Yip Yuk Kwong v. Yip Chun Yin and Others

HCMP 2552/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2552 OF 2014

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J U D G M E N T

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1.By this originating summons, Mr Yip seeks a series of declarations that will have the effect of removing orders relating to the bankruptcy of his son from the title to the Property and recording title to the Property in the name of himself and his wife, Madam Wong as joint tenants.

2.The issue is whether, at the time the Property was purchased, there was a common intention between the parties that when Madam Wong and her son, Paul Yip, acquired the Property, the interest of the son was held in trust for the benefit of Mr Yip, such that a common intention constructive trust arises in respect of Paul’s interest in the Property in favour of Mr Yip.

3.The facts are quite simple.  Madam Wong and Paul acquired the Property in 1997, under the Home Ownership Scheme, whereby Mr Yip and Madam Wong were required to forfeit a public housing unit in which they had previously resided, with their family, for some 12 years.

4.The Property was purchased in Madam Wong’s name and Paul’s name, because at that time Paul was employed by a law firm, Baker & McKenzie, and that entitled him to concessionary legal fees if he was one of the purchasers of the Property.

5.Unfortunately, in May 1998, upon his own petition, Paul became bankrupt.  At that time his legal title in the Property became vested in the Official Receiver.

6.The evidence is that at the time of the purchase the common intention of the family was that Mr Yip and Madam Wong would be the beneficial co-owners of the Property, and that the purchase was made in Paul’s name instead of Mr Yip’s name, only to get the benefit of concessionary legal fees.  All along, Mr Yip has paid off all of the mortgage repayments since the acquisition of the Property.  His affirmations set out extensively how he has achieved that.

7.Because the Official Receiver has not been able to obtain an indemnity in respect of costs from any of the creditors, she has elected not to appear in the proceedings.  However, the Official Receiver has investigated the matter and has elected to put before the court a comprehensive report.  The Official Receiver is not conclusively satisfied that the intention at the time of the purchase of the Property that Paul was holding Property on trust for Mr Yip.

8.The Official Receiver is content to abide the decision of the court, and Miss Tong did not cross examine nor make submissions on the matter.

9.I am not required to be conclusively satisfied of the existence of a common intention constructive trust.  The standard of proof in these proceedings is the usual standard in civil proceedings, namely on the balance of probabilities.  I must be satisfied that it is more likely than not that intention was that Mr Yip and Madam Wong would own the Property as joint tenants, with Mr Yip’s interest being held by Paul on trust for him.

10.The modern approach to a common intention constructive trust is well stated in the following passages of the decision of Godfrey Lam J in Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9, cited with approval by the Court of Appeal in WML v LCK (unreported, [2015] HKEC 338):

“46. The focus of the inquiry is therefore on the elements that the plaintiff has to prove in order to establish a constructive trust in his favour. In the context of this case, this means that the plaintiff must prove: (a) there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the Property despite that it was acquired in the defendant's name; (b) the plaintiff altered his position in detrimental reliance upon such common intention; and (c) it is unconscionable for the defendant to assert ownership in reliance on her legal title to the Property.

47. In ascertaining whether there was a common intention, it is the objective intention of each party ‘which was reasonably understood by the other party to be manifested by that party's words and conduct’ that one must examine: Gissing v Gissing [1971] AC 886, 906; Jones v Kernott [2012] 1 AC 776, 794 [51].

48. In the present case it is the parties’ common intention at the time of the acquisition of the Property that is relevant, there being no suggestion from anyone that the intention had changed.

49. Such intention is to be found, first and foremost, from any agreement, arrangement or understanding reached between the parties with respect to the beneficial ownership of the Property concerned based on evidence of express discussions. It is only where there is no evidence to support a finding of such an agreement or arrangement that the court seeks to infer from the conduct of the parties the relevant common intention: Lloyd’s Bank Plc v Rosset [1991] 1 AC 107, 132-133.

50. Even where, as in this case, reliance is placed on an express agreement, arrangement or understanding between the parties, their other conduct remains relevant as a matter by reference to which their assertions about the agreement or understanding must be gauged and tested.”

11.The explanation given for title being in the name of Paul, is perfectly understandable.  That it would be the common intention of the family that the true owners should be Mr Yip and Madam Wong is entirely consistent with the fact that the couple would expect to live out their lives in the Property, and that their son would eventually move on and establish his own life.  It is equally understandable that out of filial obligation, Paul would wish to give all the assistance he could to his parents.

