MA MUI CHI OMEI v. HO KA FAI

HCA 1363/2021

[2024] HKCFI 1332

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1363 OF 2021

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DECISION

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A.  Introduction

1.  By summons of 22 December 2021 (the “Default Judgment Summons”), the plaintiff (“P”) sought against the defendant (“D”) judgment in default of acknowledgment of service and defence.  For reasons set out in my decision of 31 January 2022 (the “Decision”)[1], this Court on that same day granted P default judgment (the “Default Judgment”).

2.  By summons filed on 19 September 2023 (the “Setting Aside Summons”), D seeks an order that the Default Judgment be set aside.

3.  This is the hearing of the Setting Aside Summons.  Ms Jenny Lok appeared for D.  Mr Hatten Kong together with Mr Vincent Wan appeared for P. 

B.  The relevant affirmations

4.  As Ms Lok has confirmed in her written submissions, there is no dispute that the Default Judgment is a regular one.  As put by Ms Lok[2], D “seeks the Court’s indulgence in setting aside the Default Judgment on the basis that [D] has a real prospect of success in his defence.”  I add that D also relies on alleged material non-disclosure on P’s part when seeking the Default Judgment.

5.  Given the basis of D’s application, the several affirmations of service filed in support of the application for the Default Judgment are not relevant.  What are relevant are the following affirmations which deal with the merits of parties’ respective cases:

(a)  D’s affirmations of 19 September 2023 in support (“D/Aff1”) and of 30 January 2024 in reply (“D/Aff2”), and

(b)  P’s affirmation of 14 December 2023 in opposition (“P/Aff”).

C.  P’s claim as pleaded

6.  I have summarised P’s pleaded case in the Decision.  I reproduce the summary here for ease of reference.

7.  The claim concerns Flat A on 31/F of Tower 1, Hanley Villa, No.18 Yau Lai Road, Ting Kau, Tsuen Wan, New Territories, and Car Parking Space No.21 on 2^nd Carport of Area A of Hanley Villa (the “Properties”).

8.  According to the specifically indorsed Writ of 9 September 2021, P and D used to be lovers.  The Properties were originally acquired by them in June 2009 as joint tenants.  Prior to its acquisition, they orally agreed, or formed the mutual understanding, or had the common intention, that their shares in the Properties to be acquired would be in accordance with their respective financial contributions towards the acquisition.  Subsequently and as things turned out, P paid 90.92% of the totality of the purchase price, all duties, costs, expenses and mortgage repayments involved.  Her contributions came from funds of their joint bank account (the “Joint A/C”, which funds represented the sale proceeds (the “Sui Wo Court Property Sale Proceeds”) of a property they used to own as joint tenants (the “Sui Wo Court Property”)) and other contributions out of her own resources.  All mortgage repayments were paid off in June 2011. 

9.  Since acquisition, the Properties have been used and occupied by D.  In 2020, P discovered that D got married without her knowledge.  D’s wife moved in the Properties.  P has been denied possession or use of the same.  P’s request to buy out D’s share in the Properties has been refused.  D has changed the lock to the Properties.  P’s request for rent has been refused.  P’s further requests to D to vacate the same have also been refused.  On the other hand, D asked his wife’s name to be added as an owner.  P refused.  P in May 2021 discovered that D and his wife had been trying to sell the Properties back in late 2019. 

10.  In July 2021, P through her solicitors served a notice of severance upon D, thereby severing the joint tenancy between them.

11.  P seeks therefore, on the bases of constructive trust, resulting trust, and estoppel, a declaration that D out of the 50% he holds as joint tenant holds 40.92% of the total beneficial interest in the Properties on trust for P (the “Declaration”), an order that D do assign, transfer and convey the legal title of the Properties to P in such shares, and mesne profit to be assessed[3].

D.  P’s application for default judgment

12.  D has not filed any Acknowledgment of Service or Defence.

13.  The Default Judgment Summons was issued pursuant to O.19 r.7.  That rule provides that upon hearing of an application made thereunder, “the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim”.  Evidence on merits cannot be received – see Hong Kong Civil Procedure 2024 §19/7/11.  When a declaration is sought as part of the relief prayed for, the court’s usual practice of not making a declaration without a trial however applies, though as has been explained in numerous decisions, that 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 they are entitled – see Hong Kong Civil Procedure 2024 §19/7/20.

