THE HONG KONG SETTLERS HOUSING CORPORATION LTD v. LEE SOO SHIM

DCCJ 42/2024

[2025] HKDC 241

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 42 OF 2024

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DECISION

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I.  INTRODUCTION

1.  Pursuant to my order made in the Case Management Conference on 16 December 2024 (the “CMC”), the defendant filed a summons on 30 December 2024 (the “Time Summons”) for time extension to file and serve her defence per the draft attached to the Time Summons. This is my decision on the Time Summons.

II.  BACKGROUND

2.  The background has been set out in §§2 – 6 of my decision ([2024] HKDC 2110) (the “CMC Decision”) delivered at the CMC, and I shall not repeat the same here.

3.  In respect of the procedural history specific to the present action:-

(1)  On 4 January 2024, the plaintiff issued the writ of summons herein endorsed with a statement of claim. In essence, the plaintiff’s claim against the defendant is a landlord-and-tenancy matter concerning the premises known as Flat No 412, 4^th Floor, Man Shun House, Tai Hang Sai Estate, Kowloon (the “Premises”). Specifically, the plaintiff claims that the subject tenancy agreement (the “Tenancy Agreement”) dated 16 September 2022 had expired on 31 December 2022 and continued on a monthly basis thereafter, or alternatively on a month-to-month tenancy at will. On 30 November 2023, a notice of termination of tenancy was served on the defendant requiring the defendant to quit and deliver vacant possession by 31 December 2023, but the defendant has refused and has remained and still remains in the Premises;

(2)  On 18 January 2024, the defendant signed and returned the acknowledgment of service (the “Acknowledgment of Service”);

(3)  On 8 February 2024, the plaintiff and defendant entered into a settlement agreement (the “Settlement Agreement”) whereby the defendant agreed to deliver vacant possession of the Premises to the plaintiff on or before 15 March 2024. I shall refer to this Settlement Agreement in more details at appropriate juncture below;

(4)  On 15 February 2024, the defendant should have filed and served her defence;

(5)  On 8 July 2024, the defendant having failed to deliver vacant possession despite some time extensions were given by the plaintiff, the plaintiff issued a notice of intention to enter judgment;

(6)  On 11 July 2024, Registrar Soong ordered a stay of the legal proceedings pending a Case Settlement Conference to be held on 6 August 2024;

(7)  On 19 July 2024, the defendant served a statement of defence prepared without legal representative pursuant to Registrar Soong’s order of 12 July 2024;

(8)  On 16 September 2024:-

(a)  the defendant in DCCJ 5511/2023 (“Madam Leung”) filed an application in HCAL 1600/2024 for leave to apply for judicial review (the “Judicial Review”) of the plaintiff’s decisions, inter alia, to evict her in the implementation of the redevelopment undertaken by the plaintiff;

(b)  the defendant’s current solicitors filed a notice to act for the defendant (before which the defendant was not legally represented); and

(c)  the defendant issued a summons for stay of proceedings pending the outcome of the Judicial Review;

(9)  On 20 September 2024, Coleman J granted leave for the Judicial Review ([2024] HKCFI 2592), and the proper hearing will be heard on 25 April 2025;

(10)  On 20 September 2024, the Case Settlement Conference having failed, the stay was uplifted by Chief District Judge Ko, who also fixed a Case Management Conference on 16 December 2024;

(11)  On 16 December 2024, in the CMC Decision, I refused the defendant’s applicant for stay pending the outcome of the Judicial Review, and directed the defendant to make application on or before 30 December 2024 for time extension for filing and serving defence; and

(12)  On 30 December 2024, the defendant filed the Time Summons.

