Law Man Wai v. Kwan Sau Sim
Read the full judgment text of CACV 250/2013 on BabelCite. This Court of Appeal judgment was delivered on 23 September 2014.
1. Madam Lo Pui Kau（羅佩球）was an able and wealthy woman. She came from a well to do family in Macau. Although she was married, she had no children of her own. But she had many nephews and nieces. She was known to them as 6 th Aunt. She died in December 2001. In her will she gave her estate to her nephews and nieces and also her grandnephews. Amongst her nephews are Law Man Wai（羅文蔚）(‘Wai’) (the plaintiff in HCA No. 2307 of 2009) and Lo Man Kam（羅文錦）(‘Kam’) (the plaintiff in HCA No. 143 of 2010
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CACV 249 & 250/2013 CACV 249/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 249 OF 2013 (ON APPEAL FROM HCA NO. 2307 of 2009) ________________________ BETWEEN
________________________ AND CACV 250/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 250 OF 2013 (ON APPEAL FROM HCA NO. 143 of 2010) ________________________ BETWEEN
________________________ (Heard together)
________________________ J U D G M E N T ________________________ Hon Cheung JA : Facts 1)6th Aunt 1.Madam Lo Pui Kau（羅佩球）was an able and wealthy woman. She came from a well to do family in Macau. Although she was married, she had no children of her own. But she had many nephews and nieces. She was known to them as 6th Aunt. She died in December 2001. In her will she gave her estate to her nephews and nieces and also her grandnephews. Amongst her nephews are Law Man Wai（羅文蔚）(‘Wai’) (the plaintiff in HCA No. 2307 of 2009) and Lo Man Kam（羅文錦）(‘Kam’) (the plaintiff in HCA No. 143 of 2010). 2)Wai and Kam 2.1Wai was born in 1942 and received his primary education in Macau. He came to Hong Kong when he was 14, attending, firstly, St Louis School and later on St Paul’s Co-Educational College where he graduated with good results. He did not continue higher education because his mother was ill and he returned to Macau to be with her. In Macau he started working in the Permit Department of the British Consulate. 2.2In 1966 Wai came to Hong Kong and worked in the inward bills department of a bank. He married in 1967. However he committed an offence and was jailed between 1983 and 1985, during which time his wife deserted him. He has no children. 2.3In 1987 Wai met up with Kam in Hong Kong. Kam was then 35 and working as a part time chauffeur. He was already married to Kwan Sau Sim（關秀嬋）(‘Sim’) (the defendant in HCA 2307 of 2009) who was a beautician, and they had a young son (‘Tung’). 2.4After Wai and Kam met up again, they became very close and they visited 6th Aunt frequently who had by then moved to live in Hong Kong with her sister known as the 5th Aunt. 6th Aunt loved Wai and Kam and they were her close relatives. 3)The gifts 3.16th Aunt gave a lot of money to Wai who was helping her with her foreign currency investments. By Wai’s own admission, between January and November 1999 6th Aunt had given him about $29 million. 6th Aunt later had a stroke. Kam said 6th Aunt told him and Sim during one of their visits in 1999 after she had recovered from the stroke that she had transferred part of her savings to Wai which was to be shared between him and Wai equally after she passed away. When Wai turned up later, 6th Aunt asked Wai to confirm the transfer which he did and he said the money was about $30 million. 3.2Kam further said that Wai later confirmed with him on two other occasions that the gift from 6th Aunt was about $30 million to $35 million respectively. On the first of these occasions, Wai told Kam half of the money was Kam’s. 3.3Wai’s position was different. He maintained in these proceedings that the money given by 6th Aunt was gift to him only. However what is clear is that starting from January 2000 up to June 2004 Wai had been giving Kam and Sim a total of $12.8 million. Wai insisted that the money he gave to Kam was entirely out of love and goodwill. 