Leung Ching Wai v. Li Yun Lim the Sole Executor of the Estate of Ng Bo Chuen, Deceased and Another

DCCJ 4851/2019

[2023] HKDC 459

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4851 OF 2019

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BETWEEN

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JUDGMENT

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Introduction

1.This is a dispute between two former lovers over the ownership of a flat situated in the Cheung On Estate, Tsing Yi, known as Flat 3, 30/F, On Kong House, Block 3 (“Flat”). The Flat was acquired pursuant to a scheme of the Housing Authority (“HA”) referred to in the pleadings as “Home Ownership Scheme - Secondary Market (Green Form Status” (“Green Form Scheme”). However, neither the boyfriend nor the girlfriend was the applicant. None of them was an eligible applicant.

2.Notwithstanding the many quarrels scattered in evidence, the scope of the essential and relevant factual dispute is rather narrow. The key contested factual matters which call for determination are (1) what was the agreement which led to the purchase of the Flat and who were parties to that agreement; (2) to what extent the parties contributed to the purchase of the Flat.

3.The legal analysis, however, is more intricate. The causes of action relied on by the Plaintiff (“Ms Leung”) are (a) common intention constructive trust (“CICT”), (b) purchase money resulting trust and (c) unjust enrichment. Yet given the contents of the pleadings, how the evidence unfolded at trial concerning the Green Form Scheme, and the parties’ intention at the relevant time, in addition to considering whether the ordinary requirements of each cause of action are established, the following issues are before me:

(1) If the ordinary requirements of the CICT claim are proved at trial, should this court go on to consider the question of illegality even though the Defendants chose not to plead illegality as a defence?

(2) If the answer to (1) is yes, whether the CICT claim should be rejected on the ground of illegality (as being contrary to public policy), applying the range of factors approach propounded in Patel v Mirza [2017] AC 467 and adopted in Monat Investment Ltd v All Person(s) in Occupation of Part of the Remaining Portion of Lot No 591 in Mui Wo DD 4 No. 16 Ma Po Tsuen, Mui Wo, Lantau Island [2023] HKCA 479.

(3) If the CICT claim fails on the ground of illegality, whether the Plaintiff can succeed on the resulting trust or unjust enrichment claim. In particular, are these two causes of action affected by the illegality and if so how.

The facts

4.Ms Leung had a romantic relationship with the 2^nd Defendant (“Mr Li”) from about 2009 until September 2017 when they broke up. At trial, Mr Li maintained that the relationship only started in 2011, contrary to his admission in paragraph 3 to his Re-amended Defence. As there is no evidence to substantiate Mr Li’s change of stance, I will proceed on the basis of his admission in pleading.

5.Ms Leung has been working as a flight attendant since 2012 with a steady monthly salary. She used to reside with her parents in a public housing unit in the Tsing Yi Estate. Ms Leung was the sole witness who testified at trial in support of her claim.

6.Mr Li is about 3 years older than Ms Leung. Back in 2015, he was working in a mahjong parlor handling odds and ends, after having engaged in certain shampoo business which did not turn out profitable. Before the shampoo business, he worked as an insurance agent for several years. He is now a cook.

7.Mr Li’s parents resided in a public housing unit at Room 3012, 30/F, Choi Hay House, Choi Fook Estate, Kwun Tong (“Choi Hay Unit”). Mr Li and his younger brother used to reside there too. The younger brother moved out after he got married.

8.Madam Ng Bo Chun (who passed away in 2015) was Mr Li’s paternal grandmother (“Grandmother”). Her estate (“Estate”) is the 1^st Defendant in this action. Her husband passed away in about 1999. She was the sole registered tenant of a public housing unit known as Room 1227, Shek Fong House, Shek Wai Kok Estate, Tsuen Wan, N.T. (“Shek Fong Unit”).

9.Mr Li has an uncle and aunt on his father’s side (“Uncle” and “Aunt”). They used to reside in the Shek Fong Unit with the Grandmother but moved out subsequently. They each lived with their own spouse and children. Mr Li’s mother, Uncle and Aunt testified at trial together with Mr Li in support of the defence.

10.Below is a summary of the undisputed facts as to how the Flat came to be acquired by the Grandmother as the sole registered owner pursuant to the Green Form Scheme. The key dispute (which will be analyzed in details later) is the contents of the parties’ agreement or common intention that led to the purchase.

(1) On 12 December 2014, the HA issued a Certificate of Availability for Sale in respect of the Flat.

(2) On 16 February 2015, the HA certified that the Grandmother was eligible to purchase a flat under the Home Ownership Scheme / Private Sector Participation Scheme / Tenants Purchase Scheme.

(3) On 23 March 2015, provisional agreement for sale and purchase of the Flat (at the consideration of HK$2,368,000) was signed by the Grandmother.

(4) On 9 April 2015, upon the Grandmother’s application, the HA issued a Letter of Nomination for the Flat to the Grandmother.

(5) On 17 April 2015, the Grandmother applied to the Bank of East Asia (“BEA”) for a mortgage loan to facilitate the purchase of the Flat, nominating Ms Leung as the guarantor.

(6) On 20 April 2015, the Sale and Purchase Agreement in respect of the Flat was signed by the Grandmother.

(7) On 22 May 2015, BEA issued a Notice (to individual third-party surety) to Ms Leung.

(8) On 1 June 2015, Ms Leung signed a Deed of Guarantee.

(9) On 5 June 2015, the Flat was assigned to the Grandmother as the sole registered owner; she executed a legal charge over the Flat in favour of BEA. On the same day, she made a will (“Will”) bequeathing the Flat to Mr Li, appointing Mr Li as the sole executor and trustee of her Will. The Will is a partial will as it did not deal with the Grandmother’s residuary estate. The solicitors’ firm handling the Will was the same firm which handled the conveyance of the Flat.

11.It is not disputed that the Aunt drew cheques to settle the down payment (HK$118,400) and stamp duty (HK$71,040); she was then reimbursed by the Grandmother (who did not have a cheque book).

12.Ms Leung opened an account with BEA for mortgage repayment (account number ending #7009, “Mortgage Account”). For convenience, in February 2016 she opened another account with BEA to receive her salary (account number ending #6231, “Personal Account”), and from whence she regularly transferred money into the Mortgage Account for mortgage repayment (they were topped up by cash deposits, but it is disputed as to who made them). Bank records show that monthly mortgage repayment for the Flat was regularly deducted from the Mortgage Account. The main factual disputes arising from this are whether Mr Li made the cash deposits into the Mortgage Account prior to the opening of the Personal Account, whether he reimbursed Ms Leung in cash for her mortgage payment and paid cash into the Mortgage Account.

13.The first two instalments of mortgage repayment (on 6 July 2015 and 5 August 2015 of HK$9,700.20 each) were settled by applying the HK$22,496.12 cash rebate offered by BEA.

14.It is agreed that a sum of about HK$110,000 odd was spent on renovation of the Flat. The contractor was a friend of Mr Li’s mother. The main dispute is whether Ms Leung paid HK$100,000 in cash to Mr Li to settle part of the renovation bills, and that HK$100,000 was agreed by Mr Li to be Ms Leung’s contribution to roughly half of the down payment (that is, half of HK$118,400).

