Esther Chan Pui Chun and Gilbert Leung Kam Ho Melodious Corporation
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jonathan Parker,Mr Justice Nelson,Lord Justice Rix |
| Judgment Date | 29 July 2002 |
| Neutral Citation | [2002] EWCA Civ 1075 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3 2001 2784 |
| Date | 29 July 2002 |
[2002] EWCA Civ 1075
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
HIGH COURT (HHJ McGonigal)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Rix
Lord Justice Jonathan Parker and
Mr Justice Nelson
Case No: A3 2001 2784
Simeon Thrower (instructed by Messrs Fenwick) for the Claimant/Respondent
Rosalind Nicholson (instructed by Messrs Penningtons) for the Defendant/Appellant
INTRODUCTION
This is an appeal by Mr Gilbert Leung Kam Ho ("Mr Leung") against an order made by HHJ McGonigal, sitting in the Chancery Division, Companies Court, on 30 November 2001. Before the judge were three sets of proceedings, as follows:
1. An action (ref. no. HC 2000 0745) brought by Miss Esther Chan Pui Kwan (formerly Esther Chan Pui Chun) ("Miss Chan") against Mr Leung, seeking firstly an order under section 33(3) of the Family Law Act 1996 ("the FLA") to enforce Miss Chan's entitlement to remain in occupation of a residential property known as Hill House, Roundhill Drive, Woking, Surrey, further or alternatively a declaration under section 33(4) of the FLA (alternatively under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 ("the TLATA")) as to Miss Chan's beneficial interest in Hill House. Joined as second defendant in the action is Melodious Corporation (a company incorporated in the British Virgin Islands) ("the Company"), which is the registered proprietor of Hill House at HM Land Registry. The Company is beneficially owned as to 51 per cent by Miss Chan and as to the remaining 49 per cent by Mr Leung. Miss Chan is currently in sole occupation of Hill House, in which she and Mr Leung previously lived together.
2. A winding up petition (no. 004911 of 1998) presented by Mr Leung on 29 August 1998 against the Company in his capacity as a creditor of the Company, on the ground that the Company is unable to pay its debts.
3. A winding up petition (no. 00282 of 1999) presented by Mr Leung on 18 January 1999 against the Company in his capacity as a contributory of the Company on the ground that it is just and equitable that the Company should be wound up.
By his order dated 30 November 2001, which was made in the action and in the petitions, the judge declared that the Company holds the freehold title of Hill House as trustee for Miss Chan and Mr Leung in the proportions 51:49. He further ordered that Hill House be sold (but with the proviso that, save with the consent of Miss Chan,
no sale should take place before the end of the academic term in the summer of 2003, when Miss Chan was due to complete her studies at the University of Surrey, or the earlier cessation of her studies), and that the net proceeds of sale be distributed as to 51 per cent to Miss Chan and, following payment to the Company of £180,000 in discharge of a debt owed to it by Mr Leung, the balance (if any) to Mr Leung; and he declared that until sale Miss Chan is entitled to occupy Hill House as her residence. The judge dismissed both the winding-up petitions, and directed that an account be taken:
"…. in order to ascertain the sums (if any) that are due and ought to be paid or distributed by the Company to its creditors (including Mr Leung and Miss Chan) and its contributories."
The judge's order went on to give directions as to evidence on the taking of the account. The judge awarded Miss Chan her costs of the action and the company its costs of the petitions. He refused permission to appeal, but permission was granted by Chadwick LJ on the papers on 25 February 2002.
No steps have been taken in relation to the account ordered by the judge, pending the outcome of the appeal.
THE FACTUAL BACKGROUND
In September 1992 Miss Chan, who was then aged 26, started working as political assistant to Mr Leung. Mr Leung was then a member of the Hong Kong Legislative Council. He was also a Chartered Surveyor and carried on a property business. When Miss Chan entered Mr Leung's employment, Mr Leung was under investigation for corruption in connection with a local government election. In November 1992 he was charged with bribery, and in June 1993 he was convicted and sentenced to three years in prison.
In 1993, prior to Mr Leung's conviction, a relationship had developed between Mr Leung and Miss Chan. Marriage was discussed, but Mr Leung's conviction and sentence meant that, as the judge put it, the couple's nuptial plans had to be deferred.
