FUNG PIK WAN v. LAM YAU SUM (formerly known as LAM WAI MING)

DCCJ 3479/2021

[2022] HKDC 610

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3479 OF 2021

--------------------

--------------------

--------------------

JUDGMENT

--------------------

The Application

1.  This is the plaintiff’s application by summons dated 6 September 2021 for judgment in default of Notice of Intention to Defend to be entered against the defendant for declarative relief to the effect that the plaintiff is the sole beneficial owner of the property situated at Flat 13 on 26^th Floor of Yiu Shun House (Block 4) (including the planter/planter box appertaining thereto, if any), Yiu On Estate, No 2 Hang Hong Street, Shatin, New Territories, Hong Kong (“the Property”), and that the defendant holds the interest of the Property on trust for the plaintiff’s sole benefit.

2.  The summons was originally heard by Deputy District Judge Norman Nip SC on 18 October 2021. As a result of a query raised by the court as to the effectiveness of the service of the Writ of Summons endorsed with the Statement of Claim on the defendant at the address of the Property, at which the defendant no longer resides, the hearing of the summons was adjourned to allow the plaintiff to consider the matter, and if deemed appropriate, to make an application for substituted service of the writ.

3.  Meanwhile, on 3 November 2021, the plaintiff amended the Statement of Claim pursuant to Order 20 rule 1 of the Rules of the District Court, Cap 336H (“RDC”) to include a hitherto omitted jurisdictional pleading with reference to the rateable and annual value of the Property.

4.  On 30 November 2021, on the plaintiff’s application, Master June Cheung ordered that substituted service of the amended writ was to be effected by advertising a notice of the present proceedings once in Wen Wei Po, a Chinese newspaper published in Hong Kong, and that such service shall be deemed to be good and sufficient service of the amended writ on the defendant. This the plaintiff did on 20 December 2021.

5.  The defendant has not filed any Notice of Intention to Defend subsequent to the substituted service of the amended writ. The hearing of the application for default judgment was then restored to be heard on 19 April 2022 before me.

Principles governing applications for default judgment

6.  In an application for default judgment, generally the court would not receive or consider evidence in support of the plaintiff’s claim, and must give its ruling according to the pleadings alone (see: Leung Pak Ki v The Estate of Pang Kau, HCA 624 of 2009, 1 March 2016, DHCJ Paul Lam SC; Lam Shing Shou v Lam Hon Man, HCA 361 of 2001, 15 January 2002, Chu J (as she then was); Hong Kong Civil Procedure 2022, Vol 1, para 19/7/11).

7.  Further, it is not the normal practice of the court to make a declaration without a trial. In a judgment reached without hearing evidence, a declaration can only be based upon unproved allegations. The court ought not to make declarations as facts without proof. However, this is only a rule of practice which should not be followed when the plaintiff had a genuine need for declaratory relief, and that justice would not be done if such relief was denied (see Leung Pak Ki v The Estate of Pang Kau (above) at para 6, and Tsui Ming Sin v Tsui Chi Ping and another, HCA 2550 of 2014, 2 February 2016, DHCJ Kenneth Kwok SC at paras 13-15).

8.  Of course, one must not lose sight of the effect of the failure by a defendant to file a Notice of Intention to Defend, that the pleadings are deemed to be admitted by the defendant by reason of his default (see Hong Kong Civil Procedure 2022, Vol 1, para 13/0/10).

The Plaintiff’s pleaded case

9.  Despite the above applicable principles, the plaintiff has filed evidence in support of her application that partly consists of evidence adduced with a view to proving her case. Bearing the above principles in mind, I would only proceed to consider the Amended Statement of Claim in reaching my judgment insofar as the sufficiency of the plaintiff’s case is concerned.

10.  By her Amended Statement of Claim, the plaintiff pleaded as follows:-

(i)  She and the defendant were married on 13 October 1980.

(ii)  Before 24 May 1999, she and the defendant had been occupying the Property as tenants of the Hong Kong Housing Authority (“the Housing Authority”). In about April 1999, the plaintiff received a letter from the Housing Authority inviting her and the defendant to consider purchasing the Property under the Tenants Purchase Scheme (租者置其屋計劃).

