CHONG PUI CHEONG v. CHONG PUI KWONG the Administrator of the estate of CHANG IN, Deceased

HCA 240/2013

[2022] HKCFI 3110

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 240 OF 2013

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BETWEEN

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D E C I S I O N

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A. INTRODUCTION

1.  On 6th October 2014, the Defendant having defaulted in filing any defence, judgment (“the Judgment”) was entered in favour of the Plaintiff against the Defendant, granting a declaration that the Plaintiff holds the sole beneficial interest in Flat H on 6th Floor of Block 2, South Wave Court, 3 Shum Wan Road, Aberdeen, Hong Kong (“the Property”).

2.  The Defendant indicated that he would not assist in transferring the Property to the Plaintiff.

3.  On 12th September 2018, the Plaintiff issued a summons (“the Plaintiff’s Summons”) seeking an order under s.25A of the High Court Ordinance (Cap.4) (“HCO”) that the Defendant execute a transfer of the Property; alternatively, that the documents required for the transfer be executed by the Registrar and should take effect as if they had been executed by the Defendant.

4.  On 20th August 2021, the Defendant issued a summons (“the Defendant’s Summons”) seeking to set aside the Judgment.

B. THE BACKGROUND

5.  Save as indicated, the following is not disputed, or is indisputable having regard to the contemporaneous documentation.

6.  The Plaintiff and Defendant are brothers, with eight other siblings. Their late mother (“Mother”) was the tenant of a public housing unit at Wah Fu Estate in 2006 (“the Wah Fu Unit”). It is not disputed that under the Government’s Home Ownership Schemes Secondary Market Scheme, Mother was entitled to, and did, acquire the Property in exchange for giving up the tenancy of the Wah Fu Unit. The Plaintiff says that he and Mother had agreed that Mother would apply to purchase the Property, the Plaintiff would pay for the purchase price and all expenses for the Property including the deposit, mortgage repayments, utility expenses, and government rates and rent, and that the Plaintiff would be the sole beneficial owner of the Property. The Defendant, however, says that Mother decided to acquire the Property using her and her late husband’s assets, and monthly maintenance contributions from some fifty-odd family members (except the Plaintiff).

7.  The Plaintiff moved in to live with Mother at the Property.

8.  Mother passed away in March 2009.

9.  After Mother’s passing, the Plaintiff continued to live at the Property. The Plaintiff says that he continued to pay the mortgage instalments and expenses associated with the Property.

10.  On 5th March 2010, the Plaintiff wrote to the Defendant and other beneficiaries of Mother’s estate, asking for confirmation that they agreed to the transfer of the Property to the Plaintiff at nil consideration, given the agreement between the Plaintiff and Mother. The Defendant did not procure any transfer.

11.  In June 2010, the Defendant obtained letters of administration in respect of Mother’s estate.

12.  The Plaintiff commenced the current proceedings in February 2013, claiming a declaration that the Plaintiff holds the sole beneficial interest in the Property, and an order that the Defendant execute a transfer of the Property to the Plaintiff.

13.  An acknowledgement of service of the Amended Writ of Summons was filed on 5th March 2013 (“the Acknowledgment of Service”), stating that the Defendant had no intention to contest the proceedings. In an affirmation of 18th August 2021 (“Kwong 1st”) the Defendant claimed that the Acknowledgment of Service was a forgery and was not signed by him.

14.  In the meantime, the Judgment was entered against the Defendant on 6th October 2014.

15.  Subsequently, the Plaintiff took steps to apply to the Director of Housing for a transfer of ownership of the Property. He was told that he needed to provide a form signed by the Defendant and other documents from the Defendant. The Plaintiff’s solicitors wrote to the Defendant in February and August 2015 asking whether the Defendant would provide the requested documents. There was no response to the letter. A final demand was sent on 25th May 2017. According to the Plaintiff, the Defendant telephoned the Plaintiff’s solicitors on 31st May 2017 to say that he would not provide the documents.

16.  The Plaintiff subsequently issued the Plaintiff’s Summons on 12th September 2018 seeking an order under s.25A HCO. The Plaintiff’s Summons was served on the Defendant at the same address as was used for service of the Amended Writ.

