Tong Stella Wai Yan v. Wong Kwok Wing Wendy
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DCMP 1611/2012 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MISCELLANEOUS PROCEEDINGS NO 1611 OF 2012 -----------------------
----------------------- JUDGMENT ----------------------- INTRODUCTION 1.This is about a dispute over an apartment (“the Property”) in Kowloon which the plaintiff’s father (PW1) and the defendant had previously owned as joint tenants and occupied as a co-habiting couple. After their breaking up, PW1 severed the joint tenancy and years later assigned to the plaintiff his interest in the Property. The plaintiff, who resides not in Hong Kong but in the United States, applies for an order for sale and asks that the net proceeds be shared equally between herself and the defendant. 2.The defendant initially opposed the application. Affirmation evidence, written openings and case authorities were filed by both parties on the assumption that there would be argument on whether a sale should be ordered. However, at the commencement of the trial Mr Pun, counsel for the defendant, informed that the defendant would no longer oppose the sale. Thus, the remaining issue is one of apportionment only. THE ISSUES 3.It has been the position of Mr Leung, counsel for the plaintiff, that the parties should each be entitled to 50% of the net proceeds of sale of the Property. Mr Leung relied on the fact that the Property had been purchased and mortgaged in the joint names of PW1 and the defendant and therefore it was clear that their common intention was that there should be equal ownership. This was so, despite the plaintiff’s case that PW1 had in fact contributed more than the defendant had done towards acquisition of the Property and the subsequent repayment of the mortgage loan. Mr Leung submitted that there was no or not sufficient evidence to show any change of the common intention. As such, the plaintiff (as the successor in title of PW1) and the defendant should each be entitled to a 50% share. Mr Leung relied on Stack v Dowden [2007] 2 AC 432. 4.Mr Pun did not dispute that it had been the common intention of PW1 and the defendant that the Property be held in equal ownership. However, it was submitted that the common intention had changed as a result of events which occurred after the breaking up, with the result that a new common intention should be inferred or imputed that the defendant be entitled to more than a half share. Mr Pun relied on Jones v Kernott [2012] 1 All ER 1265. Alternatively, Mr Pun submitted that credits should be given to the sums the defendant spent on mortgage repayment and also maintenance and improvement of the Property after PW1 had ceased to repay any of the mortgage loan since January 2000. Reliance was placed on Cracknell v Cracknell [1971] 356, 363D-E. 5.Apart from the issue of apportionment, there is also a side issue of occupation rent. As the defendant has been in sole occupation of the Property after PW1 moving out in late 1997/early 1998, it was submitted by the plaintiff that the defendant should pay an occupation rent to her for the entire period that the defendant is in sole occupation of the Property. This was opposed by the defendant on the basis that the defendant was entitled to stay on the Property by virtue of her co-ownership. It was also pointed out that PW1 had moved out on his own account rather than being expelled by the defendant. In his closing submission, the position adopted by Mr Leung was that, in order to facilitate the sale of the property and a matter of fairness, the defendant should be ordered to vacate the Property on or before a date to be fixed by the court and if the defendant fails to compile with that order, then she should be made to pay an occupation rent to the plaintiff after that date. Mr Pun’s position is that the defendant should be allowed to stay until before the completion of the proposed sale and there should be no occupation rent. THE RELEVANT LEGAL PRINCIPLES 6.The leading authority of the relevant law is the judgment of the English Supreme Court in Stack v Dowden, supra. The starting point is that in the case of the purchase of a house or flat in joint names for joint occupation by a married or unmarried couple, where both are responsible for any mortgage, there is no presumption of a resulting trust arising from their having contributed to the purchase price in unequal shares. The presumption is that the parties intended a joint tenancy both in law and in equity. But that presumption can be rebutted by evidence of a contrary intention, which may more readily be shown where the parties did not share their financial resources. 7.The principle in Stack v Dowden has been applied and developed in the subsequent cases and the most important of which is the judgment of the Supreme Court in Jones v Kernott, supra. It is noted that in Stack v Dowden, the search is primarily to ascertain the parties’ actual shared intentions, whether expressed or to be inferred from their conduct. However, in Jones v Kernott, the court goes further and holds that in appropriate cases where the actual intentions cannot be ascertained or inferred, the court may impute an intention to the parties which they might never had, by reference to what the court considered fair having regard to the whole course of dealing between them in relation to the property. The distinction between inference and imputation is clearly explained in the minority judgment of Lord Neuberger in Jones Kernott as follows:-
8.The principles of “common intention constructive trust” in respect of family home in joint-name cases, as recast in the joint leading judgment of Lord Walker and Lady Hale in Jones v Kernott, to which Lord Collins, Lord Kerr and Lord Wilson agree, are as follows:-
