DEXTRA CHINA LTD AND ANOTHER v. LAM WING KIT

HCMP 1852/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1852 OF 2015

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D E C I S I O N

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Matters before the court

1.  There are before the court the following 2 matters:

(1)   the appeal (“Appeal”) by Madam Lam Chui Ha and Mr Lam Wing Kwan, respectively the sister and brother of the defendant (“Sister” and “Brother” respectively and “Siblings” collectively), by notice of appeal dated 22 September 2016, against the order made by Master Chow on 8 September 2016 which dismissed (with indemnity costs to the plaintiff) the Siblings’ application for leave to be joined as the 2^nd and 3^rd defendants to these proceedings (“Joinder Application”) and for a stay of execution of the order for the sale (“Order for Sale”) of Flat C, 41/F, Block 1, Belvedere Garden Phase 2, Tsuen Wan, New Territories (“Property”) made herein by Master R Lai on 17 November 2015 until the determination or other disposal of DCCJ 5102/2015 (“District Court Action”) in which the Siblings claimed against the defendant, the registered owner of the Property, for declarations that the defendant held the Property on trust for the Siblings to the extent of 74.51% (“Stay Application”); and

(2)   the plaintiff’s application (“Registration Application”), by summons dated 2 May 2017, for an order for the vacation from the Land Register of the registration of the Tomlin Order made by consent in the District Court Action on 22 August 2016 (“Tomlin Order”) as a result of the settlement of the Siblings’ claim to beneficial ownership of the Property, the existence of which has obstructed the carrying out of the Order for Sale.

Background

2.  The background to these matters can be stated very shortly.

3.  On 28 April 2014, the plaintiffs obtained judgment for, inter alia, sums totalling RMB 5,458,951 (inclusive of pre-judgment interest) (“Judgment”) against the defendant after a 7-day trial in HCA 38/2010.

4.  In enforcement of the Judgment, on 30 July 2014, the plaintiffs obtained a charging order absolute over the Property, which was acquired by the defendant and his late father, Mr Lam Wah Chun (“Father”), as joint tenants by assignment dated 9 November 1999 and of which the defendant became the sole owner by operation of the doctrine of survivorship upon his father’s death on 7 February 2006.

5.  By the originating summons issued herein against the defendant on 31 July 2015, the plaintiff sought an order for the sale, and the delivery up of vacant possession, of the Property.

6.  On 30 September 2015, the plaintiffs’ solicitors caused a notice to occupants (“Notice to Occupants”), giving notice of these proceedings and the hearing of the originating summons on 17 November 2015, to be affixed to the Property.

7.  On 17 November 2015, the originating summons came before Master R Lai who refused the defendant’s request through counsel for an adjournment made on the basis that there was an on-going dispute as to the beneficial ownership of the Property (but without any supporting affidavit) and granted the Order for Sale.

8.  On 31December 2015, Registrar Lung issued a writ of possession for the bailiffs to take possession of the Property, the defendant having failed to comply with the Order for Sale.

9.  In the meantime, the Siblings had, by a writ of summons issued in the District Court Action on 10 November 2015, claimed against the defendant for declarations that the defendant held the Property on trust for them to the extent of 74.51%. 

10.  Broadly, as it appeared from their pleadings in the District Court Action, the Siblings so claimed on the basis of:

(1)  an express common understanding within the family (involving the defendant, the Siblings and both their parents) for the purchase of a property (which turned out to be the Property) to be jointly owned by all family members, partly with an interest free loan obtainable from the Hong Kong Housing Society upon the surrender of the public housing unit then occupied by the parents, the defendant and the Brother and partly with a bank instalment loan to be secured by the property (“Loans” collectively); and

(2)   the Siblings’ past and continuing contributions since the purchase of the Property in the names of the Father and the defendant to the monthly repayments of the Loans, the outgoings and expenses of the Property and the costs of the parents’ maintenance.

11.   The Sibling’s statement of claim contained a number of tables setting out their case as to

(1)   the amounts of the monthly repayments of the Loans, the outgoings and expenses of the Property and the costs of the parents’ maintenance; and

(2)   the defendant and the Siblings’ respective contributions thereto

over different periods of time in the 20 years from December 1999 to November 2019.  The numbers put forward were very specific, to the precise dollar.  The crystalisation of the interest claimed by the Siblings at 74.51% was based on their assertion that, between December 1999 to November 2019, their contributions would add up to 74.51% of the total sum of $4,196,445 that had been expended (and would continue to be expended) on the repayment of the Loans, the outgoings and expenses of the Property and the parents’ maintenance.

