although it was under her sole name, was used by her and her mother. She went further to say that her mother was a traditional Chinese woman who did not wish her personal finances to be known by her husband (that is, W’s father). Her mother entrusted her as the elder daughter and that her mother would place her own moneys into W’s bank account. W gave such evidence when she was cross examined upon several other entries of thousands of dollars (which was quite a lot of money in the 70s) which appeared in her bank passbook records. In particular, there was a specific withdrawal of $20,000 on 24/8/1973[18]. Her evidence was that that sum of money belonged to her mother who withdrew it for buying a 14-seater mini bus. 42.W’s evidence of withdrawing $8,000 by cash was not supported by her bank passbook records since there was a reference “TRW” against that debit entry which, according to the abbreviations provided in the passbook, mean “transfer withdrawal”. When confronted with such discrepancies, W then said she had mistakenly thought (攪錯咗) that the $8,000 was withdrawn by her in cash. 43.Although I accept that this was a withdrawal made around half a century ago back in 1971 and also given W’s age is now 75, I am not convinced that the mode of withdrawal for such a large sum of money (which was substantial in the 70s) as a single event in her life time for redeeming the mortgage of the only piece of landed property would be easily mistaken. As W was able to recall clearly that the $8,000 was H’s mother’s idea to her for redeeming the mortgage, I believe that on all probabilities it could hardly escape her memory as to how she paid H’s mother the substantial sum of $8,000 for the particular purpose. 44.Further, it seems odd that W was able to remember details of another earlier withdrawal of $20,000 in 1973 (which was 1 year earlier than the $8,000 withdrawal) where there was the abbreviation of “TRW”, which was same as the aforesaid withdrawal of $8,000 appeared in her bank passbook, but mistaken as to the mode of payment of $8,000. Given the co-incidence of “TRW” of the 2 sums where W could recall the earlier one of $20,000 was her mother’s moneys but mistaken as to the later sum, I find that W’s own words that the later sum of $8,000 was her own moneys paid for redeeming the then outstanding mortgage of the Property was, on balance of probabilities, self-serving in the absence of other corroborative evidence. W’s own testimonies was not sufficient to tip the balance in her favour on this critical issue. I do not believe W. 45.Besides, I noticed that there was a deposit $1,100 on the same day of 2/7/1974 into W’s bank account before W had enough money for the transfer of $8,000 on the same day. Upon inquiry, W told the Court that she did not have enough money to pay to H’s mother and that sum of $1,100 was borrowed from her mother. 46.W’s answer of borrowing $1,100 from her mother was not supported or verified by any other evidence except her own words. The bank passbook records did not show how this sum of $1,100 was deposited, whether it was by transfer from other bank or cash deposit over the bank counter, and where did it come from. However, since it was W’s case that her mother entrusted her and would place her own moneys in W’s bank account, it would require further evidence to prove that her mother had other bank account(s) wherefrom to withdraw this sum of $1,100 and put into W’s account to make up the sum of $8,000. If that was the case, why would W’s mother need to use W’s account to put her own moneys when her mother had other bank account(s) ? In the absence of such further evidence, I find on balance of probabilities that W’s answer that the sum of $1,100 was borrowed from her mother was not the truth. 47.Pausing here, it is worth to note that W did not produce her bank records soon after the record of the debit entry of $8,000 on 2/7/1974. The next period of bank records which she produced start to run from 9/6/1976 onwards. When W was asked by Counsel for the Intervener for the reason and put to her that the “missing period” might show the $8,000 was actually her mother’s money, W just answered that she could produce those bank records if needed. Thus, W had not provided any explanation for the absence of such period of bank records. 48.In my decision, this is odd and extraordinary. Counsel for W in his Closing Submissions[19] tried to salvage the position by taking the ‘tricky’ point that these proceedings are a chancery practice and that there was no application for further or specific discovery by the Intervener for those “missing period” of bank records. 49.With respect, I do not accept such submission. W as the opposing party to the Intervener’s claim, should ensure her case of defence was well supported by evidence. As a matter of fact, I noticed that W in her List of Documents under Schedule I Part 1 Item 2[20] stated “Copies of Hong Kong bank passbook between January 1971 to December 1979 (emphasis added)” without single out the missing period. This is unsatisfactory, if not misleading, especially when W was legally represented who must have advised W the importance and need for complete disclosure with precision even in chancery practice litigation. 