Ching Chi Sau v. Yip Woon Yin Judy and Another

CACV 261/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 261 OF 2014

(ON APPEAL FROM HCA NO. 352 OF 2008)

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REASONS FOR JUDGMENT

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Hon Cheung JA :

I. The appeal

1.1The plaintiff met the 1^st defendant in 1993 and soon thereafter they cohabitated together as man and wife.  At that time the plaintiff was estranged from his wife and had petitioned for divorce.  The divorce came through on 22 December 1994.  The 1^st defendant was already divorced when she met the plaintiff who was 62 years of age while she was 45 years of age.  The couple’s twilight romance, however, did not last long. By July 2007 the 1^st defendant moved out from their shared home and by March 2008 the plaintiff commenced the present action claiming, among other things, an interest in the properties that the couple had purchased during their union.  

1.2Deputy High Court Judge Kent Yee after a 12-day trial found for the plaintiff in respect of two of the properties.  The 1^st defendant who claimed that she was the sole beneficial owner of the properties had her counterclaim dismissed. The 1^st defendant appealed against the judgment.  At the conclusion of the hearing of the appeal we dismissed the appeal.  I now give reasons for the judgment.

II.  The properties

2.1When the parties first cohabitated they lived in a flat owned by the 1^st defendant herself.  However, on 1 April 1994 they bought a property which is known in the action as the FG House for $8.9 million. 　The property was purchased with the assistance of a mortgage of $4.5 million obtained in December 1994.  The balance of the purchase price of $4.4 million was funded by the parties themselves.  The plaintiff claimed that both of them contributed this sum.  Subject to dispute on the nature of the contribution, the 1^st defendant accepted that the parties have contributed more or less to the balance of the purchase price of $4.4 million.

2.2This property was registered in the joint names of the parties.  Thereafter, a number of properties were purchased either in the sole name of the 1^st defendant or in the name of a limited company.

1) September 2001, Carpark No. 41 (‘Carpark 41’) in Fok On Garden was purchased in joint names.  It was sold in September 2003 for $260,000.

2) April 2002, Shop 102 (‘Shop 102’) in Fok On Garden was purchased in the sole name of the 1^st defendant for $350,000.  It was sold in July 2005 at $1.1 million.

3) November 2002, a ground floor shop in Boundary Street (‘BS Shop’) was purchased in the sole name of the 1^st defendant for $4.25 million, financed by mortgage of $2.97 million.  It was sold in January 2011 for $27 million.  The net proceeds of $26,965,946 were paid into Court pending resolution of the parties’ dispute.

4) December 2003, Shop 16A in Greenery Plaza (‘GP Shop’) was purchased in the sole name of the 1^st defendant for $2.35 million financed by mortgage of $1.64 million.  It was sold in December 2007 for $5.2 million.  The net proceeds of sale after deducting payment of mortgage were $3.9 million.

5) February 2007, a flat in Cheong Ling Mansion, Nullah Road, Kowloon (‘CL Flat’) was purchased in the name of the 2^nd defendant for $2 million.

2.3There was a forced sale of the FG House in March 2009 when the mortgagee bank retook possession.  The net proceeds of sale of $3.5 million were paid into Court.

III. The plaintiff’s case on the purchase

3.The plaintiff’s case is that the properties acquired subsequent to the purchase of FG House were purchased pursuant to an agreement (‘the Investment Agreement’) reached between the parties.  The Judge summarized this agreement as follows :

‘ 128. Dr Ching relies on the Investment Agreement in his pleaded case relating to his alleged beneficial interest in Madam Yip’s Properties. The Investment Agreement was orally made in or about 2000 at the FG House in the course of his discussion with Madam Yip about property investment. Dr Ching also pleads that the Investment Agreement was their understanding in anticipation of a life-long relationship. It consists of the following terms:

(1) in order to prepare for the retirement of Dr Ching and maintain the living of Dr Ching and Madam Yip after retirement, Dr Ching and Madam Yip were to jointly make investment in the property market;

(2) the funds required for the investment were to be raised by re-financing of the FG House, or from the rental income of the properties acquired for investment and the income of Dr Ching (“the Investment Funds”), and if necessary, from Madam Yip’s money;

(3) Dr Ching and Madam Yip were jointly to decide on the property to be acquired for the investment, the time when the acquired property to be sold, and how the proceeds of sale thereof were to be utilized or dealt with for further investment purpose;

(4) the proceeds of sale of the investment properties should be reserved for further investment;

(5) as Dr Ching was approaching retirement age, it was difficult for him to obtain mortgage from banks. The investment properties would be acquired in the sole name of Madam Yip to hold on trust for Dr Ching and Madam Yip;

(6) Dr Ching would employ Madam Yip as a nurse assistant of Dr Ching so that she could have income proof, if required, for making mortgage application to banks; and

(7) Dr Ching and Madam Yip shall be beneficially entitled to the properties acquired for investment and the rental income and the proceeds of sale of such properties in equal shares.

129. …… The funds [for the purchase were] obtained from further mortgates/charges of the FG House and rental income and sale proceeds of Carpark 41 and sales proceeds of Shop 102.’

IV. FG House

1) The 1^st defendant’s case

4.1The pleaded case of the 1^st defendant on the FG House is that the plaintiff had represented to her that while the house was purchased in joint names it would be a gift to her and the plaintiff would be solely responsible for the purchase price.  However, as the plaintiff was in financial difficulties, she agreed to lend him $2,100,000.  The respective payments made by the parties are as follows : the plaintiff paid $2,634,000 ($2,100,000 part payment plus initial deposit and related sums), the 1^st defendant paid $2,100,000 (being initial deposit and part payment lent by her to the plaintiff). 