15.Renovation of the Flat was completed towards the end of 2015 (Ms Leung says in about September, Mr Li says in about November).

16.The Grandmother passed away on 7 December 2015. Mr Li says that he lived with the Grandmother in the Flat until she moved to a nursing home shortly before she passed away. Ms Leung says that since renovation was completed in 2015, she resided with Mr Li in the Flat to the exclusion of the Grandmother until their breakup, that it was agreed by the Grandmother, Mr Li and herself before the purchase of the Flat that the Flat would be the home of Mr Li and Ms Leung.

17.Mr Li obtained grant of probate in respect of the Will on 26 July 2016.

18.Following argument (Mr Li says Ms Leung was unfaithful to him; Ms Leung says they argued over Mr Li’s failure to make his share of mortgage repayment and Mr Li acted violently towards her, but I need not resolve that conflict), the two broke up in September 2017. The last transfer from Ms Leung’s Personal Account to the Mortgage Account took place on 2 September 2017 (HK$9,700). Ms Leung stopped making mortgage repayment thereafter.

19.After the breakup, Ms Leung contacted Mr Li’s mother to demand repayment of her monies and cancellation of the Guarantee. Mr Li says that the Guarantee could not be cancelled because Ms Leung did not turn up to sign the necessary papers; Ms Leung says that her demands were simply refused; Mr Li could not find a replacement guarantor yet.

20.On 28 June 2018, the HA gave an indication that it did not object to the vesting of the Flat to Mr Li.

21.By Deed of Assent dated 2 May 2019, Mr Li caused the Flat to be vested in his sole name. On the same day, Mr Li entered into a legal charge with BEA; the original Guarantee made by Ms Leung was discharged. Mr Li’s younger brother is the new guarantor.

What was the agreement leading to the purchase of the Flat

22.I will now deal with the hotly disputed facts. In assessing the evidence and the credibility of the witnesses, I have followed the principles set out in Hui Cheung Fai v Daiwa Development Limited (HCA 1734/2009, 8 April 2014) at [77]-[83] per DHCJ Eugene Fung SC. Rather than relying on the demeanor of the witnesses, the findings I make are reached by testing the veracity of the witness’s evidence against objective or undisputed facts, contemporaneous documents, and inherent probabilities. I also pay regard to the witness’s motive and whether his or her evidence is self-contradictory.

23.Mr Li and Ms Leung put forth two diametrically different versions of event regarding why and how the Flat came to be purchased.

24.Ms Leung’s case is that in about 2011, the Shek Fong Unit was vacant. Although the Grandmother was the registered tenant of that Unit, she did not reside there, but lived in a private property in Tsuen Wan. At the invitation of Mr Li, Ms Leung started cohabiting with Mr Li at the Shek Fong Unit. This is denied by Mr Li. His case is that since his grandfather passed away in 1999, his Grandmother lived alone in the Shek Fong Unit; he lived in the Choy Hay Unit with his parents and younger brother. Since about 2014, the physical condition of the Grandmother worsened, hence he would stay about 2 to 3 nights per week in the Shek Fong Unit to take care of the Grandmother. Sometimes, Ms Leung would stay overnight in the Shek Fong Unit with him, but they never cohabited.

25.I prefer Ms Leung’s evidence over Mr Li’s in this regard, for the following reasons.

(1) Mr Li’s evidence (corroborated by his mother’s) was that the Grandmother resided first in the Shek Fong Unit and then the Flat, until she was sent to a nursing home and passed away shortly thereafter. Their account is flatly contradicted by the evidence of the Aunt, who was very clear that the Grandmother never resided in the Flat. The Aunt’s evidence is supported by a Notification of Assessment Result dated 19 October 2015 (the month before the renovation of the Flat was completed, according to Mr Li) showing that the Grandmother was already of “severe impairment level” and recommended to reside in a nursing home. Mr Li and his mother’s evidence as to where the Grandmother lived is unreliable and rejected.

(2) Ms Leung’s account is substantiated by not only the evidence of the Aunt but also the fact that, as shown in the Schedule of Assets and Liabilities dated 20 July 2016 (compiled and signed by Mr Li to obtain grant of probate), the Grandmother was the registered owner of a private residential property in Tsuen Wan known as Flat A1, 11/F, Block A, Foo Yu Building, No. 269 Castle Peak Road (“Foo Yu Property”). The Land Registry (as of 20 July 2016) shows that the Foo Yu Property was purchased by the Grandmother and her husband in 1989 (10 years before the grandfather passed away) and owned by them as joint tenants.

(3) On Mr Li’s own case, by 2014 he was already staying at least several nights per week at the Shek Fong Unit, and Ms Leung stayed there with him as a couple from time to time. It seems artificial to argue that it did not amount to cohabitation because Ms Leung did not stay there every night, particularly when Ms Leung was frequently required by her job duties to travel overseas.

(4) Ms Leung did not show any proof (like credit card statements) showing that she used the Shek Fong Unit as her own address. She explained that it was easy to collect mail from her parent’s home. I find that credible and accept that evidence. I note that Mr Li also did not show any proof of his address at those relevant periods.

26.Ms Leung’s case is that towards the end of 2014 / early 2015, she was approaching 30 and contemplating marriage with Mr Li (whom she had cohabited for about 4 years by then). In the Re-re-amended Statement of Claim (“SOC”), Ms Leung’s case is pleaded as follows:

“4. In or about early 2015, since [Ms Leung] and [Mr Li] had the intention to get married, both [Ms Leung] and [Mr Li] reached the following agreement and/or common intention…:-

a. [Mr Li] would procure the [Grandmother] to surrender the [Shek Fong] Unit so that [Ms Leung] and [Mr Li] could purchase the [Flat] in the name of the [Grandmother] without paying premium to the [HA];

b. Both [Ms Leung] and [Mr Li] would contribute equally to the initial payment ($118,400), the decoration fee and the monthly mortgage payment of the [Flat] and the household expenses;

c. Since the [Grandmother] was a retired person with no income and that [Mr Li] did not have stable job/income, [Ms Leung] would act as the guarantor of the mortgage loan in the sum of $2,249,600 borrowed in the name of the [Grandmother].

d. Notwithstanding the fact that the [Flat] would still be registered in the name of the [Grandmother] (as the [Flat] was purchased without payment of any premium and thus according to the [HA]’s policy, it must be registered in the name of the [Grandmother], both [Ms Leung] and [Mr Li] would have equal beneficial interest in the [Flat] while the [Grandmother] would only be the registered owner without any beneficial interest in the [Flat].”

27.Paragraph 6 to the SOC pleaded that the Grandmother was also a party to the agreement or common intention between Mr Li and Ms Leung, to be inferred by the Grandmother’s conducts. This suggests that there was no direct discussion between Ms Leung and the Grandmother about this. However, in paragraphs 13 and 14 of her witness statement, Ms Leung referred to direct discussions between herself, Mr Li and the Grandmother about the agreement.

