Asparouh Ianev Dimitrov As Administrator of the Estate of Kaloian Ianev Dimitrov (Deceased) v. Dominic Tak Ming Lau also known as Lau Tak Ming and Another

CACV 568/2020

[2022] HKCA 1146

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 568 OF 2020

(ON APPEAL FROM HCMP NO. 887 OF 2018)

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BETWEEN

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court of Appeal):

INTRODUCTION

1.This is the 2^nd Defendant’s appeal against the order of Deputy High Court Judge William Wong, SC (“the Judge”) dated 28 September 2020 (“the Order”):

(1)  declaring that the Plaintiff’s charging order nisi dated 20 November 2017 and charging order absolute dated 15 January 2018 registered at the Land Registry on 23 November 2017 and 25 January 2018 (“the Charging Order Nisi” and “the Charging Order Absolute” respectively, and the “Charging Order” collectively) against the property known as Unit B on Ground Floor & Portions of the Lower Ground Floor of No 24, Shek O Headland, Hong Kong (“the Property”) have priority over the assignment of the Property dated 3 January 2018 (“the Assignment”) executed by the 1^st Defendant in favour of the 2^nd Defendant pursuant to ss 3, 4 and 5A of the Land Registration Ordinance, Cap 128 (“the LRO”);

(2)  ordering that the Property be sold, and the proceeds of sale thereof be applied to discharge, inter alia, the 1^st Defendant’s liability under the Charging Order; and

(3)  dismissing the 2^nd Defendant’s summons dated 11 March 2019 (“the Summons”) to discharge or set aside the Charging Order, and vacate the registration of the Charging Order against the Property at the Land Registry.

BACKGROUND FACTS

(i)  The Defendants and the Property

2.The 1^st and 2^nd Defendants were formerly husband and wife. They were married in Liaoning Province, PRC, on 29 April 1998. Their marriage was dissolved by an order of the Shenzhen People’s Court of the Futian District, Guangdong Province, dated 12 December 2017.

3.Prior to the dissolution of the marriage, the 1^st Defendant was the registered owner of the Property, having acquired it by purchase in 1978. As part of the agreed financial arrangement between the 1^st and 2^nd Defendants upon their divorce embodied in a Deed of Settlement dated 13 December 2017, it was agreed that the 1^st Defendant was to transfer the Property to the 2^nd Defendant for no consideration. The agreed financial arrangement was formalized by an Arbitration Award of the Hainan Arbitration Commission dated 28 December 2017.

4.Pursuant to the Deed of Settlement and/or Arbitration Award, the 1^st Defendant executed the Assignment of the Property to the 2^nd Defendant on 3 January 2018. The Assignment was registered at the Land Registry on 19 January 2018.

(ii)  The Charging Order

5.On 25 October 2017, the Plaintiff obtained judgment from Deputy High Court Judge To against the 1^st Defendant in High Court Action No 1079/2015 whereby it was adjudged that the 1^st Defendant was to pay the Plaintiff the sum of US$24,180,000 (or its Hong Kong dollar equivalent) together with interest thereon (“the Judgment Debt”) and the costs of the action.

6.On 20 November 2017, the Plaintiff obtained the Charging Order Nisi over the Property, then registered in the name of the 1^st Defendant, whereby the Property was charged with the payment of the Judgment Debt. The Charging Order Nisi was registered at the Land Registry on 23 November 2017, and served on the 1^st Defendant’s solicitors on 8 December 2017.

7.On 15 January 2018, Deputy High Court Judge To made the Charging Order Absolute after hearing the 1^st Defendant’s objections.

8.After the hearing on 15 January 2018, the Plaintiff conducted a land search in respect of the Property and discovered the registration of the Assignment on 19 January 2018.

9.On 25 January 2018, the Plaintiff registered the Charging Order Absolute at the Land Registry.

