NAM WAI YI v. HENRY COOMBS

DCCJ 4400/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4400 OF 2011

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DECISION

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The Applications

1. Before the court are the following applications made by the defendant:-

(1) Summons taken out on 28 January 2015 applying for a stay of proceedings pending the outcome of HCA 1892 of 2014 (“Stay Application”);

(2) Summons taken out on 9 February 2015 applying for the following (in the order as listed in the Summons):-

(a) to set aside the judgment dated 10 February 2014 (“Judgment”);

(b) to set aside the unless order dated 28 October 2013, pursuant to which the Defence was struck out and the Counterclaim was dismissed following the defendant’s default in filing particulars and document within the specified period (“Unless Order”);

(c) an extension of time to make the application to set aside the Unless Order;

(d)   an extension of time to file and serve further and better particulars of the Defence and Counterclaim and to provide documents requested pursuant to the court’s order dated 11 October 2013.

Background

2. The plaintiff is the registered owner of a premises situated at Ground Floor, 28C, O Pui, Sai Kung, New Territories (“the Premises”).  By an assignment dated 17 August 2010 (“Assignment”), the Premises was transferred to the plaintiff by her predecessor-in-title, Yu Wai Hung.  The plaintiffs took out this action against the defendant for recovery of vacant possession of the Premises and mense profit.

Procedural History

3. The plaintiff issued the writ with statement of claim on 18 November 2011.  An acknowledgment of service and notice of intention to defend the action was filed by the defendant on 3 December 2011.

4. The defendant has not filed the defence in time.  On 11 January 2012, the plaintiff filed a notice of intention to enter judgment.  Three days after the notice, the defendant filed the defence and counterclaim.

5. There was then a period of inaction by both parties.  On 12 July 2013 (which was about 1.5 years later), the plaintiff served on the defendant a request for further and better particular and notice to produce documents referred to in the pleadings (“Request for FBP & Notice to Produce Documents”).

6. The defendant did not provide any answer or document.  On 31 July 2013, the plaintiff filed a Notice of intention to proceed with the action.  On 3 September 2013, the plaintiff took out a Summons requiring the defendant to comply with the Request for FBP & Notice to Produce Documents.

7. The defendant was absent in the hearing of the Summons on 18 September 2013 (“September Hearing”).  The Registrar granted an order requiring the defendant to comply with the Request for FBP & Notice to Produce Documents within 21 days (“September Order”).

8. The specified period of 21 days expired.  The defendant has not filed any answer or document.  On 11 October 2013, the plaintiff took out a Summons seeking an unless order compelling the defendant to file the answers and the documents requested.  The Summons was heard on 28 October 2013.

9. This time the defendant attended the hearing in person.  At the end of the hearing, the Master granted an unless order requiring the defendant to comply with the Request for FBP & Notice to Produce Documents within 42 days (“Unless Order”).

10. The terms of the Unless Order are as follows:-

“Unless the Defendant do comply with the Order of Registrar Lui of 18^th September 2013 to provide Further and Better Particulars of the Defence and Counterclaim pursuant to the Plaintiff’s Request, and to provide the documents requested pursuant to the Plaintiff’s Notice to Produce Documents Referred to in the Pleadings, both served on 12^th July 2013, within 42 days from the date of the Order, his Defence be struck out and Counterclaim be dismissed, with leave to the Plaintiff to apply to enter into judgment”

11. After the expiry of the 42-day period, the defendant still failed to provide any answer or document.  The plaintiff filed an affirmation on 14 January 2014 to enter judgment pursuant to the Unless Order.  Judgment was entered on 10 February 2014 (“Judgment”) and the defendant was ordered to deliver vacant possession of the Premises to the plaintiff and pay mense profits to be assessed with interest and costs.

12. The Judgment was served on the defendant.  The defendant did not deliver vacant possession of the Premises to the plaintiff.  On 5 March 2014, leave was granted to the plaintiff to issue a Writ of Possession in respect of the Premises, and the Writ of Possession was issued on the same date.  The defendant still made no move.

