LOK SHU WING AND OTHERS v. NG KAM WING AND ANOTHER

DCCJ4694/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4694 OF 2014

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DECISION

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Introduction

1.  This case concerns the aborted sale of a lot of land situate in Sai Kung, New Territories which is owned by a Tong. 

2.  The matter currently before the court is an application by the plaintiffs by summons filed on 14 March 2016 (“the Summons”) for default judgment pursuant to Order 19, rule 7 of the Rules of District Court (“the RDC”).

The plaintiffs’ pleaded case

3.  The Statement of Claim (“the SOC”) pleads, among others, that:-

(1)  The plaintiffs are and were at all material times the managers of Lok Tun (or Tung) Hau (or Hou) Tong 駱敦厚堂 (“the Tong”) (paragraph 1). 

(2)  The Tong is and was at all material times the registered and beneficial owner of the properties known as The Remaining Portion of Lot No 577, The Remaining Portion of Lot No 595, The Remaining Portion Lot No 599 and The Remaining Portion of Lot No 601 all in Demarcation District No 217 (“the Lands”) (paragraph 2).

(3)  By a provisional agreement for sale and purchase dated 6 February 2010 and registered in the Land Registry by Memorial No 11072900300062 (“the 1^st Agreement”), Lok Shu Wing, Lok Yao Kau, Lok Yuk Tong and Lok Siu Fai acting on behalf of and duly authorised by the plaintiffs sold and the 1^st defendant purchased the Lands at the consideration of $1,146,000 and upon the terms and conditions therein stipulated (paragraph 3).

(4)  According to clause 3.1(b) of the 1^st Agreement, the plaintiffs shall apply to the Sai Kung District Office (“the SKDO”) for consent of the sale and purchase of the Lands pursuant to the terms therein and shall complete all legal and administrative procedure (paragraph 4).

(5)  According to clause 3.2 of the 1^st Agreement, the 1^st Agreement was valid for a period of 24 months and if there is any delay (of whatsoever nature), the 1^st defendant was entitled to extend its validity for a period of 12 months.  Thereafter if the sale and purchase of the Lands could not be completed, the plaintiffs shall return all initial deposit to the 1^st defendant (paragraph 5).

(6)  On 5 December 2011, the plaintiffs applied in writing to the SKDO for the aforesaid consent but the same was not granted because one of the beneficiaries of the Tong did not agree to the sale (paragraph 6).

(7)  By a provisional agreement for sale and purchase dated 8 February 2013 and registered in the Land Registry by Memorial No 13031502660648 (“the 2^nd Agreement”), the 1^st defendant sold and the 2^nd defendant purchased The Remaining Portion of Lot No 577 and The Remaining Portion of Lot No 599 all in Demarcation District No 217, being part of the Lands (paragraph 7).

(8)  On 25 February 2013, the plaintiffs through their solicitors, Messrs Au Yeung, Lo & Chung informed the 1^st defendant in writing that the SKDO did not consent to the sale and its reason, and returned the initial deposit to the 1^st defendant’s solicitors Messrs Chan & Chan (paragraph 8).

(9)  A series of correspondences then ensured between the plaintiffs’ solicitors and the 1^st defendants’ solicitors during the next 16 months.  The last one was a letter dated 10 June 2014, whereby the 1^st defendant offered to rent the Lands at a monthly rental of HK$2,000 (paragraphs 9 to 16).

(10)  Upon the expiry of 36 months from the date of the 1^st Agreement, ie, 6 February 2013 when the aforesaid consent of the SKDO had not been granted, the 1^st Agreement was terminated (paragraph 17).

(11)  Alternatively by tendering the initial deposit to the 1^st solicitors on 25 February 2013 the 1^st Agreement was rescinded for failure of condition, namely to obtain consent of the SKDO.    

The reliefs claimed by the plaintiffs

4.  In the prayer for relief in the SOC, the plaintiffs claim the following (among others) reliefs:-

(1)  A declaration that the 1^st Agreement is terminated.

(2)  The registration of the 1^st Agreement and the 2^nd Agreement in the Land Registry be vacated.

5.  In the Summons, the plaintiffs claim the following reliefs:-

(1)  A declaration that the 1^st Agreement is terminated (paragraph 1(a)).

(2)  A declaration that the 2^nd Agreement no longer affects the Lands (paragraph 1(b)).

(3)  The registration of the 1^st Agreement and the 2^nd Agreement be vacated (paragraph 1(c)).   