28.When cross-examined about various inconsistencies between the SOC and her statement, Ms Leung accepted that those documents were not entirely accurate. Her evidence was that she first discussed the matter with Mr Li in about early 2015; the two agreed to use the Grandmother’s eligibility to purchase a Green Form flat by splitting the costs roughly in half; the choice of property and need of guarantor was not discussed, but they had a budget of about 2 to 3 million HKD. About a month later, they approached the Grandmother in the Foo Yu Property to solicit her agreement, which they obtained. It was agreed that the Grandmother would pay the down payment and stamp duty for Mr Li, Ms Leung would pay for the renovation, the two would take care of the mortgage, and the property would belong to the couple in equal shares. Ms Leung and Mr Li then looked for a suitable property and chose the Flat. The question over the choice of guarantor came up after BEA told them a guarantor was required. Ms Leung agreed to take up the role because she planned to marry Mr Li (who failed the income requirement and could not become the guarantor) and because she had half a share in the Flat. At about the time the Mortgage Account was opened, the couple agreed to each contribute about HK$10,000 to that Account every month; the money would first be used to repay the mortgage loan, what was left would be used to defray their living expenses.

29.Mr Li pleaded the following agreement or common intention in the Re-Amended Defence (“Defence”):

“5. Paragraph 4 is denied… It is averred that the [Flat] was purchased with the following agreement and/or common intention between [Mr Li] and his respective family members as mentioned herein below in or around early 2015 2014:-

(a) [Mr Li] (together with his parents and … [Mr Li’s] aunt … would be responsible for making all payments in relation to the purchase (including the initial payment and the monthly mortgage payment); and

(b) All legal and beneficial interest was to be vested in the Deceased alone.”

30.It is quite clear that Defence paragraph 5(a) is incorrect as it is not in dispute that the Aunt was not responsible for any part of the purchase price of the Flat. In his witness statement, Mr Li explained that it was his grandfather’s wish to purchase an ancestral property to be passed on (爺爺… 希望我們家族有物業能夠繼續傳承下去); in about 2014, after discussion among the Li family members, they came up with the idea of purchasing a property for the Grandmother (直至約2014年，經商量後，李氏家族等成員便萌生了為嫲嫲購置物業的念頭). It was emphasized that the property to be acquired solely belonged to the Grandmother (當時大家有以下的共識：該單位的法律及實際權益都會只屬嫲嫲一人). The agreement was that the Grandmother was responsible for the down payment, and Mr Li alone was responsible for the mortgage repayment.

31.Having considered the evidence in the round against the undisputed facts, contemporaneous documents, and the inherent probabilities, I have no hesitation in rejecting Mr Li’s account and accepting Ms Leung’s evidence, for the following reasons:

(1) The grandfather already passed away in 1999; there was no particular reason which prompted the Li family members to, all in a sudden, honor his dying wish fifteen years later. There is no evidence whatsoever of how and when the alleged discussions between the Li family members came about in 2014.

(2) The Grandmother already owned a private residential property, the Foo Yu Property, which fulfilled the grandfather’s wish.

(3) I consider that Ms Leung’s agreement to become the guarantor is a weighty consideration. If Mr Li’s evidence is true, it is hard to explain why Ms Leung would be willing to assume the role as guarantor as she would have no incentive to benefit the Grandmother. On Mr Li’s own case, he broke up with Ms Leung in about October 2014 because he suspected that she was unfaithful to him; they only made up in early 2015. None of them was committed enough to talk about marriage and he never asked her to marry him at all; they did not even meet each other’s parents. That being the case, it beggars belief that in 2015, Ms Leung would, having been told that she had no interest whatsoever in the Flat, agree to become the guarantor solely out of a sense of loyalty (in Mr Li’s words, “仗義”).

(4) In contrast, Ms Leung’s account appears to me far more genuine and probable. She was willing to execute the Guarantee because she believed she was about to marry Mr Li and have half a share in the Flat. It is further supported by the mortgage application form back in April 2015 (signed by both Ms Leung and the Grandmother) where Ms Leung was stated to be the Grandmother’s “granddaughter”. Ms Leung’s evidence was that the word “granddaughter” was filled in by the bank staff upon being told by the Grandmother that Ms Leung was her granddaughter-in-law (孫新抱). I find that evidence credible and accept it.

(5) It was emphasized by Mr Li that he wanted to become the guarantor himself and it was only a “temporary arrangement” suggested by a BEA staff named Maggie that Ms Leung became the “temporary” guarantor. I reject this evidence as it is entirely incredible that a bank staff would volunteer such suggestion regarding the client’s private affairs (Mr Li did not call this staff to substantiate his account). In any event, the argument over whether Ms Leung was only a “temporary” guarantor is a red herring. During cross-examination, Ms Leung has shown a clear understanding of the obligations imposed on a guarantor. The point is that she would not have agreed to bear such responsibility but for her contemplated marriage with Mr Li and her interest in the Flat.

(6) The allegation that the Flat belonged to the Grandmother which was an ancestral property to be passed on is contradicted by the Will, which was made by the Grandmother on the very same day she became the registered owner of the Flat, prepared by the same firm of solicitors who handled the conveyance. Although the Will only took effect upon the Grandmother’s death, the timing of the Will and the circumstances of its making show that the purchase of the Flat was mainly for the benefit of Mr Li, not the Li family which included his Uncle, Aunt, and various cousins.

(7) The Grandmother did not name both Mr Li and Ms Leung the beneficiaries under her Will. Ms Leung’s explanation was this. It was Mr Li who arranged the making of the Will. Mr Li told Ms Leung that as they were not yet married, and she was not a blood relative of the Grandmother, he could not add her to the Will. However, after the Grandmother passed away, he would “add her name” (加番我個名) to the Flat. She trusted him and did not enquire further. Whilst Ms Leung’s said reaction may be criticized as naïve and unwise, I find that probable and accept her evidence, given that she was not in an arm’s length commercial transaction, but dealing with a man whom she loved and planned to get married with. She did not receive any advice, let alone independent legal advice, in relation to what Mr Li told her.

(8) The evidence of Mr Li’s mother, Aunt and Uncle, insofar as they seek to corroborate with Mr Li regarding the alleged intention to purchase a property for the Grandmother to be “passed on”, is rejected for the reasons stated above. Other than that, their evidence is of peripheral relevance as they were not party to the discussions between Mr Li, Ms Leung and the Grandmother about their detailed arrangement regarding the Flat.

(9) I have considered the criticism raised by Counsel acting for Mr Li regarding the inconsistencies between the pleading and witness statement of Ms Leung. Notwithstanding those imperfections, Ms Leung’s essential case remains consistent. More importantly, her account is inherently probable against the undisputed facts and the parties’ relationship at the time; whereas Mr Li’s account appears to me contrived and unnatural.

