Hong Kong Hua Qiao Co Ltd v. Cham Ka Tai

HCA 2619/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTIONNO 2619 OF 2005

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J U D G M E N T

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INTRODUCTION

1.On 3 June 1997, Mr Lee Daw Dai (Mr Lee) then aged 62, tragically died in an accident in Fujian province in the Mainland.  He died intestate.  He is survived by his wife, Wong Tin Tai (Madam Wong) an adult son Lee Kin Wai (Lee Kin Wai) and an adult daughter.

2.It was not until 2 July 2002 that a Notarial certificate of death was received from the Mainland authorities.  Consequently, it was not until 17 February 2003 that Letters of Administration in the estate were granted to Madam Wong.

3.Ms Cham asserts that she was living with Mr Lee at the time of his death, and that they had been in a domestic relationship since about November 1992.  Ms Cham says that during his lifetime Mr Lee had given her certain promises or assurances that she would be entitled to two properties and the shares in a company, Hong Kong Hua Qiao Company Ltd, (the company).

4.I will refer to those opposing Ms Cham’s proceedings, (his wife, Madam Wong, son Lee Kin Wai, daughter-in-law, Lee Ye Mei, (Lee Kin Wai’s wife,) and the company, collectively as “the family”.

5.The two properties are, first, Flat B 23/F,Yuet Fat Mansion, 9 Kau Pui Chik St, Tai Po, (Yuet Fat Mansion).  This property was owned by Mr Lee, and is now owned by Madam Wong in her capacity as administratrix of Mr Lee’s estate.  The other, Flat F/1F and Flat Roof, Foon Lok Mansions, 14 & 24 Tai Wing Lane, Tai Po, (Foon Lok Mansions) is owned by the company.  The company accepts that this property was used for Mr Lee’s business activities.

An intestacy:

6.Under the provisions of s 4, Intestates’ Estate Ordinance Cap 73, Mr Lee’s estate would have gone, as to the first $500,000, to his widow, and as to the balance, one half to the widow, and the other half to his son and daughter.

7.There was no evidence as to the extent of Mr Lee’s estate.  Surprisingly, there was no evidence from the estate as to the value of either of the two properties, or specific details of the mortgage over Yuet Fat Mansion.

8.An assertion by Ms Cham that she had given Madam Wong a necklace valued at about $10,000 as a gift, and that Madam Wong had properties in United Kingdom and at Wai Ha Village, Shuen Wan, as a residence was not denied at all.  There was no evidence from Lee Kin Wai or Lee Ye Mei as to any assets they had other than that Lee Kin Wai operated restaurants in the Liverpool area in the UK.  Mr Lee’s daughter apparently took no interest in the proceedings.

The proceedings:

9.By the original action the company sought possession of the Foon Lok Mansions property, alleging that Ms Cham had wrongly entered it and taken possession of it by trespass.

10.By counterclaim, and by way of defence to the action, Ms Cham asserts her entitlement to both properties and the shares in the company.  The pleadings in the counterclaim are unfortunately repetitive and prolix, but sensibly distilled amount to:

(i)   assertions of express oral agreements between Mr Lee and Ms Cham to transfer the two properties and the shares to her;

(ii)   that Ms Cham has rights based upon proprietary estoppel;

(iii)   that the properties were held on an express and/or implied and/or resulting and/or constructive trust for Ms Cham.

11.As Ms Cham carried the burden of proof of establishing her assertions I directed that she should commence the hearing.

12.At the time of trial the contention that there might be express oral agreements was sensibly abandoned.  Mr Kwong was ultimately content to base Ms Cham’s claim, first upon proprietary estoppel, and second upon a common intention constructive trust.  The contention for the family, made by Mr Chan, was that having regard to the factual circumstances, neither a proprietary estoppel, nor a common intention constructive trust was established in these proceedings.

The property:

(a)     the company:

13.The company was incorporated on 9 December 1986.  There were three directors, Mr Lee, a man named Wan Kwok Shing and a man named Wan Yun Sang.  Neither Mr Wan was called as a witness by either side. There were two shareholders, Mr Lee and Wan Yun Sang. 

14.Between 1986 and 1989, the shareholding of the company went through a number of changes.  In April 1988, the time of purchase by the company of Foon Lok Mansions, the shareholders were as at incorporation. 

15.In April 1988, shortly after the purchase of Foon Lok Mansions, 998 new shares were issued by special resolution to Mr Lee and seven other persons.  Mr Lee then held 251 shares and the six others 750 shares between them.  In December 1992, the shareholding changed again, with Mr Lee now holding 999 shares, and his wife, Madam Wong, holding one share.

16.The shareholding remained in that form until Mr Lee’s death.  No explanation was offered for the increase in the shareholding, or the reasons why six other persons needed to hold the majority of the shares at the time of the purchase of Foon Lok Mansions, or their later disposal of shares to Mr Lee and Madam Wong.

17.The 3 directors at the time of incorporation remained directors until December 1994, when Wan Kwok Shing resigned.  Mr Lee and Wan Yun Sang remained the directors of the company until the death of Mr Lee on 3 June 1997.

18.On 24 February 2005, two years following the grant of Letters of Administration, a document was filed in the Companies Office, signed by Lee Ye Mei, stating that Wan Yun Sang had ceased to be a director, and that Madam Wong and Lee Ye Mei had become directors of the company on 3 June 1997, the date of Mr Lee’s death.  The document also records that on 1 December 1997, United Secretaries Ltd ceased to be the secretary of the company and Lee Ye Mei became the secretary.  There is no evidence from Wan Yun Sang as to the circumstances in which he ceased to be a director of the company.