III.  SETTLEMENT AGREEMENT AND ITS PERFORMANCE

4.  It is convenient at this juncture to set out the relevant terms of the Settlement Agreement executed on 8 February 2024:-

(1)  Recital 4: “原告人與被告人現就案件達成和解。”

(2)  Recital 5: “原告人現階段正計劃重建大坑西新邨，並完全在特惠性質的情況下，向被告人作出提議因重建而需搬遷的安排，而被告人已接納有關提議，並同意根據本和解協議所載之條款將樓宇交吉予原告人。”

(3)  Recital 6: “在簽署本和解協議日起，被告人承諾就民事訢訟DCCJ 42/2024 不會作任何抗辯，包括就相關訴訟之缺席判決或簡易判決作出反對及向原告人作出任何反申索。”

(4)  Clause 1: “被告人必須於 2024 年 3 月 15 日或之前（“交吉日”）將樓宇交吉予原告人…”

(5)  Clause 2: “原告人將於交吉日後起計 7 天內，向法庭存檔【中止訴訟通知書】終止相關民事訴訟 DCCJ 42/2024 。 ＂

(6)  Clause 3(5)：“在合乎本和解協議內之條款的情況下，基於被告人承諾交吉樓宇，原告人同意分兩期向被告人支付特惠搬遷津貼；首部份即特惠搬遷津貼之預付款須於被告人簽署本和解協議之日償付，剩餘部份即特惠搬遷津貼之餘款須於被告人在交吉日將整個樓宇交吉予原告人後二十個工作天內償付。＂

(7)  Clause 3(6): “在合乎本和解協議內之條款的情況下，基於原告人承諾交吉樓宇，原告人同意分兩期向被告人支付特惠租金津貼；首部份即特惠租金津貼之預付款須於被告人簽署本和解協議之日償付，剩餘部份即特惠租金津貼之餘款須於被告人在交吉日期將整個樓宇交吉予原告人後二十個工作天內償付。＂

(8)  Clause 4: “如果在交吉日時，被告人無論因任何原因未能或拒絕遷出並交還樓宇或其任何部分予原告人，原告人有絕對酌情權即時終止本和解協議，並繼續於相關民事訴訟 DCCJ 42/2024 向被告人作出追討。”

5.  One day after the defendant signed the Settlement Agreement, on 9 February 2024, both the defendant and the defendant’s daughter accepted a cheque in the sum of HK$172,800 as part of the allowance under the Settlement Agreement via the plaintiff’s solicitors, and signed the acknowledgment of receipt.

6.  In the light of Clause 1 of the Settlement Agreement obligating the defendant to deliver vacant possession of the Premises on 15 March 2024, the defendant wrote a letter to the plaintiff saying that she had successfully applied for a transition flat, but that because of the works in the transition flat, she was unable to move in as originally scheduled, and therefore sought indulgence from the plaintiff for her to deliver the vacant possession of the Premises later. In reply, on 7 March 2024, the plaintiff expressed its understanding and agreed to extend the deadline to 15 April 2024.

7.  However, the defendant failed to deliver the vacant possession by 15 April 2024. As a result, on 20 May 2024, the plaintiff issued a letter to the defendant demanding the defendant to deliver vacant possession by 31 May 2024, failing which the plaintiff would terminate the Settlement Agreement pursuant to Clause 4 thereof. In reply, on 6 June 2024, the defendant wrote, among others, that:-

“本人明白有關交吉限期已過，實在感到十分抱歉，但本人絕無與 貴公司對抗之意，只是現實執行搬遷一事阻礙重重，以至至今仍未能搬出。本人承諾必會在7月15日交回單位，否則將接受 貴公司採取法律行動收回單位。

…希望 貴公司明白及體諒…”

8.  Despite the defendant’s acceptance of the cheque and the defendant’s written requests for indulgence for her to perform the Settlement Agreement, on 19 July 2024, the defendant, then without legal representative, wrote to the Court a “succinct grounds of defence” in anticipation of the Case Settlemetn Conference ordered by Madam Registrar Soong, saying:-