(10) I observed that Ms Leung only commenced this action some 2 years after the breakup, hence there was inaction on her part for some 2 years to recover her alleged interest in the Flat. In response to this court’s question of why there was such a delay, Ms Leung’s answer was two-folded. She said that she struggled for some time whether to sue Mr Li, whom she had shared an intimate relationship for a long time, and ultimately decided to sue because she found it unreasonable that her hard-earned money was lost in this way, and it took some time for her to seek the relevant bank records. I find that explanation credible and accept it.

32.To summarize, the following are my findings of fact regarding the agreement or common intention reached by Mr Li, Ms Leung and the Grandmother leading to the purchase of the Flat.

(1) In the end of 2014 or early 2015, the Grandmother lived in the Foo Yu Building, leaving Mr Li and Ms Leung to reside together in the Shek Fong Unit for some time. The young couple agreed among themselves that they wanted to make use of the Grandmother’s eligibility under the Green Form Scheme (as she was the registered tenant of the Shek Fong Unit) to purchase a Green Form flat for the benefit of the two of them without having to pay any premium to the HA.

(2) Mr Li and Ms Leung agreed on a budget of about two to three millions HKD for the flat which required a 5% down payment in the range of HK$100,000 to HK$150,000, and a renovation budget of a similar sum; that they would split the costs roughly in half and own the beneficial interest in the acquired flat in equal shares among the two of them. It was agreed that the flat would be used by them and will be their matrimonial home after they got married. The Grandmother would not live in the Flat nor have any beneficial interest in it.

(3) Mr Li and Ms Leung then told the Grandmother of their plan and persuaded the Grandmother to help them. The Grandmother agreed. She agreed to surrender the Shek Fong Unit and make the application for a Green Form flat for the benefit of the young couple; she also agreed to shoulder the down payment and stamp duty for Mr Li, but Ms Leung had to pay for the renovation and the young couple had to be responsible for the mortgage repayment themselves.

(4) Having secured the Grandmother’s agreement, Mr Li and Ms Leung looked for an appropriate property. They chose the Flat which was within their budget and which location was convenient for Ms Leung’s commute to the airport.

(5) The Grandmother surrendered the Shek Fong Unit to the HA so as to make the application under the Green Form Scheme for the purchase of the Flat. The Grandmother asked the Aunt to help draw cheques to settle the down payment, stamp duty and lawyers’ fees, then reimbursed the Aunt. Given Ms Leung’s need to travel, mainly Mr Li and his mother handled the renovation (the question of whether Ms Leung paid for the renovation fee is addressed below).

(6) When the need of a guarantee was raised by BEA during the application for a mortgage loan, Ms Leung agreed to be the guarantor and nobody else was approached to take up that role, given her interest in the Flat, her intention to marry Mr Li, and because Mr Li’s was not qualified to be a guarantor.

(7) After the amount of mortgage loan became clear, Mr Li and Ms Leung agreed between themselves that they would each contribute about HK$10,000 per month into the Mortgage Account for the mortgage repayment; what was left in that Account would be used for their living expenses.

(8) Mr Li’s parents, Uncle and Aunt were told that the Grandmother would help Mr Li to acquire the Flat by surrendering the Shek Fong Unit and paying the down payment and stamp duty, that Mr Li would manage the mortgage repayment himself. They were not told of the details about the arrangement between Mr Li and Ms Leung in respect of the Flat. The Li relatives had no objection, given that Mr Li was the Grandmother’s eldest grandson, and he would need a matrimonial home after he got married. Moreover, the Shek Fong Unit would in any event have to be returned to the HA after the Grandmother passed away.

(9) Mr Li then arranged the same solicitors’ firm which handled the conveyance of the Flat to prepare the Will for the Grandmother. By that arrangement, although neither Mr Li nor Ms Leung was an eligible applicant under the Green Form Scheme and none of them was permitted to be the lawful registered owner of the Flat when it was purchased, Mr Li could become the Flat’s registered owner once the Grandmother passed away notwithstanding the non-alienation covenants. The Grandmother was already 80 years old in 2015. Mr Li told Ms Leung that he would add her name to the Flat when he became the registered owner.

(10) Regardless of the Will, it was the express agreement or common intention between Mr Li, Ms Leung and the Grandmother that the Flat would be beneficially owned by Ms Leung and Mr Li in equal shares, to be used by them as their home and future matrimonial home; the Grandmother would not reside in it and had no beneficial interest in it. In other words, the Grandmother paid the down payment, stamp duty and lawyers’ fee for the Flat as a gift to Mr Li.

(11) Mr Li and Ms Leung resided in the Flat since renovation was completed in the end of 2015. After the breakup in September 2017, Ms Leung demanded the return of her contributions and that she ceased to be the Guarantor. Mr Li refused. After struggling for some time whether to sue, Ms Leung commenced this action.

Extent of contribution

33.The objective facts regarding when and how the down payment, stamp duty and mortgage contributions were made are all recorded in contemporaneous statements. The key disputes are over:

(1) who made the cash deposits into the Mortgage Account;

(2) whether Mr Li reimbursed Ms Leung in cash for her mortgage repayment made by transfer from the Personal Account after February 2016; and

(3) whether Ms Leung paid Mr Li HK$100,000 in cash to settle part of the renovation bills which was treated as her half share contribution to the down payment.

34.Regarding mortgage contribution, Ms Leung’s case is that when they agreed to purchase the Flat, Mr Li promised her to work hard and make his share of contribution (HK$10,000 per month) promptly. Yet he did not; he always said he had not enough money. She made the mortgage repayment and paid for the living expenses (including footing the utility bills and paying for groceries); Mr Li only paid for meals. After her complaints, on 14 September 2015 and 4 March 2016 respectively, Mr Li made two cash deposits of HK$10,000 each into the Mortgage Account. But soon afterwards, he withdrew cash from the Mortgage Account which wiped out his deposits. That led to arguments, as Ms Leung was very worried about a default and that BEA would “call loan”.

35.Mr Li’s case is that Ms Leung never made any mortgage repayment at all (事實上，一直以來安江樓的每月按揭供款都是由我本人負責出資，原告人從來沒有任何實際付出). He said that for about a year, he deposited HK$10,000 cash to the Mortgage Account every month. After the Personal Account was set up, he paid HK$20,000 cash to Ms Leung monthly (HK$10,000 before, and HK$10,000 after, she made the transfer from her Personal Account to the Mortgage Account). The cash was put in a small wooden box in the Flat for Ms Leung to collect (“Box”). Mr Li has not advanced any case that Ms Leung intended to benefit him by gift, or loan. His case is that Ms Leung did not contribute.

36.I have considered the evidence and carefully examined the bank records at the material time. I accept Ms Leung’s evidence and reject Mr Li’s evidence for the following reasons.

(1) The first question is whether Mr Li had sufficient income at the time (after deducing all necessary expenses) to make the contribution as he claimed. Mr Li disclosed no document to show his level of income in 2015 and 2016. In his statement, he said that in 2015 he had a fixed salary at the mahjong parlor of HK$12,000, but his income would add up to over HK$20,000 if bonus was included. During cross-examination, he said that his fixed salary was HK$16,000. When asked about the inconsistency, he said his base salary was indeed HK$12,000, but there was a bonus of about HK$4,000 to HK$10,000 every month. Later, he said that in 2015 his income would be as high as HK$26,000 to HK$32,000. None of this is substantiated by any contemporaneous record despite Mr Li’s claim that such record existed and were given to his lawyers. I find his evidence regarding his income incoherent, inconsistent, and unreliable.

