ONG AI MOI AND ANOTHER v. CHAN CHI SHING

HCA 1120/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1120 OF 2004

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D E T E R M I N A T I O N

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1.  This is an application to set aside a default judgment entered regularly under O.13 r.9 RHC. 

2.  The judgment primarily was to grant a permanent injunction to restrain the defendant from trespassing, interfering with or intermeddling in the management of a commercial building owned jointly by the plaintiffs, and from trespassing into a flat also owned jointly by them.  These are respectively hereafter called the 1^st property and the 2^nd property.  Consequential orders for damages and/or mesne profits to be assessed were also made.

3.  The application was originally for a setting aside of all the orders.  But before me Ms Mak representing the defendant told me she no longer sought to set aside the injunction and related orders affecting the flat, the 2^nd property.  Thus I am only concerned with the 1^st property.

Default Judgment was Entered

4.  The circumstances of how this took place are somewhat unfortunate.  Application was made and a date and venue fixed for this to be heard consequent upon the defendant having taken no steps.  I should say here that there was nothing irregular about this; the defendant had not filed a defence within time and has proffered no excuse for this default.

5.  But he did want to be heard, and having received notice of the hearing arrived at the appropriate courtroom in good time.  Unfortunately there was a last minute switch of judge and courtroom and thus the defendant was waiting in the wrong place.  Too late, he learned of the change, for by that time judgment had been entered.

6.  I am prepared to accept this, the defendant’s account, of what happened as true and accurate, for it is backed up by court records, and contemporaneously the defendant wrote to the judge from whose court the application had been transferred and to the one who entered judgment.

7.  It is possible, had the defendant been heard, that there would not have been entry of judgment or at least not at the time.  But in the event judgment has been entered by default and it is a regular judgment, so that in this the application to set it aside the defendant has the burden of having to demonstrate a real prospect of success in the defence he seeks to mount.

8.  I shall come to deal with the legal principles; first, the background.

The Plaintiff’s Account of Events

9.  The plaintiffs are women of relatively senior years who long ago, as infants, came to be taken into a Buddhist temple in Singapore and adopted by one of the sisters called Madam Khan Tat Yin.  They stayed on into adulthood and are there to this day.  Madam Khan succeeded to the position of Abbess of the Temple.  Ms Ong (the first named plaintiff) took her vows at the age of 18.  Ms Tan (the second named plaintiff) did not, but remains a permanent resident of the Temple.  Madam Khan died in 1994.  Now Ms Ong is the Abbess.  I do not think it can be doubted that the plaintiffs devote their lives to furthering their faith as devout Buddhists.

10.  During the time of her life when she was fit to do so, Madam Khan enjoyed frequent trips to Hong Kong where she visited the various Buddhist temples in Kowloon and the Po Lun Monastery on Lantau.  During these visits she was accompanied by members of the Temple; frequently this included the plaintiffs.

11.  It was under Madam Khan’s direction that the 2^nd property came to be bought, in 1981, whose principal purpose was to house the Temple visitors during their times in Hong Kong.  It is a small flat in Man Wai Street, Kowloon.  It was bought for $500,000, the money found by the pooling of funds in the Temple.  It was bought in the names of the plaintiffs because they were experienced in administration and because they are frequent visitors.  It was understood and remains so that they represent the Temple members as owners.

12.  A subsidiary use to which the 2^nd property was put was that it came to be lived in from time to time by various members of the Buddhist faith in Hong Kong in need of accommodation. 

13.  From 1982, amongst these occupants, was one Kan Kit, a first cousin of the Abbess Madam Khan.  A year or two earlier he had come to live in Hong Kong from China.  He is a devout Buddhist, was retired and was 64 years old.  In circumstances I shall come to, he has lived in the 2^nd property ever since.  Now he is about 90 years old.

14.  In 1985 the 1^st property was bought in similar circumstances.  It is an old commercial building in Temple Street with various floors and rooms rented out.  The purpose was and remains that the net rental income would be used to further the religious works of the Temple.  It cost $2,250,000, funded as before by the sisters, and purchased on their behalf by the plaintiffs.

