Today Is Finance Ltd v. Tsang Kwok Hung and Another
Read the full judgment text of DCCJ 4915/2020 on BabelCite. This District Court judgment was delivered on 26 June 2024.
1. The present hearing arose from an application made by the Plaintiff (“P”) as the judgement creditor for a charging order nisi (“the Charging Order”) against the judgement debtor (“D1”) in relation to Lot No 1910 in Demarcation District No.281, Shatin, New Territories and the buildings, messuages and erections thereon (“the Property”).
Cited by 2 cases · Cites 11 cases
|
DCCJ 4915/2020 [2024] HKDC 1050 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 4915 OF 2020 -------------------------
-------------------------
------------------- JUDGMENT ------------------- INTRODUCTION 1.The present hearing arose from an application made by the Plaintiff (“P”) as the judgement creditor for a charging order nisi (“the Charging Order”) against the judgement debtor (“D1”) in relation to Lot No 1910 in Demarcation District No.281, Shatin, New Territories and the buildings, messuages and erections thereon (“the Property”). 2.D1 did not appear at any stage of the present proceedings. 3.Subsequent to the grant of the Charging Order, the 2nd Defendant (“D2”) took out an application for joinder in the present action to oppose the Plaintiff’s application. D2’s application was allowed and a trial on beneficial ownership of the Property was ordered. 4.In fact, D2 has also, in relation to the Property, commenced HCA1985/2020 (“the HC Action”) against D1 for a declaration, inter alia, that D1 has been holding the Property on trust for D2’s benefits in pursuant to a resulting trust and/or common intention constructive trust and for an Order that the Property be transferred and assigned to D2 upon payment of premium to the District Lands Office (“DLO”) earlier on in November 2020. About a year after the commencement of the HC Action, D1 lodged an acknowledgement of service stating that he did not intend to contest the HC Action. 5.In the present hearing, both parties have confirmed that this Court would only deal with and determine the beneficial interest of the Property and thereby whether the Charging Order should be made absolute or be discharged. No declaration would be made in relation to the title of the Property. BACKGROUND 6.P is and was a licensed money lender in Hong Kong at all material times. 7.D1 is and was an indigenous villager (ie a Ding) and was entitled to build a three-storey village house on the Property. It is not disputed that D1 is and was the registered owner of the Property. 8.P and D1 had entered into a loan agreement dated 22nd November 2019 (“the Loan Agreement”) in which P agreed to lend a sum of HK$2,700,000 to D1 (“the Loan”). 9.Unfortunately, D1 did not repay the Loan. P then commenced the present action against D1 under Order 83A of the Rules of the District Court, Cap 336H (“the RDC”) for the recovery of the outstanding principal of the Loan and the interests thereon. Upon D1’s failure to acknowledge his intention to defend, P entered default judgment against D1 on 1st December 2020. 10.P further applied for a charging order on the Property as a Judgment Creditor. On 25 January 2021, a charging Order Nisi was granted to P. 11.D2 then joined in the present action to oppose the Charging Order to be made absolute and to apply for discharge of the same. D2 argued that he was the beneficial owner over the Property and his beneficial interest was duly transferred from Lee Chi Yin (“Lee”) and Lam Shu Sum (“Lam”) in the performance of an Agreement for Development 合作發展協議 dated 23rd September 2014 (“the Development Agreement”) and a Chinese Agreement 轉讓協議書dated 6th November 2014 (“the Chinese Agreement”). 12.Under the Development Agreement, D1 (as a Ding) and Lee and Lam agreed that the rights and benefits of building a village house under the Small House Policy of the Government on the Property belonged to Lee and Lam. Lee and Lam agreed in return to pay HK$1 million to D1 for the right to develop the Property and the village house to be built thereon. 13.Under Clause 5 of the Development Agreement, D1 declared himself to be the trustee of Lee and Lam in holding the Property on trust for their benefits. 14.Under the Chinese Agreement, D2 and Lee and Lam agreed that Lee and Lam would sell to D2 and his wife Madam Lee Yuk Wan (“Madam Lee”) the rights and benefits of the Property at the price of HK$3.2 millions and also that Lee and Lam would procure the execution of a General Power of Attorney (綁丁文件) by D1 appointing D2 as his attorney (“the General Power of Attorney”). 15.By reason of the General Power of Attorney made on 13 January 2015, D1 has continued to hold the subject land and and the Property on trust for the benefits of D2 and Madam Lee. 16.New Grant No. 21970 dated 2 December 2014 was executed between D1 and the Government (“the New Grant”). Clause 4 of the New Grant provided that D1 as Grantee expressly warranted, represented and declared, inter alia, that he has never made any arrangements to sell or otherwise dispose of his eligibility to apply for a grant of Private Treaty Grant under the Small House Policy of the Government for indigenous villagers in the New Territories. Clause 5(d) of the New Grant provided circumstances in which alienation was allowed, such as after a lapse of 3 years, prior written consent from DLO and payment of additional premium. 17.The construction of the village house on the Property was later completed and a Certificate of Compliance was issued in September 2019. D2 and his family have moved in and lived in the Property since 2019 up till now. 18.Apart from the Loan, D1, without giving prior knowledge to P, took out another loan from United Asia Finance Limited (“UA”) for a sum of HK$400,000. A Charging Order Absolute against the Property was obtained by UA on 9 September 2021. PROCEDURAL HISTORY 19.On 25 November 2020, D2 commenced the HC Action. 20.On 1 December 2020, P entered default judgment against D1 in this action. 21.On 25 January 2021, the Charging Order was granted. 22.On 17 February 2021, P, by way of joinder summons (“the HC Joinder Summons”), applied to intervene in the HC Action. 23.On 24 March 2021, the High Court Joinder Summons was heard, in absence of both D1 and D2, by Master D Ho who adjourned the joinder application sine die since no charging order absolute was obtained by P at that stage. 24.On 21 June 2021, D2 made an application to join in the present action and it was granted on 9 July 2021. 25.On 9th September 2021, a charging order absolute against the Property was obtained by UA with no objection from D2. 26.On 8th November 2021 (ie more than 12 months after service of writ), D1 filed an acknowledgement of service of the writ in the HC Action and specified that he was not going to contest the claim. 