Lmfe v. Fcta and Others
Read the full judgment text of FCMC 9176/2018 on BabelCite. This Family Court judgment was delivered on 16 September 2022 before His Honour Judge I Wong.
Matrimonial causes – beneficial ownership – common intention constructive trust – resulting trust – gift – equity follows the law – District Court – FCMC 9176/2018 – Wife claimed husband sole beneficial owner of 3 properties purchased in 2008 with parents as bare trustees – Respondents claimed properties were gifts to parents – Court found purchases were scheme engineered by husband but intended to benefit parents – Husband has half interest in 1st and 2nd Properties and no interest in LOC Property – Wife's claim dismissed – No order as to costs due to respondents' conduct.
Legal issues: Beneficial ownership of properties · Applicability of equity follows the law presumption
Outcome: Wife's claim dismissed
Cites 8 cases
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FCMC 9176/2018 [2022] HKFC 186 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 9176 OF 2018 ----------------------------
---------------------------- Coram: His Honour Judge I Wong in Chambers (Not Open to Public) Dates of Hearing: 12, 15, 19 and 20 October and 29 November 2021 Date of Judgment: 16 September 2022 ___________________________________________ J U D G M E N T ( Preliminary Issue – Third Party Ownership ) ___________________________________________ Background 1.This preliminary issue trial concerns the beneficial ownership of 3 landed properties. The parties involved are: the wife and the husband, who are the petitioner and the 1st respondent respectively; and the 2nd and the 3rd respondents are the father and the mother of the husband. For the ease of reference, I shall refer to them as “the wife”, “the husband”, “the father” and “the mother”. I shall refer to the husband, the father and the mother collectively as “the respondents” and the father and the mother collectively as “the parents” or “his parents”. 2.The wife and the husband were formally married in July 2012. Before then, their relationship had started as early as 1999/2000 when the husband was still validly married to someone. 3.In December 2001, the wife gave birth to a son for the husband. The son is now 20 years old and is the only child of the family. 4.In April 2012, upon the petition of his former wife on the ground of unreasonable behaviour, the husband’s previous marriage was finally dissolved. This cleared the way for him to marry the wife, which they did in July 2012. By then, their son was almost 11 years old. 5.It is unfortunate that the marriage did not last long. In July 2018, the wife petitioned for divorce on the ground of the husband’s unreasonable behaviour. 6.The main suit was uneventful. The decree nisi was granted on 10 January 2020. The Wife’s Application 7.All the 3 Properties are residential. 8.The 1st Property is a flat at New Kwai Fong Gardens (“the 1st Property”). It was purchased in about February 2008 for $1,900,000 with the husband and the father registered as its joint tenants. The purchase price was initially paid in full and a mortgage was subsequently taken out about a month later. 9.The 2nd Property is a flat at Kwai Fong Terrace (“the 2nd Property”). It was purchased in about April 2008 for $1,630,000 with a mortgage finance and was registered in the joint names of the husband and the mother. 10.The 3rd Property is a flat in Lam Tin, Kowloon, purchased under the Government’s Home Ownership Scheme (“HOS”). This HOS flat was purchased on 11 June 2008 in the joint names of the father and the mother. That was made possible by the surrender of the parents’ public housing unit (commonly called the “green form applicants”) at Kwai Fong Estate in which the whole family (including the husband and his siblings when they were young) had lived for many years. The purchase price of this flat was $2,042,600 with a 5% down-payment and the balance being funded by a bank mortgage. I shall refer to this property as “the LOC Property”. 11.The wife’s case is notwithstanding these properties in one way or the other bear the parents’ names, all of them are beneficially belonged to the husband; his parents are bare trustees only. The husband is the mastermind behind; he purchased all these properties for his own investment purpose. Hence, these properties should all go to the matrimonial pot for division upon divorce. 12.On 25 November 2019, the wife took out a summons seeking a declaration that the father and the mother are holding the 3 properties on trust for the husband. By an order dated 2 January 2020, the father and the mother have been joined as parties to the present proceeding. 13.The parties went through an unsuccessful FDR before Deputy Judge S Wong who then referred the case to this court for trial of the preliminary issues. Factual Background 14.I believe the following factual background are not in dispute 15.The parents are currently 72 years old. They have 3 children. The husband is the eldest, followed by a younger sister (“the younger sister”) and a younger brother (“the younger brother”). 16.Before his retirement in 2005, the father, with little education, had worked as a casual construction worker and the mother was most of the time a housewife. She is illiterate. 17.The husband graduated from a local university in 1993 with a Bachelor degree majoring in Mathematics and has a Master’s degree in Finance. He started his financial news business from scratch in about 2001/2002. This turned out to be a successful one. The business was acquired by a purchaser in early 2006 and was listed in Nasdaq in March 2007. Pending listing the husband was paid a substantial salary of $250,000 per month. In 2008, the husband liquidated his shareholdings and obtained about $30,000,000. He made use of the fortune in a series of property transactions as set out below. For the ease of reference, I include the 3 properties at issue and set them out in their chronological order.
18.The 3 Properties are item nos 4, 5 and 8 above. As I shall explain below, the KCP Property (item no 9) also featured at trial. At this stage, some observations can be drawn. 19.First, all these transactions took place when the parties were not married with each other. The wife said at that time they were in cohabitation and the Villa Rocha property (item no 2 above) was their family home. 20.Secondly, the 3 Properties and the KCP Property were all purchased in the first half of 2008. 21.Thirdly, the 1st Property, the 2nd Property and the KCP Property were all located in the Kwai Chung District where the parents have had strong ties. 22.Fourthly, apart from the 3 Properties at issue, all the other properties, including the KCP Property, were purchased either in the name of the husband or his FW Limited. 23.Fifthly, it appears that apart from the 3 Properties at issue and the KCP Property, all the other properties, as can be seen from their prices, were more luxurious properties in prime locations. The Husband’s Siblings 24.The younger sister and the younger brother also featured in evidence. At the time of the purchases (ie the 1st half of 2008), the younger sister was already married and did not live with the parents. She was an accounting clerk and was assisting the husband with accounting and company secretarial work. The younger brother was residing in Australia. Notwithstanding his absence from Hong Kong, he remained to be one the 3 approved occupants of the public housing unit, viz, the father, the mother and the younger brother. The Pleadings 25.Both counsel challenge the other side’s pleading as being defective. A number of authorities in support of the contention are referred to including Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 and Law Sau Wah v Lau Chu Mui [2021] HKCA 422. 26.It is well settled that a party is not allowed to run an unpleaded case. In Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663, Ma CJ said,
27.I now turn to the pleadings of the parties. The Wife’s Case 28.The wife says from what she understood from the husband there is a common intention or understanding between the husband and his parents that the husband is to be the sole beneficial owner of all the 3 Properties.[1] The 1st and 2nd Properties 29.In respect of the 1st and 2nd Properties, the wife said the common intention or understanding between the husband and his parents was that -
30.Pursuant to the common intention or understanding, the husband solely paid the monies for the purchase, the renovation costs, the subsequent mortgage repayments, the rates and government rents. 31.At all the material times, the husband has had the sole discretion to decide and arrange for the refinancing of the 2 Properties. He used the mortgage loans for his own purposes without even consulting or informing his parents.[3] The LOC Property 32.The wife says the LOC Property was purchased by the husband in the names of his parents. 33.The common intention or understanding amongst the respondents was that
34.Pursuant to the common intention or understanding, the husband solely paid the down payment, the stamp duty and the incidental expenses, the subsequent mortgage repayments, the renovation costs and the rates and government rents. 35.At all times, the husband has been using the LOC Property for his own use at his discretion without consulting the parents or getting their consent. The wife gives the following particulars.