15.  Mr Kan, the cousin to the Abbess, was asked if he would look after the 1^st property, undertaking such tasks as collecting the rent, meeting the overheads and accounting for the balance by payment into a bank account opened for the purpose.  In return he would be paid a modest wage and be entitled to free use of the 2^nd property.

16.  Mr Kan accepted the offer.

17.  The solicitors representing the plaintiff in the purchase of the 1^st property were Messrs So & Karbhari.  The partner Mr So had conduct of the conveyance.  At the time of the purchase he was instructed to prepare a power of attorney given by the plaintiffs to Mr Kan.  The plaintiffs are in that document described as “entitled at law and in equity to the property described”.  The purpose of this was to give Mr Kan authority to deal with Government agencies and officialdom should the need arise during the frequent absences of the plaintiffs.  That became known as the 1^st power of attorney.  Mr So also prepared the assignment and witnessed the plaintiffs’ signatures when they came to sign.  Both documents are dated 19 August 1985.  Both were signed at the offices of Messrs So & Karbhari.  The significance of this detail I shall explain presently.

18.  By the plaintiffs’ account, the relationship with Mr Kan was a great success, and lasted from 1985 up until 2002.  During that time he was a conscientious and loyal servant, performing his tasks honestly and efficiently, keeping by hand accurate records and accounts and paying the balance of funds earned into the designated account.  It is pertinent to note that he recorded his own remuneration deducted monthly as wages.

19.  The good order associated with all this came to an abrupt end in October 2002.  The plaintiffs had come to Hong Kong and, on inspection of the 1^st property, were shocked to see that there was a major refit going on on the ground and mezzanine floors, that being undertaken on behalf of strangers in occupation.  They had not authorized this nor had they been given any notice of it.

20.  Enquiries conducted by their solicitors revealed that there was in purported existence a tenancy agreement, the landlord having apparently been committed to it by a person identified to be the defendant, who had signed as agent for “the beneficial owner Mr Kan”.

21.  The defendant was in fact known to the plaintiffs.  A short while prior he had come to the Temple in Singapore and had introduced himself as the grandson of Mr Kan.  He offered his services in managing the 1^st property, taking over from his grandfather who was no longer up to the task given his advancing years, and had proposed the letting and refurbishing of the ground and mezzanine floors which were in need of an upgrade.  His offer was declined, and it was thought that that was the end of it.

22.  Not so.

23.  When the new tenants declined to give up possession the plaintiffs issued proceedings in the District Court for vacant possession and consequential orders.  These are pending.

24.  The plaintiffs in the meantime because of this unauthorized conduct revoked the 1^st power of attorney, and appointed new managers of the 1^st property, under what became known as the 2^nd power of attorney.

25.  Then it was that there emerged evidence of further trespass of the 1^st property and misconduct by the defendant in respect of the 3^rd floor tenancy.  Unbeknown to the plaintiffs he had negotiated a surrender of the existing tenancy and had relet to new tenants, holding himself out to having the authority of the owner to do so.  He arranged for the rent to be paid directly into an account he had opened in his name.

26.  Once again the plaintiffs had to take out proceedings, this time in the Lands Tribunal, to recover their property.  Repossession has now been achieved, although whatever rent has been paid has so far been withheld.

27.  In order to ensure that the defendant would not again intermeddle in the management of the 1^st property, and pay up such rent that he had received, the plaintiffs issued this action in May 2004.  This also included an application for an injunction to prevent the defendant from entering into and occupying the 2^nd property, it having come to their attention that he had been making unauthorized use of the flat as well.

28.  And so to the entry of judgment by default in November 2004.

The Proposed Defence

29.  The defendant’s planned defence came to light in this his application to set aside that judgment.  It was that the 1^st property was purchased with funds provided personally by Madam Khan for the purpose of providing support for her cousin Mr Kan, effectively the beneficial owner of the 1^st property.  This was why Mr Kan had all along been managing the building without interference.  At the time of the purchase in August 1985 Mr So, the solicitor having conduct of the conveyancing, had been instructed to prepare and have executed by the plaintiffs a document he called the Beneficiary Agreement, by which it was recorded that Mr Kan was the beneficial owner of the 1^st property.

30.  And that ownership has persisted to date.  Because of his advancing years Mr Kan gave his grandson, the defendant, authority to manage the 1^st property by a written authority signed and dated in January 2002.

