TSANG WAI FAN v. HUI SIU KWONG

HCMP 409/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLLANEOUS PROCEEDINGS NO. 409 OF 2016

(ON AN INTENDED APPEAL FROM HCMP 1505 OF 2014)

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JUDGMENT

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Hon Chu JA (giving the judgment of the Court):

Introduction

1.  This is the defendant's application for extension of time to apply for leave to appeal to the Court of Appeal against the order of Deputy High Court Judge Yee ("the Judge") made on 26 January 2016 refusing leave to the defendant to file a second affirmation ("the 2^nd Affirmation").

2.  The action below is an application for an order for sale under section 6 of the Partition Ordinance, Cap. 352 in respect of a property situated at Flat B, 11th Floor, Block 5, Locwood Court, Kingswood Villas, New Territories ("the Property").

Background facts

3.  The Property was initially owned by Mr Lau Yee Pang ("YP Lau"). On 24 March 1994, he transferred the Property to Madam Lau Sau Man ("SM Lau") and the defendant to hold as joint tenants. It is common ground between the plaintiff and the defendant that this was a gift from YP Lau.

4.  YP Lau, SM Lau, the plaintiff’s husband and the defendant’s mother are siblings. The defendant is therefore the nephew of the plaintiff, YP Lau and SM Lau. YP Lau passed away on 31 March 1994, a few days after he transferred the Property to SM Lau and the defendant. SM Lau is now in her eighties and resides in Seattle, USA.

5.  It is the defendant's case that he has since about October 1998 been occupying the Property.

6.  On 22 August 2012, SM Lau served a notice of severance dated 21 August 2012 on the defendant to sever the joint tenancy they held over several properties, including the Property. As a result, SM Lau and the defendant held the Property as tenants in common in equal shares.

7.  By a provisional sale and purchase agreement and an assignment both dated 20 February 2013 (respectively "SPA" and "Assignment"), SM Lau assigned her 50% interest in the Property to the plaintiff at a consideration of $1.5 million. The SPA and the Assignment were executed on behalf of SM Lau by the plaintiff's husband, who held a general power of attorney ("POA") given by SM Lau. The SPA, the Assignment and the POA were all registered in the Lands Registry.

8.  On 17 September 2012, the plaintiff gave notice to the defendant of her co-ownership of the Property. It is the plaintiff's case that she cannot gain access to the Property, and that despite her proposal to sell the Property and to divide the proceeds of sale equally, no agreement can be reached with the defendant.

HCMP1505/2014

9.  On 19 June 2914, the plaintiff issued the originating summons in the action below, applying for an order to sell the Property, and filedher supporting affirmation. The defendant filed an affirmation on 19 September 2014 to oppose the application. The plaintiff filed an affirmation in reply on 31 March 2015.

10.  On 9 November 2015, the plaintiff issued the Notice of application to hear the originating summons. On 20 November 2015, the defendant filed a counter notice applying to continue the proceedings as if the action was begun by writ. On 27 November 2015, the plaintiff's application for summary disposal of the originating summons and the defendant's counter notice were adjourned for substantive argument, which was fixed for 26 January 2016 before the Judge.

11.  On 19 January 2016, one week before the hearing, the defendant issued a summons seeking leave to adduce the defendant's 2nd affirmation (“the 2^nd Affirmation”) as further evidence. At the hearing, the Judge refused the application and gave oral reasons for his decision. The Judge acceded to the plaintiff's application for summary disposal of the originating summons, and made an order for sale of the Property together with consequential directions.

The present application

12.  Within the 28-day period for appealing against the order for sale, the defendant served and filed a notice of appeal to appeal against the order for sale. The defendant, however, did not seek to appeal against the order refusing leave to adduce the 2^nd Affirmation. 

13.  Then on 23 February 2016, the defendant issued the summons in the present proceedings, enclosing a draft notice of appeal, to apply for: (1) extension of time to serve the Notice of Appeal against the Judge's refusal of leave to adduce the 2^nd Affirmation; (2) stay of execution of the order for sale and consequential directions; and (3) general leave to amend the prayer in the appeal. 

14.  Despite the ambiguity in the summons, it became clear from the affirmation leading the application (at §8) that in respect of (1), the defendant is seeking extension of time to apply for leave to appeal pursuant to Order 59, rule 2B(4) of The Rules of the High Court, Cap. 4A.