(iii)  Thereafter, the plaintiff discussed the offer from the Housing Authority with the defendant. The defendant told her that he did not have any money, and that she could purchase the Property as her own, with which the plaintiff agreed.

(iv)  The plaintiff then proceeded to liaise with the Housing Authority and paid the following amounts out of her own money for the purchase of the Property: (i) HK$2,500 as intention money on 14 April 1999, (ii) HK$205,600 being the remainder of the purchase consideration on 24 May 1999, and (iii) HK$1,696 also on 24 May 1999 as the deposit for management fee together with the first month payment of the management fee.

(v)  By way of an assignment dated 24 May 1999, the Housing Authority assigned the Property to the plaintiff and the defendant as joint tenants at a consideration of HK$208,100 (being the sum total of the first two amounts above).

(vi)  It has at all material times been the common intention of the plaintiff and the defendant that the defendant was holding the Property on trust for the plaintiff, with the plaintiff being the sole beneficial owner of the Property.

(vii)  Alternatively, the defendant was and is holding his interest in the Property on resulting trust in favour of the plaintiff by reason of the fact that the plaintiff had provided the entire amount of the consideration for the purchase of the Property.

The law as to common intention constructive trust and resulting trust

11.  Ms Michelle Cheung for the plaintiff has referred to the case of Mo Ying v Brillex Development Ltd and Anor [2014] 3 HKLRD 224 where the principles as to express common intention have been summarised by DHCJ Eugene Fung SC at paras 37-38:-

“37. The common intention, or the agreement, arrangement or understanding between the parties may be based on express discussions between them or inferred from their conduct: see Lloyds Bank Plc v Rosset at 132E-133B (Lord Bridge) and Oxley v Hiscock at §§36 and 40 (Chadwick LJ).

38. Express common intention:

(1) To found any express agreement, arrangement or understanding between the parties, there must have been some actual discussions between them, however imperfectly remembered and however imprecise their terms may have been: see Lloyds Bank v Rosset at 132F-G (Lord Bridge).

(2) Express discussions should be pleaded in the greatest detail, both as to language and as to circumstance: Hammond v Mitchell [1991] 1 WLR 1127 at 1139E-F (Waite J).”

12.  A further exposition of the relevant principles by DHCJ Alexander Stock SC may be found in Leung Hang Lin v Lam Mei Yung, HCA 1374/2017, 22 November 2019; [2019] HKCFI 2819 at para 8:-

“(1) The starting point is that equity follows the law. There is a presumption that the beneficial interest follows the legal interest. Where the property is registered in a defendant’s name, the plaintiff bears the burden of showing, on the balance of probabilities, that the defendant held the property on trust for him or her such that the beneficial ownership differs to the legal ownership. See: Liu Wai Keung[1] §44; Mo Ying §5.16; Primecredit[2] §17.

(2) The burden may be discharged by showing that: (i) there was a common intention held by the plaintiff and the property owner at the time of the purchase (or exceptionally, thereafter) that the beneficial ownership was to be different to the legal ownership; (ii) the plaintiff altered his or her position in detrimental reliance upon the common intention; and (iii) it is unconscionable for the property owner to assert ownership in reliance on the legal title. The constructive trust is constituted by the plaintiff’s detrimental reliance on the common intention and the unconscionability of the legal owner departing therefrom. See: Luo Xing Juan[3] §38; Liu Wai Keung §46.

(3) The approach to ascertaining common intention is objective. One looks to the intention of each party which was reasonably understood by the other party to be manifested by the first party’s words and conduct. See: Liu Wai Keung §47; Mo Ying §5.16.

(4) The doctrine is sometimes described as having two limbs. First, where at any time prior to the acquisition (or exceptionally, at a later date), there is an agreement, arrangement or understanding reached between the parties as to how the property is to be held beneficially, based on evidence of express discussions. Second, where there is no evidence to support such a finding but the court relies on the parties’ conduct as a basis from which to infer a common intention. There is some authority that under the second limb, direct contributions to the purchase price by a party who is not a legal owner will readily justify the inference. See: Mo Ying §5.8; Primecredit §§2.3 and 2.4.

