HARBOUR HERO ENTERPRISES LTD v. CHAU NUNG TAI

CAMP 4/2018

[2018] HKCA 253

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 4 OF 2018

(ON AN INTENDED APPEAL FROM DCCJ NO 4969 OF 2016)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the court):

1.  This is an application of the defendant, Madam Chau Nung Tai, for leave to appeal to the Court of Appeal against the decision of His Honour Judge M K Liu on 10 October 2017 (“the Decision”). By the Decision, the judge dismissed the defendant’s application to set aside a regular default judgment obtained by the plaintiff for vacant possession of a piece of land, being part of Section R of Lot No 2056 in Demarcation District No 91, New Territories (“the land”). The judge had refused leave to appeal by a decision given on 27 December 2017 (“the Leave Decision”).

2.  The defendant’s summons in the present proceedings renewing her application for leave to appeal was issued on 9 January 2018.  She was then acting in person.  By her summons, she also sought a stay of execution of the costs orders of the judge on 10 October 2017 and 27 December 2017 as well as the writ of possession dated 20 June 2017 until the determination of her intended appeal.  She filed a supporting affirmation on 9 January 2018 exhibiting a draft notice of appeal.  The grounds of appeal are the same as those advanced before the judge in the leave application he heard.

3.  On 11 January 2018, the defendant applied for legal aid.  A legal aid certificate was issued to her on 16 April 2018 and solicitors were assigned for the purpose of continuing the present proceedings. The solicitors filed a notice to act on 20 April 2018.

4.  On 6 March 2018, the plaintiff lodged a submission to oppose the defendant’s summons and an application bundle, as no application bundle was lodged by the defendant.  The Registrar of Civil Appeals gave directions on 8 March 2018 that unless the defendant was to lodge and serve a written submission in support of her summons pursuant to Practice Direction 4.1 §§8 and 36 within seven days, she shall be deemed she is not to serve a submission and be barred from doing so.  The Registrar also gave leave to the plaintiff to serve a further submission seven days thereafter, limited to the defendant’s application for stay of execution in the event leave to appeal is granted, as this has not been addressed in the plaintiff’s submission lodged on 6 March 2018.

5.  On the expiry of the time limit for complying with the Registrar’s directions, no submission was filed by the defendant.  Her solicitors have not sought leave to comply with the Registrar’s directions out of time, after they came on record to act for her.  Nor has the plaintiff sought leave to serve a further submission to address the defendant’s application for stay of execution pending appeal, when the defendant has not lodged any submission pursuant to the Registrar’s directions.

6.  As the application bundle lodged by the plaintiff’s solicitors does not contain all the essential documents exhibited by the parties in the court below, we have called for the court file in the District Court.  Having considered the papers, we have decided to exercise the power under Order 59 rule 2A(5) of the Rules of the High Court to determine this application without an oral hearing on the basis of the written submission and the relevant materials we have read.

7.  The principles for granting leave to appeal are well established.  Under section 63A(2) of the District Court Ordinance, Cap 336, leave shall not be granted unless the appeal has a reasonable prospect of success, or there is some other reason in the interests of justice that the appeal should be heard.  Reasonable prospect involves the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable” (SMSE v KL [2009] 4 HKLRD 125 at §17).

8.  In applying to set aside a regular default judgment, the defendant would have to show “a real prospect of success”, which means that she should show that her defence carries some degree of conviction (Premier Fashion Wears Ltd v Li Hing Chung [1994] 1 HKLR 377 at 383).  And in assessing whether the defendant has shown a real prospect of success, it should be borne in mind that there should be no mini-trial on affidavit evidence.  The court is to form a provisional view as to whether the defendant has a realistic prospect of successfully defending the action and this will involve assessing whether the defendant’s evidence on disputed factual matters has a realistic prospect of being accepted; the assessment has to be carried out mindful of the interlocutory nature of the application and with a sense of proportionality (Maryo Development Limited v Tsang Yau May & Ors, CACV 101/2015, 11 January 2016, §13).

9.  The judge was mindful of the above principles.  Nevertheless, he formed the view that the defendant’s case of adverse possession would not have a real prospect of success for the default judgment to be set aside. He held that:

(1)   The plaintiff has adduced evidence to show that the defendant was a tenant of its predecessor, Hing Yip Tong (興業堂) by producing rental receipts for the years of 2012 to 2013 (paid in January 2014) and 2014 to 2015 (paid in January 2015) issued to a number of tenants, including the defendant.  The defendant would not be able to show a real prospect of success by merely saying that matters relating to the rental receipts are fabrication.  It is incumbent on her to answer this point by cogent evidence[1].

(2)   If there is any truth in the defendant’s case, she should have no difficulty in adducing evidence to refute the plaintiff’s case.  She might simply produce evidence from one or two persons named by the plaintiff to whom the rental receipts were issued to show that they have never paid rent to the plaintiff.  She did not do so, nor has she provided any explanation why she did not[2].

(3)   The only witness the defendant procured to provide an affirmation was Madam U Sou Seong who drafted the letter dated 18 November 2015 signed by a number of “occupiers” (使用人) including the defendant (“the reply letter”), which letter was held by the judge to constitute an acknowledgment for the purpose of section 23(1) of the Limitation Ordinance, Cap 347.  Madam U also deposed that she had never paid rent to any person and gave hearsay evidence that Kung Lam (who provided an affirmation for the plaintiff) and his son Kung Yuk Chuen (who played an important part in the dispute but did not provide any affirmation) had received monetary advantage from the plaintiff for giving evidence in its favour.  The judge declined to attach weight to the hearsay allegation, took the view that the assertion Madam U never paid rent to any person is unclear, and did not think Madam U’s affirmation could add anything of substance to the defendant’s case[3].

