CECCHETTI SILVIA GIADA v. TSANG TAK YIP

DCCJ300/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 300 OF 2015

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DECISION

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Introduction

1.  The defendant applies by way of summons for leave to  amend his Defence and Counterclaim. The quantum after amendment exceeds the monetary jurisdiction of the District Court, the defendant further applies to invoke section 41(3)(c) of the District Court Ordinance, Cap 336 (“the Ordinance”), to report the matter to the Court of First Instance or a judge thereof for determination of the forum of trial.

2.  The plaintiff acts in person.  She filed an affirmation in opposition but did not appear at the substantive argument of the defendant’s summons. I am satisfied the plaintiff is aware of the hearing today because she had appeared in the call over hearing of the defendant’s summons where the date for argument was fixed. The defendant’s solicitors filed an affirmation of service to confirm the hearing bundle, skeleton submissions and authorities were duly served on the plaintiff.

Factual Background

3.  The plaintiff and the defendant were lovers from 2009 until end of 2012.

4.  On 21 March 2012, the plaintiff and defendant as purchasers entered into a provisional sale and purchase agreement for a property known as Flat B, 5th Floor, Medal Court, No 38 Queen’s Road West, Hong Kong (“the Property”) in consideration of $4,330,000.00.  The defendant paid $216,500.00 initial deposit.

5.  On 3 April 2012, the plaintiff and the defendant executed a formal sale and purchase agreement as tenants in common.  The defendant further paid deposit in sum of $216,500.00.

6.  The completion of the purchase of the Property took place on 30 April 2012.  A mortgage loan in sum of $3,031,000.00 was advanced by Wing Hang Bank Limited to the defendant.  The defendant paid all other outgoing expenses. The plaintiff did not contribute to the purchase price of the Property.

7.  The ratable value of the Property is and was less than $240,000.00.

8.  On 5 May 2014, the defendant demanded the plaintiff to transfer him her half share of the Property and to deliver vacant possession.  The plaintiff refused.  She claimed she was given half share of the Property by the defendant as a gift.  

9.  The plaintiff commenced this action in the Court of First Instance for declarations as pleaded.

10.  The defendant pleaded resulting trust over the Property and counterclaimed for declaration, order of transfer, vacant possession, mesne profit and damages.  The defendant did not quantify the quantum of damages in his Defence and Counterclaim.

11.  By consent, the parties sought an order to transfer the action to the District Court on 15 January 2015 by way of a consent order.

The Amendment

12.  The defendant attempts to amend his defence and counterclaim as follows:-

(i)    an oral agreement existed that the plaintiff should pay the defendant half purchase price being $2,165,000 and such payment shall be made in reasonable time (“the Oral Agreement”);

(ii)   the plaintiff was in breach of the oral agreement, the defendant seeks an order for sale under section 6 of the Partition Ordinance, Cap 352; entitled to lien and damages in sum of $2,165,000.00.  (“the New Reliefs”).

Stage of Proceedings

13.  The defendant applies for amending his Defence and Counterclaim at a late stage of proceedings.  In the case management conference on 28 January 2016, Master S P Yip set down this action for a 5-day trial commencing on 3 October 2016.  Pre-trial review was fixed on 3 August 2016.  As at the date of this hearing, the defendant has failed to set this action down for trial where he should have done so by 17 March 2016. 

14.  The defendant issued the summons for amendment on 10 May 2016.

The Issues

15.  The issues of this application are that:-

(i)    whether leave to amend the Defence and Counterclaim should be granted, and in particular, at this late stage of proceedings;

(ii)   and if so, whether section 41(3)(c) of the Ordinance shall be invoked.  

Discussion

16.  The general principles of amendment was revisited in Dr Chan Hin Keung Henry v Apple Daily Ltd & ors (CACV 100 of 2015), Yuen JA enunciated:-

“30. It should be noted that the deputy judge accepted that applying general principles, the amendments should be allowed. These principles were stated by the House of Lords in Ketteman and Others v Hansel Properties Ltd [1987] 1 AC 189, at 212 as follows:

“First, all such amendments should be made as are necessary to enable the real questions in controversy between the parties to be decided. Secondly, amendments should not be refused solely because they have been made necessary by the honest fault or mistake of the party applying for leave to make them: it is not the function of the court to punish parties for mistakes which they have made in the conduct of their cases by deciding otherwise than in accordance with their rights. Thirdly, however blameworthy (short of bad faith) may have been a party’s failure to plead the subject matter of a proposed amendment earlier, and however late the application for leave to make such amendment may have been, the application should, in general, be allowed, provided that allowing it will not prejudice the other party. Fourthly, there is no injustice to the other party if he can be compensated by appropriate orders as to costs”. (Emphasis added).