10.By a letter dated 12 February 2018, the Plaintiff’s solicitors gave notice to the 2^nd Defendant of the Plaintiff’s intention to enforce the Charging Order against the Property. The 2^nd Defendant did not respond to that letter.

(iii)  The proceedings below

11.On 13 June 2018, the Plaintiff issued an originating summons (“the Originating Summons”) against the 1^st and 2^nd Defendants seeking, inter alia, (i) a declaration that the Charging Order had priority over the Assignment, and (ii) an order for the sale of the Property.

12.On 11 March 2019, the 2^nd Defendant issued the Summons to discharge or set aside the Charging Order, and vacate the registration of the Charging Order against the Property at the Land Registry.

13.On 22 November 2019, Madam Justice Lisa Wong directed, pursuant to a consent summons of the parties filed on 21 November 2019, that a date be fixed for the substantive argument of the Originating Summons and the Summons before a High Court Judge with 1 day reserved. There was no application by any party for the deponents of affidavits/affirmations filed in the action to attend the hearing to give oral evidence or be cross-examined, and no such direction was given by Madam Justice Lisa Wong.

14.The Originating Summons and the Summons came before the Judge on 21 September 2020. At the hearing, the Judge had before him, inter alia, 3 affirmations of the 2^nd Defendant affirmed on 20 July 2018, 6 March 2019 and 23 April 2019 respectively in opposition to the Originating Summons and/or in support of the Summons. In those affirmations, the 2^nd Defendant (supported by the 1^st Defendant) raised a variety of defences to the Originating Summons, and contended that she was legally or beneficially entitled to, or had some beneficial interest in, the Property on the following bases:

(1)  as an equitable owner of 50% of the Property under Chinese law (in particular, Article 17 of the PRC Marriage Law), by virtue of her status as the wife of the 1^st Defendant;

(2)  as the assignee of the Property under the Assignment, which was executed pursuant to the Deed of Settlement and Arbitration Award;

(3)  as a wedding gift - the 1^st Defendant had orally promised to gift her the Property to be used as their matrimonial home in consideration of, or upon, her agreeing to marry him in the summer of 1997; and

(4)  by way of proprietary and/or promissory estoppel arising from the 1^st Defendant’s oral promise to gift her the Property and her acting in reliance on such promise to her detriment, namely, incurring at least HK$2 million to renovate, repair and/or improve the Property as well as paying the utility bills (electricity, water and gas, etc) in respect of the Property over the years.

15.After hearing the parties and on the basis of the affidavit/affirmation evidence before him, the Judge, by a written judgment dated 28 September 2020 (“the Judgment”), rejected the various grounds of defence relied upon by the 1^st and 2^nd Defendants. The Judge held that the Charging Order had priority over the Assignment, and made an order for the sale of the Property as sought by the Plaintiff. The Judge also dismissed the Summons.

THE PRESENT APPEAL

16.By a Notice of Appeal dated 20 October 2020, the 2^nd Defendant appealed against the Order. The Notice of Appeal contains a total of 16 substantive paragraphs, or grounds of appeal. It is unnecessary to set out those 16 grounds of appeal individually in this judgment. Essentially, the 2^nd Defendant contends that (i) the Judge was wrong to reject her various defences, (ii) the Judge erred in deciding the case on affidavit evidence alone, or conducting a mini-trial on affidavits, (iii) there were irregularities on the part of the Plaintiff in obtaining the Charging Order Absolute, and (iv) the Judge erred in the exercise of his discretion to make an order for the sale of the Property.

17.At the hearing of this appeal on 19 July 2022, Mr Chan on behalf of the 2^nd Defendant expressly confirmed that (i) the 2^nd Defendant no longer relied on PRC law or any contention that she was entitled to an interest in the Property under PRC Law, and (ii) the 2^nd Defendant did not rely on any common intention constructive trust, and her case was based on proprietary/promissory estoppel instead.