12.It should be noted that in his bankruptcy petition, Paul immediately asserted that his interest in the Property was held by him as a trustee for his father.  The bankruptcy petition was dated 11 May 1998.  The down payment for the Property had been made in July 1995, in respect of the Property, which was apparently then under construction.  The assignment was completed on 5 May 1997, only a year before the bankruptcy.  This is not a case where an assertion of trust is made many years after the event, in order to avoid the effects of bankruptcy.  This is a case where the assertion of a trust is virtually contemporaneous with the acquisition of the Property.

13.The Official Receiver’s report points out that in 1998, Mr Yip’s salary was around $15,000 and the monthly mortgage instalment was $10,000.  It is suggested that it is unlikely that the salary of Mr Yip could pay for the instalments without a contribution from Paul and Madam Wong. But there is nothing unusual about that.  Both were working at the time and it is entirely normal in a Hong Kong Chinese family for adult members of the household contribute to the household expenses, including mortgage payments.  That is especially so when the result will be the ownership of landed Property, status that is the highly prized in our community.

14.In November 2012, Madam Wong wrote a letter to the Official Receiver in which she suggested that she and her husband were afraid they would pass away and that they decided to add their son’s name as an owner.  By this time Mr Yip and Madam Wong had been struggling for over 12 years to achieve recognition of what they believed to be the true status of title to Property.  Madam Wong’s assertion contradicts the contemporaneous assertions made at the time of the bankruptcy and within only 12 months of the acquisition.  I place no weight at all on the letter, which, I am satisfied was a desperate attempt by a frustrated person to try and achieve a perfectly reasonable result.  It is more likely than not that the assertions made at time of purchase and shortly thereafter are true.

15.The report of the Official Receiver makes reference to the presumption of advancement.  There is little value in the presumption of advancement these days, and it is a presumption that is easily rebutted.  The advantage of the saving in legal fees is more than sufficient to rebut the presumption in this case.

16.The Official Receiver refers also on the fact that Paul accepted a personal liability under the mortgage, and suggests that this is inconsistent with the existence of the trust as it constitutes a contribution to the purchase.  First, if the common intention of the parties was to be achieved, namely a purchase by the parents with reduced legal fees, it was vital that Paul should be a registered proprietor and purchaser.  It simply follows that as a registered proprietor, Paul would have to accept a personal liability under the mortgage. 

17.Second, that Paul made a contribution to the purchase by, in effect, guaranteeing, with his personal liability, his parents’ liability to the bank under the mortgage, is entirely consistent with the way in which the adult children of Hong Kong families assist their parents out of filial obligation.  I have no doubt that he would have been perfectly happy to assist his parents in that way.  That he did so does not detract in any way from the common intention of the parties at the time.

18.It is right that it would have been much better if Paul had arranged for a declaration of trust to be completed at the time of the acquisition of the Property.  However, the fact that no such declaration was made is not sufficient, in my view, to dispel the overwhelming inference in this case that Paul was holding his interest in trust for his father.  It is not suggested in any of the authorities on common intention constructive trusts that the absence of a formal declaration is a factor telling against the existence of the trust.  It is because that formal declaration of trust is absent that the law finds, in appropriate circumstances, a common intention constructive trust.

19.In the whole of the circumstances I am satisfied on the balance of probabilities, the appropriate standard in this litigation, that it was the common intention of the three family members that Paul would hold his interest in the Property on trust for Mr Yip.

(Discussion with Counsel as to relief and orders).

20.I make the following orders, consequential on my findings:

(i) A declaration that prior to the bankruptcy order dated 10 June 1998, Yip Chun Yin, alias Yip Chun Pong Paul and Wong Kit Bing held the Property on trust for Yip Yuk Kwong and Wong Kit Bing as joint tenants;

(ii) An order vesting the legal and beneficial interest in the Property in Yip Yuk Kwong and Wong Kit Bing as joint tenants.

21.There will be no order for costs.

Mr Forest Fong, instructed by Messrs L & L Lawyers, for the Plaintiff

The 1^st Defendant in person, absent

The 2^nd Defendant in person, absent

Miss Anita Tong, Assistant Principal Solicitor, of the Official Receiver’s Office, the 3^rd Defendant