19.It is difficult to see how the change of directors or secretary on either 3 June 1997, (the date of death) or on 1 December 1997, (the date alleged in the document) could have lawfully happened, because Letters of Administration had not, at either of those dates, been granted.  There was nobody with lawful authority to take the necessary steps. However, nothing turns upon the point, and as the document was prepared by solicitors, I am satisfied that both Madam Wong and Lee Ye Mei were entitled to rely upon the solicitors.  Consequently, the matter does not tell against Lee Ye Mei on credibility.

The pleadings:

20.In due course the evidence that I set out will show that it is Ms Cham’s case that Mr Lee physically handed to her the title deeds to Foon Lok Mansions.

21.In an Amended Defence and Counterclaim it had been pleaded that in so handing the title deeds to Ms Cham, Mr Lee intended to create an equitable mortgage securing advances made by Ms Cham to him.  In cross-examination Ms Cham was taken to these pleadings, which had been deleted in a Re-Amended Defence and Counterclaim, and her case confined as I have set out above.  The contention of an equitable mortgage was abandoned.  It was quite apparent from that cross-examination that Ms Cham had no understanding at all of the legal niceties constituting the pleading.

22.The Amended Defence and Counterclaim had been filed prior to the requirement of a statement of truth pursuant to RHC O 41A.  Even if it had contained such a statement of truth, the contradiction between the pleading and the case now advanced is not a matter that would have led me to reject Ms Cham’s evidence.

23.Ms Cham had plainly told her solicitors of the facts, in order that they might prepare her pleadings.  The Amended Defence and Counterclaim was drafted by counsel who did not appear at the trial. Having set out the facts, the contention of an equitable mortgage was then pleaded.  The fact upon which Ms Cham relied was the delivery of the title deeds.  It was for her solicitors and counsel, in the pleadings, to formulate the legal consequences of those facts, in order that the cause of action relied upon might be clear.

24.I have no doubt at all that there may well be circumstances in which the delivery of title deeds would constitute an equitable mortgage of a property rather than a substantive transfer of title in the property to the holder of the title deeds.  Such contentions are not facts; instead they are legal conclusions to be drawn from proven facts. 

25.Ms Cham’s solicitors might well have better explained the pleading to her, or if they have, she has not grasped the legal concepts involved.  But the contradictions are contradictions in legal conclusions and do not go any way at all to cast doubt on Ms Cham’s veracity. I place no weight at all on the cross examination concerning the pleading.

The company accounts:

26.Obviously relevant documents in the proceedings were the accounts of the company.  Accounts for the years from August 1989 to August 1995 were all signed by Mr Lee.  The accounts for the years from August 1996 to August 2004 had been signed in February 2005, by Madam Wong.  The writ was issued in December 2005.  All of those accounts were accordingly available and in the possession of the family prior to the issue of the writ.

27.The accounts for the period from August 2005 to August 2011, were signed in September 2011 by Madam Wong and Lee Ye Mei.  Those accounts were accordingly available and in the possession of the family for 19 months prior to the trial.

28.Despite requests that had been made to the solicitors for the family, by the solicitors for Ms Cham for those accounts, they were not made available until five days prior to the trial. Notwithstanding that the solicitors for the family had been ignoring requests from Ms Cham’s solicitors for the accounts over a 3 year period; no application for specific discovery was made by Ms Cham.  I was told that this was out of an abundance of caution and in order not to incur unnecessary cost.  That is an explanation that is both difficult to understand or accept.   I see no reason for caution as such an application was not, in the light of the nature of the proceedings, an unnecessary or prohibitive expense.

29.Having demanded the accounts, Ms Cham’s position when they were available was that they should not be admitted in evidence as it was too late.  It is right that Ms Cham was prejudiced by the delay, but delay alone is not a basis upon which relevant documents should be excluded from proceedings.  Mr Kwong sought to say that the accounts enabled the family to raise an inference against Ms Cham on a particular issue.

30.I was satisfied that they were proper documents which ought to have been discovered.  While the inference that concerned Mr Kwong was open, other inferences could be drawn from the accounts.  I accordingly took the view that justice demanded that all proper evidence should be before the court in reaching its decision.

31.Ms Cham’s advisers had had five days prior to the commencement of the trial to consider the accounts.  In those circumstances I allowed the accounts to come in, reserving the question of costs.

Ms Cham’s claims:

32.Ms Cham asserts that she is entitled to ownership of both properties and the shares in the company.  There was no disagreement between counsel as to the legal principles to be applied in that respect, and I shall deal with those following my consideration of the evidence.

Evidence in claims against an estate:

33.Mr Chan properly reminded me that a court should be cautious against the danger of relying upon the uncorroborated evidence of a claimant in a claim against the estate of a deceased person.  As stated in Cross & Tapper on Evidence, 12^th Edn. p 262:

“A claim against the estate of a deceased person will not generally be allowed on the uncorroborated evidence of the claimant, but there is no rule of law against allowing it in England. The absence through death of one of the parties to the transaction calls for caution in such a case, but claims have been allowed when there was no corroboration.”