12.  Insofar as the defendant was concerned, it appeared from his defence in the District Court Action that he did not dispute the Siblings’ claims to have a beneficial interest in the Property but he took issue with the inclusion of certain expenses taken into account by them and therefore the percentage of contributions and beneficial interest worked out by the Siblings.

13.  The commencement of the District Court Action was followed by the issuance of a summons herein on 23 December 2015, by which the Siblings made the Joinder Application and the Stay Application.

14.  Such applications were supported by 2 affirmations of the Sister, one made on 22 December 2015 and the other made on 26 February 2016. These affirmations altogether contained less than 10 pages of substantive text in Chinese.  I think it is not unfair to describe the former affirmation as being, in substance, a mere reproduction of the Siblings’ statement of claim in the District Court Action.  Neither affirmation exhibited any documents so that the Siblings’ case on evidence before Master Chow can be said to be consisting entirely of their bare assertions, albeit made on oath by the Sister.  In particular, I note that the lack of documentary evidence was commented on in paragraph 28(a) of the affirmation in opposition made by the plaintiffs’ solicitor on 5 February 2016.  This criticism was however not met or in any way dealt with in the Sister’s 2^nd affirmation, which was stated to be in reply to the plaintiffs’ affirmation in opposition.

15.  While the Joinder Application and the Stay Application were pending, the District Court Action was concluded by the Tomlin Order, whereby all further proceedings therein were stayed upon the terms set out in a Settlement Agreement made between the defendant and the Siblings following a 4-hour mediation on 24 June 2016.  Insofar as it is material, it was agreed that the defendant should transfer a 70% interest in the Property to the Siblings.  The Tomlin Order was subsequently sealed on 5 October 2016 and registered (by memorial No.16101900080010) at the Land Registry against the Property on 19 October 2016.

16.  Against this background, the Joinder Application and the Stay Application came before Master Chow on 8 September 2016.  The Siblings were represented by counsel namely, Ms Zoe Ning instructed by Phyllis K Y Kwong & Associates.  The Master dismissed both applications on the ground that, notwithstanding the Tomlin Order which she had taken into account, the Siblings failed to show an arguable case by a wide margin.  In particular, she observed in her oral reasons that the Siblings had not produced a single piece of documentary record, whether as to their being in actual possession of the Property or their having a beneficial interest in the Property, not to mention the gaps and contradictions in their claims, which they chose not to explain.

17.  Following a failed application by the Siblings for a stay of the execution of the Order for Sale pending the determination of the Appeal in early October 2017, the writ of possession was executed in that month.

18.  The Siblings ceased to be represented, and began to act in person, in these proceedings in January 2017.

The Appeal

The Stay Application

19.  The Stay Application had been rendered academic by the conclusion of the District Court Action by the Tomlin Order.  The Tomlin Order which was made by consent between the defendant and the Siblings, however, did not bind the plaintiffs who were not made parties to the District Court Action.  Nor did it bind Master Chow (or this court).  As between the plaintiffs and the Siblings, the question remained whether the Siblings should be allowed to intervene in these proceedings to contest the plaintiffs’ right to an order for the sale of the Property in enforcement of the Judgment because of their partial beneficial interest in the Property.

The Joinder Application

20.  Although the margin of the Siblings’ summons referred to Order 15 rules 4[1] and 6[2] of the Rules of the High Court (Cap 4A), the Joinder Application was argued before Master Chow with reference to Order 15 rules 6 and 10[3].

Applicable legal principles

21.  Where the applicant for joinder is asserting a beneficial interest in the property that is the subject-matter of the proceedings, under both rules, the burden is upon him to demonstrate an arguable bona fide claim to such beneficial interest.  In this regard, Mr Christopher Chain, counsel for the plaintiffs, has drawn my attention to:

(1)   Silver Hope Limited v Chan Kwai Wah Alice [2013] 1 HKLRD 823, in which an application was made under Order 15 rule 6(2)(b) for joinder with a view to setting aside an order for sale of property in enforcement of an unsatisfied judgment against the registered owner on the ground that the applicant was beneficially interested in parts of the property and in which Registrar K W Lung recorded at [8] that the applicant’s counsel accepted that the applicant had to demonstrate an arguable case that he held a beneficial interest over parts of the property and proceeded to consider the application with reference to such threshold; and

