HO KWAI CHUN v. LAI YU

DCCJ 916/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 916 OF 2013

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DECISION

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Introduction

1.  There are two summonses both taken out by Ho Kwai Chun (“Ho”) calling for my resolution. First in time is a summons dated 26 May 2014 (“the Directions Summons”) whereby Ho applies for certain directions for the purpose of setting down this action for trial. It is stated in the Direction Summons that the declaratory relief she is claiming relates to a real property and may not be given without a full trial. The Direction Summons was stated to be taken out pursuant to Order 19 r.7, Rules of the District Court (“RDC”).

2.  The second summons (“the Default Judgment Summons”) was stated to be taken out pursuant to Order 13 rule 6 and Order 15 rule 16 of the RDC whereby Ho claims three declarations in respect of the suit property and “all other necessary and /or proper consequential reliefs”.

3.  At the hearing, Mr Wong, counsel for Ho, applied for judgment be entered against Lai Yu relying on the documentary evidence exhibited to the 3^rd Affirmation of Ho Kwai Chun dated 5 June 2014. In other words, the Directions Summons only represents Ho’s fallback position.

4.  It is trite that in default judgment applications, the court cannot receive any evidence but must give judgment according to the pleadings alone: Hong Kong Civil Procedure 2014 Vol. 1 §19/7/11 (p.448). I indicated at the hearing my preliminary reluctance to grant declaratory relief on the Statement of Claim as it stood. As explained below, I have some difficulties with Ho’s pleaded case. I adjourned the hearing pending Mr Wong’s skeleton submissions to assist me and indicated that my decision would be handed down without a further hearing. This I now do.

Ho’s pleaded case

5.  Stated briefly, Ho’s claim is for possessory title to the rear portion of a property located at 5^th Floor, No.35, Kai Ming Street, Hunghom, Kowloon, Hong Kong (“the Property”).

6.  Lai Yu became the registered owner of the Property by an assignment dated 26 July 1958 registered in the Land Registry. It is pleaded that the Assignment also covered the rear portion of the Property (“the Rear Portion”). It should be noted that Ho’s claim relates to the Rear Portion only.

7.  On or about 5 November 1981, Ho entered into a provisional agreement for sale and purchase (“PASP”) in respect of the Rear Portion with one Lai Shing Yan (“SY Lai”). The consideration under the PASP was HK$140,000. Save the initial deposit in the sum of HK$50,000 to be paid in November 1981, the consideration was to be paid by 60 monthly instalments in the sum of HK$1,500 each from 1 February 1982 to 1 February 1987. One of the expression provisions of the PASP entitled Ho to move into the Rear Portion after the completion of the renovation works of the Property on 1 February 1982. Messrs Lau Chan & Ko (“LCK”) were stipulated to be the solicitors for SY Lai in respect of the transaction. No completion date is pleaded.

8.  Pursuant to the PASP, Ho paid the initial deposit in November 1981 and obtained exclusive possession of the Rear Portion in or about 1982. Thereafter, Ho made the monthly instalments accordingly.

9.  In or about 1983, Ho was informed by LCK that SY Lai could not make the necessary arrangements to transfer the Rear Portion to Ho.

10.  The primary case is that in view of the said information received by Ho, SY Lai was not the registered owner of the Property including the Rear Portion and hence the PASP was void ab initio.

11.  The alternative case is that given the failure of SY Lai and/or Lai Yu to transfer the Rear Portion to Ho pursuant to the PASP, SY Lai and/Lai Yu were in repudiatory breach of the same. Ho accepted the repudiation and ceased payment of the monthly instalments under the PASP. As a result, the PASP was rescinded.

12.  Notwithstanding the ineffectiveness of the PASP and the abortion of the sale, Ho has remained to be in adverse possession of the Rear Portion since about 1982 until the present moment. In the course of such possession, Ho has leased and licenced others to occupy the Rear Portion and she herself paid all the outgoings relating to the Rear Portion.

13.  Based on the foregoing pleaded matters, Ho claims that she has dispossessed Lai Yu of the Rear Portion since about 1982 and his title to the Rear Portion has extinguished by virtue of the Limitation Ordinance, Cap. 347 (“the LO”). Further, Lai Yu is barred from recovering the Rear Portion against Ho pursuant to section 7 of the LO.

Procedural steps taken

14.  The Writ endorsed with the Statement of Claim dated 15 March 2013 was served by way of substituted service on 29 November 2013 pursuant to an order dated 6 November 2013 (“the Order”). Ho applied for the Order with her supporting affirmation dated 30 July 2013 (“the Affirmation”). Lai Yu did not respond at all.

15.  Ho duly filed an affidavit of Lam Kwok Man dated 5 June 2014 to evidence the substituted service of the Writ. Pursuant to Order 13 rule 6(1) of the RDC, Ho is entitled to proceed with the action as if Lai Yu had given notice of intention to defend.