15.  The plaintiff opposed the application. Both parties had lodged written submissions.

Applicable legal principles

16.  The defendant accepts that the Order was an exercise of the Judge's discretion and a case management decision. 

17.  As the time for applying to the court below for leave to appeal against the Order has expired, the present application is a composite application for an extension of time and also for leave to appeal to be granted under Order 59, rule 2B(4) RHC.

18.  In considering whether to extend time, the court usually has regard to: (1) the length of the delay, (2) the reason for the delay, (3) the merits of the intended appeal, and (4) the degree of prejudice to the other party if time is extended.

19.  Normally, leave to appeal will not be granted unless it is shown that the intended appeal has a reasonable prospect of success, or there is some other reason in the interest of justice that the appeal should be heard: section 14AA(4) of the High Court Ordinance, Cap. 4. 

20.  Where the delay is inexcusable although insubstantial, the party applying for an extension of time will have to show a real prospect of success on the merits. Hence, a party guilty of inexcusable delay in seeking leave to appeal will have to show that the intended appeal has a real prospect of success instead of a reasonable prospect of success: see KNM v. HTF, unreported, HCMP 288/2011, 7 September 2011 at §§19-20.

21.  In the case of an intended appeal against a case management decision, it is trite that the applying party faces a very high hurdle. He has to show that the judge was plainly wrong, or made orders that clearly involved an injustice or an inability for the trial court to carry out its tasks, or had erred in principle, or that the order was irrational: Wong Kar Gee Mimi v. Severn Villa Ltd [2012] 1 HKLRD 887 at §31.

22.  Further, the court always retains a discretion whether to grant leave even if the threshold test is satisfied sinceit is rare for an appellate court to intervene in case management decision save in exceptional circumstances: 厦門新景地集團有限公司 v. Eton Properties Limited, unreported, HCMP13/2012, 14 February 2012, [2012] HKEC 216 at §9; see also the decision of this Court (differently constituted) in Li Xiao Yun v. China Gas Holdings Ltd, unreported, HCMP466/2013, [2013] HKEC 353, refusing leave to appeal against the decision of a trial judge refusing an application to admit further expert evidence made less than three weeks before the trial was scheduled to commence.

Delay

23.  The defendant's application for leave to appeal is late by 14 days. It is not an insubstantial delay. The reasons given for the delay are oversight of the legal representatives, change of counsel and the intervening Chinese New Year holidays.[1]  None of them constitutes good reason excusing the delay. It had been pointed out in KNM v. HTF at §18 that the fault of the legal representative is not a reason excusing delay.

24.  The defendant's delay in applying for leave to appeal is therefore inexcusable. He will have to demonstrate that his intended appeal against the Judge's case management decision has a real prospect of success.

Intended grounds of appeal

25.  The defendant's intended grounds of appeal, as appeared by the draft notice of appeal and the written submissions, are twofold:  

(1)  Although the application to adduce the 2^nd Affirmation was made late, the Judge should have considered there was no prejudice to the plaintiff and costs would be an adequate compensation for the plaintiff.

(2)  The 2^nd Affirmation was relevant, highly material to the defendant's case and necessary for the fair disposal of the matter.

The parties' case

26.  Before considering the Judge’s decision and the merits of the intended appeal, it is necessary to consider the parties’ respective case below and the issues before the Judge.

27.  For the plaintiff, her case was straightforward. She has acquired from her sister-in-law a half interest in the Property. Her co-owner, the defendant, refused her access to the Property and has been occupying it to her exclusion. She therefore sought an order for sale to rid herself of the shackles of co-ownership.

28.  The defendant did not contend that partition was a viable alternative or that a sale would cause serious hardship.  Instead, his challenge is directed at the plaintiff's co-owner status and her entitlement to apply for an order for sale.

29.  In his first affirmation, the defendant stated that: (1) on his suggestion, SP Lau added SM Lau as a co-owner of the Property so that she could stay in it when she visited Hong Kong, and that after SM Lau’s death, “the Property could be owned by [him] fully" (at §13); (2) SM Lau's act of severing the joint tenancy was contrary to the wishes of YP Lau (at §25); and (3) SM Lau never stayed in the Property and he has been occupying the whole of the Property to her exclusion. He has therefore dispossessed SM Lau and acquired an adverse title over her interest in the Property before she served the notice of severance on him (at §26).