17.  The Plaintiff’s Summons came before DHCJ Leung for hearing on 18th October 2018. The Defendant attended the hearing with another brother, Chong Pui Wa, who spoke on the Defendant’s behalf and handed up some written submissions (“the Statement of Opposition”) (in Chinese), signed by both of them, opposing the Plaintiff’s application. DHCJ Leung pointed out that the Defendant had filed an Acknowledgment of Service indicating no intention to defend the proceedings (and this was not denied at the time). He told Chong Pui Wa that if the Defendant sought to challenge the Judgment, he should do so within 21 days (without prejudice to the Plaintiff’s right to argue that the Defendant was out of time to do so). He expressly indicated that the court was not advising the Defendant as to what procedure was to be followed, and that he should seek legal advice. Chong Pui Wa answered that he understood.

18.  The Defendant subsequently issued the Defendant’s Summons on 20th August 2021, seeking to set aside the Judgment.

C. PRINCIPLES APPLICABLE AS TO SETTING ASIDE DEFAULT JUDGMENT

19.  The principles are not in dispute. A judgment in default which has been entered irregularly (that is, where service of the writ was defective) will be set aside ex debito justitiae, without regard to the merits of the proposed defence, although the court retains a residual discretion to decline to set it aside or to impose terms when setting it aside. See Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1996] 4 HKC 157.

20.  Where the judgment was regular, the burden is on the defendant to demonstrate that he has a defence on the merits which has a real prospect of success or carries with it come degree of conviction. If a defendant is unable to discharge the burden, there is no point in the action continuing and the court will not exercise its discretion to set aside the judgment. Exceptionally, even if the defendant demonstrates a defence with a real prospect of success, the court might still exercise its discretion not to set aside the judgment. See Young Bing Ching (deceased) v Chow Yung Fong and another [2001] 2 HKLRD 394 at 398H-J, 402D-404H.

21.  In order to show a defence on the merits, bare assertions are not sufficient. Unless the defendant can produce potentially credible affidavit evidence demonstrating a real likelihood that he will succeed on the facts, he cannot be said to have shown that he has a real prospect of success. The court needs to form some provisional view of the probable outcome of the action, although this does not mean that the court should undertake a mini-trial on affidavit evidence. Where the outcome depends on whose evidence is likely to be accepted, the appropriate test for determining whether the defendant has a real prospect of success is to ask whether the defence “could well be established” at trial or whether the defence witness could well be believed at trial. See at Sourthwest Securities (HK) Brokerage Limited v Liu Su Heng and another [2021] HKCFI 863 at [10] to [11], where DHCJ To reviewed the authorities.

D. WHETHER JUDGMENT REGULAR

22.  The Defendant claims that he never received the Amended Writ, and that the Acknowledgment of Service is forged.

23.  As the Plaintiff submits, the issue is not so much whether the Acknowledgment of Service was forged, but whether the Amended Writ was properly served. Even if the Acknowledgment of Service was signed or filed by someone other than the Defendant, it does not follow that the Amended Writ was not properly served in the first place.

24.  In this regard, the complaint by the Defendant that there was no affidavit of service to prove due service on the Defendant is misplaced. The reason why there was no affidavit of service was because the Acknowledgment of Service was filed. As Ms Lilian Ip, counsel for the Defendant, accepted, there was no basis to doubt the validity of the Acknowledgment of Service at the time when the application to enter judgment in default of the Defendant’s service of a defence was made. In such circumstances, the Plaintiff’s solicitors cannot be criticised for not having filed an affidavit of service, which is the usual practice where a defendant acknowledges service and indicates that he does not intend to contest the proceedings: Richie Interiors Ltd v Sanko Technology Ltd & others [2002] 3 HKLRD 441 at [21].