27.On 19th November 2021, D2 filed the Statement of Claim in the HC Action and applied for summary judgment against D1 in the HC Action. 28.On 22nd November 2021, the hearing of notice to show cause was adjourned pending the outcome of the summary judgment hearing in the HC Action. 29.On 20th December 2021, the restored hearing of the HC Joinder Summons was opposed by D2 who on the same day took out an amendment summons seeking to amend the Order 14 summons by adding an alternative application for default judgement in the HC Action (“the amendment summons”). 30.On 5th January 2022, D2’s summary judgment as well as the amendment summons were dismissed by DHCJ Winne Tsui based on procedural flaws. The Court also indicated that it was unlikely to grant the declaratory relief without a trial. 31.On 23rd February 2022, the HC Joinder Summons was heard by Master David Chan who stayed it pending the determination of the beneficial ownership of the Property in the present proceedings. 32.On 22nd August 2022, HH Judge Harold Leong ordered a trial on the issue of the beneficial ownership of the Property. 33.The trial of the present case was heard by me and only D2 and Lee (as D2’s witness) were required to give evidence. The Issues 34.The following are the issues raised in this trial:-
P’s case 35.It is P’s case that D1 had all along represented that he was the beneficial owner of the Property although no security had been made by D1 to P on the Property. 36.P complained that there was no proof of payment under the Development Agreement and of the premium required for the New Grant. 37.P asserted that the Development Agreement and the Chinese Agreement were tainted with illegality and/or against public policy. 38.In absence of opposition from D1 in the trial, P also asserted that P was, prima facie, entitled to have the Charging Order made absolute as it is for the judgement debtor (D1) to show cause why the Charging Order should not be made absolute, subject to the issue of beneficial interest in the Property raised by D2. D1’s case 39.In the present proceedings, D1 did not respond or attend the present proceedings at any stage and therefore D1 did not plead his own case in the present action. D2’s case 40.It is D2’s case that he is beneficial owner of the Property for his payment to acquire the right to build on the Property in accordance with the Chinese Agreement made with Lam and Lee who had also duly paid to D1 the agreed sum of HK$1 million in accordance with the Development Agreement. 41.Besides, D2 also duly paid the construction costs of over HK$1.4 million by cheque to Fu Nga Construction & Decoration Company Limited (“Fu Nga”) for building the Property. 42.Moreover, D2’s payment of the utility bills in relation to the Property showed that D2 and his family all along lived in the Property and have been paying the utilities for it. 43.Furthermore, the fact that D1 did not contest D2’s claim in HC Action indirectly proved D1’s case in the present action. BURDEN OF PROOF 44.P has rightly asserted that the burden of showing cause why a charging order nisi should not be made absolute is on the judgment debtor, namely D1 in the present proceedings. And the logic follows that the Charging Order should be made absolute when there is no objection from D1. 45.In spite of the above principle and logic, the court, in exercising its discretion, has the right and duty to take into account all the circumstances of a case, whether such circumstances arose before or after the making of the order nisi. 46.Now, the circumstances are that D1 has never appeared in the present proceedings and also that D2 has properly joined in the present proceedings and vigorously asserted that he is the beneficial owner of the Property with support of both verbal and documentary evidence. I am therefore of the view that I am bound by my duty to take into account D2’s case and evidence in exercising my discretion under Rule 50 of RDC. 47.The issue relates to the beneficial interest in the Property which is now registered in the name of D1. Thus, the onus on D2 who alleged that the beneficial ownership was different from the legal ownership to show that that is the case, the presumption being that the beneficial ownership in property follows the legal ownership. (Dextra China Limited v Lam Wing Kit, HCMP 1825 of 2015 at para 22(i)) 48.The burden is on D2 to prove on balance of probabilities that he has the beneficial interest over the Property. ORDER 50 RULES OF DISTRICT COURT 49.“The District Court can impose a charging order against the beneficial interest of a judgement debtor in, among other things, land. The provisions are contained in sections 52A, 52AA and 52AB of the District Court Ordinance (Cap 336). Order 50 of the RDC sets out the relevant procedure in relation to an application of charging order. 50.The general principles governing the exercise of the discretion to make a charging order may be summarised as follows:-
51.Concerning an entitlement to a charging order, the important limitation is that it is only the beneficial interest of a judgment debtor that may be charged. Thus, where a judgement debtor holds property as a bare trustee, that interest may not be made the subject of a charging order. 52.When a judgement creditor chooses to obtain a charging order on a property with which he does not have any specific knowledge as to the precise nature of the interest of the judgement debtor in the property charged, he takes a commercial risk that that interest may or may not be a beneficial interest. (See Tang Cheng Po Nin (鄧鄭寶蓮) v Tang Yiu Tong and Others, HCMP 1768/2005, 13 March 2006, [2006] HKCFI 275, para 16) 53.This is what happened in the present proceedings. 54.D2 was able to exhibit at trial the original New Grant, which is the original title deed required or recognized by law to prove and give the title of the Property. (See Section 13 and 13A of the Conveyancing and Property Ordinance, Cap 219) 55.On the contrary, P conceded that P’s manager (Mr Hung Kam Lung) only inspected “the Land Registry copy” of the New Grant produced by D1 to him at the time of executing the Loan Agreement. It goes without saying that the receipt of the said Land Registry copy of the New Grant was not be sufficient to support P’s case that D1 was holding the beneficial interest over the Property when the Loan Agreement was executed. 56.This is highly relevant and important for the court to determine who is the true person holding the beneficial interest over the subject property and whether P’s manager was justified to believe D1 was the beneficial owner of the Property at the material times without inspecting the original title deeds pursuant to sections 13 and 13A of CPO. In any event, P’s manager was not a solicitor or legal clerk with legal knowledge to give any view or opinion to confirm that D1 had any beneficial interest of the Property and in fact the Property was not made as security for the Loan Agreement. 