(2) The only objective fact known about Mr Li’s income is that he did not have sufficient fixed income in 2015 and 2016 to become the guarantor for the mortgage loan. He also admitted in his witness statement of having cash flow difficulties (現金週轉困難) such that his mother had to advance the second instalment of the renovation fee of the Flat for him.

(3) Mr Li’s evidence that he deposited HK$10,000 cash into the Mortgage Account for about a year is chronologically and factually wrong. The first two mortgage instalments were settled by the cash rebate, and the Personal Account was already set up in February 2016. There were only 6 cash deposits of HK$10,000 made into the Mortgage Account from September 2015 to January 2016.

Cash Deposit #1	2/9/2015
Cash Deposit #2	14/9/2015	(made by Mr Li)
Cash Deposit #3	2/10/2015
Cash Deposit #4	4/11/2015
Cash Deposit #5	3/12/2015
Cash Deposit #6	4/1/2016

(4) Among those 6 cash deposits, Deposit #2 was indisputably made by Mr Li. The bank statement produced by Ms Leung of her Standard Chartered account (which she used to receive her salary at the time) shows that on the same date as Deposits #1 and #3, she made a cash withdrawal of HK$10,000 each; her evidence was that she deposited the cash into the Mortgage Account. Her evidence is supported by the bank statements, and I accept it to be true. As for Deposits #4 to #6, there is no bank record produced by either side to show that they made the payment. On balance, I accept Ms Leung’s evidence that she paid them because (a) Mr Li’s evidence (that Ms Leung never paid any mortgage repayment at all, and his income at the time) has been shown to be untrue in material respect; (b) I accept Ms Leung’s evidence that she would have ready cash at hand after her long-haul flights.

(5) Ms Leung’s recollection regarding Mr Li’s only two cash deposits on 14 September 2015 and 4 March 2016 was that she also made a HK$10,000 deposit / transfer for those two months as she could not rely on Mr Li to make timely payment. This is supported by the bank records, which show that in those two months there were two deposits of HK$10,000 into the Mortgage Account in one single month. I find Ms Leung’s detailed explanation credible.

(6) Mr Li’s evidence about him making monthly HK$10,000 cash deposits into the Mortgage Account or leaving HK$20,000 cash to Ms Leung in the Box (the Box is not produced in evidence and its existence denied by Ms Leung) remains a bare allegation. There are no proof showing Mr Li’s deposits, nor how Mr Li obtained the cash in the first place. His bare allegation is rejected, especially having considered points (1) to (5) above.

(7) I have considered the submissions made on behalf of Mr Li, that the extent of contribution put forth by Ms Leung’s solicitors in a pre-action letter was not consistent with her present case. I note the inconsistency, however, I do not place much weight on it, as there are other glaring mistakes in that pre-action letter (for example, the rebate was not excluded from the calculation) which cast doubt over its overall reliability. I also note that there seems to me even more material inconsistencies in Mr Li’s own evidence (as noted above) and pleading (for example, as to who was to contribute to the purchase price).

37.Regarding the renovation fee, Mr Li’s case is that he or his mother paid HK$112,000 to the contractor in full. Ms Leung’s evidence is that she made cash withdrawal on 24 August 2015 (of HK$40,000) and on 17 September 2015 (of HK$52,000), and adding HK$8,000 ready cash at hand, gave HK$100,000 in cash to Mr Li to settle the renovation bills. The two withdrawals are recoded in her SCB bank statement. When cross-examined, she was very firm that those sums were for renovation fees, because she had no habit of using such a large amount of cash (which amounted to about half of her life saving) in such a short period of time. She agreed that HK$100,000 was less than the down payment and stamp duty; she explained that between her and her future husband they roughly added up the amount and each took care of an item, instead of being so exact. I accept her evidence.

38.After the breakup and since 3 October 2017 inclusive, Mr Li has been repaying the mortgage loan (sometimes the payment was made by his mother). Ms Leung’s evidence is that she believed she had no more obligation to repay the mortgage loan since she and Mr Li would not get married. She left the Flat after the breakup.

39.Based on my findings above, below is a summary of the parties’ respective contribution.

	Payment type	HK$	Payor
1.	Stamp Duty	71,040	Grandmother for Mr Li
2.	Down payment (1/2)	59,200	Grandmother for Mr Li
3.	Down payment (1/2)	59,200	Ms Leung (by setting off the renovation fee)
4.	Mortgage contribution by Ms Leung up to and including September 2016	260,410	Ms Leung
5.	Mortgage contribution by Mr Li up to and including September 2016	20,000	Mr Li
6.	Mortgage contribution by Mr Li from October 2016 up to trial (March 2023)	647,357	Mr Li

40.According to the agreed calculation prepared by Counsel for Ms Leung contained in a table handed up on the day of closing submissions (as to which Counsel for Mr Li has indicated no objection as to the quantum), the total contribution counting items 1 to 6 above is HK$1,117,207. Ms Leung’s percentage of contribution thereto (items 3 and 4) is 28.608%.

Resulting Trust

41.I have borne in mind the general principle that where there is sufficient evidence on actual intention at the time of the transaction, there is no room for the operation of presumption of resulting trust (Yuen Yat Shan Fiona v Sit Hin Kai [2005] 4 HKC 170 [20]). However, I will deal with the claim in resulting trust first because it is straight forward, and that it will become relevant in the consideration of the illegality issue and the range of factors approach, discussed below.

42.A resulting trust may arise where (Tam Sui Lim William v Fung Ho [2023] HKCFI 1583 [30]-[32]):

(1) A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested in B alone or in the joint name of A and B. By operation of law there is a presumption that A did not intend to make a gift to B. The money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions (“Purchase Money Resulting Trust”). The presumption of resulting trust can be rebutted by direct evidence that A intended to benefit B, or by a counter-presumption of advancement (which may be rebutted by evidence).

(2) Where A transfers money to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest.

43.In light of my findings as to Ms Leung’s extent of contribution, and there was no intention on her part to make a gift to the Grandmother or Mr Li, subject to the discussion on illegality, a Purchase Money Resulting Trust clearly arose in her favour, such that the deceased Grandmother (and following the Assent, Mr Li) held 28.608% of the Flat on resulting trust for Ms Leung.

Common intention constructive trust

44.The applicable principles in relation to a CICT are set out in Tam Sui Lim William v Fung Ho [2023] HKCFI 1583 [26] – [29], applying Stack v Dowden [2007] 2 AC 432 [56], Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 [46]- [50] and Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 [1.3] [1.6], [2.3], [2.4].