14.  As I have set out and explained in the Decision, this Court was aware of the Court’s duty under O.19 r.7, was aware of the practice concerning granting declaration, and had considered and scrutinized the contents of the Statement of Claim carefully.  This Court was satisfied that P appeared to be entitled on the Statement of Claim to the judgment she was seeking.  This Court also as explained in the Decision noted D’s previous attempts in selling the Properties, and that the declaration was necessary for the purpose of clarifying P’s beneficial interest in the Properties, in the absence of which she might face genuine difficulties in selling her interests in the Properties in the future.  In the end, I accepted Mr Kong’s submission (he also appeared for P during that hearing) that the Declaration was necessary to give fullest justice to P.  I granted P the Default Judgment.

E.  Whether the Default Judgment a regular one

15.  The principles and considerations applicable to an application to set aside a default judgment differ depending on whether the default judgment concerned is a regular or irregular one.

16.  The first question to be answered is hence whether the Default Judgment is a regular one.

17.  As stated above, Mr Lok accepts that the Default Judgment is a regular one.  As also recorded above, Ms Lok relies on the merits of D’s proposed defence, and in addition alleged material non-material on P’s part when seeking the Default Judgment.

18.  Despite Ms Lok’s concession, Mr Kong, on the basis of Deng Minghui v Chau Shuk Ling [2007] 1 HKLRD 905 §9, and given D’s reliance on alleged material non-disclosure, indicates in his written submissions[4] his preparedness to accept that material non-disclosure could render a default judgment irregular.

19.  I have no doubt that Mr Kong adopts that stance out of fairness, but this Court is not prepared to accept as a general proposition that material non-disclosure could render a default judgment irregular, irrespective of the nature of the material non-disclosure.

20.  As discussed by Coleman J in Alan Chung Wah Tang and Kan Lap Kee v Chung Chung Keung & Ors [2021] HKCFI 369 at §41, agreeing with counsel’s submissions, that in the context of an application to set aside a default judgment, the test for regularity or irregularity is concerned with process.  I respectfully agree.

21.  Deng Minghui is different from the present case.  There, the plaintiff invoked O.10 r.1(2)(b) as the mode of service.  The validity of that mode is prerequisite upon the defendant being within jurisdiction at the time of service.  The plaintiff had in fact received a letter from the defendant’s solicitor to the effect that the defendant had been living in the United States, and that “if the proceedings have sent to her by post, they have not been properly served.”  That letter was not disclosed when default judgment was sought.  The material non-disclosure hence related to the service process.  It had nothing to do with the merits of parties’ case.

22.  D does not dispute service.  He does not dispute knowledge of P’s commencement of the present action[5]. He said he ignored “legal letters” which he received[6]. He chose not to participate in the action due to, as summarised by Ms Lok[7] “(1) his treasure of the relationship that he shared with [P] for over 30 years and did not want it to get worse by any further argument … and (2) him trying avoid exposing to the public … their embarrassing private matters.”

23.  I will deal with D’s complaint of material non-disclosure.  But as shall be seen, put highest, the alleged non-disclosure goes to merits, but not process.

24.  In my view, the Default Judgment is clearly a regular one.

F.  Applicable legal principles on setting aside a regular default judgment

25.   I have considered the authorities cited to me, which include Hong Kong Civil Procedure 2023 §§13/9/13-14 (as cited to this Court by Ms Lok, though in fact I refreshed my memory from the 2024 edition) and Wong Ling Pan v Team Building Limited [2021] HKCFI 336 §§18-22 (as cited by Mr Kong). I refer in particular to the summary by Deputy Judge William Wong SC at §§18-22 of Wong Ling Pan (with reference to Young Bing Ching (deceased) v Chow Yung Fong & Another [2001] 2 HKLRD 394 at §§12, 24-26, Maryo Development Ltd v Tsang Yau May (CACV 101 of 2015, 11 January 2016 at §§11-14), Cheung Chi Po v Ke Jun Xiang (CACV 170 of 2011, 22 May 2012 at §§11, 16 and 17), and Menfond Electronic Art & Computer Design Co Ltd v Wong Wang Tat Victor [2013] 2 HKC 259 at §61).

