Lee Koon Wan v. Sherman Ngai Wing Lee

HCA 1942/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1942 OF 2009

__________________

BETWEEN

__________________

Before: Hon Seagroatt Deputy High Court Judge in Court

Date of Hearing: 4-6, 9-10 July 2012

Date of Handing down of Judgment: 24 July 2012

_______________

J U D G M E N T

_______________

1.This is an unhappy dispute between an 81 year-old father and his 56 year-old eldest son concerning the ownership of various properties and monies derived from properties by way of sale, or income from letting. The crucial question is whether the son holds the properties and/or monies on trust for his father and/or mother, and/or himself and five brothers or is the sole beneficiary of the property and income as gifts, or as purchases by him.

2.The Plaintiff, the father, had formerly been a Police Officer and sometime after his relatively early retirement from the Royal Hong Kong Police Force, as it then was, went to live in Scotland and established a number of catering businesses over the course of two or three decades.  His wife and children joined him in due course, and his wife worked in the businesses with him.  He maintained his roots in Hong Kong and when he returned here, it was, essentially, to enjoy his retirement.  Unhappily, he lost his wife in 2007 and lives now in Flat B, 12/F, Kwong Fuk Place, 8 Kwong Fuk Road, Tai Po, a property registered in the name of his son, Michael and a Ms Chan Yuk Bing, who I assume is Michael’s wife.

3.There is no doubt that the Plaintiff has been an extremely successful manager of properties and finances.  The Defendant recognizes this.  From the evidence available, the father could properly be described as very controlling but this had very much been in the interest of his sons even though all of them are of an age at which one could reasonably expect them to be managing their own affairs.

4.In arranging matters for his own and his wife’s lifetime, understandably he had to bear in mind their own respective needs for their support and preservation of assets, as well as the means whereby he could give effect to his and his wife’s desire to provide their sons with as comfortable a way of life financially and as equally as possible.  It would, however, not be surprising if this resulted in one son or another or more, receiving greater financial benefit than another or others but not disproportionately so.  Sometimes in families, the more achieving children receive a reward which is seen as commensurate with their achievement rather than on a strictly equal basis.  Again on other occasions, a less achieving child, or one who is less well endowed by nature or fate, may have a greater need for early or immediate support, which, on the face of it, indicates a disparity of consideration.  This often happens in the lifetime of the benefactor when he or she recognizes that achievement or need, and can do something to provide for it.  When parents have died, their estate can more easily and more equally be distributed amongst their offspring as is illustrated by the Plaintiff’s 1980 Will, and indeed by his late mother’s Will which provided equally for her eight grandsons.

THE DEFENDANT ELDEST SON

5.He clearly relied upon his parents, his father in particular, for financial aid which he says he has continued to receive despite being self supporting.  It was apparent that he was no more comfortable giving evidence in an exercise in litigation with his father than the father was with his son.  But I did detect a degree of obstinacy which has developed perhaps with time.

6.He described his parents as wanting their sons to be doctors and lawyers, stating that he was the only one who achieved their ambition.  However, one of his brothers is a dentist and another is an accountant.  There is no doubt he respected his father’s financial ability, as indeed he should, and he seemed to acknowledge that he and his brothers, had benefited significantly from his father’s good financial judgment, prudence and generosity.  Even in middle age he acknowledged that his parents were making gifts of money to him which went directly into one of his bank accounts, and on occasions came as cash in hand.  He was clearly conscious of his position as the eldest son, successful as a professional.

7.Although he had benefited considerably from his parents support at school, university and during medical training, and received considerable financial benefit thereafter, as we shall see, he had, in the course of his evidence sought to diminish to some significant extent his father’s contribution to his success.  He started to emphasize his mother’s generosity, frequently stating that benefits he received came from his mother’s money.  In fact, the account to which his mother had access was an account, or were accounts in his father’s name.  Although at the beginning of this trial references were made to joint accounts held by the parents, that was loose terminology.  There were no joint accounts produced save one at the Bank of Scotland in Aberdeen in which a relatively small sum remained and the Plaintiff said that usually the balance was about £1,000.  

8.Sadly, he moved on to accusing his father of stealing his Cheltenham & Gloucester Building Society Passbooks when he knew all along that his father had a mandate signed by him, to withdraw sums of money from the accounts.   Into those accounts the father had put money which he had been receiving from sources, in particular as rent from the letting of the Bridge of Don premises.  In fact, the Defendant had written to the Grampian Police in Scotland, alleging that his father had stolen these passbooks and withdrawn all the money from them.  This was irrational on the Defendant’s part.  I accept the Plaintiff’s evidence that when he withdrew sums from one or more of these accounts in accordance with the mandate he told the Defendant and obtained his agreement.  I am satisfied that the Defendant was content to let his father operate these accounts in their mutual interest and did not for many years concern himself with their operation.  As a consequence, specific transactions in respect of them, either deposits or withdrawals, did not feature prominently in his recollection.