A similar statement is made in Phipson on Evidence, 17^th edn. §14-11.  I note also the comment of Walton J in Re Gronin, deceased [1979] Ch 16 at 32F:

“Now, it is common sense that all claims against the estate of a deceased person, which had not been put forward while they were still living, fall to be scrutinised with considerable care, for the obvious reason that the other party to the agreement is in the nature of things unable to give his or her version of events.”

34.A second matter to which I must have regard is the fact that this is not a case of a husband-and-wife, but of a man and his mistress.  That the parties were not married is a matter that must be taken into account.  Mr Chan properly referred me to the comments of Griffiths LJ in Bernard v Josephs [1982] Ch 391 at 402E, CA:

“Most of the decided cases have been dealing with married people. The legal principles to be applied are the same whether the dispute is between married or unmarried couples, but the nature of the relationship between the parties is a very important factor when considering what inferences should be drawn from the way they have conducted their affairs. There are many reasons why a man and a woman may decide to live together without marrying, and one of them is that each values his independence and does not wish to make the commitment of marriage; in such a case it will be misleading to make the same assumptions and to draw the same inferences from their behaviour as in the case of a married couple. The judge must look most carefully at the nature of the relationship, and only if satisfied that it was intended to involve the same degree of commitment as marriage will it be legitimate to regard them is no different from a married couple. (The emphasis is Mr Chan’s).

35.A similar sentiment came from Kerr LJ at 408D:

“However, in agreement with Griffiths LJ I also consider that cohabitation and marriage, in contrast to a less permanently intended relationship, may of course have an important bearing on the ascertainment of their common intention and on the determination of an appropriate apportionment of their respective rights to the property in which they live.”

36.These principles have been recently reinforced by the House of Lords in Stack v Dowden [2007] 2 AC 432, where Bernard v Josephs was cited with approval; see Baroness Hale of Richmond at §40 and Lord Neuberger at §103.

37.I have had had due regard to these principles in my consideration of the evidence in this matter.

The evidence:

Ms Cham:

38.Ms Cham’s evidence was that she had met Mr Lee in October 1988, when she had been asked to join a cruise tour out of Hong Kong.  The tickets had been purchased through the company and in the course of that a friend had introduced her to Mr Lee.  After the trip she went to the company premises to play mahjong, and through that came to know Mr Lee better. At that time Mr Lee was spending a good deal of time in the United Kingdom where he had restaurant interests.

39.A relationship began, she said, between them in mid-November 1988.  She said that the relationship was then kept confidential as both were married.  She said that in December 1988, she was in Liverpool, UK, visiting relatives and arranged to meet Mr Lee.  They arranged to travel together to Wales.  Her evidence was that Mr Lee did not inform his family of that trip, as a result of which family members made a report to the police in respect of his absence.  There was no denial from Lee Kin Wai of that event. Mr Lee and Ms Cham made other trips together to Europe.

40.She said that in April 1989, when they were together in Hong Kong they exchanged rings.  Her evidence was that Mr Lee closed his restaurant business in the UK between 1990 and 1991, and returned to Hong Kong. Once back in Hong Kong he spent his time at the company premises where friends would call to play mahjong and from which he operated a business providing airline and tour tickets.

41.Ms Cham said that she assisted in serving customers, providing tea, sitting in when necessary at the mahjong table and similar tasks.  Her evidence was that initially she was offered a salary of $3,000 per month for this work.  She said that if Mr Lee’s wife was not staying at the Yuet Fat Mansion flat, she and Mr Lee would sleep there together.  If Madam Wong was at that flat they would sleep in a hotel.

42.She said that in 1992, she suggested to Mr Lee that he should buy out the other shares from the shareholders but that Mr Lee said that he did not have sufficient funds.  She offered the funds, saying that the shares could be held in both their names, but because one of the shareholders was reluctant to sell, the transaction did not proceed.  She said that that shareholder was reluctant to sell to her because she was pro-English, or “rightist”, whereas the shareholders were patriotic Chinese, or “leftists”.

43.Her evidence was that Mr Lee then said that he would have just enough money himself to buy the shares and the transaction proceeded.  Subsequently, she said, he told her that Madam Wong was unaware that one of the shares had been transferred into her name, and that he had signed the documents to effect that transfer.  Consequently, she said, he told her that at any time he could transfer that share into another name by signing the signature that he had used for Madam Wong to acquire the share.

44.Madam Wong was not called to deny that evidence.

45.In 1992, she said that Mr Lee was in the process of building a small house at Wai Ha Village, which when complete was to be used as a home by Madam Wong.  Her evidence was that he told her that he could then transfer the Yuet Fat Mansion property and the shares of the company to her as a gift, and that they could live at Yuet Fat Mansion until they died.  She said that he said that the company would continue to serve as a place for his Chinese friends to play mahjong and to talk politics.

46.In 1992/1993 the Wai Ha Village small house was completed and Madam Wong moved there.  At about the same time Ms Cham separated from her husband and she and Mr Lee began to live together, effectively as husband and wife, although unmarried, at Yuet Fat Mansion.

47.Ms Cham said that after they began to live at Yuet Fat Mansions, Mr Lee repeated the promises that he had made to transfer both the Yuet Fat Mansions property and the shares in the company to her as a gift.  He assured her, she said, that she could live at the Yuet Fat Mansions property for the rest of her life and that she need not worry that she had nowhere to live or that her living was not protected.