2) The documents

4.2By a Memo dated 1 December 1994 (‘Memo 1’) the plaintiff acknowledged to the 1^st defendant that the interest and rights of the FG House would be vested in her.  The content of Memo 1 is as follows :

‘ i. After completion of the transaction, the FG House would immediately be transferred to Madam Yip in her name;

ii. Within six months (wrongly stated in the judgment below as six weeks) after the completion in respect of the FG House, (if) Dr Ching could not recover any debt in Canada, (Dr Ching) would be willing to break up with Madam Yip; and

iii. In the event of separation with Madam Yip due to economic reason (unable to recover the debt), Dr Ching would be willing to continue to pay the instalments for one year.’ 

4.3By another written Memo dated 8 April 1996 (‘Memo 2’), the plaintiff acknowledged that all the interests and rights in the FG  House were vested in the 1^st defendant. The content of Memo 2 is as follows :

‘ In relation to the beneficial interest of the FG House, originally it was co-owned by Dr Ching and Madam Yip. Now it is agreed that Madam Yip owns the said beneficial interest solely and the title was to be held under Madam Yip’s sole name as evidenced by this document. The sale proceeds and/or rental income of this property could be independently dealt with and totally belong to Madam Yip.’

4.4There are two other documents relevant to the FG House.  The first document is a Power of Attorney (‘POA’) which the Judge dealt with as follows :

‘ 23. About a month later, Dr Ching executed a Power of Attorney in favour of Madam Yip on 16 May 1996 (“the POA”). Under the POA, Dr Ching, in the capacity of one of the beneficial owners as joint tenants of the FG House, appointed Madam Yip to act on his behalf to handle all the dealings relating to the FG House including but not limited to its leasing and sale. The POA was prepared with the assistance of one Mr Lee of Messrs Massie & Pickavant, who then resided in the vicinity of the FG House.’

4.5The other document is a Memo dated 12 June 1996 (‘Memo 3’) signed by the parties :

‘ (1) Both parties agreed that they should continue to stay together for a few years before confirming the legal status of the relationship;

(2) Madam Yip suggested to transfer the beneficial interests in Flat 2G and Flat 19B (both mortgaged) to Dr Ching in exchange for the beneficial interests in the FG House … all vested in the sole name of Madam Yip. The deliberation period would be three months and thereafter take the further step to look for a lawyer.

(3) Within six months after the date of the exchange transaction, if there is any economic loss suffered by Madam Yip, Dr Ching shall pay the mortgage repayment for 1 year in respect of the FG House only. Due to the non-completion of the exchange procedure, Madam Yip claimed that the originals of Dr Ching’s notes issued to Madam Yip on 1 December 1994 and 8 April 1996 (Memo 1 and Memo 2) have gone missing and hence they are invalid.

(4) To show his sincerity and the fact that the relationship in their advanced age is treasured, (Dr  Ching) shall give the following personal treasures to Madam Yip for safekeeping purposes and Madam Yip promises that she would not appropriate the same. They include: some antique banknotes of Hong Kong totaling HK$2,632, 78 golden coins and a few sets of stamps from the Qing Dynasty.’

4.6Flat 2G and Flat 19B belonged solely to the 1^st defendant and are not the subject matter of the plaintiff’s claim. 

4.7It should be noted that the plaintiff and the 1^st defendant subsequently obtained three additional loans from General Capital (Hong Kong) Limited (‘GC’) on the FG House.  The plaintiff was the one responsible for repaying all the GC loans by way of monthly repayment save and except for 13 months ($18,000 per month paid by the 1^st defendant).

3) The Judge’s decision on FG House

4.8The Judge rejected the 1^st defendant’s claim that she was the sole beneficial owner of the FG House.  He held that :

‘ 125. The first property is the FG House and Madam Yip has to persuade this court why she alone had the beneficial interest in the property though it was registered in the joint names of Dr Ching and her.

126. On this issue, I make the following observations and factual findings:

(A) Both Dr Ching and Madam Yip made contribution to the down payment. The initial deposit of HK$200,000 was paid by Dr Ching.

(B) Dr Ching and Madam Yip did have financial difficulties in raising the entire down payment. This resulted in the postponement of the completion date thereby incurring extra costs of renting the FG House pending completion. Madam Yip eventually raised fund by causing a further charge to be made on her Flat 2G in favour of the United Chinese Bank Limited.

(C) I do not accept Dr Ching’s allegation that he from December 1993 to July 1994 made a monthly payment of HK$30,000 to Madam Yip for saving purposes and hence the contribution of Madam Yip to the down payment should be deducted by the total savings in the sum of HK$240,000. Madam Yip admitted that she had received such sums from Dr Ching as accommodation charges. I too cannot accept this. They then had just started their intimate co-habiting relationship and I believe as a doctor with an established practice, it is probable that Dr Ching paid her as general household expenses.

(D) I do not accept that Madam Yip made any loans to Dr Ching for the purpose of buying the FG House. Dr Ching and Madam Yip merely pooled their financial resources together to secure a luxurious flat as their home. As Madam Yip accepted, Dr Ching loved her so much that he wanted to buy a flat and marry her. The FG House was clearly intended to be their family home. In fact, Madam Yip accepted that she was known to be Mrs Ching in the FG property among its security guards.

(E) I accept that Dr Ching might have exaggerated to Madam Yip his wealth including the value of his treasure collections (banknotes and stamps, etc.) and the debt owed to him in a legal action in Canada. Probably he wanted to assure Madam Yip that his financial predicament was only short-term and he was a man of means. I however did not believe he actually asked Madam Yip for loans. Madam Yip had made no record whatsoever of the alleged loans (not in any one of the Memos) and over the years she never attempted to recover them.

(F) I have no idea as to the exact amounts which Dr Ching and Madam Yip respectively paid towards the down payment of HK$4.2 million. The answer cannot be found in contemporaneous documents and I do not find the parties’ evidence in this regard reliable. Their contributions could be unequal and I am satisfied that Madam Yip’s contribution was also substantial.

