Shun Pong Ltd v. Chan Koo Kai Felix and Another

HCA 255/2017

[2018] HKCFI 2628

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 255 OF 2017

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Before: Deputy High Court Judge Marlene Ng in Chambers

Date of Hearing: 30 April 2018

Date of Handing Down Judgment: 29 November 2018

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JUDGMENT

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I.  INTRODUCTION

1.Chan Hiong Sing Jonathan (“Jonathan”) is the father of Chan Koo Kai Felix (“Felix”). The plaintiff (“P”) was/is the registered owner and Felix was/is the occupier of Apartment B, 3^rd floor, Yuk Sing Building (“Building”), Nos 1-9 Yuk Sau Street, Hong Kong (“Property”). According to Felix, the Property was one of various properties registered under P’s name. Felix together with all other occupier(s) in actual occupation of the Property (if any) were named as the defendant in the present action (“D”).

2.According to Felix, P was set up by his paternal grandparents[1] and was involved in the development of various properties including the Property. P was 1 of the companies that held the Chan family properties, and was passed down to their 3 sons.[2] Jonathan was a majority shareholder (holding 18,000 shares or 82% of the 22,000 shares in P) and a director of P. The other 2 shareholders were Hsu Fei Fei (Chan family friend, “Hsu”),[3] and Cheng Wai Yee (Jonathan’s sister-in-law, “Cheng”).[4] Felix claimed there was disparity in shareholdings amongst P’s shareholders because P’s rental income was not regularly distributed as dividends to the shareholders, and (as Jonathan personally told Felix) every time a shareholder needed money Jonathan would make her sign a loan agreement which would end up in transfer of shares by such shareholder to Jonathan. Felix also believed Jonathan had ready instruments of transfer in his favour otherwise he would not have time and again asserted P and the Property belonged to him.[5] Felix claimed Jonathan hired a manager Kwok King Hon (“Kwok”) who had no interest in P to act as alternate director, and Kwok’s role was to support his boss Jonathan and to facilitate signing of company documents. At the Master Hearing (see paragraph 14 below), Mr Tsu, solicitor for P, was not sure whether P had a 3^rd director.

3.According to the Felix Affs (see paragraph 12 below), he and his father had a love-hate relationship. Whilst they had a good relationship, loved each other and liked each other’s company, Jonathan wanted Felix to listen to and agree with him, but the more Jonathan tried to control Felix the more rebellious he became.[6] Felix claimed Jonathan being a professor experimented with his 2 sons by raising the elder one on tradition teaching and the younger one (Felix) on liberal teaching, so Felix had no discipline, lived a carefree life, was spoilt and became financially dependent on Jonathan over the years. Since 2008 Felix’s income was under the income limit for eligibility to purchase Home Ownership Scheme (“HOS”) flat.

4.P claimed that in/about December 2008 Felix was permitted/ allowed to occupy/use the Property as licensee at will on temporary and rent-free basis as Jonathan wanted to discharge his parental/moral obligations towards Felix, who at the time was under tremendous stress and asked for housing provision from Jonathan. P further claimed D was in actual occupation since/about January 2009.

5.Felix claimed that at that time he was finalising his divorce with his Korean wife Yuki Lee Hyun Ah (“Yuki”) with whom he had 2 children K and C (“Children”). In November 2008, Felix reached agreement with Yuki for custody of the Children to be granted to her. But by a variation order in February 2015, Felix was granted custody of the Children. Felix claimed he and his mother (and Jonathan’s wife) Betty Chung (“Betty”) had considerable differences on how he should care for the Children. In/about June 2015, Betty complained of child abuse in relation to the Children to the police, and the relationship among Betty, Felix and Jonathan broke down. On 16 July 2015, Betty commenced HCMP1716/2015 for custody of the Children.

6.P by letter dated 9 March 2016 demanded/requested D to quit and deliver up vacant possession of the Property within 3 months (ie by 8 June 2016). On 18 July and 30 September 2016, P’s solicitors by letters demanded/requested D to quit and deliver up vacant possession of the Property by 17 September 2016 (ie within 2 months) and 30 November 2016 respectively, failing which P would charge D mesne profits for alleged wrongful occupation thereof at $28,000/month as from 1 December 2016. D did not deliver up vacant possession of the Property and/or pay alleged mesne profits at $28,000/month since 1 December 2016.

7.On 3 February 2017, P commenced the present action against D for (a) delivery of vacant possession of the Property to P, (b) mesne profits of the Property as aforesaid, and (c) interest and costs.

8.On 17 February 2017, Felix acting in person filed acknowledgment of service giving notice of intention to defend. Felix claimed he applied for legal aid on 28 February 2017.

9.On 6 March 2017, P filed Notice of Intention to Enter Judgment pursuant to Order 29 rule 8A of the Rules of the High Court (“RHC”). Felix received the same on the same day. Mr Chang, counsel for P, submitted that the deadline for service of the Defence fell on 17 March 2017 being 28 days after acknowledgment of service by Felix.