13. The plaintiff continued her efforts to recover the vacant possession of the Premises and on about 2 May 2014, the Bailiff had issued a Notice to Occupier to Quit, requiring the defendant to deliver vacant possession on or before 9 May 2014.

14. The defendant did not challenge the Judgment or the Writ of Possession.  He filed a Summons on 5 May 2014 seeking an extension of time to 4 June 2014 to vacate the Premises.  By an order dated 8 May 2014, the defendant was allowed to have time until 4 June 2014 conditional upon his paying $11,000 into court on or before 15 May 2014.

15. The defendant did not give possession on 4 June 2014.  The bailiff repossessed the Premises on 16 June 2014.

16. On about 13 January 2015, the plaintiff took out a Notice of Appointment of Assessment of Damages with the hearing fixed for 2 February 2015.

17. A few days before the hearing for assessment of damages, the plaintiff’s solicitor was informed that the defendant would take out a Summons to set aside the Judgment.  On 2 February 2015, which was the scheduled date for the hearing of the assessment of damages, the defendant was given further time to take out the application to set aside the Judgment by 4 pm on 9 February 2015, failing which the defendant was debarred from taking out such application.

18. On 9 February 2015, the Summons to set aside the Judgment was taken out.  This application was now heard together with the Stay Application.

19. There will be no question of whether the action shall be stay or whether further time shall be given to the defendant to file further particulars and documents if the Judgment is not set aside.  I shall therefore first deal with the application to set aside the Judgment and the Unless Order (“Set Aside Application”).

Set Aside Application

20. Counsel for the defendant, Mr Marwah argued that the Judgment should be set aside on the following grounds:-

(1) the Judgment was irregular as there was no notice of intention to enter default judgment or affidavit of service filed in court pursuant to Order 19 rule 8A;

(2) the Judgment was irregular as it was entered ex parte and the plaintiff failed to make full and frank disclosure on the plea of fraud as a defence, and no explanation on a missing portion of the land search on the plaintiff’s predecessor in title;

(3) alternatively, the defendant has a real prospect of success.

21. The Judgment was entered into as a result of the defendant’s failure to comply with the Unless Order.  The following legal principles should be considered.

The legal principles on non-compliance of unless order

22. In Value Capital Ltd v Ke Junxiang [2011] 1 HKLRD 1011, the defendant in that case appealed against a master’s decision refusing to set aside a default judgment.  Deputy High Court Judge Au-Yeung (as the learned Judge then was) set out the following approaches in determining the consequences of a failure to comply with an unless order:-

“7. For an unless order that has the effect of debarring a party from defending, the Court will consider whether or not his failure to comply could be described as showing perverse and obstinate resistance of authority:

‘In my judgment, in cases in which the court has to decide what are the consequences of a failure to comply with an “unless” order, the relevant question is whether such failure was intentional and contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and the failure to obey was due to extraneous circumstances, such failure to obey is not be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed. (Re Jokai Tea Holdings Ltd [1992] 1 WLR 1196; adopted in PT Bank Pembangunan Indonesia (Persero) v Tan Eddy Tansil [1997] HKLRD 57).”

23. In Top One International (China) Property Group Co Ltd v Top One Property Group Ltd [2011] 1 HKLRD 606, Fok J (as the learned PJ then was) summarised the relevant principles applied by Ribeiro J (as the learned PJ then was) in Chan Chun Lung Allen v Ryland Ltd (unreported, HCA 4904/1996) as follows:-

“(a) The court will ask whether a defendant’s failure to comply with an unless order was ‘intentional and contumelious’ or whether, on the contrary, he has been able ‘clearly [to] demonstrate that there was no intention to ignore or flout the order and that the failure to obey was to extraneous circumstances’, keeping in mind that the court should not be astute to find excuses for such non-compliance.

(b) As with any other case in which a party approaches the court for an indulgence, it is incumbent on an applicant to adduce evidence upon which an exercise of discretion in his favour may be founded.

(c)  Non-compliance is contumelious where it is the result of the litigant’s conscious and deliberate decision to ignore or disobey the court’s order in the absence of any extraneous excuse. Such deliberate conduct may be contrasted, for instance, with cases where the litigant has made a serious effort to comply in good faith but has been unsuccessful through bad luck or incompetence or with cases where the litigant has not complied because of circumstances outside his control (including cases where his solicitor has negligently or otherwise missed the deadline through no fault of the litigant).”