THE TAI PO PROPERTY – 15, NAM SHING STREET 

9.In 1975, this was owned by the Plaintiff’s mother. In return for her son (the Plaintiff) bearing the cost of redevelopment, she agreed to assign the 1^st to the 5^th floors of one of the new buildings to him.  She was to retain the ground floor for herself.  It involved the demolition of one building and the construction of two new blocks each of six floors.  The Agreement is dated 16 May 1975.

10.By an assignment dated 23 August 1978, the new development being completed, the Plaintiff (described as the “Financier” in the agreement and assignment) nominated his son and asked his mother to assign the 1^st floor to him.  She then assigned the 1^st floor to her grandson who was in Scotland at the time that he signed the document.  The Plaintiff thus held the title to the 2^nd to the 5^th floors, whilst his mother held the ground floor.

11.The background to the Plaintiff transferring the 1^st floor, which was under the original agreement to be his as part of his consideration for financing the development of the old premises and erection of the new premises, was, according to the Plaintiff, a suggestion, from his mother, that the 1^st floor could eventually become a clinic or base for the Defendant’s medical practice once he had graduated and returned to Hong Kong to practise as a doctor.  The Defendant was then 22 years of age and graduated three years later, in 1981.  If it were not so used, the 1^st floor would revert to the Plaintiff’s ownership for general family use.  This was an agreement reached between the Plaintiff and his young son.  I have no doubt that there was such an agreement.  It seems to me to be a wholly logical arrangement.  However, the Defendant never did set up practice there.  In due course, it was let out for rental.  The Plaintiff collected the rental which was duly recorded in the Defendant’s tax returns after he had returned to Hong Kong.  There are documents written by the Plaintiff showing the sums received over a number of years.

12.In due course, in 2007, the Plaintiff sold the 1^st floor premises under a Power of Attorney granted by the Defendant (who was then 51 years old) and received the proceeds of sale for his own use.  That result is entirely consistent with the fact that the Plaintiff had originally become the owner of the 1^st to the 5^th floors as the financier of the whole development.   The other floors, 2^nd to the 5^th had been sold by the Plaintiff in August 1986 (the 2^nd floor) and in September 2003 (the 3^rd, 4^th and 5^th floors) the proceeds being received by him.

13.As a postscript, the ground floor premises were bequeathed by the Plaintiff’s mother on her death to be shared equally by her eight grandsons, six of them being the Defendant and his five brothers.  Her Will clearly showed, as the Plaintiff’s 1980 Will showed, that there was an intention that sons or grandsons, were to be equal beneficiaries of the estate.  She died on 20 February 1982.

14.The current position concerning the ground floor premises is that they are held by the Plaintiff and his brother William, as executors of their mother’s estate upon trust for the eight grandsons.

15.The Defendant denies that there was any such agreement with his father or any condition attached to his legal title to it.  It was, he says, an unconditional gift to him from his grandmother.  There is, of course, an inherent unlikelihood in what he contends.  As is evident from the grandmother’s disposition of her estate, this would have put him in a particularly privileged position compared with his brother and cousins whom the grandmother treated equally in her Will.  His father’s ownership of all the floors of the building (apart from the ground floor) under the 1975 Agreement meant that the assignment could only have come from him although his grandmother may well, as a doting grandmother, impressed by her grandson’s prospects as a doctor, proposed or at least lent encouragement to the idea, a good one at that, that the premises would serve well as a clinic, so that she could see more of her successful doctor grandson.  I am satisfied that the father’s account of the agreement and purpose is a true one.

THE 1980 WILL

16.The Plaintiff on the advice of his Scottish Solicitor made a Will. This is an important document in the overall context.  The solicitor suggested that the Plaintiff‘s wife also made a Will but this was not acted upon.

17.His wife and eldest son were appointed as Trustees and Executors.  On his death his wife was to take the estate absolutely provided that she survived her husband for 90 days and, if she did not survive for that period, then the estate was to be divided equally amongst all six sons (ie including the Defendant).  There was a “per stirpes” clause which does not affect the position.

18.It is clear from this that the Plaintiff wanted his six sons to benefit equally from his estate, in the same way as his mother wanted all her grandsons to benefit equally from her estate.  In the event, unhappily, the Plaintiff’s wife died in 2007 and so the question of the future beneficiaries of the estate does not occasion any problem, assuming in any event, for present purposes, that this Will has not been revoked by a later one.