25.  Whilst there is no affirmation of service from the process server himself, there is in fact evidence before the court that service was properly effected. In the Affirmation of Chong Pui Cheong filed on 22nd May 2013 (“Cheong 1st”) the Plaintiff gave evidence that he was informed by his solicitors that they served the Amended Writ on the Defendant on 26th February 2013 by (a) posting it under cover of a letter to the Defendant’s first last known address at Room 1408, 14th Floor, Wah Sang House, Wah Fu Estate, Aberdeen, Hong Kong, and (b) posting it under cover of a letter to the Defendant’s second last known address at Flat 16, 1st Floor, Chi Tak House, Lung Tak Court, Stanley, Hong Kong. The Plaintiff also exhibited copies of both covering letters. Kwong 1st confirmed that the proper address for service of the Amended Writ on him should be the former, which he described as being his residential and correspondence address. I also note that this is the address which was used for various correspondence between the Plaintiff’s solicitors and the Defendant in 2013 and 2014 relating to the Plaintiff’s application for default judgment prior to the entry of the Judgment, and the Defendant has not suggested that he did not receive any of this correspondence.[1]

26.  I therefore do not accept the Defendant’s submission that the Judgment was irregularly entered.

E. WHETHER MERITORIOUS DEFENCE SHOWN

27.  The Defendant says that the principal planks of his defence are that (1) Mother’s intention in purchasing the Property was to pass on and distribute the beneficial interest in the Property to all of her children equally, and (2) the Property was purchased by Mother with her and her late husband’s assets, as well as the maintenance contributions from other family members. It is said that these are factual matters which could only be resolved at trial.

28.  In Kwong 1st, the Defendant’s evidence as to these matters was as follows.

28.1 At the time when Mother’s late husband passed away, he left over $1m in cash and a number of gold balls and gold rings to her (“the Parents’ Assets”).

28.2 In or around 2006, after discussing with family members, Mother decided to purchase the Property, voluntarily giving up the tenancy of the Wah Fu Unit to enable the purchase. It was Mother’s intention to acquire a better place to live in for the rest of her life, and to pass on and distribute the beneficial interest in the Property to all her children equally after her death.

28.3 Mother used the Parents’ Assets in order to pay for the down payment of the Property, the legal expenses, the commission for the real estate agent, and renovation costs of the Property. A mortgage loan (“the Mortgage Loan”) was taken out for the balance of the purchase price, and Mother intended to repay the Mortgage Loan using the Parents’ Assets and monthly maintenance payments totaling over $20,000 made by members of the family (except for the Plaintiff) to her. The Defendant produced a list of his family members’ names and phone numbers.

28.4 Soon after Mother acquired the Property, the Plaintiff stole all of the remaining Parents’ Assets, and he took Mother to a cubicle (板間房) at Hoi Wu Court, Aberdeen Centre to live with strangers. This was evidenced by an accident and emergency record from Queen Mary Hospital dated 21st February 2009 which gave the Hoi Wu Court address as the Plaintiff’s address.

29.  It was submitted by counsel for the Plaintiff, Mr José-Antonio Maurellet SC (appearing with Mr Roger Phang) that these were bare allegations. The only two documents adduced by the Defendant were the list of family members’ names and phone numbers and the hospital accident and emergency record. I agree that they do not constitute credible evidence of the Defendant’s allegations.

30.  Furthermore, the Statement of Opposition which was signed by the Defendant and submitted to the court at the hearing of 18th October 2018 contradicts Kwong 1st on a number of important points. The Statement of Opposition had stated that:

30.1 Mother had not been willing to give up the Wah Fu Unit and in fact it had been given up without her knowledge. Chong Pui Wah had made enquiries of the staff of the Housing Authority and been told that a tenant giving up a public housing unit to purchase a Home Ownership Schemes unit did not need to personally handle the relevant procedures. This was the cause of all subsequent troubles;

30.2 it was unreasonable and illogical for Mother to give up the Wah Fu Unit and to buy the Property as she had severe health problems, was 85 years old, blind and suffering from cancer;

30.3 Mother had no savings and had to take out a bank loan to purchase the Property.

31.  These inconsistencies undermine the credibility of the case now sought to be advanced in Kwong 1st.

32.  Ms Ip urged me to consider the inconsistencies in the light of the fact that the Defendant had a limited education. However, even with this in mind, I do not consider the Defendant’s affidavit evidence to be sufficiently credible so as to demonstrate a real likelihood that he will succeed on the facts.