36.In addition to common intention construction trust, the wife also relies upon resulting trust to establish her claim that the 3 properties fall into the matrimonial pot.[8] 37.Indeed, it is the wife’s case not only these 3 properties, all the other properties listed in [17] above belonged to the husband solely. [9] 38.Ms Tsui, on behalf of the wife, said the wife relies primarily upon common intention constructive trust. There was indeed a common intention or tacit understanding amongst the respondents for the parents to hold their legal and beneficial interests in the 3 properties for the husband. In the unlikely event that the court is unable to infer or impute the common intention, the wife relies upon resulting trust to establish her claim. 39.Pausing here, it is necessary to refer to the criticism made by Mr Chan who appeared for the respondents. Mr Chan contended that the wife’s case on the issue of common intention is a vague one. The wife only says in her pleading and her witness statement that she understood from the husband there was such a common intention, it is unknown as to whether or not the wife is asking the court to make a finding of common intention on an express agreement basis or on the inference to be drawn on the basis of conducts. The wife is also thin on the evidence. She did not give any particulars as to the date, time, place of meeting and the participants involved. On that basis alone, the wife’s case ought to be dismissed. The Respondents’ Case 40.All the respondents were united by filing one single Defence. For the ease of discussion, I shall deal with the LOC Property first. The LOC Property 41.The respondents deny the husband has any beneficial interest in the LOC Property. They also deny there was any common intention amongst them. [10] 42.While the respondents admitted the husband contributed to the 5% down-payment, stamp duty and all the relating expenses including the renovation costs, these, they say, were all gifts to his parents. The husband was not eligible to buy any HOS property. At the material times, it was open to the father and the mother to choose between the LOC Property and another HOS development in Shau Kei Wan. The parents made their own decision to buy the LOC Property which was nearer to where they used to live.[11] The 1st and 2nd Properties 43.The respondents deny the wife’s claims that the husband has retained sole beneficial ownership in the 1st and 2nd Property. [12] 44.At paragraph 9(a), the respondents deny there was a trust arrangement by common intention between them as averred by the wife. As for the husband, he denies having communicated to the wife about the trust arrangement. The respondents specifically plead,
45.At paragraph 9(c), it is pleaded that,
46.The respondents said in the same paragraph 9(c) that the understanding as averred by the wife only goes to rental arrangement and does not relate to the beneficial interest of the properties. 47.The respondents also deny the wife’s assertion that the father and the mother were named as joint owners with the husband for the sole purpose of facilitating the collection of rental income. There was no need for the parents to be named as owners for this purpose.[13] 48.Most importantly, at paragraph 9(e), which was in response to the wife’s claim that the husband is the sole beneficial owner, the respondents deny that is the case and expressly plead that,
49.At paragraph 10, it is pleaded that,
50.Pausing here, I must admit I have difficulty in understanding the respondents’ case. 51.On the one hand, when read together with the pleading that the husband wanted to fulfil his filial duty and to repay the parents, and that the rental income, after payment of outgoings, belonged to his parents, the pleading that, “There was never any understanding amongst the respondents for (the husband) to retain any beneficial interest in the properties at all”, states tolerably clear that the husband has had no beneficial interest in the 2 Properties despite being one of the registered owners. In other words, he is merely a trustee. 52.On the other hand, Paragraph 10 seemed to be stating that the husband and the father are the legal and beneficial joint owners of the 1st Property and the same applies to the husband and the mother in respect of the 2nd Property. 53.The ambiguity of the respondents’ case caused some very valid and legitimate criticism from Ms Tsui. 54.I am sure Mr Chan was fully aware of the defects. At Opening, when being asked by this court what the respondents’ case is, Mr Chan replied that his clients’ primary case is “equity follows the law”, and so the husband has half of the interest in the 1st and 2nd Properties; and that the husband does not have any interest in the LOC Property. 55.When it was pointed out by this court that the averment that the husband owns half of the interest in the 2 Properties was not so pleaded in the respondents’ Defence; nor this assertion appeared in any of the respondents’ witness statements, Mr Chan accepted that was the case. What is more, when it was pointed out by this court that this stance was inconsistent with what was pleaded on the Defence, in particular, paragraph 9(e) of the Defence, Mr Chan attributed it to bad drafting but he declined to make an application for amendment. He tried to explain when the respondents said the husband had not retained any beneficial interest at all, the respondents were not saying the respondents’ names in the properties is beneficially different from the legal title. With respect, this submission is nothing but sophism. I am not able to read the meaning that Mr Chan tried to import. 56.Nevertheless, Mr Chan submitted that the respondents are entitled to rely upon the maxim “equity follows the law”. This, so submitted by him, is the starting point under Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2012] 1 AC 776. It seems clear to me that Mr Chan was effectively suggesting that it is not necessary to refer to the Defence anymore. I can simply ignore the respondents’ pleadings. I simply do not need to pay attention to what are pleaded in their Defence; their complete answer is “equity follows the law”. I shall deal with whether this is the correct starting point when I deal with the applicable legal principles. 57.In Law Sau Wah v Lau Chu Mui & Anor, [2021] HKCA 422, CACV 525/2019, while the Court of Appeal accepted that there is no requirement in the Rules of the High Court for a party to plead the legal consequences (in that case, the severance of a joint tenancy), acts that had the effect of severing the joint tenancy have to be pleaded. It is impermissible for a party to assert an unpleaded legal consequences that is inconsistent with his pleaded case: paras 31(5); see also Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd (2020) 23 HKCFAR 138 at [9] - [10]. 58.In my view, following the rationale of Law Sau Wah v Lau Chu Mui & Anor, the facts upon which the respondents rely in support of the “equity follows the law” have to be pleaded. Further, the pleading that there was never any understanding amongst the respondents for the husband to retain any beneficial interest in the properties at all is inconsistent with the maxim. Facts Not in Dispute The 1st and 2nd Properties 59.It is common ground that the purchase monies, the relating expenses and the mortgage repayments of the 1st and 2nd Properties were paid by the husband. These 2 Properties have always been rented out for income. This remains to be the situation now. The LOC Property 60.Both sides agree that the down-payment, the stamp duty, all the relating expenses and the renovation were paid by the husband. The respondents said these were gifts from him. As far as monies are concerned, the only dispute between the parties is whether the subsequent mortgage repayments and all outgoings were paid by the husband as contended by the wife or these were from the parents’ own pockets as asserted by the respondents. 61.The LOC Property is located far away from the parents’ neighbourhood. The parents never moved to live in the LOC Property after they had surrendered their public housing unit in exchange for the purchase of it. Instead, the parents moved into the KCP Property. They have been using the KCP Property rent-free as their home ever since its purchase. 62.The LOC Property was renovated to be more like a workshop / home-office. From the very first day it was being used mainly for the husband’s business. The husband was spending most of his time in the Mainland; so the LOC Property was mainly used by the younger sister. It has also been used as the registered office of the husband’s companies. 63.Additionally, the LOC Property was used once by a friend of the wife as temporary place of abode when she returned to Hong Kong for vacation. It was also briefly occupied by one Ms Poon who the wife said was the husband’s mistress in about 2009. When the younger brother returned to Hong Kong for good he also stayed there for a few months before settling down elsewhere. 64.The LOC Property is now being used by the husband as his place of abode after having moved out from the former matrimonial home. Applicable Legal Principles 65.In Bhura v Bhura (No 2) [2014] EWHC 727, [2015] 1 FLR 153, Mostyn J provided some useful guidance on the approach to be taken by the court when dealing with dispute over ownership in a domestic setting:
