CHEUNG MAN YUEN v. CHAU WAN KAI JONAS

DCCJ 3353/2018

[2019] HKDC 991

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3353 OF 2018

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REASONS FOR DECISION

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1.  This is an appeal against the Master’s decision in refusing to set aside a default judgment. It is, therefore, a hearing de novo under O.19 r.9 The Rules of the District Court (Cap. 336H).

2.  After the hearing on 21 June 2019, I have already made the order that the appeal be dismissed with costs of and occasioned by the application be to the plaintiff with certificate for counsel. I have also given orders regarding the summary assessment of costs.

3.  I would give the reasons for my decision as follows.

Background of the proceedings

4.  On 31 July 2018, the plaintiff commenced the present action by writ to recover vacant possession against the defendant of a property known as Flat C, 18^th Floor, Block 2, Wah Yuen Chuen, No.8 Wah King Hill Road, Kwai Chung, New Territories (the “Property”).

5.  The defendant filed a Notice of Intention to Defend but failed to file any defence.

6.  Default judgment was therefore entered on 12 October 2018.

7.  On 26 April 2019, Master Simon Ho refused to set aside the judgment. The defendant is appealing against this decision.

The legal principle

8.  There is no submission before me that the judgment was irregular.

9.  The legal principle is trite: in order for the court to set aside a regular default judgment, the defendant needs to show that his defence has a realistic prospect of success.

Background of the case

10.  There is no dispute that the defendant had defaulted on various loans and, to cut a long story short, signed an Assignment of the Property to the Plaintiff on or around 4 August 2017 to sell the Property for a sum of HK$4.3M (the “Assignment”) in order to use the proceeds to repay various outstanding loans.

11.  It is also not in dispute that the defendant was represented by Messrs. Gallant for the assignment of the Property and that the purchase price was fully paid for. The defendant, at the end, only received a sum of HK$281.12 as the remaining balance.

12.  It is also not in dispute that he is still residing at the Property up until now.

The plaintiff’s case

13.  The plaintiff’s case is that after the Assignment was completed, the Property was leased back to the defendant for a monthly rent of HK$17,000 for the term between 4 August 2017 and 18 February 2019 under a written tenancy agreement (the “Tenancy Agreement”).

14.  There was also a re-purchase agreement between the parties which allowed the defendant to buy back the Property for no less than HK$5.16M on or before 4 February 2019 (the “Repurchase Agreement”).

15.  However, the defendant had only paid the deposit of HK$68,000 under the Tenancy Agreement and had failed to pay further rent due.

16.  In February 2018, the parties entered into a termination agreement stating that the defendant would deliver vacant possession on 17 March 2018 unless he paid HK$85,000 (being the rental arrears) on or before 28 February 2018 (the “Termination Agreement”).

17.  The defendant failed to do so. Therefore, the plaintiff commenced the current proceedings.

The defendant’s case

18.  The defendant’s case, as stated in the affirmation in support of the appeal, is that “the plaintiff did not complete the sale and purchase agreement dated 22 June 2017 and the assignment dated 4 August 2017” and that “there is a missing of HK$430,000 in the transaction” which was owed to him by the plaintiff.

19.  I need not go into much details of the circumstances leading up to the Assignment which are largely relevant to the current case. Suffice to say that if the defendant genuinely had any suspicion of any illegal scam or criminal activities, it would be a matter for him to report to the relevant authorities, which, of course, he has failed to do all along.

20.  In support of the first limb of his defence, the defendant told the court that he had all along been unclear about the exact sums of outstanding loans that he owed to various institutes. He said that he had demanded that he should be given a clear list and was promised that this would be made available to him on the day of the signing of the Assignment. In fact, this was not made available to him (he claimed that even now, he was unclear as to how much he owed at the time). Yet, he had signed the Assignment.

21.  I cannot see how this line of defence has any chance of success. The defendant was represented at the time. He could have instructed his lawyers to ascertain such, and he could have simply refused to sign the Assignment if he has any doubt as to the loans he owed, or indeed, any suspicion of criminal activities involved.

22.  As for the alleged missing sum of HK$430,000. This, as explained by the plaintiff’s counsel, Mr. Tasman Tam, was the deposit for the sale of the Property. The defendant did not provide any particulars as to how he thought there was a “missing sum” save that he claimed he was not clear how the sale proceeds was paid out.

23.  In fact, the plaintiff has exhibited various correspondence between his lawyers, Messrs. Liu, Chan and Lam, and Messrs. Gallant regarding the payment of the deposit and the balance of the purchase price which were split up for payments to various parties involved (letters from Liu, Chan and Lam dated 3 July 2017 and 4 August 2017).

24.  Suffice to say that if the defendant was actually unsure about how the various sums were paid out, he should instruct Messrs. Gallant to clarify at that time.

25.   Again, the defendant did not provide any evidence that he has taken any such action besides informing the court that he had called Messrs. Gallant only a few days before the hearing and was told that “they were unclear about the basis of how the sale proceeds was split.”

26.  This clearly does not support the allegation that the defendant was genuinely concerned as his inquiry to Messrs. Gallant (even if it is true) was made almost 2 years after the sale.

27.  In any case, if there was any allegation of improper handling of these payments, his cause of action would be against Messrs. Gallant but not the plaintiff, and none such would support the defendant’s claim that the assignment was not complete.

28.  Further, the defendant also disputed the authenticity of the remaining documents (including the Tenancy Agreement, the Re-purchase Agreement and the Termination Agreement).

29.  The defendant alleged that he was asked by the plaintiff to sign on pieces of blank paper and that he did so because he trusted the plaintiff. He also claimed that he had never seen the documents, implying that the contents of the documents were later added on.

30.  The court notes that, for the contents of the documents to fit, the plaintiff would have to ask the defendant to “initial” on the corners of some blanks whilst signing full signatures in the middle of other blank pieces of paper. And, having complied with all that, the defendant never gave evidence that he asked the plaintiff to see the “final product”. This is clearly a highly improbable scenario, not to mention the inherent improbability that the defendant would have complied with such a request from the plaintiff in the first place.

31.  One would also question that, without any tenancy agreement, why would the defendant still be occupying the Property almost 2 years after the assignment, and why would he issue a cheque of HK$68,000 to the plaintiff on 18 August 2017 (which coincides with the rental deposit stated in the Tenancy Agreement)? And, after having purchased the Property, why would the plaintiff decide to forge the documents when these would only benefit the defendant to continue to live in the Property?

32.  The defendant’s case is clearly illogical and his evidence are totally unconvincing. This is nothing but an attempt to delay delivering up vacant possession of the Property for as long as possible. There is no real prospect of success of the defence.