DISCUSSION

(i)  The 2^nd Defendant as assignee of the Property under the Assignment

18.Section 3(1) of the LRO provides that: “Subject to this Ordinance, all such deeds, conveyances, and other instruments in writing, and judgments, made, executed, or obtained, and registered in pursuance hereof, shall have priority one over the other according to the priority of their respective dates of registration, which dates shall be determined in accordance with regulations made under this Ordinance.”

19.Section 5A of the LRO further provides that: “Notwithstanding section 3 or section 5 a charging order … which is duly registered shall have priority from the commencement of the day following the date of its registration.”

20.As correctly held by the Judge at §§20-22 of the Judgment, a charging order, when it is made absolute, relates back to the date of the order nisi. In other words, the charging order absolute takes effect from the date of the charging order nisi.

21.In the present case, the Charging Order Nisi was registered at the Land Registry against the Property on 23 November 2017, while the Assignment was registered subsequently on 19 January 2018. It follows that, by the operation of ss 3(1) and 5A of the Ordinance and the “relation back” principle mentioned above, the Judge is correct to hold that the Plaintiff’s Charging Order has priority over the 2^nd Defendant’s Assignment.

(ii)  The defence of “wedding gift”

22.Section 4 of the Conveyancing and Property Ordinance, Cap 219, provides that: “A legal estate in land may be created, extinguished or disposed of only by deed.” To the extent that the 2^nd Defendant relies upon the 1^st Defendant’s oral promise to give her the Property in consideration of, or upon, her agreeing to marry him in 1997 as a “gift” of the Property, it is clear that such gift was not legally effective to pass any interest in the Property to the 2^nd Defendant.

23.Mr Chan, in reliance upon Re Rose [1949] Ch 78, argues that the oral gift is effective as a gift of the Property because the 1^st Defendant had done everything in his power to perfect the gift to the 2^nd Defendant, in particular by giving her the title deeds of the Property upon redemption of a mortgage. In Re Rose, a testator executed a transfer of some preference shares in a company and gave the executed share transfer form together with the share certificates to H (the intended donee). The legal title to the shares was not, however, perfected until the directors of the company passed the transfer for registration which took place after the death of the testator. The issue in that case was whether those shares had been “transferred” to H previously to the death of the testator within the meaning of clause 3(g) of the will of the testator. Jenkins J held that that the testator had done everything in his power to divest himself of the shares in question to H (because the passing of the transfer for registration was not something which the testator had to do or could do, but was an act which depended on the directors of the company), and the shares had been transferred to H previously to the death of the testator within the meaning of clause 3(g) of the will. Jenkins J further said that H’s title to the shares was completed, or perfected, by registration after the testator’s death, and the shares were taken by H under his “inter vivos title”. Assuming (without deciding) that Re Rose stands as authority for the proposition that a gift of shares in a private company is valid or effective even though the formalities of registration have not been completed provided that the donor has done everything in his power to divest himself of the shares to the donee, we do not consider that such principle can apply to a transfer of land because the formal requirement of a deed for the creation, extinguishment or disposition of any interest in land is a requirement imposed by statute. In any event, it is obvious that, by failing to execute a deed of gift, the 2^nd Defendant cannot be said to have done everything in his power to divest himself of the land to the 1^st Defendant.

(iii)  The presumption of advancement

24.Mr Chan argues that “the conduct between the couple gives rise to a presumption of advancement” (§13 of Mr Chan’s Skeleton Argument dated 21 June 2022). This is a misunderstanding of the presumption, which can only apply where money is provided to another to purchase a property in the latter’s name when the parties have particular personal relationships. The Property here was purchased by the 1^st Defendant using his own funds and registered in his own name in 1978, many years prior to the alleged oral gift of the Property in 1997 or the marriage of the Defendants in 1998. We are unable to see how the “presumption of advancement” can have any possible application to the facts of the present case.