Although Lord Kerr and Lord Wilson in the minority differed from the other members of the court as to whether there was sufficient evidence in that case to infer a change of the common intention of the parties, both of them concurred with the majority that the appeal should be allowed but on the different basis that such a change of intention should be imputed to the parties. 9.An example of the court imputing an intention to the parties can be found in Aspden v Elvy [2012] 2 FCR 435, where Behrens J, applying Jones v Kernott, found that there had been no express discussions between the parties as to the value of the claimant’s interest and that it was necessary to impute an intention by reference to what was fair having regard to the whole course of dealing between them. 10.As regards Cracknell v Cracknell, it concerned taking accounts between a divorced couple in matrimonial proceedings. In this regard, I note that the equitable accounting applies whether the parties are married or not. I note also that the credits and debits in the accounting exercise do not alter the shares in the property, but operate to adjust the sums ultimately payable on sale: see Snell’s Equity, 32nd edition, §20-063. However, I also note that such equitable accounting between the parties should normally be considered only after the property has been sold: Wilcox v Tait [2007] 2 FLR 871. THE RELEVANT EVIDENCE AND FACTS 11.In the present case, as it is the defendant who asserts that there was a change of the common intention between PW1 and herself as to their respective shares in the Property, the burden is on her to satisfy the court, on balance of probabilities, that that was the case. 12.Because of the common ground between the parties that the Property was purchased by PW1 and the defendant with the common intention at there should be equal ownership regardless of the respective amounts contributed by the parties, this Court is saved from making findings on a number of matters about which the parties have given different versions. Examples of such peripheral matters include but not limited to the following:-
13.For the present purpose, the facts can be summarized as follows. PW1 was a married businessman. Like many people in Hong Kong in 1980s, PW1 and his family had emigrated to Canada and he alone shuttled between Canada and Hong Kong looking for business opportunities. When he was in Hong Kong, he would lodge at different places including his sister’s home. In or about late 1985, he formed an intimate relationship with the defendant who was then also lodging with his sister. At the time, PW1 was about 38 years’ old and the defendant about 25. The defendant knew that PW1 was a married man. However, PW1 seemed to have told her that he had already separated from his wife and was going to have a divorce. 14.PW1 and the defendant had intended their relationship to be a long-term one. Therefore, sometime after their co-habitation they started to look for a property as a family home. A joint bank account was opened for the intended purchase. Eventually, in 1996 they came down to the Property which was at Flat C, 1st floor, To Yuen Mansion, 39 To Yuen Street, Kowloon. Money from the joint bank account was used for part payment. Besides, both PW1 and the defendant contributed additional monies for the acquisition and PW1 agreed that the defendant’s contribution was about $500,000. Moreover, a $1 million mortgage loan was taken out the repayment of which both of them were jointly liable. 15.PW1 and the defendant moved in the Property in June 1996 and co-habited there as a couple. However, their relationship came to an end in early July 1997 after the defendant’s return from a trip to Canada. It is not entirely clear from the evidence what the cause of the breaking up was. It is apparent that whilst in Canada, the defendant had occasion to meet PW1’s family and was able to see for herself PW1’s family situation there. There is evidence that PW1 and his wife only separated in Canada in about 1992 and up to the day of the trial that marriage had not been formally dissolved. The court was also told that PW1’s wife was and is his business partner. 16.After the breaking up, PW1 proposed to sell the Property. It was PW1’s evidence that he proposed to split the proceeds equally but the defendant refused to sell. The defendant’s evidence was that PW1 had only offered to pay her $1 million but she wanted a roof over her head. I do not find it necessary to decide which version is to be accepted. Assuming that the Property was worth about $2.8 million at the time, after deducting the outstanding mortgage,[1] expenses and costs, a 50% split of the net proceeds would be more or less $1 million. 17.On 20 August 1997, PW1 executed a notice of severance so that he and the defendant became tenants-in-common of the Property. The notice of severance was registered with the Land Office on 30 August 1997. The defendant, however, denied that she had been aware of the severance. Her evidence, which I accept for the reasons to be given below, was that she only became aware of the severance as late as 2011. 18.PW1 said that he moved out of the Property in late 1997 or early 1998. After that, there had been virtually no contacts between him and the defendant. As PW1 ceased to pay the management expenses of the Property from February 1998 onwards, the inference is that he had already moved out before that month. 19.For the sake of convenience, I list out the chronology of events, which is largely not in dispute, as follows:-
20.The defendant remains single and is still living in the Property. She said that she has finished her study of Chinese medicine but has not practiced because of her ill health and lack of capital. She attributed her bad health to her abortions. She said that apart from the Property and a small amount of cash, she has no other assets. She said that she relies on her family members, who are living in Guangzhou, for financial assistance. SUBMISSIONS ON CHANGE OF COMMON INTENTION 21.Mr Pun relied on the following and argued that there had been a change of the common intention:-
22.Mr Pun submitted that in view of the above PW1’s interest in the Property, like the situation in Jones v Kernott, should have crystallized at a time which was no later than 2008. Alternatively, it was submitted that the defendant should be entitled to the increase in the value of the Property as a result of the repairs or improvement done by the defendant and also of the capital element in the repayment of mortgage installments made by her ever since PW1 had left the property in late 1997 or early 1998. 23.Mr Leung, on the other hand, submitted that none of the above events relied upon by the defendant evinced a change of the common intention of equal ownership between PW1 and the defendant. CONSIDERATION OF SUBMISSIONS Notice of severance 24.PW1 was 13 years older than the defendant. I find that the proper inference of PW1’s purpose of executing the notice of severance is that he wanted to avoid the defendant getting his interest in the Property by the right of survivorship. However, the effect of the severance was not to create unequal shares immediately between PW1 and the defendant, as it was stated in the notice that “the Property shall henceforth belong to you and me in equal shares”. 25.As to when the defendant became aware of the severance, I accept the defendant’s evidence that she only became aware of it until 2011. My reasons are as follows:-