19.It is sensible to conclude from the form of this instrument that the Plaintiff wanted to ensure that his wife was properly taken care of, and that ultimately if she did not survive for the requisite period, their sons would benefit equally.

THE LAI SHING GARDEN PROPERTY

20.In June 1988 the Lai Shing property in Shatin was purchased with the Plaintiff making payments totaling HK$631,000.  It was conveyed into the name of the Defendant and his mother, (the Plaintiff’s wife).  It is conceded that the Plaintiff paid for this property out of his own accounts though later on it was contended that it was the mother’s money.

21.At that time, the Plaintiff and his wife were still living and working in Scotland, running a take-away restaurant in Aberdeen.  The Plaintiff very fairly conceded that his wife was concerned that the liking for whisky which he had developed and the company he frequented might lead him astray and perhaps thereafter threaten the financial security of the family unit.  Understandably, she wanted to safeguard her own financial position and to that end it made sense if property in Hong Kong, which was her home (and she was described as semi-literate), were to be bought for her and as an additional safeguard, put in her eldest son’s name as well as her own.

22.There is a clear conflict between the parties over the circumstances of the purchase of this property.  The money for its purchase unarguably came from the Plaintiff’s account — the wife did not have a bank account of her own and there was no joint account as such.  At the outset of this case, there were rather loose references to the Plaintiff and his wife having joint accounts but closer questioning of the Plaintiff elicited that there was no such thing.  The account or accounts he held were in his sole name and contained income from the business or businesses which he ran with her assistance.  From time to time, and this may have been frequent or regular, he gave her money, but she had no direct access to his accounts without his being present.

23.The contention on behalf of the Defendant is that the money for the purchase of this property came from the mother.  Whilst I am satisfied that it came from an account which may well have contained the fruits of the parents’ collective earnings from businesses and/or rents from properties, I am equally satisfied that it was not the mother’s money as such but the assets of husband and wife. I am also satisfied on the Plaintiff’s evidence that there was an understanding on the part of father, mother and eldest son that the prime purpose of the purchase was to give the mother in particular and the family in a broader sense, a degree of financial security, particularly in the light of the mother’s fear, no doubt communicated to the eldest son, now a fully fledged doctor, that she might be left without adequate means.  To those ends putting it in the names of wife and eldest son made sense.  An agreement that it was held on trust for mother and then father, and then all six brothers also made sense.

24.During the course of the Defendant’s evidence on this aspect a number of cheque book stubs started to emerge, “out of the woodwork”, not having been disclosed prior to trial.  The purpose of the late production of these was, the Defendant said, to show that he paid the maintenance charge and other outgoings on the property.  Disclosed prior to trial and included in the bundle before me were records clearly showing that the Plaintiff had made monthly payments of the maintenance charge, and probably other outgoings between at least December 2003 and December 2006.  I am quite prepared to accept that the Defendant made such payments himself for significant periods of time but not for the 17 year period between 1993 and 2010 that he claims in his statement, and is pleaded in his Amended Defence and Counterclaim.  However, it does not matter because one would expect him as a salary earning doctor of ten and more years of experience, to be paying outgoings on the property in which he lived and which was in his name.  I do not accept his evidence that it was bought with his mother’s money and given to him for his sole benefit.  It was bought on the basis of the agreement testified to by the Plaintiff, for the mutual benefit of the three of them, during the parents’ lifetimes, and thereafter held on trust for the benefit of all six brothers.  How, by whom and how often the outgoings on the property were paid is immaterial to the fundamental matter of how the property was to be held.  I had to curtail Mr Chong’s re‑examination of the Defendant because he started to investigate matters outside those which could properly be covered. — they did not arise out of cross-examination.  Furthermore, the Defendant’s evidence descended into unreality when he said that only his mother had a key to the property, apart from himself, since she was the joint owner, that she told him she wanted to pay the management and utilities bills between 2005 and 2007, and then a little earlier had said that his mother told him that she had asked his father (her husband) to pay the outgoings on the property.  It was, as if the Defendant wanted to ignore the existence of his father as having any link with the property and sought to establish his mother as the only person who made any decision or contribution to it.

25.I am informed that at present this property is vacant and the Plaintiff holds the title deeds.    

THE BRIDGE OF DON PROPERTY

26.For at least ten years prior to the purchase of this property in Aberdeen in 1990, the Plaintiff had been working in Scotland running Chinese restaurants.  It was in Scotland that he had made his 1980 Will. From 1990, the Plaintiff, supported by his wife, ran a Chinese take-away business from these premises.