(5) However, the modern approach is to assess the parties’ common intention by a holistic approach having regard to the context and the particular facts. The court is not constrained to consider only pure direct monetary contributions to the purchase price. In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family are not that common, the court has to pay more regard to circumstantial matters. See: Mo Ying §§5.14 and 5.15; Primecredit §1.6.

13.  As for the law on resulting trust, the principles are well settled. In Pettitt v Pettitt [1970] AC 777 at 813-814, Lord Upjohn said the following:-

“First, then, in the absence of all other evidence, if the property is conveyed into the name of one spouse at law that will operate to convey also the beneficial interest and if conveyed to the spouses jointly that operates to convey the beneficial interest to the spouses jointly, i.e. with a benefit of survivorship, but it is seldom that this will be determinative. It is far more likely to be solved by the doctrine of resulting trust, namely, that in the absence of evidence to the contrary if the property be conveyed into the name of a stranger he will hold it as trustee for the person putting up the purchase money and if the purchase money has been provided by two or more persons the property is held for those persons in proportion to the purchase money that they have provided.

My Lords, all this is trite law but I make no apology for citing the judgment of Eyre C.B. in 1788 in the leading case of Dyer v. Dyer (1788) 2 Cox, Eq. Cas. 92, 93, 94, set out in full in White and Tudor's Leading Cases in Equity, 9^th ed. (1928), Vol. 2, 749—

‘The clear result of all the cases, without a single exception, is that the trust of a legal estate, whether freehold, copyhold, or leasehold; whether taken in the names of the purchasers and others jointly, or in the names of others without that of the purchaser; whether in one name or several; whether jointly or successive—results to the man who advances the purchase-money. This is a general proposition, supported by all the cases, and there is nothing to contradict it; and it goes on a strict analogy to the rule of the common law, that where a feoffment is made without consideration, the use results to the feoffor. It is the established doctrine of a court of equity, that this resulting trust maybe rebutted by circumstances in evidence.’ ”

Discussion

14.  In my view, the plaintiff’s pleaded case falls well within the established principles with regard to common intention constructive trust, alternatively a resulting trust.

15.  On her pleaded case, the entire consideration for the purchase had been provided by the plaintiff, and there had been a prior oral agreement or consensus after discussion on the ownership of the Property reached between the parties prior to the purchase. Whilst the provision of monetary contribution may not necessarily be the determinative factor and the context of the case has to be considered at large, this case is sufficiently pleaded to support a finding in favour of the plaintiff, on the premise that there has been a clear and unequivocal common intention between the plaintiff and the defendant as to the ownership of the Property.

16.  The plaintiff has also acted to her detriment, relying on the common intention, by having paid the entire amount of the purchase consideration whilst having the Property transferred to her and the defendant as joint tenants. It would be unconscionable for the defendant to depart from the common intention, even given the fact that the parties are husband and wife.

17.  Further, irrespective of the evidence adduced to prove her case, the plaintiff has by her affirmations dated 12 October 2021 and 4 November 2021 also set out the circumstances that led to her decision to commence this litigation. Although she and her husband, ie the defendant had been married since 13 October 1980, the defendant has, according to her account, had an affair and has moved out of the Property since some time in 2008, and has never returned to live with the family, where they have two sons. He would return to the Property to collect his mail from time to time during the past years up to mid-2020. In around April 2021, she found out from the defendant’s unclaimed letters that he had been subjected to claims from creditors for loans in default, as a result of which default judgments had been entered against him. Subsequently, on the strength of the default judgments, two charging orders nisi encumbering on the Property have issued.

18.  It was against this backdrop that the plaintiff commenced the present action. At the hearing, I am given to understand that one of the charging orders nisi has been discharged, whilst the hearing of the Notice to Show Cause in respect of the other one has been adjourned sine die. Copies of the relevant court orders have been handed up to me.

19.  In considering whether to grant default judgment, I would also take into account this aspect of the case, that is, the defendant has deserted the family, and that he has been involved in activities that would prejudice the position of the plaintiff as the beneficial owner of the Property. The defendant cannot now be found despite reasonable efforts to locate or contact him have been made[4]. Such circumstances plainly show, in my view, the plaintiff has a genuine need for declaratory relief.