66.Thus, the first step is to look at whether or not there was any express declaration of beneficial interests. 67.If there was no express agreement about the beneficial interests, the next step is to see if there was any common intention or agreement, at least, in the words of Mostyn J, some “tacit understanding” of who owned what share of it. In determining whether there was such a tacit understanding, and if so what it was, the court will look at all the evidence holistically and will examine the whole course of the parties’ conduct in relation to the property. 68.In the rare case where the evidence does not reveal a tacit understanding about ownership the court then, as a third step, can reach for the presumptions. The presumption that beneficial ownership is the same as legal title is one of the presumptions only. 69.Hence, Mr Chan’s “equity follows the law” is merely the third step in the exercise. On that view, he is jumping the gun. “Equity Follows the Law”? 70.Mr Chan cited Stack v Dowden (HL(E)) [2007] 2 AC 432 and Jones v Kernott (SC(E)) [2012] 1 AC 776, both being judgments by the highest court in England. 71.Briefly stated, it was held in both cases that where a property was registered in joint names, and where there was no contrary express declaration, the starting point is that equity followed the law so that both the legal and beneficial interest in the property were joint and equal. It was further said in Jones v Kernott that this presumption could be displaced by showing that the parties had had a different common intention at the time when they had acquired property or that they had later formed a common intention that their respective shares would change. 72.It has to be borne in mind that these 2 cases were each about a dispute between former cohabitating couple over the beneficial interests of their family home bought in their joint names. This type of situation was referred to as the “domestic consumer context”: Stack v Dowden at [58] and Jones v Kernott, at [10]. 73.In domestic context the burden to displace the presumption has been described as “heavy” and it has been said that this task is “not a task to be lightly embarked upon”: per Lord Walker at [33] and per Lady Hale, at [68], and Snell’s Equity (34th Edition), at 24.050. 74.It was thought in some cases that this starting point applied to “domestic consumer context” only. Laskar v Laskar [2008] EWCA Civ 347, [2008] 1 WLR 2695 was one of such cases. It was a decision made by the English Court of Appeal after Stack v Dowden but before Jones v Kernott. In that case a dwelling house was purchased with mortgage finance in the joint names of the mother and her daughter. It was bought for investment purpose. It was held by Lord Neuberger that where members of the same family purchased in joint names a property which they intended to be and in fact was occupied by them as a home, there was a presumption of equality; however, where the property was primarily intended as an investment that presumption did not apply. It was presumed that their respective beneficial shares reflected the size of their contributions to the purchase price: at [17]. In other words, resulting trust applied. 75.The most recent decision is the Privy Council’s judgment in Marr v Collie (PC) [2018] AC 631. This is a case where a same sex couple in Bahamas had purchased some properties (both real and personal) in their joint names for investment during their relationship, the court was asked to determine their respective beneficial interests. 76.The Privy Council undertook a review of Stack v Dowden, Laskar v Lasker and Jones v Kernott. Lord Kerr, who gave the opinion on behalf of the Board,[14] said although the statement made by Lady Hale that “the starting point where there is joint legal ownership is joint beneficial ownership” was in respect of a case where the dispute between the parties was in relation to a property which was a family home, there is no reason to doubt its possible applicability to property purchased by a couple in an enterprise reflecting their joint commercial, as well as their personal, commitment. 77.Lord Kerr did not consider that Laskar’s case is authority for the proposition that the principle in Stack v Dowden applied only in “the domestic consumer context”. His Lordship explained,
78.Lord Kerr said at [49] that
79.In other words, the presumption of equality may apply to investment properties of an unmarried couple too. 80.That said, the learned judge emphasized that for the determination of beneficial ownership, the intention of the parties would still be a crucial factor. The direct focus should be on what the intentions of the parties were: see [40] & [46]. 81.As to what the starting point is, he said a simplistic answer may be that if the property is purchased in joint names by parties in a domestic relationship the presumption of joint beneficial ownership applies, but if bought in a wholly non-domestic situation, the resulting trust presumption may apply: at [53]. 82.Lord Kerr was aware that there might be potential clashes of presumptions. It was emphasized by him that save where there was no evidence from which the parties’ intentions could be identified, the answer is not to be provided by the triumph of one presumption over another. He said that context is important and was set by the parties’ common intention or the lack of it. Similar to what Lady Hale said in [69] of Stack v Dowden that “context is everything”, Lord Kerr said at [54],
83.Lord Kerr also recognized that the initial intention (or lack of it) at the time of purchase may change. This is why intense examination of the course of conduct of the parties over the years in which they dealt with the property is relevant: at [55]. 84.Locally, Marr v Collie has been considered by our Court of Appeal in Law Sau Wah v Lau Chu Mui, supra. 85.Returning to the present case, the 1st and 2nd Properties are “income” properties; neither property has ever been used as the respondents’ home. Indeed, the husband and the parents were not living together. The properties were bought, according to the husband’s evidence, for long term investment for the protection of his parents. As such, their situation is outside the “domestic consumer context”. Similar to Laskar v Laskar, although the respondents’ relationship was familial, the financial venture on which they had embarked was not associated with a mutual commitment to each other for the future. 86.Therefore, on the strength of the above authorities, I am not able to accept Mr Chan’s invitation that as far as the 1st and 2nd Properties are concerned, even where there was no common intention or tacit understanding the starting point must necessarily be “equity follows the law”. Indeed, it would appear that the presumption of resulting may be more apt to the present situation. That said, I am aware that the crucial question is what the intention of the parties was (or the lack of it). This should be the direct focus of the court for the resolution of the dispute. 87.As said by Lam J (as he then was) in Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343, the court should first establish the parties’ true common intention as regards beneficial interest and then the court has to ascertain the extent of the parties' respective interests in the property, by adopting a holistic approach to quantification, surveying the whole course of dealing and conduct which threw light on what shares the parties must have intended. Inferred intention and course of dealings and conduct are all relevant: see Ip Man Shan Henry v Ching Hing Construction Co Ltd [2003] 1 HKC 256. Whether the Purchase of the 3 Properties was a Scheme Engineered by the Husband? The Wife’s Evidence 88.The wife said with the fortune from selling his business, the husband started to make some financial plans in 2008. He told the wife (at that time they were not formally married) that instead of giving money every month to his parents for living expenses, it would make more sense for him to buy properties in joint names with them and let them receive the rental income. He would co-own one property with each of the parents. The husband was on and off working in the Mainland, so the parents might have the legal standing collecting rents. There were additional benefits of keeping them busy. The fact that the properties were purchased as joint tenants and not tenants-in-common is very telling. The husband would be able to retain all legal and beneficial interests in them eventually as naturally he would survive the parents. 89.The wife is sure neither the father nor the mother would have the resources of their own to buy the LOC Property. The parents had lived in the Kwai Chung neighbourhood for decades. The 2 of them lived comfortably in a 5-person public housing unit. There was no reason for them to have considered moving to a totally new environment in Lam Tin. 90.It was the husband’s suggestion that the parents should consider buying a HOS flat either in Lam Tin (ie the LOC Property) or Shau Kei Wan. At the suggestion of the husband, she accompanied the parents to the Shau Kei Wan site. She noticed the parents were very indifferent. She realized the parents never had the intention of moving to the property to be acquired, whether in Shau Kei Wan or in Lam Tin. She remembered clearly that after the viewing, they had lunch together (the husband had left for his business). The parents expressed it would be too far away for them to go for cleaning up the property. They appeared they did not have a choice. She then realized the property would belong to the husband. She believed the husband’s plan was to take the benefit under the HOS scheme. 91.Therefore, the truth is the husband retained beneficial ownership in all the 3 Properties, only the monthly rental income was a gift to his parents.[15] The way in which the properties were purchased was a scheme by which the husband could keep his investments while maintaining his parents with rental income generated by the 1st and 2nd Properties. Adding the parents’ names as co-owners was only to give them legitimacy to receive rent and to take care of the management matters, if necessary. The Husband’s Evidence 92.The husband said he was diagnosed with chronic nephritis in about 2005. He was medically advised that he might need haemodialysis or even a kidney transplant. As he was the only one in the family in the position to maintain his parents he had to prepare for the worst. 93.First, he arranged to have the insured amount of some insurance policies in which his parents were beneficiaries to be increased. 94.Secondly, he was fully aware that his parents had for decades longed to have their own home. By 2008, he was financially capable of doing so. He suggested his parents to purchase a flat under the HOS scheme by surrendering their public housing unit. He was to be responsible for the down-payment, the incidental costs and the renovation. These monies were gifts to his parents. This would provide his parents a place to live. 95.Finally, he arranged to have the 1st and 2nd Properties purchased with his parents as joint tenants respectively. The rental income was for the parents’ living expenses. The parents were responsible for paying the management fees, rates, etc. while he was responsible for the mortgage payments. He had his name on the property for the purpose of raising mortgage. In the event of his death, the Properties would belong to his parents. There were insurance policies upon his death in order to meet the outstanding mortgage loan. 96.The husband admitted that in 2008 he told the wife of this plan, though he did not specifically mention the type of co-ownership. The Parents’ Evidence 97.The father did not say the husband’s kidney illness was serious. He just said it could be potentially serious and he was anxious about it. The husband was not sure about his health and so he prepared for his parents’ living. The Properties were meant to be for their protection and so were gifts to them. 98.Both parents agreed with the husband on the reasons for and the circumstances under which the 1st and 2nd Properties were purchased. Both commended the husband was a filial son, responsible for taking care of the parents and his siblings. Both confirmed that the purchase of the 1st and the 2nd Properties were long term financial measures in order to ensure they could be sufficiently maintained. The rental income from the 2 Properties were for their living expenses, the mortgage repayments and the management fees of the LOC Property. 