TSE HO KONG v. LIU WEIRONG

DCCJ 2681/2021

[2023] HKDC 274

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2681 OF 2021

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BETWEEN

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JUDGMENT

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Introduction

1.  This is the Defendant’s appeal against Master Leung’s decision made on 28 October 2021 dismissing her application to set aside the final judgment entered against her on 2 September 2021 in default of acknowledgement of service of the writ issued on 9 June 2021. A writ of possession was subsequently issued on 24 November 2021, but at the hearing of this appeal, I was informed that enforcement action has been suspended pending the outcoming of the appeal.

2.  This appeal was lodged out of time. At the hearing before me, the defendant, who was unrepresented, explained that she only issued the Notice of Appeal on 31 May 2022 because she was not familiar with court procedure. When she received letters from the plaintiff’s solicitors following up on the case, she went to the court to ask for help. Having regard to her age, her explanation that she was unfamiliar with court procedures, and the fact that she has otherwise taken active steps in the proceedings, including her attempts to apply for Legal Aid, I exercised my discretion to abridge the time for her issue and service of the Notice of Appeal, and proceeded with the hearing of the appeal.

3.  I also bear in mind that an appeal from the decision of a master is in the nature of a re-hearing, as though the matter has come before the judge hearing the appeal for the first time. Although the judge hearing the appeal may adopt the reasons of the master, his decision is in no way fettered by the previous exercise of the master’s discretion – see Hong Kong Civil Procedure 2023, Vol 1, at paragraph 58/1/2.

The facts

4.  The plaintiff’s claim herein against the defendant is in essence one for trespass, and for delivery of vacant possession of the property at Flat No 8 on 12 Floor of Block C, Hong Pak Court, No 139 Pik Wan Road, Kowloon (“the Property”). The Property was purchased by the plaintiff’s father, Tse Kuen Faat (“the Deceased”), under the Home Ownership Scheme of the Hong Kong Housing Authority in 1993. Upon the purchase, by an assignment dated 14 April 1993, the Property was registered in the names of the Deceased and the plaintiff as joint tenants.

5.  The Deceased was widowed and later remarried with the defendant on 11 June 2014. Since then, according to the defendant, she had been residing at the Property. The Deceased died intestate on 5 February 2022 at the age of 81. According to the plaintiff’s case, he became the sole owner of the Property by way of survivorship under the joint tenancy. It is pleaded in the Statement of Claim[1] that on a date unknown to the plaintiff, the defendant has occupied the Property without accounting for rent and without the apparent consent of the plaintiff and the Deceased. This then led to the present claim against the defendant for the recovery of possession of the Property.

Regular judgment

6.  The plaintiff contends, and I agree, that the default judgment entered against the defendant is regular. The writ herein was properly served on the defendant, who proceeded to apply for Legal Aid. Her application was refused on 31 August 2021. She failed to acknowledge service and file a Notice of Intention to Defend within the prescribed time, as a result of which default judgment was entered against her on 2 September 2021.

7.  The major consideration in deciding whether to set aside the default judgment in this case is whether the defendant has a real prospect of success in her defence, as discerned from the evidence filed by her. This is within the discretion of the court. The principles are well settled. Under O 13, r 9 of the Rules of the District Court (“RDC”), the court may, on such terms as it thinks just, set aside or vary any default judgment entered in default of acknowledgment of service of the writ.

8.  In the case of Goldteam Group Ltd v Qin Hui [2021] 5 HKC 708, Linda Chan J summarised the principles at paragraph 27:-

“27. By contrast [to an irregular judgment], in an application to set aside a regular default judgment, the major consideration is whether the defendant has shown a defence on the merits. For this purpose, the defendant must show that he has “a real prospect of success”. In the exercise of the discretion under the rule, the Court will have regard to all relevant circumstances in order to see where the justice of the case lies. The factors include why the default occurred, the defendant’s conduct after he had notice of the proceedings, an explanation for the time taken where there has been delay in making the application, and any prejudice that would be caused to the plaintiff or to third parties if the default judgment were to be set aside (Hong Kong Civil Procedure 2021, Vol 1, §§13/9/13, 13/9/14).”

