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Hui Cheung Fai And Another v Daiwa Development Ltd And Others

Judgment Cited authorities 19 Cited in Precedent Map Related
Vincent
Judgment Date08 April 2014
Year2014
Judgement NumberHCA1734/2009
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA1734/2009 HUI CHEUNG FAI AND ANOTHER v. DAIWA DEVELOPMENT LTD AND OTHERS

HCA 1734/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1734 OF 2009

________________

BETWEEN

HUI CHEUNG FAI
HUI MAN CHUNG		 1st Plaintiff
2nd Plaintiff
and
DAIWA DEVELOPMENT LIMITED
(大和發展有限公司)
 1st Defendant
TRIPLE GAIN LIMITED
(三井有限公司)		 2nd Defendant
KO WAI CHEUNG ALBERT 3rd Defendant
KO WAI KAR 4th Defendant

________________
Before: Deputy High Court Judge Eugene Fung, SC in Court
Dates of Hearing: 18-21 March, 24 and 25 March 2014
Date of Judgment: 8 April 2014

_______________

J U D G M E N T

_______________

A INTRODUCTION

1. These proceedings arise out of a dispute concerning a commercial property at Shop M07 on M/F, Allied Plaza, Cosmopolitan Centre, 760 Nathan Road, Kowloon (“the Property”). The 1st plaintiff (Mr Hui Cheung Fai (“the Father”)) is the father of the 2nd plaintiff (Mr Hui Man Chung (“the Son”)) and claims that the Property was held on trust for him by his son.

2. In this action, the Father advances a claim in dishonest assistance and unlawful conspiracy against all the four defendants, and a claim in knowing receipt against the 1st defendant. The Son claims against the 2nd and 3rd defendants under section 27 of the Money Lenders Ordinance (Cap 163) (“the MLO”).

B. THE FACTUAL BACKGROUND

B1. The Property

3. The Property is a commercial property. According to the Land Registry records, the Father became the registered owner of the Property on 30 June 1987.

B2. The Deeds of Gifts in 2000 and 2001

4. On 22 November 2000, a Deed of Gift was executed whereby the Father as donor assigned one half of the interest in the Property to the Son as donee.

5. On 22 January 2001, a further Deed of Gift was executed whereby the Father as donor assigned the remaining half interest in the Property to the Son as donee.

6. The consideration stated on the two Deeds of Gift for the assignment was “the natural love and affection [the Father] bears towards his son [the Son]”. The Deeds of Gift were prepared by a firm of solicitors, signed by both the Father and the Son, and registered in the Land Registry against the Property.

7. There is a dispute as to the true nature of the transaction as reflected in the two Deeds of Gift and I will discuss this issue in further detail below when I deal with the question of whether a trust of the Property was created.

B3. The Obtaining of Loans and the Mortgaging of Property by the Son from 2005 to 2008

B3a. Loan from Actex in December 2005

8. There is no dispute that the Son was introduced to the 3rd defendant (Mr Albert Ko Wai Cheung (“Mr Albert Ko”)) through one Mr Norman Lee in late 2005. Subsequently, Mr Albert Ko introduced Actex Finance Ltd (“Actex”) to the Son for the purpose of obtaining a loan.

9. By a loan agreement in writing dated 2 December 2005, Actex lent a sum of HK$450,000 to the Son with a repayment period of 36 months at the interest rate of 30% per annum. The Son’s residential property at Flat H, 4 Floor, Block 5, Belvedere Garden, Phase 2, No 620 Castle Peak Road, Tsuen Wan (“the Belvedere Garden Property”) was offered as security for this loan. By a second mortgage dated 2 December 2005, the Son agreed to charge the Belvedere Garden Property in favour of Actex to secure general credit facilities for HK$450,000 and interest thereon (“the Actex Mortgage”).

10. In a declaration form signed by the Son dated 2 December 2005, the Son declared that he was at the time owing GE Capital (Hong Kong) Ltd and Easy Fortune Property Ltd (“Easy Fortune”) HK$1,135,071.18 and HK$300,000 respectively. By two cheques dated 2 December 2005, Actex respectively paid HK$128,327 and HK$321,673 to the Son and Easy Fortune.

B3b. The Statutory Declaration and the Easy Fortune Mortgage in June 2006

11. By a Statutory Declaration dated 12 June 2006, the Son declared as follows:

“ 1. I am the registered and beneficial owner of [the Property].

2. I am prepared to mortgage the Property in favour of EASY FORTUNE PROPERTY LIMITED by way of a Mortgage, I was asked by Messrs Wong, Fung & Co., Solicitors for EASY FORTUNE PROPERTY LIMITED to produce ORIGINALS of the title deeds and documents (“the lost deeds”) in respect of the Property as set out in the List hereto.

3. To the best of my knowledge, I kept the lost deeds at my place of residence ie [the Belvedere Garden Property]. I have conducted an exhaustive searches among all the paper and documents at my place of residence but I could not find or trace the lost deeds.

