TSANG WAI FAN v. HUI SIU KWONG

CACV 42/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 42 OF 2016

(ON APPEAL FROM HCMP NO 1505 of 2014)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

1.  This appeal was brought by the Defendant against the judgment of Deputy High Court Judge Kent Yee of 26 January 2016. By that judgment, the judge ordered the sale of the property known as Flat B, 11/F, Block 5 of Locwood Court in Kingswood Villas, Tin Shui Wai.

2.  There are two summonses before us.  The first one is the summons of 13 July 2017 taken out by the Plaintiff to strike out the appeal.  The second one is the summons of 28 July 2017 taken out by the Defendant for the stay of the appeal pending final determination of HCA 3398 of 2016.

3.  It is necessary to recite some background to this appeal in order to understand the relationship between these two summonses and the proceedings in HCA 3398 of 2016.

4.  In respect of the appeal, Chu JA set out the relevant factual background at [2] to [8] in the judgment of 12 April 2016 in HCMP 409 of 2016. We respectfully adopt the same here:

“ 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.”

5.  There have been important developments since that judgment.  On 13 October 2016, SM Lau made a statutory declaration setting out her case on the ownership and devolution of title of the Property.  Basically, her evidence supported the defence case that it was intended that the Defendant would be the sole owner of the Property when it was conveyed by YP Lau to her and the Defendant as joint tenants.  She further said she did not sell the Property to the Plaintiff and she had not authorized Lau Yu Fun to convey the Property to the Plaintiff.  She denied receiving the consideration from the Plaintiff for the purchase of the Property.  The “sale” to the Plaintiff was without her knowledge and consent.  She initially did not wish to be embroiled in litigation and was thus reluctant to give evidence for the Defendant when he approached her.  However, after she learnt of the outcome in the present case she decided she had to come forward and set out the truth. 

6.  Since then, SM Lau commenced an action in HCA 3398 of 2016 against Lau Yu Fun and the Plaintiff (as well as their son) seeking relief based on the alleged fraud committed by Lau Yu Fun and the Plaintiff.  One of the relief sought is a declaration that the assignment of the interest in the Property to the Plaintiff is void.  She also sought to set aside the assignment by an order for rescission.  The action was commenced on 23 December 2016. The Statement of Claim was filed on 21 June 2017.

7.  We have examined the court file of HCA 3398 of 2016 and have seen that the Defence was filed on 23 October 2017.  In the Defence, the case now run by Lau Yu Fun and the Plaintiff is that SM Lau gave the Property to the Plaintiff by way of gift as she did not want to be further concerned with estate duty in respect of the estate of YP Lau.  This was not the case advanced before Deputy Judge Yee in the present case.  According to the judgment of the judge, the Plaintiff said she acquired the interest in the Property at a consideration of $1.5 million, see [4] of the judgment. 

8.  Further SM Lau also applied by a summons of 19 June 2017 to join as a defendant to HCMP 1505 of 2014 (the proceedings from which this appeal emanated) and sought a stay of execution of the judgment.  Her affirmation in support repeated her case set out in the statutory declaration of 13 October 2016 and the Statement of Claim in HCA 3398 of 2016.  That application is still pending. 

9.  There is obviously a serious question to be tried in respect of the validity of the assignment in favour of the Plaintiff and if her title to the Property is set aside she would not have any right to claim for relief as a co-owner under the Partition Ordinance.  Apparently, SM Lau did not want to sell the Property.  Whatever her interest is vis-à-vis the Defendant over the Property, that is a matter for her, not the Plaintiff.

10.  The Notice of Appeal was served on 23 February 2016.  The Defendant also applied for leave to appeal against the refusal of the judge to admit some evidence.  Such application was not successful and culminated in the earlier decision of this Court in HCMP 409 of 2016 of 12 April 2016. 

11.  Since then, there were developments in terms of actions taken by SM Lau.  No doubt both parties in the present appeal have been aware of such developments.  There was correspondence between solicitors on the progress of the appeal.  Despite agreement on estimated length of hearing (as set out in the letters of 3 and 7 November 2016), the Defendant did not apply to court to fix a date for the hearing of the appeal.  Solicitors for the Plaintiff complained about the same in a letter of 7 December 2016.

12.  Soon after that, on 23 December 2016 SM Lau commenced HCA 3398 of 2016 and on 20 June 2017 she applied to be joined as a party to HCMP 1505 of 2014. 

13.  It was against such background that the Plaintiff took out the summons of 13 July 2017 for striking out the appeal for want of prosecution. The Defendant filed an application to fix date for the hearing of this appeal on 17 July 2017 and on 28 July 2017 issued a summons for staying the appeal pending the final determination of HCA 3398 of 2016.

14.  The title of the Plaintiff was in dispute before the judge though the Defendant was unable to procure the evidence of SM Lau when the matter was argued on 26 January 2016.  However, in light of the change of position of SM Lau, we think the evidence of SM Lau could be admitted on appeal.  The Defendant had attempted to obtain her evidence without success and he had no means to compel SM Lau to give evidence for him.  The evidence of SM Lau could have a significant impact on the proceedings under the Partition Ordinance and it was highly unlikely that the deputy judge would have determined the case summarily.  We are also satisfied that the evidence of SM Lau is inherently not improbable.  The criteria of Ladd v Marshall are met and we are entitled and should have regard to her evidence in considering the two summonses.

15.  In light of the serious dispute on the title of the Plaintiff, which every party must have been keenly aware of since the commencement of HCA 3398 of 2016, it is surprising that the Plaintiff deemed fit to apply for the striking out of the appeal, particularly when SM Lau has applied to be joined as party to HCMP 1505 of 2014.  In this connection, we are not impressed by Mr Chain’s submission that the dispute between SM Lau and the Plaintiff has nothing to do with this appeal which would have to be resolved on the basis of evidence before the deputy judge.  As explained above, the evidence of SM Lau is admissible for the purpose of this appeal and the title of the Plaintiff is an issue in this appeal. 

16.  In light of the serious factual dispute concerning the title of the Plaintiff which can only be properly resolved by a trial in the Court of First Instance, we can see the good sense in case management for having the appeal stayed pending the resolution of that issue in the court below through HCA 3398 of 2016.  Contrary to Mr Chain’s submission, on the evidence available, including the evidence of SM Lau (which as explained is admissible in this appeal), if the appeal is proceeded with, the Court would probably conclude that given there is a serious issue to be tried on the title of the Plaintiff, it is not appropriate to reach a decision summarily and the order of the deputy judge would have to be set aside accordingly.

17.  In practical terms, the Plaintiff would not be able to proceed with the order for sale until the question of title is resolved given the registration of HCA 3398 of 2016 as a lis penden and the application for joinder by SM Lau in HCMP 1505 of 2014 and her application for stay of execution.

18.  It is quite clear that the lack of progress in the appeal was due to the need to resolve the title of the Plaintiff and not because of the lack of incentive on the part of the Defendant to prosecute the appeal. 

19.  We therefore dismiss the Plaintiff’s summons of 13 July 2017 and grant an order in terms of paragraph 1 of the Defendant’s summons.

20.  We shall make an order nisi that the Plaintiff shall pay the costs of the Defendant in respect of both summonses except there be no order as to costs regarding the issue of the Defendant’s summons.  Having considered the Defendant’s statement of costs, we fix the costs to be paid by the Plaintiff to the Defendant at $106,000.