26.   The applicable principles are not in dispute.  I do not repeat them, save highlighting the following considerations core to the present application (in the context of the Default Judgment being a regular one):

(a)  The court’s power under O.19 r.9 to set aside a regular default judgment is a discretionary one;

(b)  The defendant seeking to set aside bears the burden of satisfying the court that the court should exercise the discretion in his favour;

(c)  In considering how that discretion is to be exercised, merits is the primary and dominant factor.  The defendant has to show by potentially credible evidence at least that he has a real prospect of success on the merits of the case.  An arguable defence is not sufficient;

(d)  The court is required, not merely to consider what the defendant has said, but also to assess whether what he has said is credible.  All the circumstances of the case including the defendant’s conduct after the proceedings have been served upon him are to be considered;

(e)  The court is not to conduct a mini trial.  The approach is for the court to form a provisional view as to whether the defendant’s evidence on disputed factual matters has a realistic prospect of being accepted and, if it has, that the defendant has a realistic prospect of establishing a defence in law;

(f)  Where a defendant is able to show a defence of sufficient merits, justice will often demand that the default judgment be set aside.  But that is not an automatic entitlement.  Merits, though the primary and dominant consideration, is not the only one.  Relevant factors to be weighed against the merits factor include the defendant’s explanation as to why he allowed default judgment to occur, his conduct after proceedings were served on him, any delay on his part to apply to set aside, and any prejudice that would be cause to the plaintiff or to third parties if the default judgment were to be set aside.

G.  Alleged material non-disclosure

27.  I have considered Alan Chung Wah Tang, and in particular §22 thereof which Ms Lok relies on.

28.  I note the section of D/Aff1 under the heading “Material Non-disclosure/Merits of my Defence”. I note also Section D of Ms Lok’s submissions, which bears the heading of “The Plaintiff’s Material Non-disclosure/False Claim”. Under those headings, a number of complaints have been made.  I have considered their contents.  They include allegations of P seeking to leave a misleading impression of P and D having a 50/50 share in the Properties as the starting point by serving the notice of severance shortly before commencement of the present action, and that aspects of P’s case were false and misleading (e.g. P’s case basing on the existence of an oral agreement/mutual understanding/common intention that their shares in the Properties would be in accordance with their respective financial contributions, of P having solely responsible for the mortgage repayments, the circumstances in which P became a joint owner of the Sui Wo Court Property, and in relation to the amount out of the Sui Wo Court Property Sale Proceeds which had been used towards the purchase of the Properties).  D further complains that P’s case is inconsistent with certain of the documents he produces in D/Aff1. 

29.  In my view, those complaints are not really in the nature of material non-disclosure, but rather go to factual disputes in support of D’s case that his proposed case has merits (and P’s lacks any).  The headings under which they were set out are also telling.  In the course of the hearing, Ms Lok in fact acknowledged this.

30.  Nor are any alleged inconsistencies between P’s pleaded case and the documents produced by D as clear-cut as D says they are.  As I will explain below, the converse is in fact the case.

31.  Further, many of the matters complained of have in fact been pleaded on the face of the Statement of Claim (in particular the facts that the Sui Wo Court Property had been in their joint names, that the Property was assigned to them jointly, and that notice of severance was only served in July 2021).

32.  I will consider the factual disputes which underlie the complaints of material non-disclosure when I come to consider the primary and dominant factor of the merits of D’s proposed defence below.  But having considered their nature, I am of the view that there has been no material non-disclosure on P’s part when seeking the Default Judgment.

H.  Merits of D’s proposed defence

33.  D’s proposed defence may first be identified.

34.  At §§3 and 46 of D/Aff1, D says as follows:

“3. My defence is straightforward that at the time of purchase, [P] and I intended to purchase the Properties as our home. We had the common intention that we own the Properties jointly and the same common intention is reflected in the legal joint tenancy in the Properties that we held. I will further elaborate on the purchase hereinbelow. Subject to any equitable accounting, my beneficial interests in the Properties should be 50% and therefore, is substantially more than 9.18% as claimed by [P].”

“46. … the mortgage loan in the amount of $1,800,000 was taken out under the joint names of me …I am advised and verily believe that my proportion of beneficial interest, subject to equitable accounting, derives from the joint liability under the mortgage loan.”