10.On 28 March 2017, Felix visited the offices of the Legal Aid Department (“LAD”) to apply for legal aid, but it was not until 31 March 2017 when a completed application was filed. On 7 April 2017, the Director of Legal Aid (“DLA”) filed a Memorandum of Notification of an Application for Legal Aid giving notice that Felix had applied for legal aid. On 5 July 2017, the DLA filed a Memorandum of Notification that a Party has been Refused Legal Aid giving notice that the DLA had refused Felix legal aid (“LA Refusal”). Felix claimed that on 8 July 2017 he received a letter from the LAD dated 3 July 2017 refusing him legal aid and reminding he had 14 days to appeal, and that on 17 July 2017 he attended the officer of the LAD to appeal against the LA Refusal. The hearing of such legal aid appeal was scheduled to be heard on 7 December 2017.

11.In the meantime, D did not file any Defence within the prescribed deadline or at all. Felix claimed he thought all proceedings were stayed pending the outcome of his legal aid appeal.[7] But on 1 August 2017 P entered final and interlocutory judgment in default against D to (a) give P vacant possession of the Property, and (b) pay P damages to be assessed and costs to be taxed (“Judgment”). Felix claimed he saw a notice concerning the same posted by P’s solicitors at the door of the Property when he returned home from work on 2 August 2017.[8]

12.On 3 August 2017, Felix still acting in person filed a summons to set aside the Judgment and to stay the Judgment in the meantime (“Summons”). On 3 August 2017, 1 September and 15 December 2017, D filed Felix’s 1^st, 2^nd 3^rd affirmations (“Felix 1^st, 2^nd and 3^rd Affs” or collectively, “Felix Affs”) in support of the Summons. On 18 December 2017, P filed Jonathan’s affirmation (“Jonathan Aff”) in opposition.

13.As further canvassed below, Felix’s defence essentially asserted that Jonathan had purportedly represented to him on 3 separate occasions in November/December 2008, in/about January/February 2009 and in/about September 2014 that he could remain indefinitely at the Property on rent-free basis giving rise to defences of proprietary and/or promissory estoppels.

14.On 13 October 2017, Felix’s solicitors filed Notice to Act. The Summons came before Master Benny Lo (“Master”) on 27 December 2017 for argument hearing (“Master Hearing”). After hearing solicitor for P and counsel for D, the Master ordered that (a) the Judgment be set aside unconditionally, and (b) D to pay P’s costs of the application up to and including 15 December 2017, and P shall pay D’s costs of the application from 16 December 2017 (including the Master Hearing) with certificate for counsel to be taxed if not agreed (“Order”).

15.On 9 January 2018, P filed Notice of Appeal to set aside the Order with costs to P (“Appeal”). But Felix claimed the Master’s conclusion that he had a meritorious defence and should be given a chance to defend P’s claim should stand, and in particular (a) the defence of proprietary estoppel that D raised against P was far from shadowy and (b) other relevant factors were also in favour of setting aside the Judgment.

16.The hearing of the Appeal came before me on 30 April 2018 (“Appeal Hearing”). At the Appeal Hearing, Mr Chang and Mr Leung, counsel for D, confirmed that the Judgment was a regular judgment.

II.  FELIX’S AFFIRMATION EVIDENCE

17.Felix claimed it was on Jonathan’s promise that he could stay at the Property for as long as he wished that he moved into and stayed there on rent-free basis for close to 9 years, and it was illogical for P (which was essentially/completely controlled by Jonathan) to suddenly and without reason seek to evict him and/or demand mesne profits at $28,000/month. Felix claimed Jonathan and P could not go back on their word and cause great detriment to him just because of recent major fall-out between Felix and his parents over the Children, and P’s demand was clearly an act to support Betty’s case and to undermine his case in HCMP1716/2015.

18.Felix claimed that since about 2005 (which remained the case even later in 2008) he received a monthly salary of $19,000 from another company ran by Jonathan called Kin Fung Stock Company Limited (“Kin Fung”), and he also earned some income from teaching yoga classes on the side.

19.In late 2008, Felix sought financial help from Jonathan. At the time the Building was poorly maintained, and problems with its sewage system caused waste overflow to the lowest floor where the Property was located. This resulted in low rental yield, and the Property was not let at the time. In a discussion in/about November/December 2008, Jonathan told Felix the Chan family company (ie P) owned the Property, so “[Felix] could be rest assured that [he] could live there rent free, without worrying about being ever evicted. It was under this assurance that [Felix] agreed to move to the Property”. In short, Jonathan offered to let Felix stay indefinitely at the Property. Felix said even though the Property was in poor condition,[9] he was grateful to have a shelter.

20.Although Felix did not know Jonathan’s true motivation for such promise, he believed it must have been a mix of fatherly love and awareness that at that time Felix was finalising his divorce with Yuki whom Jonathan disapproved. Felix claimed all P’s shareholders were close family members who knew and did not object to his residence at the Property, and it was acknowledged he required additional assistance from the family due to his heart condition.

