Tang Kim Kwan Patrick also known as Patrick Tang and Another v. Lee Chi Ting Karen also known as Karen Lee
Read the full judgment text of CACV 163/2012 on BabelCite. This Court of Appeal judgment was delivered on 21 February 2014.
1. This is the defendant’s appeal from the judgment dated 26 June 2012 of Deputy High Court Judge Houghton SC (now a Recorder) and his sealed judgment dated 24 August 2012 following the trial of the action.
Cites 3 cases
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CACV 163/2012 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 163 OF 2012 (ON APPEAL FROM HCA 920/2009) ____________ BETWEEN
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_____________ JUDGMENT _____________ Hon Cheung CJHC: 1.This is the defendant’s appeal from the judgment dated 26 June 2012 of Deputy High Court Judge Houghton SC (now a Recorder) and his sealed judgment dated 24 August 2012 following the trial of the action. The facts 2.Very briefly, the 1st plaintiff, a married businessman of substantial wealth, began a relationship with the defendant in 2002. That relationship lasted until early 2009 after the defendant started a new relationship with another person. A daughter was born to the 1st plaintiff and defendant in 2004. During that relationship of over six years, the defendant did not work and was maintained entirely by the 1st plaintiff. The 1st plaintiff gave her a monthly personal allowance and made to her a number of gifts of substantial value, including cash and jewellery. Moreover, in 2003 and 2004, a total of four properties were purchased, that is, a flat in a development known as Metro Harbour View (“Metro Harbour View”), a house at Marina Cove, Sai Kung (“Marina Cove”), a flat at a development known as the Royal Peninsula (“Royal Peninsula”), and an office unit in Cheuk Nang Centre (“Cheuk Nang”). Whilst Marina Cove was purchased in the joint names of the two, the other three were all purchased in the sole name of the defendant. The properties were purchased with funds provided by the 1st plaintiff or the 2nd plaintiff, a company owned and controlled by the 1st plaintiff for speculation purposes, and (in some cases) mortgage loans were obtained. 3.The purchase of Metro Harbour View as an uncompleted flat in January 2003, at the price of $1.71 million, was funded by a mortgage taken out in the name of the defendant for $1 million, with the remaining purchase price provided by the 1st plaintiff. Completion of the purchase took place in May the same year, and in the same month, the defendant moved into the property. 4.After the 1st plaintiff broke up with the defendant, he commenced action against her for the recovery of the four properties, which he claimed were held by the defendant for him on resulting trust, he or his company having provided the purchase monies. The defendant defended the claims on the basis that the properties were all gifts made by him to her in view of their relationship at the material times. The reasoned judgment 5.After trial, in which both the 1st plaintiff and the defendant as well as the brother of the defendant (Tim) gave oral evidence, the learned deputy judge found in favour of the 1st plaintiff in relation to Metro Harbour View and Royal Peninsula, but found that Marina Cove and Cheuk Nang were gifts made by the 1st plaintiff to the defendant. In his reasoned judgment dated 26 June 2012, the deputy judge indicated his (provisional) views on the relief that he should grant in favour of the 1st plaintiff. It should be noted that by then, Metro Harbour View had long been sold by the defendant – the 1st plaintiff had said in evidence that he had been unaware of the sale, which had taken place in December 2005 for $2.1 million, until much later. The deputy judge indicated in paragraph 71 of his judgment that the 1st plaintiff was entitled to an account and inquiry as to the net proceeds of sale of Metro Harbour View, and for an order for payment upon such account and inquiry. In relation to Royal Peninsula, the deputy judge indicated in paragraph 72 that the 1st plaintiff would be entitled to a declaration of his beneficial interest in that property and an order directing the assignment of the legal title of the property to the 1st plaintiff. The deputy judge added that any such order “must however recognise the defendant’s entitlement to a share in any profits arising on sale of this property” since he had found that the 1st plaintiff had agreed with the defendant to a sharing of profit upon a quick resale of the property. The sealed judgment 6.However, the parties could not agree on the exact terms of the order to be made, and that led to a further hearing before the deputy judge, which resulted in a sealed judgment dated 24 August 2012. By that sealed judgment, the deputy judge ordered, in relation to Metro Harbour View, an inquiry as to the amount of restitutionary compensation the defendant ought to pay to the 1st plaintiff for her breach of trust by wrongfully selling the property, and that the defendant pay to the 1st plaintiff the sum found due in the inquiry with interest. In relation to Royal