The defendant’s evidence

9.  The main plank of the defendant’s case is that the Deceased had indicated his intention to transfer his share of the Property to her but this had not been agreed to by the plaintiff. Her evidence shows that in May 2019, the Deceased had obtained an application form from the Housing Authority[2] for the transfer of his share in the Property, and had filled in their personal particulars, naming the defendant as the transferee. The form bears the date of 8 June 2019. Subsequently on one occasion when the plaintiff, his wife and their child visited the Deceased and the defendant at their home for a family meal, the Deceased passed the said application form to the plaintiff for his agreement and signature, but the plaintiff refused to do so. According to the defendant, a serious row ensued between the plaintiff’s wife and the Deceased on that occasion because of the aforesaid request by the Deceased, to the extent that the Deceased was emotionally overwhelmed and even indicated he wished to call the police. According to the defendant, the Deceased in fact had several quarrels with the plaintiff and his wife over this issue, and the Deceased had been distressed by the dispute over a period of time.

10.  The defendant also says that on two occasions in June and September 2020, she had accompanied the Deceased to the offices of two solicitors’ firms attempting to make a will, but on both occasions the solicitors had difficulty understanding the tone of the Deceased’s dialect, so that no will was eventually made.

11.  Based on the above, in particular the fact that the Deceased had told her that he intended to transfer his share in the Property to her, and had requested the plaintiff to agree to and sign the application form for the transfer, the defendant claims that she is entitled to the Deceased’s share in the ownership of the Property upon his death. As such, the plaintiff is not entitled to evict her from the Property. She contends in her evidence that the Deceased was the one who purchased the Property and fully settled the mortgage repayments from 1991 to 1997. In view of his age, the Deceased had indeed wanted to pass to the defendant his share in the Property.

12.  Upon considering the Defendant’s evidence and contentions at the hearing of the appeal, I indicated to Mr Yau representing the plaintiff, that I would require further submissions on the issue whether there had been any severance in equity by the aforesaid conduct of the Deceased, in light of the matters deposed to by the defendant. This the plaintiff did.

The applicable law on severance in equity

13.  Section 8 of the Conveyancing and Property Ordinance (Cap 219) (“CPO”) provides:

“(1) A joint tenancy of an estate or interest in land may be severed at law only by –

(a) a notice served by a joint tenant on the other joint tenants; or

(b) an instrument.

(2) A joint tenancy of an estate or interest in land may be severed in equity by a notice served by a joint tenant on the other joint tenants or by any other method that is effective in equity or that would, but for subsection (1), be effective in law.”

14.  Based on the evidence before me, I do not think this is a case where section 8(1) would be applicable. There was no formal notice of severance, which is often prepared at a solicitors’ office on behalf of a client containing a specific reference to the intended severance, sometimes even referring to a severance of the legal title specifically[3], nor was there an instrument[4] where, e.g. a joint tenant alienates his interest by a sale or transfer of his title severing the joint tenancy which would have the effect of destroying the unity of title or ownership, e.g. see Malahon Credit Co Ltd v Siu Chun Wah Alice [1988] 1 HKLR196; Fortis Bank Asia HK v Yu Kam Hoi Herman [2004] 2 HKC 314.

15.  The question I need to examine further is whether there had been any severance in equity by reason of the conduct on the part of the Deceased under section 8(2) of the CPO, including whether the declaration of his intention, coupled with his presentation of the aforesaid application form to the plaintiff for his signature had amounted to a notice of his intention to sever the joint tenancy in equity[5]. If so, the defendant could argue that the beneficial interest of Deceased’s share in the Property had not passed on to the plaintiff by way of survivorship, but had formed part of his estate upon his death, to which the defendant would be entitled as his widow under intestacy.

