Tong Kwai Ying v. Poon Kwok Sin

HCA002790/1996

HCA2790/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2790 OF 1996

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Coram: Mr Recorder Kwok SC in Court

Dates of Hearing: 21 - 25 May 2001

Date of handing down of Judgment: 4 June 2001

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J U D G M E N T

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1. The plaintiff issued the writ in this action on 11 March 1996. She is not claiming maintenance, whether for herself or her son. She contends that she has a claim in constructive trust, proprietary estoppel, and resulting trust and claims an interest in Unit H on 23rd floor of Yee Hing Court (Block 4), Tai Po Plaza, No.1 On Tai Road, Tai Po, New Territories ("the Property").

The factual background

2. By a formal agreement registered on 4 October 1982, the plaintiff agreed to purchase a flat at New Kwai Fong Gardens ("KF Flat") at $323,000. The plaintiff completed the acquisition by an assignment dated 31 December 1983. The acquisition was partly financed by a mortgaged loan of $200,000.

3. The defendant was married to his ex-wife in about March 1984 and the plaintiff was married to her ex-husband in about June 1984. The plaintiff came to know the defendant in the end of 1984 or beginning of 1985. The two of them became intimate friends shortly afterwards, so intimate that the plaintiff was pregnant. In summer 1995, the plaintiff underwent an abortion.

4. By a formal agreement registered on 19 November 1984, the defendant agreed to purchase the Property at $233,400. The defendant completed the acquisition by an assignment dated 1 March 1985. The acquisition was partly financed by a mortgaged loan of $210,060. The assignment to the defendant was subject to the terms covenants and conditions mentioned in the Schedule to the Housing Ordinance, Cap.283, and any amendments thereto.

5. By a formal agreement dated 12 August 1985, the plaintiff agreed to sell the KF Flat at $330,000 and received a crossed cheque drawn on the Hongkong and Shanghai Banking Corporation ("HSBC") in her favour for $28,000. The sale was completed by an assignment dated 3 September 1985 and the plaintiff received a crossed cheque drawn on HSBC in her favour in the sum of $98,351.81.

6. After the sale of the KF Flat, the plaintiff lived in rented accommodation.

7. The daughter of the plaintiff and the defendant died shortly after birth.

8. In November 1987, the son of the plaintiff and the defendant was born. The plaintiff happened to share the same room in the same hospital with a friend of the defendant's then wife. The defendant's then wife who had been living at the Property with the defendant moved out from the Property. Shortly afterwards, the plaintiff and the son moved into the Property and cohabited with the defendant.

9. The plaintiff and her ex-husband were not divorced until February 1991.

10. In about April 1994, the defendant was detained in China and remained in detention for a few years.

11. The plaintiff has been receiving public assistance since 28 May 1994.

12. By letter dated 1 March 1996, the defendant's mortgagee bank wrote to the defendant about redemption of the Property and the plaintiff realised that the Property was about to be sold. The plaintiff obtained legal aid and issued the Writ in this action on 11 March 1996. On 12 March 1996, the Writ was registered as a lis pendens against the Property.

The plaintiff's pleaded case

13. The plaintiff's pleaded case is that at the request of the defendant, she sold the KF Flat, lent him the sum of $28,000 on about 12 August 1985 and the further sum of $98,351.81 on about 3 September 1985; that in about end of 1987, the defendant repeatedly represented to her that he would transfer the Property to her upon the expiration of 10 years from the date of his acquisition of the Property when the proposed transfer could be effected without paying any premium to the Housing Authority ("the Representation"); and that relying on the Representation, she has refrained from demanding or enforcing repayment of the loan and also paid various mortgage instalment payments, electricity, gas, rates, management fees, water and telephone charges from about 14 March 1991 to about 15 August 1996 and thereafter.

14. Until the third day of trial, she claimed the entire interest in the Property or "such shares as the Court shall determine". On the third day of trial, she further amended her claim to add an alternative claim for a half share based on her testimony that the defendant said that her name would be added to the Property.

Reason for the sale of the KF Flat and the net proceeds of sale

15. The plaintiff gave oral evidence to the effect she decided to sell the KF Flat at what she thought was an undervalue or a cheap price at the request of the defendant to lend money to him because he had financial difficulties. She said that she went with the defendant to the bank and obtained $28,000 in cash on the first occasion and obtained $98,351.81 in cash on the second occasion.