(G) I accept that Dr Ching and Madam Yip did intend themselves to be the equal beneficial owners of the FG House. Their intention was fully and truly reflected by the joint tenancy.

(H) I am not satisfied that there is sufficient and compelling evidence adduced by Madam Yip to establish that there was a post-acquisition change in the beneficial ownership agreed or commonly intended by Dr Ching and Madam Yip.

(I) It is not in dispute that Dr Ching was liable to repay the mortgage repayments throughout the years and he alone did so except that Madam Yip paid thirteen monthly payments of HK$18,000 towards the end.

(J) Madam Yip relies on Memos 1 and 2. I do not think they can assist her. For Memo 1, Dr Ching purportedly agreed to transfer his legal title to Madam Yip after completion. To begin with, this agreement did not make much sense as the legal title had not been vested in him at that time. Hence, he did not have to wait until completion to make Madam Yip the sole registered owner by any transfer of title. It appeared to be more like a sweet talk than a serious and binding agreement. Neither Dr  Ching nor Madam Yip did anything to rectify the legal title to the FG House over a decade. Madam Yip explained that she thought she could rely on the treasured collections of Dr Ching and that she merely wanted to save legal expenses and stamp duty that would be incurred in a transfer. I do not believe that she could be that simple-minded, particularly given her allegation that she already discovered the low value of the stamp collections kept by her as security in or about 1996.

(K) For Memo 1, I make it clear that I do not accept Dr Ching’s explanation that the contents were suggested to him by Madam Yip so as to fend off the harassment by Madam Wong. I refuse to accept his explanation that all the wordings came from Madam Yip and he merely dictated them on this document. I find his explanations absurd and incredible. Such contents could hardly serve the purpose. The legal ownership of the FG House was irrelevant if Madam Wong intended to cause nuisance to Madam Yip and/or Dr Ching in occupation of the FG House. I too do not understand, and Dr Ching could not explain, in what way the wordings were so ungrammatical and/or strange that they could not have been originated from him as he alleged.

(L) I do not find Memo 2 legally binding and enforceable, either. First of all, it acknowledged the equal ownership of the FG House at the outset, thereby negating any alleged legal effect of or any intention purportedly evinced by Memo 1. Though on the face of it, Dr Ching relinquished all his interests in the FG House and Madam Yip would become its sole owner, again I do not find Dr Ching to have intended this document to have any contractual force or legal effect. Indeed Dr Ching has never done anything to give up his beneficial interests up till its compulsory sale in 2009 pursuant to Memo 2. Nor has Madam Yip done anything to secure his half share of the FG House for no plausible reason. On balance of probabilities, it was again the sweet talking of Dr Ching only.

(M) I also reject Dr Ching’s similar explanations about the creation of Memo 2 for the same reason in respect of Memo 1.

(N) If Memos 1 and 2 were of any legal effect or embodied any agreement and/or intention of Dr Ching’s to give up his interests, there was no reason why Madam Yip did not show them to Mr Lee for his preparation of the POA.

(O) Further, even in the preamble of the POA, executed shortly after Memo 2 was created, it was clearly stated that Dr Ching was one of the beneficial owners as joint tenants of the property. There was no reason why Madam Yip still acknowledged Dr Ching’s beneficial interests instead of taking the chance to make it clear that he was merely her trustee holding half share of the property for her.

(P) In Memo 3, it was recorded that Madam Yip suggested that she would exchange Flat 2G and Flat 19B with Dr Ching’s half share of the FG House. I accept that it was indeed her suggestion though it might not be genuine. There was no follow-up action taken by the parties at all. Nevertheless, it shows that Madam Yip again accepted that Dr Ching had half share in the FG House.

(Q) Even in her tax return filed in May 2004, Madam Yip accepted that she only had 50% interest in the FG House.

(U) The GC 1^st Loan was used to redeem the mortgage with the SC Bank. I cannot accept any balance of the GC 1^st Loan belonged to Madam Yip absolutely. It was raised by a charge on the FG House and both Dr Ching and Madam Yip were in law liable to repay the GC 1^st Loan. I accept that Dr Ching required the sum of HK$150,000 for the specific purpose of mortgage repayment of the FG House and I cannot accept that the said sum was a personal loan extended to him by Madam Wong. The balance of HK$1,527,162.02 (“the 1^st Fund”) was paid to Madam Yip but was not meant to be owned by her absolutely.

127. In the premises, I reject Madam Yip’s allegation that she was the sole beneficial owner of the FG House. Both Dr Ching and Madam Yip bore the legal obligations to repay all those mortgages/charges (though in fact Dr Ching alone made almost all the repayments) in respect of the FG House. I hold that all monies raised by such mortgages/charges including all the GC loans could not possibly be solely owned by Madam Yip as claimed. Dr Ching and Madam Yip should have equal shares in all such monies.’

V. The Investment Agreement

5.The Judge’s finding on the Investment Agreement is as follows :

‘ 130. I believe that in or about 2000, Dr Ching did consider Madam Yip his life-long lover in light of his advanced age. Given their imitate relationship, it was probable that they had discussion about joint investments. I find that on a balance of probabilities, Dr Ching and Madam Yip had a discussion about joint investment in landed properties. I agree that Dr Ching might have practical difficulties in securing mortgage since he was almost 70 years old and it would be easier for Madam Yip with a modest income to do so. All in all, I find the terms of the Investment Agreement fair and reasonable in all the circumstances.

131. I accept that they had the understanding in terms of the Investment Agreement though I am not sure whether the parties expressly conclude the Investment Agreement orally. Yet this is not essential. As will be explained below, I accept that they certainly by their conduct carried out their investment plan in accordance with the understanding set out in the Investment Agreement. I thus conclude that Dr Ching’s case of the Investment Agreement is inherently plausible and acceptable.’

