Chan Qun Yuk v. Kwan Siu Mui

DCCJ 1916/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1916 OF 2006

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BETWEEN

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Coram :  Deputy District Judge Anthony Chow in Chambers (open to public)

Date of Hearing:  27^th October 2006

Date of Handing down of Judgment:  6^th November 2006

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JUDGMENT

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1.This is an application for summary judgment under Order 14 rule 1.

The claim:

2.The plaintiff is the sole administrator of the estate of Mr. Chan Chun Mo (the “Deceased”), his adopted father.

3.Prior to his death on 26/11/1996, the Deceased was an acupressure masseur carrying on business as a sole proprietor at the premises known as Flat B, 11^th Floor, Sing Kong Building, 233-243 Lockhart Road, Hong Kong (The “Premises”).

4.The Deceased was also the registered owner of the Premises and resided there prior to his death.

5.The defendant was an apprentice and later an employee of the Deceased.  During the Deceased lifetime the defendant had a licence to enter and remain in the Premises during business hours.

6.Upon the Deceased’s death, the license was automatically revoked; however the defendant continued to occupy the Premises and practiced as a masseuse.

7.Despite repeated demands made by the plaintiff and his sisters, the defendant refused to vacate the Premises.

8.On 19/4/2006, the plaintiff filed the present claim against the defendant for possession of the Premises, mesne profit and alternatively damages to be assessed.

The defence:

9.Although the Statement of Defence was a bit muddled (in paragraph 5(a) of the defence, it was stated “…The Defendant became an employee to the Deceased at the property …”, but in paragraph 5(b) it also stated “It is not admitted that the Defendant was an employee of the Deceased.”), the defendant stated the Deceased promised her that after her apprenticeship, she could continue to practice as an acupressure masseur, in the Premises.

10.The Deceased would take all of her revenue from her practice, deducting all utilities expenses, management fees, rates and other expenses for the Premises and gave the balance back to the defendant.

11.In addition, before the death of the Deceased and his wife, the defendant went to the market, did all cooking, cleaned the Premises, paid for all meals and massaged the deceased for an hour and a half each day.

12.When the Deceased’s wife was ill, the defendant would stay all night to take care of them. When the Deceased’s wife was in the hospital, the defendant would stay overnight at the hospital to attend to her needs.

13.After the Deceased’s wife died, in gratitude to the defendant’s care, the Deceased told the defendant that she could have possession and exclusive use of the Premises to practice acupressure massage until she retires.

14.In reliance to the Deceased’s representation, the defendant took care of him until his death and paid all utilities expenses, management fees, rates and other expenses of the Premises before and as well as after the Deceased’s death.

15.From the date the Deceased died, the defendant paid a total sum of HK$141,130.80 in expenses for the Premises.

16.The defendant denied receiving any demands from the plaintiff and his sisters. The first demand was a letter from the plaintiff’s solicitors dated 20/6/2005.

17.The defendant alleged that a common intention constructive trust and/or proprietary estopple for a life interest in the Premises was created in favour of the defendant, with the estate of the Deceased being the trustee.

18.The defendant alleged from 27/11/1996 to the present, she paid management fees, rates, water charges, maintenance and repair of the common parts of the building the Premises was a part of and the maintenance and repair of the Premises in the total sum of HK$141,130.80.

19.The defendant counterclaimed against the plaintiff for a declaration that the defendant has a life interest in the Premises, or in the alternative a declaration that the Premises was held on trust for the defendant, or in the further alternative return of HK$141,130.80, or in the further further alternative damages to be assessed.

The law:

20.The legal principle is well known: The defendant must show that there are triable issues. He has to satisfy the court that he has a ‘real or bona fide defence.’ If he makes an allegation, it must be credible or believable in the light of the evidence placed before the court. [Para 14/4/9 Hong Kong Civil Procedure 2006].

Analysis:

21.The defence was based on the creation of a common intention constructive trust or proprietary estopple.