30.  In the 2^nd Affirmation, the defendant sought to raise two matters. First, he claimed to have visited SM Lau in Seattle, USA on 9 January 2016, during which SM Lau said (i) she could recognize the signature on the notice of severance, but she had no recollection of what the document was about, and she would not sign such a document; (ii) she never agreed to sell her title in the Property to the plaintiff, and had not received any money from the plaintiff; and (iii) she was agreeable to the defendant continuing to have exclusive possession of the Property as he has done in the past. It was also said that SM Lau refused to give or sign a written statement to confirm what she told the defendant, and further declined to be involved in the dispute and litigation. Second, the defendant exhibited some correspondence exchanged between his solicitors and the Inland Revenue Department in the mid-1990s in connection with theestate of YP Lau. The defendant said the correspondence demonstrated that he had always been a 100% beneficial owner of the Property.

31.  At the hearing before the Judge, counsel for the defendant abandoned the plea on adverse possession. The case was argued on the basis that: (1) SM Lau was a bare trustee holding the interest in the Property on trust for the defendant and could nothave transferred any interest in the Property to the plaintiff (“the trust issue”); and (2) the plaintiff's husband was in beach of his fiduciary duties as the donee under the POA in that he might arguably obtain secret profits out of the assignment to his wife (“the POA issue”). Hence, it was argued, the plaintiff's husband should be made a party to the proceedings and be cross-examined on whether the execution of the Assignment was a breach of the terms of the POA or his fiduciary duties owed to SM Lau.

The Judge's decision 

32.  The Judge refused to admit the 2^nd Affirmation as evidence and gave oral reasons for the decision, the gist of which was set out in paragraph 16 of the Judgment:

"I heard the application this morning and I refused it with my reasons given orally. In gist, I do not accept that there is any good explanation for the lateness of the application. I am further of the view that, as a matter of fairness, I cannot allow the affirmation to be adduced as it contained, apart from a number of irrelevant matters, serious allegations raised (including forgery) on the basis of hearsay evidence without any corroborative documentary evidence at the eleventh hour."

33.  It is also relevant to note what the Judge said in §§38 and 39 of the Judgment:

"38. There is simply no evidence that Madam SM Lau did not know and/or did not accept the conveyance to Madam Tsang. Madam SM Lau refuses to give evidence. I cannot accept Mr Lai’s submission that then it gives rise to a triable issue warranting a trial wherein Madam SM Lau should be compelled to testify about her knowledge and acceptance or the lack of them. This court requires an arguable defence supported by credible evidence in the first place. Mere speculation cannot suffice.

39. The POA and the Assignment were executed and registered long before the commencement of these proceedings. Mr Hui should be alive to the fact that it was Mr YF Lau who executed the Assignment on behalf of Madam SM Lau to his wife. Again Mr Hui should have investigated into any suspected breach of trust much earlier on and come back with cogent evidence of such breach. He did not even mention about his suspicion in his first affirmation. This court is not convinced that there is any merit in this POA issue."

34.  The Judge, for reasons given in the Judgment, rejected the defendant's arguments on the trust issue and the POA issue. He considered there was no proper basis to refuse the plaintiff's application, and made the order for sale sought in the originating summons.

Discussions

35.  As the history of the litigation shows,[2] and as the Judge had observed, the application to adduce the 2nd Affirmation was a very later application. The proceedings below had been on foot since June 2014. The defendant was legally represented throughout. It is obvious, and the defendant must be aware right from the beginning, that the plaintiff's application was premised on her having acquired a half interest in the Property from SM Lau.The SPA and the Assignment were exhibited to the plaintiff's first supporting affirmation.It is therefore plain that they were executed by the plaintiff's husband on behalf of SM Lau pursuant to the POA.  

36.  The only reason advanced for the very late application was that a new counsel was retained and he advised the defendant to speak to SM Lau.[3] This is hardly a satisfactory reason, not only because change in legal representation or legal advice hardly excuses delay, but also because it is not a matter that requires legal advice.Given that the defendant was throughout disputing the plaintiff's interest in the Property and her entitlement to bring the proceedings, it is only natural and reasonable for him to immediately seek clarification with SM Lau. The defendant has not suggested that SM Lau is not contactable or has not been on speaking terms with him. 