48.Her evidence was that on numerous occasions Mr Lee asked her for money to settle the company’s Government rates and water bills and that on one occasion she gave him HK$30,000 cash.  Her estimate was that over the years she had given Mr Lee as much as HK$800,000.  Her evidence was that on the occasion that she gave him HK$30,000, the purpose of which was to make a donation to a “handover committee”, Mr Lee assured her that both the company and the Yuen Fat Mansions a property would belong to her in the future.

49.She said that although she had been offered by Mr Lee a salary of $3,000 per month, in fact she only received tips from customers.  That evidence was, on its face, said to be inconsistent with the company accounts which, when finally produced, arguably showed that some salary had been paid to someone.

50.The accounts showed that the following sums for were paid: 1989, $53,155; 1990, $6,000; 1991, $12,000; 1992, $24,000; 1993, $18,000; 1994, $12,000; 1995 $13,000.  I reject the concept that these sums represent a salary paid to Ms Cham for two reasons.

51.First, they are under an entry in the accounts which says: “Salary & allowances”.  There is nothing in the accounts to indicate whether the payments recorded were a salary to an employee or an allowance paid to a director or shareholder.

52.Second, there was no evidence as to whom those payments had been made.  Apart from 1989, the sums paid border on the derisory. In 1989, the sum amounts to $4,430 per month, which might at that time had been considered a reasonable monthly salary someone helping out in a mahjong parlour.  But the remainder of the payments are more akin to an allowance paid to a director for otherwise unpaid work on behalf of the company.

53.Ms Cham’s evidence was that prior to 1995, she had been investing in shares, which presumably provided her with capital and income.

54.There was nothing in the documents before the court, to demonstrate the actual source of her funds or to show how she could have given Mr Lee a total of sums which she said were in the order of HK$800,000.  When pressed in cross-examination she said that she had made money in the stock market, in gold trading, contributions from her children, and, as I understood it, from a property owned by herself and her former husband.  No attempt had been made by the solicitors for the family to require Ms Cham to produce any documentary evidence to support her source of funds or income.  There was no evidence to detract from Ms Cham’s answers.

55.Ms Cham said that in about 1995, Mr Lee and his cousins decided to buy property at Wai Ha Village, in particular a piece of land which she, Ms Cham, had intended to buy.  Although Ms Cham wished to be involved in the purchase Mr Lee said that it was “inconvenient” for her to join the development.  Having regard to the domestic arrangements, that is entirely understandable.  Ms Cham said that she gave Mr Lee $100,000 so that he could become involved in the investment.

56.Ms Cham said that in 1996, she and Mr Lee, together with a neighbour Ho Kei Chun, decided to make an investment in small houses.  Mr Li promised to transfer 300 shares in the company to Ms Cham, so that their share of the investment could be made by way of the company. 

57.Of the documentation that was produced to substantiate the expenditure, virtually all came from the period following the death of Mr Lee.  Ms Cham asserted, without any evidence to substantiate the assertion, that documents relating to payments prior to his death had been removed by his family.  However it was not in dispute that from the death of Mr Lee, up until 1998, Ms Cham paid management fees and, up until 2006, the government rent and rates in respect of Yuet Fat Mansion.  It was not in dispute that, since the death of Mr Lee, and also after moving into Foon Lok Mansions, Ms Cham has paid not only government rates, but insurance and all other expenditure in respect of Foon Lok Mansions, including management fees.

58.No evidence was led by the family to contradict these payments.

59.Ms Cham’s evidence was that in 1996, Mr Lee took her to the Kwangtung Bank near Foon Lok Mansions.  While she waited for him outside, Mr Lee went to a safe deposit box at the bank.  They then returned to Foon Lok Mansions, when Mr Lee gave her documents constituting the title deeds to Foon Lok Mansions, saying:

“Wife, this is the title deeds of Foon Lok Mansion. I promised you that I would transfer it to you, I now give it to you. You keep the title deeds. Even I am the major shareholder of the company, I cannot sell it. When there is profits generated from the small houses in the Wai Ha Village, we would redeem the mortgage from the bank and take back the title deeds of Yuen Fat Mansions. It would be convenient to do the transfer of ownership of the two properties to you together. Further, regarding the transfer of 300 shares of the company, you need to get an accountant to prepare the documentation that won’t be completed so soon.” (sic)

60.Ms Cham has since that time kept the title deeds to the Foon Lok Mansions property in a safe deposit box. The evidence in respect of the 300 shares in the company was corroborated by a letter dated 6 May 1997, from the corporate service company which dealt with the company, in which draft documents for the transfer of 300 shares to Ms Cham were sent to Mr Lee.

61.Ms Cham said that in March 1998, Lee Kin Wai, and Madam Wong’s brother, Wong Tin Choi, came to Foon Lok Mansions, where Mr Wong demanded that she should move from Yuen Fat Mansions, to Foon Lok Mansions, and live there.  Mr Wong said that there was an $800,000 mortgage on Yuen Fat Mansions, and that they wished to let the property to repay the mortgage.  Ms Cham said that because she was still upset over the death of Mr Lee she did not argue with them and moved accordingly.  She said that in the past she had asked Mr Wong if they would demand that she move away from Foon Lok Mansions, but he had assured her that they would not, and that she could continue living there.  Mr Wong was not called to challenge that evidence.

62.Ms Cham said that prior to the commencement of the legal proceedings, 8 1/2 years after the death of Mr Lee, at no stage at all was she ever asked to return the title deeds of the Foon Lok Mansions property to Mr Lee’s family.