Peninsula, the sealed judgment simply made a declaration of the 1st plaintiff’s beneficial interest in the property and ordered the defendant to assign her legal title to the property to the 1st plaintiff, without mentioning the sharing of any profits arising on resale of the property. This appeal 7.In this appeal, the defendant challenges the deputy judge’s finding of a resulting trust in relation to Metro Harbour View. Mr Albert Yau (together with Ms Melo Man), appearing for the defendant before us (but not below), took three points. First, he argued that the deputy judge treated as equivocal some words used by the 1st plaintiff which are, counsel submitted, commonly accepted in the local community as indicative of an intention to make a gift. Secondly, he criticised the deputy judge for taking into account matters which were not borne out by the evidence. Thirdly, he said the deputy judge was wrong to exclude some post‑acquisition statements made by the 1st plaintiff to Tim and the defendant’s other family members against his interest. 8.Alternatively, Mr Yau argued that credit should be given for the mortgage payments that the defendant had made in relation to the property. Those payments should be regarded as her contributions to the purchase price of the property, and they therefore gave her a beneficial share in the property and the proceeds of sale. 9.In relation to relief, Mr Yau said that the deputy judge was wrong to order an inquiry of restitutionary compensation in his sealed judgment, instead of an account and inquiry of the net proceeds of sale received by the defendant as originally indicated in his reasoned judgment. 10.As regards Royal Peninsula, Mr Yau complained that the deputy judge was wrong to omit, contrary to what he had indicated in his reasoned judgment, a direction for the sharing of any profits arising on resale of the property in recognition of the defendant’s entitlement to a share thereof, when he made a declaration of beneficial interest and ordered the assignment of the legal title in favour of the 1st plaintiff in the sealed judgment. In her supplementary notice of appeal, the defendant asked for an order of sale of the property and for directions for the sharing of the net profit on resale. Metro Harbour View – the deputy judge’s reasoning 11.Turning first to the finding of a resulting trust in relation to Metro Harbour View, the deputy judge observed at the outset that the relationship between the 1st plaintiff and the defendant was primarily a personal and clandestine one, such that the degree of commercial commonsense that might be expected in a purely commercial relationship was not necessarily to be expected in the case. He also noted that the relationship between the two was one that could come to an end at a moment’s notice. This uncertainty, according to the deputy judge, had an influence on the behaviour of both parties but that of the 1st plaintiff in particular. By that he meant that the 1st plaintiff had used the properties in question to continue, and perhaps deepen, his relationship with the defendant by, in some cases in particular, seeking to achieve what might be described as a halfway house between giving and not giving. The deputy judge therefore took the view that observations by the 1st plaintiff to others about his generosity to the defendant in regard to the properties were made by the 1st plaintiff in some cases with the primary intention of holding out the prospect of a gift rather than making a gift. 12.The deputy judge found as a fact that the 1st plaintiff had said on different occasions, in referring to the purchase of Metro Harbour View in the name of the defendant, that it was purchased to give the defendant a property “to hold onto” and to collect rental income (“等你有D嘢揸喺手同埋有樓收租”). The deputy judge understood the words “to hold onto” to be equivocal in meaning. It could mean that the defendant was to hold the property beneficially. It could also mean that she was to hold the property for the 1st plaintiff. It was therefore equivocal and not clear enough to evidence the intention of making a gift of the property to the defendant – it being undisputed that so far as law is concerned, there was no presumption of advancement in favour of the defendant (who was not married to the 1st plaintiff); rather, there was a rebuttable presumption of resulting trust in favour of the 1st plaintiff who had advanced the purchase money (leaving aside the mortgage for the time being). 13.The deputy judge found that the 1st plaintiff had subsequently referred to this and other properties as being the defendant’s when it suited him to boast of his generosity. However, he took the view that such comments after the purchase of the property did not convert something that was not a gift into a gift unless that was the clear intention of what was said or done subsequently, and it was not the defendant’s case that there was any such unequivocal subsequent conferral of a gift. 14.The deputy judge also gave significant weight to the fact that the defendant took up residence of Metro Harbour View immediately after completion of the purchase, and there was no evidence of any effort to lease out the flat for rent. 15.On the primary facts as found by him, the deputy judge concluded that the property was purchased and put in the name of the defendant simply for the purpose of housing the defendant (who had told the 1st plaintiff that she was pregnant at the time) and nothing more. No gift was intended. 