VI. BS Shop

6.1Whilst there was no issue concerning the funds for the purchase of Carpark 41 and Shop 102, there was serious dispute concerning the funding of the purchase of BS Shop and GP Shop which were in the sole name of the 1^st defendant.

1) The plaintiff’s case

6.2In July 2001, a loan of $4,195,800 was obtained from GC (‘GC 1^st Loan’) on the security of the FG House.  With this loan the parties discharged the mortgage obtained from Standard Chartered Bank on FG House leaving a balance of $1,677,162.02.  The plaintiff received $150,000 while the 1^st defendant received the balance of $1,527,162.  The balance of the GC 1^st loan was further reduced by the purchase of Carpark 41 ($250,000) and Shop 102 ($350,000), leaving behind the sum of $927,162.02.  The plaintiff claimed that this sum together with $350,000 being cash rebate and proceeds of sale of some valuables making a total of about $1,277,000 were kept by the 1^st defendant and used by her to pay for the balance of the purchase price of the BS Shop at $1.28 million ($4.25 million less mortgage of $2.97 million).

6.3The plaintiff further relied on a written Memo (‘Memo 4’) dated 19 December 2002 signed by the parties which recorded the following :

‘ (1) No 49 Boundary Street shop (BS Shop) down payment HK$1.3 million was paid by the remortgage of the FG House with GC. Madam Yip admits holding the property as trustee;

(2)   Dr Ching is willing to sell his treasures and pay HK$45,000 each month to redeem the mortgage within three years;

(3)   For this transaction, the commission of the estate agent Tin Shing Property Agency Co (天誠地產) was paid by Dr Ching.’

2) The 1^st defendant’s case

6.4The 1^st defendant case is that she charged one of her own properties (not related to the properties in this litigation) for $1,610,000 and she had a net sum of $1,010,000 after discharging some other loans.  Together with some of her savings, she paid the balance of the purchase price of $1,280,000. 

3) The Judge’s decision on the 1^st defendant’s case

6.5The 1^st defendant by her counsel, Mr Tze, argued that the figures referred to by the plaintiff were not sufficient to pay for the BS Shop.  This is the Judge’s summary of the submission :

‘ 138. Mr Tze makes a thorough calculation of all the alleged uses of the 1^st Fund and comes to the conclusion that the balance of the 1^st Fund could hardly cover the down payment for the purchase of the BS Shop in the sum of HK$1.28 (and not HK$1.3 million as stated in Memo 4). He also highlights that Dr Ching firstly got the amount of the cash rebate from the SC Bank wrong. It should be HK$95,000 and not HK$350,000. Mr Tze is quite right.’

6.6The Judge addressed Mr Tze’s submission as follows :

‘ 139. However, I do not think the inaccuracies of such figures are suggestive of any dishonesty on the part of Dr Ching and they certainly cannot dilute the effect of the acknowledgement made by Madam Yip as to the source of the fund for down payment of the BS Shop. Though the figure might not be exact, and I accept that the 1^st Fund could not fully cover the acquisitions of Carpark 41 and Shop 102 and the down payment for the BS Shop, Memo 4 does show that the parties agreed that a substantial part of the down payment indeed came out of the 1^st Fund and that Madam Yip would be the trustee for Dr Ching for his half share in the BS Shop.’

VII. GP Shop

1) The dispute

7.1GP Shop was acquired with a sitting tenant.  The rental income was sufficient to pay for the monthly mortgage repayment.  The dispute was on the $705,000 being balance of the purchase price of $2.35 million less the mortgage of $1.64 million. 

2) The plaintiff’s case

7.2The plaintiff’s case is that the $705,000 was funded by the sale of Carpark 41 of $260,000 and rental from Carpark 41 of $41,400 making a total of $301,400.  This still leaves a substantial deficit.

7.3The plaintiff relied on another memo dated 23 November 2003 signed by the parties (‘Memo 5’):

‘ Dec 2002 to Nov 2003

The big sum for paying the mortgage payment of the BS Shop received

Dr Ching contributed $45,000 x 12 = $540,000

Rental receipt 27,000 x 12 = $324,000

Fuk On 102 = $60,00

Car park = $21,600

(Total: $945,600)’

7.4A further memo dated 24 December 2007 (‘Memo 6C’) signed by the parties was also relied upon by the plaintiff :

‘ GP Shop to be sold at the price of HK$5.2 million … the balance of about HK$4 million to be earmarked for redeeming the mortgage of FG House. Madam Yip promises that in the course of her appropriation (of the balance), she would indemnify any loss caused to Dr Ching but any profit reaped as a result thereof has nothing to do with Dr Ching.’

3) The 1^st defendant’s case

7.5The 1^st defendant, however, claimed that the $705,000 came from her savings.

4) The Judge’s decision

7.6The Judge rejected the 1^st defendant’s case that the $705,000 came from her savings.  This is how the Judge dealt with the funding of the purchase of the GP Shop :

‘ 140. In regard to the GP Shop, I have the following observations and findings:

(A) It is not in dispute that the GP Shop was acquired with a sitting tenancy. It yielded sufficient rental income (about HK$15,000 per month) to cover all the monthly mortgage repayments to the BA Bank (about HK$13,000) until the GP Shop was sold. The debate is about the source of the monies for down payment.

(B) I reject Madam Yip’s evidence that she alone paid the down payment in the sum of HK$705,000 out of her savings in December 2003. There is not a shred of evidence of her alleged savings at all. The bank statements of Madam Yip referred to me by Mr Tze in his closing submissions do not really evidence the alleged savings.