63.Ms Cham said that in 2004, Lee Ye Mei, Madam Wong and an unknown man came to Foon Lok Mansions, and demanded that she should leave the property.  A number of other persons were present playing mahjong. There was a dispute, and the police were called.  She said that one of the mahjong players told the police that she was the late Mr Lee’s “wife” and was known as “Mrs Lee”. 

So Hung Fai and Ho Kei Chun:

64.So Hung Fai was present on the occasion set out in the previous paragraph.  His evidence corroborated Ms Cham’s evidence of that event.  He was not cross-examined, and I have no reason to doubt his evidence which I accept.

65.Ho Kei Chun was a neighbour who lived close to Foon Lok Mansions.  He and Mr Lee were able to chat with each other across their respective balconies.  He confirmed that Mr Lee had told him that Ms Cham was Mr Lee’s wife, and that she was referred to as “Mrs Lee”.

Cham Kam Sang:

66.Mr K S Cham is Ms Cham’s brother.  His evidence was that in about 1992/1993 he learned of Ms Cham’s separation from her husband, and that she was now living with a man called Mr Lee.  He was concerned about that, because he felt that his sister was a simple person and worried about her relationship with a married man.  Ms Cham told him that she was treated very well and that Mr Lee had promised to give her Yuet Fat Mansion, where they lived together, and Foon Lok Mansion as gifts.  Mr K S Cham found this to be reassuring.

67.Mr K S Cham said he met both his sister and Mr Lee about 10 times, in the course of visits to a home for the elderly where Mr Cham and Ms Cham’s mother was living.  Each time he spoke with Mr Lee, and through that he said he came to believe that Mr Lee and his sister had a stable relationship. 

68.From time to time Mr K S Cham would go to the Foon Lok Mansions property to chat with Mr Lee.  He said that they had much in common, as they each had brothers from the same village who had settled in Liverpool in the United Kingdom.

69.Mr K S Cham said that towards the end of 1996, Mr Lee, Ms Cham and he had dinner together at a seafood restaurant in Tai Po. Mr K S Cham raised with Mr Lee the promises that he had apparently made, seeking confirmation that Mr Lee would:

“..shoulder a man’s responsibility to take care of my sister.”

His evidence was that Mr Lee told him that he really did promise to give the Yuen Fat mansions Property in which they lived and the Foon Lok Mansions property and 300 shares in the company to Ms Cham.  Mr K S Cham said that he felt relieved for his sister when he heard this.

70.Mr K S Cham presented as a respectable man who, in retirement, had dedicated himself to educating young people about survival skills in the wild and herbal medicines in the countryside of Hong Kong.  No evidence was given to rebut his evidence.  The attack against him in cross examination was that there was no reason why Mr K S Cham would remember the events described after a long lapse of time, and it was unbelievable that he would seek verification of the promises some time after the promises were made.

71.I reject those challenges.  First, it is perfectly understandable that a brother would seek to verify such a promise from the man living with his sister.  Second, it is entirely believable that such a matter would be raised during dinner together, rather than when visiting an elderly mother living in a home.  Third, it is equally believable that a brother would remember seeking and getting such verification.  I accept Mr K S Cham’s evidence, which corroborates Ms Cham’s evidence as to the promises made by Mr Lee.

Lee Kin Wai:

72.Lee Kin Wai went to study in the UK in 1974 and, apart from visits to Hong Kong from time to time, remained living and working in the UK, where he owns restaurants.  Although he asserted that he did not observe any intimate relationship between Ms Cham and his father, that assertion does not lead me to disbelieve Ms Cham’s evidence as to the nature of that relationship.  It is not surprising that a father may seek not to disclose an adulterous relationship to his son.

73.His evidence that there were repeated demands and requests to Ms Cham to return the keys and title deeds of Foon Lok Mansions was not substantiated by any evidence, other than the evidence of the one visit by Lee Kin Wai’s wife and his mother in 2004. 

74.He denied that Ms Cham was asked to move out of Yuen Fat Mansion in order that the property may be rented but gave no evidence as to the circumstances in which she did leave that property.  There is no doubt that his mother was living in Wai Ha Village, and that Ms Cham had been living with Mr Lee in Yuet Fat Mansions, prior to Mr Lee’s death, and that she remained there for some time after his death.  These were facts which required an explanation.  I have already commented the absence of Mr Wong from the witness box which, in this situation, is significant.

75.Without any corroborating evidence, he asserted that his mother knew that she held one share in the company and that she was a director of the company.  No copy of Madam Wong’s signature or any other evidence was produced to demonstrate a likeness to the signature on the company documents.  Madam Wong was not called as a witness.

76.He said that Ms Cham merely held keys to the company premises and to the drawers of cabinets in order to help Mr Lee run the company.  He said that she simply took away the title deeds from the cabinets after Mr Lee’s death.  There was no evidence to substantiate these assertions. There was no evidence that the title deeds had been at Foon Lok Mansions in the first place.  It is entirely consistent with the proper care of title deeds that they would have been kept at a bank.  It was open to Madam Wong as administratrix of the estate to have gone to the bank to ascertain whether or not a security box was in fact kept by Mr Lee at the bank.  No such step was taken.

Lee Ye Mei:

77.Lee Ye Mei had even less contact with Mr Lee and Ms Cham over the relevant period.  Her evidence was essentially hearsay in which she related matters that her husband had told her his father had said to him.  Although she asserted that Wong Tin Choi and her husband did not approach Ms Cham about moving from Yuen Fat Mansion to Foon Lok Mansion, she was not present on the occasion and had no personal knowledge of the events.  The significant fact is that Mr Wong was not called.