21.Felix further claimed he was not surprised by Jonathan’s offer for him to stay at and to use the Property as it was a Chan family tradition for family members to be allowed to live/use family-held properties (units and carparking spaces) on rent-free or below market rent basis,[10] and/or for P’s founder to provide a residential property to each male/female child as wedding gift.[11] So Felix believed Jonathan’s offer to him was just part of such tradition, and little did he know the Property would be caught in a power struggle on how to raise the Children.

22.Felix said P arranged to clean up the Property, and he moved into the Property in December 2008. Felix’s divorce decree was made absolute in 2009. At first, Felix and Yuki contested over the custody of the Children, but they eventually came to an agreement, so by a consent order dated 19 November 2008 custody of the Children was granted to Yuki. Felix found the Property suitable for him for spending time with the Children during his access to them and/or also for the future of the Children. Felix claimed Jonathan said he should settle down in the Property, and arranged for it to be redecorated to Felix’s specific taste, including inter alia installing large mirrors on the living room walls for his yoga practice and for him to give private yoga lessons.

23.Soon after Felix moved into the Property in/about January 2009, he expended around $100,000 in further furnishing the Property. After Felix settled down in the Property, he held a small housewarming gathering at the Property in about January/February 2009. Jonathan attended such gathering with his female companion, and once again reassured Felix he could stay at the Property for as long as he wished, and even said Felix should leave space for the Children to use/stay if required. In return, Felix arranged for the Children to meet Jonathan regularly for meals and family events from 2009 until about September 2011 when Yuki took the Children to Korea.

24.Felix claimed that since 2008 his income[12] was under the income limit for HOS, and all along it was in the back of his mind to purchase a flat under HOS. Between 2009 and 2011 Felix did research on HOS and had discussions with friends, but decided against such purchase in the end because he expected he would be able to stay at the Property upon Jonathan’s assurances.

25.In about 2011, Yuki decided to take the Children back to Korea for financial reasons and to give a more desirable environment for them. Between September 2011 and the summer of 2014, when the Children returned to Hong Kong for vacation, they lived with Felix at the Property. In the summer of 2014, Yuki’s business failed. She decided she could no longer afford to raise the Children in Korea, and asked if Felix could take the Children back. In/about September 2014 at the Chariot Club in Central, Felix discussed with his parents about taking the Children back, and Jonathan once again reassured him inter alia that he could continue to stay in the Property. Confident that he would be able to provide for the Children without having to worry about a place to stay and/or payment of high rent, Felix agreed to Yuki’s request, so by a variation order dated 4 February 2015 Felix was granted custody of the Children.

26.Felix claimed he loved the Children and would seek to provide the best for them, but he would not have agreed to Yuki’s request to relocate the Children to Hong Kong with drastic changes to his and the Children’s lifestyles and also with emotional/financial stress for him if he did not already have the Property as a permanent accommodation. When the Children came under his care, Felix made significant changes to his lifestyle and daily schedule to take up more responsibilities and to become more involved with the Children rather than to pursue his own career/hobbies. During the 2014/2015 academic year, Felix and the Children lived at the Property.

27.But Felix and Betty had considerable differences over how Felix should care for the Children (especially K) to the extent she made complaint to the police in/about June 2015 of child abuse. Consequently, Felix’s relationship with Betty and Jonathan (who sided with Betty) broke down almost completely. On 16 July 2015, Betty commenced family proceedings in HCMP1716/2015. In 2015, Betty successfully applied to have the Children become wards of the court, and obtained care and control of the Children. In 2016, Betty applied to continue the wardship. Felix claimed Jonathan supported Betty in such proceedings, and his relationship with his parents soured when as a result of the seriousness of such proceedings he was left with no choice but to protect himself by dragging Jonathan into such proceedings and disclosing his personal lifestyle.

28.Felix said that in HCMP1716/2015 a major concern over whether/when the Children could be returned to him was his abode.[13] In various documents in HCMP1716/2015, Jonathan stated Felix was dependent on him all his life, and he provided Felix with an allowance and also assisted in raising the Children. Felix claimed P’s demand letter dated 9 March 2016 was deliberately issued to dampen his case in HCMP1716/2015. Such letter suggested P’s board of directors accepted a proposal from its shareholder to dispose of the Property. Felix could not help wonder why P would choose at that time to dispose of the Property out of all properties it held, especially when such proposal was not confirmed by Cheng. Felix claimed P’s claim for possession of the Property was to undermine his claim for return of the Children to his care in HCMP1716/2015 by threatening to take away the only shelter he could give them.

29.Felix claimed that when P contacted Cheng, she had no problem with Felix remaining at the Property. Cheng was unaware of P’s claim to repossess the Property, and in fact she had previously discussed the possibility of having her son’s family stay there. But Cheng’s husband had caused a lot of financial stress to the Chan family before he passed away, so she felt bad and did not wish to be involved in such Chan family issue.

