NG SHIU WAI v. CHAN, MARGARET KOON YING formerly known as NG MARGARET YING

HCA 1707/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1707 OF 2010

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BETWEEN

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J U D G M E N T

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1.  This is an application made by the plaintiff pursuant to Order 13, rule 6 and Order 19, rule 7 of the Rules of the High Court for default judgment against the defendant. 

2.  According to the affidavit of service filed on behalf of the plaintiff, the Writ of Summons with the statement of claim endorsed thereon was sent by double registered mail to the defendant at her last known address in Hong Kong, ie Flat B on the 6^thFloor of Kwong On Building, Nos 8/14, Yee Wo Street, Hong Kong (which is referred to in the statement of claim as “the Hong Kong Property”).  That was done on 3 May 2012 and, according to Order 10, rule 1(3)(a), the date of service is deemed to be the seventh day after the date on which the copy was sent to the address in question.

3.  The summons making the present application for judgment in default was sent by the plaintiff’s solicitors on 18 October 2012 to the defendant at her same address, also by double registered mail. 

4.  I am satisfied that the defendant has had notice of this action as well as this summons and I proceed to deal with the plaintiff’s application on that basis.

5.  According to the statement of claim on the writ, the plaintiff and the defendant used to be husband and wife.  They were married on 19 December 1972 in accordance with the law of New South Wales, Australia.  The marriage was dissolved by virtue of a divorce decree pronounced by the Supreme Court of British Columbia in Vancouver, BC, Canada on 23 June 2006.

6.  On or about 14 April 1994, the plaintiff entered into an agreement for the purchase of the Hong Kong Property at $2.68 million with his own financial resources, and nominated a company known as Time Ease Investments Limited, whose shares were held by the defendant and the plaintiff’s mother, Madam Ng Fong Yim Yong, to be registered as the legal owner and hold the property on trust for him.

7.  On or about 2 May 2001, upon the instructions of the plaintiff, the Hong Kong Property was transferred from the said Time Ease Investments Limited to the defendant at nil consideration and since then the defendant has continued to hold the said property on trust for him.

8.  The defendant was also the registered owner of a property in Australia known as 118 Gippsland Street, Jindabyne, New South Wales, Australia (“the Australia Property”).

9.  By a separation agreement dated 15 November 2004, as varied by a variation agreement dated 16 November 2004 (“the Variation Agreement”), the plaintiff and the defendant agreed that:

(a)  The Hong Kong and Australia Properties would be sold and realized.

(b)  The plaintiff would pay a sum of CAD$250,000 (equal to HK$1.5 million) for distribution between the parties in equal shares.

(c)  The proceeds of sale of the Hong Kong and Australia Properties and the said sum of CAD$250,000 would be lumped together (collectively called “the Distribution Funds”) and distributed to the plaintiff and the defendant in equal shares. 

10.  It is also pleaded that the followings terms were implied in the Variation Agreement:

(a)  the defendant would sell and realize the Hong Kong and Australia Properties or would cause the same to be sold within reasonable time; and

(b)  the defendant would not do or omit to do any act in relation to the Hong Kong and Australia Properties which would cause any loss or damage to the plaintiff’s interests in the said properties and the Distribution Funds.

11.  On divers days between the date of the Variation Agreement and June 2005, the plaintiff paid to the defendant a total of CAD$125,000 pursuant to the Variation Agreement.

12.  In breach of trust and the Variation Agreement, despite the plaintiff’s repeated demands, the defendant has failed and/or refused to sell or realize the Hong Kong Property or distribute the proceeds of sale of the same to the plaintiff.

13.  In further breach of trust and the Variation Agreement, on or about 30 June 2008, the defendant mortgaged the Hong Kong Property for a loan from HSBC without the plaintiff’s consent or knowledge, whereby the Hong Kong Property was and is still subject to the said incumbrance.

14.  Moreover, since a date unknown to the plaintiff but for a period of not less than three years, the defendant has leased out the Hong Kong Property for her own benefit without the plaintiff’s consent.

15.  In or about August 2010, the plaintiff found that the defendant had in further breach of the Variation Agreement sold and realized the Australia Property in August 2005 at AU$216,000.  Since that sale, the defendant has failed and/or refused to account or share the proceeds of sale of the Australia Property with the plaintiff.

16.  The plaintiff therefore claims:

(1)  a declaration that the defendant has since 14 April 1994 been and still is holding the Hong Kong Property upon trust for the plaintiff;

(2)  an order for sale of the Hong Kong Property;

(3)  an order that the plaintiff’s interest in the proceeds of sale of the Hong Kong Property be assessed and computed as if the Hong Kong Property be sold free from any incumbrance created after 16 November 2004, ie the date of the Variation Agreement;

(4)  an order that the plaintiff’s share in the proceeds of sale of the Hong Kong Property so assessed as aforesaid and his share in the Australia Property be paid out from the net proceeds of sale of the Hong Kong Property and the defendant to pay the deficiency, if any;

(5)  a declaration that the plaintiff is entitled to an equitable lien over the Hong Kong Property for any sums found due as aforesaid;

(6)  an order for an account of the rents and profits of the Hong Kong Property received by the defendant since 16 November 2004, the date of the Variation Agreement; and

(7)  an order that the defendant to pay the plaintiff what shall be found due upon the said account of rents and profits.

