THE HONG KONG SETTLERS HOUSING CORPORATION LTD v. WONG SEK TIM

DCCJ 5579/2023

[2025] HKDC 142

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5579 OF 2023

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DECISION

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I.  INTRODUCTION

1.  Before me is the defendant’s application (the “Application”) by summons filed on 24 September 2024 (the “Defendant’s Summons”) to set aside the judgment entered in the defendant’s default on 20 May 2024 (the “Default Judgment”) or alternatively to stay its execution.

II.  BACKGROUND

2.  The background has been set out in §§2 – 6 of my decision ([2024] HKDC 2110) (the “CMC Decision”) delivered at the Case Management Conference (the “CMC”) on 16 December 2024, and I shall not repeat the same here.

3.  In respect of the procedural history specific to the present action:-

(1)  The writ of summons was issued on 13 December 2023, claiming, among others, possession of the property (the “Property”) known as Flat No 225, 2/F, Man Lee House, Tai Hang Sai Estate (“THSE”). The claim is on the ground of termination of tenancy between the plaintiff as landlord and the defendant as tenant;

(2)  The writ of summons was served by inserting the same into the letterbox on 8 January 2024 for address (the “Address”) of the Property;

(3)  On 20 May 2024, the defendant having filed no notice of intention to defend, the Court entered final judgment;

(4)  On 2 September 2024, a writ of possession was issued; and

(5)  On 24 September 2024, the defendant issued the Defendant’s Summons, with the Address filled as the address for service on the summons. The Defendant’s Summons is supported by the defendant’s own affirmation with the Address written as the residential address.

III.  LEGAL PRINCIPLES IN RELATION TO SETTING ASIDE DEFAULT JUDGMENT

4.  The legal principles in relation to setting aside default judgment are trite. Where the service of the writ is regular, then the Court would have to consider whether there is real prospect of success in the defence. If so, the Court would usually set aside the default judgment, although it still retains discretion not to do so considering all the relevant circumstances. If the service of the writ is irregular, then the Court would usually set aside the default judgment without consideration of merits, although again it still retains discretion not to do so considering all the relevant circumstances.

IV.  SERVICE

5.  There is no dispute that the Address was the usual and last known address. The defendant also deposed that he received the writ on 8 January 2024 (the date of the insertion of the writ into the letterbox). The service was regular.

V.  SETTLEMENT AGREEMENT DATED 23 JANUARY 2024

6.  Despite the regularity of the service, the defendant contends that the Default Judgment is irregular because when applying for the Default Judgment on 20 May 2024, the plaintiff failed to disclose to the Court that the parties had already settled the present action by the settlement agreement dated 23 January 2024 (the “Settlement Agreement”) entered into between the plaintiff and the defendant.

7.  The terms of the Settlement Agreement, relevant for the present purposes, are:-

(1)  Recital (6) states that the defendant promised not to defend against the present action, including not to oppose any default judgment or summary judgment;

(2)  By clause 1, the defendant shall deliver vacant possession of the Property on or before 15 March 2024; and

(3)  By clause 4, if the defendant shall fail to deliver vacant possession of the Property on or before 15 March 2024, the plaintiff shall have absolute discretion to terminate the Settlement Agreement and continue to pursue the present action.

8.  There is no dispute that the defendant failed to deliver vacant possession on or before 15 March 2024. Even the defendant’s evidence is that the defendant only moved out of the Property with his personal chattels on 13 April 2024. However, such moving out (if any) was far from delivery of vacant possession. In a letter of even date, the defendant wrote to the plaintiff that he had been cooperative with the plaintiff but his son refused to move out, and the plaintiff also sought more time for him and his son to move out. If he thought he had moved out completely, he would not have sought more time for him to move out as well, and further and in any event, as his son was prima facie his licensee to stay in the Property, the defendant as the tenant would have his obligation to ensure vacant possession to be delivered. With such evidence, I am not convinced (at least at this stage) that the defendant duly performed his obligation to deliver the vacant possession under the Settlement Agreement.

9.  The defendant submits that despite the word “vacant possession” under the Settlement Agreement, the defendant’s own understanding of this word is simply possession not necessarily vacant. I am taken aback by such submissions. First, there is no evidence on the defendant’s such strange understanding, to put mildly. Second, in any event, the Court is to construe a contract objectively having regard to the factual matrix known to both parties at the time of the contract. There is simply no evidence that such strange understanding was made known to the plaintiff at the time of the execution of the Settlement Agreement.

10.  The defendant further submits that the plaintiff does not dispute that vacant possession had been delivered to the plaintiff and if the plaintiff had disputed that, the defendant would have produced more evidence to prove that vacant possession had been delivered. I disagree with the defendant’s submissions. The plaintiff simply does not respond to such allegation of delivery of vacant possession; the plaintiff has never agreed that vacant possession had been delivered. Here, it is the defendant who raised this point about the Settlement Agreement, and it is the defendant who has to discharge the burden at least to establish a prima facie case that he had performed the Settlement Agreement by delivering vacant possession. If there is no such prima facie case, I do not see why the plaintiff would have expressly to say that it does not agree to the defendant’s version.

11.  In such circumstances, I do not accept the defendant’s submission that before the application for the Default Judgment, by conduct of obtaining of vacant possession under the Settlement Agreement, the plaintiff had abandoned or waived its right to pursue the present action because in the first place, the defendant had failed to deliver vacant possession and thus there was simply no vacant possession for the plaintiff to accept. I should also add that the defendant himself has not really regarded the Settlement Agreement as settling the matter or binding in the circumstances given that he has also gone back on his promise in the recital of the Settlement Agreement not to oppose any default judgment in the present action.

