CHUI CHI HUNG v. CHUI CHI WAI

DCCJ 4704/2021

[2024] HKDC 71

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4704 OF 2021

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JUDGMENT

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Introduction

1.  By summons dated 3 November 2023 (the “Summons”), the plaintiff applies for default judgment pursuant to Order 19 rule 7 of the Rules of the District Court (Cap 336H).

Service on the defendant

2.  The generally indorsed Writ of Summons in this action (the “Writ”) was issued on 7 October 2021 and the Statement of Claim dated 7 March 2022 (the “SOC”) was filed on 14 April 2022. Also on 14 April 2022, the plaintiff’s solicitors mailed the Writ and the SOC by registered post to the defendant’s last known address. However, the envelope containing those documents was returned undelivered due to “incorrect address”. The plaintiff’s solicitors then tried to contact the defendant using his last known telephone number by calling, texting, WeChat and WhatsApp but to no avail.

3.  Separately, on 24 November 2021 the plaintiff’s solicitors searched the death records since 24 November 2016 but there was no record of the death of the defendant. The plaintiff then contacted the Hong Kong Police and the Transport Department for the defendant’s registered address but their requests were declined.

4.  In the end, the plaintiff’s solicitors applied and obtained an order from Master Bryan Lung on 6 October 2022 for substituted service of the Writ, and a notice of these proceedings was advertised in Oriental Daily on 28 October 2022. On 11 January 2023, the plaintiff’s solicitors obtained from Master Maurice Lam an order for substituted service of the SOC and an advertisement containing the said order, details of this action, the relief sought, the contact information of the plaintiff’s solicitors and a relevant warning was published in Oriental Daily on 13 February 2023.

5.  I am satisfied from the evidence filed before me that the Writ and the SOC were deemed to have been served on the defendant.

6.  The defendant has neither acknowledged service nor returned any Notice of Intention to Defend.

7.  On 11 December 2023, the plaintiff applied for a further order of substituted service of the Summons but as at the date of the hearing, the application has not been disposed of. Mr Lewis Law, counsel for the plaintiff, submitted that Order 65 rule 9 of the Rules of the District Court may be relied on to dispense with the service of the Summons. 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.”

8.  This rule has been applied on a number of occasions such that independent service of the summons seeking default judgment was held to be unnecessary. See, for example, Chan Pui Lok Daniel v The Personal Representative of Leung Shu Ming & Ors [2017] 4 HKLRD 625 per DHCJ Joseph Kwan at §§17-19; Leung Pak Ki v The Estate of Pang Kau (unrep, HCA 624 of 2009, 1 March 2016) per DHCJ Paul Lam SC at §4; Fung Pik Wan v Lam Yau Sum [2022] HKDC 610 per DDJ Vaughan at §22.

9.  Having considered the efforts made by the plaintiff’s solicitors to locate the defendant, the contents of the advertisements and the lack of any response from the defendant, I do not consider it necessary to order separate service of the Summons on the defendant. It is expedient for the hearing to be proceeded with in his absence, pursuant to Order 35 rule 1(2) of the Rules of the District Court.

Default judgments

10.  The principles applicable to default judgments are well established:-

(1)  In such an application, the court cannot receive any evidence, but must consider whether to give judgment according to the pleadings alone. The statement of claim must show a proper case for the order the applicant seeks to obtain, and the court shall give such judgment as the plaintiff appears entitled to on his statement of claim only, and only if the pleaded facts give rise to the relief sought.

(2)  The power to give such default judgment is discretionary. In the exercise of that discretion, it is to be recognized that it is not the normal practice of the court to make a declaration without trial. This is not a legal or inflexible rule, but rather a rule of practice, which need not be followed when the plaintiff has a genuine need for declaratory relief and justice would not be done if such relief were denied.

(3)  Even on what might appear to be straightforward applications, the court does not act as a “rubber-stamp” merely because of the uncontested nature of the application. In each case, it is necessary to consider whether the declaratory relief is properly made out on the pleading, and whether it is appropriate in the overall exercise of discretion for such relief to be granted without a trial.

