CHAN KA HAY AND OTHERS v. SINO FAVOUR DEVELOPMENT LTD AND OTHERS

HCA 2457/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2457 OF 2008

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REASONS FOR JUDGMENT

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Introduction

1.  After the hearing on 3 October 2012, I made an order that the Plaintiffs be at liberty to enter judgment against 3^rd Defendant (“D3”) as follows:-

(i)   A declaration that D3 had until 10 November 2011 held the land located at Section P of Lot No 482 in the DD 94 (“the Land”) as constructive trustee for the Plaintiffs for the use, occupation and enjoyment of the Plaintiffs and their successors in title as common areas of the estate known as Eden Garden (“the Estate”) for the reasonable enjoyment of their properties to the exclusion of any persons other than the owners and/or occupiers of the houses of the Estate and/or their lawful visitors and free from any interference, hindrance or obstruction from D3.

(ii)  Damages to be assessed.

2.  I further ordered that costs of this action including the costs of this application be to the Plaintiffs, the summary assessment of such costs being $50,000.

3.  I granted the above order after grating leave to the Plaintiffs to amend their application to seek only (i) and (ii) above.

4.  I set out hereafter my Reasons for the above Order.

Chronology

5.  The Writ in these proceedings was issued on 28 November 2008 by the Plaintiffs against the five Defendants herein (D1 to D5).  The Statement of Claim was served on 3 February 2009.  On 25 March 2009, the Plaintiffs filed voluntary particulars of the Statement of Claim.

6.  In summary, the Plaintiffs are the property owners of the Estate and D1 and D2 were the developers.  In about 2005, all the 10 houses of the Estate were sold to the respective owners (including the Plaintiffs).

7.  When the houses were sold, according to the Plaintiffs, D1 and D2 represented that certain areas enclosed by the boundary walls and gates (including the 1^st, 2^nd and 3^rd Lots as referred to in the Statement of Claim) were the common areas and integral part of the Estate.  The Land is referred to in the Statement of Claim as the 2^nd Lot.  The Plaintiffs claimed that they entered into the transaction of purchase acting on the faith and truth of such representation.

8.  On the above premises, alternatively by the collateral agreement pleaded in the Statement of Claim, it is the Plaintiffs’ case that D1 and D2 held 1^st Lots, 2^nd Lot and 3^rd Lots as constructive trustees for the Plaintiffs.  On about 9 May 2006, D1, D2 and D3 demolished part of the boundary walls and obstructed the Plaintiffs and other owners from using and enjoying the common areas.  Then on about 2 November 2006, D1 purportedly assigned 2^nd and 3^rd Lots to D3, and D3 further assigned the 3^rd Lots to D4 and D5 on about 21 May 2008.  The 2^nd Lot, namely the Land, however, remained being held by D3 until 10 November 2011.

9.  D3 died on 9 May 2008 before the commencement of the Plaintiffs’ action.  On 11 January 2012 by an Order, the administrator of the estate of D3, TSM, has been appointed to represent the estate of D3 in this action.  It is the Plaintiff’s case that even before this appointment, TSM was all along aware of this action.

10.  On 31 January 2012 TSM was served with all the court documents including the Writ and the Statement of Claim.

11.  At all material times, TSM did not serve any Notice of Intention to Defend, nor did he file any Defence.

12.  On 2 June 2012 the Plaintiffs filed the Notice of Intention to Enter Judgment against D3.  This was served on TSM.  Subsequent thereto on 19 June 2012 TSM was further served with the Plaintiffs’ summons to enter judgment and to seek declaratory relief (“the Summons”).  The Summons was first fixed for hearing before Master Wong on 11 July 2012.  Master Wong adjourned the Summons to this Court, as he opined that he did not have the power/jurisdiction to make the declaratory orders sought in the Summons.

13.  Thereafter, out of the blue, TSM sent a letter dated 8 August 2012 to the Registrar of the High Court (the “Letter”) indicating that he objected to the allegations made against him and claimed that because the previous solicitor had made a mistake, he had delivered the Land to D5 at no consideration.  He did not send a copy of the Letter to the Plaintiffs who were only made aware of the Letter upon receipt from this Court on 26 September 2012.  There were no details mentioned in the Letter as to what mistake D3 was referring to.