12.  In the circumstances, I do not see how the Settlement Agreement has at any point prevented the plaintiff from applying for the Default Judgment, and thus I reject the defendant’s contention that there was any failure to make disclosure about the Settlement Agreement when applying for the Default Judgment.

13.  With the regular service as I found above, the Default Judgment is regular.

14.  Therefore, I now have to consider the merits of the defendant’s defences.

VI.  MERITS OF DEFENCE

15.  One of the defences raised by the defendant is essentially the same as the grounds of judicial review in the Form 86 of the judicial review (HCAL 1600/2024) (the “Judicial Review”) mentioned in §1 of the CMC Decision and summarised in §18 of my decision of 16 January 2025 in DCCJ 5582/2023 ([2025] HKDC 97) (the “DCCJ 5582/2023 Decision”), which, to my surprise, the defendant’s legal representative told me in Court that he had not read despite its relevance and despite the plaintiff’s reference to it in its written submissions. As I said in §24 of the DCCJ 5582/2023 Decision, grounds in public law may constitute a valid defence to a private claim: Wandsworth LBC v Winder [1985] 1 AC 461 at 506C-D, 509E-H; North British Housing Association v Matthews [2005] 1 WLR 3133 at §12; Kay v Lambeth LBC [2006] 2 AC 465 at §60.

16.  Further, as said in the DCCJ 5582/2023 Decision, Coleman J granted leave for the Judicial Review in [2024] HKCFI 2592, and the substantive hearing will take place on 25 April 2025. His Lordship’s grant of leave to apply for judicial review means that the grounds in the Judicial Review are reasonably arguable “having realistic prospect of success”: see Chan Po Fun v Winnie Cheung (2007) 10 HKCFAR 676 at §15 per Li CJ.

17.  This in my view means that there is a real prospect of success in the defence of the Judicial Review to the plaintiff’s claim.

18.  Given my view on the defence of the Judicial Review, I do not need to consider the merits of the defendant’s other defences.

VI.  RESIDUAL DISCRETION

19.  This usually is sufficient to set aside the judgment. However, Ms Margaret Chan, counsel for the plaintiff, submits that I should consider exercising my discretion not to set aside. In determining how to exercise my discretion, the Court has to consider all relevant circumstances depending on the individual facts of that case, for example, why the default occurred; the defendant’s conduct after he had notice of the proceedings; an explanation for the time taken for the delay; and any prejudice to the plaintiff and third parties. That said, “[t]he consideration of merits would usually transcend any reasons given by the defendant for the delay in making the application… This may be so even where the explanation given by him on oath is false…”: see Hong Kong Civil Procedure 2025 Vol 1 §13/9/13.

20.  Further, “the right to apply to set aside on the ground of a meritorious defence is not lost even if the defendant, having had the judgment entered against him in default of acknowledgement of service, obtained from the plaintiff time in which to pay”: see Hong Kong Civil Procedure 2025 Vol 1 §13/9/15.

21.  I accept that the defendant has failed at all to explain the delay in making the present application, which is about 3-4 months between the service of the Default Judgment and the filing of the present application to set aside.

22.  As regards prejudice, Ms Chan submits that there would be no prejudice to the defendant if the Default Judgment is not set aside, because the defendant has his place to reside now. But the more relevant prejudice (if any) I have to consider is whether there is any prejudice to the plaintiff or any third party. Ms Chan fairly accepts that there is no such evidence. For the sake of completeness, insofar as there would be any suggestion that the defendant or the relevant parties have received some payments under the Settlement Agreement and thus the Default Judgment should not be set aside despite the merits of the defence of the Judicial Review, I do not see it as any relevant prejudice that would be caused to the plaintiff for the present purpose – if it sees fit, the plaintiff may take steps to claim back the sums paid under the Settlement Agreement.

23.  Having considered the above, especially the real prospect of success in the defence of the Judicial Review and the absence of any real prejudice against setting aside, I find it appropriate to exercise my discretion to set aside the Default Judgment.

VI.  CONCLUSION

24.  In the circumstances, I allow the Defendant’s Summons.

25.  As regards costs, the defendant submits that I should depart from the usual costs order against the defendant where a regular default judgment is set aside. His reason is that the defendant did not have the financial means and thought that the Settlement Agreement was still subsisting. I cannot accept this reason. First, financial means is not a good reason itself, and second, despite the Settlement Agreement, the defendant had not duly performed and in any event the Default Judgment was entered.

26.  There being no good reason for departing from the usual costs order, I order that the defendant do pay the plaintiff costs of the Defendant’s Summons, summarily assessed at HK$85,000, with discount already applied as a result of the plaintiff’s failure to serve the statement of costs together with the submissions in compliance with PD 14.3. Since the plaintiff will still have a few hearings to attend in other related cases, here, I specifically make it clear that if there would be such failure to comply with PD14.3 again, the plaintiff’s solicitors may well be met with personal costs order against them.

VII.  POSTCRIPT

27.  As a postscript, I should mention about the defendant’s submissions that the plaintiff only commences action against the defendant but not the occupants of the Property. I mention about this because the defendant repeated such submissions many times. I am not sure whether such submissions were made in support of his contention that the Default Judgment was irregular, or whether this would somehow constitute a defence against the plaintiff’s claim. In any event, I do not see how such submissions would be relevant to the irregularity or regularity of the Default Judgment. Provisionally, I also fail to see how this would constitute a defence, but in any event, as said above, I do not have to consider the merits of the other defences than the defence of the Judicial Review.