16.As regards the mortgage, the deputy judge found that the 1st plaintiff was understood to be underwriting the defendant’s liability under the mortgage, and did so, at least for as long as she was resident. He found that it was the common intention of the 1st plaintiff and the defendant that the defendant would in fact bear no responsibility for the mortgage payments, which were all made by the defendant from monies given to her by the 1st plaintiff. 17.The deputy judge therefore concluded that the property was held by the defendant on resulting trust for the 1st plaintiff. Counsel’s arguments 18.Mr Yau appreciated that the deputy judge had made findings of primary fact. He acknowledged the deputy judge’s advantage in seeing and hearing the witnesses first hand. Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336. However, the focus of his argument was on the meaning of the words “揸手” (to hold onto) found by the deputy judge to have been used by the 1st plaintiff as evidence of his intention relating to the property. The nub of Mr Yau’s argument was that the deputy judge had not fully grasped the meaning of the Chinese words used. Mr Yau argued that whilst the translation “to hold onto” might be equivocal in meaning, the original Chinese words, when used by the 1st plaintiff in the context of the relationship between the two, were not. “揸手” signifies, according to Mr Yau, the making of a gift of the subject property to the person in whose name it is bought, for the purposes of providing financial comfort or security to the latter. This is particularly so when those words are used by a Chinese man to his partner or family member in a loving or close family relationship. 19.Mr Yau also emphasised the context here, that is, this was the first property the 1st plaintiff bought for the defendant after their relationship had become close and intimate. Further, he told others it was hers. What else, Mr Yau asked rhetorically, could he have meant when he said those words? 20.Mr KC Chan, for the 1st plaintiff, submitted otherwise. He maintained the original Chinese words used were equivocal in meaning. He emphasised that the deputy judge’s finding of fact was not “plainly wrong” and is therefore not challengeable on appeal. My views 21.I am with Mr Yau. We are not concerned with a finding of primary fact here. We are concerned with the meaning of words in Chinese found to have been used by the 1st plaintiff, as evidence of his intention. We are concerned with reasonable inferences that can be drawn from the 1st plaintiff’s words or conduct: Gissing v Gissing [1971] AC 886, 906 B‑D (quoted by the deputy judge in paragraph 16 of his judgment). 22.There is no dispute that “to hold onto” is as good a translation of the original Chinese words as any. However, I accept Mr Yau’s contention that to provide something for someone to “揸手”, when used in Hong Kong, is generally understood to mean the provision of something by one person in favour of another, so as to give the recipient some sort of security, comfort and/or control, particularly if something unexpected, untoward or the like should happen. It is usually used in the type of situation where the relationship between the provider and recipient is less than absolutely secure or certain, and the provision of the subject matter in question is intended to address the anxiety or concern that very often arose out of such insecurity or uncertainty. Thus, in the context of a man and his mistress, the provision of a property by the man to the mistress for the purposes of “揸手”, would convey in the ordinary usage of the language in the local community, the idea of the man providing some form of security to the woman (whose position or relationship is less than perfectly secure, as compared, for instance, with the wife of that man), so as to redress the underlying anxiety or unease. And, should anything happen in future, including the breaking up of the relationship between the two, the woman would have something to “hold onto” (“揸手”). 23.Another possible example of how the term may be used is the provision of some property as security for a loan borrowed from another, particularly when the lender is not an institutional lender and the lending is done informally. The property so provided to the lender to “揸手”, would serve as a security for the repayment of the loan. In case the borrower fails to repay the money as agreed, the lender will have something to hold onto (“揸手”). 24.“揸手”, when used in the context under discussion, is, therefore, quite inconsistent with the idea of the recipient being a bare trustee, someone who is to deal with the subject property in full accordance with the directions of the beneficiary. 