Yeung Kiu Ho v. Yau Pik Wing and Another
Read the full judgment text of DCCJ 3468/2002 on BabelCite. This District Court judgment.
1. Wife (“Plaintiff”) and husband (“D1”) were married in 1973 and had 4 children. The subject land was purchased in 1976 with D1’s money at $10,000. Pig-stys and a store (Old House) were built, legal title being in D1’s name. Pig-farming ceased in 1992. Since then D1 was living virtually full-time in the mainland carrying on his own business ventures returning home in the initial few years only during Chinese festivals, but thereafter was hardly home, only telephoning the children to come ou
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DCCJ3468/2002 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3468 OF 2002 -------------------- BETWEEN
-------------------- Coram : Deputy District Judge W. Lam in Court Dates of Hearing : 8th to 10th June 2005 Date of Handing Down Judgment : 16th June 2005 JUDGMENT The facts 1.Wife (“Plaintiff”) and husband (“D1”) were married in 1973 and had 4 children. The subject land was purchased in 1976 with D1’s money at $10,000. Pig-stys and a store (Old House) were built, legal title being in D1’s name. Pig-farming ceased in 1992. Since then D1 was living virtually full-time in the mainland carrying on his own business ventures returning home in the initial few years only during Chinese festivals, but thereafter was hardly home, only telephoning the children to come out to dinner. By mid-2000 the Old House was so delapidated that the Plaintiff decided to rebuild. She spoke to D1 who agreed. However D1 said he had no money to contribute, so that the Plaintiff would have to finance the project herself. The Plaintiff raised the question of D1 transferring legal title to her, which D1 agreed to do, although he said going to solicitors for formalities would cost money and time, which he did not yet have. However he reassured the Plaintiff and the children several times that the Plaintiff was in practice running the land herself anyway, and more importantly, that D1 would not sell the land because the Plaintiff and the children were living there. As a result of such reassurances, the Plaintiff expended a total of $225,500 out of her own pocket, being a loan from her mother who transferred her Yuen Long property into the Plaintiff’s name (see Bundle C21-27). The Plaintiff’s aged mother who was nearly 80 years old was willing to do this because she needed to move into the New House so that the Plaintiff could care for her. In addition to finance, the Plaintiff had put in personal efforts into re-building. The New House, consisting in fact of 3 single-storey houses, was completed in June 2001. Since then the Plaintiff and children have been living on site, with the Plaintiff solely responsible for paying all rates taxes and running costs out of her own pocket, D1 continuing to be absent from the land all the time. In about April 2002 the Plaintiff suddenly came to know from D1’s half brother who came to tell the children in threatening language that D1 had sold the land and that they must soon move out. We now know the sales agreement, on its face, was entered into by D1 on 6th November 2001 at a price of $200,000. In other words, 5 months after the Plaintiff had expended her own money and effort completing the New House, D1 apparently signed an agreement to sell to D2, with the Plaintiff, the Plaintiff’s mother and children still in occupation. 2.The Plaintiff seeks declarations that, because of her equitable interest in the land, D1’s sale was invalid and/or ineffective, and consequential remedies. D1 is unrepresented. He has filed a “Defence” in his own format, together with a witness statement, basically in relation to a loan he borrowed from a stranger Mr. FAN via introduction by D1’s half-brother: Bundle A59 and B215. D2’s counterclaim against the Plaintiff is not now pursued. D2 claims to be a bona fide purchaser for value without notice and says she is therefore entitled to take possession. The witnesses 3.The Plaintiff testified. She adopted her witness statement and testified consistently therewith. The essence of her testimony is as stated in “The facts” above. The Plaintiff answered questions in a straightforward manner and without any exaggeration. There is nothing in her testimony which is implausible or inherently improbable. She was repeatedly cross-examined about the same things, e.g. what D1 had said about transferring title to her, but her answers were consistent throughout. I find her honest and reliable. 