16. The defendant insisted that the bank would not pay cash on a crossed cheque. This is a red herring calculated to mislead or confuse. He accepted that he accompanied the plaintiff to HSBC on the first occasion; that the crossed cheque for $28,000 was deposited into her (savings) account with HSBC; that HSBC paid the amount of the cheque into her account and made the proceeds of the cheque available to her immediately; and that she withdrew money from her account and obtained cash in the sum of $28,000 over the counter. He also accepted that he accompanied her to HSBC on the second occasion and told her how obtaining cash was done but claimed that he did not know whether she obtained cash over the counter.

17. I am not satisfied on a balance of probabilities that the plaintiff sold the KF Flat to help the defendant. I am also not satisfied that she had made any loan to him, whether on about 12 August 1985 or 3 September 1985.

18. The KF Flat was the plaintiff's only asset of some substance. She bought it with her years of savings. She had known the defendant for a few months only and had just undergone an abortion.

19. Having lost a child, why would she have agreed to part with her then life savings? Mr Lawrence Ng, counsel for the plaintiff, contended that she would because she risked her life bearing a child for the defendant. I have no hesitation in rejecting Mr Ng's contention because it assumes that the pregnancy was intended and that she knew that it was risky for her to be with child. In the absence of any evidence on either point, I am not prepared to make either assumption.

20. I do not accept that she agreed to dispose of the KF Flat at what she thought was a cheap price in order to help the defendant. She would have to find rented accommodation. She would also have to earn her own living. She could not rely on the defendant to support her because on her case he had been in dire need of her financial assistance.

21. I find it improbable that the defendant would have wished to obtain cash in the precise amount of $98,351.81. What did he want the one cent note for?

The plaintiff as a witness

22. Further and in any event, the plaintiff did not impress me as a credible or truthful witness and I reject her testimony on all the factual matters in issue. She painted the picture that she cared about the defendant and had all along been trying to protect the Property from the people who caused the defendant to be detained. The truth of the matter, as I find it, is that she was quite bitter; that she has never visited, or sent any note to, the defendant during all the years of his detention (the point is not whether she could have done anything for the defendant - a caring co-habitee would have tried to convey her care and concern to him); and that the trial of this action proceeded to its conclusion, many months after the defendant's release.

The defendant as a witness

23. The defendant is no better as a witness. He was evasive. He did not impress me as a credible or truthful witness and I reject his testimony on all the factual matters in issue.

The Representation

24. I declined to accept the respective witness statements of the plaintiff and the defendant as their respective evidence-in-chief.

25. On the first day of trial, the plaintiff gave evidence to the effect that after she had given birth to the son, she was in fear that the defendant would no longer look after her. He said in future the Property would be given to her and told her not to worry. He said the Property could only be after sold after 10 years and would be transferred to her name. At a later stage, she added that the defendant said her name would be added.

26. At 10:53 hours on the second day of trial, the plaintiff said :-

"He only said it would be sold at the expiration ... would be sold, would be given to me, or would add my name ... it would be given to me or my name would be added on when it expired."

27. The plaintiff twice said that the defendant said that the Property would be sold. Needless to say, if the defendant had "only said it would be sold at the expiration", the plaintiff must fail in this action. If the defendant had said the Property "would be sold, would be given to me or would add my name", then the defendant was so equivocal that I find it difficult to see how the plaintiff could attach any importance to it.

28. I am not satisfied on a balance of probabilities that the defendant has made any representation to the effect that he would give the Property to the plaintiff or that her name would be added.

29. If the plaintiff had any concern about the defendant not maintaining her in future, the most natural thing for her to have done was to ask the defendant to repay the loans allegedly made on about 12 August 1985 and 3 September 1985. I do not think it is probable that the plaintiff, said to be concerned about the future, i.e. about the defendant's possible change of mind in future, would have settled for what was a statement of the defendant's present intention, or a promise by the defendant, to make a gift of the whole or half of the Property to her many years in the future.

30. On 12 March 1996 the plaintiff registered the Writ in this action claiming a beneficial interest in the whole of the Property when on her own testimony at trial in May 2001, the defendant had also said that her name would be added.