57.Applying Tang Cheng Po Nin (鄧鄭寶蓮), supra, I am of the view that P was taking a commercial risk that that interest may not be a beneficial interest when accepting the said Land Registry copy of the New Grant. Issue 1: Payments made under the Development and Chinese Agreements 58.In respect of the payment of HK$ 1 million as the consideration for the Development Agreement, there was an express provision in the Development Agreement with D1’s signature thereon acknowledging receipt of $750,000 from Lee/Lam. Moreover, Lee gave evidence that he issued 2 cheques in the total sum of HK$220,000 ($190,000 and $30,000 respectively) to pay D1. Moreover, Lee confirmed at trial that he paid further HK$30,000 to D1 in cash. 59.As mentioned in the above, D1 did not appear in this action. It is however worthy to note that D1 responded to D2’s claim in the HC Action by filing an Acknowledgment of Services of the Writ of Summons specifying that he was not going to contest the claim in the action. In other words, D1 did not contest D2’s claim that D1 has been holding the Property on resulting trust and/or common intention constructive trust for the benefit of D2 as pleaded therein. Also, D1 did not dispute the receipt of HK$1 million from Lee and Lam under the Development Agreement as pleaded in paragraph 12 of the Statement of Claim therein. 60.Even in absence of D1’s response in the HC Action, I am satisfied that it is more than probable that the consideration of HK$ 1 million had been paid by Lee and/or Lam to D1 by reason of D1’s subsequent conducts. 61.D2 was able to produce the original New Grant which must have been given to D2 by D1 who was the grantee of the New Grant. Furthermore, the General Power of Attorney was made by D1 to secure D2’s interest in the Property under the Chinese Agreement. But for the proper payment of HK$1 million in accordance with the Development Agreement, I do not think D1 would have done these. 62.P also submitted that there was no proof of payment for the premium of the New Grant despite D2’s production of the original demand note for paying for preparation, verification and registration of the New Grant, copy of demand note for paying administrative fee for the New Grant and copy of demand note for paying premium for the New Grant. All these documents are just demand notes in themselves. Moreover, Lam, a key witness to the above payments, was not located as a witness for D2. 63.I am however of the view that I am entitled, and in fact under a duty, to consider all these documents in light of all the surrounding circumstances, including the fact that the New Grant was actually issued to D1 who subsequently passed it to D2 in accordance with D1’s obligation under the Development Agreement. 64.For the consideration under the Chinese Agreement, D2 has produced copies of cheques, bank deposit slip and cash deposit slip, and also ebanking statements in this proceedings for proving the total payment of HK$3.2 million. In fact Lee being one of the two recipients of this HK$3.2 million did not dispute either himself or Lam did not receive the said HK$3.2 million from D2 as the purchase price of the Property and he is willing to be the witness for D2 in the present hearing, I am therefore satisfied that the sum of HK$3.2 million has fully been paid by D2 to Lee and Lam. Issue 2: Whether the Development and the Chinese Agreements were tainted with illegality or against public policy 65.P’s main argument to challenge D2’s case was that the arrangements under the Development Agreement and the Chinese Agreement were tainted with illegality and/or against the public policy, rendering the Agreements of no effect and/or unenforceable. 66.P submitted that D1 made false declaration to the DLO that he was the true owner of the Property, causing the subject land be granted to D1. D2 however disputed the same on the ground of the absence of proof of illegality. In the present proceedings, P failed to adduce the related Statutory Declaration made by D1 to Director of Land since the DLO refused to provide the same to P without D1’s authorization. 67.In fact, the best evidence would be the evidence from D1 himself. Nevertheless, he did not appear not only at the trial but also throughout the whole proceedings so far. In absence of the said essential documentary evidence or verbal evidence from D1, it would be inappropriate for this court to determine that the Development and Chinese Agreements were tainted with illegality. 68.In respect of the type of declaration required, the Court of Appeal in Lau Kwai Kiu v Bian Xintian & others, CACV 263/2010, 30 March 2012, [2012] 2 HKLRD 954 has given a gentle reminder:-
69.In reliance of Lau Kwai Kiu, D2 further submitted that DLO issued the New Grant to D1 by relying upon his declaration that he was an indigenous villager of Tuo Shek village. D1 was not required to make any declaration that he was an owner of any land. In fact, it was the government land on which DLO allowed D1 to build a small house. 70.P further submits that the occupation of the Property by D2 and his family may be in contravention with the covenants that impose restrictions or alienation under the New Grant, which provides, inter alia, that:-
71.On this point, D2 submitted that by virtue of his payment of consideration of HK$3.2 million pursuant to the Chinese Agreement, D2 had acquired a proprietary interest in the Property, in particular that D1 has clearly declared in the Development Agreement that he was holding the Property on trust for Lee and Lam and their transferee; so that the restriction under the New Grant does not affect the D2’s proprietary interest because it arose independently from the contracts which might otherwise be unenforceable, relying on Best Sheen Development Limited v The Official Receiver [2001] 1 HKLRD 866 at 874B-875A. 72.On the issue of public policy, this Court finds the case of Li Pui Wan v Wong Mei Yin CACV 49 of 1997 [1998] 1 HKLRD 84 highly relevant. In that case, the appellant and the respondent had entered into an agreement for sale and purchase of the property under the New Grant with similar restriction on alienation as that in this case. After discussion, P Chan (as he then was) found that the prohibition of alienation was not a public policy and that even if such was the public policy, the term of the agreement, which provided that the parties should complete at a later date after payment of the premium and receipt of the government’s consent did not amount to breach of public policy. Li Pui Wan case was applied in a subsequent Court of Appeal decision Lau Kwai Kiu v Bian Xintian [2012] 2 HKLRD 954 at [62]. 