25.For these reasons, I think the words used on more than one occasion by the 1st plaintiff to describe the purchase of Metro Harbour View for the defendant to “揸手” were not equivocal, when used in the known context of the case. Rather, they were quite unequivocal in meaning, and provided good evidence of the true intention of the 1st plaintiff. I believe this was a reasonable inference that could, and indeed should, have been drawn by the deputy judge against the 1st plaintiff. 26.Moreover, I am with Mr Yau on his criticism of the deputy judge’s treatment of the post‑acquisition statements made by the 1st plaintiff against his interest. The deputy judge considered those statements only in the context of whether they were sufficient to convert “something that was not a gift into a gift” (paragraph 52 of his judgment) – he concluded that they were not. However, that begs the prior question of whether the original purchase of the property was meant to be a gift in the first place. 27.In my view, whilst the weight to be attached to those post‑acquisition statements adverse to the 1st plaintiff’s interest was a matter for the trial judge, the fact that the deputy judge failed to consider at all those statements as possible evidence of the 1st plaintiff’s intention at the time of purchase must inevitably call into question the correctness of his ultimate conclusion that this was not a gift. In this regard, I reject Mr Chan’s argument to the contrary that the deputy judge had actually taken those statements into account in the context I have just described. 28.In my view, the inference drawn by the deputy judge from the primary facts that no gift was intended at the time of purchase cannot stand. This court is quite entitled to interfere with that inference and substitute therefor an inference of its own. In my view, on the totality of the evidence before the court and the findings of primary fact made by the deputy judge, the proper inference to be drawn from the words and conduct of the 1st plaintiff is that the property was purchased by him as a gift to her. I find this inference sitting very comfortably with the known circumstances. As mentioned, it was the first property bought by the 1st plaintiff in her name. As the deputy judge found, he was then infatuated with her. It was bought at a time not long after their relationship had become close and intimate. It was bought at a time when he was told by the defendant that she was pregnant with his baby. The price of the property was not, relatively speaking, particularly high. It was a small property. Besides, there were other gifts of substantial value made to her. In a relationship of this type, it was not unusual at all for the woman to ask for, and the man to be agreeable to provide, something substantial for her to “揸手”. As the deputy judge very rightly observed, the relationship between the two was a rather insecure one such that it could be terminated “at a moment’s notice”. It was indeed most natural for the woman to want something from the man to “揸手” in order to provide her with some comfort and security under that inherently insecure and uncertain relationship. 29.In my view, all in all, that the property was intended to be a gift and understood to be so is the more natural and proper inference to be drawn, once the meaning of the actual Chinese words used is fully appreciated. “To hold onto” is as good a translation as any for the Chinese words used. But in this court, we have the advantage of working on the original Chinese words. Conclusion on Metro Harbour View 30.Given this conclusion of mine, it is quite unnecessary to deal with Mr Yau’s arguments on the mortgage payments. Whether the mortgage payments, made by the defendant from monies given to her by the 1st plaintiff, should be regarded as gifts made by the 1st plaintiff, or as payments made by the defendant personally from monies gifted to her for her general use, does not really matter. 31.Nor is it necessary to deal with the question of relief, that is, whether it was right for the deputy judge to order an inquiry of equitable compensation, rather than an account of the net proceeds of sale of the property, against the defendant. 32.Given my conclusion, judgment should be given for the defendant against the 1st plaintiff in relation to the property and the net proceeds of sale. In other words, the 1st plaintiff’s claim regarding Metro Harbour View should be dismissed. Royal Peninsula – the deputy judge’s views 33.That leaves Royal Peninsula. The deputy judge found that the property was purchased for speculation purposes. Again, a mortgage was taken out by the defendant for $1 million, and the 1st plaintiff (through the 2nd plaintiff) was responsible for the rest of the purchase price. The intention of the parties at the time of purchase was that this would be a short term proposition funded by the 1st plaintiff. There was no actual intention that the defendant would acquire an interest in the property wider than an entitlement to a share in the profit upon a quick resale by undertaking the responsibility of taking out a mortgage in her name. (The mortgage was subsequently discharged and replaced by another mortgage taken out by the defendant for her own use and purpose). 