99.The father confirmed that (same as the husband) the decision to purchase the LOC Property was made at the suggestion of the husband. The father agreed that the opportunity of purchasing a HOS flat only came up once every 3 to 5 years. He seized the opportunity. When it was put to him that by the time he applied for a HOS flat, he already had the 1st Property, why would he still want to have a HOS flat, his reply was the 1st Property was for his living expenses, he wanted to have a property “in hand”. 100.The father denied the wife’s claim that he was just responsible for cleaning the LOC Property and that the purchases were a scheme masterminded by the husband. He had no recollection about the lunch. Discussion 101.The father confirmed he always wanted to buy his own property. He considered by 2008 he was finally able to do so when his children had the financial ability; he could return the public housing unit to the Government so as to let others more in need to live in the unit. This noble motivation was not mentioned in his witness statement. 102.The period within which the parents could make their application was short. It was from 28 February to 12 March 2008 only. The objective fact is when the parents decided to surrender the public housing unit, the 1st Property was already purchased. 103.The father admitted he had to report to the Housing Authority once every 2 years on his and the family members’ income and assets. At that time, only the parents and the younger brother remained as approved occupants. However, not only that he did not know the younger brother’s financial situation in Australia for the purpose of reporting but also that since he had purchased the 1st Property, he had to return the public housing unit to the Government. I am sure this was the real reason why they had to buy a HOS flat when there was an opportunity to do so. The evidence is the scheme that they participated was the only one in the last couple of years. The reality they faced was they could not wait for another scheme, which might or might not come up in a few years’ time. Another reality is that all the flats available for sale under that particular scheme in 2008 were “surplus” units, ie, they were flats pre-owned or not chosen by applicants under the previous schemes. Only two locations offered unoccupied flats in hundreds: Lam Tin and Shau Kei Wan. Practically speaking, these were the only viable options. In my assessment, these explain why they were in such a hurry and why the location was not a prime concern. 104.As the parents were legible to apply under the “Green Form Scheme”, the mortgage and the attractive low interest rate were guaranteed by the Government. The husband admitted it was a very good bargain but significantly he said he only knew it at a very late stage. He thought it was like “normal” transactions where 30% down-payment was payable. At the same time, he said he knew HOS flats were subject to a lot of restrictions imposed by the Government. It was only after the LOC Property had been chosen that they were so told of the low interest rate by the bank officers. I do not accept the husband’s evidence in this regard. On the husband’s own admission that he was very keen on real property investment, and given the level of his education and experience, together with the fact, his parents, and for that matter including the husband as well, had been beneficiaries of public housing for decades, and that his parents had longed for buying their own property, it is utterly unbelievable for him not to have known of the Government’s guarantee at the time of his suggestion. I am sure that husband was telling lies. 105.It is clear the parents never moved to the LOC Property. What is not clear is when that decision was made. 106.The respondents pleaded that shortly after the commencement of the renovation of the LOC Property, the husband and the younger sister discovered their parents had reservations about moving away from the neighbourhood. [16] 107.In his witness statement, the husband said when the time for moving out of the public housing unit was drawing near, he and the younger sister noticed his parents were very unsettled for they would dearly miss their acquaintances and the community. Incidentally, at that time, said the husband in his statement, the KCP Property was for sale in the market at an attractive price, he seized this opportunity and bought it and decided to use it as the parents’ new home. 108.The father also confirmed that the original plan was for him and the mother to move to the LOC Property. He agreed he was emotionally unsettled. He was happy to move to the KCP Property. He said he was in charge of the renovation matter in exchange for lending the LOC Property to the husband. 109.The timeline was that the KCP Property was purchased on 18 May 2008 (Provisional Sale and Purchase Agreement) and was completed on 24 June 2008. The purchase of the LOC Property was completed on 11 June 2008. Chronologically, it could not be the case that the parents were found to have been unsettled and there was a change of plan after the renovation had commenced. 110.It is not in dispute that the husband has been using the LOC Property for his business most of the time. There is a discrepancy in who made the suggestion regarding how the property was to be used. 111.The husband emphasized it was at the suggestion of the parents, as owners, that the LOC Property could be used as a workshop for him; accordingly, it was renovated as a workshop with a bed. 112.In his witness statement, the father agreed that was the case. Since the LOC Property could not be rented out without payment of premium to the Government and the husband was in need of somewhere to work, it was his and the mother’s suggestion that the LOC Property could be so used. However, in evidence, the father said it was the husband’s request for borrowing the LOC Property from them. 113.The objective fact is the husband was at the time actively engaging in real estate investment. He also claimed his insurance policies or coverages were for the purpose of investments. All the 4 Properties, viz, the 1st Property, the 2nd Property, the LOC Property and the KCP Property were purchased within a space of about 6 months’ time. These happened because of the husband’s fortune. On the evidence before me, I find that:
The Rental Income 114.On the husband and the father’s written testimonies, the rental income of the 1st Property went to the father and that of the 2nd Property went to the mother. Each of them then made use of their rental income in settling the out-going expenses such as management fees, rates and government rents of his or her own property, the balance was treated as each’s living expenses. At the beginning, the husband still had to pay some extra money to the father as living expenses. There was no need for him to do so when the monthly rentals went up to $10,000 or above. The husband was responsible for the mortgage repayments of the 2 Properties. 115.At trial, where the rental income of the 2 Properties had gone was subject to close scrutiny. With respect, in my view, this line of questions is of very little utility, if any, to the wife. The reason being the wife’s Points of Claims pleads at para 8(b) that,
116.It is true at paragraph 12 of the Points of Claims it is pleaded that the parents “have been receiving and keeping money for the husband in relation to the income of these properties” and the parents are only bare trustees of such monies, however, no particulars in support are pleaded. Certainly, the wife does not claim, whether in her witness statement or in the witness box, that the parents could only take that much of the money that was sufficient for their living expenses from the rental income or the parents could spend as much as they wanted and the rests were being held by them as trustees for and on behalf of the husband. Indeed, the wife confirmed in no unequivocal term, at paragraph 32 of her witness statement, that “the truth is the husband retains all beneficial ownership, only the monthly rental income is the gift to his parents… (emphasis added)”. 117.It appeared Ms Tsui has retracted somewhat in this regard by saying in her Opening that the wife agreed that the rental income generated from the 2 Properties maybe gifts. As mentioned earlier, the case authorities are clear: all parties should be bound by his/her pleadings. On the pleadings and on the wife’s own evidence, I do not think there is any room for the wife to argue that the rental income did not belong to the parents. Once it is established that the rentals were the parents’ it is then up to them as to how to make use of the monies, and for that matter, to make use of the monies in the monthly mortgage repayments of the LOC Property. Rental Income of the 1st Property 118.The father testified that he had taken all the rental income, making use of the same for settling the mortgage repayments and outgoings of the LOC Property. At the beginning when the rental income was $5,000 to $6,000 per month, the shortfall was covered by the monthly living expenses of $8,000 given by the husband to each of his parent. Together with this, a total of $16,000 would be sufficient for the LOC Property and their living expenses. 119.The bank passbook of the father clearly shows the rental income of the 1st Property was deposited into his account with the Hang Seng Bank. The bank passbook also clearly shows the mortgage repayments and the management fee of the LOC Property, totalling about $9,300, were paid out from this bank account. This evidence has not been challenged. 