30.Felix said Jonathan assigned Kwok to act as alternate director at P. Kwok had no interest in P and his role was to support his boss and to facilitate signing of company documents. Kwok told Felix he was in a difficult position in view of (a) his duty to protect the personal privacy of Jonathan who hired him and (b) Betty’s strong interest in P’s assets with enquiries made as to the value of P’s properties and Jonathan’s net worth. Even before P’s demand for possession of the Property, Felix had numerous conversations with Kwok about the Property as he was worried Jonathan might not honour his offer that “the flat would be left to him as promised or in the case of incapable to address his wishes”, and further worried about possible dispute since Jonathan was not the sole owner of P. But Kwok assured him Jonathan would have a plan, and the easiest way would be to swap company shares as “all the family companies under their administrations have different shares structure”, and it made sense for Jonathan (who already owned 82% shareholding in P) to eventually 100% own P.

31.As alluded to in paragraph 6 above, on 18 July 2016 Felix received a letter from P’s solicitors demanding him to quit the Property, which Felix claimed was used in HCMP1716/2015 as a reason not to return the Children to him. On 27 September 2016, Felix’s solicitors in HCMP1716/2015 wrote to Withers (presumably Betty’s solicitors) about P’s demand to evict him from the Property claiming that Kwok (P’s previous alternate director and Jonathan’s personal assistant) relayed a message to Felix that if Felix did not talk to Jonathan and “…… voluntarily gave up his parental rights to the two children, [Jonathan] would terminate [Felix’s] job in his company and stop paying [Felix] his salary of $19,000, and would also issue proceedings to evict [Felix] out of his apartment”, and that “[Betty] whilst on the one hand repeatedly alleges that she has not used the repossession action as a leverage in [HCM1716/2015], she (and her husband) on the other hand continues to exert pressure on [Felix] by threatening to cripple his financial position”.

32.By a letter dated 28 September 2016, Felix’s “employment” with Kin Fung was terminated by 1-month notice effective from 1 November 2016 purportedly “due to restructuring of the Company”. Felix claimed this went to support what was stated in the letter dated 27 September 2016 by his solicitors in HCMP1716/2015.

33.On 12 December 2016, Felix wrote to P to remind that in 2015 Jonathan told Ms Lai of the Social Welfare Department that the Property was provided to him free of charge as home for him and the Children, and it was stated in the investigation report that “[Jonathan] assured that he was financially sufficient. He would provide financial support to help [Felix] raise the children as far as he could”.

34.On 28 December 2016 Felix received letter from P’s solicitors that demanded possession of the Property and also mesne profits. On 13 January 2017, Felix replied to reiterate inter alia that (a) he had lived at the Property (being the only home for him and the Children) on rent-free basis for over 8 years, (b) it was his understanding that he was entitled to continue to do so, and (c) he could not see any ground for P to charge mesne profits except to put litigation pressure on him as the Wardship Hearing (see paragraph below) in HCMP1716/2015 for determining the custody of the Children was due to commence on 8 February 2017.

35.Felix and his parents were involved in a 15-day hearing in HCMP1716/2015 on 8-10 and 13-17 February 2017, 3, 13, 27-28 and 31 March 2017, and 7 and 25 April 2017 (“Wardship Hearing”) in respect of the custody of the Children.

36.But on 4 February 2017, ie 4 days before the 1^st day of the Wardship Hearing, P served the writ of summons in the present action on P by insertion into the letterbox at the Property. Given the temporal proximity between the issuance of the writ of summons in the present action and the commencement of the Wardship Hearing, Felix believed the present action was motivated by his parents’ attempt to gain unfair tactical/litigation advantage for the purpose of HCMP1716/2015 because if Jonathan could break his promise and evict Felix from the Property (being his and the Children’s only residence), Felix’s claim in HCMP1716/2015 for return of the Children to his care would be undermined. The matter of Felix’s residence was raised at the Wardship Hearing, and DHCJ Lee took into account reduction of Felix’s income and his possible eviction from the Property as practical difficulties against restoring the Children to him.

37.In the present action, Felix filed acknowledgement of service on 17 February 2017. He immediately went to the LAD to make enquiries for assistance. When the Wardship Hearing was adjourned on 28 February 2017, Felix applied for legal aid (as Jonathan revoked family support for Felix via cessation of salary payment by Kin Fung), and was told there was no need to respond to any letters until further notice. But on 6 March 2017 D received from P’s solicitors the Notice of Intention to Enter Judgment.

38.On 28 March (not February) 2017 (by which time he had received the letter dated 6 March 2017 by P’s solicitors), Felix attended the LAD’s offices. He was guided through the application process, and claimed to have been told by LAD staff not to respond to any letter from P, so he thought he should refrain from taking any step in the present action. Felix completed the application for legal aid on 31 March 2017, and believed the present action would be stayed pending the outcome of his legal aid application. In the meantime, the Wardship Hearing took up all of Felix’s time as it lasted until April 2017, and he had no time/energy to deal with the present action even though he intended to defend P’s claim.