22.In Underhill and Hayton, Law Relating to Trust and Trustees, the learned author explained common intention constructive trusts at page 412, as follows:

“A constructive trust may be imposed on specific property, such as a house in M's name, in order to give effect to an express or inferred common intention of M and W (whether at the time of the purchase or subsequently) that W is to have a beneficial interest therein, so leading W to act to her detriment in reliance on that intention, so making it unconscionable to allow M to deny W any interest by pleading the lack of the necessary written formalities for a valid declaration of trust or contract. In such circumstances, the positive common intention can oust any prima facie resulting trust treating M and W as acquiring the shares they paid for at the time they completed the purchase with their saved, inherited or borrowed money, so that if M bought the house in his name with a mortgage (in his name, of course) having paid the deposit with his money, he will be sole legal beneficial owner, though if W provided the deposit and at the outset undertook with M to provide all the mortgage payment M will hold on resulting trust for her. If the common intention was that W was to have a specific interest, eg a half or a quarter, or a share to be quantified on sale of the house or earlier separation of the parties as a fair share, taking account of W's financial contributions or their real and substantial equivalent to the acquisition of the house (without penalising her or him when prevented from making their usual contributions e.g. because of childbirth. or illness), there will be a constructive trust of the specified share or of a fair share.”

23.In the same publication, the learned author explained proprietary estopple in page 248, as follows:

“ Equity is seen as its flexible best or worst in its doctrine that if a defendant encourages, or acquiesces in, the claimant acting to his detriment, in the belief that the defendant's property is the claimant's property or that the defendant has given or will give the claimant the property or an interest therein, then equity will estop the defendant (and his personal representatives) from asserting his full legal and beneficial ownership and from claiming that non-compliance with statutory formalities under the Law of Property Act 1925 or the Wills Act 1837 bars the claimant's claim. Such estopple gives the claimant an equitable right which may be for a sum of money, perhaps supported by an equitable lien on the defendant's property for the claimant's expenditure or the value of his improvements or lost expected occupancy rights, or a decree perfecting the defendant's imperfect gift by ordering the defendant to convey or lease land to the claimant, or grant the claimant an easement for a licence to use the premises as longas the claimant permanently resides there or until the claimant receives compensation from the defendant.”

24.The defendant’s case therefore depended on two elements: (1) The deceased telling the defendant that she could have possession and exclusive use of the Premises to practice acupressure massage until she retires; and (2) In reliance thereto, the defendant acted to her detriment.

25.As there are no documentary evidence and the defendant was the only witness to the Deceased alleged statement, the issue on whether the Deceased told the defendant she could have use of the Premises until she retires is clearly a matter of fact that can only be decided on the veracity of the defendant’s testimony. This can only be accomplished at the trial when the defendant will be subjected to cross-examination.

26.In applying for summary judgment, the plaintiff must have accepted that the Deceased did tell the defendant she could use the Premises until she retired, the plaintiff’s case must be the defendant did not act in her detriment based on the Deceased’s statement. Otherwise, there was clearly a factual dispute that can only be decided by trial and the plaintiff’s Order 14 application must be dismissed, with costs to the defendant.

27.What were the defendant’s detrimental acts in reliance to the Deceased’s statement? In paragraphs 5(c), 5(d) and 5(e) of the Statement of Defence, the defendant listed the deductions from her revenues for utility expenses, management fees, rates and other expenses, the payment of meals for the Deceased and his wife, went to the market, did the cooking, cleaned the Premises and massaged the Deceased for 1 ½ hours each day and staying at the hospital when the Deceased’s wife was ill, etc.  All of which occurred prior to the Deceased’s alleged statement that the defendant could have use of the Premises until she retires. Nothing stated in these paragraphs could be attributed as detriments in reliance to the Deceased’s statement.

28.In paragraph 5(g) of the Statement of Defence, the defendant alleged she did the following after the Deceased’s statement:

(i) Taking care of the Deceased until the day he died;

(ii) Settling all the utilities expenses, management fees, rates and other expenses of the Premises before the Deceased died; and

(iii) Settling all the utilities expenses, management fees, rates and other expenses of the Premises after the Deceased died.

29.Mr. Chong, counsel for the plaintiff, raised 2 issues on these acts:

30.First, the contribution made by the defendant must have been intended as a contribution and not as a loan. In Snell’s Equity, 31^st Ed, at 22-43, the learned author stated:

“…Further, the payment must be intended as a contribution and not, e.g. as a loan which has been applied towards the purchase price.”