16.  To start with, the plaintiff referred to the often cited case of Williams v Hensman (1861) 1 J & H 546 at 557, where Page Wood V-C expressed the following view concerning severance of a joint tenancy in equity:

“A joint tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. The right of each joint tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund – losing, of course, at the same time, his own right of survivorship. Secondly, a joint tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the other persons interested. You must find in this class of cases a course of dealing by which the shares of all the parties to the contest have been effected…” [underline added]

17.  In Burgess v Rawnsley [1975] Ch 429 at 439C, Lord Denning MR said the following after referring to the above passage:

“In that passage Page Wood V.-C. distinguished between severance “by mutual agreement” and severance by a “course of dealing.” That shows that a “course of dealing” need not amount to an agreement, expressed or implied, for severance. It is sufficient if there is a course of dealing in which one party makes clear to the other that he desires that their shares should no longer be held jointly but be held in common. I emphasise that it must be made clear to the other party…”

18.  Later at 439E, Lord Denning made the following further remarks:

“I come now to the question of notice. Suppose that one party gives a notice in writing to the other saying that he desires to sever the joint tenancy. Is that sufficient to effect a severance? I think it is[6].”

19.  It is submitted by the plaintiff that the above second and third ways of severance are not applicable to the present case as the defendant does not allege any mutual agreement or course of dealing between the plaintiff and the Deceased whereby it is shown that they had mutually treated their interests as constituting a tenancy in common.

20.  As for the first way of severance, the plaintiff contends that this entails an act which operates upon a joint tenant’s own share which must have a final or irrevocable character that effectively estops the severing joint tenant from claiming the benefit of survivorship in the future, referring to Re Wilks [1891] 3 Ch 59 at 61. In that case, a fund had been carried over in an administration action to the credit of the three infant plaintiffs as joint tenants. When the eldest of them attained the age of twenty-one, solicitors on his behalf had applied for his share in the fund to be paid out to him. The application by summons was returnable on a date and the parties attended, but due to the pressure of court business the summons could not be reached, and was adjourned to a later date. Before the returnable date of the adjourned hearing, the eldest plaintiff passed away. It was held that the application on his behalf for payment out to him his share in the fund did not amount to a severance of the joint tenancy. In order to amount to a severance of a joint tenancy, the act of a joint tenant must be such as to preclude him from claiming by survivorship any interest in the subject-matter of the joint tenancy. Stirling J expressed the following view at p 62:

“In the present case all that was done by or on behalf of Wilks Child was to take out and prosecute a summons for payment of one-third of the fund to himself; but no order was made. Until an order was made on that summons Wilks Child was completely master of the proceedings; he was at liberty, if he thought fit, to discontinue them at any moment, paying of course the costs incurred by the other parties. If then one of the infant co-Plaintiffs had died after the 28^th of March, and Wilks Child had been still surviving, I am unable to see why he might not have obtained leave to amend the pending summons by asking for payment to himself of a moiety of the fund instead of one-third; or if for any reason such leave was refused, why he should not have abandoned the pending summons on payment of costs, and issued a fresh summons claiming half the fund. If an order had been made on the summons the position would not have been the same; Wilks Child would no longer have been at liberty as of right either to abandon the summons, or to amend it. It is not necessary to decide the point, but he would then appear to me to have carried his acts to such a point as to preclude him from claiming any further right by survivorship.

There is very little authority on the question, but such as it is, it appears to me to be somewhat in favour of the view which I have taken. In Partriche v Powlet[7] Lord Hardwicke says: “If no agreement, then there must be an actual alienation to make it amount to a severance; the declaration of one of the parties that it should be severed, is not sufficient, unless it amounts to an actual agreement.””

21.  Based on Re Wilks above, the plaintiff argues that there was no conduct on the part of the Deceased of such irrevocable nature acting on his share of the interest in the Property that would have amounted to an effective severance in equity.