“3. 被關注組誤導及平民屋宇威逼之下簽和解退租協議。事源平民屋宇在去年6月2日單方面宣布回遷方律師信案， 逼令必須於兩個月內（ 8月2日）前交回 “回條” 接受方案，住戶沒有在期限內接受回遷安排，將喪失回遷資格，不獲發放任何津貼，會啟動收回單位的法律程序，所有費用包括律師費法庭費等由住戶負責。於一個月內要簽妥退租協議，本戶只能無奈簽了回條，本戶一直都堅持拒絕簽退租協議，原因事前不可看退租協議內容，向平民屋宇提出問題一概不回答，沒有作出承諾必定可以搬回來，建築期超過5年怎樣安排，聯絡電話，負責人等等問題都沒有回答，根本就等同不可回遷沒有分別。之後分別在9月同12月都收到律師信，通知租約終止要在一個月內遷離單位，否則進行法律程序收回該單位及向我追討所衍生的法律費用。今年1月再收到傳訊令， 1月24日的晚上與大坑西村民權益關注組開會，會上大概有20-30人。關注組主席歐陽潔珍說詢問過律師的意見，就算有法律援助，在敗訴的時候，也要支付對方的法律費，說對方的律師費可大可小，收我們幾十萬都可以，就算勝訴，也可能需要支付部份法律援助署的律師費，跟住他說已同平民屋宇溝通過，如在1月26日前（只得2天時間考慮）同意和解並簽署退租協議就可以不用上庭，否則不再接受和解及失去回遷資格及要上庭，就是這就被威逼安排約簽不平等條約的和解退租協議。本戶一直都有配合平民屋宇先遷出後回遷方案，為了這個重建搬遷事宜已經令到我整家人意見分歧，經常發生糾紛…”

9.  Pausing here, I should conveniently deal with this point of duress and misrepresentation here, a point which Mr Jeffrey Tam (leading Ms Sabina Sui), counsel for the defendant, only makes lukewarm mention in his submissions (rightly in my view). I cannot ascertain from the succinct grounds of defence any particulars of duress and any particulars of misrepresentation. Coupled with the fact that the defendant had accepted the cheque under the Settlement Agreement and she made repeated requests for time extension to perform the Settlement Agreement, even assuming all set out there to be true, I find that there is not even a prima facie case of duress and misrepresentation that would vitiate the Settlement Agreement.

10.  On 29 November 2024, the plaintiff issued an open offer to the defendant. The open offer, though stating that the defendant had repudiated the Settlement Agreement, stopped short of stating that the plaintiff accepted the repudiation. Mr Tam submits that this open offer means that the Settlement Agreement had been terminated. I disagree – for a termination of agreement upon repudiation, there must be a clear communication (in writing, orally or by way of conduct) of acceptance of repudiation. The 20 May 2024 letter issued by the plaintiff issued above as well as this open offer all stopped short of mentioning any acceptance of repudiation. On the contrary, the open offer seems to suggest that if the defendant would deliver vacant possession, the plaintiff would pay the remaining parts of the allowance as agreed under the Settlement Agreement.

IV.  LEGAL PRINCIPLES IN RELATION TO TIME EXTENSION FOR FILING DEFENCE

11.  The legal principles in relation to time extension for filing defence are trite. The Court has to consider the following factors:-

(1)  The length of the delay;

(2)  The explanation for the delay;

(3)  Prejudice caused by the delay to the plaintiff and third parties; and

(4)  The merits of the proposed defence. While the Court would not examine the merits of the defence in detail, the Court should consider whether the defence is arguable.

See The Decurion [2012] 1 HKLRD 1063 at §11; Schindler Lifts (Hong Kong) Ltd v Ocean Joy Investments Ltd [2002] 1 HKLRD 279 at 22-23; Hong Kong Civil Court Practice 2025 at §627.1.

12.  I should also add that since a decision whether to grant time extension is discretionary, the Court should also consider any other relevant factors in the determination.

V.  LENGTH OF DELAY AND EXPLANATIO FOR THE DELAY

13.  For the 5-month delay from 15 February 2025 (the date of when the defence should have been filed and served) until 8 July 2024 (the date of the notice of intention to enter judgment), I do not accept the defendant’s explanation that she was under a mistaken belief that it would be sufficient for her to file the Acknowledgment of Service without filing a defence. I do not accept such explanation because the Acknowledgement of Service reminded the defendant in Chinese that she had to file defence within 14 days. I agree with the submissions of Mr Michael Lok (leading Mr Paul Law) that the true reason for the defendant’s default was that she was still trying to perform the Settlement Agreement, as evidenced by her acceptance of the cheque and her repeated requests for time extension for her to perform the Settlement Agreement, as mentioned above.