4. I verily believe that the lost deeds have been lost or mislaid during the decoration of my place of residence in about December 2005.

…

AND I make this solemn declaration conscientiously believing the same to be true and by virtue of the Oaths and Declarations Ordinance (Cap 11).”

12. The Statutory Declaration was registered against the Property in the Land Registry on 13 June 2006.

13. By a mortgage dated 12 June 2006, the Son agreed to charge the Property in favour of Easy Fortune as security for due payment of all moneys payable by the Son to Easy Fortune (“the Easy Fortune Mortgage”). Clause 3.01 provided that the Son charged the Property “as Beneficial Owner” to Easy Fortune. Clause 7.01(ii) provided that the Son covenanted and agreed with Easy Fortune that the Son had “good right and title to charge the Property”.

14. A third legal charge dated 12 June 2006 was executed by the Son in favour of Easy Fortune in respect of the Belvedere Garden Property as security for due payment of all moneys payable by the Son to Easy Fortune.

B3c. Loans from Easy Fortune and the Winasia Sub-Mortgage in 2006

15. The Son obtained additional loans from Easy Fortune in 2006:

(1) HK$2,000,000 pursuant to a loan agreement dated 17 July 2006 to be repaid on or before 17 July 2007;

(2) HK$500,000 pursuant to a loan agreement dated 17 August 2006 to be repaid on or before 17 August 2007;

(3) HK$150,000 pursuant to a loan agreement dated 24 October 2006 to be repaid on or before 24 October 2007.

16. Both the Property and the Belvedere Garden Property were used as security for all of these loans from Easy Fortune.

17. By a Sub-Mortgage dated 7 November 2006, Easy Fortune charged, amongst others, the Property to Winasia International Holdings Ltd (“Winasia”) as security for all moneys due or to become due from Easy Fortune to Winasia (“the Winasia Sub-Mortgage”).

B3d. Loan from Hampton and the Hampton Mortgage in July 2007

18. The Son was due to repay the principal of one of the loans (namely HK$2,000,000) from Easy Fortune by 17 July 2007. According to the Son, in around mid-June 2007, he spoke to Mr Albert Ko and told him that he needed cash to discharge his indebtedness to Easy Fortune. The Son also alleged that other matters were mentioned in this conversation with Mr Albert Ko which will be dealt later in the Judgment. Be that as it may, there is no dispute that the Son was at this time in need of cash to satisfy his then financial commitments towards Easy Fortune.

19. By a form dated 23 June 2007, the Son made an application to another finance company, Hampton Finance Ltd (“Hampton”), for loan facilities. In the application form, it was stated that the remaining balance owing to Easy Fortune was HK$2,650,000 and that the Property would be used as security for the new loan.

20. By a loan agreement in writing dated 19 July 2007, Hampton lent a sum of HK$3,200,000 to the Son to be repaid within one year by 19 July 2008. It was further agreed under the loan agreement that the Property would be used as security for the loan.

21. It was provided in the loan agreement that the HK$3,200,000 would be drawn down in the following manner:

(1) a cashier order for HK$2,710,350 in favour of Easy Fortune;

(2) a cashier order for HK$4,400 in favour of Messrs Wong, Fung & Co;

(3) a cheque for HK$900 in favour of the HKSAR Government and

(4) a cashier order for HK$484,350 in favour of the Son.

The three cashier orders and cheque were all issued on 19 July 2007.

22. By an irrevocable Power of Attorney dated 19 July 2007, the Son appointed Hampton to sell the Property in the event the Son defaulted in the repayment of interest for two months.

23. By a mortgage dated 19 July 2007, the Son agreed to charge the Property in favour of Hampton as security for the due payment of all moneys payable or which may become payable by the Son to Hampton (“the Hampton Mortgage”). Clause 3.01(i) provided that the Son charged the Property “as Beneficial Owner” to Hampton. Clause 7.01(ii) provided that the Son covenanted and agreed with Hampton that the Son had “good right and title to charge the Property”.

24. By a Release dated 19 July 2007, the Easy Fortune Mortgage and the Winasia Sub-Mortgage were released.

B3e. Loan from Triple Gain and Mortgage on Belvedere Garden Property in July 2007

25. At all material times, Mr Albert Ko was and still is the sole shareholder of the 2nd defendant (Triple Gain Ltd (“Triple Gain”)).

26. By a loan agreement in writing dated 23 July 2007, Triple Gain lent a sum of HK$200,000 to the Son. It was a condition precedent under the loan agreement that Triple Gain would receive a mortgage over the Belvedere Garden Property.

27. By a written official receipt dated 23 July 2007 and signed by the Son, it was recorded that the Son received a total of HK$196,350 from Triple Gain, being

(1) HK$53,500 in cash,

(2) HK$93,000 by a cheque and

(3) HK$50,000 to set off a previous loan made on 3 July 2007 owing by the Son for the same amount.

The Son, however, asserted that he only received HK$143,000 from Triple Gain but not the cash of HK$53,500.

28. On 23 July 2007, a mortgage in...

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