(4)   Apart from bare denials, the defendant has not produced any satisfactory evidence showing that she has never paid rent to the Tong and the rental receipts are all wrong[4].

10.  The main ground of appeal is that the judge erred in conducting a mini-trial on affirmations and in holding that the defendant’s case does not carry the necessary degree of conviction for the default judgment to be set aside (grounds 1 and 2 in the draft notice of appeal).

11.  The crucial disputes here are factual matters.

12.  In summary, the defendant’s case of adverse possession is that on or about 28 August 1998, her ex‑husband Lee Chik Sam (“Lee”) purchased a wooden hut on the land from Kung Yuk Chuen for the price of $120,000.  The defendant and Lee occupied the hut as their home until their divorce in September 2002.  She continued to live there after the divorce.  She and Lee had never entered into any tenancy agreement concerning the hut or the land.  By about August 2010, she has acquired a possessory title to the land by adverse possession.

13.  In support of her case, the defendant produced a hand-written agreement dated 28 August 1998 signed by Lee and Kung Yuk Chuen for the sale and purchase of the hut at the price of $120,000.

14.  The plaintiff did not adduce evidence from Kung Yuk Chuen but produced hearsay evidence in the affirmation from Kung Lam alleging that at the time of the sale and purchase, Kung Yuk Chuen had orally made clear to Lee that (1) Kung Yuk Chuen did not own the land on which the hut stood, the land was owned by the Tong; (2) the consideration of $120,000 was only for the transfer of the hut and had nothing to do with the land; (3) as Lee would occupy the hut, he would have to pay annual rent of $250 to the Tong for the use of the land, just as Kung Yuk Chuen had done before and the person responsible for collecting the rent for the Tong was his father Kung Lam. Kung Lam alleged that thereafter he had collected rent from Lee until Lee moved out in 2002.  Another witness for the plaintiff, Kwok Man Yau, deposed that he had collected rent for the Tong from the defendant in January 2014 and January 2015.  It is the plaintiff’s case that the tenancy agreements entered into by Lee and subsequently by the defendant with the Tong for the use of the land were made orally.

15.  The judge would appear to have accepted the hearsay evidence of Kung Lam on the sale and purchase of the hut.  He observed that the sale and purchase agreement stated the subject matter of the sale was a wooden hut and no interest of land was mentioned.  He found that “in the circumstances, it would not be surprising that the defendant had paid rent to the Tong for using the land”[5].

16.  We are inclined to think there are serious arguments in favour of the defendant in respect of the sale and purchase transaction in 1998, such that there may be a realistic prospect of her case being accepted.  The purchase price of $120,000 was not an insubstantial sum at the time.  As for the omission to mention any interest in land in the agreement, this may or may not be attributable to the fact that the agreement was apparently written by laymen.  Kung Yuk Chuen has not provided any affirmation.  He was the tenant of House No 19 on Lot No 2056 according to the rental receipts issued in 2014 and 2015 produced by the plaintiff and there is no suggestion he is not available to give evidence.  If he had made the oral statements to Lee as alleged by his father, it is not known why those oral statements were not reduced to writing in the agreement signed by the parties.

17.  Furthermore, the defendant has adduced 120 pages of invoices and vouchers showing that from 2014 to early 2016, she had incurred substantial expenses for the renovation of her home in the total amount of $698,133.  She deposed that this substantial amount on renovation went beyond what a tenant would do.  Although the judge referred to the substantial expenses[6], it is not apparent if he has attached any significance to this.

18.  On the above analysis, it may not be right to regard the defendant’s denial on payment of rent as bare denial or that she has not answered the point about the rental receipts with satisfactory evidence.

19.  We think the defendant has reasonable prospect in persuading the court that she has surmounted the threshold for setting aside the default judgment and that the substantial factual disputes should be resolved in a trial.

20.  The other grounds of appeal (grounds 3 to 5 in the draft notice of appeal) relate to the judge’s holding that the reply letter constituted an acknowledgment of the plaintiff’s title to the land under section 23(1) of the Limitation Ordinance and would have the effect of extending the limitation period[7].  We think it is reasonably arguable that the reply letter may not be a clear and unambiguous acknowledgment of title.  As to whether an acknowledgment of title can restore a title extinguished by statute after the expiry of the limitation period (if the plaintiff should succeed in establishing that she has acquired a possessory title by 2010), the judge acknowledged this is an “open question”[8].  We think leave to appeal should be granted for the remaining grounds of appeal as well.

21.  For the above reasons, we grant leave to appeal to the defendant.  We direct her to file and serve a notice of appeal as per the draft annexed to her summons within 14 days of the handing down of this judgment.

22.  It is appropriate in the circumstances to grant stay of execution pending appeal.  It can readily be appreciated that where the relevant order is one for the possession of premises, more often than not, it is likely that an appeal would be rendered nugatory without a stay of execution (Star Play Development Limited v Bess Fashion Management Co Ltd [2002] HKEC 1875 at §9(1)).  As for the costs orders of the judge, it is appropriate that they should also be stayed pending appeal from his decision, which was not made after trial. We make an order in terms of §§2 and 3 of the summons.

23.  For the costs of this summons, we make an order nisi that costs be in the cause of the appeal to be brought by the defendant.