120.It is clear from the entries of the bank passbook that the father did not rely on the rental income as his living expenses. The evidence is that from November 2018 to April 2020, not more than $35,000 (on average about $2,200 per month in these 16 months) were withdrawn. The father was able to save up the rental income. His deposit went up from $205,104 in November 2018 to $376,946 in April 2020. His explanation was that there were supports from the younger sister and the younger brother. He led a simple life and did not spend much. The father denied the monies in his account were the husband’s. Rental Income of the 2nd Property 121.The rental income was deposited into the mother’s Hang Seng Bank account. The mother’s bank passbook shows that, similar to the father’s situation, she did not require the rental income for living expenses. As a result, the rental income was allowed to be accumulated in the account. There were 3 major withdrawals only: $400,000, $220,000 and $300,000 on 15 August 2016, 7 December 2016 and 28 October 2019 respectively. I shall deal with these withdrawals below. At this stage, I only need to say I agree with Ms Tsui that it is clear neither of the parents has had the habit or need to draw money from the rental income for their daily expenses and that they had enough to spend from the contributions of the younger sister and the younger brother. The Out-goings of the 1st and 2nd Properties 122.As mentioned above, on their written testimonies, the respondents said each parent made use of his/her rental income in settling the out-goings of his/her own property. The oral testimonies however gave a different story. Both parents testified in court that the payment of the management fees, rates and government rents of the 1st and 2nd Properties were undertaken by the father who was given $4,000 in cash from the mother on monthly basis for doing so. He seemed to be saying that the $4,000 must have come from the rental income of the 2nd Property. 123.The mother confirmed that was the case. She said she might or might not need to resort to the money in her bank account for this monthly $4,000. At closing, Ms Tsui submitted that the logical conclusion is this $4,000 came from the husband in cash. However, this suggestion was not put to the mother during her cross-examination. The Tenancy Matters 124.The husband said in his witness statement that he never involved in the leasing of the 2 Properties; all these matters were handled by his parents. He never signed any tenancy agreement. In fact, there was one tenancy agreement in respect of the 2nd Property that he had signed together with the mother in May 2018. I do not think this discrepancy is material. 125.The father’s evidence that he was the one responsible for tenancy matters was not challenged. Indeed, it is reasonable to have this arrangement because the undisputed evidence is that the husband worked mainly in the Mainland, and more importantly, it was the parents who were to receive the rentals. I accept the tenancy matters were handled by the father. Loans or Mortgage Repayments by the Parents (1) $720,000 126.In their Defence, the respondents said since 17 July 2017, out of their own savings, the father and the mother advanced a total of $720,000 (father: $420,000 and mother: $300,000) to the husband at his request as loans (with the mutual understanding that the husband would repay as and when the parents demand for repayment) to solve the husband’s liquidity problems. Accordingly, all the 3 respondents treated the loans as the parents’ repayment to the husband of money paid for the down-payment of the LOC Property. [17] 127.Pausing here, it can readily be seen that this paragraph is self-contradictory and unintelligible. If the monies were loans, they would have to be repaid, but if they were treated as down-payment, they were not loans. Further, the figure is apparently incorrect. The LOC Property only required payment of 5% of the purchase price as down payment, which means $102,130 ($2,042,600 X 5%). There is no explanation on what the remaining was for. 128.The respondents’ evidence on this part is in a state of total confusion. 129.The husband said, in his witness statement, that the father ensured him needed not worry about repayment, the monies could be treated as his contributions to the mortgage repayments of the 1st Property and the mother similarly told him he needed not worry about repayment. 130.Hence, there is a discrepancy in to how the money was treated. The Defence said it was for the down-payment of the LOC Property but the husband’s witness statement said it was for mortgage repayments. 131.Surprisingly, the husband said in the witness box that the father did not pay any mortgage repayments. This contradicted his own statement and also the father’s version in his witness statement where the father said the advancement of $420,000 would be treated as his contribution of mortgage repayments of the 1st Property. He had no plan of seeking the return of the monies because of the immense contribution of the husband to the family; so the husband would not be required to return. 132.Another surprise is that, under cross-examination, the father was firm to say he never treated the money as mortgage repayments. Being a family member, the husband could repay the money as and when he is in a position to do so; he also confirmed that there was no other loan apart from the $420,000. He did not agree to the suggestion that the $420,000 was the return of rental income to the husband. At a later stage, the father said he never mentioned about how the $420,000 was to be treated; whether the money was for down-payment or mortgage repayments was never mentioned. 133.The mother was said to have loaned $300,000 to the husband. It is to be recalled that there were 3 major withdrawals from the mother’s Hang Seng Bank account into which the rental income was deposited: see [121] above. The said $300,000 can be identified as being the loan given by the mother as pleaded in the Defence. 134.The mother said this loan has to be repaid as and when the husband has the ability to do so. She confirmed apart from this sum she had no recollection of having given any other sums of money to the husband whether by way of loans or the same were treated as mortgage repayments. When being asked if the money was treated as the down-payment for the LOC Property, the mother said she was not clear; it was the father’s arrangement and it was not her concern. 135.As for the other 2 sums, the mother initially had no recollection as to whether or not the $400,000 was advanced to the younger sister for cash flows problems. As for the $200,000 she initially replied she had no recollection but then said vaguely that it was for her spending, she then turned to say she gave it to the younger sister. Later on, she mentioned vaguely that the 2 sums of $400,000 and $200,000 were given to the younger sister for solving her cash-flow problem; and it seemed the $200,000 was used by the younger sister for easing the husband’s cash flow problems. At the end, she was not sure how much was advanced to the younger sister. She did not have a record. (2) Further Sums 136.It was pointed out to the husband by Ms Tsui that according to his Answers dated 20 September 2019, apart from the above $720,000, there were 5 other sums totalling $428,000 that he said were from his parents for repayments of mortgage. Taking this $428,000 together with $720,000 would mean a total of $1,148,000. 137.This $428,000 has not been pleaded in the Defence. The husband accepted $1,148,000 is the correct figure. He also accepted this figure of $1,148,000 does not appear in any of the respondents’ documents. The husband tried to explain it was not explicitly said whether the monies were for loans or for repayment of mortgage or in respect of which property. He just told his parents that he had cash flow problems. He said this Answer was a “typo”, and attributed this to miscommunication with his solicitors. 138.Indeed, the bank statements of the husband produced by him in the ancillary relief proceeding showed these monies were not from his parents. These monies were withdrawn in cash from the husband’s account with the Hang Seng Bank (882 account) and deposited into his HSBC (HSBC-833) account. In other words, these were transfers inside his own pocket. The Answers were untrue. 139.What are the conclusions that can be drawn from this disarrayed and even contradictory evidence? 140.To start with, it is patently clear that the Defence and the witness statements and indeed the entire preliminary issue proceeding were haphazardly and even recklessly prepared. I say so because the source of $428,000 could have been easily discernible from the bank statements. Yet no correction was made. This must have been a gross mistake on the part of the husband and his legal team. 141.I ask myself what is the relevance of the remaining $720,000, which belonged to the parents, in the context of the wife’s claim? 142.I acknowledge the respondents’ evidences were in a mess as to how the monies were to be treated and whether they needed to be repaid or not. The said $720,000 were transferred from the parents to the husband and the transfers were post-purchase events. The first transfer took place 9 years after the purchases, there being no suggestion that there were other prior transfers. 143.It should not be forgotten that neither party has pleaded there was a change of intention regarding the ownership of the Properties in question. The said $720,000, even if treated as mortgage repayments, cannot support a claim of change of intention. These monies, and how they were to be treated, would only be relevant if I have to determine the ownership in terms of resulting trust. 144.In the final analysis, I think it is important to bear in mind that this family is, as put by the wife, a traditional Chiu Chow family where the husband is the eldest and the ablest child. I do not think too much emphasis or weight could be attached to the discrepancies since very often the situation of this nature is not that clear-cut among family members. This specifically applies to the present family where the contribution of the husband is enormous. The majority of the wealth enjoyed by the parents could be sourced back to the husband. Against this backdrop, the inference I can draw is that there were no explicit discussions on how the monies were to be treated. Re-Mortgage of the Properties 145.The husband arranged to have the 1st and 2nd Properties re-mortgaged in April and May 2016 for extra cash. This exercise was for solving the husband’s cash flow problems. In evidence, the husband confirmed it was his decision including the decision to engage an expensive mortgage agent. He put the extra money into his companies. Out of this exercise, an extra $1.579 million was obtained from the 1st Property and $1.336 million from the 2nd Property. The existing outstanding mortgage loans of these 2 Properties are about $3 million. 146.The father admitted he knew from the husband that the latter was in financial difficulty. He did not suggest selling the property because if it had been sold, he would have been left without protection. He did not know for how much the 1st Property was re-mortgaged and he just signed the documents for the husband. 147.The mother said she was not asked of the re-mortgage of the 2nd Property. 