32.1 The Defendant attempted to explain the inconsistencies in Kwong 2nd. He explained that he and Chong Pui Wah had limited education and did not know English, let alone law. The Statement of Opposition had been drafted by a friend of Chong Pui Wah, who claimed to have some legal knowledge and offered to assist on a complimentary basis; however, due to a communication barrier and/or misunderstanding between Chong Pui Kwong and the friend, the Statement of Opposition did not accurately reflect the Defendant’s case. In fact, part of the facts in the Statement of Opposition did not reflect the Defendant’s true case. In any event, it was an irrelevant document as it had never been filed as a pleading and was not binding on the Defendant, and could be disregarded by the court.

32.2 This does not properly explain what the communication barrier was, and how any misunderstanding could have come about: the Statement of Opposition was written in Chinese, and the Defendant does not say that he was unable to read or understand it, or that he did not read or understand it when he signed it. The inconsistencies relate to simple facts, not any issue of law, such as whether Mother had made the deliberate decision to give up the Wah Fu Unit so as to purchase the Property with a view to leaving it to her children, or whether she had not even been aware that she had given up the Wah Fu Unit at all (and would not have been willing to do so). The Defendant signed the document and it was submitted to the court to oppose the Plaintiff’s application for judgment. He must have intended the court to treat it as a serious and truthful document.

33.  The Defendant’s current stance (that Mother purchased the Property so that it could be passed on to all of her children, and it was paid for by (inter alia) the contributions of such beneficiaries) should also be assessed against the fact that it is the Defendant who applied for and obtained letters of administration of Mother’s estate. As Mr Maurellet submitted, the Defendant should have been seeking to get in and realise the assets of the estate for the benefit of the beneficiaries. However, there is no evidence that after Mother died in 2009 and the Defendant obtained letters of administration in June 2010, the Defendant sought to arrange for repayments under the Mortgage Loan, to evict the Plaintiff (who is still living in the Property), or to sell the Property and distribute the proceeds to the beneficiaries – some or all of which would have been expected if the Property formed part of Mother’s estate. There were also, as mentioned above, various letters sent to the Defendant in 2013 and 2014 regarding the Plaintiff’s application for default judgment, which the Defendant does not deny receiving; yet he did nothing to oppose the application until the hearing in September 2018.

34.  Kwong 1st had said that Mother decided to purchase the Property after discussing with family members. There is no evidence that any of the other siblings, who are entitled to a share of Mother’s estate, have objected to the Plaintiff’s occupation of the Property. The Plaintiff’s solicitors wrote to each of the beneficiaries on 5th March 2010 demanding confirmation in writing that they agreed to the transfer of the Property from the estate of the Deceased to the Plaintiff at nil consideration. No objection to such a course was received.

35.  The Defendant’s case also needs to be assessed against the Plaintiff’s evidence, which shows that:

35.1 the Plaintiff was the one who had records of payment of various expenses in relation to the Property, including mortgage instalments, rates and government rent, management fees, utilities bills, cable television fees, legal expenses relating to the acquisition of the Property;

35.2 some of these payments spanned both the period prior to Mother’s death, and the period afterwards;

35.3 the initial deposit for the acquisition of the Property was paid for by a cheque drawn on the Plaintiff’s account;

35.4 the formal agreement for sale and purchase of the Property gave the Plaintiff’s company’s address as Mother’s address. The Plaintiff says that this was for correspondence purposes during the acquisition process;

35.5 some of the mortgage instalments made after Mother passed away, whilst paid from Mother’s bank account, were funded by the proceeds of cheques drawn on the Plaintiff’s company’s account (the Plaintiff produced evidence of monthly payments into Mother’s bank account from 2014 to mid 2018). The Plaintiff says that he also funded the mortgage instalments paid prior to Mother’s death, although he did not have contemporaneous records of such funding.