(2)   Wing Hang Bank Ltd v Success Orient Investment Ltd, HCMP 2457/2011, unreported, 31 January 2013, which were proceedings under Order 88 in which an application for joinder was made under Order 15 rule 10 and in which Registrar K W Lung recorded at [11] the applicant’s reliance on Clough JA’s quotation of Minet v Johnson [1890] 6 TLR 417 in Yu Wing Kan v Lau Shuk Lan [1990] 2 HKLRD 583 at 590B-590I that any person in actual possession of land who was not made a party to an action for possession of that land by a plaintiff against a defendant was entitled to be added under Order 15 rule 10 as a defendant before or after judgment, provided that he had a bona fide independent claim to be in possession.

22.  In addressing the question whether the Siblings have demonstrated an arguable bona fide claim to partial beneficial ownership of the Property to justify their joinder in these proceedings, Mr Chain has reminded the court to bear in mind the following:

(1)   The onus is on the party alleging that the beneficial ownership is different from the legal ownership to show that that is the case, the presumption being that the beneficial ownership in property follows the legal ownership.  See Lewin on Trusts (19th ed), §9-062.  See also Mo Ying v Brillex Development Ltd [2014] 3 HKLRD 224 at [34] per Deputy High Court Judge Eugene Fung SC.

(2)   Where an express “common intention constructive trust” is asserted (as the Siblings do), discussions must be pleaded in the greatest detail, both as to language and as to circumstance.  In assessing credibility, the court will naturally accord weight to contemporaneous evidence, and have regard to the consistency and inherent plausibility of a witness' account: Mo Ying v Brillex Development Ltd, supra, at [38] & [77].

(3)   The court is entitled to draw adverse inferences against a party who fails to adduce evidence that can reasonably be assumed to be available to him or where he fails to explain such failure.  See, e.g. Tam Po Kei v Tam Bo Kin [2011] 1 HKLRD 537 at [27]-[28] per Harris J.

Discussion on the basis of the Siblings’ case and evidence before Master Chow

23.  Mr Chain has addressed me on:

(1)   the unexplained internal inconsistency in the Siblings’ case in that the Sibling’s claim to 70% or more beneficial interest in the Property was premised upon the proportion of the financial contributions made by just the 3 children of the family to expenses relating to the Propertywhereas the common understanding alleged by them to have been reached within the entire family before the purchase was for the Property to be owned by all members of the family which would have to include also the parents (“物業由全家人共同擁有”);

(2)   the inherent implausibility of the Siblings’ case, for example, in taking into account financial contributions to the Property that were yet to be made by them to the exclusion of the defendant[4] (up to November 2019); and

(3)   the unexplained timing and delay of the Joinder Application which is said to cast doubt on whether the Siblings’ case was bona fide.  In particular, the Siblings claimed that they resided in the Property. If that was the case, they should have been aware of the plaintiffs’ enforcement efforts through the Notice to Occupants affixed to the Property on 30September 2015 and would not have failed to take any action until the very last minute.

24.  I have taken some care in describing in some detail, in paragraphs 10, 11 and 14 above, the evidence put by the Siblings before Master Chow in support of their claim to partial beneficial ownership of the Property.  As stated above, the Siblings’ case on evidence before Master Chow consisted entirely of their bare assertions, unsupported by any documentary or other independent or objective evidence.  And given the nature and basis of the Siblings’ claim, one would have expected some probative written records to exist, especially documents in proof of some, if not all, of the financial contributions upon which the Siblings rest their case, particularly when such contributions were supposed to be continuing.  There was no explanation by the Siblings as to why they could, or would, not adduce any documentary evidence, despite the criticism in paragraph 28(a) of the plaintiffs’ affirmation in opposition.

25.  On such evidence, even leaving aside the other points mentioned by Mr Chain as summarised in paragraph 23 above, I am of the view that the Siblings had fallen fall short of what is required to show an arguable bona fide claim to a beneficial interest in the Property.  Any decision otherwise would oblige the court to act on bare assertions.

Documents produced by the Siblings at the hearing

26.  However, this is not the end of the matter.  Immediately before the hearing on 5 May 2017, the Siblings handed up to the court, and copied to the solicitors for the plaintiffs, a bundle of copy documents under the cover of a letter addressed to me dated 5 May 2017 and signed by the Brother. 