4) The properties 4.16th Aunt’s estate included real properties. Two of these were sold by the executors of the estate to Wai, Kam and another nephew Lo Man Hing. Two other properties were sold by the executor to Sim. These two properties are a flat in Fung Yip Building (‘the flat’) where 6th Aunt lived before she died and a shop in Hoi To Court (‘the shop’). Wai claimed that although Sim purchased the properties in her name, it was him who provided the consideration of $7.96 million. Between June and August 2004, Wai had given Kam and Sim $8.3 million in cash. He claimed that Sim held the properties on trust for him. As made clear in the judgment below there is no dispute that payments made by Wai to Sim were to be treated as payments to Kam. 4.2Sim denied this. She said she was the legal and beneficial owner of the two properties and the money used for the purchase of the properties was part of the gift given by 6th Aunt to Wai and Kam. She counterclaimed damages against Wai for obstructing the sale by her of the flat to a purchaser. She also claimed that Wai had not accounted for the rent he received from the shop. Kam’s action against Wai was for, among other things, a declaration that Wai holds on trust for him half of the money transferred by 6th Aunt to Wai for their benefit, an account of the money that 6th Aunt had given to Wai and payment of money found to be due from Wai to him on the taking of the account. The judgment 5.Recorder Jat SC, after a four day trial, found for Sim and Kam. Wai now appeals. The appeal 6.Wai is represented by Ms Margaret Ng who ably conducted the appeal on his behalf. Originally her challenge of the Recorder’s judgment was on two factual grounds, namely, first, he erred in finding that 6th Aunt had intended to give her money to both Wai and Kam, and, second, he erred in finding that Sim was the beneficial owner of the two properties. Shortly before the appeal Wai’s notice of appeal was amended and a challenge on a point of law was raised, namely, the Recorder erred in failing to hold that, on Kam’s pleaded case that there was no perfected trust or gift in favour of Kam on the monies transferred to Wai. Validity of the gift 7.1I will deal first with the challenge on the validity of the gift. This was not a point raised by Kam at the trial below. However, the Recorder obliquely dealt with this issue in paragraph 8 of the judgment, where he stated that ‘Ms Ng did not dispute that the 6th Aunt’s gift, if proved, did not constitute a valid trust’. Ms Ng informed the Court that this point was simply not raised at the trial. The Recorder, however, did not elaborate how this would affect the parties’ case and he did not address this matter further in his judgment. 7.2Ms Ng’s attack on the validity of the gift is on two limbs. First, the trust over 6th Aunt’s money was void for uncertainty (‘the uncertainty argument’) and second, the gift was an imperfect gift in that 6th Aunt merely expressed an intention of gifting an as yet incompletely transferred and unspecified sum of money to be held by Wai for Kam (‘the imperfectly gift argument’). 7.3Kam and Sim (represented by Mr Albert Yau and Ms Melo Man) objected to Wai raising this challenge for the first time on appeal. Mr Yau argued that had this matter been raised below, there would be factual evidence called to deal with the challenge. 7.4Ms Ng relied on Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356 and argued that Wai is not barred from taking this point on appeal because it arises on Kam’s pleadings and no factual issue is involved. She relied on Bokhary PJ’s judgment at page 369 B-C that :
I. The uncertainty argument 1) The principle 8.One of the three requirements for a valid trust is that the subject matter of the trust must be certain. The following principle from Pettit’s Equity and the Law of Trusts (12th Ed) page 51 illustrates the point :
2) The pleading 9.1In respect of the gift from 6th Aunt, Kam in his pleadings relied on an express trust or alternatively a trust ‘by operation of law’ but without specifying its precise nature. In respect of the gift, this is what Kam pleaded in his re-amended statement of claim :
9.2The Fund as defined by paragraph 3(2) is pleaded as the subject matter of the trust :
3) Wai’s argument 10.1Ms Ng argued that there is uncertainty in the subject matter of the trust because the Fund consisted of both of the money that had been transferred from 6th Aunt to Wai and also money of unspecified amount that had not yet been transferred. Ms Ng argued that at the time of 6th Aunt’s expression of intent in early 1999 of making the future gift, the subject matter of the purported gift had not yet been constituted and was uncertain. It was uncertain at what point and what further transfers would be made to constitute the purported gift. On the particulars pleaded, five transfers were made between 19 February and 23 March 1999. No declaration of trust was made on the transferred amounts by 6th Aunt as, according to Kam, the transfers constituting the gift were still incomplete, and