27.The premises were purchased in the name of the Defendant even though the Plaintiff and his wife were running the business and earning the income from it.  The purchase price of the premises was £120,000 and a further £30,000 was spent on improvements and alterations to the premises.  More money was spent on a Planning Application.  The original instructions to Campbell Connon & Co were that the title to the property would be taken in the names of the Plaintiff and his wife, but the Plaintiff subsequently changed this so that the property would be taken in the name of Defendant.

28.The Plaintiff’s evidence is that he paid for the property and the ancillary expenses himself out of his, and his wife’s money, and that there was an agreement that the son would, in fact, hold it on trust for his parents and, after their deaths on trust for himself and his five brothers.  The Defendant disputes that there was any such agreement and some effort was made to show that the Defendant had, or could have, accumulated savings to the extent necessary to enable himself to make the purchase and that because the Plaintiff had access to his bank books or accounts, his own money had been used by the Plaintiff.

29.The records of the Defendant’s income between 1981 and 1990 do not support this.  His gross income in the United Kingdom, Gibraltar and Hong Kong, on a very generous assessment, falls far short of the £150,000 paid out for the property and additional work on it without taking into account solicitor’s fees and any other linked expenses.  On the other hand, the Plaintiff, his father, had, on his son’s admission, been very successful in property transactions, and he had been told that his father’s investments had been very profitable.  A cursory examination of the father’s accounts showed that he clearly was earning money from his business ventures, thus providing the wherewithal for the purchase of properties, some being provision for other sons whose careers were less successful and less well‑remunerated than that of their eldest brother.     His parents had also worked hard throughout their lives, and in the light of the Plaintiff’s business acumen and accumulation of savings as a consequence of a prudent attitude, I am satisfied that the monies used to purchase the property came from the father’s own sources, whether they be accounts in his own name or accounts in his son’s name which he used to deposit income or other monies accumulated by him.  The parents had, of course, run the business at Bridge of Don for 10 years, and would in my view have accumulated significant savings from that business.

30.In this transaction, as in others, it is apparent that both parents wanted to treat their children equally and given the Defendant’s professional standing it is understandable that the parents would rely upon him to safeguard their provision as well as that of his brothers.  It would also be entirely understandable if the mother, in order to have her position protected, relied upon her eldest son to be a form of guardian of her interests if the husband died first or if he appeared to put the family assets at risk.  This had brought about the vesting of the title in the Hong Kong Lai Shing property in 1988 in both mother and son.  In relation to the Bridge of Don property, I am satisfied both parents had their own future in mind as well as the equal treatment of their sons.  The father being a strong personality and more “au fait” with the mechanics of investment was, I am sure, the prime mover.

31.The father said that his son agreed to hold the property in that form of trust and I accept his evidence.  But suppose the son had not expressly said that he would but that the father took his son’s silence or neutral reaction as agreement.  If the Defendant by silence or a non‑committal posture indicated his agreement, upon which the father acted thus giving him the title, then in my judgment such silence or equivocal reaction would have led the mother and father to believe that they had his agreement.  He is bound by that.  I am satisfied that the father would not have had the property conveyed into the son’s name for the latter’s sole enjoyment and benefit, to the exclusion of his parents and his brothers.  The Defendant’s subsequent behaviour towards his father and the solicitor in Scotland must have come as a shock to his father and to his mother, if she became aware of it — she died in 2007, not long after relations between father and eldest son started to deteriorate.

THE RENTAL RECEIPTS FROM THE BRIDGE OF DON PROPERTY

32.In 2000, the Plaintiff and his wife decided to retire from the business in Aberdeen and return to Hong Kong.  Instead of selling it, they decided to rent the premises, the return on a monthly basis providing income for them in their retirement.  It was decided by the Plaintiff to put the rental receipts into the Cheltenham & Gloucester Building Society accounts held by the Defendant, the Plaintiff being given a mandate, signed by the Defendant, to withdraw sums as and when required.  The Defendant says that he was well aware that his father was using the passbooks for that purpose.  In 1990, he was 44 years old and had been working as a doctor in Hong Kong since 1983, with a seven-month tour of duty in Gibraltar from December 1988 until July 1989. His father was then 59 years of age.  He agrees that he had known of the arrangement for many years although he does not accept that the rental was in fact for his parents.  He says that he did not know how much money was in the account at any time but he was certainly in a position to find out.  He did not bother to ask his father because, he says, he trusted him.  If he seriously thought that the properties and rental were for his benefit alone, a few moments consideration would have highlighted that with six sons to fund and benefit equally, his parents could not have intended that he, and he alone, should have the 1^st floor of the Tai Po property and its income, the Lai Shing property and the Bridge of Don property with its rental income.