35.  Ms Lok summarises D’s proposed defence as follows[8]:

“[D’s] defence is that at the time of purchase of the Properties, [P] and [D], lovers and cohabitants at that time, shared a common intention[9] that they were to own the Properties jointly.”

36.  Whilst certain other concepts (of equitable accounting, and D’s interest having allegedly been derived from the joint liability under the mortgaged loan) have been mentioned in D/Aff1, they have not been developed by Ms Lok in her written submissions.  No authority has been placed before me in support. In the course of the hearing, when this Court invited Ms Lok to assist as to how the concept of equitable account would factually arise, she informed this Court that she would stand by the proposed by common intention constructive trust.  Those other concepts have not been further pursued.

37.  I will hence focus upon D’s proposed defence based on common intention constructive trust, as summarised by Ms Lok at §8 of her written submission.

38.  Ms Lok, relying on Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, at §5.15, submits that in inferring common intention, the Court adopts a “holistic approach” and considers the “whole course of conduct”.  Mr Kong does not dispute that.  I accept that that is the correct approach.

39.  This Court does not hold a mini-trial.  But this Court is required to form a provisional view as to whether D has discharged his burden by potentially credible evidence showing that his proposed defence has any real prospect of success.

40.  I have considered all the relevant matters referred to me.  I have specifically considered those matters set out in §9 of Ms Lok’s written submissions which she highlights for this Court’s attention as part of the holistic consideration.  Having undertaken this process, and for reasons and matters highlighted below, I find that D has failed to discharge the onus on him to establish any defence with any real prospect of success:

(a)  I note the relationship between P and D;

(b)  I note that the Sui Wo Court Property had been held jointly by them. But they did not acquire the same via any purchase.  P inherited it from his father upon his death in 1987.  Even on D’s own case, P in 1996 repaid his debt (of about HK$200,000) in full, and that to show his love and commitment to P, he registered P’s name as a joint owner of Sui Wo Court Property;

(c)  The ownership of Sui Wo Court Property is not per se indicative of the nature of P’s and D’s respective interest in the Properties.  The valuation of that property does not change that;

(d)  The alleged Common Intention has not been recorded in writing anywhere;

(e)  4 sets of text messages between P and D have been produced (covering the periods between 29 July 2012 to 2 September 2014, 28 November to 8 December 2020, 25 to 29 March 2021, and 2 April to 18 June 2021);

(f)  Ms Lok relies on certain messages from P[10] and submits that P has made “admission” that “[s]he did not calculate in the past because parties were lovers.  She changed her mind to calculate because [D] married another woman behind her back.  She now changed their relationship to business partner”, that “[s]he could not pay $5,000,000 because she retired and did not want to take out a bank loan”, and that “[s]he offered to sell her share to [D] for $5,000,000”[11];

(g)  I have considered those messages.  The text message on 5 May 2021 which Ms Lok relies heavily on is as follows:

“沒有我，你連穗禾苑也保不住。以前是拖友關係，當然冇計。但現在，你竟在我背後偷偷攪女人，偷偷結婚，然後要我讓你女人上名在契，現在又迫我買樓，謀我錢財。咁賤的嘢都做得出。咁，我當然就要同你恩斷義絕！我已被你迫得發怒了！好！就當你是普通合作生意的合顆人，錢銀計算一定要認真了！”

(h)  Mr Kong has taken me through a number of other text messages.  They collectively support the clear picture that P had been seeking to settle the matter with D so as to have a clean break, whilst D had been dragging the matter on.  Different suggestions from both sides had been put forward and haggled.  They hardly constitute any admissions as Ms Lok submits them to be; 

(i)  In my view, rather than supporting D case, those text messages are in fact inconsistent with it.  In various messages, P said that she was the owner of the Properties, that it was her place, that her share was much bigger than that of D’s, and that upon calculation by lawyers, it would be shown that D had contributed less than a quarter[12]. Despite what P had said, D did not retort or counter by making reference to the alleged Common Intention.  When I sought Ms Lok’s assistance on these, the best she could point to was the message of 9 May 2011[13], that:

“P: 另外你死反骨佬何嘉輝已欠租$52萬元，你若本月仍不還，我要由本月……起計算埋利息……

D: 你有病睇醫生 欠你租你發神经!

