Wah Sun Investments Ltd v. Wealthy Base Properties Ltd and Another
Read the full judgment text of HCA 3046/2016 on BabelCite. This High Court CFI judgment was delivered on 7 May 2025.
Cited by 1 case · Cites 6 cases
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HCA 3046/2016 [2025] HKCFI 1819 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 3046 OF 2016 ________________
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________________________ J U D G M E N T ________________________ 1.Introduction 1.1The 1st Defendant (“D1”) is the registered owner of 9 lots of land, particulars of which are set out at Schedule 1 of the Amended Statement of Claim (“Relevant Lots”). In these proceedings, the Plaintiff (“P”) seeks a declaration that it is the beneficial owner of the Relevant Lots and consequential relief. It is P’s case that D1 holds the Relevant Lots on common intention constructive trust or alternatively resulting trust for it. 1.2The 2nd Defendant (“D2”) was the sole director and sole shareholder of D1 until 2016. It is P’s case that the agreement and/or common intention underpinning its common intention constructive claim was formed with D2’s involvement in or about April/May 2013. P’s claim against D2 was dismissed on the basis that P failed to comply with an unless order dated 18 May 2023 to provide security for costs by 4 pm on 30 May 2023. 1.3At the trial, P was represented by Mr Avery Chan and D1 by Mr Danny Chan (with Mr Johnson Cheung). 2.Background 2.1The background matters set out in this section are largely taken from the documentary evidence and the Agreed Chronology. 2.2In 1992, P purchased Lot No 204, Lot No 287 and the Remaining Portion of Lot No 294 in Demarcation District 51 (“Land”). On 10 March 1993, the Land was subdivided[1] into, inter alia, the Relevant Lots[2]. As set out in the Joint Valuation Report dated 5 September 2023 (“Joint Report”), the Relevant Lots are located in a rural settlement area known as Tin Ping Shan Tsuen in Sheung Shui, North District, New Territories and within a Village Type Development zone. The Relevant Lots are primarily intended for development of small houses by indigenous villagers. 2.3There is no dispute that P acquired the Land for redevelopment. 2.4By letters dated 16 and 29 April 1993 from Messrs Ho and Wong (“H&W”) to P (“April 1993 Letters”), Mr Lau Cham Yuen Albert (“Mr Lau”) was asked to sign sets of documents in respect of a number of plots of land which included, inter alia, the Relevant Lots. Mr Lau was at that time a joint owner of P with his father (“Lau Senior”). 2.5Each set of documents comprised (1) an Assignment (not to be dated), (2) a Chinese Agreement, (3) a Deed of Trust (not to be dated) and (4) a set of Minutes (to be signed by Lau Senior as well). The April 1993 Letters were in, inter alia, the following terms:
2.6On 7 June 1993:
2.7As alluded to in the April 1993 Letters, the Chinese Application Forms were eventually submitted to District Lands Office, North (“DLO“) on 16 July 1993, by which the 1993 Assignees applied for a construction permit under the Small House Policy. However the applications were rejected by the DLO on 16 December 1994, on the basis that that they would jeopardize the implementation of the Tin Ping Shan Village Expansion Area (VEA) Scheme. As explained further in DLO’s letter of 19 September 1995, the Land was subject to overland flow and inundation during heavy rainfall, and development in the area including the implementation of the VEA would not be commenced before the training of River Indus nearby. 2.8On 13 January 2001, a legal charge (“Legal Charge”) was executed between P (as borrower) and Winland Finance Limited (“Winland Finance”). By Clause 3.01 of the Legal Charge, the Land was charged as security for loan facilities granted by Winland Finance. 2.9On 16 April 2013, D2 became the sole director and sole shareholder of D1. 2.10Between 22 April and 8 May 2013, the following documents were executed:
2.11The Cancellation Agreements were in the following terms:
2.12The term “丁屋權利買賣合約” is a reference to the Chinese Agreements alluded to in the April 1993 Letters. Whilst the Chinese Agreements have not been adduced into evidence, according to the Powers of Attorneys drafted by H&W and executed by the 1993 Assignees (collectively “POAs”)[3], it appears that the Chinese Agreements were of the following effect:
