HUANG TEH HSIUNG v. HUANG SUNG SHEN AND ANOTHER

HCA 1891/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1891OF 2014

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DECISION
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INTRODUCTION

1.  I have before me a summons dated 13 July 2015 (“the summons”) issued by the plaintiff seeking judgment against the 1^st and 2^nd defendants in default of defence, pursuant to Order 19, rule 7 of the Rules of the High Court.

Background

2.  This action was brought by the plaintiff against the 1^st and 2^nd defendants by way of a writ of summons issued on 24 September 2014.

3.  The plaintiff’s claim against the 1^st and 2^nd defendants is for (inter alia) a declaration that they hold the property known as Flat B, 20/F, Block 7, Villa Oceania, No 8 On Chun Street, Ma On Shan, Sha Tin, New Territories, Hong Kong (“the Property”) upon trust for the plaintiff and an order that they transfer the Property to the plaintiff.

4.  The following allegations appear in the statement of claim:-

(1) The plaintiff is the father of the 1^st defendant.

(2) The 1^st and 2^nd defendants were formerly husband and wife.  They married in February 2001 and divorced in April 2014.

(3) Prior to January 2003, the 1^st defendant was working in the USA, and the 1^st and 2^nd defendants and their children were all living in the USA.

(4) In or around February 2003, the 1^st defendant moved from the USA to Hong Kong to assist the plaintiff in the latter’s business in Hong Kong and mainland China.

(5) In around March 2005 –

(a) the 2^nd defendant moved from the USA to live with the 1^st defendant in Hong Kong;

(b) as the plaintiff intended the 1^st defendant to stay in Hong Kong for a substantial period of time, he decided to purchase a property in Hong Kong for the 1^st defendant and his family to live in;

(c) the plaintiff informed the 1^st and 2^nd defendants of his intention to purchase a property in Hong Kong for them to live in rent-free while the 1^st defendant was working for the plaintiff in Hong Kong.

(6) Between 2005 and 2007, the plaintiff transferred the total sum of US$900,000 (“the Funds”) into a joint account the 1^st and 2^nd defendants in Hong Kong, expressly informing them to keep the money on his behalf to purchase the intended property.

(7) In or around August 2007, the plaintiff and the 1^st and 2^nd defendants orally agreed that the latter would use the Funds to purchase a property in Hong Kong in their names and held the property on the plaintiff’s behalf.  It was also agreed that the intended purchase of the property would be partly financed by a mortgage loan, such loan to be repaid by the plaintiff.

(8) In October 2007, the Property was purchased by the 1^st and 2^nd defendants pursuant to the aforesaid oral agreement.  The purchase price was HK$6,780,000, which was financed partly by the Funds and partly by a mortgage loan of HK$1,500,000 obtained from HSBC.

(9) Soon after the purchase of the Property, the 1^st defendant moved permanently back to Taiwan as a result of sickness, while the 2^nd defendant remained in Hong Kong.

(10) The 2^nd defendant moved into the Property in around late 2007 or early 2008.  She lived in the Property until January 2010, when she left Hong Kong and moved back to Taiwan to live with the 1^st defendant.

(11) The plaintiff paid all the mortgage loan instalments, and the mortgage loan was fully repaid on or about 5 October 2012.

(12) The plaintiff claims to be the sole beneficial owner of the Property by way of an express trust, or alternatively a resulting trust.

(13) Despite repeated requests and demands, the 1^st and 2^nd defendants have refused or failed to sign any document required in connection with the discharge of the mortgage so that the plaintiff could take possession of the Property and obtain the title deeds relating to the Property, or transfer the Property to the plaintiff, or pay the plaintiff a sum equivalent to the value of the Property.

5.  On 5 January 2015, Master Ho granted leave to the plaintiff to issue a concurrent writ and to serve the same on the 1^st and 2^nd defendants out of the jurisdiction.  Pursuant to such leave, the concurrent writ was served on the 1^st and 2^nd defendants in Taiwan.

6.  The 2^nd defendant acknowledged service of the writ and gave notice of intention to defend through her former solicitors on 21 April 2015.  She applied for legal aid, but the application was refused by the Director of Legal Aid on 26 May 2015.  Pursuant to a notice to act in person, the 2^nd defendant has been acting in person in this action since 29 June 2015.

7.  Having regard to the statutory stay of proceedings consequent upon the 2^nd defendant’s legal aid application, the time for the 2^nd defendant to serve her defence expired on 30 June 2015.

8.  On 8 July 2015, the 1^st defendant acknowledged service of the writ, and indicated that he did not intend to defend the plaintiff’s claim against him.

9.  As earlier mentioned, on 13 July 2015 the plaintiff took out the summons seeking default judgment against the 1^st and 2^nd defendants.

10.  On 14 July 2015, a defence and counterclaim of the 2^nd defendant dated 10 July 2015 was received by the court. According to the plaintiff’s skeleton submissions dated 23 July 2015, the plaintiff also received a copy of the defence and counterclaim of the 2^nd defendant on 15 July 2015.

11.  A number of matters are raised in the 2^nd defendant’s defence and counterclaim, which apparently was prepared by the 2^nd defendant herself.  The only point of substance raised in her defence which is relevant to the plaintiff’s claim is the contention that the Property was a “gift” by the plaintiff.