14.  For the 3-day delay from 8 July 2024 (the date of the notice of intention to enter judgment) until 11 July 2024 (when Registrar Soong ordered a stay), it was a minor delay that would not really call for any explanation.

15.  For the almost 3-month delay from 20 September 2024 (when the stay was lifted) until the CMC on 16 December 2024 (where I directed the defendant to file the Time Summons), the explanation is that the defendant had issued the summons for stay pending the outcome of the Judicial Review, and thus the defendant would like to wait and see. I do not accept this explanation because:-

(1)  The stay summons itself did not stay the proceedings. Nor there was any interim stay sought or ordered pending the CMC; and

(2)  Further, a defence would have assisted me in determining the stay application during the CMC because the defence would have informed me of the degree of the overlap of the issues between the defendant’s defence and the Judicial Review. The degree of overlap was a significant factor I had to consider in determining the stay application.

16.  For the sake of completeness, Mr Tam, for the defendant, also submits that the delay was also caused by the complication of the matter and the defendant’s acting in person before September 2024. However, this is not what the defendant says in the evidence. The defendant simply refers to the complication of the matter arising from the interaction between the private law and the public law as a justification of the time extension, and I understand this to mean that such complication has jurisprudential significance and thus the Court should in any event grant extension. The defendant has never said that because of the complication of the matter, she needed more time for the delay. Indeed, she never mentioned complication of the matter when she was explaining the delay under “Circumstances pertaining to my delay” in her affirmation.

17.  Therefore, there is no good explanation for the almost 3-month delay from 20 September 2024 to 16 December 2024.

18.  To sum up, there is no good explanation for the almost 8-month delay altogether.

VI.  PREJUDICE

19.  The prejudice according to the 3^rd Affirmation of Hau Kim Keung filed on behalf of the plaintiff:-

“52… the Plaintiff had all along relied on the Defendant’s assurance that she would return the Premises. That was the reason why the Plaintiff did not apply for default judgment beforehand. Had the Plaintiff known that the Defendant would not honour the Settlement Agreement, it would have entered into default judgment as quickly as possible. As such, there is significant prejudice to the Plaintiff if the Defendant is now permitted to file her Defence out of time.

53. Moreover, I would also stress that the Defendant is currently the only occupant left in Man Shun House. Accordingly, if the Plaintiff could obtain vacant possession of the Premises, the demolition project of Man Shun House and/or other preliminary steps could immediately commence without waiting for other cases in relation to the recover of other premises.”

20.  I do not agree that the first purported prejudice is a valid prejudice at all, because had the defendant applied to enter judgment earlier or even had the defendant managed to enter the judgment, the likelihood is that the defendant, raising the defence as she now has, would have been able to resist the entering of the judgment or set aside the entered judgment. I shall explain it more in my discussion on the merits of the defence below.

21.  As regards the second purported prejudice, while the plaintiff may have been able to demolish the whole Man Shun House earlier, in the light of the other occupied buildings in the Estate, the redevelopment of which would have to be undertaken as a whole, the prejudice arising from this delay is, in my view, not significant in the overall scheme of things.

VII.  MERITS OF PROPOSED DEFENCE

22.  There is no dispute that the defendant’s proposed defence is essentially the same as the grounds of Judicial Review. As explained in §18 of my decision in DCCJ 5582/2023 ([2024] HKDC 97), although the decision being the subject decision under the Judicial Review is the plaintiff’s decision specifically against Madam Leung in DCCJ 5511/2023, namely, (a) the decision to limit any rehousing and relocation arrangement and assistance to a one-off rental subsidy (the “Rehousing Arrangement Decision”) to Madam Leung and the decision to terminate (the “Eviction Decision”) Madam Leung’s tenancy and evict her, the grounds there are in my view generally applicable to the plaintiff’s decision to terminate and/or evict the tenants in THSE, including the tenancy with the defendant in the present action.

23.  Further, as explained in §§24-25 of my decision in DCCJ 5582/2023 and §16 of my decision in DCCJ 5579/2023 ([2024] HKDC 142), the defence is a reasonably arguable defence having realistic prospects of success to the plaintiff’s claim grounded in private law.