31.The defendant clearly treated the utilities expenses etc. as a loan because in a letter dated 28/6/2005, the defendant’s former solicitors demanded repayment of these expenses.  The solicitors wrote:

“ During these years, our client (the defendant) has paid on behalf of the deceased expenses for maintenance and repairs to the Property (the Premises) as well as the share of expenses for maintenance and repairs to common parts attributable to the Property in the total sum of HK$50,116.00 as well as rates from 1 January 1997 up to this month in the total sum of HK$28,809.00 which should be paid back to her out of the estate of the deceased. Enclosed are copies of the various receipts for your reference.”

32.Similarly, in the letter dated 18/7/2005, the defendant’s solicitors reiterated her demand for repayment of these expenses by stating:

“ …At the moment our client has no intention to retire and will not deliver the Property to your client. Further, as our client denies any liability to your client’s claim. On the other hand your client as administrator of the estate of the deceased is liable to reimburse the sums of HK$50,116.00 and HK$$28,809.00 to our client (a)s set out in our said letter.” 

33.Mr. Chan, counsel for the defendant, reply was somewhat muddled, he said something to the effect that these were “just solicitor’s letters”. Being solicitor’s letters, the contents of these letters must have been treated seriously and the content representing the real intention of the defendant at the time. 

34.Second, the detriment must be in connection to the relevant land. In Taylor Fashions Ltd. v. Liverpool Trustees Co. [1982] QB 133, Oliver J. stated at page 144:

“ …if A under an expectation created or encouraged by B that A shall have a certain interest in land, thereafter, on the faith of such expectation and with the knowledge of B and without objection by him, acts to his detriment in connection with such land, a Court of Equity will compel B to give effect to such expectation.”

35.Mr Chan’s reply on this ground was much more convincing. Referring me to Jenning v Rice [2002]EWCA Civ 159, as authority that the detrimental act need not be connected to the land. Lord Justice Robert Walker stated at paragraph 45:

“Sometimes the assurances, and the claimant’s reliance on them, have a consensual character falling not far short of an enforceable contract (if the only bar to the formation of a contract is non-compliance with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, the proprietary estopple may become indistinguishable from a constructive trust: Yaxley v Gotts [2000] Ch 162). In a case of that sort both the claimant's expectations and the element of detriment to the claimant will have been defined with reasonable clarity. A typical case would be an elderly benefactor who reaches a clear understanding with the claimant (who may be a relative, a friend, or a remunerated companion or carer) that if the claimant resides with and cares for the benefactor, the claimant will inherit the benefactor's house (or will have a home for life). In a case like that the consensual element of what has happened suggests that the claimant and the benefactor probably regarded the expected benefit and the accepted detriment as being (in a general, imprecise way) equivalent, or at any rate not obviously disproportionate. Cases of that sort, if free from other complications, fit fairly comfortably into Dr Gardner's first or second hypothesis (both of which aim to vindicate the claimant's expectations as far as possible, and if possible by providing the claimant with the specific property which the benefactor has promised)."

36.Clearly, in a situation where “ an elderly benefactor who reaches a clear understanding with the claimant (who may be a relative, a friend, or a remunerated companion or carer) that if the claimant resides with and cares for the benefactor, the claimant will inherit the benefactor's house (or will have a home for life)”, the exact situation in the present case, there was no need for the detrimental act to be connected to the land.

37.To summarize, the defendant alleged in reliance to the Deceased’s statement, she did two things to her detriment: (1) She took care of him until his death; and (2) She paid for the utilities and other expenses.

38.As to the utilities and other expenses, the defendant made demands for repayment and therefore manifested that she considered these a loan and not a contribution.

39.That still leaves the first detrimental act: Taking care of the Deceased from the time he made the statement until his death. As I have stated earlier, in applying for summary judgment, the plaintiff’s case must be that even if the Deceased did tell the defendant she could use the Premises until she retired, the defendant did not act in her detriment based on that statement. Viewed from that point, the defence was real and bona fide. Whether the defendant took care of the Deceased from the time he made the statement until his death is clearly a triable issue.

Order:

40.There will be unconditional leave to defend.

41.Costs in the cause, with certificate for counsel.

Representation:

Mr. K.M. Chong, instructed by Messrs Lo, Chan & Leung, for the Plaintiff

Mr. Kenneth Chan, instructed by Messrs Kitty So & Tong, for the Defendant