NGAI CHUK WA v. HU XIUPING

DCCJ 128/2024

[2024] HKDC 1330

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 128 OF 2024

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JUDGMENT

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Introduction and Background Facts

1.  By Summons dated 13 May 2024 (“the Summons”), the Plaintiff (“P”) applies for default judgment against the Defendant (“D”) pursuant to O 19, r 7 of the Rules of the District Court, Cap 336H (“RDC”).  P seeks the following orders:

(1)  D do pay P the sum of HK$690,000;

(2)  D do pay P interest on the said sum of HK$690,000 at 1% over HSBC prime lending rate from 30 June 2022 to the date of judgment and thereafter at judgment rate from the date of judgment until the date of payment;

(3)  A declaration that P was entitled to rescind and has rescinded the Oral Agreement as defined in the Statement of Claim; and

(4)  Costs of the action (including costs of the Summons) be paid by D to P, to be taxed if not agreed, with a certificate for counsel; and P’s own costs be taxed in accordance with the Legal Aid Regulations.

2.  As declaratory relief is sought by P, not being within O 13, rr1-4 of RDC, P must proceed as if D has given notice of intention to defend under O 13, r6(1) of RDC, although D has never filed any acknowledgement of service of the Writ endorsed with the Statement of Claim (“SOC”) which was issued on 9 January 2024.

3.  As no defence has ever been filed by D, P is entitled to make this application pursuant to O 19, r7 RDC.

4.  In the SOC, it is pleaded that:

(1)  In 2019, P informed D’s younger sister of her interest in acquiring land / a small house in the New Territories.  P and D came to know each other through D’s younger sister;

(2)  On or about 28 February 2022, D introduced to P a property which she described as her house (“the House”).  P had visited the House twice with D.  D made the following representations to P (“the Representations”) that:

(a)  The House was built in around 1970s.  Originally it belonged to a university professor who later moved to the UK;

(b)  The House was a “紅牌屋” and had a number plate with a red number thereon (“Number Plate”) which proved ownership of the House.  Whenever officers of the Lands Department inspected the House, one just needed to produce the Number Plate to prove ownership of the House;

(c)  In around 2021, D bought the House from a relative of the professor who possess the Number Plate for a price of around HK$600,000;

(d)  Before deciding to purchase the House, D had consulted her younger sister’s ex-husband who was a senior officer in the Lands Department;

(e)  After purchasing the House, a relative of the professor delivered possession of the House and the Number Plate to D;

(f)  D then spent around HK$1 million to refurbish the House;

(g)  As D’s daughter was going to study in Canada, D intended to sell the house to fund her daughter’s studies;

(h)  If P bought the House from D, D would deliver the House together with the Number Plate to P; and

(i)  Although the land on which the House was built was on Government land, by purchasing the House together with the Number Plate from D, P would acquire a permanent right to use and reside in the House.  If the Government wanted to reclaim the House and expel P therefrom, it would have to provide monetary compensation to P;

(3)  On about 1 May 2022, relying on the veracity of the Representations, and with the Representations forming the basis of their common understanding and consensus,  P reached an oral agreement with D whereby D agreed to sell and P agreed to purchase the permanent right to use and reside in the House at the consideration of HK$2,100,000 (“the Oral Agreement”);

(4)  Between 11 May 2022 and 30 June 2022, P paid D a total sum of HK$690,000 (“the Sum”) as part payment of the consideration for the purchase of the permanent right to use and reside in the House;

(5)  However the Representations were false in that the Number Plate did not connote or entail any ownership and/or permanent right to use and/or reside in the House.  It merely indicated that the House was a squatter structure on Government land/leased agricultural land which existed before June 1982 and had been surveyed and recorded by the Lands Department.  Under the Squatter Control Policy, the Government would tolerate the House remaining on a temporary basis on Government land/leased agricultural land as long as its location, dimensions, building materials and use remain the same as that recorded in the survey conducted in 1982, until the House has to be cleared for development, environmental or safety reasons.  Such temporary tolerance does not create any legal rights or interests or obligations and does not confer on any person the right of occupation of the land;

(6)  Accordingly, D did not have any right, interest or obligation, whether legal or equitable, in the House and was incapable of selling and transferring the permanent right, interest or obligation to use and reside in the House to P;

(7)  D made the Representations knowing them to be false or not caring whether the Representations were true or false; and

(8)  On about 22 July 2022, P contacted D by WeChat to rescind the Oral Agreement.

Service of process and non-appearance of D

5.  I am satisfied from the affirmations of service filed on behalf of P that the Writ of Summons endorsed with the SOC was served by inserting the same through the letterbox for D’s usual and last known address.  I accept that the said service amounts to proper service on D under O 10, r1(2)(b) of RDC.

