Mo Ying v Brillex Development Ltd And Another

CACV 120/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 120 OF 2014

(ON APPEAL FROM HCA NO. 111 OF 2011)

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J U D G M E N T
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Hon Cheung JA :

1. The plaintiff wife (‘the wife’) claims beneficial ownership of a residential property in the State Theatre Building, North Point (‘the property’) which was registered in the sole name of the 2^nd defendant husband (‘the husband’). The property was sold by the husband to the 1^st defendant (‘the purchaser’) in October 2008. The wife claims against the husband and the purchaser for, among other things, a declaration that she has a beneficial interest in the property and the husband is holding that interest on trust for her. She also seeks to set aside the sale of the property to the purchaser. The wife’s claim against the husband and the purchaser was dismissed by Deputy High Court Judge Eugene Fung S.C. The wife now appeals.

I Background

2.1 The wife was a resident of Hangzhou in the Mainland. The husband was a Hong Kong resident. On 29 October 1987 they were married in Hangzhou and about a year later in December 1988 the wife came to Hong Kong to join the husband and lived in the property as their matrimonial home. Shortly after the marriage, on 31 May 1988 the husband bought the property for $500,000. The sale was completed on 20 June 1988. The husband paid a deposit of $50,000 and the balance of the purchase price of $450,000 was financed by a mortgage obtained by the husband. The wife claims that the property was bought as their matrimonial home because she had planned to move to Hong Kong for residence after their marriage and she and the husband wished to have their own children. The property was bought in the sole name of the husband because she was then still living in Hangzhou and had not yet moved to Hong Kong. Before the husband bought the property, he was living on his own in Hong Kong in a smaller flat which he also owned. That flat was sold shortly after the acquisition of the property.

2.2 Shortly after the wife arrived in Hong Kong and lived in the property, she discussed with the husband about adding her name as a registered owner of the property (‘the discussion’). However, this was not done and the matter was not pursued further by the wife because at the discussion the husband told her that it would be very troublesome and they would have to incur expenses to add the wife as a registered owner. Another reason was that the wife was acting under the belief that as she was the lawful wife, she would have a beneficial interest in the property regardless of whether she was added as a registered owner or not.

2.3 Two children were born of the marriage, a daughter in January 1990 and a son in November 1995. The family continued to live in the property although since mid 1995 the martial relationship had deteriorated. In July 2008, the husband entered into a provisional agreement to sell the property to the purchaser for $1.75 million. The wife was told by an estate agent that a provisional agreement had been signed. The formal agreement was signed in July 2008 and the wife, by her own admission, knew of the sale by 1 October 2008.

2.4 The husband told the wife he had bought other properties in Tai Po for the family to live in. But the wife refused to move to Tai Po. She also refused to move to a rented flat in North Point. The husband then leased back the property from the purchaser for a term of one year on 9 October 2008. The sale to the purchaser was completed on 29 October 2008. The wife and the children continued to live at the property and the husband continued to rent it until July 2010.

2.5 From late July 2010, the husband defaulted in the payment of rent. On 13 September 2010, the purchaser commenced proceedings in the Lands Tribunal against the husband to recover vacant possession of the property. Although the Lands Tribunal ordered that vacant possession of the property be delivered to the purchaser, it also allowed the wife to be joined as a party and stayed the order for possession on 25 January 2011.

2.6 On 20 January 2011, the wife commenced the present action and on 30 January 2011 commenced divorce proceedings in the Family Court against the husband (‘FCMC 1264/2011’).

2.7 At the time of the trial below, both the Lands Tribunal and the Family Court proceedings were stayed. On the hearing of the appeal we were informed that the wife had since moved out from the property.

II Nature of the wife’s claim

3. The wife’s claim to the property is that the husband held the property on a common intention constructive trust for himself and her, and the husband sold the property without her knowledge and consent. The purchaser did not inspect the property before the purchase and therefore had constructive notice of the wife’s beneficial interest in the property.

III The Judge’s decision

A. The claim against the husband

4.1 The Judge held that the burden is on the wife who was not a registered owner to prove she has a beneficial interest in the property. He found that the wife had failed to establish the common intention constructive trust either expressly or by inference.

A.1) Express common intention

4.2 In respect of the express common intention, the Judge held that the husband did not want to make the wife a co-owner of the property and the wife knew of this. This is what the Judge found :

‘ 61. Having carefully reviewed the evidence, I find that there was a short conversation between the Husband and Wife shortly after December 1988. In this conversation, the Wife asked the Husband to add her name as a co‑owner of the Property. The Husband refused and said to the Wife “it’s troublesome, have to pay” (“好麻煩，要加錢”). The Wife did not have any substantive response and the conversation ended shortly thereafter. I find that the Husband at the time did not want to make the Wife a co‑owner of the Property, and that the Wife knew that this was the case. And that was the reason why the Wife never raised the subject with the Husband again. I do not think the words used by the Husband in fact led the Wife to believe that she was to have some interest in the Property. These findings are made not on the basis of my assessment of the credibility of the Husband and Wife, but on the basis of the Wife’s own evidence, namely that the reason why she believed at the time she had an interest in the Property was due to the fact that she was married to the Husband. Even on her evidence, the Wife never said that she was led by the Husband’s response in this short conversation into thinking that she had or would have an interest in the Property. Insofar as the Wife thought at the time that she had an interest in the Property, I find that her (erroneous) belief was not caused by what the Husband said to her during the short conversation shortly after December 1988.’ (emphasis added)

A.2) Inferred common intention

4.3 The wife relied on the following matters in support of her case that the common intention can be inferred :

1) there was a marriage;

2) the wife made monetary contributions through the pooled family resources;

3) the husband abandoned the property after 2005;

4) the husband took away his hi‑fi equipment from the property in December 2008; and

5) the wife’s sister was allowed to stay at the property after its purchase.

4.4 The finding of the Judge on this issue is as follows :

‘ 91. In the light of my findings made about regarding the absence of any alleged pooled family resources, it seems to me that the Wife can only rely on two matters to support her case on detriment: (1) that she paid for some of the household expenses (ie expenses not related to the Property) prior to 1997; and (2) that she resigned from work in around September 1997.

92. In my view, neither of these matters (whether taken singly or together) can constitute reliance on the part of the Wife to establish a common intention constructive trust. As mentioned above, the sort of conduct sufficient to constitute detriment for the purpose of establishing a common intention constructive trust must be conduct on which the plaintiff could not reasonably have been expected to embark unless he/she was to have an interest in the property: see Grant v Edwards at 648G‑H (Nourse LJ). The two matters relied upon by the Wife cannot be described as such conduct. Indeed, as the Wife herself said so in her cross-examination, the reason why she gave up her job in 1997 was to look after the children and to help them with their studies, and she did not want to regret for not having done so.

93. Accordingly, even if the Wife has established a common intention to share the Property beneficially (which she has not), I would not have been able to find that the Wife acted to her detriment in reliance on any agreement, arrangement or understanding that she would take a beneficial interest in the Property.’

B. The claim against the purchaser

4.5 The Judge held that his finding on the lack of a common intention was sufficient to dispose of the wife’s claim against the husband and the purchaser. However the Judge also addressed other issues concerning the purchaser.

B.1) The purchaser’s constructive notice

4.6 The Judge held that the purchaser was not a bona fide purchaser for value without notice. The Judge held that if the land is occupied by a person...