148.On the evidence before me, it is clear that the decision to have the 2 Properties re-mortgaged was made by the husband solely and the exercise was for the benefit of his business. Insurance Policies and Tax Benefits 149.The insurance policies taken out by the husband for the protection of his parents in the event of his premature demise was closely scrutinized. It is the wife’s case that the alleged coverage on the father is not sufficient to cover the mortgage loan in respect of the 2 Properties. In the middle of the trial a bundle of insurance documents of over 150 pages were adduced by the wife as an exhibit. I have no doubt these documents, some of which dating back as early as early as 2008, came as a surprise to the husband and his team. The next day, the husband responded by lodging a 379-page bundle as another exhibit. I must say this practice is to be denounced. Before me were not just a few pages of documents but in hundreds. These documents should not have been adduced on an ad hoc basis or as an ambush. There is no justification why these documents should not have been included in the trial bundles. 150.On evidence, it seems clear that the husband secured some protection for his parents at the time of the purchases. The husband essentially admitted that as far as protection offered by insurance policies were concerned, the parents were given more protection than his son back in 2008. I accept that less protection might have resulted because of the 2016 re-mortgage exercise but I would not attach much weight on this point. It seemed it is accepted that while the mortgage loans had increased, so was the value of the properties since 2008. There is no evidence before me on what the net equity was and whether or not the net equity would be sufficient for the parents’ living. In any event, the insurance point was not pleaded nor was it mentioned in the wife’s affirmation or witness statement. 151.It is also Ms Tsui’s submission that the husband arranged the 1st and 2nd Properties and the KCP Property to be purchased in the way they were for tax benefits. The husband did not have any personal income in Hong Kong; and he did not have to pay property tax on the 1st and 2nd Properties. Neither the FW Limited nor the father, and for that matter the mother as well, have had to pay property tax. Again, this point was not pleaded or mentioned in the wife’s witness evidence. Change of Intention 152.The husband said, under cross-examination, that at the time of the purchase he intended that in respect of the 1st Property the father was to own it solely; it was also the case for the mother in respect of the 2nd Property. He claimed there was a change of intention since the present proceeding that the property was to be held by the husband and the father on 50/50 basis. The reason for this change of intention was due to the objective legal opinion given to him. He did not specify when this change of intention happened. 153.In his Form E of 18 February 2019 (which was well before the respondents’ Defence dated 3 April 2020), he reported he had been in receipt of 50% share of the rental and he was responsible for paying the outgoings and in the Form E, he stated he made contribution to parents in the sum of $21,500 per month. Under cross-examination, the husband admitted all these were not truthful; all figures were made up for painting a picture that he owned 50% in the properties. In his words, “the figures were re-structured” (“砌番條數出嚟”). When being put to him that he was telling lies because the Form E contained a Statement of Truth, the husband tried to save the situation by saying that the figures could be treated as “receivables”. 154.Later, in his revised Form E dated 25 February 2021 (that was after the Defence of 3 April 2020), while the husband continued to report that he had 50% interest in the 2 Properties, he did not state he was in receipt of any rental income. As mentioned above, it is now known that the husband actually did not receive the rental income. 155.In evidence, the father was on the same page as the husband. He emphasised that the properties were gifts from the husband. He knew the 1st Property was purchased in joint names, there was some explanation at the time of signing of the documents. Yet, he said as long as he lives, the property is his; and should he die, the property would pass on to his 3 children. He even said at the witness box he was not aware that the husband has had half of an interest in the property. The husband never said this to him. However, when being asked who would take the LOC Property should he die early, he was able to say the mother would take the entire property; and should she die, the property would go to their 3 children. 156.The mother also maintained should she die early, the 2nd Property would go to her 3 children. 157.It should not be forgotten that the father was responsible for the tenancy matters of the 2 Properties. All the tenancy agreements should contain the husband’s name as one of the 2 landlords. There was at least one tenancy agreement that was signed by both the husband and the mother, which on the father’s evidence, was his responsibility. In my assessment, if the father was fully aware that should he die early, the LOC Property would go the mother, then there is no way the father did not know, legally speaking, should he die early, the 1st Property would go to the husband; and likewise the same for the mother in respect of the 2nd Property. 158.The father was in court when the husband was cross-examined. I am sure he tried to cope his evidence with that of the husband. His evidence must be considered with extra caution. Likewise, the husband’s evidence in this regard is indicative that he was, at the very least, cursory in preparing for this litigation. Indeed, he was prepared to fabricate figures to suit his case. Again, his evidence has to be scrutinized with utmost care. 159.For the above reasons, I do not accept there has been a change of intention. This has not been pleaded and must be rejected. 160.The parents and the husband have all along been represented by the same legal team but clearly it was only the husband who was given an objective legal opinion. The same legal team continued to represent all the respondents in face of the conflicts of interest arising from the disparity in the “change of intention” point caused an outcry from the wife. Where appropriate, this is a matter to be taken up by the relevant professional bodies. Other Points Not Related to the Properties 161.The respondents were cross-examined on areas and issues unrelated to the purchases. This caused some valid objections from Mr Chan. 162.The wife said when they were in a relationship, the husband lied to her that he had already divorced with his ex-wife. The wife said she was close to the parents after the birth of the son and she paid frequent visits to them so she knew the family well even before their marriage. The parents however hid the truth from the wife. The parents also kept the wife in the dark when the husband took another mistress Ms Ng for a trip to Macao together with the parents. 163.It is clear that the parents were evasive about these issues. The father initially said he rarely saw the grandson. It is utterly unbelievable that the grandson, being the only male grandchild of them at the time, would have had such a distant relationship with the grandparents. I believe they said so only because of the wife’s claims that they had concealed the husband’s relationship with his ex-wife. The mother’s evidence was inconsistent and evasive about whether the husband’s mistress had been to Macao with them. On the evidence, in light of her evasiveness, I am confident that they did. 164.The father acted as directors and/or shareholders in 6 of the companies in which the husband had interests. Under cross-examination, the father said he was not clear about any of the business, never attended any meetings (except one of which the father was also named as a shareholder) and just signed the documents when so requested by husband or by the younger sister. 165.There was a PT Limited of which the father was the sole director. The husband was cross-examined on a number of transactions that took place from July 2018 to October 2018. I do not think it is necessary to set out these transactions in any detail. In brief, the husband’s evidence in court contradicted what he had given in his Answers. I am sure PT Limited belonged to the husband and not to the father as what he said in the Answers, nor was it belonged to his friend in Canada as claimed in court. 166.Mr Chan submitted that these transactions, being post-purchase of the 3 Properties, are not relevant to the issues before me. Ms Tsui, in response, submitted that these transactions and indeed all these conducts are relevant to the credibility of the parties. She emphasized that the court has to adopt a holistic approach in the determination of the ownership issue before it. 167.I acknowledge a holistic approach has to be adopted; yet the conducts must be relevant to the Properties in question: see [83] above and Marr v Collie, supra, at [55]. I agree these conducts and transactions are not relevant to the issues before me. Indeed, I do not think these matters would be helpful to the wife’s case. It is clear on the evidence that as far as the ability to amass wealth is concerned, the husband has been the ablest in this closely knitted family. He has been making tremendous financial contribution since his graduation from the university. I have no doubt that the husband has always been generous with his parents and provided more than adequate for their living; and the parents are very proud of him. I am sure that no matter what, specifically whether they were given any Properties or not, the parents were willing to shelter for the husband, even to the extent of not being truthful in their testimonies. Analysis 168.The question before me is whether the husband is the beneficial owner of the 3 Properties. The burden is on the wife to prove her case on the balance of probability. The same set of particulars are relied upon by her to establish common intention constructive trust or resulting trust. 169.I have found -