73.In Li Pui Wan, all the evidence pointed towards it being a “jumping the gun” situation but the Court held that such situation did not amount to a breach of public policy. I am convinced by the D2’s submission that the present case is similar to Li Pui Wan that the evidence did not suggest the existence of any intention on the part of D1, Lee, Lam or D2 to cheat the Hong Kong Government by not paying the land premium eventually. In fact, D2’s witness, Lee, a retired estate agent of Ding house, when testifying in court, also used the same term “jumping the gun” to describe the transfer of the beneficial interest over the Property prior to the payment of the additional land premium. In fact, in the HC Action, D2 is seeking an order that the Property be transferred and assigned to him upon payment of premium to DLO. 74.Further, by applying Li Pui Wan case, even if the occupation of the Property by D2 and his family would amount to a breach of the Special Conditions of the New Grant, this matter would not provide P with a valid ground to oppose D2’s claim for beneficial interest under the laws of contract. 75.In the present case, D2 mainly relies on the legal principles of resulting trust and/or common intention constructive trust to establish his claim for the beneficial interest over the Property. D1 was and is at all times holding the Property as trustee for the benefit of Lee and Lam and D2 thereafter. This Court is of the view that the D2’s case which was similar to Lau Kwai Kiu case, the Court of Appeal held that breach of the New Grant by the parties would not necessarily cause the contract or arrangement illegal unless the Government had suffered damage; and even if the contract was illegal, it might not affect the proprietary interest of the defendant if he could establish his proprietary interest without relying on the illegality, applying the principle held by the House of Lords in Tinsley v Milligan [1994] 1 AC 340 that a claimant to an interest in a property which had been acquired in the course of an illegal transaction might recover the property if it was not necessary for him to plead or rely on the illegality. 76.On the principle set out in Tinsley v Milligan case, P submitted that this HL case was overruled in Patel v Mirza case by the Supreme Court of the UK. P also cited Kwan Hung Shing v Fong Kwok Shan [2023] HKCA 1020 and submitted that the Court of Appeal in that case actually adopted the approach in Patel v Mirza case which laid down a new “range of factors” approach. Despite so, I will not go into the details of this new approach as I am of the view that I am bound by the Court of Final Appeal decision of HKSAR v Lau Kam Ying (2013) 16 HKCFAR 595 in which Tinsley v Milligan case was applied and I believe my view is consistent with that expressed in a number of Court of First Instance decisions as mentioned in Kwan Hung Shing case at para 46. 77.P submitted that he would only try to distinguish Lau Kwai Kiu case from the present case in respect of breach of public policy. As analysed in the above, breach of public policy was not an illegal act and I do not think P’s further submission on this point would get P’s case any further. Issue 3: whether there was a resulting trust and/or common intention constructive trust RESULTING TRUST 78.As in the present case, the Court of Appeal in Lau Kwai Kiu case also considered both resulting trust and/or common intention constructive trust and the issue of illegality. The Court of Appeal, affirming the judge’s finding that the plaintiff was the beneficial owner of the property pursuant to a common intention constructive trust and/or resulting trust, said at paragraph 61 that:-
79.In Kwan Hung Shing（關雄盛）v Fong Kwok Shan, Christine（方國珊）and Others, supra, the Court dismissed the appeal on the unjust enrichment claim which tainted with illegality. The fact that the Deceased did not receive any consideration for assigning the title in her land gave rise to the presumption of resulting trust. The Defendant could not dispute the existence of the resulting trust by relying on the illegal development scheme. 80.In Kan Wai Chung v Hau Wun Fai [2016] 1 HKLRD 632, by an agreement, dings sold their Ding right to property developers. In return, the developers assigned land to the Dings, though with stated consideration, which had never been actually paid. The Dings applied for building licence with their Ding right to build village-house on the land. False declaration that they were the legal and beneficial owner of the land was made by the Dings in the application. The developer paid for the construction costs of the village-house and the premium to uplift the non-alienation clause under the Small House Policy. The assignment assigning legal interest in the land to the Dings was later registered at Land Registry. The whole transaction was done under an arrangement of trust that the Dings were to hold the land on trust for the developer. The developer later sold the village-house. The Dings sued the solicitor who acted for the developer in the sale and purchase transaction alleging the solicitors having conspired with the developer to injure their interest. 81.The issue was whether the Dings had any proprietary interest in the village-house. It was held that the Dings were mere nominee holding the legal title of the land on the trust for the developer. In applying Best Sheen and Tinsley v Milligan, Anthony To J succinctly summarised the following principles:-
82.The Court of Appeal in Kan Wai Chung case further comments that:-
83.The majority approach in Tinsley v Milligan case was adopted in Best Sheen Development Ltd case and was expressly approved by the Court of Final Appeal in Lau Kam Ying case at paragraph 20. 84.The Judge followed Tinsley v Milligan and Lau Kam Ying approach when he decided that the Developers are the legal and beneficial owners of the Land Lots on the basis of resulting trust. 85.In Best Sheen Development Ltd v Official Receiver, supra, no receipt had been exhibited for the money alleged to have been paid by the plaintiff to Lai. Whilst a Chinese document had been exhibited as, or evidencing, the agreement between the plaintiff and Lai, parts of that document had been blanked out and it also appeared to be incomplete. The declaration of trust, although dated the same day as the assignment to Lai, was not stamped or registered until 1999, after the plaintiff became aware of Lai’s bankruptcy. However, the court decided that notwithstanding the above, the plaintiff had proven that there was indeed a “development scheme” as alleged. 