GOOD FORTUNE CREDIT LTD v. MAN KWAI HING AND OTHERS

DCMP 1510/2020

[2025] HKDC 1240

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1510 OF 2020

---------------------------

---------------------------

----------------------

DECISION

----------------------

THE SUMMONS

1.  In this action, the Plaintiff (“P”), a money lender and a legal chargee, claims against the 1^st, 2^nd and 3^rd Defendants for delivery of vacant possession of a property known as All That piece or parcel of ground situated lying at Yuen Long, New Territories and registered in the Land Registry as Lam Hau Tsuen House Lot No.112 also known as Lam Hau Lot No.112 in Demarcation District No.120 (“the Property”).  P also seeks an order for sale of the Property under the Partition Ordinance, Cap 352 (“PO”).

2.  The trial of this action took place on 21 and 23 May 2025 before me.  At the conclusion of the trial, I reserved my judgment.

3.  On 19 June 2025, the 2^nd Defendant (“D2”) and the 3^rd Defendant (“D3”) made the following applications by way of Summons:

(1)  To strike out the Statement of Claim and dismiss this action (“the Striking-out Application”);

(2)  Alternatively, leave be granted to D2-3 to amend their Defence (“the Amendment Application”); and

(3)  Alternatively, this action be transferred to the jurisdiction of the Court of First Instance of the High Court for further disposal (“the Transfer Application”).

THE STRIKING-OUT APPLICATION AND THE TRANSFER APPLICATION

4.  These two applications can be dealt with together.

5.  Ms Leung, appearing for D2-3, submitted that the District Court does not have the jurisdiction to hear this case, on the ground that the rateable value of the Property is not determined in accordance with the provisions of Rating Ordinance, Cap 116, as not exceeding $320,000, as provided under section 35 of the District Court Ordinance, Cap 336 (“DCO”) and section 9 of the PO.

6.  Ms Leung relied on a letter from the Rating and Valuation Department dated 20 May 2020.  The second paragraph of the letter reads:

“Please be advised that the subject property falls within the Designated Village Area and is currently exempt from assessment to rates under Section 36(1)(c) of the Rating Ordinance. As such, no rates demand will be issued.”

7.  Mr Wong, solicitor for P, complained that this application came very late.  Under Order 12 rule 8(1) of the Rules of District Court, a jurisdictional challenge must be made within the time limited for service of a defence.  Rule 8(7) provides that except where an application is made, the acknowledgement by a defendant of service of a writ shall be treated as a submission by the defendant to the jurisdiction of the Court in the proceedings.

8.  However, I do not think I should ignore the jurisdictional challenge simply due to the non-compliance of Order 12 rule 8.  The District Court is a court of limited civil and criminal jurisdiction.  Section 3(2) of the DCO provides that the civil and criminal jurisdiction and powers of the District Court are conferred upon it only by the DCO and other enactments of law in force.  If this Court does not have the jurisdiction in this case, I shall not proceed to hear and determine the matter.

9.  In Hoi Cheng Pan v Headstart Educational Group Ltd(DCCJ 4028/2006, 24/04/2007), the defendant took out a summons just days before trial commenced to strike out the plaintiff’s claim for want of jurisdiction.  The summons was heard on the first day of trial. HHJ Marlene Ng (as she then was) held that a jurisdictional challenge was of a fundamental nature and thus the Court ought to deal with it even though it was raised belatedly.  The learned judge said in §§62 and 63:

“62. In my view, irrespective of whether the application is late or not, the court should deal with such a fundamental challenge raised in the defendant’s second summons. As stated in Hong Kong Civil Procedure 2007, supra, the court, if it considers appropriate, may allow an objection to jurisdiction to be raised even at trial. More importantly, the learned text further says that where the court lacks jurisdiction by statute, as what is contended here, it is its duty to disclaim jurisdiction irrespective of whether or not the defendant pleads the defence.

63.  I agree with such statement which is an important one, as will be seen below.  Whether the court has jurisdiction is a fundamental matter.  The court cannot be seized of any matter before it unless it has jurisdiction.  This is so whether any of the parties raises the issue of jurisdiction with the court or not.  Jurisdiction cannot be conferred by agreement of the parties or by their inactivity or silence where there is actually no jurisdiction.”

10.  I also draw support from Ralf Borchert v Drmyo Ltd (HCA 2234/2007, 28/10/2009).  In that case, a ground on which the 2^nd defendant sought to strike out the statement of claim was that the matter was within the exclusive jurisdiction of the Labour Tribunal.  In other words, the 2^nd defendant contended that the High Court did not have any jurisdiction over the matter.  The plaintiff cited Order 12 rule 8 and submitted that it was too late for the 2^nd defendant to raise the issue.