37.  The defendant’s submission suggests that it was because the plaintiff had secretly taped her conversation with the defendant that the defendant was forced to investigate whether she had acquired the interest in the Property, and further complains that the Judge failed to consider this aspect.[4] There is no merit in this argument. Firstly, the defendant did not in his affirmation give this as a reason for the delay. Secondly, the recording and the transcript were disclosed as early as March 2015 in the plaintiff’s second affirmation, but it was more than nine months later in January 2016 that the defendant made his visit to SM Lau.  

38.  Furthermore, the reasonsgiven in the affirmation and by way of submission cannot explain the lateness in exhibiting the correspondence with the Inland Revenue Department. They were not new materials or information, and there is no suggestion that they were hitherto unavailable to the defendant. They should have been disclosed at the very first opportunity when the defendant made his first affirmation, if they are, as the defendant now contends, so pertinent to his case.

39.  We agree entirely with the Judge that there is no good reason for the very late application, and that this should weigh heavily in the exercise of the Judge’s discretion.

40.  The defendant’s intended grounds of appeal really boil down to this.  Theapplication and the 2^nd Affirmation, albeit very late, should be admitted in the interests of doing justice on the merits because the plaintiff suffered no prejudice since she could be given time to respond to the 2^nd Affirmation and be compensated in costs for any adjournment of the substantive hearing. In our view, these grounds are unarguable.

41.  Firstly, the argument that costs could adequately compensate the plaintiff wholly ignores the duties of parties and their legal representatives under Order 1A rule 3 RHC to assist the court to further the underlying objectives of the Rules, which include to increase the costs-effectiveness of any practice and procedure, to ensure that cases are dealt with as expeditiously as is reasonably practicable, and to ensure that the resources of the court are distributed fairly (Order 1A rule 1(a),(b) and (f) RHC). 

42.  In this post-CJR era, there is no room for the notion that delay, even though inordinate and unexplained, will be forgiven as long as there is no prejudice and costs are paid. In the light of Order 1A rules 1 and 3, late applications for admission of further evidence cannot be determined solely by reference to whether the opposing party could be compensated by costs. It should be recognized, and the court should take into account, that even with a compensatory costs order, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings.  Further, the vacation or adjournment of a hearing occasioned by last minute applications will mean the loss of a hearing day which could have benefitted other litigants, and inefficiencies in the use of court time, which is a public resource. 

43.  Secondly, while we accept that the ultimate concern of the court is to achieve a just resolution of the case, it does not mean that a party should be permitted to raise any arguable case at any point in the proceedings, on payment of costs. If a party has been afforded a reasonable opportunity to advance its case, the just resolution of the case does not require that he should be allowed a further opportunity in spite of his own inordinate and inexcusable delay. Accordingly, even if the defendant is correct that the 2^nd Affirmation is material to his case (which we have doubts)[5], it does not follow that the Judge erred in the exercise his discretion in refusing to admit it. Any unfairness to the defendant by reason of the non-admission of the 2^nd Affirmation is self-induced, having regard to the long and inexcusable delay on his part.      

44.  Thirdly, the Judge, in exercising his discretion, was entitled to consider that the part of the 2^nd Affirmation recounting what SM Lau had said is hearsay in nature, especially when SM Lau is refusing to confirm in writing or to testify in the proceedings. The defendant’s written submission complains that the Judge wrongly held the evidence to be inadmissible as being hearsay and uncorroborated by documentary evidence. It is said that in the summary disposal of an originating summons, it is permissible to relay on hearsay evidence and there is no requirement that it should be corroborated. We do not accept this criticism, which is a misreading of the Judge’s reasoning. What was said at §16 of the Judgment is that as a matter of fairness, the 2^nd Affirmation should not be allowed to be adduced because it was put in at the last minute and raised serious allegations that were hearsay and not supported by documentary evidence.

45.  We do not see how the Judge can be said to have erred in his reasoning or his exercise of discretion. Serious allegations of fraud and forgery were raised very late in the day. Yet, whether SM Lau knew, agreed to or had received the consideration for the transfer were matters that the defendant does not have personal knowledge, or has no other means of proving. Given the highly controversial nature of these hearsay allegations, and with SM Lau refusing to testify and being out of jurisdiction, even if they were admitted into evidence and the case were to proceed to trial, it seems to us that no weight could properly be placed on them.   