86.Yuen J (as she then was) “granted the declaration because she was satisfied that a declaration that the developer was the beneficial owner of land did not amount to enforcement of an illegal contract, the developer was not property interest, even though the legal contract explains why it came about that the “Ding” was registered as the owner of the land.” 87.Here, D2 submitted that the beneficial interest over the Property remained vested in D2 by the operation of resulting trust, and his interest in the Property is not tainted with illegality. 88.According to Lau Kwai Kiu case at 61, it was held that even assuming there was any illegality (after considering Tinsley v Milligan and Best Sheen Development Ltd v Official Receiver) the plaintiff (who was similar to D2 in this action) can nevertheless establish equitable proprietary interests (under a resulting trust and/or common intention constructive trust) by reason of her payment of premium for the grant and the construction costs, even though those interests were acquired in the course of carrying out through an illegal transaction (Tinsley v Milligan at p 375). She (similar to D2 in this action) does not need to establish a cause of action by reference to the illegal transaction. Application of legal principles 89.As submitted by D2, Lau Kwai Kiu case is highly relevant to the present case in which one can find ample of evidence both verbal and documentary to prove that D2 paid the purchase price of the Property in the sum of HK$3.2 million to Lee and Lam, and also the construction costs of over HK$1.4 million to Fu Nga. D2 has produced copies of cheques, receipts of payments in relevant amounts and documents showing the signed acknowledgment of receipt clause to support the said payments settled by D2 and/or his spouse and family members. 90.On this, P however in the hearing tried to establish that the money paid by D2 was in fact not his own money. In this regard, D2 testified that all the relevant payments through his brother Sum Chi Yuen (沈志遠), wife (Madam Lee) or the laundry service company (jointly owned by D2 and his wife) to transfer the relevant sums to Lee and Lam and Fu Nga were of his own money. P submitted that there was no direct evidence of payments by D2 and also that some of the said payments were not made by D2 himself but by different persons, like D2, his spouse, his family members, his company or his wife’s company. I must say that it is very understandable in particular that D2 and his wife are running business. Drawing funds from different accounts to settle bills of different kinds cannot cause this Court to cast doubt on D2’s evidence. In view of the family relationship between them, and most important in the absence evidence from P to rebut the non-payment of the relevant sums, this Court accept that on the balance of probability all the relevant payments by D2 were of his own money. 91.No evidence has been adduced before me showing that Fu Nga or D1 or Lee or Lam has ever disputed the said payments. In fact, P was not in a position to disprove these payments. Besides, there is no dispute that a village house has been built on the Property which was evidenced by Certificate of Compliance and utility bills including Government rates showing D2 and his family’s occupation of the Property since 2019 up to now without interference by D1 or anyone. It is clear to this Court that the express provision in the Development Agreement that D1 holds the Property on trust for Lee and Lam and their transferee, and D1’s conduct not contesting D2’s claims in the High Court Action and signing of the General Power of Attorney to secure D2’s interest and handing over the original copy of New Grant to D2 all show that D1’s common intention with Lee and Lam, and with D2 that D1 has been holding the Property on trust for the benefit of D2 as transferee of Lee and Lam under the Development Agreement. 92.In fact, Lee being one of the two recipients of HK3.2 million as consideration from D2 pursuant to the Chinese Agreement did not dispute either himself or Lam did not receive the said HK3.2 million from D2 as the purchase price of the Property. Lee is now even willing to be Ds’ witness to testify in court. I am convinced by the evidence of Lee which corresponds to those supporting documents exhibited by him and D2. 93.Further to the Chinese Agreement entered between D2 and Lee and Lam, D1 did later follow the instruction of Lee to attend law office to sign the General Power of Attorney. Although D2 cannot recall in the hearing the exact date of signing the General Power of Attorney and other documents as 綁丁手續 to appoint D2 as D1’s attorney, D2 still remembered clearly he had to wait for a few months for the issuance of the New Grant and visited the law office few months after the signing of the Chinese Agreement under the instruction of Lee, and then collected the original New Grant at Tai Wo McDonald’s from D1 who was accompanied by Lee. 94.Besides, regarding the construction costs of the Property, there is no evidence to show that Fu Nga has ever disputed the receipt of sum of over $1.4 million from D2, even though it appears in the hearing that there were some miscalculation for the total amount of payment to Fu Nga, ie the copy of exhibited cheques proved a larger sum of $1.7 million which was actually paid to Fu Nga, I agreed with the submission of D2’s counsel that this did not affect D2’s case of the sum of $1.4 million (which is also pleaded in the Statement of Claim of D2 in HC Action). In fact, there is no evidence in the present proceedings to suggest that D1 or any other person has paid the construction fees for the Property in the Land. Also, no one including D1 has ever tried to stop the construction works carried out by D2 for over 7 year since 2016 and the actual occupation by D2 and family since 2019 until present. 95.On the issue of the occupation, the Court also considered the P has exhibited the Tenancy Agreement of the Property (entered between the D1 and the related tenant) given by D1 in order to persuade this Court that the Property might have leased out by D1 and occupied by the said tenant in order to challenge the actual occupation and beneficial interest of D2 over the Property. In this regard, first of all, the alleged Tenancy Agreement exhibited by P was not stamped, prima facie, it is not admissible as evidence in the present action pursuant to section 15 (1)(b) of Stamp Duty Ordinance, Cap 117. D1 also did not attend the hearing to prove such alleged Tenancy agreement. Further there is no evidence from P that such alleged tenant did carry out any legal proceedings or any actions to protect his interest over the alleged tenancy agreement or even become P’s witness in the present action. More importantly, there is no evidence to show that this alleged tenant ever actually lived in the Property. D2 testified that he reported the case to police after someone came to visit his house once about the alleged tenancy matter and there was no issue needed to follow up. Hence, considering this evidence, this Court is of the view that the alleged tenancy agreement did not carry any evidential weight on it and the Court will disregard the same. 96.Regarding the utilities bills expenses of the Property, by being the registered names over varies utilities bills including government rent & rates, water, electricity and gas by D2 and his family members, and by payment of the same, and also evidence shows that D2 and family had kept a good record of relevant payments, acknowledged the receipt of money between D2 and Lee. In the circumstance, I am convinced by the said evidence before this Court that the said payment were paid by D2 for the Property. 