34.On that basis, the deputy judge found that the property was held on resulting trust for the 1st plaintiff. He made a declaration to that effect and ordered the assignment of the legal title to the property to the 1st plaintiff. The deputy judge said in paragraph 70 of his reasoned judgment, after finding that the property was purchased with a view to resale for profit to be shared by the parties (and Tim), that the question before him turned on whether the gift of the share of profit to be made on resale was to be considered as an incomplete gift. He observed that the point was barely argued at the hearing. He said he accepted the principle that courts will not step in and perfect an imperfect gift. However, he took the view that the 1st plaintiff had done all that was necessary on his part to complete the gift by placing the property in the name of the defendant. Accordingly, the defendant was entitled to a share of the profit, if any, on resale of the property, and this had to be recognised in the declaration and order for conveyance which he indicated he was minded to make. 35.However, after further hearing on the proper form of relief, the deputy judge changed his mind and the suggested recognition was omitted from the sealed judgment. Although no reasons were given for that change, they are quite apparent from the transcript of the further hearing and Mr Chan’s arguments on that occasion (which were substantially repeated before us). Mr Chan’s arguments 36.Essentially, Mr Chan argued that the deputy judge was wrong to indicate in his reasoned judgment that the defendant would be entitled to a share in the potential profit upon resale. He argued that the issue of a gift of the potential profit was never a live one such that the parties never properly prepared for it or dealt adequately with it at trial. He further submitted that in any event, the promise of a share of the profit to be made on resale was an incomplete gift that could be withdrawn at any time by the 1st plaintiff. He submitted that by the issue of writ at the latest, the 1st plaintiff had already revoked that incomplete gift. 37.Mr Chan, who, unlike Mr Yau and his junior, appeared for the plaintiffs at the trial below, conceded, however, that there was actually no evidence before the deputy judge to support his finding that the profit to be made upon resale (if any) was to be shared amongst the 1st plaintiff, the defendant and Tim. Rather, the evidence was that it was to be given to the defendant alone as a gift. This concession is clearly borne out by the witness statements of the 1st plaintiff which he adopted as part of his evidence in chief. The deputy judge, according to Mr Chan, has probably confused a previous transaction with the transaction relating to Royal Peninsula. But Mr Chan submitted that this did not affect the correct position which the deputy judge reached in his sealed judgment. My views 38.I do not accept the pleading point taken by Mr Chan. It is the 1st plaintiff’s own case that by reason of his payment of the purchase price, the property is held by the defendant on a resulting trust for him. However, it is also an inherent part of his own case that the property was purchased with a view to making a profit upon a quick resale, which profit would be given to the defendant as a gift. When it comes to relief, particularly when the 1st plaintiff is seeking relief in equity, it is quite impossible to ignore this inherent part of the 1st plaintiff’s own case, that is, that the profit (if any) to be made upon resale will belong to the defendant. After all, he who seeks equity must do equity. See generally Spry, The Principles of Equitable Remedies (8th ed) 248, 412‑413. 39.In those circumstances, I take the view that it is the 1st plaintiff’s own pleaded case that raises the question of the defendant’s entitlement to the profit upon resale. That, therefore, is a live issue that the court, when considering equitable relief, cannot ignore but must deal with. 40.As regards the incomplete gift point, according to the deputy judge, the 1st plaintiff accepted he had told the defendant that she could herself engage in property investment for profit. When she told the 1st plaintiff that she did not have the money to do so, he simply asked her to look for a suitable flat and that he would “help her out” or perhaps “help her to fix it” (paragraphs 32 and 33 of the judgment). That arrangement, according to the deputy judge, was not to give the defendant any beneficial interest in the property. Rather, it was entered into so that the 1st plaintiff could “help out the defendant to take part in property speculation” (paragraph 58). The deputy judge specifically found that at the time of purchase, the intention of the parties was that this would be a short term proposition which was to be funded by the 1st plaintiff. There was no actual intention that the defendant would acquire an interest in the property wider than an entitlement to the profit (paragraph 59). In the deputy judge’s view, the 1st plaintiff had done all that was necessary on his part to complete his gift of the profit upon resale (if any) to the defendant by placing the property in the name of the defendant (paragraph 70). 