2.13The POAs were executed by the 1993 Assignees to appoint P as its attorney to perform the acts set out therein, including “to sell assign transfer surrender whether for consideration or otherwise to such person or persons company or companies including the Attorney itself… in such manner and on such terms and conditions as my Attorney may think fit without accounting to me the proceeds of sale or other consideration whatsoever my Attorney may receive…” 2.14According to the S&P Agreements, the 1993 Assignees and D1 jointly appointed Messrs Dickman LT Chan & Co (“Dickman Chan & Co”) to handle the transactions. 2.15The Receipts, which were addressed to Dickman Chan & Co, were in the following terms:
2.16On 11 August 2016, D1 allotted new shares to D2 and Foster Success Holdings Limited (“Foster Success”). 2.17On 28 October 2016, D2 ceased to be a director of D1. 2.18On 2 November 2016, D2 and Foster Success transferred their respective shareholdings in D1 to one Mr Phillip Cheng (“Mr Cheng”) at a consideration of HK$10,000. 2.19On 22 November 2016, the present proceedings were commenced. 2.20On 29 August 2018, Mr Cheng transferred the entire shareholding in D1 to Mr Ng Oi Yu (“Mr Ng”). 3.Issues for determination 3.1As directed at the pre-trial review (“PTR”), the parties have identified the following issues for determination:
3.2In relation to Issue (4), the parties have, by reference to the Joint Report, agreed on the quantum of P’s claim for equitable compensation. 4.The witnesses 4.1P called Mr Lau and Mr Ng gave evidence for D1. It is pertinent to state at the outset that Mr Ng only became involved when he acquired D1 on 29 August 2018. As such, he does not have any personal knowledge of the matters which are germane to the resolution of Issues (1) and (2). 4.2The person who did have personal knowledge of those events which are relevant to D1’s case is D2. As stated at §1.2 above, P’s claim against D2 was dismissed for procedural reasons. Prior to the PTR held on 25 July 2024, by a letter dated 19 July 2024, solicitors for D1 enquired whether D2 was willing to attend the trial to give evidence. Prior to the dismissal of P’s claim against D2, D2 had filed 2 affirmations and a witness statement in these proceedings. 4.3On 22 July 2024, D2’s solicitors replied and stated that D2 was overseas and had no plans to return to Hong Kong shortly. 4.4At the trial, Mr Danny Chan sought to rely on D2’s witness statement (“D2’s Statement”) as hearsay evidence subject to the appropriate weight to be given. 4.5There is no dispute between counsel on the approach on fact‑finding and assessment of credibility, namely the credibility of a witness should be assessed by reference to contemporaneous documentation where it exists, as well as inherent probabilities having regarding to all the facts that are known. It is also important to bear in mind the internal consistency of the evidence of a witness, which is often tested by a comparison between the oral testimony of the witness on the one hand and his witness statement and pleadings on the other: Hui Cheung Fai v Daiwa Development Ltd, HCA 1734/2009, 8 April 2014 §§77-82. 4.6In the following sections, I will evaluate the evidence chronologically. Although the analysis is done chronologically, I have considered the evidence overall as a whole in reaching my findings. 4.7My overall impression is that Mr Lau is an honest and reliable witness. On the other hand, for the reasons set out below, not only does Mr Ng not have any personal knowledge of the material events, his evidence is generally incredible on significant aspects and inherently improbable. Given the fact that D2 is overseas, I am of the view that I should accede to Mr Danny Chan’s invitation to admit D2’s Statement as hearsay evidence. However, having considered the factors set out at sections 49(1) and (2) of the Evidence Ordinance Cap 8, and having assessed the content of D2’s Statement against the totality of the evidence, no or no significant weight should be attached to it. 5.Factual findings 5.1The matters set out in this section, unless otherwise stated, are not in dispute and should be read together with the background matters set out at section 2 above. 