39.The final closing submissions of the Wardship Hearing were heard in June 2017. On 20 June 2017, P’s solicitors replied to LAD’s letter dated 19 June 2017 to deny Jonathan offered Felix use of the Property. On 8 July 2017, Felix received a letter from LAD refusing him legal aid, and reminding he had 14 days to appeal. On 17 July 2017, Felix attended the offices of the LAD to lodge legal aid appeal, and was informed nothing needed to be done in the meantime. Felix’s legal aid appeal was scheduled to be heard on 7 December 2017. But in the meantime, the Judgment was entered against him on 1 August 2017. On 19 September 2017, DHCJ Lee ordered that wardship of the Children be continued subject to review in/about June 2018.

40.Felix claimed that in view of Jonathan’s assurances, he had no planning for his future residence as he never thought he would be asked to leave the Property being his only abode. He claimed it would be unjust for Jonathan to allow him to live at the Property for almost 9 years since 2008 and to financially provide for him for 44 years (and well knowing he had a heart condition that made him incapable of holding a normal job) (ie he had positioned his life based on Jonathan’s assurances that he could treat the Property as his own rent-free residence as long as he wished), and then suddenly to take away his salary allowance, evict him from his home and take away the Children just because of family dispute arising from Felix not heeding his parents’ advice regarding the upbringing and education of the Children. Felix believed he was entitled to hold Jonathan and P to their word and it would be unjust to now evict him or charge him mesne profits.  If he were so evicted, it would seriously affect his ability to make access and care arrangements in respect of the Children. Felix claimed the aforesaid arrangement was P’s/Jonathan’s commitment to him for providing a safety net for a family member in need, and it came with the condition that it would be home to the Children. Felix claimed the agreed usage included providing “shelter” for the Children, and complained that his parents were using the legal system to exert power/control to punish him for not “respecting” / “following” their wishes and to dress up a family dispute as one between licensor and licensee. After all, P was in truth Jonathan’s “cash cow” with Jonathan repeatedly asserting that P belonged to him and it was his company.

41.Felix claimed the Judgment was entered against him because of his misunderstanding of court procedure as he thought all proceedings would be stayed pending the outcome of his legal aid appeal. He further claimed he was ambushed by Jonathan’s litigation tactics, and urged the court to give him an opportunity to defend P’s claim and to air his case which had merits.

III.  JONATHAN’S AFFIRMATION EVIDENCE

42.Jonathan disagreed Felix was entitled to life-long residence at the Property, and denied he had promised/allowed Felix to reside at the Property rent-free or had promised Felix he could live at the Property as long as he wished. Jonathan claimed he permitted Felix to stay/live at the Property on a temporary basis solely because as Felix’s father he wished to discharge his parental/moral obligations towards his own son but not otherwise.[14]

43.As regards Felix’s allegations that it was a Chan family culture/ tradition for P’s founder to provide a residential property to every male/ female child as wedding gift, and that Jonathan’s own residence was a gift from his father and Jonathan gave his elder son money to purchase a property in America when he got married, Jonathan denied any such family culture/tradition and/or family settlement/trust to provide property to descendants whenever they got married, so Felix had no right, interest and/or benefit in, and was not entitled to use, enjoy and/or occupy any of the Chan properties and/or the Property free of rent.[15]

44.On Felix’s allegations that the purpose in commencing the present action was to deprive him of the chance to gain custody order in relation to the Children in HCMP1716/2015, Jonathan did not want to say too much on this as DHCJ Lee granted temporary care and control of the Children to Betty for reasons which Jonathan did not think was necessary to repeat in the Jonathan Aff except that Felix was not a fit and proper father to look after and to have care and control of the Children.

45.As to the commencement of the present action to evict Felix out of the Property, Jonathan said that as Felix’s father he had looked after Felix for many years after his graduation from university, and he realised that in providing Felix with all-round and/or full-range financial protection/support for many years had made Felix fully dependent on him and his company for financial support, which spoiled rather than helped Felix. So Jonathan intended to let Felix start afresh with his own life by being more independent and by learning to survive without any assistance/help from Jonathan and/or the Chan family.

IV.  LEGAL PRINCIPLES

46.Mr Chang and Mr Leung had no essential quarrel over the relevant legal principles.