(4)  In the exercise of the discretion, the court will consider all relevant factors, including whether the plaintiff has established a strong and obvious case for proprietary relief on the face of its pleading, and where the claim is proprietary, whether there would be any prejudice to the plaintiff’s property and rights.

See: Cheung Sai Lon v Cheung Sai Ha [2020] HKCFI 2552 per Coleman J at §§30-33

The plaintiff’s pleaded case

11.  The present action concerns the beneficial ownership of the property known as Flat 13 on 15/F of Siu Pong Court, No 38 Tin King Road, Tuen Mun, New Territories (the “Property”).

12.  The plaintiff is the younger brother of the defendant. Since 26 August 2004, the defendant has been registered as the owner of the Property.

13.  At all material times, the plaintiff and his wife jointly owned another property situated at Flat 3, 23/F of Siu Lung Court, No 33 Tin King Road, Tuen Mun, Hong Kong (the “Siu Lung Property”).

14.  Before the acquisition of the Property in 2004, the plaintiff and his wife lived in the Siu Lung Property, and the defendant rented another apartment in Tuen Mun.

15.  On 27 July 2004, the plaintiff and his wife attended an auction of the Property and made a successful bid. However, the plaintiff was unable to obtain a mortgage loan because of his level of income and the then outstanding mortgage loan over the Siu Lung Property. The plaintiff enquired with the defendant over the phone on whether the defendant would be willing to assist in obtaining a mortgage loan for the purchase of the Property. In that phone call, the plaintiff and the defendant made an oral agreement (the “Agreement”) whereby it was mutually understood and commonly intended that:

(1)  The plaintiff would nominate the defendant as purchaser of the Property;

(2)  The defendant would apply for a mortgage loan to finance the purchase of the Property;

(3)  Insofar as there was a shortfall between the purchase price and the mortgage loan, the plaintiff would pay the difference to the auctioneer directly;

(4)  The plaintiff would also be responsible for making all future mortgage repayments;

(5)  The defendant would be registered as the owner of the Property in the conveyancing documents and the Land Registry;

(6)  The plaintiff would, however, be the sole beneficial owner of the Property;

(7)  In consideration of the defendant’s willingness to help secure a mortgage loan to finance the purchase of the Property, the plaintiff would allow the defendant to live in the Siu Lung Property temporarily after the Property was acquired and the plaintiff’s family would move to live in the Property.

16.  Pursuant to the Agreement, the plaintiff settled the balance of the purchase price and transaction costs. Moreover, he has lived in the Property with his family since around September 2004, settled all the mortgage repayments of the Property from August 2004 to June 2021, and allowed the defendant to live in the Siu Lung Property continuously from around September 2004 to around 2016 without payment of any rent.

17.  Over the years, the plaintiff has advanced two loans to the defendant to avoid the Property from being pledged by the defendant to other lenders.

18.  The plaintiff and the defendant last met in early 2016 to discuss the arrangement for the defendant to assign the legal title over the Property to the plaintiff, but such arrangement was not implemented. Since then, the plaintiff has lost contact with the defendant. The defendant did not answer any phone call and he appeared to have moved out of the Siu Lung Property. In around 2018 or 2019, the plaintiff repossessed the Siu Lung Property and found that all the defendant’s personal properties had already been taken away.

19.  Over the years, in addition to the mortgage repayments, the plaintiff settled the interest of the mortgage loan, rates, management fees, and utility expenses of the Property. On 23 June 2021, the mortgage over the Property was discharged.

20.  On or around 2 September 2021, the plaintiff’s wife received information that someone had brought with him a provisional sale and purchase agreement signed by the defendant as vendor of the Property to attend the office of China Light and Power in an attempt to change the Property’s electricity account.

21.  The plaintiff therefore commenced the present action and sought declaratory relief that the plaintiff is the sole beneficial owner of the Property and that the defendant holds the Property as trustee for the plaintiff by way of common intention constructive trust and/or resulting trust.

Common intention constructive trusts

22.  The principles concerning common intention constructive trusts are well established.

23.  Where a common intention constructive trust has arisen, ownership in the property is split into legal ownership and beneficial ownership. The trustee holds the legal title on trust for the beneficiary: Luo Xing Juan Angela v Estate of Hui Shui See Willy, deceased [2009] 12 HKCFAR 1 at §38.