Discussion

12.  Where a defence is served after the expiration of the prescribed time but before judgment has been given, the court should not disregard the defence and enter judgment for the plaintiff as if the defence does not exist.  The applicable principles are set out in the judgment of Deputy High Court Judge A Cheung (as he then was) in California Insurance Company Limited v Choung Suk Wah, HCA 172/2002 (19 September 2002), as follows:

“ 19. As mentioned above, the Plaintiffs’ motion for judgment in default of defence falls within O.19 r.7. The Court has a discretion whether to give judgment or to extend a party’s time to plead when it is just to do so: See Hong Kong Civil Procedure 2002 (Vol. 1) para. 19/7/13.

20. Furthermore, if the defendant has put forward a defence albeit out of time and without leave, the Court should look at the merits of the defence as disclosed in deciding whether to accede to the plaintiff’s motion for judgment, and if so, to what extent; the Court cannot simply disregard the defence: See Gill v Woodfin (1884) 25 Ch D 707; Gibbings v Strong (1884) 26 Ch D 66; Hong Kong Civil Procedure 2002 (Vol. 1) para. 19/7/4.  Whilst in the present case, no defence has yet been filed by the Defendants and all that I have got is a time summons to file a defence as well as a draft defence presented to me by counsel on the day of hearing, in my judgment, the same principles apply in the present case.  I should look at the merits of the matter.”

13.  In the present case, whether the plaintiff is entitled to the judgment sought depends on the true nature of the transaction between the plaintiff and the 1^st and 2^nd defendants relating to the acquisition of the Property in October 2007.  There does not appear to be any dispute that the purchase price was paid by the plaintiff.  The critical issue is whether (as the plaintiff says) there was an express oral agreement that the 1^st and 2^nd defendants would hold the Property on trust for him, or (as the 2^nd defendant says) the plaintiff made a gift of the Property to the 1^st and 2^nd defendants. This is an issue of fact, which is normally not suitable for determination summarily or on affidavit evidence only.

14.  Mr Woo (for the plaintiff) argues that the 2^nd defendant has failed, in her defence and counterclaim, to traverse various allegations raised by the plaintiff in the statement of claim (eg the alleged oral agreement pleaded in paragraph 8 of the statement of claim), and she must be deemed to have admitted those allegations.  Mr Woo relies upon the judgment of the Court of Appeal in Jim Mai-gi v Choy Kwun-ping, CACV 104/1981 (20 November 1981) in support of this submission.

15.  Order 18, rule 13 of Rules of the High Court provides as follows:-

“ (1) Subject to paragraph (6), an allegation of fact made by a party in his pleading is deemed to be admitted by the opposite party unless it is traversed by that party in his pleading or a joinder of issue under rule 14 operates as a non-admission of it.

(2) Subject to paragraph (5), a traverse may be made either by a denial or by a statement of non-admission and either expressly or by necessary implication.

(5) Where an allegation made in a statement of claim or counterclaim is traversed by a denial, the party who denies the allegation shall in his defence or defence to counterclaim –

(a) state his reasons for doing so; and

(b) if he intends to put forward a different version of events from that given by the claimant, state his own version.

(6) A party who –

(a) fails to deal with an allegation, but

(b) has set out in his defence or defence to counterclaim the nature of his case in relation to the issue to which that allegation is relevant,

is to be taken to require that allegation to be proved.”

16.  I accept that, generally speaking, a defendant ought to plead his or her defence clearly and with as much precision as possible.  Also, any material allegation raised in the statement of claim ought to be dealt with specifically.  However, rules of pleadings must also be applied in a sensible manner.  In the present case, the 2^nd defendant denies, generally, the allegations of fact raised in the statement of claim (see paragraph 1 of her defence).  She further alleges that the Property was a “gift” by the plaintiff, but the plaintiff now puts forward a different version or story in view of view of the change in the matrimonial relationship between the 1^st and 2^nd defendants (see paragraph 2 of her defence).  By necessary implication, the 2^nd defendant must be taken to have denied the oral agreement relied upon by the plaintiff which allegedly gives rise to an express trust of the Property.  I consider that Order 18, rule 13(2) is applicable to the present situation.

17.  In other words, I do not accept the contention that the 2^nd defendant is to be taken to have admitted the plaintiff’s plea in respect of the alleged oral agreement in the statement of claim which is critical to the plaintiff’s case of an express trust.

18.  In so far as the plaintiff’s case is based on a resulting trust, the application of the presumption of resulting trust in the present case is not straightforward in view of the fact that the plaintiff is the father of the 1^st defendant and the Property was transferred to (I am told by Mr Woo) the 1^st and 2^nd defendants jointly. In any event, having regarding the case of an express trust raised by the plaintiff on the one hand and the case of a gift by the 2^nd defendant on the other hand, it is unlikely that the court will need to resort to any presumption to determine the issue of beneficial ownership of the Property.

19.  The plaintiff is not applying to strike out the 2^nd defendant’s defence and counterclaim, or for summary judgment under Order 14 or judgment on admission under Order 27.  The plaintiff is seeking judgment in default of defence.  My task is to look at the merits of the defence as disclosed in deciding whether to accede to the plaintiff’s application for judgment.  I consider that the 2^nd defendant’s defence has raised a reasonable ground of defence, and judgment should not be entered for the plaintiff against the 2^nd defendant.  In order to avoid the possibility of any inconsistent judgment, I also consider that judgment should not be entered against the 1^st defendant at this stage.

20.  In all, I make no order on the summons, save that the costs of the application shall be in the cause of the action.