(C) I accept that more likely than not, the said sum came from the balance of the 1^st Fund (if any), the cash rebate of the SC Bank, the sale proceeds of Carpark 41 (HK$260,000) and the rental income thereof before it was sold in September 2003 and/or other remaining balance of the Investment Funds as pleaded. I am aware that equally there is no documentary proof adduced by Dr Ching (save Memo 5) in this regard but I believe it is more probable that the down payment was raised by such funds intended for investment purpose rather than Madam Yip’s own fund.

(D) I accept the explanation of Dr Ching as to the purpose of Memo 5. By this document, Dr Ching wanted to show Madam Yip that there should be sufficient Investment Funds to purchase the GP Shop, which seemed to be a good investment to him. He set out all the possible incomes in Memo 5 to give Madam Yip encouragement and reassurance.

(E) That being the case, the validity of those figures in fact, though properly and skillfully challenged by Mr Tze, is not really material.

(F) Madam Yip also accepted that Dr Ching indeed contacted some estate agents over the phone with a view to a sale of the GP Shop. He even set the asking price. There is no evidence that Madam Yip ever stopped him from doing so. In fact, this dovetails with the terms of the Investment Agreement in that he though not being the registered owner would also decide on the sale of the investment properties.

(G) Lastly, in Memo 6, Madam Yip confirmed that the sale proceeds of the GP Shop had to be applied to redeem the mortgage in respect of the FG House in accordance with the Investment Agreement. It follows that Madam Yip agreed that the GP Shop was necessarily purchased pursuant to the Investment Agreement as their joint investment.

(H) However, no valuation evidence was adduced with respect to the market price of the GP Shop. I have no basis to conclude that Madam Yip sold it at an undervalue and hence I am not convinced that Dr Ching has suffered loss as a result of an undervalue sale.

(I) Madam Yip accepted that she had used the sale proceeds in the sum of HK$4 million in her own investment activities in Memo 6. She is clearly accountable to Dr Ching for his half share of the trust money.

(J) Lastly I am not satisfied that because of the failure of Madam Yip to account for the sale proceeds of the GP Shop, the FG House was to be compulsorily sold by the mortgagee bank at an undervalue. The causal link cannot be established to my satisfaction. In any event, there is no expert evidence to prove that the FG House was indeed sold at an undervalue.

141. I do not find this issue to be easy. Yet, given my finding for the actual existence of the Investment Agreement and the intimacy of their relationship in 2003, it was inherently improbable that Madam Yip would invest in a real property with her own monies in breach of the Investment Agreement. The two Memos could lend support to the case of Dr Ching too.’

7.7Earlier the Judge had commented adversely on the 1^st defendant’s financial position :

‘ 133. I have serious reservation about the financial soundness of Madam Yip prior to 2007. She held out to have substantial means. She had three properties at Manlai Court immediately before her co-habitation with Dr Ching and she had rental income. However, her bank statements produced by her do not suggest that she enjoyed wealth. She added that she also invested heavily in the stock and forex markets. She said once she lost hundreds of thousands on one single trading day. That may explain why she could not retain impressive credit balance in her bank statements.

134. Since their relationship started, Madam Yip had not been in gainful employment until she was employed by Dr Ching as a nurse assistant with a monthly income of HK$10,000 pursuant to the Investment Agreement. On the other hand, the Restaurant operated by Madam Yip from September 2004 to March 2008 did not yield much revenue, as shown in the tax returns filed. Madam Yip accepted that she operated the Restaurant just for fun and not for profit.’

VIII. CL Flat

8.1In relation to the CL Flat, the Judge held that the 1^st defendant did not intend the flat to be a joint investment item with the plaintiff.  Her clear intention was to terminate her relationship with the plaintiff and to reside separately at the flat on her own.  The Judge held that their relationship was clearly broken and there was no basis to form a common intention to further invest in landed property.  More importantly the judge held that there was no evidence of the plaintiff’s financial contribution to the acquisition of this flat and he cannot infer any of the investment funds were applied to the purchased price of this flat.  On the contrary the 1^st defendant’s assertion that the purchase price was raised by withdrawing a sum from her fixed deposit and by loans from banks is supported by banking documents. 

8.2The plaintiff had chosen not to pursue any appeal on the CL Flat.

IX. Overview

1) Principles of common intention constructive trust

9.1The parties accept that the principles of common intention constructive trust are relevant to the facts of this case.  This Court in the recent case of Mo Ying v. Brillex Development Limited and Chan Wai Tim, CACV 120/2014 extensively reviewed the authorities in this area.  Based on the finding of the Judge, the present case is really about an express rather than an inferred common intention constructive trust.  As the properties in question consist both of properties in joint names (‘FG House’) and properties in a sole name (‘the other properties’), it is only necessary to refer to the following parts of the judgment in Mo Ying :

‘ 5.16 In [Jones v Kernott [2012] 1 AC 776], Lord Walker and Baroness Hale in their joint judgment further elaborated on the applicable principles on disputes in respect of family homes in joint names and family homes in sole name. In respect of joint name homes, the principles are as follows. For ease of reading, I have arranged each of the five principles in separate paragraphs :

‘ 51 In summary, therefore, the following are the principles applicable in a case such as this, where a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests.

(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.

(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.

(3) Their common intention is to be deduced objectively from their conduct:

“ the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party”: Lord Diplock in Gissing v Gissing [1971] AC 886, 906.

Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden [2007] 2 AC 432, para 69.  

(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, “the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property”: Chadwick LJ in Oxley v Hiscock [2005] Fam 211, para 69.  In our judgment, “the whole course of dealing … in relation to the property” should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties’ actual intentions. 

(5) Each case will turn on its own facts.  Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).’