24. In Top One, the court has also considered the post-CJR position and the provisions in Order 2 rules 4 and 5:-

“ … although intentional and contumelious disregard of a court’s peremptory order may be the most usual circumstance leading to the refusal of an extension of time to comply with a peremptory order, the exercise of the discretion to refuse and extension or to relieve a party from sanctions is not limited to cases of intentional and contumelious default. As directed by O.2 r.5 of the Rules of the High Court, the court should consider all the individual circumstances including those listed in r5(1) at subparas. (a)-(j). Depending on the circumstances, failure to comply with one or a number of orders through negligence, incompetence or sheer indolence may be such as to lead the court to conclude there is an existence and degree of fault which warrants a refusal of an extension of time, so that relief from a sanction for non-compliance specified in peremptory order (including an order striking out a pleading) should not be granted. Any other conclusion would, in my opinion, be to ignore the positive duty placed on parties to assist the court to further the underlying objectives of CJR (O.1A r.3 of the Rules of the High Court) and on the court to do so by actively managing cases (O.1A r4(1) of the Rules of the High Court).”

25. Order 2 rule 4 provides that:-

“Where a party has failed to comply with a rule or court order, any sanction for failure to comply imposed by the rule or court order has effect unless the party in default applies to the Court for and obtains relief from the sanction within 14 days of the failure.”

26. Sub-paragraphs (a) to (j) of Order 2 rule 5(1) are as follows:-

“(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure to comply;

(e) the extent to which the party in default has complied with other rules and court orders;

(f) whether the failure to comply was caused by the party in default or his legal representative;

(g) in the case where the party in default is not legally represented, whether he was unaware of the rule or court order, or if he was aware of it, whether he was able to comply with it without legal assistance;

(h) whether the trial date or the likely trial date can still be met if relief is granted;

(i) the effect which the failure to comply had on each party; and

(j) the effect which the granting of relief would have on each party.”

Decision

27. The sanctions in the Unless Order took effect at the expiry of the 42-day period (Order 2 rule 4).  On 9 December 2013, the defence was struck out, the counterclaim was dismissed and the plaintiff has leave to enter Judgment.

28. The defendant has not made any application for relief from sanction under Order 2 rule 4 and the 14-day time limit has long lapsed.  The present Summonses were taken out more than 1 year after the sanction took effect and these Summonses are not proper application for relief from sanction.

29. The defendant said that the non-compliance was not deliberate.  Judging from the objective facts and the conduct of the defendant in the action, I am of the view that the defendant’s non-compliance of the Unless Order was intentional and contumelious.  There is no justifiable excuse on the defendant’s conduct that warrants the exercise of discretion to grant the relief from the sanctions. 

30. The defendant clearly has knowledge of the Unless Order. He has attended the hearing in person on 28 October 2013, during which the Unless Order was made by Master Yip.  The defendant understands English.  He has acted in person in defending this action with a counterclaim.  He has filed a defence and counterclaim written by himself.  He has made applications for extension of time in person.  There is no suggestion that he did not understand the proceedings. I am satisfied that he understands the nature and consequence of the Unless Order. 

31. The defendant has consulted lawyers on a number of occasions in respect of this claim.  He had a meeting with solicitors on 17 September 2013 (which is the day following his return from a short trip and the day before the hearing on which the September Order was made).  He has also consulted firm of solicitors after the Unless Order was made.

32. It is not the defendant’s case that he could not comply with the Unless Order without legal assistance or the default was caused by his legal advisers.

33. The defendant was fully aware of the consequences of the Unless Order.  He had not even raised any objection to the Judgment when the plaintiff applied for Writ of Possession and the subsequent execution by the bailiff.  All that he asked at that time was for more time to vacate the Premises.

34. There is no good explanation for his failure to comply with the Unless Order.

35. Further, as shown from the procedural history recited above, the defendant has been dilatory in defending the case.  To name a few examples:-

(a)   He filed his defence and counterclaim only after the plaintiff filed a Notice of intention to enter judgment.