78.She added nothing to the narrative.

Discussion:

79.Although there was a paucity of evidence as to Ms Cham’s assets and income during the relevant period, her evidence as to the nature of the relationship between herself and Mr Lee was corroborated by the witnesses she called.  In assessing their evidence I have borne in mind any relationship they might have with Ms Cham.

80.I found the evidence of Mr K S Cham to be particularly compelling.  It is entirely believable that a brother would hold the concern that he held for a sister, and that in an appropriate circumstance, he would challenge a person in the position of Mr Lee in respect of the promises that had apparently been made.  Mr K S Cham impressed me as a decent honest man and I have no reason to reject his evidence.

81.The evidence of Lee Kin Wai and Lee Ye Mei suffered from the extent of the distance between where they had resided over the relevant period, and Mr Lee’s residence in Hong Kong.  Lee Kin Wai’s evidence was between his graduation in the mid-1980s and 1997, when Mr Lee died, he had returned to Hong Kong only six or seven times.  He visited the Foon Lok Mansions property only once during that time. 

82.The reality of the situation was that Lee Kin Wai had so little contact with his father over the relevant period that his personal knowledge of the events was of little assistance.

83.On no occasion did he ask Mr Lee where documents relating to the company were kept and he said that he had not even considered whether Mr Lee might keep important documents in a bank deposit box.  He did not enquire of Mr Lee as to the circumstances in which Mr Lee had become virtually the sole shareholder of the company.

84.It is apparent from Lee Kin Wai’s evidence that following Mr Lee’s death he had to go to the Foon Lok Mansions property to find out what assets Mr Lee had.  His contact with, and knowledge of his father, both as to his manner of living or his property was very limited indeed.

85.Although in his witness statement, Lee Kin Wai denied that in February or March 1998, Ms Cham had been asked to leave the Yuet Fat Mansions property, in cross-examination he acknowledged that she had been living there following Mr Lee’s death and that she had moved from that property to Foon Lok Mansions.  But he was quite unable to explain the statement in his witness statement, or offer any explanation why Ms Cham might have made that move.  Her explanation for the move was logical and believable.

86.It was apparent that there was very little contact between Lee Kin Wai and Lee Ye Mei with Mr Lee.  In essence they were reduced in their evidence to unsubstantiated assertions of a denial of Ms Cham’s evidence.  One might very well have sympathy for them in the circumstance in which they found themselves, but that sympathy cannot lead me to accept those assertions of denial to reject Ms Cham’s evidence.

87.Although Madam Wong is now 80, and said to be in poor health, the absence of any evidence from her contradicting the evidence of Ms Cham was significant.  There was no medical evidence before the court to say that she was in such a condition that she could not recollect events or that she was physically or mentally unable to give evidence.

88.Having regard to the whole of the evidence I find it more likely than not that from about 1992, for a period of 5 years, Mr Lee and Ms Cham lived as husband and wife in circumstances in which she was known as Mrs Lee.  I accept the evidence of Ms Cham as to the promises that were made to her, and the circumstances in which they were made.  I accept that throughout the whole of this period, and continuing after his death, Ms Cham provided significant funds to Mr Lee to enable him to support the properties and themselves.

89.I accept Ms Cham’s evidence that Mr Lee gave her the title deeds to the Foon Lok Mansions property in the way in which she described.  Although there was a paucity of evidence to substantiate the extent of the payments made by Ms Cham over the years I find it more likely than not that, in the absence of evidence to the contrary, that Ms Cham contributed a substantial sum to Mr Lee, principally for the purpose of maintaining the two properties and their lifestyle.  I accept Ms Cham’s evidence that documentation, which might otherwise have substantiated payments made by her, was removed from the Foon Lok Mansions property and so was not available to her.

90.I accept Ms Cham’s evidence that Mr Lee told her that when he became owner of all of the shares in the company but one, he had signed his wife’s signature on the documents for that one share and that accordingly he was able to transfer all the shares in the company if he wished.

91.It is right that Mr Lee could have taken steps to transfer the shares in the company to Ms Cham, and two properties to her during his lifetime, or that he could have made a will in her favour.  The fact that he had not taken any steps to do so does not detract in any way from the conclusion I have reached as to the making of the promises, the delivery of the title deeds, and the payment of funds made by Ms Cham.

Promissory estoppel:

92.The leading authority in Hong Kong on promissory estoppel is the decision of the Court of Final Appeal in Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1.  At §55 Ribeiro PJ said:

“A promissory estoppel may be said to arise where (i) the parties are in a relationship involving enforceable or exercisable rights, duties or powers; (ii) one party (the promisor), by words or conduct, conveys or is reasonably understood to convey a clear and unequivocal promise or assurance to the other (the promisee) that the promisor will not enforce or exercise some of those rights, duties or powers; (iii) the promisee reasonably relies upon that promise and is induced to alter his or her position on the face of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.”

The relationship: 

93.In Luo Xing Juan the court found that the couple were living together as man and wife.  I have found in the present case that Ms Cham and Mr Lee lived together as man and wife. 

94.The court found in Luo Xing Juan that at the time the promise was made the deceased was the controlling shareholder in a company, having 80% of its shares, and had the power to cause the company to exercise its rights over property in a manner adverse to the interests of Miss Luo.