20.  Having regard to all the matters above, I am of the view that this case calls for default judgment to be entered in favour of the plaintiff, save for one matter concerning the contents of the plaintiff’s summons, which I shall first deal with below.

The deficiency of the Plaintiff’s summons

21.  At the hearing on 19 April 2022, I raised with Ms Cheung a point about the validity of the plaintiff’s present summons which was issued on 6 September 2021 at a time when the substituted service of the amended specially endorsed writ had not yet taken place. The summons remains, as at the hearing, to be one pertaining to the alleged default of the defendant in failing to file a Notice of Intention to Defend in respect of the original un-amended writ and Statement of Claim. Ms Cheung submitted that by virtue of Order 65 rule 9 of the RDC, the summons was not required to be served on the defendant in such a situation where he has defaulted as to acknowledgement of service. Order 65 rule 9 provides:-

“Where by virtue of these rules any document is required to be served on any person but it is not required to be served personally or in accordance with Order 10, rule 1(2) and at the time when service is to be effected that person is in default as to acknowledgment of service or has no address for service, the document need not be served on that person unless the Court otherwise directs or any of these rules otherwise provides.”

22.  Whilst I have no qualms with Ms Cheung’s submission that the summons is not one which requires personal service on the defendant, and the summons need not strictly speaking be served in the present situation under Order 65 rule 9 (see e.g. Camel Group Hong Kong Investment Trading Co Ltd v Leading International Group (HK) Ltd and Others HCA 3155 of 2016, 26 September 2018, DHCJ Le Pichon and Lok Wai Yuk v Cheung Che Hung DCCJ 4275 of 2007, 24 September 2010, Deputy District Judge H. Au-Yeung (as he then was)), that does not address the issue concerning the validity or appropriateness of the summons, which forms the basis of the application. The case was then adjourned for the plaintiff to consider the matter and provide further written submissions.

23.  In her supplemental submissions subsequently provided to the court, Ms Cheung maintains that although the present summons was taken out relying on the default of acknowledgement of service of the original un-amended writ endorsed with the Statement of Claim, the Amended Statement of Claim is in substance the same as the original one, with the exception of the jurisdictional paragraph subsequently added. Therefore, Ms Cheung submits, the substance and information provided in the summons is accurate. As the first hearing was adjourned and later restored, a new summons was not taken out at the time as the matter remains the same.

24.  I do not accept that submission. The matter has not remained the same. It is for the plaintiff to keep her house in order when making any application. It may be said this is a deficiency in form only whilst there is no doubt the plaintiff is now relying on the default with regard to the specially endorsed amended writ, but this does not detract from the duty of the plaintiff to rectify the deficiency.

Orders

25.  As I said, this case calls for judgment in favour of the plaintiff, save for the issue concerning the plaintiff’s summons. In the circumstances, I make the following orders:-

(1)  On condition that the plaintiff files with the court an Amended Summons, within 7 days from the date of this order, to place reliance on the default by the defendant to file a Notice of Intention to Defend in respect of the Amended Writ of Summons dated 3 November 2021 endorsed with the Amended Statement of Claim dated 3 November 2021, and specifying the manner in which it was served, judgment be entered for the plaintiff in the following terms:

(i)  A declaration that the plaintiff is the sole beneficial owner of the Property and the defendant holds the interest of the Property on trust for the plaintiff’s sole benefit;

(ii)  The defendant do transfer or convey his legal title in the Property to the plaintiff within 14 days from the date of this Judgment, failing which a partner of the solicitors for the plaintiff (to be named) shall execute all necessary conveyance from the defendant to the plaintiff;

(iii)  There be liberty to apply;

(2)  The costs of this application be to the plaintiff to be taxed if not agreed, save that there be no order as to costs of the first hearing held on 18 October 2021[5] before Deputy District Judge Norman Nip SC.

26.  The plaintiff’s solicitors shall nominate the partner of their firm for the purposes of paragraph 25(1)(ii) above on the draft order to be submitted for the court’s approval.

27.  I made no order as to costs for the hearing on 18 October 2021, which was adjourned to allow the plaintiff to consider the effectiveness of the service of the original writ and Statement of Claim, and for the plaintiff to amend the Statement of Claim.

28.  Lastly, I thank Ms Cheung for her assistance.