4.D1 testified. He agreed with the Plaintiff’s evidence and three times he said “What the Plaintiff says in the witness box is completely true”. D2’s counsel criticised him as to why he had not at least put something in writing regarding his willingness to transfer title to the Plaintiff and/or the children, and why he had not used precise language when discussing this matter with his family. However we must not lose sight of the fact that we are dealing with a husband and a wife, at least at the material times both trusting each other, the wife only wishing to have some security because she was to bear the whole rebuilding cost herself, and both the Plaintiff and D1 were pig farmers, not lawyers accustomed to the use of precise legal language in everything they were to say. I do not find the criticisms to have eroded into D1’s credibility. I will say a little more on D1’s credibility below. Regarding the facts themselves, D1 says he had never voluntarily sold the land. The Memorandum Agreement of sale (Bundle C177, C193) and the Power of Attorney (C202) were obtained by fraud, because he knew little English, and the documents were never explained to him by solicitor Mr. KONG. He signed because his half-brother, who was on the same side as loan shark Mr. FAN (whose repayment terms exceeded the lawful upper limit of 60% p.a.), was the latter’s middleman, and D1 trusted his half-brother, who said the documents were merely a loan repayment agreement. D1 says he had not consented to sell the land, nor would he ever have agreed to sell, firstly because his wife and children were still living there, everyone being emotionally attached to the land, the land having been passed down from his ancestors, and secondly certainly not for a mere $200,000 because even government requisition would pay at least $1.3M (being $168/sq.ft) and it would be insane for him to sell at $200,000. Besides, he says, he had previously been offered $250/sq.ft and he did not sell. D1’s case was that the sales agreement was obtained by fraud. As to the loan agreement itself, D1 says if he had known the interest rate was illegal he would not have signed even what he thought was a loan agreement at Bundle C193. D1 admits he had indeed borrowed $200,000 from Mr. FAN, and this is supported by 3 subsequent repayments, e.g. Bundle C229, until he stopped repayment because he (D1) discovered he had been defrauded. D1 says when he went with his half-brother to solicitor KONG’s office on the 6th November 2001, the purpose as explained to him was only to obtain the loan $200,000 from Mr. FAN, who was present, but nothing was mentioned about sale of his land. I can see extraneous evidence supporting D1’s contention that the Memorandum Agreement of Sale was a sham:
5.The whole transaction smacks of irregularity to the extreme. I find the above evidence supports D1’s allgation of fraud, and I find the purported sale to have been nothing but a sham. 6.I find that D1 landed himself in the present predicament because his half-brother, who was conspiring with Mr. FAN, preyed on D1’s misguided trust in him. The undisputed evidence of this half-brother threatening D1’s children to be ready to move out of the land, and after the matter had become a legal battle he threatened D1 that if D1 should “appear” he would be chopped to death, shows the true personality of this half-brother. When challenged by D2’s counsel during cross-examination, D1 was able to support his testimony with other evidence, e.g. that immediately after he had discovered what had happened when he went to the Lands Registry, the same afternoon he went to report the matter to the Yuen Long Police Station. In court D1 offered to tender documentary proof of this visit, but counsel for D2 immediately decided not to pursue further. 7.Counsel for D2 paints D1 as an irresponsible man who had left his family for business ventures in the mainland, but who had never sent any money back to Hong Kong, or maintained any or any close contact with the Plaintiff. However if D1 was irresponsible, there would have been even less reason why he would, as counsel asserts, collude with the Plaintiff to say he had not wanted to sell the land, because a selfish D1 selling the land would only have brought himself benefit instead of harm. D1’s testimony “If I had genuinely and willingly signed the sales agreement, it would have meant that I not only had to repay the loan with high interest, but I would also have lost my family’s land, which is ridiculous to suggest” I find logical and convincing. If the sales agreement was genuine, all D1 needs to say in court is “I had no more interest in the land. I have made 20 times in profit, and the sale was a life-saver for me because I urgently needed the loan for my white wine business in Guangzhou. As to my wife, she had plenty of money. Her mother had plenty of money to give to her, and she had income from her steady supermarket job anyway”. I can see no reason or motive why D1 should now lie in court and say the sale was a sham. I accept D1’s testimony to represent the truth. 