33.I am equally satisfied that the Plaintiff was entitled to withdraw using the mandate agreed by the Defendant, and use for his own benefit two sums from the two Cheltenham & Gloucester Building Society accounts, HK£32,000 on 22 October 20005 and £42,000 on 16 May 2006, although the use the Plaintiff made of that money is not entirely clear.  That does not matter.  What does matter is that it came from most probably the rental of the Bridge of Don premises.  It did not come from any income or savings of the Defendant.

34.Linked with this aspect is the purchase of a property in London on 19 April 1996 for £150,000 with the completion statement showing a final payment of £136,173.52, which money came from one of the Cheltenham & Gloucester Building Society accounts in the Defendant’s name. This was eventually sold on 18 January 2007 with the Defendant’s brother, Norman, exercising a Power of Attorney.  It was not shown into which account of the Defendant, the sale proceeds of £319,000 were paid.  The Plaintiff says that the Defendant promised to give him 50% of the sale proceeds, and I accept his evidence, but the Defendant subsequently declined to honour this promise. By this time, the relations between father and son had begun to deteriorate seriously.  The correspondence passing between the Scottish solicitors Messrs Campbell Connon and the Defendant in 2006 is clear evidence of this. He had written on 28 June 2006 stating that he would make “all the final decisions concerning my property at Bridge of Don” that only he will receive the money for the rental money from it, and that “if and when the time comes, only I can sell my property.”  Mr John Hendry of the firm replied that he would, of course, act on his instructions.  Shortly afterwards, the Defendant was asking the solicitors to commence proceedings against his brother, David, to recover rent which he said his mother had asked the tenant of the Bridge of Don premises to pay into David’s account.  He also told the Cheltenham & Gloucester Building Society that the passbooks had been lost.  Then he wrote again to John Hendry of the Scottish firm of solicitors saying that he had cancelled the Power of Attorney which he had given to his father in 2004. John Hendry wrote back saying that he was unaware of such a Power of Attorney and thereafter the Defendant’s correspondence contained statements of mistrust, of pressure put upon him by his father and a “so‑called” (his term) brother, and of lost or stolen passbooks demonstrating a gradual decline in his relations with father and at least one brother.  The Scottish solicitor wrote to him several times in 2007, following the death of his mother, in particular to ask him if he was prepared to provide some financial assistance to his father and specifically as to whether he would convey the Bridge of Don premises to his father.  Not only did the Defendant not reply to those letters but appeared to try and hide behind an excuse that he had discussed the matter with his brothers.  Eventually, he reported John Hendry to the Scottish Law Society alleging that he had acted improperly and against his interest and instructions.  Some of his complaints, made in 2009, alleged professional misconduct.  The latter were dismissed by the Law Society’s disciplinary panel.  They were right to do so because they were wholly without substance and it is difficult to understand how the Defendant could have made them when the documentation showed perfectly correct professional conduct on the solicitor’s part.  On a very minor matter concerning a formal lease, the Law Society found that the solicitor should have maintained some pressure on his client, the Defendant, in order to obtain clear instructions that the letting should proceed on a formal basis.

35.In February 2010, the Defendant wrote to the Grampian Police complaining that “my father had stolen my 2 bankbooks and withdrawal (sic) all money in them without me knowing, he has access to withdrawal (sic) my money.”  Matters had reached a very low state of affairs.  By that time, of course, his father had commenced proceedings against his son and the relationship seemed finally to have unraveled.

36.The position concerning the London property is a little more problematical.  I am satisfied that it was bought with monies accumulated for the letting of the Bridge of Don premises and that the Plaintiff reached an agreement with the Defendant that the flat would be held in the Defendant’s name for the benefit of the whole family as a base when they were flying between Aberdeen and Hong Kong.  But the purchase monies were a mix of the Plaintiff’s and the Defendant, neither knowing exactly how much each had contributed. Although there was a rather general agreement as to the use to be made of the flat, the Plaintiff did not go so far as to say that he and his son agreed that the latter would hold it on trust.  Although clearly some of his own money was used in the purchase, being rent from the Bridge of Don and possibly other sources of his, the fact that he relied upon a promise by the Defendant to give him half of the sale proceeds―which the Defendant reneged upon―tends to suggest that I should in any event regard this property transaction as in a different category from the others, particularly since there is no clear assertion by the Plaintiff of a trust on the part of the Defendant.  The Defendant is therefore left with the proceeds of sale to which his father contributed to an undefined extent and may regard himself as fortunate to have benefited from a windfall.

GENERAL

37.There were clearly a number of other properties purchased by the Plaintiff directly or indirectly for the benefit of other sons, and investments made by the Plaintiff for the Defendant’s benefit using the Defendant’s own money and aided by the Plaintiffs own financial resources to a small extent such as the village house in Wong Yiu Tau.  The Plaintiff readily indicated that this was for the benefit of the Defendant absolutely, and I am not concerned, therefore, with this.