47.Setting aside default judgment  Order 19 rule 9 of the RHC provides that “[the] Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order”. The rule gives the court a discretion to set aside a default judgment. “The purpose of the power is to avoid any injustice that may be caused by the entering of judgment in default. Two underlying principles that come into play in the exercise of this power are, on the one hand, that a party should observe procedural rules with judgment entered against him in default and, on the other, that a party should not be deprived of an adjudication of the case on its merits”.[16]

48.If a default judgment is regular, the defendant must show a meritorious defence with a real prospect of success or which carries some degree of conviction.[17] Bare assertions are not sufficient for this purpose.[18] Unless potentially credible affidavit evidence from the defendant has demonstrated a real likelihood that he will succeed on fact, he cannot have shown that he has a real prospect of success.[19] This requires the court to form some provisional view of the probable outcome of the action. Where the outcome depends on whose evidence is likely to be accepted, the appropriate test for determining whether the defendant has a real prospect of success is to ask whether the defence “could well be established” at trial or whether the defence witnesses could well be believed at trial.[20]

49.It is not correct to adopt the approach that if the defendant can show he has an arguable defence, a default judgment against him ought to be set aside unless there is incontrovertible evidence before the court to negate it.[21] The court is also entitled on assessment of the affirmation evidence to come to a view that the defence put forward is inherently unbelievable and the defendant therefore has failed to discharge the burden of putting forward a defence with a real prospect of success.[22]

50.But, on the other hand, the Court of Appeal in Maryo Development Limited v Tsang Yau May explained that:[23]

“13. Godfrey JA speaks in terms of the defendant being required to show ‘a real prospect of success’ and the court forming a provisional view of ‘the probable outcome of the action’. These formulations have their origin in the judgment of the English Court of Appeal in the ‘Saudi Eagle’.[24] There is a danger that they can be read as requiring the court to undertake a mini-trial on the affirmations as to the likely outcome if the matter goes to trial. This is not what is required and perhaps the correct approach can be more helpfully summarised 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.”

51.There are other considerations which a court must consider in deciding whether or not to set aside a default judgment, such as the reason why default judgment was allowed to occur in the first place, and any delay in setting aside and any consequent prejudice caused to the plaintiff.[25] The court’s approach is to conduct a balancing exercise of all relevant factors.[26] But the critical factor and starting point are the merits of the defence. If the defence has no real prospects of success, there is no point in setting aside the same.[27]

52.Proprietary estoppel  The essential elements of proprietary estoppel are as follows: (a) where the owner of land induces, encourages or allows the claimant to believe that he has or will enjoy some rights or benefit over the owner’s property, (b) in reliance of this belief the claimant acts to his detriment to the knowledge of the owner, and (c) the owner then seeks to take unconscionable advantage of the claimant by denying him the right or benefit which he expected to receive. This equity gives the claimant the right to go to court to seek relief. The claimant’s claim is an equitable one and subject to the normal principles governing equitable remedies. The court has a wide discretion as to the manner in which it will satisfy the equity in order to avoid an unconscionable result having regard to all the circumstances of the case, including but not limited to the expectations and the conduct of the parties.[28]

53.In Li Yuk Ying v Wong Yuet Kam, Anthony To J said as follows:[29]

“13. The question whether there was representation or assurance, reliance and detriment in the context of the doctrine of proprietary estoppel are questions of fact. …… That issue has to be determined on the facts of the particular case. The authorities show that detriment is not a narrow or technical concept. It need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial …… Very often, the quality of the relevant representation may influence the issue of reliance, and reliance and detriment are often intertwined. The fundamental principle behind the doctrine of proprietary estoppel is that equity is concerned to prevent unconscionable conduct permeating all three elements of the doctrine. The requirement of detriment must therefore be approached as part of a broad inquiry as to whether in all the circumstances it is unconscionable to allow a party to repudiate his representation upon which the other party have acted. ……” (my emphasis)

54.Promissory estoppel  A promissory estoppel may be said to arise where (a) the parties are in a relationship involving enforceable or exercisable rights, duties or powers, (b) one party (the promisor), by words or conduct, conveys or is reasonably understood to convey[30] a clear and unequivocal promise or assurance to the other (the promisee) that the promisor will not enforce or exercise some of those rights, duties or powers, and (c) the promisee reasonably relies upon that promise and is induced to alter his or her position on the faith of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.[31]

55.Unconscionability  To establish an equity under the estoppels there must be an underpinning element of unconscionability. A claimant has to establish that it is unconscionable for the promisor or owner of the land to act in such a way as to defeat the expectation that the promisee or claimant has been encouraged to believe that he had.[32] Indeed, the requirement of unconscionability is now regarded as an essential element of any form of estoppel.[33] A relevant factor for determining whether the promisor’s or owner’s conduct has been unconscionable is whether the detriment is sufficiently substantial, and this is to be tested by whether it will be unjust or inequitable to allow the assurance to be disregarded.[34] Further, this is to be considered as at the time at which the promisor or owner (ie the person who has given the assurance) seeks to go back on it.[35] The above matters have to be approached as part of a broad inquiry as to whether it is unconscionable in all the circumstances for the promisor or owner to resile from the promise or assurance, and in approaching such broad inquiry the judge has to stand back and look at the matter in the round.[36]

56.Although the doctrine of estoppels is a developing area of the law, there is opinion inkling towards the view that there is no real difference between proprietary estoppel and promissiory estoppel.[37] Indeed, for present purpose, the relevant constituents of these two forms of estoppels are shared.