On 1 September 1993 Miss Chan began working for Ho & Chan, a legal firm used by Mr Leung. At the time of his conviction, Mr Leung was engaged in various property development projects, including two projects which are referred to in the evidence as, respectively, Wo Mei and Ho Chung. While Mr Leung was in prison, Miss Chan assisted him in progressing these two projects. On 21 June 1993 Mr Leung gave Miss Chan a general power of attorney over his affairs.
At some date in 1993 Mr Leung gave Miss Chan HK$700,000 so that she could buy out her brother's interest in a flat which was registered in her parents' names.
In October 1994 Miss Chan left Ho & Chan and went to work for a Dr Sam Wong, another Hong Kong legislator, for whom she had worked previously. Whilst working for Dr Wong, Miss Chan continued to assist Mr Leung in relation to the Wo Mei and Ho Chung projects.
During Mr Leung's sojourn in prison, he wrote a large number of letters to Miss Chan, many of which were put in evidence. I shall make further reference to these letters later in this judgment: for the moment, I merely note that they testify to the existence of not merely a strong personal relationship, but also a high degree of collaboration on commercial matters – in particular the Wo Mei and Ho Chung projects – and that it is clear from the letters that Mr Leung was looking forward not merely to living with Miss Chan but also to setting up in business with her.
In March 1995 Mr Leung was allowed out of prison during the day, and was once again able to conduct his business affairs personally.
In early May 1995 Miss Chan came to England to stay with Mr and Mrs Oscar Lai, who were friends of Mr Leung, in Guildford. Mr Lai, who is a lawyer, had also been convicted of bribery in Hong Kong, and he and Mr Leung had become acquainted in prison. Miss Chan's purpose in coming to England was to look for a suitable house in which she and Mr Leung could live together.
On 18 May 1995 contracts were exchanged for the purchase of Hill House by Miss Chan, at the price of £360,000. Hill House is a large 4-bedroom family property with a substantial garden, a swimming pool and a fish pond.
A deposit of £40,000 was paid on exchange of contracts, the funds being remitted from Mr Leung's personal account in Hong Kong.
On 1 June 1995 Mr Leung was released from prison, having served two years of his three-year sentence.
Completion of the purchase of Hill House took place on 11 June 1995. On completion, Hill House was transferred into the sole name of the Company (which had earlier been bought off the shelf for the purpose). Payment of the balance of the purchase price (amounting to £320,000) was funded by a loan of £360,000 made to the Company by Bank of East Asia, London, repayable by monthly instalments. The loan was secured by a legal charge over Hill House, and by a charge over a cash deposit of £360,000 made with Bank of East Asia, Singapore Branch, by Mr Leung. The cash deposit was in turn funded partly out of Mr Leung's own resources and partly from a loan made to him by Goldface Finance Ltd, a company owned by a Mr Tai, a business associate of Mr Leung. Miss Chan joined Mr Leung in signing a letter to the nominee director of the Company ( East Asia Corporate Services Nominees Ltd) asking that the necessary resolutions be passed to accept the loan from the Bank of East Asia and to grant the legal charge over Hill House.
The balance of the Bank of East Asia loan of £360,000 remaining after completion was paid (with Mr Leung's consent) to Miss Chan. No issue arises in the action as to that payment, and the judge made no reference to it in his judgment beyond recording that it was made.
Following completion, Miss Chan and Mr Leung moved into Hill House and set up house there together. Monthly repayments were made under the Bank of East Asia's charge. The evidence before the judge did not disclose the source of the funds with which the repayments were made, and he made no finding as to that.
In September 1995 the loan of £360,000 was refinanced on revised terms by the Bank of East Asia, and the cash deposit in Singapore was reduced to £180,000 in exchange for a joint personal guarantee by Miss Chan and Mr Leung limited to £180,000.
In 1996 Miss Chan was contacted by the Bank of East Asia in connection with a monthly repayment which had for some reason been missed. This brought home to her that Hill House was still subject to a mortgage to secure a debt of £360,000. She pressed Mr Leung for the mortgage debt to be repaid in full, but Mr Leung persuaded her to agree that only half the debt should be repaid, so that funds would be available for the acquisition of a portfolio of investment property.
Accordingly on 2 July 1996, the remaining cash deposit of £180,000 was remitted to the London Branch of the Bank of East Asia, thereby reducing the Bank of East Asia loan to £180,000.
In December 1996 the Company embarked on the acquisition of a portfolio of investment...
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