25.At §13 of his Skeleton Argument, Mr Chan goes on to state that: “D1 gave D2 rental income earned from the Property in addition to its title deed. D2 did not ask D1 for reimbursement of [renovation] expenses relating to the Property. Objectively, these matters evidence a common intention between the couple that the Property should belong to D2.” These matters may well be relevant to a possible claim based on a post-acquisition common intention construction trust. However, as earlier noted at §17 above, Mr Chan has expressly disclaimed any reliance on common intention constructive trust. On the other hand, we do not see how the matters mentioned in §13 of Mr Chan’s Skeleton Argument can advance his argument in respect of the presumption of advancement.

(iv)  Proprietary and/or promissory estoppel

26.The 2^nd Defendant’s case on proprietary and/or promissory estoppel is based on the alleged oral promise by the 1^st Defendant to gift the Property to the 2^nd Defendant in consideration of, or upon, her agreeing to marry him and the fact that she had, allegedly, acted in reliance on such promise to her detriment by incurring at least HK$2 million on renovating, repairing or improving the Property and paying the utility bills in respect of the Property.

27.The Judge found, however, the 2^nd Defendant’s factual case in relation to the alleged proprietary and/or promissory estoppel to be directly contradictory to contemporaneous documents and incredible, for the following reasons:

(1)  The contention that the 2^nd Defendant was the beneficial owner of the Property or had some beneficial interest in the Property was contradicted by the Assignment, which was signed and acknowledged by the 2^nd Defendant and prepared by a firm of solicitors. In the Assignment, it was stated in clause 1 that the 1^st Defendant assigned the Property as “Beneficial Owner” to the 2^nd Defendant at nil monetary consideration. The Judge considered that if there was an oral gift of the Property as alleged by the 2^nd Defendant, there was no reason why this fact was not stated in the recital to the Assignment (§§31 and 32 of the Judgment).

(2)  The allegation of an oral gift of the Property was also contradicted by the Deed of Settlement entered into by the 1^st and 2^nd Defendants. In the Deed of Settlement, it was stated in clause 2 that the 1^st Defendant warranted to the 2^nd Defendant that he was the registered and beneficial owner of the Property as he used his own money to purchase it prior to the marriage, and it remained vested in him solely as beneficial owner. The Judge considered that if there was a gift of the Property by the 1^st Defendant to the 2^nd Defendant at the time of the marriage as alleged, there was no reason why it was not mentioned in the Deed of Settlement (§§34 and 35 of the Judgment). The Judge rejected the 2^nd Defendant’s explanation that she was ignorant of the law as being incredible, having regard to the fact that the Deed of Settlement was entered into some 3 weeks after the Charging Order Nisi was made and it was prepared with the assistance of lawyers. The Judge took the view that there was no credible reason why the 2^nd Defendant would not have relayed her alleged beneficial interest in the Property to her lawyers at that time (§36 of the Judgment).

(3)  The Judge referred to Mr D’Souza’s submission that the allegation of oral gift only surfaced for the first time in the 2^nd Defendant’s 3^rd affirmation made on 23 April 2019, which did not sit well with her two previous affirmations made on 20 July 2018 and 6 March 2019 where she only claimed 50% of the beneficial interest of the Property by virtue of her marriage with the 1^st Defendant under Chinese law (§36 of the Judgment). Read in the context of the Judgment, it is clear that the Judge accepted this submission.

(4)  The Judge took into account the fact that the Property was subject to a number of mortgages and assignments of rentals in favour of various banks or financial institutions over the years, and there was no contemporaneous document to show that any bank or financial institution had ever been informed about the 2^nd Defendant’s alleged beneficial interest in the Property (§37 of the Judgment).

(5)  It was the 2^nd Defendant’s case that the Property was gifted to her by the 1^st Defendant to be used as their matrimonial home. However, there was an assignment of rentals in favour of Pacific Finance (Hong Kong) Limited dated 19 July 2004 and registered in the Land Registry against the Property on 12 August 2004. That assignment of rentals was only released on 11 December 2017[1], ie contemporaneously with their divorce on 12 December 2017 and shortly before the Assignment on 3 January 2018. This showed that the Property was, for a significant portion of the duration of the 1^st and 2^nd Defendants’ marriage, not used as their matrimonial home but for rental purposes (§37 of the Judgment).