The Affirmations of the sons, Michael and Norman

38.Before trial, these two statements were filed on behalf of the Plaintiff’s case.  On the day before trial, the court received affirmations from both of them explaining that they did not wish to give evidence because of divided family loyalties.  I make it clear that one can well understand their feelings.  How should I approach the contents of their original affirmations which I had not read before I reached this stage of my judgment?

39.It is apparent that their latest affirmations do not indicate that they are resiling from their original affirmed evidence.  I have decided that it would be fair, just and equitable to consider what two other brothers or sons had to say in relation to their understanding of the nature of the financial support provided by their father.

40.Michael referred to the village house at Shatin which was bought in his name and those of his brothers, David and Norman, as well as the Plaintiff.  It was sold about ten years later with the Plaintiff retaining the proceeds. Michael stated that, it was understood, by all of them that it would be held on trust essentially for the parents with the brothers sharing it equally if the parents died before any sale of it.  His father had bought him an apartment in Tai Po, as a gift when he was experiencing difficulties in his marriage and his career.  As far as the Bridge of Don property was concerned, he says that, it was understood that his father bought it and let it out, and that the Defendant’s claim to have paid for, it was a matter of utter surprise.

41.Norman confirmed the agreement in respect of the Shatin village house which William described in his statement and his surprise at the Defendant’s contention in relation to the Bridge of Don property.  Both brothers recognized their father’s support throughout their lives and understood his desire to treat them equally.

42.Of course, Mr K M Chong, on behalf of the Defendant was unable to cross-examine either of them, but it would not be reasonable to think that they could or would be shaken on their evidence in relation to the Shatin village house property.  I have already accepted the Plaintiff’s evidence on the Bridge of Don property not simply on the basis that I found him to be truthful, but also, because the inherent probabilities support his explanation in relation to it and the other disputed properties.  I find their statements helpfully confirmatory of the position and state of affairs which I have already found to have existed.  I do not rely on them as resolving any matter on which I am uncertain, and so I have no difficulty in allowing their statements do take their place in that context.

The Law in relation to the evidence

43.The Plaintiff’s case is not based on enforceable express trusts and at no stage has argument been advanced on his behalf to contend that it is.  There is no written evidence to support an express trust.  The first argument is that the Plaintiff can rely upon the principles of constructive trust which I will examine shortly.

“….Although trusts of land can be created only in writing, a person who takes real estate by an instrument “inter vivos” in pursuance of a parole arrangement, of which he is cognizant, that the property should be held by him on trust, is not allowed to use the statute as a means of avoiding the performance of a trust. A court of equity … fastens on the individual who obtains a title … and imposes him a personal obligation because he applies the statute as an instrument for accomplishing fraud.”

Halsbury’s Laws

44.Snell’s “Equity” states the equitable principle succinctly :

“The[se] statutory provisions were intended to prevent fraud, and the court has not allowed them to be used as “an engine of fraud”. It is a fraud for a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land as his own. A person claiming land conveyed to another may therefore prove by parole evidence that it was so conveyed on trust for the claimant, and may obtain a declaration that the grantee is a trustee for him. It was on the ground of not allowing the … statutory provisions to be used as an engine of fraud that the doctrine of secret trusts was originally evolved.”

[Snell’s Equity – (31^st Edn)

P 486 – 20.14]

45.A very simple example of this principle of equity which has been refined over the years is to be found in the decision, almost one hundred years old, of Warrington J in Longfield Parish Council v Robson (Ch Div) (1913) 29 TLR p 357.  This echoed the approach of Lindley L J in Rochefoucauld v Boustead [C A] 1 Ch 1897 at p 206 :

“It is … established by a series of cases, the propriety of which cannot now be questioned, that the statute of frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself.”

The facts of the Longfield Parish Council case were so straightforward, and largely not in dispute, that it is difficult to see how the Defendant could have hoped to succeed even though he had used his own money to effect the purchase.  The Rochefoucauld case was more complex, but the court had little difficulty in concluding that, whether or not letters were signed by the Defendant resisting the claim of trust, the other evidence, essentially parole evidence, was admissible and proved the Plaintiff’s claim for a trust “completely”.

46.In Hodgson v Marks 1970 2 AER Russell L J at p 933 adopting the findings of fact of the judge at first instance (Ungoed – Thomas J) said as follows :

“…Despite the reference to love and affection as consideration in the transfer of her house to Mr Evans, the Plaintiff did not intend to make any gift to him, and that it was well-understood and indeed orally arranged between them that the beneficial ownership was to remain in the Plaintiff.”