6.  Furthermore, given that a notice of intention to enter judgment and the Summons were served on D, I am of the view that it is expedient to proceed with the hearing of the Summons under O 32, r5 of RDC notwithstanding the absence of D at today’s hearing.

7.  Mr Leung, counsel on behalf of P, appears at today’s hearing.

Applicable principles

8.  The applicable principles for default judgment under O 19, r7 of RDC are well-settled.  The power to grant judgment under O 19, r7 is discretionary. The court is required to scrutinize whether the matters pleaded in the Statement of Claim entitle the plaintiff to the judgment sought.  The court’s decision is made on the basis of pleaded facts, rather than on evidence.  See Hong Kong Civil Procedure 2024, Vol 1, §§19/7/11 and 19/7/14.

9.  As for declaratory relief, the rule of the court that a declaration will not be granted when giving judgment by consent or in default without a trial is a rule of practice and not of law, and will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled. The Court will consider whether the declaratory relief is properly made out on the pleadings and whether it is appropriate in the overall exercise of discretion for such relief to be granted without trial.  The declaratory reliefs to be granted should not be in terms wider than what the plaintiffs are entitled to and what is necessary to do justice to them.  See ibid, §§19/7/14 and 19/7/20.

10.  See also Cheung Sai Lon v Cheung Sai Ha [2020] HKCFI 2551 per Coleman J at §§29-32.

Analysis and Disposition

11.  In the SOC, P relied upon the following causes of action: (1) unjust enrichment based on failure of basis and/or mistake; and (2) misrepresentation.

12.  In respect of a claim in unjust enrichment, there are 4 elements: (a) enrichment of the defendant; (b) at the expense of the plaintiff; (c) enrichment being unjust; and (d) no defence applicable.  See Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at §§66-67.

13.  In the present case, I am satisfied from the SOC that there is sufficiently pleaded matters to make out a claim in unjust enrichment.

14.  Firstly, plainly D was enriched by the Sum.

15.  Secondly, it is pleaded that P paid to D the Sum and accordingly, enrichment was at the expense of P.

16.  Thirdly, it has been pleaded that there was a failure of basis and/or mistake that P would acquire the permanent right to use and reside in the House and D had the right to sell and transfer such right.

17.  I am satisfied that the failure of a state of affairs on which the Oral Agreement was premised can constitute a failure of basis such that enrichment is “unjust”: see Barnes v Eastenders Cash & Carry plc [2015] AC 1 at §§106-107.

18.  Alternatively, a payment made under a mistake of fact or law is an unjust factor: see Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 375H.  At 407H, Lord Hope of Craighead held that subject to any defences that may arise from the circumstances, a claim for restitution of money paid under a mistake raises the following three questions:

(1)  Was there a mistake?

(2)  Did the mistake cause the payment?

(3)  Did the payee have a right to receive the sum which was paid to him?

19.  In the present case, I am satisfied that there is pleaded a mistake that P would acquire the permanent right to use and reside in the House and that D had the right to sell and transfer such right.  There is also pleaded that as part payment of the consideration for the purchase of the permanent right to use and reside in the House, P paid to D the Sum.  Furthermore, there is no other discernable basis that D was entitled to receive the Sum.  I am therefore satisfied that mistake as an unjust factor is sufficiently pleaded.

20.  Fourthly, no defence having been filed by D, there is no applicable defence.

21.  As for the claim based on misrepresentation, I accept as submitted by Mr Leung, on the basis of Chitty on Contracts, 35^th Edn, Vol 1, §10-006, party A has a right to rescind a contract and/or claim damages from party B as a remedy for misrepresentation where:

(1)  B made a statement of fact or law, and it was reasonably intended that A should rely on that statement;

(2)  The statement was at least substantially untrue; and

(3)  The statement must have induced A to enter the contract.

22.  I am satisfied that it is sufficiently pleaded that P entered into the Oral Agreement after the Representations were made, the Representations were false and relying upon the veracity of the Representations, P entered into the Oral Agreement.  P is entitled to rescission of the Oral Agreement.

23.  However, given that I am satisfied that P has properly pleaded and is entitled to restitution of the Sum and I will grant judgment for the Sum, I am not satisfied that a declaration that P is entitled to rescind and has rescinded the Oral Agreement is necessary in order to do justice to P.  I will therefore decline to exercise my discretion to make the declaration sought.

24.  I am otherwise satisfied, having carefully scrutinized the SOC, P is entitled to judgment and the other relief sought.  Costs should follow the event.

25.  I therefore enter judgment against D in terms of the Summons save I will not grant the declaration sought.