Luo Xing Juan Angela v The Estate Of Hui Shui See, Willy Deceased And Others

FACV No. 32 of 2007

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 32 OF 2007 (Civil)

(ON APPEAL FROM CACV No. 381 of 2004)

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HCCW 568/2002

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J U D G M E N T

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Chief Justice Li:

1. I agree with the Judgment of Mr Justice Ribeiro PJ.

Mr Justice Chan PJ:

2. I agree with the Judgment of Mr Justice Ribeiro PJ.

Mr Justice Ribeiro PJ:

3. This appeal concerns equitable rights alleged to have arisen in the course of a relationship between an unmarried couple regarding a property which they occupied and which is owned by a limited company.

4. The respondent (“Miss Luo”) and Mr Willy Hui Shui See (“the deceased”) had lived together as a couple for some four years (together with Miss Luo’s daughter for some of that time). They were intending to marry when, unfortunately, Mr Hui died suddenly. He did not leave a will. The deceased’s sister, Miss Hui Mi Chi (“Miss Hui”) is the sole representative of his estate (“the estate”). Miss Luo and her daughter continue to occupy a flat in a building known as Hillview Court in Sai Kung (“the Property”), which is the property in dispute and the flat where Miss Luo and the deceased had cohabited. The Property is owned by a company called Glory Rise Limited (“Glory Rise”) of which Miss Luo is a 35% shareholder, with the balance of its shares now held by the estate.

5. Miss Hui, acting on behalf of the estate and as a director of Glory Rise, caused that company to institute proceedings[1] against Miss Luo for possession of the Property and for mesne profits. Miss Luo resists those claims on the basis of certain rights allegedly acquired in the course of her relationship with the deceased. She issued her own proceedings,[2] petitioning as a minority shareholder to wind up Glory Rise on the just and equitable ground and claiming other relief pursuant to section 168A of the Companies Ordinance.[3] The estate, Miss Hui and Glory Rise are named as respondents in those proceedings.

6. At first instance, Kwan J[4] decided that Glory Rise holds the Property on a common intention constructive trust for its shareholders in the proportion of their respective shareholdings, representing a 35% beneficial interest in the Property for Miss Luo. Furthermore, her Ladyship held that Miss Luo was entitled to a 35% interest in the shareholders’ loans made or caused to be made by the deceased to Glory Rise. Glory Rise’s claim for possession and mesne profits was dismissed on the footing that Miss Luo is an equitable tenant in common of the Property and entitled to remain in possession. Kwan J also ordered Glory Rise to be wound up, directing that the liquidator should have regard to the rights and interests of the shareholders as adjudicated upon in the proceedings. Their appeal to the Court of Appeal having been dismissed,[5] the estate, Miss Hui and Glory Rise now bring the present appeal by leave of the Appeal Committee granted on 21 September 2007.

7. At the start of the appeal, the Court invited submissions on the question of whether a promissory estoppel may have arisen on the Judge’s findings. The hearing was adjourned to allow counsel time for preparation and the Court is grateful for the assistance they provided on that question as well as on the other issues in the appeal.

A. The course of events

8. The facts, as found by the Judge, may be summarised as follows. Miss Luo was married to a Mr Yik on the Mainland in April 1992. They went to live in the United States and had a daughter, Mon Din, born in August 1993. In 1995, they came to Hong Kong, but separated shortly afterwards. Miss Luo continued to live and work here on her own, her daughter being looked after by her parents in Shanghai.

9. In 1996, she first met the deceased, a Hong Kong businessman, who had, since 1980, been investing and trading in properties. This was a business which he carried on together with Miss Hui, often through companies in which they each held shares. One such company was called Inter-Trade Agencies Limited (“Inter-Trade”) in which the deceased held 80% and Miss Hui held 20% of the shares. The deceased also did business with Mr Cheng Pui Kit (“Mr Cheng”). In 1993, the deceased was diagnosed with lung cancer. He recovered after surgery, but thereafter relied substantially on Miss Hui to handle his business affairs.