14.  TSM has clearly failed to give Notice of Intention to defend and the time for filing a defence has long expired.  The Letter was not filed nor did TSM seek leave to file a defence out of time.  He did not turn up at the hearing before this Court, nor did he turn up at the hearing on 11 July 2012 before Master Wong.

15.  Upon receipt of the Letter, the Plaintiffs’ solicitors conducted a search in the Land Registry and discovered that TSM had on 10 November 2011 transferred the Land (the 2^nd Lot) to D5 at a consideration of $20,000, notwithstanding that a sealed copy of the Writ has been registered as lis pendens.  Further, contrary to what D3 said in the Letter, he did not transfer the Land to D5 at no consideration.

16.  Mr Cheung, Counsel for the Plaintiff, has sought leave at the commencement of the hearing to amend the Summons to now only seek a declaration that D3 held the Land as constructive trustee for the Plaintiffs up to the date of 10 November 2011, namely up to the transfer to D5 by TSM.  Mr Cheung has submitted that even if the Letter is deemed to be a Defence, no reasonable cause of defence has been shown in relation to the Plaintiffs’ application for a declaration prior to his transfer.

17.  D1 and D2 have entered into a settlement with the Plaintiffs by way of a Tomlin Order dated 16 July 2012 upon which the present proceedings as between them have been stayed.  Thus, D3, D4 and D5 are the only parties remaining in the present action.

18.  On 11 July 2012, when Master Wong adjourned the Summons to this Court he also ordered that the Plaintiffs should inform all interested parties within 28 days by written notice the Summons and the resumed hearing before this Court.

19.  The Plaintiffs’ solicitor Mr Tse has filed an affirmation on 7 August 2012 stating as follows:-

(i) Upon commencement of the action, a sealed copy of the Writ and Statement of Claim were served by post on the estate of D3 on 9 December 2008 and 20 February 2009;

(ii) After letters administration of the estate of D3 were granted to TSM on 18 May 2010, the Plaintiff’s solicitors had on 25 May 2011, 8 July 2011 and 2 September 2011 posted letters to TSM.  Upon receipt of the said letters TSM had in fact telephoned Mr Tse who confirmed that he spoke to TSM personally on 11 June 2011 explaining to him the claim herein and discussing with him the possibility of a settlement and thereafter Mr Tse had further contacted TSM and had discussions with him about the case but D3 made no concrete reply (B:63);

(iii) Thereafter on 3 December 2011, the Plaintiffs took out an application to appoint TSM to represent the estate of D3 in this action. Such application and order obtained were again served by post to TSM.

(iv) The Notice of Intention to Enter Judgment against D3 and the Summons had also been served by post to TSM.

(v) All documents posted to TSM were sent to his last known address at Room 1629, Tong Hong House, Hong Ting Estate, Tuen Mun, New Territories.  None of the documents sent had been returned through post office or otherwise.

20.  Further, in compliance of Master Wong’s order, Mr Tse has stated that TSM and all the interested parties were informed by written notice of the Plaintiffs’ present application to enter judgment against D3 and the resumed hearing of the Summons before this Court on 3 October 2012 by posting up the written notice on 6 August 2012 at the main gate of the Estate.  In particular, the Plaintiffs’ solicitor had also sent a letter dated 3 August 2012 to Messrs John Ip & Co, a firm of solicitors which filed a notice to act for D4 and D5 on 6 June 2012.