170.I now move to consider the ownership of the 3 Properties. In doing so, I shall bear the undisputed facts that I have set out in [59] to [64] above in mind. What was the Common Intention of the Parties, if any? 171.I have already mentioned the importance of context of a particular case in the search of common intention of the parties or lack of it: see [82] above. There are many factors other than financial contributions which may be relevant to divining the parties’ true intentions: see Stack v Dowden, supra, at [69]. 172.In the local context where the population is predominately Chinese, Lam VP (as he then was) said in Primecredit Ltd v. Yeung Chun Pang Barry [2017] 4 HKLRD 327 at [1.6] that in a domestic context, particularly in relation to a matrimonial home, the Court is not constrained in that exercise by pure direct monetary contributions to the purchase price. In a Chinese setting, where explicit discussions on property rights within the family are not that common, the Court has to pay more regard to circumstantial matters: see also Ho Kwok Wing v. Chan Mei Mui [2020] 3 HKLRD 548 at [8.9] per Cheung JA. 173.Where there were conducts that are alleged to have happened proximate to the purchases and those which were not, speaking of admissibly of these conducts as evidence of intention at the time of transfer, it was said by Stock NPJ in Leung Wing Yi Asther v Kwok Yu Wah (2015) 18 HKCFAR 605 at [56] that as a matter of common experience, contemporaneous conduct was inherently more likely to be a reliable indicator of intention than were words and conduct after the event, especially in the case of self-serving statements and conduct. But it did not follow that subsequent conduct was necessarily irrelevant: the Court could be presented with evidence of subsequent conduct to rebut the presumption or inference that otherwise would be drawn, the issue being one of weight. 174.It is interesting to note that Leung Wing Yi Asther v Kwok Yu Wah is a case about the beneficial ownership of some shares ‘given’ to the wife by her father. The father, as the “patriarch” of the family, provided all the working capital and operational funds of the company in question, and retained sole control over the operation of its bank accounts. The father controlled the company throughout and no dividends were ever declared. He regarded the company as his personal “piggy bank”. The wife and her brother who was the other shareholder did not gain any benefit, nor did they bear any responsibility from holding the shares: see LWYA v KYW, & LLP, CACV 151/2013 & CACV 152/2013 (date of judgment: 4 December 2014), at [25]. Nevertheless, it was held that the wife was the beneficial owner of the shares. 175.I remind myself that each case depends on its own facts and that all the relevant facts and circumstances have to be taken into account in the deliberation. Nevertheless, I consider the first instance decision in Leung Wing Yi Asther v Kwok Yu Wah, supra, highlighted one important point - whilst the degree of “control” may be an important factor, it is not the only or decisive factor. Context is everything and a holistic approach has to be adopted. 176.In my view, given the peculiar facts of this case that the husband was sole financier, my task is to discover what the husband’s intention was when he arranged to have the Properties purchased in the way they were. It is pertinent to note what Lord Philips MR said in Lavelle v Lavelle [2004] EWCA Civ 223, [2004] FCR 418,
177.The main theme of the wife is that the respondents’ family is a traditional Chiu Chow family. While many traditional Chinese families would very much arrange their financial matters and hold properties for each other without documents and relying on their oral agreement, this is also the case for the respondents’ family. The parents would always act according to the advice and arrangement of the husband, being the favourite eldest son in a Chiu Chow family. They would do everything to protect the husband whether concerning money or concealing the husband’s relationship with other women from being known to the wife. It is exactly what the parents have done in relation to the 3 Properties. 178.The wife conceded that she was never involved in any discussions leading to the agreements, if any, between the husband on the one side and the parents on the other. Indeed, at the time of the purchases, she was not formally married to the husband. 179.The wife said she was told by the husband of the purchases, but she was not able to recall the particulars. She vaguely recalled that one of such occasions happened when they were in the bedroom and the conversations appeared to be brief. 180.She also admitted that she was not consulted because the husband was the highest authority in the family. Nobody could disagree with or challenge the husband. Yet, the wife insisted that she knew the family, the financial position of the husband and his investment plan well, and judging by the conduct of the parties, she is sure that all the 3 Properties are the husband’s investments. 181.The wife said the husband was assertive of his rights. He made it clear that the parents’ assets belonged to him. She recalled the husband mentioned this once in about 2008 during a family dinner and another time was in 2014 when the husband said this to the younger sister. He tried to remind his brother, via his sister, that the parents’ assets belonged to him; and mentioned that the parents should make a will. There is however no concrete evidence as to whether a will has been made. In any event, legally speaking, it is trite that a will would not be able to dispose of a joint tenancy upon the death of a testator. 182.In my view, the wife’s knowledge on the matters is to the extent of her subjective observations and what she was told by the husband. There are a number of matters that are based merely on the wife’s beliefs, presumptions or even speculations that the husband was the highest authority in the family and that he would eventually own the things that he paid for. She said if the Properties were gifts to his parents, the husband would have said so. The husband just told her that he intended to buy two more properties to co-own with his parents; his parents were to have the rentals instead of the husband giving living expenses to them. 183.I agree with the wife that the husband was the mastermind behind the acquisition of the Properties. The husband was very much in control of the scheme, if not in total control. This is a factor that I should not ignore; yet, in my judgment, this factor does not provide a complete answer to the question before this court. 184.The husband, being a successful entrepreneur and a well-educated person, must have had a rationale behind which he made his decision to have the 2 Properties registered in the joint names of his parents. The million-dollar question is what the reason was. 185.The wife admitted that save for the purpose of rental collection and/or for facilitating the leasing of the Properties, she did not know why the husband had to put his parents’ names on the properties. I am not persuaded that the rental collection exercise could be the answer. If the husband had no intention of benefitting his parents in terms of ownership, making them as a joint tenant is, in my view, the last option open to him; there could have been a number of other ways to do it without the involvement of “ownership”, which could be potentially risky. One can readily think of the husband could have executed a Power of Attorney in favour of his father, or he could have purchased the 2 Properties in the name of FW Limited or another company under his control and made his father a director of the company. I am sure one can think of a multiple of ways to achieve the purpose. 186.It is important to note that it is agreed by all that the husband has always been taking good care of his parents, such that, as far as the financial side is concerned, his parents are worry-free. Indeed, the unchallenged evidence of the father is that had it not been for the financial support of the husband, he would not have been able to support the younger brother’s education in Australia. There was also a loan from the husband to the younger brother for him to purchase a property in Australia. 187.It is also important to note that the wife agreed that the husband had kidney illness; the only difference being that on the wife’s version the illness was not life-threatening or as serious as the husband wished to put it. I note the point being made by the wife that if that was so serious, there would have been plans in place for their son, who was 8 years old in 2008. 188.Ms Tsui reminded me that the ordinary meaning of joint ownership is that joint tenants own the entire property together 100% until severance or until death of the other. She quoted the following:
189.The wife made the point that should the Properties be gifts to his parents, there is no reason for them to co-own the properties with the husband as joint tenants, not allowing the parents to give away their share to the husband’s siblings. I accept as a matter of law “tenants-in-common” could be an alternative mode for holding the Properties. By that mode of ownership, the legal implication is that if his parents are to die intestate there is a possibility that the husband’s siblings would be benefitted in the event of demise of their parents or if the parents are to give his or her interest away inter vivos. In making this point, it seems the wife was saying that the husband should have allowed, at least the possibility that, his siblings are to be benefitted by having a share in the Properties should his parents were minded to do so. 190.With respect, I am not able to come to this view. It is true that I have found the purchases were a scheme engineered by the husband, but this per se does not mean at the time the husband was entirely a selfish person minding his business or investment only, the parents were just his “puppets” and that he did not have any intention to benefit his parents in some ways. Quite to the contrary, it has been agreed by all that the husband has been a filial son. This is something that I should attach weight. 191.The husband, being in a position of a “settlor”, was entitled to determine who is to take a beneficial interest in the 2 Properties. The younger sister and the younger brother at the material time were financially independent and having their own family. There is no suggestion that any of them required any maintenance from the husband. While the husband might be more than happy to share his fortune with his parents, there was no reason or any obligation on his part to share his hard-earned monies with his siblings. 192.One may look at the matter from another view. It is important to recall that at the time of the purchases the husband was still lawfully married to his ex-wife. What would the situation be should the husband, in the rarest case, have predeceased the parents who - on the wife’s version - were bare trustees of the Properties and there being no suggestion from the wife that the husband had made a will? 193.Another important point that carries weight is the fact that it has been the parents who have been in receipt of the rental income. It is trite that an owner has the right to enjoy the rentals of his/her property. 