24.  A common intention constructive trust is constituted by the three elements of (i) the common intention; (ii) the claimant’s detrimental reliance on their common intention; and (iii) the unconscionability of the property owner departing from it. The burden of proving each element is on the person seeking to show that the beneficial ownership is different from the legal ownership: Fung Pik Wan (supra) at §§11-13 and Lau Wai Kei v Yiu Sze Wan [2023] HKDC 637 per DDJ SP Yip at §§5-10.

25.  The first situation where common intention constructive trust may arise is where at any time prior to acquisition, or exceptionally at some later date, there is an agreement, arrangement or understanding reached between the parties on how the property is to be held beneficially. The second situation is where there is no evidence to support a finding of an agreement or arrangement on the beneficial ownership of the property, and the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention on the beneficial ownership of the property and as the conduct relied on to give rise to a constructive trust. In this situation, direct contributions to the purchase price by the party who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust: Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 per Lam V-P at §§2.3-2.4

Resulting trusts

26.  A resulting trust is based on a rebuttable presumption that the provider of the funds of the purchase of the property has a beneficial interest in the property. This presumption can be rebutted by evidence that the provider of funds did in fact intend the registered owner to take the property as the beneficial owner, and the latter bears the burden to rebut the presumption: Lau Wai Kei (supra) at §§10-11.

27.  Between constructive trust and resulting trust, at least in a domestic context, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust: Primecredit (supra) at §1.3.

Analysis

28.  Applying the legal principles in respect of common intention constructive trusts to the plaintiff’s pleaded case, I am satisfied that the plaintiff has established his claims on the basis of the SOC.

(1)  At the time prior to acquisition of the Property, there was an agreement, common intention or understanding reached between the plaintiff and the defendant that the plaintiff would be the sole beneficial owner of the Property.

(2)  Such common intention is supported by the parties’ conduct in that (i) the defendant has never resided at the Property and, instead, it has been occupied and used by the plaintiff and his family; and (ii) the plaintiff was solely responsible for all the expenses related to the purchase of the Property.

(3)  By reason of the plaintiff’s payment of deposit, related expenses and the mortgage repayments of the Property in performance of the Agreement and by allowing the defendant to live at the Siu Lung Property, the plaintiff has detrimentally relied on their common intention.

(4)  It would be unconscionable for the defendant to depart from the common intention.

29.  Since it is possible to resolve the matter by reference to common intention, it is not necessary to consider resulting trust. In any event, I am satisfied that on the plaintiff’s pleaded case, a resulting trust is established in favour of the plaintiff.

30.  The next issue to be decided is whether the court should exercise its discretion and grant the declaratory relief sought. Having considered the relevant authorities, I accept that there is justification for granting the declaratory relief sought:-

(1)  On the face of the pleading, the plaintiff’s case appears to be strong, and the defendant is deemed to have admitted the particulars in default of filing any Notice of Intention to Defend.

(2)  The defendant has left the Siu Lung Property for years and ceased to have any contact with the plaintiff. Despite the efforts made by the plaintiff’s solicitors, the defendant cannot be located. There is no benefit or purpose in requiring the claim to go through the interlocutory process to a trial. It would be a waste of time and costs to do so.

(3)  The plaintiff had previously advanced two loans to the defendant in order to avoid the Property from being pledged to other lenders. These loans, together with the more recent incident concerning a provisional sale and purchase agreement purportedly signed by the defendant, seem to indicate a real risk that the defendant would seek to transfer, assign, charge or otherwise dispose of the Property without regard to the plaintiff’s beneficial interest.

(4)  The plaintiff has a genuine need for the declaratory relief and he would not be able to recover the Property unless the relief is granted.

Disposition

31.  The plaintiff’s application for default judgment is allowed and I make an order in terms of the Summons as amended at the hearing. As suggested by Mr Law, there be no order as to costs of this action, including the Summons.

32.  I thank Mr Law for his assistance.