16.  All of the Directions Summons, the Default Judgment Summons and the notice of the hearing were served by way substituted service without leave on 6 June 2014. The substituted service allowed by the Order was confined to the service of the Writ only. Mr Wong relies on Order 65 rule 9, RDC and submits that no service of the Summonses on Lai Yu is needed at all given Lai Yu’s failure to file an acknowledge of service and/or lack of an address for service.

Analysis

17.  The normal practice of the court is that a declaration would not be made without a trial: Patten v Burke Publishing Co Ltd [1991] 2 All ER 821. There, Millet J (as he then was) further explained the nature of the practice as follows:

“… the rule is a rule of practice only. It is not a rule of law. It is a salutary rule and should normally be followed, but it should be followed only where the claimant can obtain the fullest justice to which he is entitled without such a declaration.”

18.  In Lai Wai Kuen v Wong Shau Kwong, unreported, HCA 3424/2003, 12.11.2004, Lam J (as he then was) also held that this long standing practice is not an inflexible rule. There, his Lordship granted declarations in respect of the plaintiff’s claim of adverse possession in an application under Order 19 rule 7, Rules of the High Court after having been satisfied that the plaintiff had a genuine need for the declaratory relief and such relief was justified on the merits.

19.  In the present case, I have no doubt that Ho has a genuine need for the declaratory relief sought. However, I have some difficulties with Ho’s pleaded case even if I should take the pleaded matters as proved.

20.  First, in the Affirmation, Ho deposed to the fact that SY Lai is the son of Lai Yu. This fact is not pleaded in the Statement of Claim. The basis upon which SY Lai, and not Lai Yu, entered into the PASP with Ho is unknown. The mere fact that SY Lai could not make the necessary arrangements to transfer the Rear Portion to Ho at a subsequent stage, as relayed to Ho by LCK in 1983, does not necessarily mean that the PASP was void ab initio. Nor does the plain fact that SY Lai himself not the registered owner of the Rear Portion. I cannot accept Ho’s primary case without further investigation of the material facts by way of a trial.

21.  However, I accept that SY Lai repudiated the PASP some time after 1983 in that there was no completion pursuant thereto and Ho validly accepted the repudiation by non-payment of the balance of the consideration. It is not pleaded when exactly Ho stopped the payment and hence the PASP was rescinded. This is germane to her plea of adverse possession in that during the currency of the PASP, her possession of the Rear Portion was agreed under the PASP and could not be said to be adverse. In other words, Ho could not have the requisite animus possidendi while the PASP was still alive. I cannot accept the pleaded case that Ho has adversely possessed the Rear Portion since 1982.

22.  This is not the end of the matter though. The non-payment and hence the rescission of the PASP should have taken place before the end of the payment term under the PASP, i.e. February 1987. Even assuming Ho accepted the repudiation by defaulting the last instalment only, her adverse possession should commence in early 1987 and should still suffice to extinguish the title of Lai Yu when the Writ was issued in March 2013. Ho should be entitled to pray in aid sections 7 and 17 of the LO to claim the declaratory relief sought. This is so even though Ho could not prove the pleaded commencement date of her adverse possession: Yu Siu Cheuk v RealRay Investment Limited, unreported, CACV 181/2009, 10.11.2009 per Cheung JA at §§20-22.

23.  To conclude, despite my difficulties with the pleaded case, I am of the view that on the pleading, Ho is entitled to, and I so grant, the following two declarations:

(1) A declaration that Lai Yu’s title in respect of the Rear Portion of the Property has been extinguished and Lai Yu be debarred from taking any action against Ho to recover the Rear Portion; and

(2) A declaration that Ho has acquired a possessory title to the Rear Portion.

24.  I further make a costs order nisi that Ho should have costs of this action except the costs relating to her 3^rd Affirmation, which is inadmissible for the purpose of the Default Judgment Summons. The Directions Summons is thus otiose and I order that it be dismissed with no order as to costs.

25.  Lastly, I should point out that I have obviously adopted a liberal approach in this matter to do fullest justice. It was submitted to this court, both orally and subsequently in writing, that the Rear Portion is not of substantial value and Ho is not of substantial financial means. Hence any further proceedings would cause Ho hardship. This submission is plainly right but I would have thought in these circumstances the right thing for Ho’s legal advisors to do is to prepare for Ho an open and shut pleaded case and to take only the appropriate and essential steps to obtain judgment on the pleading. In addition, to ensure a favourable outcome, maximum assistance should have been given to this court. A skeleton submission and a simple hearing bundle are merely basic. The latter has not even been provided to this court despite my specific direction. However straightforward this kind of applications may seem to Ho’s legal advisors, this court should not be expected to deal with the matter on a do-it-yourself basis and rubber-stamp this uncontested application without further ado.