17.  However, according to an “update land search record” of the Hong Kong Property as adduced by an affidavit filed on 31 October 2012 on behalf of the plaintiff, the defendant became the registered owner of the Hong Kong Property on 2 May 2001, from Time Ease Investments Limited, apparently for a consideration of $1,380,000, as opposed to for nil consideration as pleaded in para 2(b) of the statement of claim (see para 7 above).  Although upon my enquiry, Ms Wong informs me that the stated consideration of $1,380,000 in fact had not been paid, I am of the view that I cannot simply ignore this piece of evidence that was adduced for the plaintiff or accept the explanation from counsel.  This evidence affects the relief sought by way of a declaration that the defendant holds the Hong Kong Property on trust for the plaintiff.  The relief to which the plaintiff is entitled should only properly be based on the Variation Agreement.

18.  Moreover, under Order 19, rule 7, the court retains its discretionary power whether to give judgment.  This is a general statement of the law made by the editors of the White Book, ie, Hong Kong Civil Procedure, Vol 1, at para 19/7/13 thereof.  Although the White Book makes no reference to any such situation, as in the present case, where there is evidence that contradicts what is pleaded in the statement of claim, I consider that it would not be just to a defendant even if he has not given notice of intention to defend or serve a defence that judgment be given according to a statement of claim when evidence available to the court clearly contradicts the material allegations in the pleading.

19.  Moreover, it is not the normal practice of the court to make a declaration without a trial.  See para 19/7/20 of the White Book. 

20.  Further, as referred to in para 11 above, according to the statement of claim (para 8 thereof), the plaintiff fully paid to the defendant a total of CAD$125,000 only in June 2005 pursuant to the Variation Agreement.  Without this payment or until it was made, it can hardly be said that the obligation of the defendant to sell both the Hong Kong and Australia Properties had arisen.  Thus, even if I accede to the request of the plaintiff to specific performance of the Variation Agreement, the fair date from which the defendant should be ordered to account should be from 1 July 2005 instead of from 16 November 2004 as sought.

21.  Ms Emma Wong, on behalf of the plaintiff, has very helpfully prepared a draft minute of the order that she seeks from me.  I have taken into account what I consider to be fair and just as stated earlier in this judgment when going through the draft minute with her.  The order that I make is set out below.

(1)  An order that the property known as Flat B on the 6^th Floor of Kwong On Building, Nos 8/14, Yee Wo Street, Hong Kong (“the Hong Kong Property”) be sold with vacant possession by way of public auction or private treaty at a price not less than the market value to be assessed by an independent professional valuer within 2 months from the date of this judgment.

(2)  The conduct of the sale be given to Messrs K M Lai & Li, solicitors for the plaintiff.

(3)  For the purpose of the sale, the defendant do deliver up vacant possession of the Hong Kong Property to the plaintiff’s said solicitors.

(4)  An order that upon the sale of the Hong Kong Property, the defendant:

(a)  do all acts and things necessary to vest her legal title to the Hong Kong Property in the purchaser or purchasers by executing the conveyancing or transfer deeds of the Hong Kong Property and do all such other acts and things, if any, as may be necessary to give and confer upon the purchaser or purchasers the defendant’s legal title to the Hong Kong Property; and

(b)  failing which, Mr Leung Man Man, assistant solicitor of the plaintiff’s solicitors, or alternatively, the Registrar of the High Court, be authorized under section 25A of the High Court Ordinance, Cap 4, to execute all conveyance contract or other document as may be necessary to give and confer upon the purchaser or purchasers the defendant’s legal title to the Hong Kong Property.

(5)  Upon the sale of the Hong Kong Property, the proceeds thereof be applied in the following manner:

(a)  first, to discharge all Government rent, taxes, rates and other outgoings due from and affecting the Hong Kong Property;

(b)  secondly, to discharge all prior incumbrance, if any; and

(c)  thirdly, the balance be divided and distributed between the plaintiff and the defendant, subject to paragraphs (6), (7) and (8) below and upon completion of the inquiry and account herein provided.

(6)  An inquiry of the loss, damage, costs and expenses incurred and occasioned by any incumbrance created on the Hong Kong Property after 16 November 2004.

(7)  An inquiry for the income/profits/proceeds from and costs and expenses of and incurred for the sale by the defendant of the property in Australia known as 118 Gippsland Street, Jindabyne, New South Wales, Australia (“the Australia Property”).

(8)  An order that the following sums be paid to the plaintiff out of the net proceeds of sale of the Hong Kong Property, and if there be a deficiency of the said proceeds, the balance be paid by the defendant:

(a)  half share of the net proceeds of sale of the Hong Kong Property to be assessed and computed on the basis that the Hong Kong Property be sold free from any incumbrance created after 16 November 2004; and

(b)  half share of the net proceeds of the Australia Property.

(9)  The defendant do within 60 days hereof provide a true and proper account of the rents and profits of the Hong Kong Property received by the defendant, her agents or servants since 1 July 2005 and that such account to be verified by an affidavit/affirmation of the defendant.

(10)  The plaintiff be at liberty to inspect all the relevant documents in the possession, custody or power of the defendant in respect of the said account within 30 days after it is provided by the defendant.

(11)  The defendant do pay the plaintiff of one-half of what shall be found due upon the said account of rents and profits, with interest at the judgment rate from the date of this order.

(12)  There be liberty to the parties to apply.

(13)  The costs of and occasioned by this application and of this action be paid by the defendant to the plaintiff, to be taxed if not agreed.