31. These remain the court’s guiding principles post-CJR: see Topwell Corporation Ltd v Kwan CACV88/2013, 21 May 2013, where Hon Kwan JA held (para 39):

“The principles in Ketteman v Hansel Properties ... on the exercise of discretion to allow or refuse an amendment of pleadings remain good law after the CJR ... Having said that, in the exercise of discretion, the court must of course have regard to the underlying objectives in Order 1A of the RHC or of the RDC, so it cannot be assumed that once the principles in Ketteman are satisfied, the amendment would be allowed. The court would need to balance all relevant factors to decide how its discretion should be exercised, if the application is made in circumstances offending one or more of the underlying objectives. In this particular case, a pertinent consideration in giving effect to the underlying objectives is that the court ‘shall always recognise that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties’ (Order 1A rule 2(2) of the RDC)”. (Emphasis added).”

17.  Notwithstanding the Defence and Counterclaim was premised on resulting trust, the defendant had also pleaded an existence of an oral agreement in paragraph 19 thereof.  The defendant pleaded some kind of discussion when he and the plaintiff decided to purchase the Property as tenant in common. More particularly, paragraph 19(d) stated, the plaintiff “would later pay back the Defendant her half portion of the financial contribution of the Property after she had realized her equity investment when the market situation had been improved”.  

18.  The Defence and Counterclaim (drafted by solicitors) was only bettered by the amendments drafted by Mr Hung, by adding the Oral Agreement in precise terms.

19.  In achieving a fair resolution,  the New Reliefs are necessary to cater for the court to grant reliefs in event the trial judge came to a finding that the plaintiff has half share of the beneficial interest of the Property.  It is known that an order for sale pursuant to section 6 of the Partition Ordinance, Cap 352 is an appropriate relief (See Law Chun Wai v. Chu Suk Har & ors [2016] 1 HKLRD 224, HH Judge Andrew Li).

20.  The plaintiff opposed the defendant’s application. She rebutted the existence of the Oral Agreement by deposing,

“Mr. Tsang Tak Yip [the defendant] identified me as his fiancé and next of kin when signing the mortgage papers therefore I had no objection to be the guarantor on the mortgage. I would like to pay contributions to it but I am not allowed to do so by the defendant and the bank.”

21.  In the premises, the arrangement and / or agreement of how the parties acquired the Property is the sole factual dispute in this action, where no new facts have been introduced, I accept it would be fair for the defendant to amend his Defence and Counterclaim with the Oral Agreement and New Reliefs.  Bearing in mind the court does not assume the role to punish the party for faults and/or mistakes that the omission of causes of actions and/or defence pleaded.  The defendant is short of bad faith and no real prejudice is caused to the plaintiff.  The second and third limbs of Ketteman are satisfied.

22.  The only hurdle in this application is the time when the defendant’s summons for leave to amend the Defence and Counterclaim was taken out, when directions for setting down were given and trial dates has been fixed.

23.  Yet, no directions in Master S P Yip’s order dated 28 January 2016 precluded the parties to make further interlocutory applications before trial.  Paragraph 10 therein stated “all interlocutory applications made hereinafter shall be listed for hearing before the trial judge unless the court directs otherwise”.

24.  Having considered the application in light of Ketteman, I find a just resolution of dispute can only be achieved by granting leave, be it at a late stage, to the defendant to amend the Defence and Counterclaim.

The quantum of the Amended Counterclaim is over one million

25.  Subsequent to granting leave to amend the Defence and Counterclaim, I have to decide whether section 41(3)(c) and 41(4)of the Ordinance shall be invoked.  The defendant pleaded $2,165,000.00 as damages in his counterclaim which is in excess of the monetary jurisdiction of the District Court.  The defendant did not quantify it in the Defence and Counterclaim and hereby seeks an order to report the matter to the Court of First Instance or a judge thereof.  

26.  Section 41(3)(c) and 41(4) of the Ordinance read as,

“(3) If a defendant in an action or proceeding within the jurisdiction of the Court makes a counterclaim which is not within the jurisdiction of the Court but within the jurisdiction of the Court of First Instance, the Court may, either of its own motion or on the application of any party, order-

(a) that the whole proceedings be transferred to the Court of First Instance; or

(b) that the proceedings on the counterclaim be transferred to the Court of First Instance; and the proceedings on the plaintiff's claim, except for a defence of set-off as to the whole or a part of the subject matter of the counterclaim, be heard and determined by the Court; or

(c) where the Court considers the whole proceedings should be heard and determined in the Court, that the matter be reported to the Court of First Instance or a judge thereof. [emphasis added]

(4) On the receipt of a report mentioned in subsection (3)(c), the Court of First Instance or a judge thereof may, as it or he thinks fit, order either-

(a) that the whole proceedings be transferred to the Court of First Instance; or

(b) that the whole proceedings be heard and determined in the Court; or

(c) that the proceedings on the counterclaim be transferred to the Court of First Instance; and the proceedings on the plaintiff's claim, except for a defence of set-off as to the whole or a part of the subject matter of the counterclaim, be heard and determined by the Court.”

