SIU PIK FONG v. TSE CHU KAI

DCMP 153/2018

[2019] HKDC 987

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 153 OF 2018

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DECISION

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Application

1.  I handed down a judgment on 15 April 2019, dismissing the plaintiff’s application by originating summons for an Order for sale of the Property under section 6 of the Partition Ordinance (Cap 352).  This is an application by the plaintiff for leave to appeal against that judgment.  The draft notice of appeal contains five proposed grounds.

History

2.  The history of the action was set out in paragraphs 2 to 9 of the judgment.  I adopt the history and the defined terms therein.  In brief, Ms Siu and Mr Tse were married in 1991 and were divorced in 2001.  Pursuant to the Order (made by consent), Mr Tse shall pay HK$50,000 to Ms Siu and Ms Siu shall transfer and assign to Mr Tse her interest in the Property absolutely.  Mr Tse did pay HK$50,000.  Ms Siu did execute an assignment transferring her interest in the Property to Mr Tse.  However, Mr Tse was unable to obtain a fresh loan to discharge the then existing mortgage to complete the transfer.  The transfer did not take place.  Ms Siu now refuses to accede to Mr Tse’s request (upon discharge of the original mortgage) for transfer and seeks an order to sell the Property, as she argues that the Order has expired and she is no longer obliged to carry out the terms therein.

Legal principles

3.  There is no dispute on the applicable legal principles.  The applicant needs to show a “reasonable prospect of success” or there is some other reason in the interests of justice why the appeal should be heard[1]. A “reasonable prospect of success” means an appeal with prospects that are more than “fanciful” without having to be “probable”[2].

4.  To meet the “reasonable prospect of success” requirement, an appellant is required to show more than an arguable case - his appeal must have merits and ought to be heard, although he does not have to demonstrate that the appeal will probably succeed[3].

5.  Mr Wong, counsel for Ms Siu, did not represent Ms Siu at trial. From Mr Wong’s written submissions and oral submissions, there was no mention of any other reason in the interests of justice why the appeal should be heard.  In other words, Ms Siu only relies on the “reasonable prospect of success” limb in this application.

Ground 1

6.  It is said that I erred in law and principle in failing to apply the limitation period prescribed by section 4(4) of the Limitation Ordinance (Cap 347) (the “LO”) to Mr Tse’s defence of promissory estoppel, or that I had failed to hold that Mr Tse was debarred from raising promissory estoppel to resist Ms Siu’s application to partition and sell the Property.

7.  The argument runs thus: section 4(7) of the LO provides:-

“This section shall not apply to any claim … for other equitable relief, except in so far as any provision thereof may be applied by the court by analogy in like manner as the corresponding enactment contained in the Limitation Act 1980 (1980 c.58 U.K.) is applied in the English Courts.”

Mr Wong says that promissory estoppel falls within the phrase of “any claim … for other equitable relief...” under section 4(7) of the LO and thus the court ought to have applied the limitation period of 12 years prescribed under section 4(4) of the LO “by analogy” and held that the claim of promissory estoppel has been time-barred.

8.  I consider this argument flawed.  This is Ms Siu’s application by originating summons and Mr Tse as a defendant has not made any claim or counterclaim for equitable relief (under promissory estoppel or otherwise). The issue of promissory estoppel only arose as a defence to Ms Siu’s claim (as a shield, not a sword).  I do not agree that raising the defence of promissory estoppel in response to Ms Siu’s claim falls within section 4(7) of the LO, as it simply is not a claim.

9.  Mr Wong further argues that by allowing Mr Tse to run the defence of promissory estoppel, the effect of the expiration of the limitation period prescribed by section 4(4) of the LO on the enforcement of the Order was lost.  I cannot agree with this argument.  The effect of the expiration of the limitation period under section 4(4) of the LO is that Mr Tse can no longer enforce the Order.  This effect has not been lost.  The fact that Ms Siu is unable to satisfy the court that she is entitled to an order for partition and a portion of the sale proceeds (due to the doctrine of promissory estoppel) does not mean that Mr Tse can enforce the Order.

10.  Further, one needs to bear in mind that Mr Tse has not sought to enforce the Order in the present action.  By raising a defence of promissory estoppel against Ms Siu’s claim is not “an action … brought upon any judgment …” and does not fall within the 12-year limitation period set out in section 4(4) of the LO.

11.  I am not persuaded that this ground of appeal has a reasonable prospect of success.

Ground 2

12.  It is said that I erred in fact and law in applying the doctrine of promissory estoppel in that I failed to consider Mr Tse did not come with clean hands in relying on promissory estoppel.  Mr Wong’s argument is that the reason why Mr Tse failed to obtain a fresh loan was due to him not being able to provide sufficient income proof, which was in turn due to Mr Tse not having filed a tax return to evade tax liability.

13.  Mr Wong relies on the maxim of “He who comes into equity must come with clean hands”.  Leaving aside the issue of whether there was sufficient evidence to establish a link between Mr Tse’s action (evasion of tax) and his failure to obtain a fresh loan to discharge the original mortgage, I am not persuaded that the maxim is relevant to the present scenario.

14.  The question is not whether any general moral culpability can be attributed to Mr Tse, but is rather whether relief should be denied because there is a sufficiently close connection between Mr Tse’s misconduct (evasion of tax) and the relief sought[4]. Again, it must be borne in mind that in the present application Mr Tse has not sought substantive relief as such but simply to defend against Ms Siu’s application.  It is clear that any inequity (if any) committed by Mr Tse was not committed by him in his dealings with Ms Siu but in his dealings with the Inland Revenue Department or the Government of the HKSAR.  In other words, Mr Tse does not need to invoke or involve his act of tax evasion to raise estoppel as a defence to Ms Siu’s application.  It thus had no “immediate and necessary relation to the equity sued for” and as such the maxim had no relevance[5].