6.  As can be seen from the above, the relief claimed in paragraph 1(b) of the Summons (set out in paragraph 5(2) above) has not been claimed in the SOC.

Procedural steps taken

7.  By an affirmation of service dated 14 March 2016, the plaintiffs’ process server confirmed that on 9 July 2015 he served the Amended Writ of Summons endorsed with the Statement of Claim on the defendants by pre-paid registered post addressed to the 1^st defendant at (inter alia) Flat F, 32^nd Floor, Block 37, City One Sha Tin, New Territories, Hong Kong (“the 1^st Address”) and to the 2^nd defendant at Flat E, 14^th Floor, Block 37, City One Sha Tin, New Territories, Hong Kong (“the 2^nd Address”), which documents had not been returned undelivered by the Post Office.  The 1^st Address was given by the 1^st defendant in the 1^st Agreement and the 2^nd Agreement.  The 2^nd Address was given by the 2^nd defendant in the 2^nd Agreement.  They were therefore the usual or last known addresses of the defendants.  

8.  By an affirmation of service dated 5 April 2016, the plaintiffs’ process server confirmed that on 16 March 2016 he served the Summons on the defendants in the same way to the same addresses, which had not been returned undelivered by the Post Office.

9.  I am satisfied that the amended Writ endorsed with the Statement of Claim was duly served on both defendants.  The defendants failed to serve a defence, and accordingly the plaintiffs are entitled to apply to the court for judgment against the defendants pursuant to O 19, r 7 RDC.

Grant of declaration without trial: applicable principles

10.  It is trite that in default judgment applications under Order 19, rule 7 of the RDC, the court cannot receive any evidence but must give judgment according to the pleadings alone: Smith v Buchan [1888] 58 LT 710; Young v Thomas [1892] 2 Ch 135 (CA) at 136 per Lindley LJ; Hong Kong Civil Procedure 2016, Vol , §19/7/11.

11.  For the grant of declaration without a trial, the normal practice of the court is stated in §19/7/20 of the Hong Kong Civil Procedure 2016, Vol 1. The relevant principles may be summarised as follows:-

(1)  It is not the normal practice of the court to make a declaration without a trial: Wallersteiner v Moir (No 1) [1974] 1 WLR 991 at 1029A-B per Buckley LJ; Top One International (China) Property Group Company Ltd v Top One Property Group Ltd [2011] 1 HKLRD 606 at §§83 and 85 per Fok J (as he then was); Tsui Ming Sin v Tsui Chi Ping & Anor, HCA 2550/2014 (2 February 2016, unreported) at §§13-15 per DHCJ Kenneth Kwok SC; Leung Pak Ki v The Estate of Pang Kau, deceased & Anor, HCA 624/2009 (1 March 2016, unreported) at §6 per DHCJ Paul Lam SC. 

(2)  However, this is only a rule of practice which should not be followed when the plaintiff had a genuine need for the declaratory relief and justice would not be done if such relief were denied: Lam Shing Shou v Lam Hon Man & Others, HCA 361/2001 (15 January 2002, unreported) at §13 per Chu J (as she then was); Lai Wai Kuen v Wong Shau Kwong, HCA 3424/2003 (12 November 2004, unreported) at §6 per Lam J (as he then was).

(3)  Where declaratory relief is sought, the court will scrutinize the application for default judgment carefully and does not hastily grant the relief sought: Chau Yan Chi Catherine v The Incorporated Owners of Fung Wah Factorial Building, DCCJ 1459/2014 (22 July 2014, unreported) at §14 per HH Judge Andrew Li; Chan Wing Go v The Incorporated Owners of Wing Hong Factory Building, DCCJ 1736/2014 (9 October 2014, unreported) at §20 per DDJ Amy Chan.

(4)  Where declaratory relief is sought, the court expects maximum assistance to be provided in order for the relief to be granted.  However straightforward this kind of applications may seem, the court cannot be expected to deal with the matter on a do-it-yourself basis and rubber stamp the uncontested application without further ado: Ho Kwai Chun v Lai Yu, DCCJ 916/2013 (3 July 2014, unreported) at §25 per HH Judge Kent Yee; Shue Huei Yue v Tan Chung Meng, DCCJ 2294/2013 (1 August 2014, unreported) at §24 per DDJ J. Chow.

(5)  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 between them: Lee Kwok Leung v Li Foa Shang, DCCJ 2165/2014 (10 April 2015, unreported) at §16 per HH Judge Alex Lee.