97.In the premises, in applying the principles in Kan Wai Chung case , this Court is satisfied that D1 was and is holding the Property in the resulting trust for D2 after D2’s payment of consideration of $3.2 million, construction costs of over $1.4 million and various utilities bills. COMMON INTENTION CONSTRUCTIVE TRUST 98.D2 submitted that there was common intention constructive trust between D1 and Lee and Lam for D2. In order to establish that there was common intention constructive trust between D1 and D2, one must first establish such trust between D1 and Lee & Lam. Both P and D2 referred this court to Mo Ying v Brillex Development Ltd [2014] 3 HKLRD 224 for legal principles under this head. 99.In Mo Ying, the ex-wife brought proceedings for vacant possession of the matrimonial home against the ex-husband and the purchaser of the home. The ex-wife alleged that the ex-husband had sold the matrimonial home to the purchaser without her knowledge or consent and claiming a beneficial interest in it on the basis of a common intention constructive trust. 100.Despite the throughout analysis of legal principles in Mo Ying, it is a former partner case and the subject property was a matrimonial home. It did not touch upon this court however see Lau Kwai Kiu and Bian Xintian [2012] 2 HKLRD 954 a more apt authority under the circumstances of the present case. 101.In Lau Kwai Kiu, the subject property was a 3-storey house built under the Small House Policy, i.e. a ding house. The registered owner of the subject property has passed away. The plaintiff was his first cousin and the defendant was his second wife. The deceased was granted the lot under a grant. A premium was paid by the deceased who had received the funds for this purpose from the plaintiff, as the deceased had agreed to apply for a grant in exchange for $100,000. The construction costs of the ding house was paid by the plaintiff. The plaintiff and her family moved in and lived there after the issuance of the certificate of compliance. The plaintiff’s case was based on a common intention constructive trust and/or a resulting trust and she essentially relied on her payment of the premium and the construction costs. 102.The plaintiff produced 2 Chinese letters signed by the deceased in which he transferred the lot to the plaintiff by way of gift and agreed that after 5 years, he would unconditionally apply to government to “formally” transfer the property to her name. 103.The defendant argued that the 2 Chinese letters only evidenced the deceased’s intention to make a gift of the property to the plaintiff. He argued that the fact that the deceased also gave a Power of Attorney and made a Will in respect of the property in favour of the plaintiff (which Will was subsequently invalidated by his remarriage) showed that he was the legal and beneficial owner of the property, rather than a trustee for the plaintiff. 104.The Court of Appeal nevertheless viewed that what the said documents indicated was that the deceased was acknowledging to the plaintiff that he had no beneficial interest in the property. That was the purport of the 2 Chinese letters, which were executed before the completion of the property. Then, within days after the property was completed and the Certificate of Compliance was issued by the Government, he signed a Power of Attorney in the plaintiff’s favour enabling her to deal with the property, including applying to the District Officer for his consent to assign the property. 105.A year prior to cohabiting with the defendant, the deceased executed a Will bequeathing the property to the plaintiff. Had he not remarried (thereby invalidating the Will) the plaintiff would have been able to acquire the title to the property on his death. The documents therefore support the plaintiff’s case. The Court of Appeal then affirmed the judge’s finding that the plaintiff was the beneficial owner of the property pursuant to a common intention constructive trust and/or resulting trust. 106.Lau Kwai Kiu case is applicable in the present case. 107.In the present case, Clause 4 of the Development Agreement showed the common intention of parties, i.e. D1 and Lee & Lam that D1 was a trustee for Lee & Lam in respect of the Property. D1 acknowledged that he was merely the trustee for Lee and Lam for the rights and benefits from this agreement. 108.Clauses 6 and 7 showed that D1 also knew that Lee and Lam could transfer their rights and benefits arising from the Development Agreement to other individual or corporation (i.e. D2 in the present case). 109.By way of the Chinese Agreement dated 6 November 2014, the rights and benefits arisen from the Development Agreement was then transferred from Lee and Lam to D2. 110.D1 was only the trustee to hold the Property for Lee and Lam (clause 5 of the Development Agreement). D1 was fully aware that such rights and benefits of the Ding House in future owned by Lee and Lam could be transferrable to other individuals (D2) and D1 as trustee had to assist Lee and Lam to sign afresh contract and all pre-requisite documents (clause 6 of the Development Agreement). Hence, D1 was fully aware that his duty as trustee would be carried forward and transferred to others (i.e. D2) pursuant to clause 6 of the Development Agreement. 111.Also, Lee and Lam were entitled to request D1 to transfer his name to their designated buyer or person after payment of the additional premium under clause 7 of the Development Agreement. 112.Hence, clauses 6,7,8,10 and 11 of the Development Agreement clearly specified the trustee’s duties had to be carried out by D1 regardless Lee and Lam transferred the Development Agreement to others (i.e. D2) under clause 6 of the Development Agreement. 113.And upon executing the Chinese Agreement, Lee and Lam transferred the rights and benefits of the Development Agreement to D2. 114.Indeed, in the present case, D1 had assisted D2 by executing the General Power of Attorney and also later handed over the original New Grant to D2. D1 has in fact carried out his continuous duty as the trustee’s duties specified in the Development Agreement for D2. 