other transfers were made on or after 19 November 1999. No declaration of trust was made on the final sum after further transfers were made to Wai. On Kam’s pleadings there was no further conversation between Kam and 6th Aunt on the alleged gift. 10.2Accordingly, Ms Ng argued that neither the subject of the gift nor the intention of gifting of the final sum was certain or ascertainable. Indeed, on Kam’s pleadings the sum of money constituting the purported gift was uncertain as to the total value as well as to the meaning of ‘transfer’, whether it included any cash withdrawals by Wai from time to time. This can be seen from paragraph 4(2) of the Re-Amended Statement of Claim :
4) Wai can take this point on appeal 11.It is clear that arguments on the uncertainty of trust are based solely on the state of the pleadings which I have set out above. In my view Wai is entitled to raise this point on appeal. 5) Merit of this point 12.1I am also of the view that Ms Ng’s submission on the uncertainty of the subject matter is correct. When 6th Aunt informed Kam of the gift, the subject matter of the gift had not yet been constituted and was uncertain because the gift consisted of both the money that had been transferred to Wai and also money of unspecified amount that had not yet been transferred. It was uncertain at what point and what further transfers would be made to constitute the gift. I disagree with Mr Yau’s contrary argument that there is no uncertainty in the subject matter. 12.2Mr Yau argued that future assets may be included in the trust fund. He relied on Underhill and Hayton’s Law Relating to Trusts and Trustees, 18th ed., paragraph 1.4, where the editors stated that :
12.3In my view this passage does not assist Mr Yau. The discussion of this passage proceeded on the basis of a validly constituted trust. The issue of uncertainty of the subject matter is not discussed. 12.4Mr Yau further relied on the statement in Hayton and Mitchell’s Commentary and Cases on the Law of Trusts and Equitable Remedies, 13th ed., paragraph 4‒99 that :
12.5He submitted that there is no suggestion that the trust is void simply because some of the assets comprising that trust fund happen to be unascertained at the time of its creation. Certainty of subject matter requires that the property to be held on trust must be certain for otherwise there will be nothing specific to which the trust can attach. As long as there is at the time of its creation sufficiently ascertainable assets settled on that trust (and no doubt they encompass assets already transferred to the trustee to hold on trust), the trust is valid even though it also consists of future-acquired property. 12.6In my view this passage in fact supports the uncertainty argument. The uncertainty of the subject matter renders the trust void is well established. 12.7 Further the traditional trust precedent that appeared at paragraph 1‒161 of Hayton and Mitchell and relied upon by Mr Yau does not help him. His reliance on Recital (C), namely :
and the meaning of ‘trust fund’ in paragraph 1.‒(2)(d), namely :
must be read subject to Recitals (A) and (B) (footnote omitted), namely :
12.8As can be seen from Recital (B), the trust is to be declared in respect of the specified assets. In other words a valid trust is to be properly constituted by the specified assets. It is upon this valid and subsisting trust that the settlor may transfer further assets to the trustees to be held on trust by them. The definition of ‘trust fund’ in the precedent does not carry the matter further. The starting point is that there is a properly constituted trust with the subject matter being certain, namely, the designated assets which is the first item in the definition. This is unlike the present case where the subject matter of the trust is to consist both the transferred money and unspecified money to be transferred in the future. 12.9Mr Yau also relied on a trust by operation of law. He submitted that it is in the nature of a constructive trust. Constructive trust was not pleaded nor argued upon at the trial. Mr Yau now submitted that it was unconscionable for Wai to deny on one hand the gift and on the other hand continue receiving the money from 6th Aunt who made the transfer on the assumption that the gift was good and Wai would honour his obligation. This renders Wai a constructive trustee. He referred to Underhill and Hayton at paragraph 8.29 where it reads :