22.  However, In Re Wilkes was doubted by Browne LJ in Burgess v Rawnsley at 444D-H where he went on to say, after concluding that the joint tenancy was severed by an agreement and that the appeal would be dismissed on that ground:

“This conclusion makes it unnecessary to consider the important and difficult questions of what the effect of negotiations not resulting in an agreement or of a mere declaration would have been and, in particular, the problem raised by the decision of Plowman J. in In re Draper’s Conveyance [1969] 1 Ch 486, and Walton J. in Nielson-Jones v. Fedden [1975] Ch.222. I agree also that the proviso to section 36(2) of the Law of Property Act 1925 seems to imply that notice in writing would, before 1925, have been effective to sever a joint tenancy in personal property. It is clear that section 36(2), as Sir John Pennycuick is going to point out, made a radical alteration in the previous law by introducing the new method of severance by notice in writing, and that cases before 1925, in particular In re Wilks, Child v. Bulmer [1891] 2 Ch.59, must now be read in the light of this alteration. I agree that an uncommunicated declaration by one joint tenant cannot operate as a severance.” [underline added]

23.  A similar observation was made by Lord Denning MR at 439E-G.

24.  Section 36(2) of the Law of Property Act 1925 contains wordings similar to section 8(2) of the CPO, providing, where relevant, that “where a legal estate (not being settled land) is vested in joint tenants beneficially, and any tenant desires to sever the joint tenancy in equity, he shall give to the other joint tenants a notice in writing of such desire or do such other acts or things as would, in the case of personal estate, have been effectual to sever the tenancy in equity…”[8].

25.  It appears to me that the questions of what constitutes a notice to sever a joint tenancy in equity, and the effect of a declaration of intention to sever by one joint tenant, are important questions that have to be specifically examined in this case.

26.  In In re Draper’s Conveyance [1969] 1 Ch 486, it was held that a wife’s summons under section 17 of the Married Women’s Property Act 1882, together with her affidavit in support of the summons, showed an intention inconsistent with a continued joint tenancy and operated to sever her beneficial joint tenancy during the husband’s lifetime[9]. Plowman J referred to Hawskesley v May [1956] 1 QB 304 at 313 where Havers J said, after referring to the passage of Page Wood V-C in Williams v Hensman at 557 mentioned above:

“The first method indicated, namely an act of any one of the persons interested operating upon his own share, obviously, includes a declaration of intention to sever by one party.”

27.  Relying on what Havers J said in Hawskesley v May, he then went on to say at 491G-492D:

“So from that case I derive this: a declaration by one of a number of joint tenants of his intention to sever operates as a severance. Mr. Cooke also, as I have said, relied upon the notice in writing which under section 36(2) of the Law of Property Act, 1925, is allowed in the case of a joint tenancy in land, although not in personality, and he submits that the summons to which I have already referred, although not signed, amounted to a notice in writing on the part of the wife that she desired to sever the joint tenancy in equity. I say “although not signed by the wife or by anybody on her behalf” because there is no requirement in the subsection of a signature…it seems to me that [the wife’s] submissions are right whether they are based on the new provision in section 36(2) of the Law of Property Act, 1925, or whether they are based on the old law which applied to severing a joint tenancy in the case of a personal estate. It seems to me that that summons, coupled with the affidavit in support of it, clearly evinced an intention on the part of the wife that she wished the property to be sold and the proceeds distributed, a half to her and a half to the husband…I feel little doubt that in one way or the other this joint tenancy was severed in equity…” [underline added]

28.  In re Draper’s Conveyance was mentioned in Chiu Kwai Ping v Yip Tse Tang (a firm) unrep, HCA 2159 of 2016, 11 May 2018, DHCJ Saunders[10], and in the recent case of Wong Anita Shu Ting (formerly known as Wong Shu Ting Anita) v Yuen Yiu Chung HCMP 710 of 2021, 26 January 2022, Ng J. Counsel for the defendant in the latter case had misgivings about DHCJ Saunders’ reliance on Plowman J’s judgment in In re Draper’s Conveyance for the proposition that an act of a joint tenant evincing an intention contrary to the joint tenancy would effect severance, which was said to be contrary to other authorities, eg Berdal v Burns [1990] WAR 140 at 144-145[11].