Russell L J went on to state :

“The evidence is clear that the transfer was not intended to operate as a gift, and, in those circumstances, I do not see why there was not a resulting trust of the beneficial interest to the Plaintiff, which would not, of course, be affected by section S3(1) [of the Law of Property Act, 1925]…

If an attempted express trust fails that seems to me just the occasion for implication of a resulting trust, whether the failure be due to uncertainty, or perpetuity or lack of form.  It would be a strange outcome if the Plaintiff were to lose her beneficial interest because her evidence had not been confined to negativing a gift, but had additionally moved into a field forbidden by section S3(1) for lack of writing.” 

47.The resulting trust is in effect the Plaintiff’s second argument. Snell’s “Equity” again provides the succinct statement of its application :

“[W]here A makes a voluntary payment to B or pays (wholly or in part) for the purchase of a property which is vested in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B. The money or property is held on trust for A (if he is the sole provider of the money) or in the case of joint purchase by A and B in shares proportionate to their contributions.”

The presumption can be rebutted by proof that A did in fact intend B to take the property as beneficial owner.  In the case before me, there is no such evidence of rebuttal because of my findings that the Plaintiff is an entirely honest witness and that he did not intend that his eldest son should be the beneficial owner of the properties concerned.  Any benefit that the son might derive in future upon the happening of certain events was a benefit on a par with that of his five brothers.  The presumption of advancement upon which the Defendant relies is negatived because there is no evidence from which it can be inferred that the father intended to make a gift to his son other than that of the Defendant which I have rejected.

48.Adverting to Snell’s “Equity” again [31^st Edition – p 23.09] :

“Both the presumption of a resulting trust and the presumption of advancement can be rebutted by evidence of the actual intention of the purchaser… The clearest evidence of rebuttal is an express declaration of trust on the face of the conveyance of the legal estate. Even where this is absent the court puts itself, in the position of a jury, and considers all the circumstances of the case, so as to arrive at the purchaser’s real intention; it is only where there is no evidence to contradict it that the presumption of a resulting trust, or of advancement, as the case may be, will prevail.”

49.I do not propose to consider the matter of proprietary estoppels.  It adds nothing in my view to the principles of resulting trust and constructive trust.  My attention has been drawn to a practical and jurisprudential approach expressed in Hayton & Marshall’s “Commentary and Cases on the Law of Trusts and Equitable Remedies” :

“It is time that the Courts and Counsel moved beyond pigeon‑holing circumstances into common intention constructive trusts and equitable estoppels and concentrated upon the basic principle of unconscionability underlying both doctrines.”

50.Goff J, (as he then was) in Re‑Densham 1975 3 AER at p 732 reflected the growing trend :

“To hold such an agreement unenforceable unless in writing is, in my opinion, contrary to equitable principles, because once the agreement is formed, it would be unconscionable for a party to set up the statute and repudiate the agreement. Accordingly, in my judgment he or she becomes a constructive trustee of the property, so far as necessary to give effect to the agreement. That in my judgment was established long ago in Rochefoucauld v Boustead.”

51.If I may respectfully add, I think that Lord Goff was, in fact, refining that decision in the context of the development of the doctrine of constructive trust. 

52.Lam J in Ho Tak Ming v Chiu Ka Tsin & others HCA 3130/2001 encapsulated the position on constructive trusts by reference to a number of authorities :

“Constructive trust requires agreement, arrangement or understanding reached between the trustee and the beneficiary when the property was acquired. The common intention to support a constructive trust need not be as specific as the certainty of words for creation of an express trust. Such common intention can be inferred from evidence of express discussion between the parties or from conduct of the parties… Direct contribution to the purchase price is recognized in Lloyds Bank v Rosset as “conduct” readily justify[ing] the inference necessary to the creation of a constructive trust.”

53.In my view the unconscionability approach is appropriate, and I favour the term “constructive trust” as opposed to “resulting trust” as being the appropriate equitable term to describe the nature of the trust under which the Defendant holds these assets.

54.I should add in this context by way of a postscript to my findings, even though I have indicated this earlier, that it is beyond credence that the Plaintiff would have made gifts to the Defendant which effectively meant that he alone had the beneficial interest in the Nam Shing property, the Lai Shing property and the Bridge of Don property with the income flowing from all three, to the exclusion of any of his brothers as well as his father during the latter’s lifetime.

MISCELLANEOUS

The Plaintiff’s pleaded case

55.The Defendant sought to argue that the Plaintiff’s Statement of Claim is defective, deficient and does not plead his case in a manner which enables the Defendant to meet it effectively.  The argument is misconceived.