95.The same situation arises in respect of the company and Foon Lok Mansions in this case save that in this case Mr Lee controlled 100% of the shares.  As the sole owner of the Yuet Fat Mansions property Mr Lee was in a position to exercise his rights over that property, as well as the Foon Lok Mansions property in a manner adverse to the interests of Ms Cham.  During his lifetime he could have evicted her from Yuet Fat Mansions, and disposed of Foon Lok Mansions without any of the proceeds going to Ms Cham.

96.Just as the relationship was found to be a sufficient relationship for the purposes of promissory estoppel in Luo Xing Juan, so I find the relationship between Mr Lee and Ms Cham to be a sufficient relationship for the purposes of promissory estoppel.

The sufficiency of the promise

97.In Luo Xing Juan, §§59-60, Ribeiro PJ  had this to say about the sufficiency of the promise:

“While the promise need not be express, the meaning of the promise conveyed by the promisor’s words or conduct must be clear and unequivocal. He must make it clear that he is promising not to enforce the relevant rights or powers. This message must be conveyed with a clarity similar to that needed to vary a contract. Whether there is sufficient clarity is to be assessed objectively by the court.

The court will seek to ascertain the meaning in substance of the promise.  It is the substance of its meaning that must be clear and unequivocal.  A promisor may make his intentions perfectly plain but, not being a lawyer, may express himself in terms which are legally imprecise or inaccurate.  A promisee may likewise clearly understand the substance of what is being promised without any knowledge of the legal rights or powers within which the promise is framed.”

The promise in respect of Yuen Fat Mansion:

98.The promise in respect of Yuen Fat Mansions is equivocal.  Ms Cham’s evidence was that he promised her that “she could live at the property for the rest of her life and that she need not worry that she had nowhere to live or that her living was not protected”, see §47 above.  That is not a promise to make an absolute gift of a property to a person, but at best, a promise of a life interest.

99.The subsequent statement made by Mr Lee, at the time he delivered the title deeds of Foon Lok Mansions to Ms Cham, that it would be convenient to deal with both properties at the same time, does not take the matter further for Ms Cham.  It only adds to the equivocality of Mr Lee’s intentions.  The assurance to “transfer the ownership of the two properties together”, insofar as it relates to Yuet Fat Mansions may have been a promise to transfer that property into both their names.  It is not clear whether that would be as joint tenants or tenants in common. 

100.I am not satisfied that a sufficient promise was made in respect of Yuen Fat Mansions that Ms Cham is now entitled to the absolute ownership of that property.

The promise in respect of Foon Lok Mansions and the shares:

101.The promise made in respect of Foon Lok Mansions is entirely different, for it was accompanied by the act of the delivery of the title deeds, as well as words.  I am satisfied that there can be nothing more clear and unequivocal than the delivery of title deeds to indicate an intention to transfer, absolutely, title to a property to a person.  Both Mr Lee and Ms Cham understood clearly what was being done.

102.The act of the corporate services company in forwarding to Mr Lee documents prepared to transfer 300 shares in the company to Ms Cham corroborates his intention to transfer 300 shares to her absolutely, and immediately.  The corporate services company could have acted only upon Mr Lee’s instruction.  The letter was addressed to him.  No evidence was called from the corporate services company to contradict this plain inference.  It is right that provision is made in those documents for bought and sold notes, implying a consideration to be paid by Ms Cham, but there is nothing in the evidence to indicate that Mr Lee would have actually required any payment in respect of the shares.

103.It matters not that Foon Lok Mansions was owned by the company because Mr Lee effectively controlled 100% of the shares in the company.  He was able to transfer the whole of that real estate to Ms Cham by that control of the company.  According to the accounts, the Foon Lok Mansions was the only property the company owned.  At the time the promise was made to give Ms Cham 300 shares, both had an intention to invest in other property using the company.  I infer that Mr Lee’s intention was that Ms Cham would have a 30% interest in any investments that might be made by the company.

104.The essential meaning of his promise was, both in respect of the Foon Lok Mansions and the shares, in my view, plain and unambiguous.

Reliance on the promises:

105.It is beyond argument that Ms Cham relied upon the promises.  She remained living with Mr Lee in a de facto relationship, one which Mr Lee could end at any time.  Having left her husband, without the support of Mr Lee, Ms Cham would have to have relied upon her own assets for accommodation and support.  Instead she applied her own assets, in part at least, in the support of Mr Lee and both properties.  Just as similar acts were found in Luo Xing Juan, at §64 E.5, to be “significant acts and omissions of detrimental reliance”, so am I satisfied that Ms Cham has established sufficient significant acts and omissions of detrimental reliance.

106.Equally, in Luo Xing Juan, just as such acts were found to create a situation where it would be inequitable or unconscionable for the estate to now act inconsistently with the deceased’s promise, so it would be inequitable or unconscionable for either the company or the estate to now act  inconsistently with the promises made by Mr Lee.

107.For these reasons, I am satisfied that Ms Cham has established all of the criteria to entitle the court to hold that relief should be granted to her to give effect to the equity to which she is entitled, in respect of both Foon Lok Mansions and 300 shares in the company.

Common intention constructive trust:

108.Having so found, it is not strictly necessary that I should deal with the question of a common intention constructive trust, but I do so for completeness.

109.In Luo Xing Juan, a company owned the real estate, in which the claimant had been promised a 35% share.  The deceased promisor owned 80% of the shares and so had control of the company.  The intervention of the company between the promisor and the promisee led the Court of Final Appeal to hold that the fact that A and B might form a common intention that they should have shared beneficial interest in C’s property was not sufficient to impose a constructive trust on C to hold C’s properly on trust for A and B, irrespective of any liability between A and B.