10. Not long after they met in 1996, Miss Luo and the deceased developed an intimate relationship and began living together in a rented flat. In September 1997, they moved into a different flat on the 4^th floor of Wah Po Building in Prat Avenue in Tsimshatsui. That property was purchased by the deceased in Miss Luo’s name. He paid the deposit of $500,000 and also the mortgage repayments, as well as other expenses, while they were in occupation.

11. The Property was acquired in the course of the business being carried on by the deceased with Miss Hui. Miss Luo was not involved. It was decided to use Glory Rise as the vehicle for its acquisition and, in April 1998, Miss Hui signed the contract on behalf of Glory Rise to acquire the Property for $7,790,600.00.

12. Glory Rise had been incorporated in June 1997 with a nominal capital divided into 10,000 shares of $1.00 each, of which 6,000 shares were allotted to Mr Cheng and 4,000 to the deceased. As Mr Cheng was not to participate in this investment, he divested himself of his shares in Glory Rise before completion of the Property’s purchase. On 3 February 1999, he transferred 4,000 shares to the deceased and 2,000 shares to Miss Hui.

13. Initial payments for the Property exceeding $2.5 million were paid by the deceased and Miss Hui in the proportions of 80:20, reflecting their respective shareholdings in Glory Rise. Those payments were treated as shareholders’ loans. The balance of the purchase was financed by a term loan of $4 million from a bank, repayable by 180 monthly instalments of $41,768.99, secured by a first legal charge over the Property and by a joint and several personal guarantee given by the deceased and Miss Hui.

14. The Property was assigned by the vendors to Glory Rise on 12 February 1999 and the mortgage instalments for March and April 1999 were thereafter paid, in the 80:20 proportion, by the deceased and Miss Hui. During that period, the Property was placed with estate agents in an attempt to re-sell it or to let it profitably. However, by April 1999, no acceptable offers had been received.

15. Meanwhile, in February 1999, the deceased proposed marriage to Miss Luo and she accepted. However, Miss Luo was still waiting for her divorce from Mr Yik to come through. The decree nisi was in fact only issued on 14 June 1999 and made absolute on 21 September 1999. Nevertheless, during February, the couple went to Shanghai to collect Mon Din and to bring her to Hong Kong where the three of them began to live together as a family. The deceased treated Mon Din in all respects as if she were his daughter.

16. In April 1999, as the sale or rental of the Property had not been achieved, the deceased decided to take it over for their own occupation. Miss Hui stopped contributing to the mortgage repayments having at that point paid a total of $528,576.40 towards acquiring the Property. The deceased, Miss Luo and Mon Din moved into the Property and the Tsim Sha Tsui flat was let. Miss Luo spent some $70,000.00 on decorating the master bedroom and in buying furnishings for the Property. She also arranged for her furniture in the Tsim Sha Tsui flat to be moved there.

17. When, in June 1999, Miss Luo’s decree nisi was issued, the deceased renewed his proposal of marriage. He decided that Miss Luo should have 35% of the shares in Glory Rise and, on 25 June 1999, he transferred 3,500 of his then 8,000 shares to her without receiving any payment in return. Simultaneously, he arranged for Miss Hui to transfer her 2,000 shares to himself. However, as the deceased was then in a tight cash position, Miss Hui executed the transfer documents in escrow and the transfer was not completed until March 2000 when the deceased was able to reimburse her contributions towards acquisition of the Property. It is in this context that a centrally important promise or assurance was found to have been communicated by the deceased to Miss Luo, a matter to which I shall return.

18. To relieve the deceased’s then cashflow needs, Miss Luo lent him $1 million in June 1999. She also paid the mortgage instalment for August 1999. However, in March and April 2000, the deceased’s financial position improved. During those two months the transfer of Miss Hui’s 2,000 shares in Glory Rise to the deceased was completed and she received reimbursement of $528,576.40; Glory Rise’s debt to Miss Hui in that amount was adjusted in its books to represent a debt to the deceased; Miss Luo’s mother, brother and sister-in-law came to Hong Kong and received customary gifts of money and jewellery from the deceased in anticipation of the marriage; he...