56.It pleads an express trust even though there is no document which meets the requirements of sections 3 and 5 of the Conveyancing and Property Ordinance (Cap 219), and there is no reason why the Plaintiff should not live in the hope that discovery might provide the requisite document.  In this case, some discovery from the Defendant came virtually “on the hoof” so the Plaintiff was justified in clinging to the plea and the hope, even though the damning document did not emerge.  Furthermore, the pleading contains an averment that reliance would be placed upon the doctrines of “Estoppel and Resulting and/or constructive trusts to support his claim” (para 17).  In my judgment, it was abundantly clear what the Plaintiff’s case was, and that parole evidence was the key to its equitable basis.  Whilst the pleading could have been more aesthetically and linguistically pleasing in its form and substance, it occasioned no problem for the Defendant’s lawyers.  No attempt was made by the Defendant to strike the pleading out in part or in whole.  His lawyers did not even consider it necessary to ask for any further and better particulars.  I allowed the Plaintiff to amend his Statement of Claim at the start of this trial in the face of the Defendant’s opposition, but the changes were largely cosmetic.  There was certainly no fundamental change in his case, merely a marginal increase in definition and emphasis.  I made it clear to Mr K M Chong that if he felt at some stage he needed more time to consider it, and if necessary, to amend his Defence and Counterclaim.  I would, of course, give him that opportunity.  He clearly, in the event, did not consider it necessary.

57.It is true that fraud was not expressly pleaded.  It was not necessary to do so.  By implication, if the Plaintiff established his case, an element of fraud arose from the Defendant’s case, but this was an action between father and son, and to introduce such an express allegation of fraud could be regarded as gratuitous and superfluous.  I cannot see how it, if pleaded, could have influenced the nature or substance of the Defendant’s case or how it was presented.  There were two questionable documents produced by the Defendant in discovery which Mr Hylas Chung termed as “bogus”.  These were letters purportedly sent by the Defendant to the Scottish solicitor, Mr John Hendry. Mr Hendry wrote that he had never received them.  They remain a curious feature in this case but are more of a sideshow.  Genuine or false, they do not affect the issues, but had they been found to be fabricated, their fraudulent creation would have enabled the Plaintiff to make a clear predictable point without having had to allege fraud.

DECLARATIONS

58.In accordance with my findings, the Plaintiff is entitled to a number of declarations to give effect to them.

The Lai Shing Property 

59.It is declared that :

The Lai Shing Property is held by the Defendant upon trust for the Plaintiff, and upon the death of the Plaintiff, upon trust for himself and his five brothers as tenants in common in equal shares:

Further it is ordered:

i)  that some other proper person, other than a member of the family be appointed Trustee of the said property jointly with the Defendant;

ii)  that the Defendant do pay hereafter to the Plaintiff all or any rental income received from the property, the Plaintiff being responsible for all payments necessary to be made in respect of the said property by way of management fees, utilities etc.;

iii)  that the Defendant provides an account of the rent, profits and/or monies received by the Defendant for the property;

iv)  that the Defendant returns to the Plaintiff all rent, profits and for monies received by the Defendant for the property subject to deductions upon documentary proof, in respect of all necessary payments made by him by way of management fees, utilities etc.

The Bridge of Don Property 

60.It is declared that:

The Bridge of Don Property is held by the Defendant upon trust for the Plaintiff, and upon the death of the Plaintiff, upon trust for himself and his five brothers as tenants in common in equal shares:

Further it is ordered:

i)  that some other proper person, other than a member of the family be appointed Trustee of the said property jointly with the Defendant;

ii)  that the Defendant do pay hereafter to the Plaintiff all or any rental income received from the property, the Plaintiff being responsible for all payments necessary to be made in respect of the said property by way of management fees, utilities etc.;

iii)  that the Defendant provides an account of the rent, profits and/or monies received by the Defendant for the property;

iv)  that the Defendant returns to the Plaintiff all rent, profits and for monies received by the Defendant for the property subject to deductions upon documentary proof, in respect of all necessary payments made by him by way of management fees, utilities etc.

I have not heard Counsel on the precise form of the orders and declarations to be made and have relied upon the prayer in the Amended Statement of Claim.  There is leave to apply, and in order to resolve this aspect application must be made for a hearing on, at the latest, 2^nd August 2012.

61.There will be an order that the Defendant pay the Plaintiff’s costs to be taxed if not agreed.  The Counterclaim is dismissed with costs.

Mr Hylas Chung and Mr Andrew Lee, instructed by Kitty So & Tong, for the Plaintiff

Mr K M Chong and Mr Lester Lee, instructed by Cheng, Chan & Co, for the Defendant