110.The same principle must apply in the present case, and it is not open to me to find a common intention constructive trust in respect of the Foon Lok Mansions property.

111.The modern approach to a common intention constructive trust has been explained by the House of Lords in Stack v Dowden, first in the speech of Baroness Hale §60:

“The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of the whole course of conduct in relation to it.”

And in the headnote, at p 432H:

“Where a domestic property was conveyed into the joint names of cohabitants without any declaration of trust there was a prima facie case that both the legal and beneficial interests in the property would joint and equal; that the onus of proof lay upon any party seeking to establish that equity should not follow the law; that such a party had to prove that the parties had held a common intention that the beneficial interests might be different from the legal interest, and in what way; that in order to discern the parties’ common intention the court should look at the parties’ whole course of conduct in relation to the property; that the law had moved on from the presumption of a resulting trust and many more factors other than the parties respective financial contributions might be relevant to divining the true intention; and that when all the relevant factors had been taken into account, cases in which an joint legal owners were to be taken to have intended that the beneficial interest should be different from the illegal interests would be very unusual.

112.Mr Chan was entitled to draw to my attention the following passages from the speech of Lord Neuberger, first at §141:

“Consistently with what has already been discussed, I am unconvinced that the original ownership of beneficial interest could normally be altered merely by the way in which the parties conduct their personal and day-to-day financial affairs. I do not see how the fact they lived together for a long time, had been a loving relationship, have children, operated a joint bank account, and shared outgoings of the household, including in respect of use and occupation of the home, can, of themselves, indicated an intention to equalise their originally an equal shares any more than they would indicate an intention to equalise their shares on acquisition, as discussed earlier…. Even the fact that one party pays all the outgoings and the other does nothing towards would not seem to me to justify any adjustment to the original ownership of the beneficial interest (subject to the possible exception of mortgage repayments).

And at §143:

“It is worth repeating that one is concerned with the ownership of what would normally be the most important and valuable asset of the parties, and the way they conducted their day-to-day living in finances is, in my view, at least of itself, not a reliable guide to the intentions in relation to that ownership. Even payments on decoration, repairs, utilities in council tax, although related to the home, are concerned with its use and enjoyment, as opposed to its ownership of a capital asset.”

113.Stack v Dowden was followed and applied by Lam J (as he then was) in Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 333.  The head note adequately sets out the principle to be drawn from the case:

“The determination of beneficial ownership under a common intention constructive trust involved a two stage process. First, the key was to establish the parties’ true common intention that the claimant should have a beneficial interest. Second, it was necessary to ascertain the extent of the parties’ respective interests in the property, by adopting a holistic approach to the quantification, serving the whole course of dealing in conduct which threw light on what shares the parties must have intended. The court could not impose it is own view of what it considered fair”

114.The facts in the present case fall a long way short of establishing a common intention constructive trust.  It does not appear on the evidence that Mr Lee had any intention to immediately benefit Ms Cham, in respect of the Yuet Fat Mansions property, rather than intending her to have security of a residence and income at some time in the future or in the event of his death.  The imprecise nature of the evidence as to the actual contributions made by Ms Cham is also a factor against finding a common intention constructive trust.

115.While I am satisfied that Mr Lee made promises in respect of Foon Lok Mansions, that are enforceable by way of promissory estoppel, I am not satisfied that the statements made by him in respect of Yuet Fat Mansion, or the payments made by Ms Cham are sufficient to establish a common intention constructive trust.

116.Were that the only cause of action open to Ms Cham, her case would fail.  However she succeeds in respect of Foon Lok Mansions on the promissory estoppel.

Relief:

117.The question of relief in Luo Xing Juan was complex because the promise was of only 35% of the property, and others owned the remaining 65%.  That difficulty does not arise in the present case where the promise was that Ms Chan would have the whole of the properties.  Although the promise was of 30% of the shares in the company, on the face of the accounts, the only property owned by the company is Foon Lok Mansions.  In those circumstances, ownership of the shares becomes academic.

118.I am satisfied that, by way of relief, Ms Cham is entitled to an order transferring the legal title of the company in the Foon Lok Mansions property to her, and that 300 shares in the company be transferred to her.  Leave is reserved to apply in respect of the terms of any orders required to give effect to that relief.

COSTS

119.Ms Cham has succeeded in the action in respect of one of the two properties the subject of litigation.   It is right that she failed in the common intention constructive trust cause of action, however the evidence required for both causes of action, and both properties, was essentially the same.  Neither the additional cause of action nor the additional property affected the length of the trial.  At best it might be said that it added briefly to the length of the submissions, but did not add to the length of the trial.  Notwithstanding that, the failure to achieve a full result must be reflected in the costs order made.

120.Having considered the submissions in respect of the discovery issue, I am satisfied that no particular cost order need be made in that respect.

121.There will be an order nisi that the defendants must pay 80% of Ms Cham’s costs of the claim and counterclaim, including any reserved costs, to be taxed on a party and party basis.

Mr Edward T C Chan instructed by Messrs Lawrence K Y Lo & Co, for the plaintiff by original action and the 1^st and 2^nd defendants by counterclaim.

Mr Alan Kwong, instructed by Messrs Jimmie K S Wong & Partners, for the defendant by original action and the plaintiff by counterclaim.