8.D2 elected not to testify, or call any witnesses. Whether D1 had orally assigned his interest to the Plaintiff 9.The Plaintiff says D1 in effect had left the land to her disposal, and D1 says “everything the Plaintiff says in court is true”. D1 himself repeatedly told this Court that he had orally agreed to assign the land to the Plaintiff, only he was not in Hong Kong long enough or had the money to go to solicitors to effect a legal transfer, and he gave convincing reasons why. In reliance on this agreement, the Plaintiff expended finance and efforts. Accordingly I find that there was an enforceable contract: Pascoe v. Turner [1979] 1 WLR 431. 10.However the Plaintiff has a stronger claim on the land on the basis of Equity. D1 had since 1992 left the land on moving his domicile to the mainland. I find that he had not only orally passed his interest in the land to the Plaintiff and/or the children, which is entirely supported by conduct, but more importantly I find that the Plaintiff, via her own financial and physical input, with D1’s knowledge agreement and approval, had created an equitable interest in the land. As to what proportion the Plaintiff’s interest is, I have not been asked to make a finding, but the evidence shows that the Plaintiff’s equitable interest is the whole of the land except to the extent of D1’s original payment moneys which, together with interest over the years until today, I allow at $40,000. The Memorandum Agreement of Sale 11.For the abovestated reasons I find that D1 has not in equity sold his land to D2, as the sale was procured by fraud. In any event D1 had no right to sell the land to D2 when the Plaintiff had an equitable interest far exceeding D1’s interest, and with the Plaintiff still in occupation. It follows, therefore, that even if D1 had willingly sold the land, the sale was invalid, because he had insufficient proprietary interest in the land to pass on to D2. D2’s position 12.D2 has advanced a 2-pronged argument, namely (1) the Plaintiff cannot claim an equitable interest in the land because she did not have “clean hands”, and (2) D2 is a bona fide purchaser for value without notice. 13.Regarding the first argument as to whether the Plaintiff can claim a lawful interest in the land, D2 says that the land could only be used for “padi” (agricultural) purposes, hence if the Plaintiff had been living on site she had acted unlawfully and so she cannot now claim any equitable interest. Bundle C205-208 contain D2’s strongest point in this argument. However I also note that the authorities have by their conduct permitted residence on the land, albeit in a limited way, on the land by D1 and the Plaintiff for 30 years, and more recently even after rebuilding (more below). D1’s testimony of “As long as we did not build beyond the original physical dimensions and not rent the property to others for profit, neither the Government nor our Village Chiefs would have any objection; by necessary implication farmers must have been allowed to live on site, otherwise livestock would be stolen without us knowing” I find reasonable, logical, and convincing. I find a prohibition against “alteration” (at C208) to mean “substantial alteration beyond the originally permitted physical dimensions, and/or alteration from private into commercial use”. The evidence does not show that the Plaintiff has acted “ultra-user”. 14.Further, the undisputed evidence from the Plaintiff shows that the authorities had been to the land with the New House already in place, and had carried out valuations for council rates, leading even to an appeal by the Plaintiff, and leading eventually to the quantum of rates being settled out of court. There had been nothing secretive about the existence of the New House. What is “residential use” in the present context is a matter of degree. The restriction has never been a tight one, and “land use” has been held to be only descriptive, not prohibitive: see AG v. Melhado Investment Ltd. Civil App. 79/1982, and Block Crown Lease at Bundle B202 a passage of which was recited in In the matter of an application by the Attorney General HCMP 104/1971. Similar rulings are found in Niceboard Development Ltd. v. China Light & Power Co Ltd. [1994] DCLR 69 (LT), and WONG WAI Tsak-tong v. Secretary for Transport [1996] 4 HKC 301 (LT). I find that even if the Plaintiff has committed a “breach of user” she has not acted illegally vis-à-vis the Government to the extent of ex turpi causa: Best v. Glenville (1961) P & CR 48. It would be different if the Plaintiff and D1 had conspired to bomb down the delapidated house and use the insurance money to build a new house, in which case her claim against the insurer would be unenforceable. In any event, regarding the “residential user” aspect, it is not the situation here that the Plaintiff had used padi land to develop into a residential estate with 20 blocks each consisting of 30 storeys for her own investment purposes. I am therefore not surprised that the authorities by conduct had acquiesced and/or agreed to the Plaintiff’s “new” use, as evidenced by its inspection, valuation and revision of rates on the whole property after the New House had been built. Neither the Plaintiff nor