46.  We come fourthly to the defendant’s contention that the 2^nd Affirmation is material to his case and determinative of the dispute. We need deal with this briefly since we have indicated above that even if the defendant is right on this, given the inordinate and inexcusable delay on his part, any unfairness arising from the non-admission of the 2^nd Affirmation is self-induced, and it would be within the Judge’s discretion to refuse to admit it.  We also do not wish to be seen as prejudging the issues in the appeal against the order for sale.

47.  It suffices for us to make two points. The first relates to the submission that the correspondence with the Inland Revenue Department supports the defendant’s case on the trust point. The defendant placed specific reliance on (i) the solicitors’ letter dated 5 February 1996, (ii) an account of YP Lau’s estate that he swore on 16 January 1996, which was attached to the solicitors’ letter, and (iii) a Chinese receipt given in August 1994 by a Madam Ng for a sum of $800,000.

48.  It is submitted that document (i) is “contemporaneous evidence that the intention was for [the defendant] to be 100% beneficial owner”. However, as YP Lau died in March 1994, the solicitors’ letter written almost two years later on the defendant’s behalf cannot possibly be contemporaneous evidence of his intention. In any event, the content of the letter hardly sheds light on the alleged intention of YP Lau.  

49.  As to document (ii), it is said that it shows the defendant is “the sole donee of the gift of cash for acquiring 100% of the Property”.  However, the sworn account on the face of it does not bear this out.  More importantly, in the schedule of property of the estate enclosed in the Inland Revenue Department’s letter dated 15 March 2004, the Property was listed under the heading of gift made by the deceased to the defendant and SM Lau within three years prior to death. It was argued on behalf of the defendant that the schedule of property was only a draft and could be amended, if there was disagreement. But the correspondence disclosed by the defendant did not show he had raised any objection or requested an amendment to this.

50.  In the case of document (iii), it is said that it shows the defendant had paid $800,000 to Madam Ng out of his own source and is therefore clear evidence of his 100% ownership of the Property. However, this document clearly referred to the defendant as the personal representative of the estate, and the $800,000 was described as a payment that YP Lau had promised to give to Madam Ng. Although the document mentioned that Madam Ng would move out of the Property, it said nothing about the ownership of the Property, let alone the defendant having a 100% ownership in it.  

51.  The second point we would make concerns what SM Lau allegedly told the defendant when he visited her. We have already made observation on the weight that could be given to these allegations. We would additionally point out that if SM Lau was a bare trustee for the defendant as alleged, it would be very odd that she should express agreement to the defendant continuing to have exclusive possession of the Property, as he had in the past. Her agreement would not be necessary and it would be out of place for a trustee to say this.            

52.  In our view, the defendant’s contention that the 2^nd Affirmation is material to his case and is determinative of the dispute, such that the non-admission of it has caused him prejudice and unfairness is more illusory than real.      

53.  In short, the intended appeal has no real prospect of success.  We refuse the application to extend time to apply for leave to appeal. It follows that there is no proper basis for the stay of execution application and the other relief sought in the defendant’s summons. They are also refused.

Disposition

54.  For the foregoing reasons, we dismiss the defendant’s summons.

55.  We are further satisfied that the applications in the summons are totally without merit, and therefore order pursuant to Order 59 rule 2A(8) RHC that no party may request a reconsideration of our determination at an oral hearing.

56.  Applying the normal rule of costs follow event, we make an order that the defendant pays the plaintiff the costs of this application.

57.  The plaintiff has put in a statement of costs for summary assessment. Section E of it claims a lump sum as fees for two counsel who are said to have 36 and 4 years of experience, with no breakdown. We note that the defendant’s statement of costs similarly does not give a breakdown of the fees of the two counsel engaged. We take this opportunity to point out that where more than one counsel is involved, the statement of costs must give a breakdown of each counsel’s work and fees. Notwithstanding the reference in the statement of costs to two counsel, the written submission for the plaintiff was signed off by only one counsel. In any event, we do not consider this application justifies engaging two counsel. We therefore make a reduction in the counsel fee and summarily assess the plaintiff’s costs in the amount of HK$84,660.

[1] Affirmation of Wai Chung Kiu Rainbow, §5.

[2] See §§ 9 to 11 above.

[3] The 2^nd Affirmation, §3.

[4] Reply submission dated 21 March 2016, §4.

[5] See §§46 to 52 below.