115.Besides, the fact that D1 did not ever interfered with the occupation of the Property by D2 (and D2’s family members) since 2019 after issuance of Certificate of Compliance also showed that D1 has had the common intention (together with Lee/Lam and D2) that D1 has been holding the Property on trust for the benefit of D2 as transferee of the benefits and rights of Lee/Lam under the Development Agreement. 116.In the premises, this Court satisfied that D1 was and is holding the Property on trust for D2 under common intention constructive trust. Issue 4: whether D2 has the beneficial interest of the Property which justifies the discharge of the Charging Order 117.In conclusion, based on the above findings, this court holds that the D2 succeeds in establishing that D1 was and is holding the Property on trust for D2 on the resulting trust and/or common intention constructive trust and D1 thereby did not have any beneficial interest over the Property. Accordingly, the Charging Order: Notice to show cause dated 25 January 2021 should be discharged. COSTS 118.On the issue of costs, this Court has satisfied that D1 was holding the Property on resulting trust and common intention constructive trust for the benefit of D2. D1 has no beneficial interest in the Property charged by the Charging Order, so that the Charging Order: Notice to Show Cause should be discharged. Accordingly, the costs of the P’s application should follow the event. 119.In costs submissions, D2 invited the court to apply Tang Cheng Po Nin case (鄧鄭寶蓮) since P as the judgment creditor took a commercial risk to try the present case by obtaining and registering a charging order without any specific knowledge as to the nature of the interest of the judgment debtor (i.e. D1) in the property charged. Hence, P should take the full responsibility to bear the costs of D2 as the winning party in the present proceedings. 120.P however submitted that the present case was very different from Tang Cheng Po Nin case and would be justified to depart from the general rule. P also invited this Court to consider two pre-Tang Cheng Po Nin cases which have not been mentioned in Tang Cheng Po Nin case. They are: (1) Po Kwong (China) Stone Ltd v Cheung Wai Wah (CACV 157/2004, 16th November 2004 at para 12) and (ii) Best Sheen Development Ltd, supra. Relevant Legal Principle 121.The starting point is Order 62 rule 3(2) of RDC:-
122.Regarding exercise of discretion in costs application, this court also finds guidance in the judgement of Smith LJ in Bostock v Ramsey Urban District council [1900] 2 QB page 622:
123.This court also find guidance in the exercise of the discretion from Smith LJ in Bostock v Ramsey Urban District council [1900] 2 QB page 622:-
D2’s Submissions on Costs 124.D2 submitted that P as a licensed money lender and a professional financial institution should have had the knowledge about the nature of interest held by D1 when deciding whether to grant loan to D1. Without inspecting the original New Grant from D1, P chose to take the risk to believe D1 was holding the beneficial interest over the Property. It became more unreasonable for P to proceed the application after D2 joined in the present action. 125.D2 further submitted that D2’s claim under the Writ of Summons dated 25th November 2020 in HC Action was registered at Land Registry against the Property (by Memorial No. 20112502070014) long before P’s application for and registration of the Charging Order : Notice to Show Cause dated 25th January 2021. Thus, P had notice of D2’s claim for proprietary interest of the Property when P proceeded to apply for the Charging Order. Thus, P should have conceded the present application or waited for D2 to resolve the matter in the HC Action. Since in the present proceedings P chose to proceed with the application for Charging Order absolute notwithstanding the clear notice and knowledge of the D2’s claim in the HC Action, D2 therefore invited this Court to apply Tang Cheng Po Nin (鄧鄭寶蓮) case and see P as taking the commercial risk by exposing itself to the risk of litigation costs in obtaining the charging order. Thus, P could not escape but bear D2’s costs of this application. Plaintiff’s Submissions on Costs 126.First of all, P submitted that Court of Appeal in Po Kwong (China) Stone Ltd case has clearly stated that the evidence of the person and his/her witness must be tested in cross-examination on the beneficial ownership of the property subject to the charge. 127.P contended that the approach suggested by the Court of Appeal in Po Kwong (China) Stone Ltd was correct because there was possibility that the judgement debtor colluding with the person claiming beneficial interest in the property subject to the charging order. The forms of collusion are varied. The judgment debtor may actively give evidence in support of the claimant or disappear altogether. 128.In addition, P has referred this Court to various case authorities including Ritter v Godfrey [1920] 2 KB 47, Hung Fung Enterprises Holding Ltd v Agricultural Bank of China [2012]3 HKLRD679 paras 100-103, the common theme of those cases is that the parties who were deprived of costs had created the situation which justified the other parties starting or defending the litigations. But one such situation that could be discerned from the above cases that justifies the departure from the general rule is where the party that was deprived of costs had misled the other party. ANALYSIS 129.In the present case, D2 has not registered the Chinese Agreement although he must have access to legal service when signing the Power of Attorney and other related documents. Accordingly, prima facie, D1 was a registered legal owner without any encumbrance over the Property. In other words, it may be reasonable to think D1 would be the beneficial owner of the Property as well. This is particularly so when the final premium had not been paid which means that since the non-alienation clause in the New Grant had not been complied with, ownership of the Property should not be changed. Therefore, a reasonable man (including P even as a Money Lender) looked at the land search records when approving a loan to D1 may regard him as the owner of the Property. Further, the fact that D1 was in fact possessed the original copy of the payment for the administrative fees and demand notes as well as payment receipts for premium of the Land and Certificate of compliance which were provided to P, it would further make P and his manager Mr Hung to consider D1 as the legal and also beneficial owner of the Land. In such circumstances, the conduct and/or omission of D2 was indeed in my view leading P to a situation that necessitates litigation which was similar to Best Sheen case, supra. 