50.There is no dispute that the Property was purchased for the consideration of $25,830[21] with the aid of mortgage with The Hong Nin Savings Bank Limited for the mortgage sum of $12,830 repayable by 60 equal monthly instalments of $294 per instalment[22]. The payment date for each instalment was the 10th day of each month with the first instalment to be paid on 10/3/1971. According to the official records, the said mortgage was redeemed and reassignment took place on 24/3/1975[23]. 51.The instalment due on 10/6/1974 would be the 40th instalment. That said, after payment of the 40th instalment, there only remain 20 outstanding instalments and the amount of outstanding mortgage sum would then be $5,880 ($294 x 20 months). To recap, W’s case was that she paid $8,000 to H’s mother on 2/7/1974. This was the month after the 40th instalment. 52.The instalment due on 10/2/1975 would be the 48th instalment. That said, after payment of the 48th instalment, there only remain 12 outstanding instalments and the outstanding mortgage sum would then be further reduced down to $3,528 ($294 x 12 months). 53.Having said, the sum of $8,000 could hardly match either of the above figures, even taking the amount of $5,880, there was an excess of $2,120 (that is, $8,000 - $5,880 = $2,120). This was a substantial sum of money in the 70s as could be reflected by the price of the whole Property was only $25,830. 54.Even though there might be related fees and expenses for redemption, I do not believe it could amount to $2,120 in those days. The unaccountability of such sharp difference casts doubt on the veracity of W’s evidence that the sum of $8,000 was for redeeming the then outstanding mortgage of the Property. If taking the amount of outstanding mortgage in February 1975, the difference was even bigger at $4,472 (that is, $8,000 - $3528 = $4,472). 55.Taking full account of all the above with careful consideration given, I do not accept W’s evidence that the sum of $8,000 on 2/5/1974 recorded as debit entry in her bank passbook was her payment to H’s mother for redeeming the then outstanding mortgage of the Property. I find against W on this topic. 56.For the other mortgage repayments, there was no solid or cogent evidence to show that W had paid for them except her bare assertion. It is also my finding that such assertion was self-serving which carried little or no evidential value. They are insufficient to prove the existence of resulting trust in her favour. 57.On W’s other contention of proprietary estoppel, she referred to a list of expenses paid by her over the years either for the benefit of the Property or for her and the family’s use during occupation in the Property. W produced various receipts of payment as documentary proof. 58.For proprietary estoppel to be successfully established, either through payment of expenses by W or detriment caused to W, it must be referable to the time of acquisition of the Property[24]. Further, financial contribution towards the family expenses must be substantial in that it could raise an inference of a trust. 59.It must not be overlooked that the Property was acquired in March 1971 (that is, 2 months prior to the marriage) with the then outstanding mortgage redeemed in March 1975 as per official records. That said, W’s contention of proprietary estoppel through any one or all of those enlisted payments must took place either before March 1971 or at the latest March 1975. Payments made after acquisition of the Property or redemption of the mortgage would not be considered or accepted as they would not be taken as “referable” to acquisition. Within the context of the law of contract, post-acquisition or post-redemption payments could only be taken as past consideration. 60.With the exception of payments for the cleaner lady and water and electricity bills, all other payments were made after (emphasis added) the acquisition of the Property in 1971 and after (emphasis added) redemption of the mortgage in 1974 (as per W’s case) or 1975 (as per official records). Hence, those post-acquisition or post-redemption payments could not be taken as referable to the acquisition of the Property. In my decision, all those payments were made for W’s and the family’s use and occupation of the Property as opposed to any common intention for acquisition by W. 61.For the cleaner lady expenses, water and electricity bills, although they were paid before and after acquisition, my finding was that those payment(s) from any perspective were only day to day general expenses spent for the benefit of W’s and the family’s use and occupation of the Property rather than paid in anticipation of any common intention for acquisition by W. 62.I find against W on her contention of proprietary estoppel and/or detriment. 63.Neither was there any other solid or cogent evidence as to the whole course of conduct of the parties giving rise to any inferred common intention for constructive trust in anyone’s favour. 64.Concluding the 1st main issue, I find W does not have any legitimate defence of beneficial interest to the Intervener’s claim over the Property by way of (a) common intention constructive trust; (b) resulting trust; and (c) proprietary estoppel. There was no detriment caused to W for any beneficial interest over the Property that could be established or inferred by way of defence. 