12.10Mr Yau, however, did not articulate how this would convert an otherwise invalid trust into a valid one. 12.11Subject to the issue of estoppel that I will later discuss, I conclude that there is no valid trust. I also tend to agree with Ms Ng that if the express trust fails, Wai would either hold on resulting trust for 6th Aunt as to the half share intended for Kam, or is accountable to her (or her estate) as her agent, but in neither case would Kam have any recourse against Wai by way of an account. II. Imperfect gift without transfer 1) The principle 13.Ms Ng relied on Milroy v Lord 4 DE G.F. & J. 264 at 274 and 275 where Turner LJ held that :
2) Not necessary to address this point 14.The imperfect gift argument is a related although different issue from the uncertainty argument. The uncertainty of the subject matter will render the trust void. But an imperfect gift may arise even when there is no issue of uncertainty of the subject matter but when the trust fund was not transferred to the trust. Having found that the trust is void for uncertainty, it is not necessary for me to discuss this topic further. Factual challenges 1) Wai’s argument 15.1Ms Ng submitted that in respect of the gift to Kam, Kam bears the burden of proof and he had failed to discharge the burden. She submitted that Kam’s evidence was unsatisfactory. He relied solely on a single conversation with 6th Aunt in early 1999 during a social visit. There was no written record of the gifting. He could not recall the exact date or the actual words of gifting, or when the gift was intended to be transferred to him. The only corroboration came from Sim. By his own admission he had never mentioned the gift to anyone except Wai, neither during 6th Aunt’s lifetime nor after her death or disclosed to any third party its existence until shortly before these actions 10 years after 6th Aunt’s death. On such unsatisfactory evidence, and given the considerable inherent improbability, Kam’s claim should have been dismissed : 1) If 6th Aunt wanted to make a gift to Kam, there was no reason why she did not transfer the money to him; 2) For such a substantial gift it was strange that neither Kam nor anyone kept any record of it at any time; 3) A total sum of $3,600,000 was paid by Wai to Kam in 2000. If it was part payment of the gift, it was strange that Kam never even acknowledged it to 6th Aunt; 4) 6th Aunt’s transfers to Wai were made known after her death, and Wai paid $4.77 million in estate duty; even then Kam did not disclose that he had a share in the gift and he did not pay any part of the estate duty; 5) In the 10 years between the alleged gift and the commencement of proceedings, no account was kept by Kam of how much of Wai’s obligation under the gift had been discharged and how much remained outstanding, whether interests were payable and if so at what rate (Kam claimed interests on the gift in his statement of claim); and 6) Stranger still, neither did Wai keep any account in spite of his being a meticulous person with money. 15.2Ms Ng further submitted that : 1) the Recorder had reversed the burden of proof by requiring Wai to explain why he gave so much money to Kam; 2) the Recorder had made his finding on a false premise, namely, Wai was a man of modest means who had a relatively humble job with a pizza restaurant; 3) the Recorder had given inconsistent treatment to the evidence of Sim and Madam Lee, the wife of the late tenant who gave evidence for Wai; and 4) the Recorder had failed to take proper account of the only relevant contemporaneous records of Wai which did not show he was paying off any obligation to Kam. 15.3In respect of the two properties, Ms Ng submitted that Sim would only succeed if Kam could establish the $8.3 million was part of the gift from 6th Aunt. Wai’s intention to buy the properties was supported by independent evidence. The payment of $8.3 million by cash was different from the previous payments to Kam by cheque or direct transfer who was consistent with Wai’s explanation that he wished to avoid any evidence of an inter vivos transfer attracting estate duty as he had just paid $4.77 million in estate duty for 6th Aunt’s gift. The Recorder was wrong in his doubts about Wai’s evidence on his reasons for changing the name of the purchaser of the shop and finally the Recorder had overly relied on demeanor and his assessments of characters. 