27.  In short, in addition to repeating some of the assertions already made in the Sister’s said affirmations, the Brother’s said letter seeks to explain, inter alia, why the Siblings failed to produce any documentary evidence in support of their claim before Master Chow,[5] which explanation I will go into in a moment in paragraph 34 below.

28.  In support of such explanation, included in the bundle were, inter alia, a 1-page list of the documents claimed to have been passed by the Siblings to the lawyers formerly acting for them and copies of what appeared to be the documents on that list (“New Documents”) which are arranged in chronological order below:

(1)   a HSBC payment advice dated 26 July 2007 addressed to the Sister at the Property for $9,000 in settlement of a claim for water damage suffered on 3 January 2007 under an insurance policy;

(2)   4 deposit slips dated 4 May, 18 May, 4 June and 20 December 2010 showing the respective deposits of $12,700, $13,200, $12,200 and $15,000 into a bank account of the defendant;

(3)   a statement of the Sister’s Standard Chartered Bank (“SCB”) account dated February 2011, with a withdrawal of $12,700 highlighted;

(4)   3 statements of the Sister’s SCB account dated February 2012, October 2012, December 2012 and February 2013, each with a withdrawal of $13,200 highlighted;

(5)   3 statements of the Sister’s SCB account dated February, March and April 2013, each with a withdrawal of $8,060 highlighted;

(6)   a statement of the Sister’s SCB account dated April 2014, with 2 withdrawals of $8,060 each, highlighted;

(7)   a statement of the Sister’s SCB account dated May 2014, with a withdrawal of $8,060 highlighted;

(8)   10 bank customer advices dated 9 June, 4 November and 7 December 2014, 1 June, 15 June, 28 July, 4 October, 28 October and 3 December 2015 and 4 January 2016 showing transfer of $8,060 each to an account of the defendant;

(9)   a settled rates demand in respect of the Property for the third quarter of 2015;

(10)   a rates demand in respect of the Property for the first quarter of 2016 and a 7-eleven receipt evidencing settlement of such demand by cash; and

(11)   7 various letters and other documents with dates in 2001, 2003, 2004, 2005, 2008, 2012 and 2013 addressed to the Brother at the Property or showing the Property as his address.

29.  The Siblings invited me to have regard to the New Documents in deciding the Appeal.

30.  After the Civil Justice Reform, in an appeal under Order 58, rule 1(5) provides that no further evidence, other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made by the master, may be received on the hearing of the appeal, except on “special grounds”.

31.  The expression “special grounds” is the same as the test in Order 59 rule 10(2) (governing appeal to the Court of Appeal) and requires the following 3 conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 to be satisfied:

(1)   that the evidence could not have been obtained with reasonable diligence for use at the hearing below;

(2)   that the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(3)   that the evidence must be such as is presumably to be believed.

See Hong Kong Civil Procedure 2018, Volume 1, paragraph 58/1/3.

32.  In the context of an appeal from Order 14 proceedings in which the defendant has to show just a triable issue, the application of the conditions laid down in Ladd v Marshall has been somewhat modified by Lord Bridge in Langdale v Danby [1982] 1 WLR 1123 at 1133:

“It may well be that the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial. The second and third conditions will no doubt be satisfied if the further evidence tendered is sufficient, according to the ordinary principles applied on applications for summary judgment, to raise a triable issue. But I can see no injustice at all in requiring a defendant to use such diligence as is reasonable in the circumstances to put before the judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced.” (emphasis added)

See also Fortis Insurance Company (Asia) Limited v Lam Hau Wah Inneo, unreported, CACV 86/2010, 28 October 2010, per Kwan JA at [18].  Such guidance is also apt for the present case where the burden on the Siblings was to show only an arguable bona fide claim to a beneficial interest in the Property.

33.  I am afraid I find the Siblings failing at the first condition of Ladd v Marshall, even as modified in Langdale v Danby.

34.  Unlike most cases in which pertinent evidence was obtained after the decision under appeal so that the question arises as to whether the new evidence could have been obtained earlier with reasonable diligence, as I understand it, the Siblings had already located and put together the New Documents by the time they commenced the District Court Action against the defendant.  They claimed to have given such documents, as per the list mentioned in paragraph 28(1) above, to the lawyers then acting for them.  They were however advised that it was not necessary for the time being to adduce such documents in support of the Joinder Application.  This seems to be consistent with the statements made by former counsel for the Siblings before Master Chow that there were documents which, it was suggested, need not be produced because it was not required for the purpose of the Joinder Application as the issue of the Siblings’ interest in the Property was raised and dealt with in the District Court.