36.  Ms Ip submits that the Plaintiff’s evidence as to whether Mother had been evicted from the Property and sent to a cubicle in Hoi Wu Court to live was inconsistent. The Plaintiff had not mentioned the cubicle in the Amended Statement of Claim, and accounted for it only after Kwong 1st raised it. Then (it is said), he gave inconsistent versions of what happened, on one occasion saying that Mother regularly went to Hoi Wu Court during the day accompanied by a helper, but on another occasion making no mention of the helper. Furthermore, the Defendant said that he never saw a helper at Hoi Wu Court, and that Mother had been both day and night. However, these matters do not bolster the credibility of the Defendant’s case. Even if it could be said that they may raise some questions as to the Plaintiff’s version of events, they do not assist the Defendant in establishing the defence he seeks to put forward. The issue before me is not whether the Plaintiff has proved his case.

37.  I therefore do not consider that the Defendant has shown that he would have a real prospect of success at trial.

F. THE PLAINTIFF’S SUMMONS

38.  The Defendant’s principal argument against the Plaintiff’s Summons is that the court is functus officio so that it cannot grant the relief sought by the Plaintiff (ordering the Defendant to execute a transfer of the Property to the Defendant, and/or an order that the Registrar execute such documents pursuant to s.25A HCO). Ms Ip submitted that the court had no jurisdiction to grant such orders as DHCJ Kent Yee did not order the Defendant to execute a transfer of the Property. The only remedy was for the Plaintiff to appeal against the Judgment.

39.  I do not agree that the DHCJ Kent Yee decided the issue against the Plaintiff, leaving the Plaintiff with only the option of an appeal. Rather, he left it open for further consideration if necessary. The Plaintiff’s evidence, which is not disputed, is that although the summons issued on 22nd May 2013 for judgment in default of defence had also sought an order that the Defendant execute a transfer of the Property to the Plaintiff, Deputy High Court Judge Kent Yee did not make such an order at the hearing of the summons on the basis that it was premature to do so, there being insufficient evidence before the court that the Defendant would not cooperate in executing the documents for a transfer. After all, at that stage, there was before the court the Acknowledgment of Service indicating that the Defendant would not contest the proceedings, and the Defendant did not appear at the hearing. As events have transpired, the Defendant is not, in fact, willing to cooperate, so that it is necessary for the Plaintiff to return to court to seek relief.

40.  The Defendant then argues that unless the Plaintiff can demonstrate that a transfer of the Property to him would not violate the policies of the Housing Authority or that the Housing Authority has consented to the waiver of a payment of premium, no assignment of the Property should be executed in favour of the Plaintiff, as this would bypass the authority of the Housing Authority, there being a restriction on alienation of the Property.

41.  However, the Defendant has not adduced any evidence as to what the restriction is in the present case such as to prevent a transfer of the Property to the Plaintiff.

42.  Furthermore, I agree with the Plaintiff that there is in any event nothing in the argument. It is not disputed that in its letter of 18th December 2018, the Housing Authority noted that the death of Mother could constitute a reason to allow a change in ownership, and indicated that the application for transfer of ownership could only be considered provided that the Registrar of the High Court or someone else who could legally exercise the power of the administrator (of Mother’s estate) signed the application form for transfer of ownership and executed the subsequent Deed of Assent. The orders sought would therefore not bypass the authority of the Housing Authority.

43.  The Defendant has not advanced any other substantive reason as to why he should not have to transfer the Property to the Plaintiff. The Plaintiff has already obtained a declaration that he holds the sole beneficial interest in the Property, so that the Defendant holds the legal title to the Property on trust for the Plaintiff. There is no reason why the Plaintiff cannot call for the transfer of the Property from the Defendant.

G. DISPOSITION

44.  I therefore dismiss the Defendant’s Summons.

45.  As for the Plaintiff’s Summons, I make an order that the Defendant do execute the documents required (a) to apply for the Housing Authority’s consent to a change of ownership of the Property to the Plaintiff, and (b) upon such consent, to effect the transfer of the Property to the Plaintiff. In the event that the Defendant neglects or refuses to comply with the Plaintiff’s written request in respect of either (a) or (b) within 21 days of the making of such a request, the documents shall be executed by the Registrar and shall take effect as if they had been executed by the Defendant.

46.  I further make a costs order nisi that the Defendant pay to the Plaintiff the costs of and occasioned by both the Defendant’s Summons and the Plaintiff’s Summons, to be taxed if not agreed.