29.  Berdal v Burns was a case decided by the Supreme Court of Western Australia concerning whether an order granted by the Matrimonial Court in 1975 had the effect of severing the joint tenancy of the former husband and wife in the matrimonial home, which was an issue different from that in the present case. At p.144, however, the court said:

“The mere commencement of litigation by one joint tenant against another seeking a partition, sale or settlement of their joint property will not effect a severance of the joint tenancy: In Re Wilkes [1891] 3 Ch 59; Davies v Davies [1983] WAR 305…”

30.  In Davies v Davies, the plaintiffs sought a declaration that the joint tenancy of the defendant and her deceased former husband in certain property was severed by her application to the court for the sale of the land and division of proceeds, seeking to defeat the right of the defendant to take her former husband’s interest in the land by survivorship. It was held by the Supreme Court of Western Australia, dismissing the plaintiffs’ claim, that a declaration of an intention to sever a joint tenancy made by one joint tenant and communicated to the other (in that case being the application to the court), of itself and without more, was insufficient as a severance of the joint tenancy in equity. Burt CJ observed that there was no equivalent to section 36 of the Law of Property Act in his jurisdiction, and that the plaintiffs needed to establish the proposition that a declaration of intention to sever would be sufficient to sever a joint tenancy in the absence of any statutory provision similar to section 36 of the Law of Property Act^[12]. He considered In re Draper’s Conveyance and expressed his view that that decision was not based on section 36 of the Law of Property Act but upon the judgment of Page-Wood VC in Williams v Hensman (above), with which he disagreed, in particular where it was said that an act of any one of the persons interested operating upon his own share obviously included a declaration of intention to sever by one party.

31.  With respect, I do not agree with Burt CJ in Davies v Davies that the decision in In re Draper’s Conveyance was not based on section 36 of the Law of Property Act. Plowman J clearly stated at 492B-C in his judgment[13] that the wife’s submissions were correct, whether they were based on the new provisions in section 36(2) of the Law of Property Act, or whether they were based on the old law which applied to severing a joint tenancy in the case of a personal estate. Plowman J had clearly considered the issue of notice under section 36(2) of the English Act. In effect, the judge accepted the wife’s submissions that her summons amounted to a notice in writing of her intention to sever the joint tenancy in equity.

32.  It is further pointed out by the plaintiff that where there is no outright transfer or alienation but only a specifically enforceable contract to transfer, such a contract would be effective to sever the joint tenancy – see Burgess v Rawnsley[14]. The plaintiff submits that the defendant’s case is different. She is solely relying on the application form obtained from the Housing Authority which was allegedly filled in by the Deceased, but the application form was not signed by the Deceased, so that it is not final or irrevocable. It does not constitute a specifically enforceable contract to transfer. As such, the plaintiff argues that there was no severance of the joint tenancy in equity.

33.  However, it appears to me that in Burgess v Rawnsley there was no specifically enforceable agreement but only a course of dealing where it had been mutually agreed that there should be a severance of the joint tenancy. Lord Denning said at 440E-F:

“It remains to apply these principles to the present case. I think there was evidence that Mr. Honick and Mrs Rawnsley did come to an agreement that he would buy her share for £750, That agreement was not in writing and it was not specifically enforceable. Yet it was sufficient to effect a severance. Even if there was not any firm agreement but only a course of dealing, it clearly evinced an intention by both parties that the property should henceforth be held in common and not jointly.”

34.  The question whether there was an enforceable agreement apart, I agree however that in any event there was no mutual agreement or intention in the present case arising from the course of dealing between the Deceased and the plaintiff that there should be a severance.

Discussion

35.  As I have said, the matter however does not end there. The questions of the effect of a declaration of intention to sever, and what would constitute notice to sever a joint tenancy in equity under section 8(2) of the CPO, need to be examined independently, in light of the cases referred to above.