24.  This, however, is not the end of the matter. Mr Lok, for the plaintiff, submits that the defendant is not entitled to benefit from the defence of the Judicial Review, because of the Settlement Agreement.

25.  Mr Lok first submits that by the Settlement Agreement, a compromise has been reached between the parties, and thus the defendant should not be permitted to raise the defence.

26.  While a compromise has been reached, it is in my view at least arguable that the dispute has not been settled because:-

(1)  The parties agreed that the present action would be discontinued only after the delivery of vacant possession of the Premises; and

(2)  There has been no delivery of vacant possession, and therefore, under the Settlement Agreement, the current action remains extant.

27.  More fundamentally, in my view, there is at least an arguable defence on whether the plaintiff had the power to enter into the Settlement Agreement in the first place. The Settlement Agreement is at least arguably part of the redevelopment undertaken by the plaintiff. The Settlement Agreement is arguably effectively an arrangement for compensation based on which the plaintiff then asked the defendant to move out. This, in my view, is at least arguably like the Rehousing Arrangement Decision and the Eviction Decision, the subject decisions in the Judicial Review. Absent any other factors, logically, it should follow that at least it is arguable that the plaintiff’s exercise of its power to enter into the Settlement Agreement was subject to the same constraints as set out in the Judicial Review.

28.  Mr Lok, for the plaintiff, does not seem to dispute all these. However, he submits that there are indeed other factors. He submits that since the defendant voluntarily entered into the Settlement Agreement (for this, I have already found above no duress and misrepresentation), the defendant must be taken as having been satisfied with the Rehousing Arrangement Decision and thus the legitimate expectations mentioned in the Judicial Review, even held by the defendant, had been satisfied. Therefore, as between the plaintiff and the defendant here, the plaintiff’s power to enter into the Settlement Agreement had been properly exercised and cannot be challenged by way of judicial review.

29.  To examine the validity of such submissions, I should set out the summary of the Judicial Review set out in §15 of the Form 86 therein:-

“(1) Ground 1: The Decisions had the cumulative effect of terminating [Madam Leung’s] tenancy before commensurate alternative housing is provided to [Madam Leung] during the redevelopment period, in breach of the applicable policy/Government directives (both as directed by the Government and which HKSHC had represented to the Legislative Council) which stipulated that satisfactory rehousing and relocation of affected residents is a precondition to redevelopment, and are thus unlawful;

(2) Ground 2: The Rehousing Arrangement Decision where a One-Off Rental Subsidy is given to [Madam Leung] to find alternative accommodation on her own with no guarantee that she will be able to secure comparable alternative housing for the entire redevelopment period, as well as the Eviction Decision which evicted [Madam Leung] and her family from the Flat before a proper and lawful rehousing arrangement is devised,are irrational, perverse and Wednesbury unreasonable; and

(3) Ground 3: [The plaintiff] is also in breach of [Madam Leung’s] substantive legitimate expectation when it reneged on: (a) the Government-mandated directives; and (b) its prior representations to the general public via its statement to the Legislative Council, in failing to devise a proper and lawful rehousing arrangement for affected residents and proceeding to evict those residents before such an arrangement is properly put in place.”

30.  Put another way:-

(1)  Ground 1 is “Breach of Policy, Illegality and Failure to Have Regard to Government Directives”, as the heading of Section D of the Form 86 suggests;

(2)  Ground 2 is “Wednesbury Unreasonableness”, as the heading of Section E of the Form 86 suggests; and

(3)  Ground 3 is “Breach of Substantive Legitimate Expectation”, as the heading of Section F of the Form 86 suggests.

31.  For Grounds 1 and 2, I can see at least an arguable proposition that whether the defendant was satisfied with the Rehousing Arrangement Decision or not, the plaintiff’s power to enter into the Settlement Agreement was still subject to the same constraints.