11.  Deputy High Court Judge L Chan (as he then was) considered Rothmans of Pall Mall (Overseas) Limited and Others v Saudi Arabian Airlines Corporation[1981] 1 QB 368 and Wilkinson v Barking Corporation [1948] 1 KB 721, and held that Order 12 rule 8 does not apply to claims that are within the exclusive jurisdiction of the Labour Tribunal.

12.  In Ng Cho Chu Judy v Chan Wing Hung (DCMP 2498/2014, 18/10/2016), Deputy District Judge Winnie Tsui (as she then was) also entertained a jurisdictional challenge on the basis of lack of jurisdiction even when it was made for the first time shortly before the second day of the substantive hearing.

13.  In my view, Order 12 rule 8 does not preclude a defendant from raising a jurisdictional challenge at the trial or even after trial as in the present case if the challenge is that the jurisdiction does not exist at all.

14.  I now proceed to consider whether this Court has jurisdiction to hear and determine this matter.

15.  Section 9 of the PO provides that:

“Jurisdiction is hereby conferred on the District Court for the purpose of any proceedings under this Ordinance where the annual rent or the rateable value, determined in accordance with the Rating Ordinance (Cap 116), or the annual value of the property in land, whichever is the least, does not exceed the sum mentioned in section 35 of the [DCO], and in such proceedings a District Judge shall have the power and authority of a Judge of the High Court conferred by this Ordinance.”

16.  Section 35 of the DCO provides that:

“The Court has jurisdiction to hear and determine any action for the recovery of land, where the annual rent or the rateable value of the land, determined in accordance with the Rating Ordinance (Cap. 116), or the annual value of the land, whichever is the least, does not exceed $320,000.”

17.  Hence, this Court has jurisdiction under both Ordinances if the least of the three criteria for measuring the value of the land, ie, (i) the annual rent of the land, (ii) the rateable value of the land, both determined in accordance with the Rating Ordinance, and (iii) the annual value of the land, does not exceed $320,000.

18.  It is then noted that only the first two, namely, the annual rent and the rateable value of the land, are to be determined in accordance with the Rating Ordinance, while the third, namely, the annual value of the land, is not.

19.  However, the letter from the Rating and Valuation Department only states that the Property is exempt from assessment to rates and hence there is no rateable value determined in accordance with the Rating Ordinance.  The letter does not suggest that there is no annual rent determined in accordance with the Rating Ordinance.  As to the annual value of the Property, as said above, it is not something which is determined in accordance with the Rating Ordinance.

20.  Whether the annual rent, annual rateable value or the annual value of the Property at the time of the commencement of this action was less than $320,000 is a factual question. I consider that D2-3 have by their conduct admitted that the least of these three criteria was less than $320,000:

(1)  It was endorsed on the Originating Summons dated 26 May 2020 (which was subsequently amended twice on 21 October 2020 and 10 May 2022) that the relief sought falls within the jurisdiction of the District Court under section 35 of the DCO.  D2-3 however never in their pleadings, affirmations or witness statements denied the jurisdiction of this Court;

(2)  On the other hand, D2-3 have been running a positive case in their Defence that D1’s share in the Property was beneficially owned by D3.  At trial, D2-3 also asked this Court to hear this positive case and make findings in their favour.  If D2-3 disagreed and disputed that the least of annual rateable value and the annual value of the Property was less than $320,000, they would not have run this case of trust in this Court or asked this Court to hear and determine their case;

(3)  I also note that D2-3 took out a Summons on 27 March 2024 for relief from sanction of an unless order, which was heard and granted by Master Maurice Lam on 18 April 2024;

(4)  In my judgment, D2-3 have by their conduct admitted that P’s claim is within the jurisdiction of this Court.  This means that D2-3 have conceded a factual issue, namely that at least one the annual rent, annual rateable value or the annual value of the Property at the time of the commencement of this action was less than $320,000.

21.  For the aforesaid reasons, I dismiss the Striking-out Application.

22.  The ground on which the Transfer Application is made is that this Court lacks jurisdiction to hear this case.  As I find that this Court does have jurisdiction to hear this case, I also dismiss the Transfer Application.

THE AMENDMENT APPLICATION

23.  D2-3 seek leave to amend their Defence in two aspects.  The first aspect is in relation to the plea of trust pleaded in paragraph 2, while the second is about P’s notice of D3’s interest in the Property pleaded in paragraph 4.

The lateness of the application

24.  The application is undisputably very late.  The reason given by D2-3 in their affirmation is that their former solicitors did not plead those matters clearly and that their current solicitors took up the case just recently and therefore they did not have the opportunity to seek Counsel’s advice on the amendment.

25.  I do not accept such an explanation.

(1)  D2-3 were all along legally represented.  A change of legal representation is not a good reason for late applications;

(2)  In any event, their current solicitors were appointed by them by 19 March 2025 when the Notice of Change of Solicitors was filed;

(3)  D2-3 were represented by Ms Leung at least in the case management hearings on 26 September 2023, 21 March 2024 and the pre-trial review hearing on 20 March 2025.  D2-3 had ample opportunities to seek Counsel’s advice;

(4)  Ms Leung also appeared for D2-3 at trial on 21 and 23 May 2025.  Still no application for amendment was made at that time.