26.I remind myself that a secret intention harboured by a party is not relevant since it cannot support an inference of a shared intention: see Fowler v Barron [2008] EWCA Civ 377, at §§ 37, 52 & 57. I also remind myself that in the present case the primary search is about the common intention of the parties which is to be deduced objectively from their conduct. The relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words or conduct notwithstanding that he or she did not consciously formulate that intention in his or her own mind or even acted with some different intention which he or she did not communicate to the other party. 27.In my judgment, the fact that PW1 executed the notice of severance, on its own, is not evidence of a change of the common intention. However, the severance allowed the possibility of future changes in the shares by subsequent events. Moreover, I find that the proper inference to be drawn is that PW1 was aware of that possibility as he had engaged solicitors to help him prepare the notice of severance. Purchase of other properties by PW1 28.As regards PW1’s purchase of the office premises for APL and the Mei Foo property in 2002, the situation was not similar to Jones v Kernott.[2] The Supreme Court has emphasized that each case will depend on its own facts. In that case, the majority of the court was able to infer a change of common intention of the parties from the fact that after their separation they cashed in a joint life insurance policy so that Mr Kernott was able to buy a new home for himself. There was also a finding that Mr Kernott would not have been able to do this had he still had to contribute towards the mortgage, endowment policy and other outgoings on the premises the subject matter of the dispute. The inference that the majority of the court drew was that the parties intended that Mr Kernott’s interest in the subject premises should crystallize then. Just as he would have the sole benefit of any capital gain in his own home, Ms Jones would have the sole benefit of any capital gain in the subject premises. 29.In the present case, however, there is no evidence before me that the purchase prices of the office premises or the property in Mei Foo came from any joint resources of PW1 and the defendant. Moreover, there is nothing to suggest that PW1 would have not been able to purchase these two properties had he still had to contribute towards the mortgage and other outgoings of the Property. There is no evidence before me as to PW1’s purposes of the purchases and none was suggested by Mr Pun. Moreover, there is no evidence before me that the defendant was aware of PW1’s purchase of the two properties at the time. 30.In my judgment, the purchase of the two properties and the subsequent disposal of one of them is not evidence from which a common intention can be inferred or imputed. Was there a change of the common intention 31.Based on the evidence before me, I make the following findings and draw inferences which are objectively deduced from the conduct of PW1 and the defendant:
32.By applying Jones v Kernott, in deciding what each party is entitled to, the court has to consider what is fair having regard to the whole course of dealing between PW1 and the defendant in relation to the Property. In this regards, I take into account the following:-
33.By a rough calculation, if one takes into account the respective expenses of PW1 and the defendant on the Property after the breaking up of their relationship, the ratio is $427,955.96: $570,728.65 which is about 4:6. In all the circumstances, I consider this to the fair ratio of the respective shares of PW1 and the defendant in the net proceeds of the Property. Equitable Accounting 34.Given my decision above, I do not think it is necessary to consider the question of equitable accounting. In fact, even if there should be an equitable accounting between the parties, it would be more appropriate for it to be done after the sale of the Property and perhaps the filing of further evidence as regards their respective expenditure relating to the Property. DIRECTION FOR SALE 35.The parties have reached substantial agreement for the mechanism of the proposed sale. I am content with their agreement. There are only two matters which require my direction:-
36.As regards (i), I see no reason why the defendant should be required to vacate the Property before the completion of the proposed sale, provided that she is willing to give reasonable access to potential purchasers to inspect the Property on reasonable notice. 37.As to whether the defendant should pay an occupation rent from the date of this judgment up to the date she vacates from the Property, that has not been pleaded in the prayer of the originating summons. Moreover, there is no evidence before me as to what the level the market rent is. In the circumstances, I am not inclined to make such an order. Of course, if the defendant fails to vacate the Property on or after the completion of the proposed sale, that would be subject matter of a separation cause of action. 38.As to (ii), for the sake of avoiding any future problem on title, I direct that the Registrar of the District Court should sign on behalf of a party on a document relating to the proposed sale who refuses to do so. ORDER 39.I make the following orders and directions pursuant to s 6 of the Partition Ordinance, Cap 352, and Order 31 of the Rules of the District Court, Cap 336H:-
40.As mentioned above, the defendant’s concession to the application for sale of the Property was made at the eleventh hour. That belated concession had reduced much of the relevancy of the affirmation evidence and written submissions filed. Had the concession be made earlier, a lot of costs may have been saved and the matter may have been dealt with earlier to the benefit of both parties. Because of this, I also make an order nisi that there be no order as to costs.
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