(6)  Although the 2^nd Defendant claimed that she had spent some HK$2 million on the Property for its renovation, repairs or improvement, she was able to produce only one receipt in support of this allegation. The receipt is dated 5 March 2010 (after completion of the renovation and repairs which the 2^nd Defendant said was in or about late 1999[2]) for the amount of RMB32,000, and relates to the purchase of some aluminium window frames in China. There is nothing on the face of the receipt to show that it had anything to do with any renovation, repairs or improvement of the Property in Hong Kong. The Judge rejected the 2^nd Defendant’s explanation that the lack of supporting documents was a result of her not having a habit of keeping receipts as being incredible, and considered that it was simply untenable that no records could be produced for the payments that the 2^nd Defendant had allegedly made in respect of the Property over the past 20 years, which on her own account would include at least renovation expenses totalling HK$2 million as well as regular household expenses (§44 of the Judgment).

(7)  The Judge also found it hard to believe the 1^st Defendant’s evidence tendered in support of the 2^nd Defendant’s case, having regard to the fact that his lawyers appeared before the court at both hearings of the Charging Order Nisi and the Charging Order Absolute but never informed the court that the 1^st Defendant had gifted the Property to the 2^nd Defendant. On the contrary, the 1^st Defendant specifically, through his lawyers, submitted to the court that he was the sole beneficial owner of the Property. The Judge considered the 1^st Defendant’s explanation (namely, that as a layman, no one (including his former solicitors) had ever told him or advised him about the implications of promissory or proprietary estoppel or unwritten equities in Hong Kong and thus he had never previously given any thought to the fact he had given the Property to the 2^nd Defendant and her subsequent conduct in incurring or spending at least HK$2 million on the Property) to be totally incredible (§§45 and 46 of the Judgment).

28.As pointed out by the Judge at §30 of the Judgment, the burden was on the 2^nd Defendant to prove that she had some beneficial interest in the Property. On the evidence before him, the Judge was entitled to find that the 2^nd Defendant’s factual case was not credible, and she had failed to discharge the burden of proving that she had any beneficial interest in the Property.

(v)  Trial on affidavit evidence

29.Mr Chan argues that there were dispute of facts in relation to the 2^nd Defendant’s claim of proprietary/promissory estoppel, and the Judge was wrong to have determined the case on the basis of affidavit evidence alone. Instead, the Judge ought to have ordered the proceedings to continue as if the cause or matter had been begun by writ and given directions for the filing and service of pleadings, or ordered the deponents to attend court to give oral evidence and be cross-examined on their affidavits/affirmations.

30.This complaint has no merit in view of the fact, as mentioned by the Judge at §29 of the Judgment, that the parties had agreed not to adduce oral testimony and asked the court to decide disputes of facts by taking into account all relevant factual circumstances of the case, including the inherent plausibility of a party’s narrative, the contemporaneous documents and the lack of contemporaneous documents to support his/her case (see also §12 of the Judge’s decision dated 30 December 2020 in relation to the 2^nd Defendant’s application for stay of execution pending appeal).

31.In the 1^st Defendant’s skeleton submissions before the Judge dated 17 September 2020, it was stated that: “All parties have agreed that no viva voce evidence will be adduced in this paper trial. That being the case, any dispute on facts would have to be determined by this court by adopting the threshold of inherent probability …”. Although there were some references in the 2^nd Defendant’s skeleton submissions dated 14 September 2020, at §§10(2) and 96, to the possibility of the case being allowed to proceed to a trial or full trial, it is clear from the transcript of the hearing on 21 September 2020 that the 2^nd Defendant’s former counsel expressly agreed that it was open to the Judge to determine the case on the existing affidavit evidence, and he was content for the Judge to “do his best by looking at the affidavits, assessing against the contemporaneous documents”, or “the lack of it and also the inherent probability”[3]. No one applied for the proceedings to be converted into a writ action, or asked for the deponents to attend the hearing to give oral evidence and be cross-examined.