我与太太住自己屋企不用交租

……

P: 你自己那小份收不收你女人租，你自己決定，我不會理你。

    我的那份一定要收……”

Despite what P had said (that “你自己那小份”), D made no reply, and made no reference to the alleged Common Intention;

(j)  It is most incredible for D not to have made reference to the alleged Common Intention had it in fact existed;

(k)  Jumping ahead in time, after P had obtained the Default Judgment, she started HCMP 1101/2022 for an order for sale, which she obtained during a hearing on 7 December 2022.  All papers for that application had also been served on D.  D also ignored them, and had done nothing until some 20 months after the Default Judgment when he finally took out the Setting Aside Summons;

(l)  Such prolonged inaction on D’s part is also most incredible if the alleged Common Intention had in fact existed;

(m)  There are more;

(n)  In respect of the use of the Sui Wo Property Sale Proceeds:

(i)    D in D/Aff1 claims[14] that down payment for the purchase of the Properties in the sum of HK$1,700,000 was taken out of the Sui Wo Property Sale Proceeds from their joint account;

(ii)   In P/Aff, with reference to the handwritten records she had kept, P accounts for the flow of funds in the Joint A/C[15]. In particular, she states that HK$1,000,000 out of those proceeds was on 1 September 2008 transferred from the Joint A/C to D’s Citigold account, after which transfer there was only less than HK$800,000 left in the Joint A/C;

(iii)  In D/Aff2, D does not dispute the transfer of HK$1,000,000 to his Citigold account.  He rather claims that he has no record of the fund transfer prior to the purchase of the Properties, and “it is the common understanding of [P] and I that substantial part of the [Sui Wo Court Property Sales Proceeds] was applied towards the purchase of the Properties”[16]. He has failed to provide any details on the basis of that alleged “common understanding”;

(iv)  On the evidence before me, in respect of the disputed facts as to the use of the Sui Wo Court Property Sales Proceeds, I form the provisional view that D’s evidence does not have a realistic prospect of being accepted;

(o)  In relation to D’s alleged monthly contributions:

(i)    P’s case that she paid the monthly mortgage repayments for the Properties is supported by the passbook of P’s Bank of China account;

(ii)   That passbook also shows that the partial early repayments of HK$1,400,000 (on 19 June 2010), HK$100,000 (on 19 August 2010), and all the subsequently reduced monthly repayments came from that same account;

(iii)  The mortgage became fully repaid in June 2011;

(iv)  D claims that he made payments to P as contributions towards the mortgage repayments.  He sets out those payments in a table at §47 of D/Aff1;

(v)   P’s evidence is that those payments represented the living expenses and other miscellaneous expenses D paid to her.  She pointed out that those payments were not made regularly, their amounts varied, and that some were in odd sums of HK$1,300, 200, 500, 712 etc;

(vi)  Most importantly, those payments continued till, as shown by P with reference to the passbook of her HSBC account, September 2014, well after the full settlement of the mortgage loan in June 2011;

(vii) As submitted by Mr Kong which I agree, D has failed to offer any reason as to why he kept making alleged contributions even after the mortgage had been paid off, and then why he stopped in 2014;

(viii)On the evidence before me, in respect of the disputed facts as to whether D had make any contribution towards the mortgage repayments, I form the provisional view that D’s evidence does not have a realistic prospect of being accepted;

(p)  D’s payment of the management fees means little, as he was in occupation of the Properties. 

41.  For the above reasons, I conclude that in respect of D’s proposed defence based on the existence of the alleged Common Intention, he has failed to discharge the onus on him to establish any defence with any real prospect of success.  For that same reasons, and in particular those set out above in §§40(n) and 40(o), no defence with any real prospect of success on equitable accounting has been established, even if it remains being pursued.

I.  Conclusion and disposition

42.  For the above reason, I dismiss D’s Setting Aside Summons.

43.  On costs, I order on a nisi basis that D shall bear the costs of the Setting Aside Summons, with certificate for one counsel, to be summarily assessed.  Any application for variation may be made by letter to this Court within 7 days from the date of this Decision, upon receipt of which this Court will hand down further directions, with the view of dealing with the same on the papers.  In the absence of any application for variation, P shall within 14 days from the date of this decision lodge her statement of costs, D to lodge his statement of objection 7 days afterwards, and P to lodge their reply within 7 days afterwards.