2) Overview on factualchallenge 16.It is necessary to take an overview before the detailed complaints are considered. As this is an appeal against the finding of fact by the Recorder, the well-established principle in this regard is that the appellate court will not disturb such a finding unless it is shown to be plainly wrong, for example, where the finding is contrary to some uncontroverted evidence or that the judge had ignored some material evidence (Ting Kwok Keung v. Tam Dick Yuen & Others [2002] 3 HKLRD 1). For a recent affirmation of this approach, see the United Kingdom Supreme Court judgment of McGraddie v McGraddie [2013] 1 WLR 2477. 3) Nature of payment 17.1In terms of the context of this case, the most prominent feature is that of the $29 million that Wai admitted 6th Aunt had given him, he had given more than half of them to Kam. The total amount was about $18 million. Even if the $8.3 million used in the purchase of the properties are to be excluded from this sum, Wai had still given about $10 million to Kam. 17.2Many of the payments continued after the purchase of the properties until 2009. Even if some of the later payments are rentals as Kam and Sim had claimed, the amount paid by Wai to Kam was very substantial indeed. If 6th Aunt had indeed transferred about $35 million to Wai as Kam’s inquiry with the executor had suggested, then the payment made by Wai to Kam represented nearly half of that amount. 17.3The payment was made by Wai to someone who is only his first cousin. Before they met up again in Hong Kong in 1987, their two families were not close at all. When they eventually met again in 1987, Wai was aged 45 and Kam was 35. While they became close until their falling-out in November 2009, the inevitable question one has to ask is why was Wai so generous to Kam? There really is no indication that Wai and Kam had bonded so much in their relationship that Wai would go to such length to help Kam out. It is said that Wai is not married and has no family of his own and it is not odd for him to help Kam out. On the other hand Wai has his own siblings and the evidence shows that he had only given $500,000 to one of his sisters. 17.4One may ask, is it more likely that, Wai and to his credit, was merely fulfilling the obligation that 6th Aunt had imposed on him to share the money between him and Kam or that Kam had made up a false story about the gift of 6th Aunt and Wai’s payment to him was entirely out of Wai’s generosity towards him? There is no presumption of gift from Wai to Kam because this presumption applies only between parent and child and between spouses. In any event this presumption can easily be displaced (see Suen Shu Tai v Tam Fung Tai (CACV 187/2013)). 17.5This is the stark context that the Recorder had to decide on the nature of the money given by Wai to Kam. The amount of the payment cried out for an explanation from Wai. Ms Ng urged upon us not to be overly concerned with the reason why Wai chose to give away his money. In my view one must consider the inherent probability of Wai’s actions. I do not regard the Recorder had reversed the burden of proof which admittedly was imposed on Kam, when he rejected Wai’s explanation for the payment. In my view the Recorder’s factual finding in favour of Kam can be supported by the inherent improbability of Wai’s case of the gift. 17.6Many of the complaints raised by Ms Ng had been argued and considered by the Recorder. Specifically he had borne in mind of Ms Ng’s impassioned closing submission that Kam and Sim were ‘putting words in the mouth of an elderly person who, has been dead for 10 years’. 17.7Kam’s case on the nature of the gift is of course dependent on his and Sim’s oral evidence. The Recorder held that Kam gave the impression of being a straightforward man who is not very sophisticated. Why 6th Aunt chose to give to him and Wai is not entirely without reason. While Wai may be 6th Aunt’s favourite nephew and since 1995 had been looking after her affairs, the Recorder also accepted Kam’s evidence that :
17.8The Recorder rejected Wai’s explanation that the $5.6 million given to Kam within a couple of months in early 2000 was to reimburse him for his loss in foreign currency investment. He found that :
17.9In respect of Wai’s generosity, Ms Ng’s submission was that Wai is a person with a strong sense of family solidarity, and with no children of his own, Kam’s family was the closest resemblance he had of a family, which would explain why he had been so generous towards Kam and Sim. To that the Recorder held :