5.17 In respect of sole name family homes, the joint judgment held that the principles are :

‘ 52 ……The starting point is different. The first issue is whether it was intended that the other party have any beneficial interest in the property at all. If he does, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But their common intention has once again to be deduced objectively from their conduct. If the evidence shows a common intention to share beneficial ownership but does not show what shares were intended, the court will have to proceed as at para 51(4) and (5) above.’ ’ (emphasis added)

2) Challenge on finding of fact

9.2The finding by the Judge that the plaintiff has a share first in FG House and also in the BS Shop and GP Shop is a finding of fact.  The appellate Court would only overturn such a finding when it is plainly wrong.  Based on the findings that FG House belongs to the parties equally, the existence of an express joint investment agreement between the parties after the acquisition of FG House, and the funding for the acquisition of the two properties in dispute came from funds that rose from FG House and from the disposal of Carpark 41 and Shop 102, the 1^st defendant really carries with her an extremely heavy burden of showing that the Judge’s decision on these two disputed properties is plainly wrong. 

9.3Mr Tze started off his appeal by saying that the Judge in fact had made some very strong adverse comments against the plaintiff.  Mr Tze summarized them as follows :

‘ The Judge had expressed his general observation that the plaintiff is NOT an honest and straightforward witness. In his subsequent findings,

(1)the Judge did not accept the plaintiff had paid HK$30,000 monthly to the 1^st defendant from December 1993 to July 1994;

(2) he did not find the plaintiff’s evidence on contribution towards the down payment of FG House;

(3) the Judge held that the plaintiff’s evidence and explanation on Memo 1 was absurd and incredible;

(4) the Judge found the plaintiff’s evidence and explanation on Memo 2 absurd and incredible;

(5) the Judge rejected that the plaintiff had paid HK$45,000 to the 1^st defendant for 2 years;

(6) the Judge did not accept the plaintiff had traded treasure collections for the Investment Agreement;

(7) the Judge did not accept the plaintiff’s evidence that the 1^st defendant agreed to pay HK$45,000 rent for BS Shop;

(8) the Judge rejected the plaintiff’s evidence for LC Flat; and

(9) the Judge indicated that the evidence of the plaintiff for trespass of chattel as ever-changing.’

9.4Mr Tze submitted that in the light of these serious adverse comments the Judge was wrong to accept the plaintiff’s evidence that he and the 1^st defendant had agreed to have an equal share in the properties that they purchased. 

9.5In my view it is not helpful to pick out those pieces of evidence in which the Judge had expressed adverse comments on the plaintiff.  The relationship of the parties lasted from 1993 to 2007. In between this period they had acquired many properties.  There may well be unsatisfactory aspects of the plaintiff’s case but the Court must keep a proper perspective on the whole of the evidence to see whether on the key issues the plaintiff had established his case that the parties have an equal share in the properties that they acquired. 

9.6While the Judge had criticized the plaintiff, he had also held at the same time that the plaintiff was clear thinking.  The plaintiff was 83 years of age at the time of the trial.  This is what the Judge said :

‘ 113. Dr Ching was well educated and clear thinking notwithstanding his advanced age. He appeared to be an astute gentleman to me, making an effort, albeit at times contrived, to handle tricky questions under cross-examination……’

9.7In my view, notwithstanding the adverse comments that the Judge had made about the plaintiff, if he was clearly satisfied that the plaintiff was telling the truth on the key issues, I see no reason why his decision must be flawed.  It has to be borne in mind that when the Judge decided to accept the plaintiff’s evidence he had also considered the unsatisfactory aspects of the 1^st defendant’s evidence as well.  One important factor that the Judge had taken into account is the 1^st defendant’s stand on the authenticity of her signatures on some of the written memorandums.  While initially she denied that they were her signatures and claimed that they were forged (which required the calling of handwriting experts to address the issue of authenticity), she completely changed her case on the last day of the hearing by admitting the authenticity of all the questioned signatures and by advancing an unpleaded new case of her signing on blank withdrawal slips upon which some of the written memorandums were written.  As the Judge said :

‘ 98. …… Madam Yip’s new story speaks volume for the lack of her own conviction in and also the validity of her allegations of forgery. All the expert analysis of the questioned signatures including her own expert was rendered an exercise in futility. It turns out that the authenticity of the questioned signatures is a non-issue at all despite her pleaded case.’

9.8Earlier, the Judge had held that :

‘ 43. I find it convenient and logical to determine the issue of authenticity of the foregoing controversial documents first. I do so because the parties agree that these documents relate to the central issue, i.e. the beneficial ownership of some landed properties in these proceedings. Further, given the relevance of these documents and the gravity of the allegations of forgery, my determination of the authenticity would also have a bearing on the general credibility of Dr Ching and Madam Yip. If I find Dr Ching to have forged those documents to suit his case, I am entitled to have a very dim view of his evidence generally. Likewise, if I conclude that Madam Yip goes out of her way to deny the existence of those documents and even sees fit to falsely make serious allegations against Dr Ching, which can give rise to criminal liability to be borne by an elderly man, this again is something that may shed light on her general credibility in respect of the main issues in this action.’

9.9The Judge was clearly not impressed by the 1^st defendant, this is his comment on her evidence :

‘ 113…..On the other hand, Madam Yip was prone to exaggeration and she did not really care what she had stated in her witness statements. Very often when she was asked to explain the inconsistencies between her witness statements and her oral testimony or contemporaneous documents, she did not hesitate to blame her group of lawyers (我班律師) and claim that she did not pay attention to the contents of her lengthy statements despite the statements of truth contained therein. Her allegation of forgery, which I find to be false, seriously undermines her credibility too.’

9.10In my view, Mr Tze’s criticism of the Judge’s approach on evidence must be rejected.

X.  FG House

10.1Mr Tze submitted that the Judge had failed to consider the legal effect and meaning of Memo 1 and Memo 2.  He submitted that the common intention expressed in these two documents is that the 1^st defendant solely owned the beneficiary interest in FG House.  Further, he submitted that the execution of the POA by the plaintiff to the 1^st defendant gave the 1^st defendant the sole right to independently deal with FG House as stated in Memo 2. 