(b)   He did not attend the September Hearing although he was in Hong Kong on that date.

(c)   He did not comply with the terms of the Unless Order although he was given a further time of 42 days.

(d)   He refused to vacate the Premise even after the Writ of Possession and the Bailiff’s Notice to Quit.

(e)   He failed to move out of the Premises by 4 June 2014 (the extended time that he asked for and was granted).

36. The defendant has repeatedly disobeyed court orders.  He took advantage and continued to stay in the Premises without payment of rent or mense profit for a substantial period of time.

37. There is a long delay on the defendant to apply for the relief.

38. The Judgment has already been partially executed.  The vacant possession of the Premises was recovered after the issuance of the Writ of Possession in the absence of any challenge by the defendant. To allow the defendant to set aside the Judgment and the Unless Order at this stage will cause prejudice to the plaintiff.  The memory of witnesses are affected by the long delay.

39. There is no issue of trial date approaching.  The parties are at a relatively early stage of the proceedings but for the Judgment.

40. Considered all the factors and evidence, I am satisfied that in the interests of administration of justice, the Set Aside Application should be dismissed.

Argument on irregularity of the Judgment misconceived

41. In support of his application, the defendant put forward arguments on the irregularity of the Judgment and the reasonable prospect of success of the defence, I will also consider his arguments.

42. The defendant’s arguments on the irregularity of the Judgment are clearly misconceived.

43. Order 19 rule 8A has no application in the present case.  Under the clear and unambiguous provisions of the rules, (1) it only applies where a party intends to enter judgment under the provisions of Order 19, which is not the present case; (2) Order 19 rule 8A(2)(a) expressly excepted the application where an order was made prescribing or extending the time for service of defence, which is the present case.  The defendant was granted on more than one occasion order extending the time to file the defence and the further and better particulars of the defence. 

44. The next argument of material non-disclosure is a non-issue in light of the circumstances and the basis upon which the Judgment was entered. In any event the alleged non-disclosures of the plea of fraud and the filing of an incomplete land search were contradicted by documentary evidence.  First, fraud was clearly pleaded in the defence.  Secondly, the defendant’s complaint that the plaintiff filed an incomplete land search in support of her application to enter judgment has no leg to stand.  It may be because counsel for the defendant has failed to note that the first land search was a search on current particulars, whereas the other land search was a search on both historical and current particulars.  In any event, the existence of a predecessor in title (the information that the defendant said was missing on the first land search) was pleaded in the statement of claim and was not a fact unknown to the court.

45. The defendant failed to establish that the Judgment is irregular.

Reasonable prospect of success of the defence

46. Mr Marwah then argued that the defendant has a reasonable prospect of success in defending the claims and therefore the Judgment should be set aside.

47. The gist of the defence was that the plaintiff is not a beneficial owner of the Premises.  The defendant said he learnt that the plaintiff’s predecessor-in-title has committed a fraud against Mr Ernie Yim Kok Ping (“Mr Yim”) by simply registering himself as owner of the Premises in disregard of the joint development agreement entered into with Mr Yim[1]. The defendant pleaded that he therefore was under no obligations to give up the Premises to the plaintiff.

48. According to the defendant, he has been occupying the Premises through an arrangement with Mr Yim of Terra Cotta Company Limited (“Terra Cotta”).  He said he had entered into tenancy agreement with Terra Cotta, but he could not produce the tenancy agreement or a copy of it.

49. The defendant did not dispute that the plaintiff is the registered owner of the Premises.  The defendant said that Mr Yim is suing Yu Kam Por, Yu Wai Hung (the plaintiff’s predecessor in title) and the plaintiff in a High Court action HCA 1892 of 2014 (“High Court Action”) on some development agreements in respect of the Premises with allegations of fraud.

50. At the hearing, Mr Marwah put forward a further defence of resulting trust which was not pleaded in the Defence and Counterclaim at all.

51. I have carefully examined the evidence before me and considered the submissions from both counsel, I am not convinced that the defendant has shown a reasonable prospect of success in the defence.