45.A party seeking to show that the beneficial title does not follow its legal title bears the burden of proof. To succeed in the CICT claim, Ms Leung must prove that:

(1) There was a common intention (express or inferred) between her and the defendants that she and Mr Li was each to be a 50% beneficial owner of the Flat despite it being acquired in the Grandmother’s sole name.

(2) Ms Leung altered her position in detrimental reliance upon such common intention; and

(3) It is unconscionable for the defendants to assert ownership in reliance on the legal title to the Flat.

46.The parties’ common intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the property concerned, based on evidence of express discussion. Where there is no evidence to support a finding of express agreement or arrangement, the court seeks to infer from the conduct of the parties the relevant common intention. Direct contributions to the payment of the purchase price of the property will readily justify such an inference. The modern approach is to assess the common intention of the parties by a holistic approach having regard to the context and inherent probabilities.

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

48.Based on the findings of fact made above, there was clear evidence of express discussion between the Grandmother, Mr Li and Ms Leung showing a common intention that the latter two were to be the beneficial owners of the Flat in equal shares despite it was acquired in the Grandmother’s sole name. If I am wrong regarding the express discussions, I have no difficulty in inferring the same common intention by the parties’ conducts, including in particular the Grandmother’s application for the Flat pursuant to the Green Form Scheme in which she never resided, her making of the Will, Ms Leung’s contribution towards the renovation fees and mortgage loan repayment, and Ms Leung’s agreement to become the guarantor.

49.I further find that such common intention accords with the factual context viewed holistically. The common intention was reached at a time when Ms Leung (reaching her 30s) and Mr Li (3 years older than Ms Leung) were dating for some years and contemplating marriage. Mr Li, being the Grandmother’s eldest grandson, sought help from the Grandmother to buy a property to be used as his matrimonial home.

50.Ms Leung clearly altered her position in detrimental reliance upon such common intention. She made the contributions and became the guarantor.

51.However, I do not regard it unconscionable for the Defendants to assert ownership in reliance on the legal title to the Flat to the extent beyond Ms Leung’s contribution (28.608%). The agreement or common intention was for the Flat to be used by both Mr Li and Ms Leung (as their home, and future matrimonial home) and for them to be equally contributing to the mortgage repayment (which obligation would last more than a decade). There is no reason, nor is it conscionable, to hold Mr Li to that same arrangement when Ms Leung is not performing her part. To hold otherwise would be requiring Mr Li to gift Ms Leung some 21% beneficial ownership in the Flat in circumstances where the agreed basis of their arrangement, the common intention, is spent.

52.Subject to the issue concerning illegality, my conclusion is that the deceased Grandmother (and upon the Assent, Mr Li) held the Flat on a common intention constructive trust in favour of Ms Leung as to 28.608%.

Illegality

53.I have quoted paragraph 4 of the SOC which set out Ms Leung’s case regarding the parties’ common intention underlying the Grandmother’s application for the Flat pursuant to the Green Form Scheme. It is clear on the face of the SOC that, according to Ms Leung at least, the intention of all three concerned was to use the Grandmother’s eligibility to apply for and acquire the Flat to benefit Mr Li and Ms Leung, knowing full well that neither Mr Li nor Ms Leung was eligible under the Scheme. Ms Leung was asked in cross-examination why did they choose to buy a Green Form Flat; she answered it was because the Flat would be cheaper. It goes without saying that the price of the Flat was below market value because of government subsidy – a financial gain at public expenses which Mr Li and Ms Leung was, indisputably, not entitled to.

54.It is accepted in paragraph 6(b) of the Defence that Mr Li was not supposed to have any beneficial interest in the Flat.

“As [Mr Li] was not a registered household member of the [Shek Fong] Unit, he was not supposed to have any interest to the [Flat] purchased as a result of the said … [Green Form Scheme]. He was in fact a registered household member with his parents at another public housing unit … at the material times.”

55.At the pre-action letter stage of this action, solicitors for Mr Li were already alive to the issue of illegality. In a letter dated 20 August 2018, CW Lawyers (acting for Mr Li) said, “[Mr Li] denies that the beneficial interest of the [Flat] vested in [Ms Leung] and [Mr Li] equally. We note that such arrangement an illegal attempt to get around with the stamp duty and public housing premium requirement.” [sic.]

56.On first day of trial, I expressed my serious concern to the parties regarding whether the pleaded common intention of the parties gave rise to an issue of illegality. Caution against self-incrimination (drafted and agreed by Counsel) was given to Mr Li and Ms Leung respectively when they gave evidence. Before their respective clients went into the box, Counsel also reassured me that the parties have been sufficiently advised on the necessary ramifications arising from this issue.

57.Both Counsel addressed me on the issue of illegality in closing submissions. After the Court of Appeal handed down its Judgment in Monat, Counsel also put in further written submissions at this court’s direction.

58.As can be seen from the findings made above, Ms Leung’s evidence regarding the parties’ common intention was by and large established at trial. I observe that the abuse of the public housing resources and the Green Form Scheme by all parties involved in this case appears to be obvious and egregious.

(1) When the Shek Fong Unit became vacant, such scarce public resource was treated like the Li family’s private property and used by Mr Li and Ms Leung when neither of them was a registered tenant, to the exclusion of the Grandmother (the registered tenant, who was not in need of that public housing unit herself). Worse still, at the time Mr Li was already a registered household member with his parents at the Choy Hay Unit. Ms Leung was also residing with her parents in another public housing unit. By occupying the Shek Fong Unit, they were depriving the eligible applicants for public housing of valuable housing resources.

(2) Then in 2015, the Grandmother’s status as the registered tenant at the Shek Fong Unit (in circumstances where she did not reside there at all) was used to acquire the Flat under the Green Form Scheme for the benefit of Mr Li and Ms Leung, when neither of them was an eligible applicant under that Scheme. The elderly Grandmother was essentially used as a nominee to obtain the subsidized Green Form Flat despite that she was never intended to be a beneficial owner or resident of that Flat. The heart of the common intention was for Mr Li and Ms Leung to (in Ms Leung’s own words) avoid paying premium to the HA.

59.The acts described in paragraphs 53 and 58 above may or may not be criminal or quasi-criminal in nature; however, in any event public interest is clearly engaged which may attract the application of the ex turpi causa maxim, as discussed in Les Laboratories Servier and Anor v Apotex Inc and Ors [2015] AC 430 and adopted in Monat [23.8].

60.I also note that:

(1) At the time of her death, the Grandmother was still the owner of a private property, the Foo Yu Property (the ownership started since 1989). I have not been told whether her long-time ownership of a private property was ever disclosed to the HA, and on what basis she would still be the registered tenant of the Shek Fong Unit or obtained the Certificate of Eligibility to Purchase from the HA for the purchase of the Flat despite that ownership.

(2) In the Legal Charge dated 5 June 2015, the Grandmother purported to charge the Flat to BEA as beneficial owner (Clause 4). This would appear to be a material misrepresentation to the bank, as she did not and would have any beneficial ownership in the Flat.

For the avoidance of doubt, as these matters were not explored in detail in cross-examination, I only note them for completeness but do not base my conclusions on them.