Reliance on the Representation

31. The first limb of the plaintiff's pleaded case on reliance is refraining from demanding or enforcing the repayment of the loans of the proceeds of sale of the KF Flat. As I have found against the plaintiff on the existence of any of the two loans, the plaintiff could not have refrained from demanding or enforcing the repayment of loans which did not exist. Further and in any event, I find against the plaintiff on the reliance point. There is no allegation of any step having been taken to demand or enforce repayment between 12 August 1985 and November 1987. There is no allegation of any change in circumstances (apart from the making of the Representation) between 12 August 1985 and November 1987. I do not accept that the reason(s) for the plaintiff not demanding or enforcing payment changed after November 1987 from the earlier reason(s) to reliance on the Representation, particularly where what allegedly led to the making of the Representation was the plaintiff's concern about financial provision in future.

32. The second limb of the plaintiff's pleaded case on reliance is the payment of mortgage instalment payments and other expenses from about 14 March 1991 to about 15 August 1996 and thereafter.

33. There are two periods under this limb. The first is from about 14 March 1991 to the defendant's detention in about April 1994 and the second is since the defendant's detention.

34. On the first period, the plaintiff did not come up to proof in her evidence. In her witness statement, she stated that she had paid mortgage instalments, management fees, rates, electricity, gas, telephone and water charges totalling $60,227.60 during this period. I do not see how such a statement could properly have been made, bearing in mind her evidence that she had only been babysitting for about two years during this period, earning $2,000 per month at the beginning and $2,300 per month at a later stage. Be that as it may, I return now to her evidence on the payments. Of the items said to be mortgage instalment payments, her evidence on most of them was that she did not know or could not remember. She said that she did not know if one of them was litigation costs. On some items, she said she did not know if it was mortgage, or did not know if it was mortgage related, seemed mortgage, might be mortgage, also mortgage, seemed might be mortgage, thought also mortgage or mortgage. Even if the plaintiff had established that in respect of all the payments relied on, she was the person who physically made all the payments in cash or the payments were by cheques drawn by her on her account, she would still have failed. Under cross-examination, she agreed that between 1987 and 1991, she never worked and the defendant looked after her and the son, and that the defendant was responsible for her and the son between 1987 and the defendant's detention in 1994. In these circumstances, what in fact happened was that she was the person who attended to the acts of effecting some of the payments. In the absence of any allegation by the plaintiff that the defendant had neither provided her with funds prior to the payment nor reimbursed her afterwards, I am not satisfied that the plaintiff has funded any of the payments before the defendant's detention in 1994. Further, I do not accept that any of the payments was made in reliance on the Representation. If she had any concern about the future, she would have saved the babysitting income.

35. I turn now to the period from the defendant's detention. It seems clear to me that public assistance was not the plaintiff's only source of income. The sources of her other income are irrelevant because the defendant has not satisfied me on a balance of probabilities that the plaintiff was paid any sum by him or on his behalf or on his instructions. I accept that the plaintiff paid the mortgage instalment payments and other expenses. However, I do not accept that the plaintiff did so in reliance on the Representation. The plaintiff accepted that it was impossible for the defendant to be responsible for her and the son during his detention. The truth of the matter was that the plaintiff had to look elsewhere for her subsistence. The mortgage instalment payments and the expenses had to be paid in order to keep the Property as the residence for herself and the son. Moreover, the plaintiff knew from messages given to her that the defendant agreed to the sale of the Property. By the date of issue of the Writ in this action, she had clear and unequivocal knowledge that the defendant was about to sell the Property, in apparent breach of the Representation. I find that there could be, and there was in fact, no reliance.

Post acquisition agreement, arrangement or understanding

36. The defendant completed the acquisition of the Property by 1 March 1985. The plaintiff had nothing whatsoever to do with the acquisition. The Representation was not allegedly made until the end of 1987, more than two and a half years after acquisition.

37. In Lloyds Bank plc v. Rosset [1991] 1 AC 197 at pp.132-133, Lord Bridge said that (emphasis added) :-

" The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.

In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or arrangement to share, however reasonable it might have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do."

38. In the course of Mr Ng's final submission, I asked him what was exceptional about the post-acquisition agreement arrangement or understanding (called "agreement" for brevity reasons) or Representation. He submitted that the plaintiff's case was exceptional because agreement was reached after acquisition and that if an agreement was not within the normal case, then it was exceptional.

39. If it mattered not whether the agreement was prior to or after acquisition, then the words "prior to acquisition, or exceptionally at some later date" were superfluous.

40. I asked him whether there was any authority to support the proposition that an agreement was exceptional because it was post-acquisition. On 24 May 2001 he said he had no authority. On 25 May 2001 he relied on the following two passages.