36.  For the first question, despite there being a number of commonwealth cases, in particular the Western Australian cases referred to above[15], to the effect that a mere declaration by a joint tenant of an intention to sever a joint tenancy, or even the commencement of litigation seeking a partition or sale of joint property, did not amount to effective severance in equity, the English authorities referred to above, namely Williams v Hensman, In re Draper’s Conveyance and Hawskesley v May on the other hand seem to lend support to the proposition that a declaration of intention to sever, if communicated to the other joint tenants, could amount to a severance in equity. It seems to me that the law is not settled in this respect.

37.  As for the second question, i.e. what would constitute notice to sever a joint tenancy in equity under section 8(2) of the CPO, it seems from the above authorities, in particular In re Draper’s Conveyance, that this issue is very much at large.

38.  In the present case, the Deceased had obtained an application form from the Housing Authority for the transfer of his share in the Property to the defendant, and had filled in their personal particulars. The address of the Property was yet to be included in the form, but it is clear that the act of obtaining the form and presenting it to the plaintiff was an act referable to the Property. Although the Deceased had not signed on the form, he had clearly communicated his intention to the plaintiff and had requested him to sign on the form to signify his agreement. The plaintiff had refused the request, but the declaration of the intention on the part of the Deceased was clear to the effect that he wanted to transfer his share to the defendant, which could be relied upon as either amounting to a severance in equity by way of a declaration of intention, or the presentation of a document in writing that constituted a notice of severance.

39.  The present case may be one where, as Browne LJ has put it in Burgess v Rawnsley, the important and difficult questions of what the effect of negotiations not resulting in an agreement or of a mere declaration would have been can be decided upon.

40.  In passing, I note that according to the powers given to the Housing Authority under section 17A of the Housing Ordinance, Cap.283, and the information provided by the Housing Department[16], change of ownership is restricted except for disposal in the secondary market after two years has elapsed since the first assignment, or in the open market upon payment of a premium. However, the Housing Authority may at its discretion and on the merit of each case give consent to a request for change of ownership under special circumstances. It is not entirely clear whether the said restrictions would apply to the Property that was purchased in 1993 (the court has not been presented with the terms of the sale and purchase agreement signed with the Housing Authority with regard to the Property), and whether such an application for approval would have to be made for a transfer. Nevertheless, for the purpose of my deliberations on the issue whether there had been any severance in equity, I do not find such restrictions, even if applicable, would have an impact on the issue. It is not the defendant’s case that there had been an actual alienation of the Deceased’s interest in the Property leading to a severance, which, if made without the approval of the Housing Authority, was prohibited and would be rendered void under section 17B of the Housing Ordinance. In fact, it has been held that a notice of severance does not constitute an act of alienation that would be contrary to section 17B – see Che Yim Mei v Lei Sio Peng, in her personal capacity and as one of the executrices of the estate of Lee Ming Yuen, deceased, DCMP 3500 of 2020, 30 July 2021, HH Judge Harold Leong. Thus, the fact that the Property is under the Home Ownership Scheme would not affect the above issues to be decided on.

41.  Further, to make it clear, I do not find the evidence concerning the Deceased’s attempts to approach solicitors for the purpose of making a will helpful in this appeal, for a joint tenancy cannot be severed by the making of a will (Carr v Isard [2007] WTLR 409 at para.10). In any event, those attempts had not been communicated to the plaintiff and had not formed part of any discussions between the plaintiff and the Deceased, resulting in the making of mutual wills unlike, e.g. in the case of Chiu Kwok Yin Wendy and Chiu Kang Huen Kenneth as the Executors of the Estate of Chiu Wan Yin Vernessa Deceased v Lo Wai Hung Peter & Another, HCMP 1115 of 2021, 14 March 2022, Madam Recorder Rachel Lam SC.

42.  Based on the above, if the defendant’s evidence as to the Deceased’s conduct was accepted, it could be seriously argued on the part of the defendant that the joint tenancy had been severed in equity. I do not see anything incredible in the defendant’s evidence as to the circumstances surrounding the presentation of the said application form by the Deceased. In fact, the defendant’s factual evidence had not been seriously challenged by the plaintiff. Based on the legal analysis above, I find, without saying more, that the defendant has shown merits in her defence that carry a real prospect of success.