26.  The lateness of the application without satisfactory explanation is one important matter I should consider in the exercise of my discretion.

27.  I now turn to the substance of the application.

The plea of trust

28.  In the original Defence, D2-3 pleaded in paragraph 2 that:

“Paragraphs 2 and 3 of the Statement of Claim are admitted except that the 1^st Defendant has been holding 1/2 share of [the Property] on trust for the benefit of the 3^rd Defendant at all material times by allowing the 3^rd Defendant to have possession of all original title deeds and documents of the Property which the 1^st Defendant agreed to transfer and assign his 1/2 share of the Property to the 3^rd Defendant for settlement of her claims for ancillary relief in divorce proceedings.”

29.  The proposed new paragraph 2 expands the whole paragraph substantially, which reads (those underlined are new averments):

“Paragraphs 2 and 3 of the Statement of Claim are admitted except that the 1^st Defendant has been holding 1/2 share of [the Property] on (i) resulting trust due to her payment and contribution of money for household expenses throughout the marriage with the 1^st Defendant, including the costs for erection of extra floor on top of the originally two-storeyed house of the Property, and/or alternatively (ii) common intention constructive trust for the benefit of the 3^rd Defendant at all material times by allowing the 3^rd Defendant (since she married the 1^st Defendant whose mother allowed the 3^rd Defendant to have the 1^st Defendant’s interest in the Property by keeping the title deeds) to have possession of all original title deeds and documents of the Property which the 1^st Defendant agreed to transfer and assign his 1/2 share of the Property to the 3^rd Defendant for settlement of her claims for ancillary relief in divorce proceedings (which the 1^st Defendant also confirmed and represented in his Affirmation filed on 7^th July 2017 in HCA2638/2016, and the 3^rd Defendant relied upon such representation of the 1^st Defendant so that the 3^rd Defendant would suffer loss, detriment and irreparable damages for losing the Property as her only residence and accommodation) so that it was the common intention of the 1^st and 3^rd Defendants to recognize the 3^rd Defendant to have beneficial interest over and in respect of the 1^st Defendant’s 1/2 share of the Property.”

30.  It is clear that the amendment seeks to, firstly, introduce a new case of resulting trust based on D3’s alleged financial contributions, and secondly expand the factual basis of the alleged trust.

31.  Seeking to make such a substantive amendment after trial is highly unfair and prejudicial to P.  The trial has already been completed.  P prepared for and came to the trial to meet D2-3’s case as then pleaded.  If I allow the amendments, unless I also allow P time to conduct investigations, and allow the parties to re-open their cases and witnesses to be re-called, there is obviously grave prejudice caused to P. Such prejudice cannot be compensated by costs.

32.  As the trial has also been completed, there is no good reason why I have to order the parties to re-open their cases and witnesses to be called.

The plea of actual or constructive notice

33.  The relevant part of the paragraph 4 of the Defence of D2-3 reads:

“… the Plaintiff had notice of the 3^rd Defendant’s interest for her possession of the title deeds and documents of the Property, so that the 1^st Defendant did not validly charge or mortgage his 1/2 share of the Property to the Plaintiff but subject to the 3^rd Defendant’s prior interest…”

34.  D2-3 seeks to amend the paragraph in the following way (those underlined are the amendments):

“… the Plaintiff had actual or constructive notice and knowledge of the 3^rd Defendant’s interest for her possession of the title deeds and documents of the Property and her occupation of the Property, so that the 1^st Defendant did not validly charge or mortgage his 1/2 share of the Property to the Plaintiff but subject to the 3^rd Defendant’s prior interest…”

35.  In my view, D2-3 have not shown why the amendment is necessary either for disposing fairly of the cause or matter or for saving costs: Order 20 rule 8(1A) refers.  P clearly denied having any type of notice, whether actual or constructive, of D3’s interest in the Property.  In fact, it is P’s case that D3 did not have any interest in the Property at that time.  Evidence was adduced by the parties on the issue of notice, and the witnesses were cross-examined on this issue as well.  In my view, adding the above-underlined words and phrases would not enhance the defence in any way.

Conclusion on the Amendment Application

36.  In the exercise of my discretion, I have considered the lateness of the application, the lack of satisfactory explanation for the lateness, the prejudice caused to P if the application is allowed, necessity, and the overall justice of the matter.  I decide to disallow the amendment and dismiss the Amendment Application accordingly.

CONCLUSION AND COSTS

37.  The Summons is dismissed in its entirety.

38.  After hearing submissions on costs, I further order that the costs of the Summons be paid by D2-3 to P, agreed by the parties at $40,000, payable forthwith.