5.2In about 1990, Lau Senior was minded to acquire the Land for redevelopment (“Redevelopment”). P was set up by Lau Senior for this specific purpose. At the time of P’s incorporation, Mr Lau and Lau Senior were the directors and shareholders of P. In 2010, due to Lau Senior’s health deterioration, Mr Lau became the sole shareholder and director of P. As I understand the evidence, another key personnel was Mr Liu Chun Kui, the village head of Tin Ping Shan Village (“Mr Liu”). 5.3For the purpose of the Redevelopment, P had put in place a team which included H&W, an architectural firm, a surveyor firm and a consultant firm (“Team”). The Redevelopment was spearheaded by Lau Senior and the Team and Mr Lau did not have any primary responsibility. When requested by the Team, Mr Lau would execute documentation on P’s behalf. 5.4In 1993, upon the arrangement of H&W and Mr Liu, Mr Lau executed the documents mentioned at §§2.4-2.6 above. I should mention that P only made disclosure of the Deeds of Trust shortly before the PTR. As explained by Mr Lau in his witness statement dated 7 February 2022, the documentation kept by P was incomplete. It was only in July 2024 that he managed to obtain the Deeds of Trust from Winland Finance. In my view, D1 has (rightly) not served a notice to challenge the authenticity of the Deeds of Trust. The existence of the Deeds of Trust is amply supported by the contemporaneous documents (ie the April 1993 Letters). 5.5I accept Mr Lau’s evidence that the 1993 Assignees were each paid HK$50,000 “tea money” (茶錢) as reward for their agreement to execute the 1993 Assignments. The Deeds of Trust expressly provide that the 1993 Assignees were holding the assigned land on trust for P and that the purchase money paid under the 1993 Assignments were in fact provided by P. 5.6Following the rejection of the application made by way of the Chinese Application Forms in July 1993 (§2.7 above), the Redevelopment came to a halt and the Relevant Lots were left idling. 5.7Mr Lau met D2 in 1998 through the introduction by a mutual friend. D2 was experienced in redeveloping land in the New Territories. Between 1999 and 2001, Mr Lau needed financing for his project in Macau. D2 told Mr Lau that he had a good relationship with the owner of Winland Finance. As a result, P obtained a loan from Winland Finance in January 2001 which was secured by a personal guarantee from Lau Senior and the Legal Charge. Disputes subsequently ensued with Winland Finance, and on 1 September 2003, P and Lau Senior commenced HCA 2517/2003 against Winland Finance, which proceedings remain unresolved. Mr Danny Chan queries why Winland Finance would offer assistance by providing the Deeds of Trust to P when they were in litigation. However, it seems to me that it is unsurprising that Winland Finance would offer assistance as it is commercially not in its interest for P to lose the present proceedings, which would negatively impact Winland Finance’s ability to obtain repayment. 5.8There were no material developments for 10 years between 2003 and April 2013. As stated at §2.10 above, between 22 April and 8 May 2013, the Relevant Lots were assigned to D1. The circumstances of the 2013 Assignments form the core dispute between the parties. 5.9P’s case is as follows:
5.10Conversely, D1’s case is as follows:
5.11As pointed out by Mr Avery Chan, in a case where there are only two competing theories of events before the court, the rejection of one version of events should normally lead to the acceptance of the other, and there is generally no need to speculate as to other alternatives. This approach was specifically applied in a common intention constructive trust context in Pang Ketian Sally v Tam Yuk Hung Annie, HCA 298/2012, 11 June 2013 at §55. 5.12I have no hesitation in rejecting D1’s case, for the following reasons:
5.13Conversely, the documents enumerated at §2.10 are explicable by and not inconsistent with the existence of the Oral Agreement, which involved the assignment of the Relevant Lots from the 1993 Assignees to D1 at no consideration. 5.14For the above reasons, I find that the Oral Agreement was reached between P and D2, and pursuant to the Oral Agreement, D1 was the corporate vehicle used by D2 to hold the Relevant Lots for P. I do not regard it necessary to resort to the drawing of any adverse inference (advocated by both counsel). For avoidance of doubt, I in particular accept Mr Lau’s evidence set out in his witness statement as follows:
5.15In closing, Mr Danny Chan submitted for the first time that the Oral Agreement, even if it existed, was only in respect of the shares of D1 and not the Relevant Lots. I am unable to accept Mr Danny Chan’s submissions. First, that case is not pleaded. Secondly, the evidence of Mr Lau set out in the preceding paragraph is of the plain effect that the Oral Agreement was in respect of the Relevant Lots and D1 was simply the corporate vehicle deployed to effect the agreement reached. 6.Analysis of P’s claims 6.1There is no dispute between counsel on the applicable principles. 6.2The relevant principles are encapsulated in Lam Ka Kui v Choi Yuen Ling [2020] HKCFI 2647 at §§9-14. In summary:
6.3In considering the evidence of common intention, the modern approach is to apply a holistic approach having regard to the context: Primecredit v Yeung [2017] 4 HKLRD 327 at §1.6. (i) Issue (1) 6.4In view of the factual findings set out above, I answer Issue (1)(a) in the affirmative, Issue (1)(b) in the negative, and Issue (1)(c) in the negative. (ii) Issues (2) and (3) 6.5I have found that the Oral Agreement was reached between P and D2. No submission was made by Mr Danny Chan as to why the Oral Agreement was either invalid or unenforceable. 6.6The effect of the Oral Agreement is such that P is entitled to the return of the legal title of the Relevant Lots based on constructive trust. All requisite elements set out at §6.2(1) are satisfied. In view of that finding, it is unnecessary for me to deal with the present case on the basis of resulting trust. (iii) Issue (4) 6.7Mr Danny Chan does not dispute the proposition set out in Re Howlett (William Henry) [1949] 1 Ch 767, namely a trustee who has wrongfully occupied a property for his own use and benefit was held chargeable with an occupation rent and to have notionally received the rent on behalf of the beneficiary. See also Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §125 per G Lam J. 6.8As stated earlier, by reference to the Joint Report, the parties have agreed on the quantum of equitable compensation up to 4 September 2023 as follows:
6.9However, it seems to me that I should only award compensation from 24 May 2016 to 4 September 2023, which should be assessed by reference to the agreed monthly market rent at set out above. P only formally demanded the return of the Relevant Lots on 23 May 2016 (§5.9(8)). For the period after 4 September 2023, D1 is to pay equitable compensation of HK$30,100 per month until delivery up of the vacant possession of the Relevant Lots. 6.10As regards interest, counsel agree that interest should be awarded on the basis of the commercial rate (1% over the HSBC best lending rate). There is further no dispute between counsel that the period of P’s claim for pre-judgment interest should be by reference to the notional date when the occupational rent arose up to the date of judgment. 7.Conclusion 7.1I enter judgment in favour of P as follows:
7.2I dismiss D1’s counterclaim for an order that the registration of the writ of summons in this action in the Land Registry be vacated. 7.3As no objection was raised by Mr Danny Chan, I also accede to Mr Avery Chan’s request for an order that the security for costs deposited by P into Court on 23 March 2023 (in the sum of $200,000) and 3 October 2023 (in the sum of $250,000) be paid out of court to P. 7.4I further make a costs order nisi that D1 is to pay to P the costs of the action and the counterclaim (including any costs reserved) to be taxed if not agreed.
Mr Avery Chan instructed by Lam, Lee & Lai for the Plaintiff Mr Danny Chan and Mr Johnson Cheung instructed by Kenneth C.C. Man & Co. for the 1st Defendant [1] Lot No 204 was subdivided into Lot Nos 204 A-J and 204 RP. Lot No 287 was subdivided into Lot Nos 287 A-C and 287 RP. Lot 294 RP was subdivided into subsections 1-6 and Lot 294 RP. [2] Sections A, B, D, E, F and G of Lot No 204, Section A of Lot No 287 and Subsections 4 and 5 of Lot 294 RP. [3] The POAs were apparently executed at the same time as the Chinese Agreements. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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