12.  It is with these principles in mind that I turn to deal with the application for default judgment. 

Discussion

13.  In my judgment, looking at the SOC alone, the plaintiffs have proved that the 1^st Agreement had been terminated:-

(1)  According to paragraphs 3, 4 and 6 of the SOC, the sale and purchase of the Lands under the 1^st Agreement was subject to the consent of the SKDO and such consent was not given.  Accordingly, the 1^st Agreement was terminated for failure of the plaintiffs to obtain such consent.

(2)  According to paragraphs 5 and 8 of the SOC, the maximum duration of the 1^st Agreement was 3 years, ie to 6 February 2013.  Since the sale and purchase of the Lands could not be completed within the time stipulated, the plaintiffs shall return the initial deposit to the 1^st defendant, which they did by their solicitors’ letter dated 25 February 2013.  On this basis, too, the 1^st Agreement was terminated.       

14.  In the present case it is my view that the plaintiffs have a genuine need for the declaratory relief that the 1^st Agreement was terminated and justice would not be done if such relief were denied:-

(1)  Following the return of the initial deposit by the plaintiffs to the 1^st defendant, the only outstanding matter between the plaintiffs and the 1^st defendant is whether the 1^st Agreement has come to an end and is no longer subsisting.  This issue should not be left unresolved.  

(2)  The plaintiffs’ right to sell the Lands in the future would be seriously prejudiced by any contention that the 1^st Agreement was still subsisting.  After judgment in this action it will no longer be open to the 1^st defendant to argue that the 1^st Agreement is still subsisting without having the judgment set aside, but in the meantime the omission of any declaration to that effect from the judgment could seriously inhibit the plaintiffs in any attempt to sell the Lands.      

15.  I note that in Patten v Burke Publishing Co Ltd [1991] 1 WLR 541 Millett J (as he then was) granted a declaration that the agreement under consideration in that case had been determined by the defendants’ breach and that the plaintiff was no longer bound by its terms: at 542H-543A.

16.  In my view, the declaratory relief claimed in paragraph 2(b) of the Summons stands in a different footing because the same has not been claimed in the SOC. 

17.  Applying the same principles of reasoning, it appears to me that the plaintiffs are not entitled to the relief claimed in paragraph 2(b) of the Summons.  At the hearing, the court enquired with the plaintiffs’ solicitor as to whether the plaintiffs will seek leave to amend the SOC.  Mr Lo informed the court that, in the interest of saving time and costs, the plaintiffs will not seek to do so.  He accepts that the plaintiffs did not have a genuine need for such declaratory relief. 

18.  In the circumstances, I will not grant the relief claimed in paragraph 2(b) of the Summons.

19.  In the light of the plaintiffs’ concession, it is strictly speaking not necessary for me to consider the principle that a declaration may be made although not specifically claimed in the statement of claim (see Lau Wing Hon & Others v Wong Wor Hung & Another [2006] 4 HKLRD 671 at §145 per Recorder McCoy SC; Harrison-Broadley & Others v Smith [1964] 1 WLR 456 (CA) at 466 per Harman LJ; §15/16/7 of the Hong Kong Civil Procedure 2016, Vol.1).  I note that these cases are not decided under Rules of Court dealing with default judgment applications but are decided after trial when the facts have been found.

Order    

20.  By reason of the matters aforesaid, I make an order in terms of paragraphs 1(a) and 1(c) of the Summons, ie, a declaration that the 1^st Agreement is terminated and the registration of the 1^st Agreement and the 2^nd Agreement in the Land Registry be vacated.

21.  There is no reason why costs should not follow the event.  Subject to paragraph 22 below, I make a costs order nisi that the plaintiffs’ costs of this action, including costs of this application, be paid by the defendants to the plaintiffs, to be taxed if not agreed.

22.  I will disallow the costs of preparing the affirmation of Lok Yao Kau dated 28 April 2016 (“Lok’s Affirmation”) and the plaintiffs’ skeleton submission dated 29 April 2016 which substantially repeats the contents of Lok’s Affirmation.  It is well established that in default judgment applications under Order 19, rule 7 of the RDC, the costs of any affidavits in support will be disallowed: Jones v Harris (1887) 55 LT 884, §19/7/11, Hong Kong Civil Procedure 2016, Vol.1.    

23.  I thank Mr Lo for his assistance to the court.