35.  The fact that the Siblings might have been wrongly advised as to the burden of proof on them for the Joinder Application (for which they may seek redress elsewhere) does not detract from the fact that, vis-à-vis the plaintiffs, the Siblings could have without any difficulty adduced, but had chosen (albeit on advice) not to adduce, the New Documents before Master Chow.

36.  In view of the non-fulfilment of the first condition, it is unnecessary for me to consider the second and third conditions of Ladd v Marshall.

37.  I refuse the Siblings’ application to adduce the New Documents.

38.  The conclusion I reach in paragraph 25 above on the Appeal stands.

Registration Application

39.  According to paragraphs 8 to13 of the plaintiffs’ solicitors’ 2^nd affirmation dated 2 May 2017, the sale of the Property was unsuccessful as interested buyers were deterred by the registration of the Tomlin Order against the Property at the Land Registry.

40.  In invoking the court’s inherent jurisdiction, Mr Chain has referred me to:

(1)   what Cheung JA said at [2.8]-[2.9] in Join Win Holdings Limited v City Target Limited, unreported, CACV 190/2015, 23 November 2015 which was dealing with the court’s inherent jurisdiction to vacate the registration of an unauthorised registration (as in not affecting or sufficiently affecting land) to prevent a manifest injustice; and

(2)   what Deputy High Court Judge A Cheung (as he then was) said at [16] in Wong Kum Chi v Lee Tit Ying [2003] 1 HKLRD 594 which involved the removal of an unregistrable instrument lodged for registration but listed as a deed pending registration.

41.  This case does not fall exactly into either situation.  The Tomlin Order was registered.  The schedule to the Tomlin Order recorded the terms of settlement between the defendant and the Siblings regarding the allocation of the beneficial ownership of the Property and was prima facie capable of being registered against the Property.

42.  Nevertheless, I have come to the view that the registration of the Tomlin Order should be vacated from the Land Register pursuant to the court’s inherent jurisdiction to prevent an abuse of its process.

(1)   The Judgment has remained unpaid.

(2)   The plaintiffs have obtained the Order for Sale with a view to satisfying the Judgment. 

(3)   The dismissal of the Joinder Application effectively decides the issue of the Sibling’s assertion of beneficial ownership of the Property as between the plaintiffs and the Siblings.

(4)   The plaintiffs are entitled to carry out the Order for Sale.

(5)   The Tomlin Order was nothing more than an agreement between the defendant and the Siblings.  There was no adjudication by the District Court on the beneficial ownership of the Property.

(6)   Such agreement was entered into in the District Court Action, to which the Siblings chose not to join the plaintiffs as parties despite knowing that the plaintiffs had obtained a charging order absolute and the Order for Sale over the Property.

(7)   It was made after the issue of the summons by which the Siblings made the Joinder Application and while the Joinder Application was due to be heard substantively.

(8)   After losing the Joinder Application, they nevertheless proceeded to register the Tomlin Order, which had the (intended) practical effect of blocking or impeding the sale of the Property by the plaintiffs pursuant to the Order for Sale.

(9)   I agree with Mr Chain that the creation of the Tomlin Order and the registration of the same could be regarded as a collateral attack on the present proceedings (under which the Siblings made the Joinder Application) and therefore an abuse of process.  See Parakou Shipping Pte Ltd v Jinhui Shipping and Transportation Ltd [2011] 2 HKLRD 1 at [87]-[103] per Reyes J.

Orders

43.  For the above reasons:

(1)   I dismiss the Appeal and order the Siblings to pay the plaintiffs’ costs of the Appeal, to be taxed if not agreed on a party and party basis with certificate for counsel for the hearing on 5 May 2017.

(2)   I order that the registration of the sealed copy of the Tomlin Order be vacated from the Land Register.  I also make an order for the Siblings to pay the plaintiffs’ costs of the Registration Application, to be taxed if not agreed on an indemnity basis with certificate for counsel for the hearing on 5 May 2017.

44.  Lastly, I note that paragraph 4e of the Order for Sale provides for the payment of what is left of the proceeds of sale of the Property after the deductions allowed under the preceding sub-paragraphs.  In view of the Siblings’ attempt to intervene, the plaintiffs may wish to consider making an application in respect of the handling of such residue.