Read the full judgment text of HCMP 007250/1999 on BabelCite. This High Court CFI judgment was delivered on 24 April 2001 before Yuen J.
Property law – beneficial ownership – declaration of trust – bankruptcy – New Territories Small House Policy – indigenous villager – Ting house / Small House – Building Licence – concessionary terms – illegal contract – misrepresentation to Government – civil wrong – Bowmakers rule – Tinsley v Milligan – resulting trust – presumption of advancement – locus poenitentiae – Tribe v Tribe – express trust – Conveyancing and Property Ordinance s.17 – land transfer for no consideration – whether Court lends aid to enforcement of illegal agreement – costs of Plaintiff's own making. A developer purchased a piece of land in Sai Kung and the same day assigned it to an indigenous villager of the New Territories for purported consideration of $250,000. The same solicitor acted for both parties. The villager simultaneously applied to Government for a Building Licence under the New Territories Small House Policy, and signed a Declaration of Trust declaring himself trustee of the Land for the developer. No consideration was in fact paid and the Declaration of Trust was not stamped or registered for six years. After the villager was adjudicated bankrupt and the Official Receiver became trustee of his property, the developer sought a declaration that the Declaration of Trust was valid and subsisting, that it was the sole beneficial owner of the Land, and consequential orders including the vacating of the Receiving Order and Order of Adjudication from the land register. First issue – whether the Plaintiff had proven the existence of the 'development scheme' on the facts. Held, yes. The cumulative evidence – the common solicitor, the Bankrupt's execution of three General Powers of Attorney and a Will in favour of the Plaintiff or its director, the absence of any receipt for the $250,000, and most decisively the Bankrupt's July 1999 Statutory Declaration admitting he had never paid the consideration, admissible because it came from the party who could otherwise have relied on estoppel by deed – established that no true sale took place. Second issue – whether granting the declaration would assist the Plaintiff in enforcing an illegal agreement, given that the purpose of the scheme was to misrepresent the Bankrupt as the legal and beneficial owner of the Land so as to obtain concessionary Building Licence terms to which the true owner was not entitled. Held, no. The Building Licence was granted on terms which only made sense if the licensee held both legal and beneficial ownership, and Government had itself withheld execution after learning of the trust. The scheme was therefore a contract to commit the civil wrong of misrepresentation on Government, which is illegal at common law, and if the Plaintiff had been seeking to enforce the scheme itself the Court would not have assisted. However, following Tinsley v Milligan [1994] 1 AC 340 (the Bowmakers rule), a party to an illegality may recover property if he can establish his title without relying on the illegality. The Plaintiff could rely on the express Declaration of Trust, or in the alternative on a resulting trust arising from the voluntary transfer without consideration, and no presumption of gift arose. Further, the doctrine of locus poenitentiae applied: the Building Licence had not been executed by Government, no house had been erected, and the application for a Small House grant had been abandoned, so the illegal purpose had not been achieved. The present case was distinguished from Li Pui Wan v Wong Mei Yin [1998] 1 HKLR 84, which concerned a mere premature disposition of land that had belonged to an indigenous villager; here the Land was never the Bankrupt's to own. Outcome – declaration granted that the Plaintiff is the sole beneficial owner of the Land and that the Bankrupt and the Official Receiver hold the Land on trust for the Plaintiff. Consequential orders in paragraphs (4) and (5) of the Originating Summons made. The application to vacate the Receiving Order and Order of Adjudication from the land register was refused in the absence of a specific provision in the Land Registration Ordinance (Cap 128), and on the basis that the declaration would suffice to show the Land was not part of the Bankrupt's estate. Costs ordered to be paid by the Plaintiff, the proceedings being of its own making.
Legal issues: Whether the Plaintiff has proven the existence of a 'development scheme' between itself and the Bankrupt · Whether granting the declaration would lend the Court's aid to the enforcement of an illegal agreement
Outcome: Plaintiff's originating summons granted in part: declaration that Plaintiff is the sole beneficial owner of the Land and that the Bankrupt had been and the Official Receiver has been holding the Land on trust for the Plaintiff. The order sought under paragraph (6) of the Originating Summons to vacate the Receiving Order and Order of Adjudication from the land register was not made, on the basis that no specific provision in the Land Registration Ordinance (Cap 128) had been cited to enable such an order, and that registration of the declaration would suffice.
Cited by 4 cases