32.We accept, as a matter of principle, that a judge is not strictly bound by the parties’ agreement on how a cause or matter originally begun by way of an originating summons ought to be continued or determined. We also accept that a judge’s decision to follow the parties’ agreement on the mode of the proceedings or method of determination of a cause or matter may, in some exceptional circumstances, be open to review by the Court of Appeal. This is not, however, such a case. As earlier mentioned, we consider that it was open to the Judge, on the evidence before him, to find that the 2^nd Defendant’s factual case was incredible, or unbelievable. That being the position, it was not necessary for the Judge to direct the proceedings to continue as if the cause or matter had been begun by writ, or order the deponents to attend the hearing to give oral evidence and be cross-examined. In our view, the Judge was well entitled to determine the case on the basis of the affidavit evidence before him.

(vi)  Irregularities in obtaining the Charging Order Absolute

33.This complaint can be dealt with briefly. Mr Chan argues that the Plaintiff ought to have made inquiries of any person in occupation of the Property prior to applying for the Charging Orders Nisi/Absolute, and should be taken to have constructive notice of the 2^nd Defendant’s equitable interest in the Property. Since we have rejected the 2^nd Defendant’s claim that she has a beneficial interest in the Property, it is not necessary to consider the issue of constructive notice. Mr Chan’s further contention that the Plaintiff ought to have served notice of the application for the Charging Order Absolute on the 2^nd Defendant as the occupant of the Property is likewise without substance. She had no legal or beneficial right or interest in the Property, and there was nothing to show that the Plaintiff was aware of her allegation she had some such right or interest. Order 50, rule 2 of the Rules of the High Court does not require an applicant for a charging order in respect of land to serve notice of the order to show cause on a mere occupant of the land. Mr Chan next argues that the Plaintiff ought to have carried out a land search prior to applying for the Charging Order Absolute and, had he done so, would have discovered the existence of the “stop deeds”, ie the Deed of Settlement and Arbitration Award. Assuming, for the sake of argument, that the Plaintiff ought to have carried out a land search and discovered the existence of the Deed of Settlement and Arbitration Award, it would be clear that those documents only came into existence after the registration of the Charging Order Nisi and ranked in priority after the Charging Order Nisi even if they had not been stopped from registration. There was nothing in Order 50, rule 2 of the Rules of the High Court which required the Plaintiff to serve notice of the order to show cause on the 2^nd Defendant in those circumstances.

(vii)  Exercise of discretion

34.Lastly, the complaint that the Judge erred in the exercise of his discretion in making an order for the sale of the Property is without substance. The Judge did not err in principle or approach, or take into account irrelevant matters, or fail to take into account relevant matters, and his conclusion was not outside the generous ambit within which a reasonable disagreement is possible. There is no proper basis on which the Court of Appeal may interfere with the Judge’s exercise of his discretion in the present case.

35.In all, the 2^nd Defendant’s appeal has no merits and is rejected.

DISPOSITION

36.The 2^nd Defendant’s Notice of Appeal is dismissed. The costs of the appeal, including the costs of the 2^nd Defendant’s renewed application to the Court of Appeal for a stay of execution of the Order pending appeal, shall be to the Plaintiff, to be taxed if not agreed. The previous order for stay of execution of the Order pending appeal dated 17 August 2021 is discharged upon the dismissal of the 2^nd Defendant’s appeal.

Mr Robin D’Souza, instructed by Boase, Cohen & Collins, for the Plaintiff

The 1^st Defendant, acting in person and absent

Mr Charles Chan K C, instructed by Ivan Tang & Co, for the 2^nd Defendant