130.In this regard, D2 argued that P failed to inspect the copy of New Grant produced by D1 carefully. P as a licensed financial institution has failed to examine the documents provided by D1 in a loan application. In my view, to certain extent, Mr Hung as the manager of the P, a Money Lender institution should have knowledge and experience to raise requisition on the title document such as the New Grant. It is especially so since the word “copy” appears on the document provided by D1. On the other hand, it is quite true that there was no encumbrances over the Property from the Land Registry record. Moreover, P was provided with documents including the receipt of the premium of the Land and other documents to prove D1’s title and proprietary interest on the Property by P. Further, P did not have knowledge of the existence of the Development and Chinese Agreements. Regarding the documents in relation to money payment made by D2 to Lee and Lam and also the construction costs of the Property disclosed at a later stage, it would be reasonable for P as a Judgment Creditor to testify and/or defend the alleged beneficial interest over the Property in order to protect their interest as Judgment creditor. 131.In applying Po Kwong (China) Stone Ltd case, it is for the person claiming beneficial interest to produce sufficient evidence so that case could go to trial and that the evidence of that person could be tested under cross examination. In this regard, I am convinced by the P’s submission that it has never been the case that once someone produced evidence of ownership, the judgment creditor would have to assess whether to concede. More often than not, the judgment creditor would not have any knowledge as to the dealings between the judgment debtor and the party claiming beneficial interest in the Property subject to the charging order. This indeed leads to the situation where P as the Judgment creditor to testify or defend the D2’s claim as the beneficial owner over the Property. In the present case, this Court has to consider even if it is justified for P to testify the evidence of D2 claiming the beneficiary interest over the Property in the trial hearing, would D2 need to bear the costs of P even when D2 could establish his case eventually. 132.P referred this Court to Best Sheen case, the fact that the land in question belonged to the plaintiff developer in the first place (who would also be responsible for the construction costs) and was assigned by it to the Ding purportedly for a consideration of $250,000 that had never been paid. The developer won the case on the basis of resulting trust as the ding had never paid the contract sum. In awarding costs to the Official Receiver (as third party), the Court commented that “the Official Receiver as a third party to the scheme was acting properly when he required the plaintiff to prove its case, I would therefore order that the costs of the proceedings be paid by the plaintiff.” 133.In the present case, I cannot agree with P that the role of P as a Money Lender to charge the Judgment debtor on the Property would be as similar as the role of Official Receiver as a Third Party in Best Sheen case. I could at most accept P’s argument to the extent that this court would make no order as to costs of the proceedings. In other words, parties have to bear their own litigation costs for the present proceedings. Further, when considering the HC Action, D2’s claim could be examined in the trial hearing even without the appearance of D1 or any intervening party, however, it is clear that P has been very keen in their application to seek leave from the Court to be the joinder in the HC Action to oppose the D2’s beneficial interest claim over the Property in order to protect the interest of P for charging the Default Judgment debtor over the Property. Therefore, I do not see P’s opposition would be as pure as a Third party. I rather think that it all lies on P’s own commercial interest for charging and later applying for order for sale of the Property to settle the Default Judgment debt owed by D1. Hence, in my view, P to certain extent needs to bear their costs of their commercial decision by taking the risk of losing legal costs in the present litigation. I am of the view that despite D2’s conducts mentioned hereinabove, it would not be justified for D2 to pay the costs of P in the present action. 134.D1 has been absent in the present proceedings although he did file the Acknowledge of service indicating not to contest D2’s claim on the beneficial interest over the Property in the HC Action. The Development and Chinese Agreements between D1, Lee and Lam and D2 were not registered in Land Registry. By applying Po Kwong (China) Stone Ltd, D2 as the claimant for the beneficial interest over the Property should be attending the trial hearing to give evidence. Besides, according to the High Court Decision of DHCJ Winnie Tsui, D2’s application for summary judgement and amendments (to the summary judgement summons by adding default judgment as an alternative basis of entering judgment against D1) should go for trial before the declaratory relief could be granted. Further, P up till now has not had the chance to testify D2’s evidence in the HC Action since the P’s joinder action was adjourned sine die. Therefore, in my view, it is necessary give P the opportunity to testify the evidence of D2 through cross examination at the present trial hearing. 135.It is my view that the non-registration of the Development and Chinese Agreement to certain extent would lead the belief that the Property was free from any encumbrances and D1 was both the legal and beneficial owner of the Property even after conducting land search in the Land Registry office. Also, even up to the present proceedings, D1 is still named as a legal owner in the record of the Land Registry. In addition, considering the conditions of New Grant and its alienation clause and the sequence of events, I am of the view that it is necessary and reasonable for P to testify the evidence of D2 so as to enable the court to determine the issue on D2’s beneficial interest over the Property. 136.In the premises, this Court, having considered the above, holds that it would be justified for the Court to depart from the general rule that costs follow the event. There should be No order as to costs. ORDER 137.By the reasons aforesaid, I make the following orders:-
138.Lastly, I remain grateful to P’s counsel Mr Raymond Tsui and Mr Edward Lun, D2’s counsel, Ms Virginia Leung and their instructing solicitors for their helpful assistance rendered to me in these proceedings.
Mr Raymond W N Tsui & Mr Edward Lun, instructed by Huen & Cheung, for the plaintiff The 1st defendant was not represented and did not appear Ms Leung Yin Ting Virginia, instructed by M K Lam & Co, for the 2nd defendant | |||||||||||||||||||||||||||||
Cases cited in this judgment
Other judgments that cite this case
Further hearings and rulings under DCCJ 4915/2020