65.It is important for me to re-iterate that such finding was not determinative or indicative of W’s claim for beneficial interest (if any) over the Property within the matrimonial regime (emphasis added) nor would such finding prejudice W’s position in her subsequent ancillary reliefs claim, which has yet to begin. As said, such claim would have to be decided upon the matrimonial framework which was different from the present proceedings. 66.Now I will deal with the 2nd main issue as to whether the Intervener was a bona fide mortgagee for value without notice. It is useful to start with some important cases and authorities. 67.In the case of Sun Sek Haw v. Au So Kum, CACV No.215/1998, where it was said by Godfrey JA :-
68.In the recent case of Far East Consortium Ltd and Another v. The Trustees of the Property of Margaret Chiu, a bankrupt and others [2021] HKCFI 3707 which was the trial of a mortgagee action and determination of preliminary issues (heard together), the learned Madam Recorder Sit, S.C. meticulously analysed the issues involved and set out in great detail the relevant law and legal principles involved. I find the judgment extremely useful and informative which represents the legal position in terms of constructive notice at common law. 69.At paragraphs 46 to 52 of the Judgment, the learned Madam Recorder said :-
70.With these cases in mind, the answer to the 2nd main issue turns upon the evidence of the Intervener’s Account Manager Miss Yeung and upon scrutiny of the entire process of H’s loan applications, including any enquiries ought to have been made or due diligence ought to have been carried out in the process of approval by the Intervener as “men of business under similar circumstances”, a term which was used by the learned Recorder in her Judgment when citing the Sun Sek Haw case. 71.According to Miss Yeung, H made 2 separate loan applications from the Intervener within a month. The 1st loan was for $500,000 which was advanced to H on 15/5/2015. The 2nd loan was for $1,800,000, part of which was for settlement of the 1st loan already withdrawn, and the 2nd loan was advanced to H on 11/6/2015. 72.Miss Yeung in the witness box was shown the Loan Application Form for the 1st Loan[25]. She confirmed that it was signed by H in her presence and then she signed as a witness at the bottom left hand corner. This happened on the date appeared on the form, that is, 15/5/2015. She confirmed that she had gone through the details shown in the form with H before asking H to sign on it. Miss Yeung said her role was to ensure H accepted the details filled out in the form are true and accurate. She also testified that the details recorded in the form were actually not received by her from H there and then on the date of the Loan Application Form but were received a few days earlier. Her colleagues who received the information would check upon their accuracies before inputting the information into the system for print out the Loan Application Form. 73.For completeness, I have extracted the relevant part of the transcript of Miss Yeung’s evidence in chief and when she was cross examined by Counsel for W and providing answers to questions from the Court. I have bold printed those important questions and answers as follows[26] :-
74.Towards the end of her testimonies, this Court raised further questions with Miss Yeung as to the routine procedure of loan application. The following questions and answers in bold print are important[27] :-
75.In summary, Miss Yeung agreed that despite she noticed that H’s marital status recorded on the form was “Married” when she gone through the contents of it with H on 15/5/2015 :-
76.Although Miss Yeung said her colleagues would check the accuracies of H’s information which had been provided to the Intervener few days in advance of her meeting H, and she said her colleagues would review H’s bank statements or pay slips, there was no direct evidence on such process of checking before the Court apart from her own testimonies, which was only given during trial and was also hearsay by nature. There was no affirmation filed by the colleague(s) who carried out the checking process. There was no documentary evidence of any pay slip(s) either, to show that H’s income was $50,000 in May 2015. Such evidence on process checking was not even mentioned by Miss Yeung in her witness statement. 77.Upon cross examination by Counsel for W as to the reason why the column “Living with 與誰居住” in the Loan Application Form was left blank, Miss Yeung’s answer was that clients might refuse to provide for privacy reasons and therefore she did not ask H for it. For verifying H’s marital status, she also did not ask H for marriage certificate as they followed the common practice of not asking marriage certificate. Surprisingly, she then added that she did not know why the Loan Application Form was so designed[29]. 