31.  It was in exercise of the duties conferred upon him by his grandfather the beneficial owner that he had assumed control of the 1^st property in the manner about which the plaintiffs had complained, giving rise to this action.

32.  The plaintiffs’ reaction to this defence is to deny that Mr Kan is or has ever been the beneficial owner, or has ever held a position other than as paid caretaker of the 1^st property.  With direct knowledge of how and why they came to be bought, they held firm to their claim that they are the legal and equitable owners of both properties for the Temple.

33.  They deny they signed a document acknowledging Mr Kan was the beneficial owner.  When the defendant produced a document purportedly signed by them before solicitor So which was to that effect, they denounced it as a forgery.  If Mr Kan had signed an authority in favour of the defendant to manage the 1^st property, he lacked any right to do so.

34.  And so now to this application to set aside.

35.  First, the law.

The Legal Principles in an Application to Set Aside a Default Judgment

36.  These are not contentious and I need to do no more than recite from passages in the White Book:

    “Setting aside a regular judgment

13/9/12      (1) Discretionary nature of the power — The power to set aside a default judgment which has been entered regularly is discretionary and such power is unconditional.  The court should not lay down rigid rules which deprive it of the jurisdiction.  The purpose of the discretionary power is to avoid the injustice which may be caused if judgment follows automatically on default.

13/9/13      (2) Relevant considerations — On an application to set aside a regular default judgment, the major consideration is whether the defendant has shown a defence on the merits to which the court should pay heed, not as a rule of law, but as a matter of common sense, since there is no point in setting aside a judgment if the defendant has no defence, and because, if the defendant can show merits, the court will not prima facie desire to let a judgment pass on which there has been no proper adjudication (per Lord Wright in Evans v. Bartlam [1937] A.C. 473, HL at 489).

  This is not to say that a defendant who is able to demonstrate a defence which has a real prospect of success has an automatic entitlement to have the default judgment set aside.  In exercising the discretion under this rule, the court has regard to all relevant circumstances.  What will be relevant as a factor in any particular case will depend on the individual facts of that case.  The usual factors are: why the default occurred; the defendant’s conduct after he had notice of the proceedings; an explanation for the time taken where there has been delay in making the application; and any prejudice that would be caused to the plaintiff or to third parties if the default judgment were to be set aside.  These other relevant factors will then have to be weighed against the dominant factor of the merits in order to see where the justice of the case lies (Vann v. Awford (1986) 83 L.S. Gaz. 1725; The Times, April 23, 1968, CA; Shocked v. Goldschmidt (1998) 1 All E.R. 372 at 379f; Premier Fashion Wears Ltd & Another v. Chow Cheuk Man & Another [1994] 1 H.K.L.R. 377 at 380(6)-(12); (35)-(42); 382(26)-(32); Young Bing Ching (dec’d) v. Chow Yung Fong & Another [2001] 2 H.K.L.R.D.392, CA).

…

13/9/14      (3) Meritorious defence — It is not sufficient to show a merely ‘arguable’ defence that would justify leave to defend under O.14.  The defendant must show that he has ‘a real prospect of success’.  To do so, he must satisfy the court that his case and the evidence that he adduces in support of it is potentially credible and carries some degree of conviction.  Thus, the court must form a provisional view of the probable outcome of the action (Evans v. Bartlam [1937] A.C. 473, HL as explained in Alpine Bulk Transport Co. Inc. v. Saudi Eagle Shipping Co. Inc., The Saudi Eagle [1986] 2 Lloyd’s Rep.221, CA applied in Yeu Shing Construction Co. Ltd v. Pioner Concrete (H.K.) Ltd [1987] 2 H.K.C.187, CA; Premier Fashion Wears Ltd & Another v. Chow Cheuk Man & Another [1994] 1 H.K.L.R. 377 at 383; Law Kwok Hung v. Tse Ping Man & Another [1999] 4 H.K.C. 397; L & M Specialist Construction Ltd v. Wo Hing Construction Co. Ltd [2000] 3 H.K.L.R.D. 262, Gimex Development Ltd v. Fung Meng Sung, unreported, HCA No. 2436 of 2001, November 29, 2001, [2001] H.K.E.C. 1514)

…”

The emphasis in each case is mine.