43.  In passing, I should mention that the plaintiff has also referred to a potential argument by the defendant on common intention constructive trust. However, I do not think this may assist the defendant as there could have been no common intention in the present case between the Deceased and the plaintiff as to the beneficial ownership of the Property to be held under a tenancy in common. As such, I do not see any need to go in that direction.

Conclusion

44.  On the above considerations, I find that the defendant, by her evidence, has demonstrated a real prospect of success in establishing that the Deceased had declared his intention, and given notice to the plaintiff with a view to severing the joint tenancy in equity, or had otherwise by his conduct severed the joint tenancy in equity.

45.  Even if it can be said that the law is currently unsettled, this would be the very reason why I should exercise my discretion to set aside the default judgment and allow the issues to be resolved. Whilst it is important that a party should be expected to observe the procedural rules, on the other hand, he should not be deprived of an adjudication of the case on its merits. These are two underlying principles the court has to consider when exercising its discretion whether to set aside a default judgment – see Hugo Boss Trademark v Britain Boss International Co Ltd [2015] 3 HKLRD 4 at paras.27-28; Hong Kong Civil Procedure 2023, Vol.1, para.19/9/1. Based on the above analysis, I am of the view that the discretion should be exercised in favour of the defendant in this case.

46.  I therefore allow the appeal and set aside the default judgment entered against the defendant. In view of my ruling, I also set aside the Writ of Possession issued on 2 September 2021. I also make the following orders:

(i) The defendant shall file and serve her Acknowledgment of Service within 7 days from the date hereof;

(ii) The defendant shall file and serve her Defence and Counterclaim (if any) within 28 days thereafter;

(iii) The plaintiff shall file and serve his Reply and Defence to Counterclaim (if any) within 28 days thereafter.

Costs

47.  Usually, the plaintiff should be entitled to the costs of setting aside a regular judgment. The relevant principles have been summarised by Deputy High Court Judge William Wong SC in Lu Shaoping v Wu Lianmo & others, HCA 589 of 2019, 4 June 2020, where he said at paras.5 to 7:

“5. Generally, the costs of setting aside a regular judgment should be awarded to the plaintiff. In Ko Sin Yau v Chan Chuen & Another [2007] 1 HKLRD 324, Cheung JA at §21 said:

“21. Generally speaking if an irregular judgment is set aside then the plaintiff should be ordered to bear the costs of the setting aside of the default judgment because the judgment was not properly obtained in the first place. However, where a judgment was set aside not because of it being irregular but because of a meritorious defence the general rule is that the defendant should bear the costs of the application to set aside the default judgment. As an alternative the costs of the application can be in the cause of the action.”

6. The Court can exercise its discretion to depart from the general rule but it must do so with good reason.

7. Where the plaintiff continues to resist a setting-aside application when the basis of the defendant’s defence has been revealed, the costs for resisting the setting-aside application should follow the event. (See Harbour Hero Enterprises Ltd v Chau Nung Tai [2019] 3 HKLRD 174 (CA) which applied Chung J’s judgment in Welson International Limited v Jebson Investments Limited, unreported, HCA 2620/2008, 29 June 2010 at §16)”

48.  There seems to be no reason why the general practice should be departed from in this case. The issue concerning severance of a joint tenancy in equity was raised by the court at the hearing, and secondly it is one that required extensive consideration. It cannot be lightly or fairly said that the plaintiff ought to have stopped resisting the appeal. In the circumstances, I order that the costs of the hearing on 28 October 2021 and the costs of this appeal be to the plaintiff. The plaintiff shall lodge and serve his statement of costs within 28 days from the date hereof, and the defendant shall lodge and serve a list of objections 28 days thereafter, if any. The costs shall then be assessed summarily on paper.

49.  Lastly, I wish to thank Mr Yau for his assistance, and the defendant for attending the hearing.