41. The first passage which he relied on is what Griffiths LJ said in Bernard v. Josephs [1982] 1 Ch.391 at p.404 :-

"It might in exceptional circumstances be inferred that the parties agreed to alter their beneficial interests after the house was bought; an example would be if the man bought the house in the first place and the woman years later used a legacy to build an extra floor to make more room for the children. In such circumstances the obvious inference would be that the parties agreed that the woman should acquire a share in the greatly increased value of the house produced by her money. But this depends upon the court being able to infer an intention to alter the share in which the beneficial interest was previously held; the mere fact that one party has spent time and money on improving the property will not normally be sufficient to draw such an inference: see Pettitt v. Pettitt [1970] A.C.777. In the absence of any special circumstances I agree with the judge in this case that the time at which the beneficial interest crystallises is the time of the acquisition, but to ascertain this he must look at all the evidence including all the contributions made by the parties."

42. The second passage which he relied on is what Fox LJ said in Burns v. Burns [1984] 1 Ch.317 at p.327 :-

"That approach does not, however, in my view preclude the possibility that while, initially, there was no intention that the claimant should have any interest in the property, circumstances may subsequently arise from which the intention to confer an equitable interest upon the claimant may arise (e.g., the discharge of a mortgage or the effecting of capital improvements to the house at his or her expense). Further, subsequent events may throw light on the initial intention."

43. Both cases had been cited in Lloyds Bank plc v. Rosset, but Lord Bridge referred to neither of them. I confess I do not see how either passage supports Mr Ng's proposition that an agreement is exceptional because it is post-acquisition.

44. Lord Bridge's oft-quoted passage quoted above was considered by the English Court of Appeal in First National Bank plc v. Wadwani, 22 April 1998, an unreported decision not cited by Mr Ng but available on Lexis. On 21 March 1972, the husband was registered as the sole proprietor of a dwelling-house, bought with the assistance of an instalment mortgage from a building society. The husband married the wife in June 1975. The wife relied on her contributions (during the time of her employments from 1979 to 1982 and from 1987) of about 40%-50% towards the mortgage instalments which the husband was paying to the building society and claimed a beneficial interest in the house. Sir John Vinelott, giving the leading judgment in the Court of Appeal rejected her contention :-

"I do not think that that passage supports the proposition that where the matrimonial home was owned by the husband at the time of the marriage, subject to a mortgage for which he alone was liable to repay, the mere fact that the wife contributed by her earnings to the fund from which the instalments were paid by the husband would be by itself a sufficient ground for inferring a common intention that the wife should have a beneficial interest in the property. Their must be something more if that inference is to be drawn. The observations I have cited are governed by the initial observations in the first part of the passage where Lord Bridge makes it clear that he is dealing with a case where there has at some time prior to the acquisition or exceptionally at some later date been an agreement or arrangement or understanding. 'Exceptionally at some later date' would cover unusual cases where, for instance, there has been considerable expenditure on improvements or something of that kind and the improvements were met wholly or in part by an instalment mortgage and where the circumstances justify the inference that the wife would contribute by her earnings for the repayment of the monies raised to make the improvements and would in exchange have a beneficial interest in the property. There is nothing of that sort here.

The facts relied upon by the wife are wholly consistent with there being no intention that she should have any beneficial interest in the house. After the marriage she continued to work until she became pregnant. There is nothing surprising or out of the way in that. She started to work part-time earning L28 a week, a figure, I should add, equal to only one quarter of the monthly instalments under the Halifax mortgage. She then gave up work, again for a lengthy period, while her youngest child was an infant and started again full-time later. The facts support at most the inference that she worked and that it was always contemplated that she would work, when she was able, so as to assist the husband in meeting necessary expenses, including the mortgage repayments on a house which he already owned."

45. As I have found against the plaintiff on the facts, it is not necessary for me to decide whether there is anything exceptional about the post-acquisition Representation in this action, despite my considerable reservations.

46. First National Bank plc is authority against Mr Ng's contention that the mere fact of the plaintiff's payments from 14 March 1991 gave rise to a beneficial interest in the Property.

Disposition

47. This unmeritorious claim fails and I dismiss the plaintiff's action. The defendant contributed to the waste of the court's time and in the exercise of my discretion, I am inclined to make no order for costs in his favour. I make an order nisi that there be no order as to costs as between the parties and that the plaintiff's own costs be taxed in accordance with the Legal Aid Regulations.

Representation:

Mr Lawrence Ng, instructed by Messrs Chui & Lau, for the Plaintiff

Defendant in person, present