17.10\The Recorder plainly had considered the issue of inherent probability and other evidence in order to form an overall assessment of the parties’ credibility and the strength of their case. This includes the episode regarding the sale of a flat in Classic Mansion by Madam Chow, a lady friend of Wai, to Sim. Sim entered into a sales contract to buy the flat for $1 million in May 2004. Kam’s evidence is that he asked Wai to return some of 6th Aunt’s gift to him so as to acquire the property. Sim said Wai told her that he would deduct the purchase price from the amount he had to pay Kam from 6th Aunt’s gift. The sale was completed without Sim paying the vendor anything. In addition Wai gave her $100,000 to return the 10% deposit that Sim had paid Madam Chow. Wai’s case was that the flat was his and Madam Chow held it on trust for him, and he directed Madam Chow to transfer the property to Sim as a gift. 17.11The Recorder was clearly not impressed with Wai’s version of the event. A conclusion, he, as a trial judge, was entitled to reach on the evidence he had heard and seen. 17.12The Recorder also considered Wai’s evidence on the purchase of the two properties unsatisfactory. The initial offer to purchase the shop was made on behalf of Ever Rise Investment Ltd, a company jointly owned by Wai and Sim. The offer to buy the flat was made on behalf of Wai alone. The Recorder found Wai’s insistence that he intended to buy the shop alone unsatisfactory. While Wai maintained that Sim had never expressed any interest in buying the shop and the flat, he was unable to explain why the offer to purchase the shop was originally made on behalf of Ever Rise. Wai then said Sim became the purchaser because Kam who worked as a clerk in a solicitor’s firm told him that this was to avoid potential conflict of interest problems. 17.13The Recorder held that he was unable to accept Wai’s explanation :
17.14The Recorder also found that Wai’s evidence on the payment of $8.3 million in cash unsatisfactory :
17.15It is apparent that the Recorder had also considered factors in Wai’s favour when he assessed the case :
17.16But having taken all these factors into account, the Recorder found against Wai on the gift issue. In my view the Recorder was clearly entitled to such a view. It cannot be said that he was plainly wrong on this issue. 17.17I do not consider the Recorder had decided this issue simply on the demeanour of the parties. No doubt he had taken this into account as he said in paragraph 102 of the judgment referring to Wai’s demeanour when he gave evidence on the purchase of the two properties. But his finding is clearly supported by other evidence. 17.18I do not regard the Recorder’s finding was materially affected when he stated that Wai was a man of humble means who had a relatively humble job, when in fact he had earlier found Wai to be well educated and between 1995 and 1999 was profitably engaged in foreign exchange trading. Nor do I find the Recorder had applied different standards in assessing the evidence of Sim and Wai’s witness. 17.19I do not regard my view on the invalidity of the trust by reason of the uncertainty of the subject matter has any adverse bearing on the finding of fact by the Recorder. These are two distinct and unrelated issues. 4) The purchase of the properties 18.In my view the Recorder was clearly entitled to find that the $8.3 million used for the purchase of the properties was part of the gift that 6th Aunt had given to Kam. He was entitled to find that there was no agreement between the parties that Sim was to hold the properties for Wai. Estoppel by convention 19.1In his written submission, Mr Yau alluded to estoppel but without specifying what kind of estoppel and how it is to be applied. This Court is of the view that on the basis of the finding on law and facts, estoppel by convention, which will preclude Wai from denying the validity of the gift notwithstanding the invalidity of the trust, is an arguable point and because of the late challenge on the validity of the trust, this point should be considered and further submissions on this point was directed and received from the parties. 1) The principle 19.2Simply put, estoppel by convention is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other’s detriment. 19.3In First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569 at 601 the Court of Final Appeal summarized the restatement of the principles on estoppel by convention by Ribeiro PJ in Unruh v Seeberger (2007) 10 HKCFAR 31 as follows :
19.4See a further discussion of this doctrine in Ryan v. Moore [2005] 2 SCR 53 (Supreme Court of Canada) and Prime Sight Ltd. v Lavarello [2014] 2 WLR 84 (Privy Council on appeal from Gibraltar). 2) The pleading 19.5In her written response, Ms Ng argued that the estoppel must be specifically pleaded by reference to Muskham Finance Limited v Howard [1963] 1 QB 904 at 913, Li Kwai Fong Ah Pat v Bachy Soletanche Group & Another, unreported, CACV 30/1989 at p.3 and Gillett v Holt [2001] Ch. 210 at 224B. Since it has not been pleaded, it is not open to Kam to rely on it now. 19.6In my view, Wai may rely on this estoppel. As Coppinger v. Norton [1902] 2 Ir. R. 241 observed, the requirement of pleading estoppel is subject to the pleader having the opportunity to do so. The principle is stated in the judgment of Wright J at 237. Although Wright J was the dissenting judge, there was no disagreement by the other members to this principle on pleading :
19.7This is also reflected in Hong Kong Civil Procedure 2014 volume 1, paragraph 18/8/11:
19.8The unusual feature in this case is that the invalidity of the trust is only raised for the first time on appeal. It brings into focus the question now faced by this Court, namely, what is the consequence of the parties’ respective case if the challenge to the validity of the trust is substained while the factual findings are maintained. In my view fairness in the circumstances must allow Mr Yau to raise this point despite the matter not having been pleaded before. Further, it is quite impossible for Mr Yau to have pleaded this beforehand in the absence of a specific plea on the invalidity of the trust. This Court will, if necessary, grant leave to Mr Yau to file a respondent’s notice to rely on the estoppel by convention as identified in paragraph 19.1 herein. Application of the estoppel in the present case 20.In my view estoppel by convention applies on the basis of my finding : (1) i) The parties in this case entered into a transaction or legal relationship on the basis of an assumption that was shared by or common to them both, namely, there was a valid gift of money from 6th Aunt to Wai and Kam. As Ribeiro PJ explained in Unruh v Seeberger :
ii) Ms Ng challenged the application of the estoppel. She submitted that Kam has not satisfied the threshold requirement because it is not shown that the parties had entered into some transaction or legal relationship. Ms Ng argued that as far as Kam’s action was concerned, Kam was merely receiving presents and payments from Wai to which he was not entitled, since there was no gift. As for Wai’s action, there was still no ‘transaction’ between Wai and Kam. The ‘transaction’ over the two properties were between the purchaser and Law Man Shing as vendor. iii) I disagree. Here the parties must have been engaged in acts or omissions affecting their mutual relationship. On the basis of the factual finding the parties must have proceeded on the assumption of a valid gift. On that assumption Wai was required to pay Kam his share of the gift and Kam could enforce the payment from Wai. Had the trust been a valid one, Wai was the trustee and Kam the beneficiary of the trust with the attendant legal rights arising from this relationship. iv) Ms Ng further argued that there was no inducement on the part of Wai for Kam to enter into the transaction. She relied on the part of the seventh proposition identified in paragraph 19.2 herein which deals with departure by one party from the common assumption : the departure is unjust because of the part taken by him in occasioning its adoption by the other party. v) On the facts of this case as found by the Recorder, Wai must have relied upon and adopted what Wai told him about 6th Aunt’s gift in his relationship with Wai. Examples of this reliance can be found in paragraphs 35 and 84 of the judgment :
(2) The assumption was communicated by some mutually manifest conduct in the light of the factual findings that Wai had orally confirmed to Kam what 6th Aunt had told Kam about the gift. (3) The issue of the invalidity of the trust is irrelevant because there is no necessity for the parties to believe that the assumed state of affairs was true. (4) Wai and Kam had acted on the basis of the same shared assumption in the form of Wai providing the money to Kam and Kam receiving them over a substantial period of time. (5) The content of the common assumption is sufficiently certain, namely, there was a valid gift of money from 6th Aunt to Wai and Kam equally. Ms Ng’s successful argument on the uncertainty of trust which is based on a point of law does not in any way lessen the certainty of the content of the common assumption. (6) Wai