10.2However, Mr Tze had not addressed the effect of Memo 3 which declared that Memo 1 and Memo 2 were invalid. Further the 1^st defendant took no follow-up action to the sale pursuant to the POA but instead jointly took out another mortgage on the property, the Union Bank mortgage in 1999 and later substantially extended the mortgage repayment period.  Further FG House was disposed of by a forced sale and the 1^st defendant’s indifference to the possibility of the forced sale was contrary to a genuine belief or claim in sole ownership.

XI. BS Shop and GP Shop

1) Inaccuracy of figures

11.1Mr Tze again referred to the inaccuracy of the figures concerning the acquisition of the BS Shop and GP Shop.  This is an argument he had already canvassed in the Court below and the Judge had considered and addressed it.  It must be borne in mind that in respect of the acquisition of these shops, the common intentions of the parties were not merely based on the funding of their acquisition.  There is also the written memorandum upon which the 1^st defendant recognized the parties’ joint interest. 

11.2Mr Tze further argued that in respect of the BS Shop, again there were discrepancies in the figures relied upon by the plaintiff concerning the redemption of mortgage.  Mr Tze submitted that he had raised these discrepancies in the Court below but the Judge did not deal with his arguments in the judgment. 

11.3In my view, even assuming that there were discrepancies, it is not the 1^st defendant’s pleaded case that notwithstanding any common intention on equal share at the time of the acquisition of BS Shop, somehow their intention changed at the time of the redemption of the mortgage loan.  This being the case I do not see how the arguments on discrepancies on the redemption of the mortgage would assist the 1^st defendant.

2) Authenticity of the written memorandum

11.4Mr Tze referred to the evidence that Memo 4 bears the indented signature of Memo 5Y.  Memo 5C bears the indented signature of Memo 6C and there is an indented signature found on Memo 6C and that indented signature is similar to the signature of the 1^st defendant. 

11.5The plaintiff’s evidence was that when Memo 5Y and Memo 6C were being signed he had not taken out Memo 4 and Memo 5C.  Mr Tze submitted the plaintiff had failed to discharge his burden of proof on the way the Memos had been executed as described by him. 

3) The relevance of indented signatures

11.6It has to be borne in mind that the relevance of the indented signature was related to the issue of tracing of signatures raised by the 1^st defendant’s expert, Dr Wong.  He claimed that the signatures on Memo 5Y and Memo 6C could have been produced by tracing by reason of the indentations found on Memo 4, Memo 5C and Memo 6C.  Both experts agreed that to establish tracing, the indentations must closely correspond with the suspected model signatures (i.e. superimposability).  Yet Dr Wong failed to examine superimposability as well as the important factor of naturalness, and accepted under cross-examination that it was inherently impossible for the signature on Memo 5Y to be produced by tracing two model signatures. 

11.7The Judge held that Dr Wong’s assertion of tracing had no evidential basis at all and was purely speculative.  He further concluded that none of the questioned signatures were prima facie forgery.  The Judge considered this issue in his judgment as follows :

‘ 69. Dr Wong [the 1^st defendant’s expert] raised the allegation of tracing in his reports and this indeed took up a large amount of the trial time. The allegation arose out of his ESDA findings that there were indentations on Memos 4, 5C and 6C. In his report, Dr Wong claimed that the indentation on Memo 4 corresponds with Q4 (signature on Memo 5Y), the indentation on Memo 5C corresponds with Q5 (signature on Memo 6C) and the indentation on Memo 6C corresponds with, again, Q4 (signature on Memo 5Y). Dr Wong inferred that Q4 appearing in the original copy of Memo 5Y was created on top of Memos 4 and Memo 6C and that Q5 appearing in Memo 6C was created on top of Memo 5C. Dr Wong opined that this showed Q4 and Q5 could have been produced by tracing though under cross-examination he accepted that it was inherently impossible that Q4 was produced by tracing two model signatures in Memos 4 and 6C.

70. Mr Cheng [the plaintiff’s expert] by the Letter indicated his agreement that Q4 appearing in the original copy of Memo 5Y was created on top of Memo 4. Mr Cheng also gave a qualified opinion that Q5 appearing in Memo 6C was created on top of Memo 5C. His reservation was due to the inferior quality of the transparency and the lack of complete matching. However, Mr Cheng disagreed that the indentation appearing in Memo 6C corresponded with any of the questioned signatures.

71. Regrettably, the experts did not do anything further to prove or disprove this serious allegation of tracing in the Joint Report. I should first point out that Madam Yip does not have to go so far as to adduce evidence of tracing. A forged signature is already a forgery regardless of whether it is a traced copy or not. Further, I believe that it is nothing more than common sense that when an indented signature is found on a document bearing another signature, it does not necessarily mean that the former was a traced copy of the latter. It really depends on the superimposability of the former on the latter. Also to establish tracing, the indentations found must necessarily correspond closely with the suspected model signatures. Both Mr Cheng and Dr Wong agree to these propositions.

72. To assess the superimposability of the indented signatures (Q4 and Q5) on Memos 4, 5C and 6C and the proximity between the indentations and suspected model signatures, Dr Wong conducted tests and measurements in court, which consumed a great deal of time. For superimposability, the transparency copies of Q4 and Q5 and indeed all other questioned signatures were placed on top of the ESDA transparencies of Memos 4, 5C and 6C. Measurements of their correspondence and dissimilarities were recorded. Dr Wong could not explain satisfactorily why he did not undergo this exercise to prove tracing in his reports and merely accepted that it was his negligence.

73. I do not think it is necessary to set out the findings here. Suffice it to say, it was clear that the superimposability of these questioned signatures was low. Dr Wong accepted that Q4 and Q5 could not be a complete match of the signatures found in Memos 4, 5C and 6C. It is also clear that the indented signature found in Memo 5C does not really correspond with Q5 and more importantly, the indentation does not actually correspond with the Q3 on Memo 5C either. It means that Q3 could not be the model signature for any traced signatures.  