15.  There is also a complaint that I had mixed up proprietary estoppel and promissory estoppel.  However, there was no explanation of how I had done so or how it can be shown that there can be a reasonable prospect of success.  There is no substance to this complaint.

16.  Mr Wong further says Mr Tse had never raised the doctrine of promissory estoppel in his affirmations, and as such Ms Siu was deprived of a chance to adduce evidence to rebut Mr Tse’s assertion on promissory estoppel.  I disagree.  It is trite that a deponent should only depose to facts and not law in affirmations.  If sufficient facts had been set out in an affirmation which afford a defence of estoppel, it is up to anyone who wishes to refute such facts to adduce evidence to do so.  If the facts deposed to support a defence of promissory estoppel, a mere lack of reference to the legal term “promissory estoppel” cannot bar an argument being run. 

17.  Mr Wong further criticizes the fact that I was wrong to have held the repayment of the mortgage by Mr Tse in full as a detriment suffered by him and was induced by and relied upon Ms Siu’s promise as enshrined in the Order and the assignment.  He says Mr Tse would have repaid the mortgage regardless of Ms Siu’s promise, as Mr Tse had married his present wife in 2002 and had lived in the Property ever since.  I find no substance in this criticism.  If anything, Mr Tse’s re-marriage strengthened the point that he would not have repaid the whole mortgage by himself but for Ms Siu’s promise to transfer her interest to him upon payment of HK$50,000.

18.  Mr Wong also says I had erred in law in allowing Ms Siu to adduce additional evidence only on matters concerning the alleged agreement in paragraph 10 of her affirmation dated 16 January 2018, but not on matters before the divorce, in particular, the circumstances before entering into the consent summons that led to the Order.  I repeat paragraphs 16 to 17 of the judgment which set out the discussions between the court and counsel for both the plaintiff and the defendant.  Counsel for Ms Siu had submitted that any factual inconsistencies between the parties were irrelevant to the determination of the originating summons, and that the only relevant factual dispute concerned the alleged agreement between Mr Tse and Ms Siu.  This then led to my case management decision to reject the application to turn the originating summons into a writ action, but instead to hear live evidence on only this narrow issue.  In any event, if counsel disagreed with my refusal to turn the originating summons into a writ action and refusal to allow additional evidence on other issues to be filed, the appropriate course to take would have been to appeal within 14 days of 19 December 2018, when that case management decision was made.  I thus do not find there to be any merit to this complaint. 

Ground 3

19.  Mr Wong says that I had erred in law and in fact in deciding the issue of whether Ms Siu is a beneficial owner of the Property, as I refused to allow Ms Siu to adduce evidence on matters before the divorce and as such there was insufficient evidence to decide on the issue.  I disagree.  Mr Tse had deposed in his affirmations (with no objection from Ms Siu) that he had paid off the last instalment of the mortgage.  In Ms Siu’s 1^st affirmation in support of the originating summons, she never mentioned that she had contributed to the purchase price of the Property.  Ms Siu also never suggested in her affirmations that she had contributed to the monthly mortgage instalments since the Order was made.  It was only in her 2^nd affirmation in reply to Mr Tse’s affirmation that she said she had contributed to the purchase price of the Property.  Taking Ms Siu’s case to the highest, she would have contributed HK$35,000 plus repayment of part of a HK$30,000 loan.  It was therefore never a matter in dispute that Mr Tse had repaid the bulk of the mortgage.  It was certainly not a matter in dispute raised by either counsel when the application to turn the originating summons into a writ action was considered.

20.  I should point out at this juncture that this is Ms Siu’s application and she ought to have placed all relevant evidence (no less important evidence on her contribution to the Property, if any) before the court when she lodged the originating summons.  Quite plainly, in applying for the partition order and an order for 50% of the sale proceeds, Ms Siu was simply relying on the fact that she is a joint registered owner. 

21.  An applicant cannot rely on the court to point out the inadequacies of his/her case at the substantive hearing and then expect to be able to salvage the application by applying to adduce further evidence.   Mr Wong criticized the fact that I had disallowed Ms Siu from adducing further evidence on matters before the divorce.  Again, this was a case management decision based on exchange with counsel on what were the relevant factual disputes.  It would not have been appropriate to allow irrelevant evidence to be adduced and cross examinations to take place in the hope for parties to find some additional argument to rely on.

Ground 4

22.  The 4^th ground is that “I erred in law and fact in failing to consider the issue of whether there is hardship to Mr Tse”.  I repeat my observations in paragraphs 36 to 38 of my judgment.  I did consider the issue. Given the facts of this case, I do not consider that my discretion was exercised erroneously.

Ground 5

23.  The 5^th ground was that I erred in holding that the costs of the action be to the defendant Mr Tse.  There was no elaboration on this ground, whether on paper or orally at the hearing.  Ms Siu should have applied to vary the costs order nisi should there be circumstances where costs should not follow the event.  I do not see any substance in this ground.

Conclusion

24.  I am not convinced that the appeal has a reasonable prospect of success.  The summons for leave to appeal is therefore dismissed.

Costs

25.  I make a costs order nisi that costs of the application for leave to appeal are to be paid by the plaintiff to the defendant, with certificate for counsel, on a party and party basis, to be taxed if not agreed.  Unless the parties make an application to vary the above costs order nisi within 14 days from the date of this order, the costs order nisi will be made absolute after the expiry of the said 14 days.