The Validity of the Defence

37.  Central to his planned defence is the defendant’s exhibiting of the Beneficiary Agreement, which he claims to be a proper authorization giving him management rights over the 1^st property.

38.  The document is a single page which reads as follows:

“TO WHOM IT MAY CONCERN

Date: 17^th, August, 1985

Re:  Agreement Letter for Beneficial Owner of

   Premises No. 274 Temple Street, Kowloon

We, hereby, Ong Ai Moi (holder of Republic of Singapore Identity Card No.0507348-J) and Tan Mary (holder of Republic of Singapore Identity Card No.0492490-H) agree Mr. Kan Kit (holder of Hong Kong Identity Card No. H471194) as beneficial owner of the said promise No.274 Temple Street, Kowloon with all rights to use and enjoy the property at all times hereafter.

Yours faithfully,

Authorised Signature:	(Signed)
	Ong Ai Moi
Authorised Signature:	(Signed)
	Tan Mary

Signed this letter dated
The 17^th, August, 1985
in the presence of:-

(Signed)
SO HO MING
Solicitor,
Hong Kong.”

39.  The plaintiffs apart from their denial of ever having signed it point to various discrepancies.  These include the following:

the type face is different from the other documents of conveyance prepared contemporaneously; the signature of Mr So is similar to but also different from that he inscribed on the assignment;

the date is typed not hand-written;

the chop beneath Mr So’s signature is in a different format from that beneath his signature as witness of their signatures on the assignment;

the document was not registered.

40.  Furthermore, the proposition that Mr Kan has all along been the equitable owner of the 1^st property flies in the face of the decision making process which led to the purchase of the 1^st property.  It also brands inaccurate and illogical their description in the 1^st power of attorney as being “entitled at law and in equity to the property described”.

41.  The further anomaly is that Mr Kan’s records so well and faithfully kept for 17 years made reference to fixed wages to which he was entitled and which he drew, consistent with his role of a paid rent collector and manager.

42.  But the document is there, produced by the defendant; perhaps it tells its own story.

43.  Is that enough to warrant a setting aside of the default judgment and a trial, to establish where the truth lies?

44.  I come to consider that next.

Discussion

45.  I have had the benefit of examining the original of the Beneficiary Agreement.  I do not pretend to be a handwriting expert, but I have made a visual comparison with the signatures of the plaintiffs and Mr So the solicitor penned by them on the assignment.  

46.  What is immediately striking is that whilst they are similar in form, apart from a discrepancy in Mr So’s signature spotted by the plaintiffs, those in the Beneficiary Agreement have the appearance of not having been spontaneously recorded.  Rather, that they have been slowly and carefully written, consistent with someone copying genuine versions.

47.  Another perhaps yet more compelling feature is in the script of the document.

48.  Given the timing of its apparent execution and the obvious importance of it, one would have expected it to have been professionally drawn, like the assignment and 1^st power of attorney.  After all, Mr So had conduct of the preparation of the conveyancing documents, and was the witness.  But it is quite ungrammatic and sparse in detail.

49.  Furthermore, whilst it has been paraded as an agreement, giving Mr Kan beneficial ownership of the 1^st property, it does not in fact do so.  It is not an assignment to him, nor a declaration of trust; it is not an agreement at all, but a notice to the World of Mr Kan’s status.

50.  But where is the evidence to support that what it gives notice of has actually taken place?  There is none.

51.  In short, the Beneficial Agreement not only is not one, it has all the hallmarks of a sham document, unprofessionally drawn, intended to mislead the casual observer.

52.  I am not prepared to find as a fact that the document is a counterfeit.  But there is enough evidence from documents prepared and signed at the same time and from the same source to put it in the category of being inherently suspect.  And this is only made the more obvious by the denials by the plaintiffs that they were parties to such a document and why it could not be genuine.

Conclusion

53.  The defence the defendant wants to air at trial is quite without merit.  In the face of overwhelming evidence that the plaintiffs have to counter the authenticity of the Beneficial Agreement, the provisional view I take of the outcome is that he would be bound to fail.

54.  There is thus only one proper exercise of my discretion in dealing with his application to set aside the default judgment; that is to dismiss it.  I do so, with costs, nisi, to the plaintiffs.