194.It is to be recalled that at the relevant time, the husband purchased some other properties as set out in [17] above. The wife agreed these other properties, whether in his name or in the name of FW Limited, are not trust properties. Ms Tsui, in her submissions, said these other transactions are relevant. There is, however, no further explanation on this point. 195.Mr Chan raised the point that the husband’s modus operanti clearly show that the husband intended to gift the Properties to his parents. Apart from the 3 Properties at issue and the KCP Property, all the other properties, as can be seen from their prices, were more luxurious properties in prime locations. 196.The father said he viewed and chose the 1st Property; he even succeeded in the negotiation to have the purchase price lowered by $10,000. He looked after the tenancy matters. He instructed estate agents, scrutinised potential tenants, negotiated on the rentals and signed the tenancy agreements. These evidences were not challenged. 197.The husband was cross-examined on the re-mortgages of the 2 Properties. In re-examination, the husband tried to distinguish the 2 Properties from the other properties owned by him. These 2 Properties were for long term investment and for the living of his parents. When he arranged the re-mortgages of his properties in 2016, he ensured the 2 Properties were low-geared, with a mortgage loan less than 50% of each’s value while his other properties were geared up to over 70% of the values and with higher interest rates. I accept what the husband said regarding the re-mortgage exercise. The LOC Property 198.I now turn to aspects specific to the LOC Property 199.The rental for the parents’ 5-person public housing unit was merely $1,400. Ms Tsui submitted that the parents were financially at ease by living at the public housing unit; there was no reason for them to have purchased the LOC Property. I do not think any significant point can be made out of it. It is entirely understandable that, with the support from the husband, the parents had an aspiration to make use of their public housing unit in buying a HOS flat. 200.The father’s evidence is that prior to the purchase, since the husband and the younger sister were already in employment, their names as occupants had been removed, leaving the parents and the younger brother as approved occupants. At the beginning, it was the intention of the father to make an application for the purchase in the names of all 3 of them (ie including the younger brother) but was rejected by Housing Authority for the reason that the younger brother was living outside Hong Kong. In order to be legible as an applicant, the father had to remove the younger brother as an approved occupant. This part of the evidence was unchallenged. The significance of this fact is that if the father could, he would have purchased the LOC Property jointly with the mother and the younger brother. 201.As mentioned above, there were only two viable options at that time: Lam Tin and Shau Kei Wan. The husband emphasized that the choice was made by his parents because it was intended to be their new home, notwithstanding that at that time he preferred Shau Kei Wan. 202.The father accepted there were properties for sale closer to their neighbourhood. When being asked why they did not choose a property in Kwai Chung which was also for sale by the Housing Authority under the same scheme, the father explained that he went to different locations including Mei Fu, Lai Chi Kok and Wong Tai Sin; these were all pre-owned units. He preferred the LOC Property which was not the case. Again, this part of evidence was unchallenged. 203.It was pointed out by Mr Chan that if the property belonged to the husband, there was virtually no need for the parents to view the property in Shau Kei Wan. The wife agreed there was no practical reason to do so and said it was merely out of courtesy that the husband invited his parents to go. That said, under cross-examination, she admitted the LOC Property was preferred by the parents, while the husband preferred the Shau Kei Wan property. Importantly, the wife also admitted the husband never expressed that the LOC Property belonged to him; she just knew it was the case. 204.I find the father did have a choice as to who were to co-own the property with him. The LOC Property was preferred by the father because it was never occupied and it, being nearer to where they lived, would be more accessible to them. The father did give a calculated consideration on the choice of the property. These were not matters ordained by the husband. The mortgage of the LOC Property 205.The monthly mortgage repayments were payable bi-monthly of $4,274 each, making a total of $8,544 and the management fee was $722 per month. These payments were made out of the father’s Hang Seng Bank account into which the rentals of the 1st Property were deposited. These were the father or the parents’ monies. The Use of LOC Property 206.The husband said the parents had the keys, visited the property as and when they liked; and the parents had the right to decide who could stay there. There were two occasions when the father declined the requests for their friends to stay there temporarily. One request was in relation to the husband’s colleague Ms Poon and the other was in relation to the wife’s friend. 207.The wife seemed to have accepted that Ms Poon had to move out upon the insistence of the father. She also accepted that the father declined to allow her friend to stay there. She however explained that she was not seeking approval from the father. She just informed him out of courtesy. She did not insist although the husband said she could go ahead with the plan. 208.On evidence, I accept there were two occasions when the father declined the requests for stay and the father allowed the younger brother to live at the LOC Property temporarily when he returned to Hong Kong. I am aware there is a dispute as to how long he had stayed. I do not think this is material. On the totality of the evidence, I find the father did have a say as to who could stay at the LOC Property. 209.I have not lost sight of the fact that the LOC Property all along was mainly used for the benefit of the husband’s business. The younger sister worked there and the husband’s companies used the address as their registered office. The father disagreed with Ms Tsui’s suggestion that by allowing the husband and the younger sister to use the LOC Property, it was somewhat like paying rent for the use of the KCP Property. 210.I have already found the use of the LOC Property as a workshop/home-office was an arrangement made at the time of the purchase. That said, the arrangement, being an informal family arrangement, must not be seen with rigidity. This is not entirely a matter of dollars-and-cents or a purely commercial deal. While the LOC Property is unquestionably part of the scheme engineered by the husband, for the reasons I have said, I cannot come to a view that, by reason of the husband’s payments in respect of the LOC Property and how it has been put into use, the LOC Property must have been solely owned by the husband. Importantly, there is not a tint of evidence on what the husband has done, if he were the owner, in safeguarding his interest in this property. Conclusion 211.Notwithstanding the adverse comments I have made in this judgment regarding the respondent’s case and their testimonies, the burden remains on the wife to prove her case. The circumstances of this case were that by 2008 the husband was able not only to build up his own investments but was also able to secure the living of his parents. I do bear in mind that one being able to do something does not necessarily mean he would do it. Against the backdrop that the husband had been taking good care of his parents, I am satisfied that, on balance, the husband did carry out the plan and had the subjective intention to benefit the parents as regards the Properties; specifically, the LOC Property was to be beneficially owned by the parents jointly. That was the reason why the 3 Properties were purchased in the way they were. 212.Not only that the parents were proud of the husband and in reliance on him, they also had total trust in him. On evidence, I do not think there was any express agreement about the beneficial interest of the Properties. Given the husband was the mastermind, his over-riding position within the family and being the financier, I am satisfied there was a tacit understanding amongst the respondents that the parents were to go along with the husband’s plan and intention. This gave the husband a free-hand in the re-mortgage exercise. In coming to the conclusion that I have reached I have carefully taken the inconsistent or ambiguous case pleaded and evidence given by the respondents into consideration. 213.Joint tenants are to own the entire property together. With the concession made by Mr Chan on behalf of the respondents, I am satisfied that the husband has half of the interest in the 1st and 2nd Properties and that he does not have any interest in the LOC Property. Order 214.For the above reasons, the wife’s claim is dismissed and I so order. Costs 215.While normally “costs follow the event”, it is ultimately a matter of discretion on the part of the court, having regard to the special matters set out in Order 62, rule 5, Rules of the High Court. In the present case, it is clear that the proceeding was ill-prepared on the part of the respondents. Not only that they failed to articulate their case clearly in their pleadings, their pleadings were inconsistent and even contradictory within the pleadings themselves and also between their pleadings and witness statements. They failed to seek amendment even when so enquired by the court. I consider that in the circumstances I should exercise my discretion not to award costs in favour of the respondents in order to show the court’s disapproval of their conduct: Order 62, rule 5(2)(b), RHC. I therefore make an order nisi that there be no order as to costs of the preliminary issue proceeding, including all costs reserved.
Ms Jennifer Tsui, instructed by Chan & Chan, Solicitors, appeared for the Petitioner, LMFE Mr Sunny Chan, instructed by Fan Wong & Tso, Solicitors, appeared for the 1st Respondent FCTA, the 2nd Respondent FK and the 3rd Respondent CY [1] Paras 8 & 14, Points of Claim [2] Para 8, ditto [3] Paras 10 and 12, ditto [4] Para 14(a), ditto [5] Para 14(b), ditto [6] Para 14(c), ditto [7] Para 16, ditto [8] Paras 11 and 17, ditto [9] Para 7, ditto [10] Para 8(h), Points of Defence [11] Para 14(b), ditto [12] Paras 8(d) & (e), ditto [13] Para 9(d), ditto [14] The members were Lord Neuberger, Lady Hale, Lord Kerr, Lord Wilson and Lord Sumption [15] Paragraph 32 of the wife’s witness statements [16] Para 18(a), Points of Defence [17] Para 17, Points of Defence | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment