OR CHI PING v. CHIU KAI YEUNG

DCCJ 3145/2017

[2018] HKDC 584

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3145 OF 2017

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

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

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

DECISION

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

A. Introduction

1.  This is a decision of the defendant’s appeal against Master’s decision refusing to set aside a default judgment.

2.  The plaintiff is a brother of the defendant’s ex-wife, Madam Or.  The facts of this matter concern the purchase and use of a property, possession of which is now sought by the plaintiff against the defendant in these proceedings.  The property was purchased in 1991.  Relevant to the year of purchase is that the divorce proceedings of the defendant and Madam Or was commenced in 1992, and the marriage of the defendant and Madam Or ended in 1993.

3.  The subject property is at 4^th Floor, No 7 Luen On Street, Kowloon, Hong Kong (the “Property”).  The Property was purchased in the sole name of the plaintiff on 23 August 1991.  It is now 27 years since then.  It is common ground between the parties that the defendant has use and occupation of the Property with the consent of the plaintiff, for these 27 years.  Madam Or lived elsewhere with their son.  It is also common ground that the defendant since 1991 deposited varying amounts of money to Madam Or’s bank account each month all the way to about May 2017.  The defendant partitioned the Property and let them to various tenants.

B.   Procedural history

4.  This action was commenced on 11 July 2017 by the plaintiff against the defendant for, among other things, vacant possession of the Property, and mense profit until delivery of possession.  This is an appeal by the defendant against the decision of Master D To dated 15 February 2018 rejecting his application to set aside the default judgment. 

5.  The default judgment was made on 19 September 2017 pursuant to Order 13 Rule 4 of the Rules of District Court in default of the defendant’s filing of the acknowledgement of service.

6.  The defendant applied for setting aside of default judgment on 20 November 2017.  The defendant acted in person.  He has filed three affirmations in support, dated respectively 15 November 2017, 5 December 2017 and 19 December 2017.  In his affirmation, he explained his 2 month lateness in attending to the matter, on ground that he did not pay much attention to the court documents as he was tired and as he did not quite understand English.  When he realised the nature of the action, he first took the time to liaise with his ex-wife about the matter.

7.  The plaintiff has filed an affirmation dated 8 January 2018 in opposition of the setting aside application.  The plaintiff is legally represented.  His affirmation was prepared with an attention to details and with a care to support facts with relevant evidence.  For example, the plaintiff included a summary setting out the monthly deposits of each month from 2006 to 2017, and which was prepared based on the copy bank passbook of Madam Or (exhibit OCP-4).

8.  The defendant’s appeal was made 18 days late.  At the hearing, he submitted that his sickness has slowed down his action.  The defendant was not legally represented.  The plaintiff may not have suffered any real prejudice for the 18 days lateness of the notice of appeal.  The plaintiff has not sought possession of the property for 27 years.  In light of the circumstances of this case, I am minded to grant leave for the defendant to appeal out of time.

9.  The defendant did not serve the notice of appeal to the plaintiff, until 32 days after the lodging of the appeal.  As a result, the plaintiff has only 8 days before the hearing to prepare for this hearing.  The defendant explained at the hearing that the delay was not deliberate.  He was affected by sickness and became forgetful.  He stressed that he had not delayed in service last time for the setting aside application.  The plaintiff did not press the matter as it appeared that the defendant did serve the papers promptly last time.  I noticed that the plaintiff’s counsel did not fail to produce a comprehensive submission even he has just less than 8 days.

10.  I am approaching this matter as a rehearing of the setting aside application.  As will be reasoned below, I am minded to allow the appeal.  All these instances of the defendant’s failure in complying with the rules and procedures will go to the matter of imposing of condition subject to which the default judgment is set aside.

C.   Competing versions of facts – manner in which matrimonial home proceeds applied for purchase, the basis of defendant’s 27 year occupation, and his monthly payments to Madam Or 

11.  As to the circumstances of the purchase of the Property, the plaintiff’s case is that the Property was purchased when his sister’s divorce was contemplated; it was purchased for Madam Or to reside with her son after divorce; the Property was purchased by her with her own share of the sale proceeds of the matrimonial home at 16J, Hip Wo Street (“16J”); such share was in the sum of HK$390,000 and was applied by her as down payment for the Property.  The Property was put in the name of the plaintiff because Madam Or had no income and the plaintiff’s name was used for the purpose of taking out the mortgage.  Madam Or did not like the Property after the mortgage was taken out.  At the same time, it happened that the defendant needed a place to live and Madam Or agreed to let him live in the Property out of mercy of the young son of the defendant with another woman.  It appears that the plaintiff has not stated clearly who had made the mortgage repayments.

12.  As to the monthly deposits by the defendant to Madam Or, the plaintiff says that they were licence fees in consideration of the defendant’s use and occupation of the Property.  As stated in paragraph 2.2 of the statement of claim, the licence for the defendant’s use of the Property was on the terms, among others, that the defendant had to contribute a licence fees to the Plaintiff for the occupation therein with a sum to be negotiated between the parties (ie the plaintiff and the defendant) from time to time.

13.  The defendant’s case is that the Property does not belong to the plaintiff; its purchase was funded by 16J (the matrimonial home in joint names of him and Madam Or), and so his case was that he has an interest in the Property, and ought not be ordered to leave.  The decision to purchase the Property was made during the course of marriage and out of his initiative to move the family to a larger flat, and letting other parts out to generate rental income to provide for the family; this was his plan occasioned by the diagnosis of his liver problem.  The Property was put in the plaintiff’s name because at the time of purchase, because Madam Or wanted the family to apply for public housing.  The cheque for the purchase was issued by him.  The letting of the flat was proceeded upon even after the divorce in 1992-1993 and continued for all these 27 years.   The defendant is not legally represented.  Though not expressed in his affirmations, it is the defence of the plaintiff’s holding the property on resulting or constructive trust for him (and also Madam Or) that the defendant is relying on.

14.  At the hearing, the defendant agreed with the accuracy of the plaintiff’s summary of monthly deposits (OCR-4), but he claimed that they were rentals out of the Property he earned for Madam Or and for the maintenance of their son; they were not licence fees for his use of the Property.

D.   Analysis of the facts in dispute

15.  It is common ground in the two competing versions that the purchase of the Property followed from the sale of 16J.  It is also common ground that 16J used to be in the joint names of the defendant and Madam Or.  The key difference is that the plaintiff stated that the proceeds of 16J were split in equal half.  They were divided up already in 1991 by the couple, notwithstanding divorce proceedings was commenced only the next year; the HK$390,000 down payment was her own share, cleanly being her own money, for the purchase of the Property.

16.  To me, among other inherent problems in the plaintiff’s case as I will detail further in Section G below, it is most notable that the plaintiff did not exhibit the land search of 16J, nor any evidence relating to the sale of 16J and the size of the proceeds.  There is also no evidence showing that the HK$390,000 was cleanly coming from Madam Or’s own money or share of sale proceeds after splitting.  At the hearing, I asked whether the plaintiff could made them good in time if given.  The plaintiff could not confirm.

17.  The absence of a land search of 16J and supporting evidence on the source of HK$390,000 down payment can be telling.  It was so much of the plaintiff’s case that the Property’s down payment was Madam Or’s own money.  A simple land search of 16J could show what price 16J was sold and whether a half share could reach HK$390,000 as claimed.  But the land search and other evidence on this issue are tellingly missing from the plaintiff’s affirmation which otherwise was satisfactorily prepared.

18.  The defendant’s case is also not without anomalies.  The defendant says in his three affirmations that he manned the Property and generated rental income for Madam Or and their son.  He basically accounted to his ex-wife the rentals in full, for all these 27 years, for maintaining their son.  It seems to me also remarkable that the defendant, as he emphasized, selflessly accounted to Madam Or all rentals in full (less costs of repair materials).  This is quite unusual, to say the least, considering that under the divorce, the maintenance he has to pay Madam Or and the son each for only HK$750.  His son is over 30 by now.

E.   Legal principles regarding setting aside of regular default judgment application

19.  There is no evidence or allegation that the judgment is not regular.  The defendant confirmed he had actually received the court documents.  I proceed on the basis the judgment was regular.

20.  Mr Tasman Tam, counsel for the plaintiff, relied on Maryo Development Ltd v Tsang Yau May & Ors, CACV 101 of 2015 dated 11 January 2015[2]. The Court of Appeal stated in paragraph 13 that: -

“13. … the correct approach can be more helpfully summarized as requiring the Court to form a provisional view as to whether or not the defendant has a realistic prospect of successfully defending the action. Determining this will involve assessing whether or not the defendant’s evidence on disputed factual matters has a realistic prospect of being accepted and, if it has, that the defendant has a realistic prospect of establishing a defence in law. The assessment has to be carried out mindful of the interlocutory nature of the application and with a sense of proportionality.

14. … as Bokhary JA (as he then was) explains in his judgment in Premier Fashion other factors such as the reason judgment was allowed to be entered, and any delay in making the application to set aside, are to be taken into account. In a case in which the assessment of the prospects of the defence lies in the balance these other factors may tip a case one way or the other.” (own emphasis)

21.  Mr Tam also helpfully referred me to Choi Chung Bun Vincent v Australia China Holdings Ltd [2011] 3 HKC 336; at paragraphs 32-33, the learned High Court Judge McWalters stated:-

“32. In Manolakaki v Constantinides [2003] EWHC 401…Deputy Judge Boyle QC reviewed the authorities and distilled the principles from them into the following summary in para 46 of his judgment:

“…whether in any particular case there is ‘a real prospect of successfully defending the claim’ must ultimately turn on a judgment to be made on the particular facts of the particular case, applying common sense, and taking account of the requirement that the defence should carry some degree of conviction. The court should not attempt to judge questions of fact on conflicting statements which have not been tested by cross-examination and should avoid attempting to try issues of fact where apparently credible facts are advanced by each side…if the court is unable to reach that [there is no real prospect of successfully defending the claim] on the materials before it, it may be, depending on the circumstances of the particular case, that the court has to conclude that there is a real prospect of successfully defending the claim. At all events, it appears to be wrong to require the defendant to show ‘a real likelihood that he would succeed’, as suggested in the note to the Supreme Court Practice 1999.’

33. This, I believe, is a helpful guide to the exercise of the discretion where the court is placed in the situation of having before it competing assertions as to fact, neither of which, on its own, is inherently incredible and without the benefit of other independent evidence, such as documentary evidence, to help it in its search for the truth.” (emphasis added)

22.  I am guided by the above principles in making the decision here.

F.   Analysis as to the Defendant’s chance of establishing the defence at trial

23.  The parties’ cases are mutually exclusive of each other.  As a whole, the anomalies inherent in the plaintiff’s case are more plentiful than those in the defendant’s case.  I am not judging the credibility of the parties without trial.  The anomalies are inherent in the versions of facts and evidence before me.

24.  Considering the many inherent problems of the plaintiff’s case, I find that the defendant’s version of fact has a realistic likelihood of being accepted, and so a defence of resulting and/or constructive trust is capable of being established at trial.

25.  Alternatively, I allow the appeal also because I do not believe that the defendant’s case has no real prospect of success or of being accepted.  This is so notwithstanding that his case has two inherently unbelievable features as mentioned in Section D above. 

26.  I have not overlooked the fact that it should be for the defendant to discharge the burden of showing realistic prospect of success of a defence at trial.  I consider that the burden is discharged viewing the matter in the round and taking into consideration the many inherent problems in the plaintiff’s case.

G.   Inherent anomalies in the plaintiff’s case

27.  Illustration of the inherent problems of the plaintiff’s case should start with paragraphs 6 and 7 of the plaintiff’s affirmation, which are set out as follows:-

“6. 因離婚及賣樓之緣故，家姐需要一個新的居所，但因為家姐本身沒有收入無法由銀行批出貸款，故決定由本人購入物業作為家姐之居所。又因地產經紀的遊說，倉猝下便決定迅速購買該物業。其時家姐亦將賣出16J物業其所獲分之收益(約港幣39萬元)借予本人購入該物業，而餘款由本人申請銀行按揭貸款支付。本人現附上一份該物業日期為1991年8月23日的按揭文件(土地註冊處登記編號4994291)副本，標記為附件“OCP-3”。至於被告人所假稱其資助購買該物業的事宜是不真確的。本人只有從家姐處獲得資助而非被告人。

7. 在本人購入該物業並承造按揭後，家姐卻發覺該物業環境未如理想，故而決定另外尋找居所。其時適逢被告人向家姐要求居住於該物業，而家姐因一時心軟(念其婚外情所生兒子年幼的緣故)，故代被告人向本人要求暫住於該物業中。有見及此，本人及後與被告人達成了申索書第二段所述之許可協議以便讓被告人及其家人居於該物業內。”

28.  Apart from the deliberate leaving out of the land search of 16J, which will otherwise easily establish the timing of sale and size of proceeds of 16J, there are the following inherent problems in the plaintiff’s case:-

(1)   Even according to the plaintiff’s own case, Madam Or has a beneficial interest in the Property.  According to the plaintiff, the Property was placed in his name only for taking out mortgage; he made no mention of who has paid the mortgage instalment; but the down payment was Madam Or’s own money; the Property was also purchased for Madam Or to live after divorce.  It was not a case of all legal and beneficial ownership resting with the plaintiff alone as the plaintiff pleads.

(2)   The negotiation of licence fees was between the plaintiff and the defendant, not between Madam Or and the defendant.  This is according to paragraph 2.2 of the Statement of Claim.  However, the money was invariably paid to Madam Or each month.  It is unclear in the plaintiff’s case to whom, whether Madam Or or the plaintiff, the licence fees were payable. 

(3)   It suffices to say from points (1) and (2) above that in the plaintiff’s own case, Madam Or is at least one of the beneficial owners.  Such was contrary to the plaintiff’s plead in paragraph 1.1 of the Statement of Claim that he is and was the sole legal and beneficial owner of the Property.

(4)   The gist of the arrangement in the plaintiff’s own case involves separation of legal ownership and beneficial ownership ie the plaintiff’s holding the Property or part of its interest for his sister beneficially, for getting mortgage.  There is a kind of trusteeship in the plaintiff’s case, though not pleaded nor relied on.  Such trusteeship also underlies the defendant’s version ie that the plaintiff was holding the Property for him (and also Madam Or) for a purpose of application for public housing.  There is a grain of truth, to say the least, that the legal title does not represent the way the beneficial interest is held or intended to be held.  There are some elements or features of a common understanding for one to hold the Property for another beneficially.

(5)   The plaintiff pleaded in paragraph 2.2 of the Statement of Claim that the licence fees were at sums negotiated from time to time.  However, one can see from the summary in OCP-4 that the size of monthly deposits varied from month to month.  It is quite hard to reconcile the summary/figures with the plaintiff’s case that the amounts were an outcome of negotiation of licence fees.  For example, in November 2006 it was HK$1,300, December 2006 HK$3,100, January 2007 HK$3,300, February 2007 HK$4,300, and so on.  The figures are too jumpy to be an outcome of negotiation of fees for the use of the Property by the defendant.

(6)   Remittance of “Rent” is the defendant’s case.  Even the summary in the plaintiff’s exhibit OCP-4 itself bears the title which corresponds with the defendant’s case:-

“Address: 4^th Floor of No 7 Luen On Street

Monthly Payment (Rent) History” (own emphasis)

The heading of the summary also goes on to repeat “Monthly Payment (Rent)” twice.

(7) That Madam Or chose not to live in the very property she purchased because she later did not like the environment does not sound easy for one to believe. That she then agreed for the defendant to reside there out of the moments of compassion is also not easy for one to believe, considering that such arrangement has lasted for 27 years.

H.   The Defendant’s application to adduce new evidence  

29.  The defendant has filed a 4^th affirmation dated 19 March 2018 as new evidence in support of the appeal.  The plaintiff strongly opposed the adducing of new evidence.  As analysed above, I arrive at the decision to allow the appeal on the basis of the defendant’s case based on the first three affirmations. No reliance was placed by me in making this decision on the 4^th Affirmation, and so I believe that I do not need to deal with the application of the defendant for adducing new evidence.

I.   Conditions

30.  As shown in Section B above, the defendant has a history of default in complying with the procedures, including lateness in filing notice of appeal, in serving it, and of course in failing to acknowledge service of the Writ of Summons.

31.  I understand that the plaintiff has, out of an abundance of caution, hold up execution of writ of possession pending this appeal though he is not obliged to.  The last monthly deposit of the defendant was in May 2017 at HK$7,000.

32.  In the circumstances, I believe that pending trial, it is in fairness to the plaintiff that the defendant be expected to pay and to continue the deposits as from June 2017.  I therefore impose the condition for setting aside of the default judgment that the defendant make payment into court at HK$84,000 (calculated with reference to HK$7,000 each month accounting as from June 2017 to May 2018).

33.  That the defendant should be asked to pay up further money pending trial as from June 2018 can be a matter of further applications on other basis, if the plaintiff is so advised.

Order

34.  I make the following orders:-

(1)   Leave be granted for the defendant’s appeal by notice dated 19 March 2018 out of time;

(2)   On condition that the defendant pays HK$84,000 into court within the next 28 days, and upon such payment, the final and interlocutory judgment dated 19 September 2017 be set aside and the writ of possession dated 13 October 2017 not to be further executed until further order of the court;

(3)   Subject to the satisfaction of the condition set out in paragraph (2), the defendant’s appeal is allowed;

(4)   The defendant is to pay the plaintiff’s costs of the appeal with certificate for counsel, to be summarily assessed and be disposed of on paper;

(5)   The plaintiff is to file a statement of costs within the next 14 days; the defendant is to file a list of objection within 14 days thereafter;

(6)   The defendant forthwith pays the plaintiff’s costs of the setting aside application below at HK$28,500; and

(7)   There be liberty to apply.

35.  I direct that this decision be interpreted in Punti by court interpreter to the defendant.  My clerk will contact the defendant to arrange for an appointment for the defendant to attend the District Court building for this purpose.  For the avoidance of any doubt, in the event that the condition for the defendant to pay HK$84,000 into court is not complied with in time or at all, the plaintiff can continue to rely on the judgment and to execute the proceedings for possession. 

36.  I thank Mr Tam for his assistance to the court and his comprehensive written submissions.