32.  Grounds 1 and 2 would be sufficient for the defendant to mount an arguable case that the plaintiff’s power to enter into the Settlement Agreement was not properly exercised. In my view, even for Ground 3, although the defendant’s execution of the Settlement Agreement and acceptance of part of the allowance under it is evidence pointing to her satisfaction, such evidence is by no means conclusive given her “succinct grounds of defence”. Although I have rejected her allegation of duress and misrepresentation set out there, and although the defendant’s execution of the Settlement Agreement and acceptance of part of the allowance under it is evidence pointing to her satisfaction, the Court would have to consider all the evidence holistically to determine whether her legitimate expectations were satisfied, as logically, one can find herself not satisfied with the terms of a contract she voluntarily enters into. Therefore, though forceful is Mr Lok’s submissions, I still find that there is at least arguable case that the defendant’s legitimate expectations were not satisfied.

33.  For completeness sake, insofar as there is also argument that the Settlement Agreement means that the defendant did not rely on the legitimate expectations, detrimental reliance, though normally required, is not a pre-condition: see Lam Yuet Mei v Permanent Secretary for Education and Manpower [2004] 3 HKLRD 524 at §§76-78 per Chu J (as she then was).

34.  Therefore, in my view, at least it is arguable that the plaintiff’s exercise of its power to enter into the Settlement Agreement was subject to the same constraints as set out in the Judicial Review. As such, there is at least an arguable case that the defendant is still entitled to raise the defence of Judicial Review as he does.

35.  Mr Lok also submits that by recital (6) of the Settlement Agreement, the defendant is estopped from raising any defence now.

(1)  By recital (6), the defendant has, independently of the Settlement Agreement, made clear representation that she would not raise, or she has waived, any defence in the present action.

(2)  The plaintiff has, in detrimental reliance, paid the defendant part of the allowance under the Settlement Agreement.

(3)  Therefore, the defendant should be estopped from raising the defence or any defence now.

36.  I can see the force in such submissions. However, since there is at least an arguable case that the plaintiff’s power to enter into the Settlement Agreement was subject to the same constraint as set out in the Judicial Review, there is at least an arguable case that the Settlement Agreement may be void or voidable in the first place. While Mr Lok submits that the representation made in recital (6) is independent of the Settlement Agreement, there is at least arguable that such representation was made as part and parcel of, or as quid pro quo for, the Settlement Agreement, or simply that it is indeed a term of the Settlement Agreement. Therefore, it is at least arguable that the defendant is not estopped from raising the defence as she does now.

37.  Given my view above, I do not need to deal with Mr Tam’s submissions that the plaintiff has terminated the Settlement Agreement so that the defendant has been released from her obligation not to raise any defence.

38.  The above analysis in relation to the plaintiff’s power to enter into the Settlement Agreement has of course not been pleaded in the draft defence, given that in the first place, the Settlement Agreement is not the basis of the plaintiff’s claim in the Statement of Claim. Insofar as Mr Lok’s submissions based on the Settlement Agreement are intended as submissions for other reasons for refusing time extension or prejudice, the above analysis applies equally so that I would not regard such reasons or prejudice as significant at all.

VIII.  CONCLUSION

39.  Although there is no good explanation for the almost 8-month delay, given that there would be insignificant prejudice to the plaintiff and the reasonably arguable defence raised by the defendant, I exercise my discretion to allow the Time Summons.

40.  As regards costs, there are two sets of costs. The first set is the costs of the application itself, and the second set is the costs of today’s hearing. I do not see any reason to depart from the general rule that the party seeking indulgence should pay the costs of the application. Thus, I would order the defendant to pay the costs of the application to the plaintiff, summarily assessed at HK$125,000 (certificate for one counsel included). For the costs of the present hearing, I think that the plaintiff should pay the defendant costs of the hearing, but since the defendant’s legal team (honourably) act for the defendant pro bono, I would make no order as to costs of the present hearing. Both Mr Lok and Mr Tam ask me to make a costs order nisi for prudence sake. I thus make a costs order nisi that the defendant shall pay the costs of the application to the plaintiff in the sum of HK$125,000.

41.  I also make consequential directions leading to the CMC with the other related cases to be held on 9 May 2025, in terms of the directions proposed in §40 of Mr Lok’s Skeleton Submissions filed on 11 February 2025, to which Mr Tam agrees.