Jurisdiction - Hong Kong
Hong Kong – High Court Finds Trust On Basis Of Co-Habitants’ Enforceable Oral Agreement.

19 January, 2015


The High Court of Hong Kong in Ching Chi Sau v. Yip Woon Yin Judy And Another has found in favour of a non-registered owner claiming beneficial interests in properties against its legal owner. The Defendant, the legal owner of the properties and former co-habitant of the Plaintiff, was held to hold the Plaintiff’s beneficial interest in the properties on trust due to the existence of an enforceable oral investment agreement between the parties.  The case is a helpful demonstration of how fact specific these types of cases are and how Courts grapple with those facts.




The Plaintiff and Defendant were co-habitants for fifteen years until their relationship ended in 2008. During this period, several properties were purchased in the Defendant’s name. The Plaintiff claimed that the Defendant purchased several properties in her name or in the name of a company in which she was the sole shareholder using his funds. He claimed that, despite having no legal title, he had beneficial interests in the properties due to an oral investment agreement (the “Agreement”) made between the Plaintiff and the Defendant. He alleged that the Agreement contained the following terms.


  1. The Defendant and Plaintiff were to invest jointly in the property market as a means of financially supporting them both in retirement;
  2. The funds for these investments would come from refinancing the parties’ home (the “FG House”), the Plaintiff’s salary and, if necessary, the Defendant’s money;
  3. The Plaintiff and Defendant would jointly decide on the property to be acquired, the time to sell the acquired property and how the proceeds of sale would be utilized for further investment;
  4. The proceeds of sale should be reserved for further investment;
  5. The legal title would be in the Defendant’s name as the Plaintiff was reaching retirement age and would find it difficult to obtain a mortgage from the banks. The Defendant would hold the properties on trust for herself and the Plaintiff;
  6. The Defendant would receive an income from the Plaintiff as a nurse assistant to provide proof of income for mortgage purposes; and
  7. Both parties would be beneficially entitled to the properties acquired for investment, the rental income and the proceeds of sale from such properties in equal shares.


This Agreement was supplemented by several written memos, the most significant of which (“Memo 3″) is summarised below.


  1. Both parties agreed that they should continue to stay together for a few years before confirming the legal status of the relationship;
  2. The Defendant proposed the transfer of the beneficial interest in two flats to the Plaintiff in exchange for the beneficial interest in the FG House. The legal title would be held in the sole name of the Defendant. The period for considering this proposal would be three months;
  3. Within six months of the exchange transaction, if there was any economic loss suffered by the Defendant, the Plaintiff would make the mortgage repayments for 1 year in respect of the FG House only;
  4. To demonstrate his sincerity and the fact that the relationship in their advanced age was treasured, the Plaintiff would give certain “personal treasures” to the Defendant for safekeeping.


The Defendant contested the authenticity of the above memo and claimed that her signature had been forged.


The Issues


1.   Beneficial Interest In The FG House


This property was registered in the joint names of the Plaintiff and the Defendant. The Defendant claimed to have sole beneficial ownership of the property. In addition, the Defendant claimed that she gave the Plaintiff loans to help purchase the house with some of the Plaintiff’s personal chattels being offered as security.


The Decision


Both parties had made contributions to the down payment on the property and it was clearly intended to be their family home. In addition, the Court found against the existence of the loans as there was no written record of these alleged loans and the Defendant never made any attempts to recover them. Both parties bore legal obligations to repay all charges and mortgages on the property. Furthermore, it was clear from both parties’ intentions and written records that this property should be held in equal shares. The Court therefore held that monies from the sale of the property should be split in equal shares.


2.   Beneficial Interest In Properties Purchased As Part Of The Agreement


There were three properties in relation to which the Defendant was the sole registered owner. The Plaintiff pleaded that he held beneficial interests in these due to the existence of the Agreement.


The Decision


In reaching his decision, Kent Yee J referred to Luo Xing Juan v Estate of Hui Shui Shee (2009) 12 HKCFAR 1, which concerned equitable rights arising in the course of a relationship between a married couple. In this judgment Riberio PJ cited Lord Diplock in Gissing v Gissing


Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom.”


The Court held that, given the close nature of the relationship between the parties, it was likely that they had had a discussion about joint investment. The Court further acknowledged that it would be difficult for the Plaintiff to have obtained a mortgage due to his age. The Court therefore held that the terms of the Agreement were fair and reasonable in all the circumstances. It was further held that the parties by their conduct acted in accordance with the Agreement. The investments were funded by re-mortgaging the FG House in which both parties had legal title. One additional written memo highlighted that the Plaintiff set the asking price for one of the properties, indicating that he had a significant role in the investment portfolio. As a consequence, all proceeds from the properties purchased as part of the Agreement held in the Defendant’s name were held on constructive trust to be distributed between the two beneficiaries in equal shares. Under this arrangement, it would have been unconscionable for the Defendant to have departed from the Agreement and to claim sole beneficial ownership of the properties.


3.   The Property Held In The Company’s Name


The Plaintiff further pleaded that he had a beneficial in a property (the “CL Flat”) of which Bestview, a company solely owned by the Defendant, was the sole registered owner. The Plaintiff alleged that the property was purchased using the proceeds of loans secured by the FG House. The Plaintiff argued that he had been misled by the Defendant into believing that he had become a 70% shareholder in Bestview.


The Decision


The Court found the Plaintiff’s account implausible. He had been a shareholder in the past and would have been aware of the need to sign certain legal documents to become a shareholder. In addition, at the time of the purchase the relationship between the Plaintiff and Defendant had deteriorated. Therefore, the basis of the investment fund (i.e. a life-long relationship) had already fallen away. The Court believed that the Defendant had no intention to purchase the flat as a joint investment. More significantly, there was no cogent evidence that funds from the FG House were used to purchase the property and there was no evidence that the Plaintiff made any financial contributions to the purchase of the property. The Plaintiff therefore had no beneficial interest in the property.


Authenticity Of Handwritten Evidence


The authenticity of the memos was key to the Plaintiff’s claims. The Defendant contested the authenticity of the documents and argued that her signature had been forged on Memo 3. The Court held, citing Nina Kung v Wang Din Shin [2005] 8 HKCFAR 387, that if forgery is asserted then the burden is on the party asserting forgery. This burden is high. The Defendant was seen as an unreliable witness and her claims of forgery were found to be false. These claims were viewed to be an abuse of process and as a result the Defendant was ordered to pay the Plaintiff’s costs on an indemnity basis.


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For further information, please contact:


Gareth Thomas, Partner, Herbert Smith Freehills

[email protected]


Dominic Geiser, Partner, Herbert Smith Freehills

[email protected]


Herbert Smith Freehills Dispute Resolution Practice Profile in Hong Kong

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