V.  DISCUSSION: PROPRIETARY ESTOPPEL

57.Mr Chang argued P was entitled to revoke Felix’s licence at will at the Property without prior notice[38] and was thereby entitled to possession of the Property unless Felix could establish some equity which would prevent P from exercising such right. Mr Chang submitted that even assuming Jonathan made representations to Felix that he could live rent-free at the Property for as long as he wished, no proprietary estoppel could arise as a matter of law since P was the legal owner of the Property and Jonathan was merely P’s shareholder, and it was irrelevant whether or not Jonathan took the view that the Property belonged to him.

58.In Luo Xing Juan v Estate of Hui Shui See,[39] W and M (deceased) cohabited as a couple and moved into a property owned by C in which M was the majority shareholder. Subsequently, M proposed marriage to W which she accepted, and a few months later M expressly promised W a 35% beneficial interest in the property as a form of financial security in anticipation of their marriage. M immediately transferred 35% of the shares in C into W’s name without receiving payment in return. W and M would have married but for M’s sudden death. M’s sister became representative of M’s estate and controlling shareholder of C. C purported to give W 1 month’s notice of its intention to revoke her licence to occupy the property. The Court of Final Appeal held that each of the elements of promissory estoppel (see paragraph 54 above) did not sit in its own watertight compartment separate from the other elements, which meant the meaning of the words/conduct had to be understood in light of the legal rights/powers exercisable and known to be exercisable by the promisor. It was held that all elements of promissory estoppel were satisfied in that case, which gave rise to a mere/personal equity:

(a)	W and M as a cohabitating couple intending to get married had a sufficient relationship, and M had the power to cause C to exercise its rights over the property in a manner adverse to W’s interest;
(b)	the meaning of the promise in substance and as understood in context was that M as controlling shareholder of C would secure for W a 35% share in the value of the property if and when the same should be realised by C and that, unless and until the property was disposed of, W would have the security of being allowed to occupy it as her home without interference by C;
(c)	in reliance upon M’s promise, W continued to reside with him de facto as man and wife, forwent the pursuit of employment opportunities of her own and paid the $44,000 mortgage instalment for August 1999, which were significant acts and omissions of detrimental reliance;
(d)	the combined expectation and reliance factors made it inequitable or unconscionable for M’s estate to act inconsistently with M’s promise.

59.In that case, Ribeiro PJ said as follows:

“54. The doctrine of estoppel continues to represent a developing area of the law and aspects of the applicable principles are subject to debate. Thus, there is discussion as to the extent to which promissory estoppel and proprietary estoppel overlap, with a body of opinion inclining towards the view that there is no real difference between them. In the present context, proprietary estoppel is inapplicable because the deceased, not being the owner of the Property, was not in a position to confer on [W] a proprietary interest in it. However, as Maharaj v Chand establishes, this does not prevent recourse to promissory estoppel. The doctrines therefore differ at least to that extent. However, it is at the same time clear that many of the constituent elements of the two forms of estoppel are shared and where that is so, authorities on proprietary estoppel provide guidance in cases involving promissory estoppel.” (my emphasis)

60.In Hong Kong Hua Qiao Co Limited v Cham Ka Tai, Kwan JA referred to the above passage in Luo Xing Juan and went on to say as follows:[40]

“In the present case, the constituent elements of promissory estoppel overlap with those of proprietary estoppel. As in Luo Xing Juan, the only reason why proprietary estoppel is not applicable in the present situation was because the Deceased was not the legal owner of Foon Lok Mansions and so could not confer a proprietary interest on Madam Chan.” (my emphasis)

61.But here, as pointed out by Mr Leung, Jonathan was not just P’s shareholder. He was also 1 of 2 directors of P, and the other alternate director Kwok was, according to Felix and not expressly refuted by Jonathan, an employee to do Jonathan’s bidding and to facilitate signing of corporate documents. Gray & Gray, Elements of Land Law said as follows:[41]

“Where an alleged proprietary estoppel relates to the exercise of rights normally incident to a fee simple estate, the representation or assurance on which the estoppel is based must have been given by someone speaking as fee simple owner or by some other person entitled to act on his behalf. A relevant assurance can be given by a corporate body acting through its employees or agents. ……” (my emphasis)

Jonathan in the Jonathan Aff also mentioned Felix was fully dependent on financial support from “me and/or my company”. In my view, there was sufficient basis to put forward a credible case that the assurances / representations were attributable to P being a limited company that acted through its director/agent Jonathan. But even if otherwise, the above authorities showed that failure to cross this hurdle would not have prevented Felix from raising a case of promissory estoppel.

VI.  DISCUSSION: ASSURANCES

62.Mr Chang in his written submissions fairly accepted Jonathan (father) and Felix (son) might have a sufficient relationship, but argued the other 2 requirements of “representation” and “detrimental reliance” for establishing promissory estoppel could not be satisfied.