61.Counsel for Mr Li, Mr Ivan Lee, submitted that Mr Li would not plead illegality as a defence, but this court is urged to reject the CICT claim on the ground that the CICT is ex facie illegal. I am referred to Igal Dafni v CMA CGM SA [2013] 2 HKLRD 73 [31-[34] (a contract claim), where Recorder H Wong SC held as follows:

“31… In my judgment, the authorities are clear that it is only in the case where the relevant contract is ex facie illegal – or if it is not, the Court is nonetheless satisfied that all the relevant facts and circumstances bearing on the question of illegality are fully known to it – that the Court becomes entitled to decide that the contract is unenforceable by reason of illegality even though the issue of illegality has not been pleaded by either party.”

62.Counsel for Ms Leung, Mr Simon So, submitted that the common intention asserted by Ms Leung was not illegal or against public policy, by applying the principles stated in Cheuk Shu Yin v Yip So Wan (2012) 15 HKCFAR 344 which is binding on me. Mr So also disputed whether the transaction was ex facie illegal because the parties were not given a fair chance to tender evidence as to how the Grandmother applied for the Flat. I do not agree with the second point because the circumstances of the acquisition of the Flat are by and large undisputed; Mr So has not identified what other relevant evidence is missing before me.

63.Regarding Mr So’s first point, I have considered the relevant judgments in Cheuk Shu Yin including the two first instance decisions by Fung J. I first summarize the findings and principles therein.

(1) In Decision No. 1, Fung J found that the plaintiff and her husband provided the purchase price of a Green Form flat purchased in the name of the defendants (the plaintiff’s parents in law). Fung J refused the declaration sought by the plaintiff for the transfer of the property to her because of his view that unless premium was first paid to the HA, the transfer would amount to a prohibited alienation under ss.17AA and 17B of the Housing Ordinance (Cap. 283). Fung J also noted (without finding) that the defendants’ application for Green Form flat might offend HA’s policy (雖然第一及第二被告人已交還公屋單位，但容許他人利用綠表申請居屋，可能有不按序插隊之嫌).

(2) After having made enquiries with the authorities, in Decision No. 2, Fung J observed that, “雖然房屋署的回信未有直接指出粉嶺物業的購買是否違反居屋的公共政策，但從覆函的整體詮釋，特別是第一及第二被告人的公屋申請符合當時的公屋申請條件；他們以綠表購買居屋獲豁免符合入息及資產限額和不能擁有住宅物業的規定；及若實際擁有人為已登記的家庭成員可申請豁免補 [地] 價幾點來看，以綠表購買的居屋由第三者實益擁有並無違反公共政策”.

(3) When the case reached the CFA (heard together with another case, Lam Wa v Chu Yuen Lun Garmen FACV 11/2011), the issue was whether the creation of the beneficial interests by the plaintiff’s contribution to the purchase price of the Green Form flat was an “alienation” forbidden by s.17B of the Housing Ordinance (Cap. 283). The CFA answered in the negative (overturning the CA’s finding in this regard). The CFA held that the non-alienation restriction was to discourage speculation, and the creation of beneficial interests under a constructive or resulting trust would not give rise to the abuses which s.17B sought to prevent. Moreover, the equitable owner could not realize the value of his interest until the non-alienation restriction lapsed, hence the equitable owner could not interfere with the occupation of the flat by the eligible purchaser (to whom the flat was sold).

64.It seems obvious to me that (contrary to Mr So’s submissions that Cheuk Shu Yin is on all fours with this case) the present factual situation is markedly different from Cheuk Shu Yin. Neither Mr Li nor Ms Leung (the beneficial owners of the Flat) were registered tenant of the Shek Fong Unit. More importantly, a key aspect of the agreement or common intention which gave rise to the equitable ownership was that the eligible purchaser (Grandmother) would not own or reside in the Flat at all. The present case is not one (as envisaged by the CFA in Cheuk Shu Yin to be permissible) where family members pooled resources to enable an eligible applicant to purchase the Green Form flat and reside there. Here, the Grandmother misused her eligibility under the Green Form Scheme to benefit ineligible third parties (including Ms Leung, who was not her family member).

65.I quote what the Secretary for Housing said in moving the second reading of the 1982 Bill (reproduced by Lord Hoffmann NPJ in Cheuk Shu Yin [27]):

“Flats produced under the home ownership scheme are intended for one purpose only – to provide homes for people eligible for them. It is not the intention of the schemes to give opportunities for speculations, or to provide such housing for people who fall outside the eligibility criteria.”

66.In this case, the Grandmother’s Certificate of Eligibility to Purchase together with the HA’s Nomination granted to the Grandmother were treated by the parties like an option to purchase a subsidized flat. The Flat was not used to meet the housing need of the registered tenant of the surrendered public housing unit, but to benefit third parties of that tenant’s choosing. The abuse of the Green Form Scheme in this case is just another kind of “profiteering” of public resources (to borrow the word of Bokhary PJ in Cheuk Shu Yin [1]).

67.In the circumstances, I come to the conclusion that I should consider the issue of illegality although it is not pleaded, and the common intention underlying the CICT as asserted by Ms Leung which is established at trial is ex facie contrary to public policy.

68.Had the law in Hong Kong been the reliance approach in Tinsley v Milligan [1994] 1 AC 340, I would hold that the CICT claim is rejected on the ground of illegality as the SOC plainly relied on an agreement or common intention which was contrary to public policy for the purpose of establishing the CICT.

69.Following the Monat decision, the range of factors approach propounded in Patel v Mirza [2017] AC 467 falls to be considered. In place of a merely mechanistic process, the court should consider the following “trio of necessary considerations” to determine whether it would be harmful to the integrity of the legal system to allow a claim involving an illegal act (Monat [36.4], [57]):

(1) consider the underlying purpose of the prohibition which has been transgressed;

(2) consider conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim;

(3) keep in mind the possibility of overkill unless the law is applied with a due sense of proportionality.

70.On the first factor, the underlying purpose of the public policy transgressed was that public housing resources should not be treated as private commodity, family investment or hereditary entitlement, but made to cater for the genuine need of those eligible for public housing.

71.On the second factor, the other relevant public policies which may be rendered ineffective or less effective by denial of the claim is the consideration that (per Lord Hoffmann NPJ in Cheuk Shu Yin [35]) the denial of a remedy to a person who paid all or part of the purchase price on the understanding that he or she would acquire a beneficial interest can be very unjust.

72.I have kept in mind the possibility of overkill unless the law is applied with a due sense of proportionality.

73.Having considered the matter as a whole, and applying the range of factors approach, I have reached the conclusion that the CICT claim in this case should be rejected, because of the following reasons.

(1) The injustice of denying a remedy in constructive trust to Ms Leung (who contributed to the purchase price of the Flat on the understanding that she would acquire a beneficial interest therein) is sufficiently remedied in this case by the availability of a claim in Purchase Money Resulting Trust. It follows that Mr Li would not receive any windfall even if the Flat increased in market value.