D1 had known of any illegality ever since 1976. On the contrary, there is positive evidence from the Plaintiff and D1 that their belief was legality and indeed necessity, with neither the Government nor the Village Chiefs nor any villager objecting. Furthermore, the evidence shows the Government had gone out to inspect the land as a result of this proceeding, yet I have seen no evidence that the Government has ordered demolition or threatened the Plaintiff or D1 with prosecution or any legal action. And further, a breach of covenant can be waived, the equivalent of “tolerance fees” being made up by a rise of rates and taxes charged to the Plaintiff (Chitty on Contract paragraph 10-012), as the Plaintiff’s undisputed evidence indeed shows. In any event, there is nothing illegal about the oral contract of transfer from D1 to the Plaintiff and/or the children. From the evidence I can see nothing “unclean” from the Plaintiff’s point of view to rob her of her obvious equitable interest in the land. I do not accept D2’s argument in this regard. But there is more. 15.Even if the Plaintiff’s rebuilding project was illegal vis-à-vis the Government, this would not affect her equitable interest, because the Plaintiff’s equitable claim against D1 and D2 does not rely on the Crown Lease itself: see Best Sheen Developments Ltd. HCMP 7250/1999. The Plaintiff is not claiming against the Government. And even if the Plaintiff’s claim on the New House was illegal, which is not my finding, her claim on the land itself is not affected: see Snell’s Equity (31st Ed) at paragraph 5-15. 16.If I am wrong in finding that the Plaintiff’s residential user has been lawful, I nevertheless find that D2 had not acquired the land because D1 had never in truth or willingly passed his legal title to D2, and so D2’s case against the Plaintiff (or D1) cannot succeed in any event: more below. 17.As to D2’s second argument, i.e. whether D2 was a bona fide purchaser for value without notice, the evidence shows that on 30th April 2002 the Plaintiff via her solicitors had already given written notice to D2’s solicitors, but the latter nevertheless proceeded to complete the sale on 3rd May 2002 (Bundle C203, B175 and C233). This notice coupled with the lack of inquiry fixed constructive notice upon D2’s solicitors as D2’s agent: Snell’s Equity (31st Ed.) at para. 4-31, and CHENG Kam-wing Civil Appeal 75/1990. When D2’s agent had notice, this became imputed notice upon D2 herself. Counsel for D2 says the precise nature of the Plaintiff’s “proprietary interest” as stated in the notice was not spelt out, but as D2’s solicitors were professional lawyers, I find they must have known what the term “proprietary interest” in fact meant. Furthermore, given this notice, D2’s solicitors had never made any inquiry as recommended in Law Society Circular No.125/1992, such as making a visit to the land to see what was happening, which would not have been a difficult exercise. If they had done so, the Plaintiff would certainly have told them her position, and the details of the “proprietary interest” would have been confirmed. However despite being under imputed noticeD2 had permitted and/or caused her solicitors to complete the sale. This disposes of the question of “notice”. As to the issue of “for value”, I have seen no evidence that even up to the time when D2 (and her solicitors) received notice she had paid any “value” to D1. The $200,000 was Mr. FAN’s money, being a loan to D2 and having nothing to do with the sale of land. D2 had never appeared. She was not at solicitor KONG’s office on the 6th November 2001, D1 has never seen her, and she has never appeared on the land with a view to buy, or in the interim after receiving notice from the Plaintiff’s solicitors, or on the day of completion to ensure the land and structures were in good condition to be passed to her. I find D2 not to be a bona fide purchaser, nor was she a genuine purchaser for value, nor was she a purchaser without notice. 18.Finally, in respect of D2 vis-à-vis D1, as stated above I find that D1 had not in truth ever sold the land to her, and so whether the Plaintiff had “clean hands” or not, D1 had not sold to anybody because his signatures and/or the documents of sale were procured by fraud. Therefore, as far as D2 is concerned, at law the land remains with the previous owner. Remedies
20.Costs to the plaintiff against both defendants nisi to be taxed if not agreed. While I am not in a position to apportion costs as between D1 and D2 in terms of overall liability to the Plaintiff, I note that D1 had tendered very few documents as compared to D2. The Plaintiff in considering costs may wish to take this factor into account.
Representation: Ms. Annie Lai instructed by Messrs. Au Yeung, Cheng, Ho & Tin for the Plaintiff. The 1st Defendant, in person, present. Mr. Hylas Chung instructed by Messrs. Gary Lau & Partners for the 2nd Defendant. |
Cases cited in this judgment