78.From Miss Yeung’s evidence, it is clear that the entire process of loan application, starting from going through the Loan Application Form, approval of the application, signing of forms and declarations, execution of loan agreement and deed of mortgage, release of the approved loan was all done within a day. While this might be so arranged in order to facilitate the borrower who might be in need of funds urgently, this did cause concern as to the adequacy of “check and vet” that was normally required of the money lending business under similar circumstances to be completed within a day. 79.In my decision, none of those factual reliance could obviate the need of the Intervener to carry out usual and proper inquiry as to H’s asserted 100% beneficial ownership of the Property. Quite to the contrary, in my decision, H’s personal details provided to the Intervener; in particular, his marital status, his monthly income of HK$50,000, and asserted residence at the Property but without stating with whom he was residing, even naming his spouse, are important facts which are alarming in that it was reasonable to put any money lending business same as the Intervener on notice to make inquiry, not only as to the accuracies of them, but also to the possible existence of other’s interests in addition to H’s interests. Failure to make such inquiry or take such steps as are reasonable to verify whether there exist other earlier interests casted upon the Intervener with constructive notice in that their interests would be subject to it. 80.Miss Yeung’s evidence that she had consulted and was advised by the lawyer Miss Kam that there was little problem for the Intervener to proceed with the transaction given the fact that there were prior mortgages by H with Hang Seng Bank and Konew Financial Express Limited and that similar inquiries would already have been made. In my decision, this fall short of the level of prudence that was required by law for avoiding any finding of constructive notice[30]. Whatever “advice” or “views” provided by the lawyer Miss Kam could neither displace the fact that the Intervener themselves did not make the usual and proper inquiry which ought to have been made in the circumstances after being aware of those important and alarming facts of H nor dispense with the need to do so. 81.Reliance upon actual possession of title deeds and records of ownership of legal title likewise could not dispense with the need for the usual and proper inquiry of any other possible beneficial interests in existence which would not be discoverable merely by reviewing documents of title. 82.Given the benchmark is what was usually done by men of business under similar circumstances, the Intervener’s failure to inspect the Property or to make the usual and proper enquiry with H constituted constructive notice of W’s beneficial interests and thereby acquiring their interests subject to W’s interests. 83.As a matter of fact, had the Intervener carried out inspection of the Property, it would also reveal W’s presence in occupation. Conclusion 84.For all the above reasons, I find the Intervener acquired their beneficial interests over the Property with constructive notice of W’s beneficial interests under her spousal relationship and presence in occupation in the Property. 85.That said, the Intervener’s beneficial interests acquired through the Deed(s) of Mortgage rank after W’s beneficial interests. The extent of W’s beneficial interests vis-à-vis H had yet to be determined at the ancillary reliefs trial. Costs 86.The Intervener was unable to succeed on claiming full beneficial interests whereas W was unable to succeed on her defence to the Intervener’s claim. I am of the overall view that neither of them could be said to be the winning party. 87.H (the Respondent) adopted a neutral stance throughout this preliminary issue trial but was involved as a matter of cause and procedure. 88.Given the above, I believe that it is fair and reasonable that there should be no Order as to costs between all parties; save and except H’s (Respondent’s) own costs be taxed in accordance with Legal Aid Regulations. Orders 89.I now make the following Orders :
90.Last but not least, I wish to thank all parties’ legal representatives and Counsel for their valuable assistance to this Court.
Mr Enzo W.H. Chow instructed by Messrs. Jal N. Karbhari & Co., Solicitors for the Petitioner Miss Leung Ki Hin, Constance of Messrs. Leung Kin & Co., Solicitors for the Respondent Mr Anthony P.W. Cheung instructed by Messrs. Peter K.S. Chan & Co., Solicitors for the Intervener [1] TB: A/ pages 13 to 18 [2] TB: A/ pages 19 to 30 [3] See §§ 1 to 12 of the Decision dated 28/8/2019 [4] TB: B2/ pages 332 to 354 [5] TB: B1/ pages 191 to 214 [6] TB: B2/ pages 355 to 361 [7] TB: B2/ pages 526 to 528 [8] TB: A/ pages 38 to 46 [9] TB: B2/ pages 280 to 287 [10] TB: B2/ page 462 [11] TB: A/ page 49 at §13 [12] TB: B1/ page 43 [13] TB: A/ page 48 at §6 [14] TB: B2/ pages 560 to 574 [15] TB: A/ pages 76 to 252 [16] [2014] 3 HKLRD 224 [17] See Stack v. Dowden [2007] 2 AC 432 [18] TB: B2/ page 461 [19] See paragraph 40 of W’s Counsel Submissions [20] TB: A/page 60 [21] TB: B1/pages 30 to 40 [22] TB: B1/pages 41 to 55 [23] TB: B1/pages 56 to 62 [24] See Burns v. Burns [1984] Ch. 317 [25] TB/B2 at page 280 [26] Pages 3B to 10T of transcript [27] Pages 16K to 17M of transcript [28] TB:B2/ page 285 [29] See page 41 of this Judgment (§74 between N and O) [30] See paragraph 67 of this Judgment (per Vinelott J) |
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