52. The defendant placed lots of emphasis on the allegation of fraud. This is at best an assertion with insufficient particulars. In the defence, no particulars of fraud was pleaded. Even in the amended defence that the defendant intends to file, particulars of fraud were not sufficiently pleaded.

53. The defendant referred to the joint development agreement to which neither the plaintiff nor the defendant is a party.  He produced some agreements but not complete, notably the principal Development Agreement that contains the main terms is missing.  The court could not discern the nature and details of the agreement or arrangements.

54. The defendant produced a statement of claim in the High Court Action.  In the absence of the key underlying documents and the defence in that case, the court could not accept the assertions in the statement of claim on its face. 

55. In Choi Bing Wing v Chief Executive of Hong Kong Special Administrative Region [2006] 1 HKLRD 666, it was held that allegation of fraud could not be made without proper evidence. If they were made irresponsibly, the court will exercise its inherent jurisdiction to strike out the same.

56. The defendant did not challenge the legal ownership of the plaintiff.  The defendant only claimed that the plaintiff does not have the beneficial interest in the Premises.

57. Putting the defendant’s case to the highest and assuming that the beneficial interest of the Premises was not vested in the plaintiff (which the defendant has failed to prove), it is still not a defence available to the defendant.  As between the plaintiff and the defendant, the plaintiff in her capacity as the registered and legal owner of the Premises, has the right to recover from the defendant possession of the Premises and mense profits for the period in which the defendant has occupied the same.  The rest is a matter between the legal owner and the beneficial owner themselves. (See: Poon Fow Hing v Poon Kwai Ping Corinna, unreported HCA 1636/2014, 28 April 2015.)

58. Resulting trust is not a pleaded defence.  The defendant is not entitled to rely on it.  Even if the court takes into account of this defence, it does not assist the defendant. 

59. Mr Marwah’s submission on the existence of a resulting trust are as follows, which I quote[2]:-

“4. Money was paid by Terra Cotta Company Limited (TCCL) for the purchase of the land and building the village house through Newest (e.g. see the HK$800,000 Cashier Order at HB/D/233).

5.  Accordingly, YWH [the plaintiff’s predecessor in title] held the Premise on resulting trust for TCCL (see Best Sheen Development Ltd v Official Receiver [2001] 1 HKLRD 866 (CFI) at 874F-875A)”

60. The reliance on Best Sheen Development is misplaced.  In Best Sheen Development, there was an express declaration of trust.  The resulting trust referred to in that case was one that may be implied where an attempted express trust fails.  There is no declaration of trust between Mr Yim or Terra Cotta and the plaintiff’s predecessor in title in respect of the Premises.  There is no evidence of any intention between the parties to create a trust relationship by way of the joint development agreement.  

61. Mr Marwah referred to Cheuk Shu Yin v Yip So Wan and others (2012) 15 HKCFAR 344 and suggested that a resulting trust was presumed in the present case.  The situation described in Cheuk Shu Yin is clearly different from the present case.  Here, on the defendant’s own case, there was a development agreement between the plaintiff’s predecessor in title and Terra Cotta and the money was paid pursuant to the joint development agreement.  The joint development agreement (which was not before the court) governs the relationship between them.  As said, there is no evidence that the joint development agreement creates any trust relationship.

62. Mr Marwah failed to point out how the alleged resulting trust arises.

Prejudice against the plaintiff

63. I agree with the submission of Mr Chan, counsel for the plaintiff, that if the defendant is entitled to reopen the case after the substantial and inordinate delay on his part in most of the stages in the proceedings, the plaintiff’s position will be prejudiced by the inordinate delay.  

Conclusion

64. The court has an unfettered discretion in determining whether the Judgment should be set aside.  As I have analysed above, the defendant failed to establish any reason that the Judgment or the Unless Order should not be set aside. 

65. I dismiss the defendant’s applications in the two Summonses. 

Costs

66. I make an order nisi that the costs of this application be paid to the plaintiff to be taxed if not agreed, with certificate for counsel.  This cost order nisi shall become absolute if no application to vary the same is made within 14 days from the date of this decision.