(2) For a court of law to give effect to an agreement or common intention, be it express or inferred, which is contrary to public policy may convey an undesirable message to the public that such wrongful conducts are condoned. Where the injustice in the denial of the CICT claim is sufficient remedied, denial of the CICT claim is a proportionate response to the illegality in question.

74.I have considered whether the question of illegality also arises when a Purchase Money Resulting Trust is concerned. I come to the view that it does not. In Primecredit [2.6] – [2.8], Cheung JA summarized two doctrines on the rationale of a resulting trust (without preferring one over the other).

(1) The first view is that a resulting trust is in response to the absence of any intention on the part of the person providing the purchase price to benefit the recipient (the “lack of intention analysis”).

(2) The second view is that a resulting trust arose from the presumed common intention of the parties that the transferor did not intend to benefit the transferee (the “positive intention analysis”).

75.Under either analysis, the turpitude which underlined the CICT would not be pertinent.

76.The application of the range of factors approach is principled and transparent, but fact sensitive. In the context of CICT, there may be claims where the non-owner claimant only made trivial expenditure on the property, or that the contribution to the purchase price was less than the established percentage of beneficial ownership, or that the contribution was not monetary in nature (a classic example would be Eves v Eves [1975] 3 All ER 768, cited by Mr So). If illegality is involved in such situations, the weighing of the factors becomes more difficult. Some of the relevant considerations in the CICT context (apart from those given in Patel v Mirza [2017] AC 467 at [107]) may include the availability of alternative remedies to the non-owner claimant, whether he or she is profiting from the wrongdoing, and whether the registered owner would benefit from an unjust windfall or reward had the CICT claim been denied.

Unjust enrichment

77.As set out in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 [67], following the traditional common law approach, four questions should be asked in a claim for unjust enrichment:

(1) Was the defendant enriched?

(2) Was the enrichment at the plaintiff’s expense?

(3) Was the enrichment unjust?

(4) Are any of the defences applicable?

78.Recorder Eugene Fung SC observed in Credit One Finance Ltd v Yeung Kwok Chi & Ors [2021] 1 HKC 598 [43] that,

“As a matter of good practice, it seems to me that a plaintiff should make clear in his pleading what material facts are being relied upon to establish that the defendant was enriched, that his enrichment was gained at the plaintiff’s expense, and that his enrichment is unjust. These are the first three questions in Ribeiro PJ’s analytical framework. The last question relates to the defences; the burden of proof lies on the defendant to establish the defences and the absence of which is not something that a plaintiff should ordinarily plead in a statement of claim.”

79.Ms Leung’s unjust enrichment claim is contained in two short paragraphs of the SOC inserted by re-re-amendment. I have sympathy with the criticism made on behalf of Mr Li regarding the way the unjust enrichment claim is pleaded, which seems to be rather scant. That said, Mr Li did not apply for further and better particulars or to strike out that plea. He simply repeated his case that Ms Leung never made any contribution. The reason seems to be that the substance of Ms Leung’s claim in unjust enrichment is rather simple: she made the contributions which were not gifts to the Grandmother or Mr Li, hence it would be unjust for Mr Li to retain those monies if Ms Leung had no interest in the Flat.

80.Mr Li had no difficulty in responding to the unjust enrichment claim (which shows that he knew the case to meet), and he did not put forth any positive defence like bona fide change of position. In the circumstances, the resolution of this unjust enrichment claim only goes back to the core factual dispute of whether Ms Leung made the contributions. On balance, I am prepared to deal with it substantively despite the imperfections on the pleading.

81.Following from the findings made above, subject to the question of illegality, my conclusion is that Ms Leung’s unjust enrichment claim should be allowed in the event that her trust claims failed. She paid HK$260,410 into the Mortgage Account and HK$100,000 cash to Mr Li for the renovation. She did not intend to benefit the Grandmother or Mr Li by making those contributions as a gift. The Estate and Mr Li has no reason to keep those monies if Ms Leung had no beneficial interests in the Flat.

82.In Mr Li’s closing submissions, a suggestion was made that half of Ms Leung’s contributions should be deducted as her share of “living expenses” because she resided in the Flat. I reject this argument because (1) I have found above that Ms Leung shouldered the couple’s living expenses when they lived together. Mr Li only paid for meals and on his evidence, he sometimes bought Ms Leung gifts. (2) Mr Li had not pleaded any positive defence which warranted a deduction to Ms Leung’s contributions. (3) The suggested deductions were arbitrary and without any evidential support; it was not even featured in Mr Li’s own evidence.

83.The next question is whether and how the contravention of public policy in this case affects Ms Leung’s unjust enrichment claim. In Patel v Mirza [2017] AC 467, Mr Patel paid GBP 620,000 to Mr Mirza pursuant to an agreement to bet on a bank’s share price using insider information (which amounted to a conspiracy to commit the offence of insider dealing). The insider information did not materialize, no bet was placed, but Mr Mirza kept the money for himself. Mr Patel sued Mr Mirza to recover the monies, claiming breach of contract and unjust enrichment. The first instance judge dismissed the claim by applying Tinsley v Milligan [1994] 1 AC 340.

84.The Supreme Court upheld the Court of Appeal’s ruling in allowing Mr Patel’s claim, holding that the reliance approach was no longer good law. The Supreme Court (Lord Toulson JSC at [116]) held that a claimant who satisfies the ordinary requirement for a claim in unjust enrichment should be entitled to the return of his property and should not prima facie be debarred from recovering his property just because the consideration which had failed was an unlawful consideration. To allow the unjust enrichment claim would have the effect of returning the parties to the positions prior to the conclusion of the illegal contract, as well as preventing the recipient from being unjustly enriched.

85.Applying the principles set out in Patel v Mirza, in the event that Ms Leung’s trust claims failed, her alternative claim in unjust enrichment should be allowed. The key consideration is that (as in Patel v Mirza) to allow such claim would revert the parties to the original position and avoid the recipient (Mr Li) from being unjustly enriched.

86.However, I need not make any order regarding the unjust enrichment claim, given that Ms Leung already succeeded in her resulting trust claim.

Disposition

87.I make a declaration that the deceased Grandmother and (since 2 May 2019) Mr Li held and holds 28.608% of the beneficial interest in the Flat on a purchase money resulting trust in favour of Ms Leung.

88.Ms Leung’s claim in common intention constructive trust is dismissed.

89.I make no order on her unjust enrichment claim.

90.As there may be complications arising from the need to pay premium to the HA, and none of the parties addressed me on the order for sale sought in the SOC, I refuse to make an order for sale of the Flat at this stage. The parties may make an appropriate application supported by the necessary evidence if they still seek such an order.

91.I make an order nisi that costs of this action including all costs reserved be paid by the Defendants to the Plaintiff with certificate for counsel, to be taxed if not agreed. The Plaintiff’s own costs to be taxed in accordance with the Legal Aid Regulations.

Mr Simon So, Counsel instructed by Ivan Tang & Co, for the plaintiff

Mr Ivan Lee, Counsel instructed by Lo & Lawyers, for the 1^st and 2^nd defendants