had departed from the common assumption by asserting that his payment to Kam was not pursuant to 6th Aunt’s gift and this departure is unjust because in his action against Sim, he is denying that the payment of $8.3 million for the purchase of the two properties is part of the gift from 6th Aunt and by his assertion of right to these two properties, he is seeking to deprive Kam and Sim what truly belongs to Kam under the gift. I disagree with Ms Ng that Kam could not be said to have suffered any detriment. (7) As a result Wai is estopped from denying the gift and his obligations towards Kam in respect of the gift. Backdoor argument 21.1Ms Ng submitted that to extend estoppel by convention to apply to the circumstances of this case is in effect to override Milroy v Lord, by coming to the aid of a volunteer and perfecting an imperfect gift by the backdoor on the mere confirmation by a non-trustee of a failed gift of the gift. If Wai acted unconscionably in receiving money intended by the transferee for a different purpose and retaining it for his own use, equity’s remedy is to make him accountable to the transferee, not to the volunteer or any other person. 21.2The Court of Final Appeal in First Laser Ltd discussed the backdoor argument in paragraphs 87-89 in the context that estoppel by convention cannot normally be used in effect to validate an agreement which by statute would otherwise be invalid or unenforceable. In this case, the estoppel does not contravene any public policy. Disposition of the Appeal 1) Wai’s action (CACV 249/2013) 22.1Wai claimed that he is the beneficial owner of the two properties. Sim’s case is that the money provided by Wai for the purchase of the two properties was money from the gift which Kam was entitled to receive from Wai and there was no agreement that she was to hold the two properties on trust for Wai. The Recorder found for Sim on these two points. 22.2As a result of the application of the doctrine of estoppel by convention, notwithstanding the invalidity of the trust, Wai is precluded from denying that the purchase price he had provided for the two properties was money that Kam was beneficially entitled to. Further as a result of our conclusion that the Recorder was correct to find that there was no agreement for Sim to hold the two properties on trust for Wai, there is no issue of Sim holding the properties on resulting trust for Wai because she does not. Accordingly the Recorder is correct to give judgment in favour of Sim. Wai’s appeal is accordingly dismissed. 2) Kam’s action (CACV 250/2013) 23.1Kam’s action is based entirely on the gift. Mr Yau informed the Court that due to the long lapse of time and the substantial amount he had already received from Wai, Kam does not intend to enforce the judgment ordering the taking of account and payment arising from the result of the taking of account. Instead he invited this Court to declare that the money transferred by 6th Aunt to Wai was her gift to Wai and Kam and this gift included the $8.3 million for the purchase of the two properties. 23.2In my view the declaration that should be granted in the light of this Court’s conclusion on estoppel is that Wai is estopped from denying that the money (which included the $8.3 million) that he had paid to Kam was in the nature of a gift from 6th Aunt to Kam. This will replace the declaration made by the Recorder that :
23.3The Court further records Kam’s position that he will not pursue the order for an account and payment upon taking account. Wai’s appeal is allowed to this limited extent. Costs 24.The two appeals were heard together and there were common issues between them. Wai fails on the issue of the gift because he is precluded from denying that the money he had paid to Kam was in the nature of a gift from 6th Aunt to Kam. This affects both appeals. However, he succeeds in challenging the validity of the trust which took up a substantial part of the hearing. The costs order nisi in respect of the two appeals is that Wai is required to pay half of the costs of the appeals respectively to Sim and Kam. Hon Chu JA : 25.I agree with the judgment of Cheung JA and the orders His Lordship proposes. Hon Poon J : 26.I agree.
Ms Margaret Ng, instructed by Lee & Chow, for the plaintiff in CACV 249/2013 and defendant in CACV 250/2013 Mr Albert Yau and Ms Melo Man, instructed by Tso Au Yim & Yeung, for the defendant in CACV 249/2013 and plaintiff in CACV 250/2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under CACV 250/2013