27.  Mr Hung, counsel for the defendant submitted (contrary to the order to be sought in the defendant’s summons), notwithstanding section 41(3)(c) and 41(4), this Court can direct this action, in excess of the monetary jurisdiction of the District Court, to remain to be heard in District Court without reporting to the Court of First Instance.  The reason being, this action was initially transferred from the Court of First Instance, and it was well pleaded in the Defence and Counterclaim that damages will be half the purchase price of the Property, i.e. more than one million.  The Court of First Instance must have known and had allowed such a claim of more than one million to be heard in the District Court at time of allowing the transfer.

28.  This is not the case here.  The order of transfer was done by way of consent order and prior to that, a consent summons for transfer was filed on 4 December 2014.  The parties had expressly stated in the consent summons the action “….be transferred to the District Court on the ground that the ratable value of the subject property…. is below HK$240,000.00”. The jurisdictional point has never been alerted to the Court of First Instance.  A report made to the Court of First Instance or a judge thereof is necessary.

29.  Mr Hung correctly submitted Re Estate of Chow Nai Chee [2010] 5 HKLRD 640, Hon Lam J (as then he was), in paragraphs 41 – 43 of the judgment, he enunciated,

“41. After the implementation of the Cvil Justice Reform, the court and the parties together with their lawyers should be more proactive in case management and more sensitive to cost effectiveness. It is necessary to have regards to the underlying objectives under Order 1A in choosing the forum. In my experience, there are civil cases in the High Court that can be justly and efficiently dealt with in the District Court. In many cases, a transfer to the District Court would bring about more expeditious and more cost effective disposal of the case. To evoke Section 44, the parties have to consent. That means a case cannot be transferred to the District Court if one or more parties object. However, a refusal to consent may be taken into account when the court considers the question of costs, particularly when the court has indicated that the case can properly be tried in the District Court and one party has agreed to such a course.

42. For cases commenced in the District Court, Sections 41(1) mandates the District Court to transfer a claim outside the District Court jurisdiction to the High Court (apart from exercising the power of striking out under Section 41(2) of the DCO). However, it is not so for counterclaim. Section 41(3)(c) gives the District Court the power to report to the High Court that the case should be heard in the District Court. On the receipt of such a report, the High Court can make an order that the whole proceedings shall be heard in the District Court. Once such an order is made, Section 41(6) provides that the District Court shall have jurisdiction notwithstanding any enactment to the contrary. Consent of the parties is not required. I have come across several cases transferred to the High Court on account of the counterclaim exceeding the monetary limitations under the DCO. Some of these involved inflated counterclaims advanced by the defendants. [emphasis added]

43. In my view, consistent with the spirit of the Civil Justice Reform, we should make more use of Section 41(3)(c) and Section 44.” [emphasis added]

30.  Hon Lam J’s decision was succinct and unequivocal, and should be followed.

31.  I also consider the necessity to vacate the pre-trial review and trial dates. The milestone dates should not be varied unless with exceptional circumstance (See Order 25 rule 3(2) and 3(3) of the Rules of District Court, Cap 336H).  The underlying objective of Order 1A of Rules of District Court should be upheld.  An exceptional circumstance arises when making a report to the Court of First Instance or a judge thereof.  It is impracticable to maintain the pre-trial review and the trial dates, be it milestone dates.  The pre-trial review and the trial dates are less than one month and three months respectively from the date of this decision.  The parties should not be left in limbo when the forum of trial has not been decided.  It would be equally impractical that the plaintiff to set this action down for trial in the District Court when the order from Court of First Instance is pending.  With utmost reluctance, both the pre-trial review and trial dates have to be vacated.

Directions

32.  I make the following orders:

(i)     Leave be granted to the defendant to amend the Defence and Counterclaim as per the draft attached to the defendant’s summons filed on 10 May 2016.

(ii)    The defendant do file and serve the Amended Defence and Counterclaim within 14 days hereof.

(iii)   Leave be granted to the plaintiff to amend her Reply occasioned by the Amended Defence and Counterlcaim within 28 days from the service of the Amended Defence and Counterclaim.

(iv)    The matter be reported to the Court of First Instance or a judge thereof for determination of the forum of trial pursuant to section 41(3)(c) of the District Court Ordinance, Cap 336.

(v)    The defendant do apply for further directions with respect of the conduct of this action within 14 days from the receipt of the report by the Court of First Instance or a judge thereof by way of summons before a judge in the District Court.

(vi)   Both the pre-trial review on 3 August 2016 and the trial dates commencing on 3 October 2016 with 5 days reserved be vacated.

(vii)  The costs of the defendant’s summons filed on 10 May 2016 be to the plaintiff, to be taxed if not agreed.

(viii) The costs of and occasioned by reporting the matter to the Court of First Instance or a judge thereof for determination of forum of trial be in the cause.