41.On these facts as found by the deputy judge, it is quite plain that the purchase of the property in the name of the defendant was part and parcel of a property speculation exercise of the defendant. It was her speculation exercise; it was for her to sell, and decide when to sell, the property for profit. Significantly, the property was purchased in her name, rather than the name of the 1st or 2nd plaintiff. 42.In my view, the position is therefore this. Based on the deputy judge’s findings, the defendant, as trustee of the property pending its resale for profit, was given a power of sale of the property in order for her to earn the profit. That power of sale was part and parcel of the understanding reached by the parties of which the holding of the property on trust pending its resale and the giving of the profit to be earned upon resale also formed part. In itself, the profit to be made upon resale is a mere expectancy which cannot be made the subject matter of a gift: Halsbury’s Laws of England (5th ed), vol 52, para 225; Re Ellenborough, Towry Law v Burne [1903] 1 Ch 697. However, the distinguishing feature here is that the defendant as trustee has been given a power of sale in order to enable her to earn the profit upon resale. In other words (and to be more precise), the power of sale is coupled with a further power to keep part of the proceeds of sale, representing the net profit upon resale, for the defendant’s own use and benefit. 43.A power of disposition or sale is of course something recognised by law and can be made the subject matter of an agreement or a gift. See generally Snell’s Equity (32nd ed), chap 10. On the facts of the present case, the power was given by the 1st plaintiff to the defendant, in whose name the property was purchased, for her to sell the property to earn the profit that she was promised. In so far as this power of sale constituted a gift in itself, it was completed when the property was purchased in the name of the defendant. Thus analysed, the case does not turn on whether there could be a gift of the future profit upon resale (if any), whether that gift was a complete one or not, or whether it had been revoked or withdrawn. This case is concerned with a power given to the defendant as donee to sell and to keep part of the proceeds. 44.For all these reasons, whilst I have no difficulty with the declaration in favour of the 1st plaintiff of a trust regarding the property, that only represents half of the story. There is still this power to sell and to keep part of the proceeds of sale representing the net profit that may be earned upon resale to give recognition to. In other words, the declaration of trust must be subject to this power of sale. And it also impacts on the further relief granted by the deputy judge, that is, the order for the conveyance of the legal title of the property to the 1st plaintiff. I note that the defendant has in her supplemental notice of appeal asked for an order for sale of the property. In my view, the just and fair order to make, in order to give effect to the true intention of the parties and to recognise the power of sale described above, is to direct the defendant to so sell the property, to repay the purchase price contributed by the 1st plaintiff, and to keep the net profit of sale (if any) after accounting for the rentals received. I have heard no suggestion that under the current market conditions, there is any chance of the defendant not making some gain upon resale. Conclusion on Royal Peninsula 45.For these reasons, I would also allow the defendant’s appeal in relation to Royal Peninsula; qualify the declaration made in paragraph 3 of the sealed judgment by subjecting it to the power to sell and to keep part of the proceeds of sale representing the net profit of resale (if any); set aside paragraph 4 of the sealed judgment and in substitution therefor, make the following orders and directions :
Costs 46.As regards costs, I would set aside the costs order made by the deputy judge in relation to the costs of the action, and in substitution therefor, make an order nisi that the 1st plaintiff shall pay to the defendant 70% of her costs of the action. As regards the costs of this appeal, I would make a costs order nisi that they be paid by the 1st plaintiff to the defendant. Any application to vary the costs orders nisi shall be dealt with by written submissions only. Hon Yuen JA: 47.I agree with the judgment of the Chief Judge. Hon Kwan JA: 48.I have had the benefit of reading in draft the judgment of the Chief Judge. I agree with it and the orders he proposes to make. Hon Cheung CJHC: 49.Accordingly, the appeal is disposed of as indicated in paragraphs 32, 45 and 46.
Mr K C Chan, instructed by W K To & Co, for the plaintiffs Mr Albert Yau and Ms Melo Man, instructed by Lau, Chan & Co, for the defendant |
Cases cited in this judgment
Further hearings and rulings under CACV 163/2012