74. Mr Tze referred to an article of which Mr Cheng was a co-author. It was entitled “Forgery II- Tracing” published in Journal of Forensic Sciences, Vol.38, No.2, March 1993 at pp.413-424. The short point made by Mr Tze out of this article is that even a traced copy does not coincide the model signature precisely.

75. I accept that Mr Tze’s submission is right. Indeed the focus of the article is to show that, as revealed in the test undertaken by the authors, in traced forgeries, the general shape and pictorial effect of the model were closely followed but details might be neglected. In other words, a traced forgery may not be able to superimpose completely on its model signature.

76. However, in the present case, I agree with Mr Cheng that the differences were so significant that the questioned signatures could not possibly be created by tracing.

77. In addition, if Q4 and Q5 had been indeed traced forgeries, their naturalness would have inevitably been compromised with the presence of all the hesitation and measured indicators. On this issue, with my acceptance of Mr Cheng’s opinion, I am not at all convinced that they were traced copies of the signatures appearing in Memos 4, 5C and 6C or any other model signatures.

78. Moreover, it is noteworthy that none of the indentations found in Memos 4, 5C and 6C coincides with sufficient proximity with the respective signatures appearing therein. It follows that none of them was ever used as the model signature for tracing. Dr Wong’s assertion of tracing has no evidential basis at all and is purely speculative.

79. To sum up, I find the evidence of Mr Cheng reasonable and acceptable and I have little concern about the authenticity of the questioned signatures on their face. On the other hand, I am not convinced by the evidence of Dr Wong that any of the questioned signatures was prima facie a forgery.’

11.8For ease of reference, Q1 is the signature on Memo 3, Q2 is the signature on Memo 4, Q3 is the signature on Memo 5C, Q4 is the signature on Memo 5Y which is a copy of Memo 5C, Q5 is the signature on Memo 6C and Q6 is the signature on Memo 6Y which is a copy of Memo 6C.

11.9In fact the Judge had clearly considered the issue of the indented signatures which he dealt with again when he considered the allegation of the 1^st defendant that she had signed on blank withdrawal slips.  This is how the Judge addressed the issue :

‘ 104. In his closing submissions, Mr Tze prays in aid section 69(a)(iii) & (vii) of the Crimes Ordinance, Cap. 200 and submits that the Memos 3, 4, 5C, 5Y, 6C and 6Y can still be forgery even with the genuine signatures of Madam Yip if I accept that her evidence that she did sign the blank withdrawal slips. It follows that Dr Ching made use of such signed withdrawal slips to create such memos.

105. I do not accept this submission. In the first place, I refuse to accept her evidence of signing the blank withdrawal slips. I cannot understand how such blank withdrawal slips could make it convenient for Dr Ching to make mortgage payments to the Union Bank. Such payments should be made by depositing money into their joint account in the Union Bank to be deducted by autopay or standing instructions and not by withdrawing money therefrom. The bank statements relating to their account with the Union Bank further negative her allegation. Also, this is simply not the pleaded case of Madam Yip. Dr Ching was never asked to meet this new case at all. Such a conclusion is not open to this court at all.

106. Lastly, before leaving the issue of authenticity, I should point out that there remains a mystery as to why Q4 corresponded with the indented signature found on Memo 4. Q4 was purportedly appended to the original of Memo 5Y on 23 November 2003 whereas Memo 4 was created almost a year ago on 19 December 2002. This however does not alter my view on the issue of authenticity.

107. It crossed my mind that Madam Yip’s allegation of her signing blank withdrawal slips might provide an answer to the mystery. Yet, I cannot really accept her allegation, as explained above. Even if I do so, there are still missing links to establish forgery and there can be other innocuous explanations. Since this allegation was not being properly raised by pleadings and investigated at trial, this court should not be tempted to speculate.

108. Lastly I make it clear that I appreciate that the fact that Memos 3, 4, 5C, 5Y, 6C and 6Y are genuine documents does not mean that their contents are necessarily true and accurate. This is so even with the endorsement of the contents by Madam Yip’s signatures.’

11.10Mr Tze also submitted that the Judge had wrongly considered that the 1^st defendant had admitted that she was in FG House when Memo 6 was signed.  He suggested that this seriously affected the Judge’s assessment and he reached a wrong conclusion that Memo 6 was signed by the 1^st defendant and the GP Shop was under the alleged Investment Agreement.  He submitted that the conflicting evidence of the parties in this issue has not been properly considered. 

11.11In my view, in the context of this case, where Memo 6 was actually signed would not have a significant impact on the authenticity issue and on the Judge’s assessment of the credibility of the parties.

11.12In my view the 1^st defendant had not shown the Judge was plainly wrong on the authenticity issue which may impact on his assessment on the credibility of the parties. 

Conclusion

12.Accordingly, the appeal was dismissed with costs to the plaintiff.

Basis of taxation

13.Ms Tsui for the plaintiff asks for indemnity costs.  She submitted that the 1^st defendant repeats the same arguments below, particularly on the authenticity issue which wasted so much time and costs below.  In my view the present appeal was reasonably arguable.  I am not satisfied that indemnity costs should be visited upon the 1^st defendant.  She was already required to pay indemnity costs below in respect of the authenticity issue.

Hon Yuen JA :

14.I agree with Cheung JA’s Reasons for Judgment.

Hon Kwan JA :

15.I agree with Cheung JA’s Reasons for Judgment.

Ms Jennifer Tsui, instructed by Adrian Yeung & Cheng, assigned by Director of Legal Aid, for the plaintiff

Mr James Tze, instructed by Chui & Lau, for the 1^st defendant