21.  D3, D4 and, in particular, D5 who has acquired the Land from D3, did not turn up at the hearing before this Court.

The Law

22.  Mr Cheung has submitted that the applicable legal principles can be summarized as follows:-

“(1) In general, a declaration would not be granted when giving judgment without trial (e.g. default judgment). However, this was only a rule of practice and not of law and would give way to the paramount duty of the court to do the fullest justice to the plaintiff which he was entitled... A declaration can also be granted without trial, by way of a default judgment under Order 19 Rule 7, if the plaintiff has a genuine need for such relief and the court could properly grant it based on the merits of the case. It is only a rule of practice but not a rule of law not to make a declaration when giving judgment in default without a trial: HKCP2012 §15/16/2; Patten v Burke Publishing Co. Ltd. [1991] 1 WLR 541 (applied in Liu Chi Keung v Law Sim Yuk [2006] 4 HKLRD 385; Lam Shing Shou v Lam Hon Man & Others [2002] HKLRD (Yrbk) 94)

(2) The statement of claim must show a case for the order the applicant seeks to obtain. The court’s task (in exercising its discretion) is to see whether the plaintiff appears to be entitled to judgment on his statement of claim. The court does not need to be satisfied by evidence adduced by the plaintiff to prove his case: HKCP2012§19/7/14.

(3) A plaintiff may apply for default judgment against a defendant and proceed with the action against other defendants if his claim against the defendant in default is severable from his claim against the other defendants: Order 19 Rule 7(2)(a) RHC.

(4)  Even the declaration sought is a declaration of legal right, the force of objection (if any) to the making of such declaration would be much weakened if it does not affect the right of anyone other than the defendant(s) or persons claiming through them: Patten v Burke Publishing Co. Ltd. [1991] 1 WLR 541 at 544G; HKCP2012§19/7/14.”

The Declaratory Relief is Necessary

23.  Mr Cheung has submitted that the Plaintiffs’ case is not a case that could be settled simply by awarding them damages alone.  Before amending the Summons, the Plaintiffs had sought, briefly, among other things, the following declaratory relief:-

(i)   D3 has held the Land (2^nd Lot) as constructive trustee for the Plaintiffs

(ii)  Plaintiffs shall be entitled to use occupy and enjoy the Land (2^nd Lot) as common area free from interference from D3.

24.  In view of D3’s transfer of title to D5, the Plaintiff no longer proceeded with (ii) above and only sought (i) up to the date of D3’s transfer.  Mr Cheung has submitted that the declaratory relief is necessary as it is part of the chain in the Plaintiffs’ case of constructive trust in that D3 had held the Land (2^nd Lot) for about 5 years from about 2 November 2006 to about 10 November 2011 (date of transfer).

25.  Further, on the basis of the deemed admissions of the matters contained in the Statement of Claim, Mr Cheung has submitted the declaration sought is merely a reflection of what was deemed to be admitted.

The Declaratory Relief is Severable

26.  Mr Cheung has further submitted that although the declaration sought is a declaration of legal right, such declaration would not affect the rights of D4 and D5, and the judgment is not binding against D4 or D5.  Mr Cheung says in view of the discovery of the transfer, the Plaintiffs will be seeking leave to amend the Statement of Claim as against D4 and D5.

27.  The Land (2^nd Lot) was held by D3 alone until 10 November 2011.  It is distinct from the 1^st and 3^rd Lots.

Conclusion

28.  I am satisfied that TSM on behalf of estate of D3 has been properly served with all relevant court documents including the Writ, the Statement of Claim, the Order of 11 January 2012 appointing him to represent the estate of D3, the Plaintiffs’ Notice to enter Default Judgment and also the Summons.  He should be fully aware of the proceedings and he chose to take no action apart from sending the Letter.  He has not bothered to attend any of the court hearings.  I am also satisfied that the Letter has discharged no reasonable cause of defence to the Order sought in the amended Summons.

29.  I am further satisfied that D5’s solicitors have been duly notified and informed of the Plaintiffs’ application for leave to enter judgment against D3 and the hearing before this Court.

30.  Having considered all the circumstances of the case, I accept the submissions of Plaintiff’s Counsel Mr Cheung that the declaratory relief sought is necessary, severable and only affects TSM on behalf of estate of D3, and is not binding on D4 and D5.

31.  The above are the reasons why I gave the Order as sought.

Costs

32.  At the end of the hearing Mr Cheung submitted a Statement for Costs for summary assessment.  The amount was a total of $87,961.  I save an Order for the amount of $50,000 being costs to be paid by D3 to the Plaintiffs.