63.According to the Felix Affs, Jonathan made assurances to Felix that he could stay at the Property on rent-free basis as long as he wished on 3 specific occasions:

(a)	in/about November/December 2008, Jonathan told Felix he could live and settle at the Property rent-free without worry about being evicted (so Felix agreed to move into the Property under such assurance, but before Felix moved in the Property was redecorated to his specific taste/requirements, eg installation of large mirrors on the living room walls to enable him to pursue his yoga career) (“1st Assurance”);
(b)	at a small housewarming party at the Property in/about January/February 2009 attended by Jonathan and his female companion, Jonathan again told Felix that he could stay at the Property for as long as he wished and space should be left for the Children to use/stay if they should require it (“2nd Assurance”);
(c)	in/about September 2014 (ie after Yuki (i) relocated to Korea with the Children in 2011 and (ii) in the summer of the 2014 asked Felix to take back the Children and care for them in Hong Kong) at a discussion by Felix with his parents about taking back custody of the Children, Jonathan assured Felix he could continue to stay at the Property (“3rd Assurance”).

64.Mr Chang complained the alleged 1^st, 2^nd and 3^rd Assurances (collectively, “Assurances”) were not supported by documentary evidence, and were in any event inherently unreliable as Felix’s contentions were tantamount to suggesting that Jonathan had agreed to gift the Property to him without execution of formal transfer document:

(a)	the Felix 1st Aff did not make references to any of the 3 Assurances and only referred to the Chan family tradition of allowing family members to use family properties rent-free or below market rent;
(b)	there was change of focus in the Felix 2nd Aff to the Property being left to him as promised which suggested an allegation of gift of the Property, which was different from Felix’s allegation that he could live at the Property as long as he wished on rent-free basis;[42]
(c)	the 3 Assurances only appeared in detail in the Felix 3rd Aff;
(d)	regardless of the 1st Assurance in paragraph 63(a) above, Felix would have moved into the Property anyway because he had nowhere else to go when he was merely “employed” by King Fung at a monthly salary of $19,000;
(e)	there was no reason for Jonathan to give the 2nd Assurance on the occasion described in paragraph 63(b) above;
(f)	it was contrary to common sense that Jonathan (Felix’s father) would find it necessary to clearly and unequivocally tell Felix he could stay at the Property for as long as he wished without fear P would evict him;
(g)	even if Jonathan did tell Felix he could remain at the Property for as long as he wished, both of them must have known it did not mean Jonathan would never cause P to enforce its legal rights and, in essence, to gift the Property to Felix;
(h)	Felix’s case was like any other family context where a father allows a son to live on licence for the time being at a property he owned, and if this is sufficient to raise an estoppel, every family member in similar context would potentially be entitled to claim life-long licence over the family property.

65.In my view, the starting point was the common ground that Jonathan permitted/allowed Felix to occupy/use the Property, and pursuant thereto Felix actually enjoyed rent-free accommodation at the Property for almost 9 years. As Mr Leung submitted, the dispute between the parties was whether there was any representation, express or otherwise, of some form of entitlement larger than a revocable licence.

66.In order to raise an equity of estoppel, a representation or assurance must confirm to its recipient either an understanding that he is already the owner or an expectation that he will be the owner of some interest of entitlement which would not otherwise be his, but such representation need not relate to any specific asset. Although it has been said that the assurance of entitlement must be “clear and unequivocal”, “[in] practice the court draws an important distinction between two different sorts of certainty. In the law of estoppel relevant assurances must always be certain as to the existence or inevitability of the representee’s entitlement, but need not be absolutely precise in relation to the nature or quantum of that entitlement”.[43] Unless the entitlement allegedly secured by the representor’s assurance was excessively vague or uncertain, the law is relatively relaxed as to the nature or quantum of the rights assured, and in many cases the subject matter takes the form of some objectively recognisable right in or over the land, such as a life interest.[44] This suggested that the subjective intention of the representor (ie Jonathan in the present context) irrelevant.

67.I note such dispute arose in the family context, ie the relationship between father (Jonathan) and son (Felix), and the need for the son (Felix) to care for his children (Children). In such context and at this interlocutory stage, I find it inherently credible the 3 Assurances were not reduced into or referred to in writing. There was also no dispute Felix was financially dependent on Jonathan as a major part of his monthly income came from Kin Fung, and he was permitted/allowed to live at the Property.

68.I am not persuaded by Mr Chang’s suggestion that the 1^st Assurance was inherently incredible because inevitably Felix would have to live at the Property due to his tight finances. I note that at that time Felix received a $19,000/month from Kin Fung and made some earnings on the side from teaching yoga. Whilst I accept the Property (redecorated by P) would afford more comfortable accommodation for Felix, it was by no means impossible for him to rent a place and live elsewhere (possibly less comfortably) on his monthly income. In my view, the 1^st Assurance was not inherently incredible (especially when the Property was not provided on bare-shell basis but redecorated to suit Felix and his taste/requirements). I also bear in mind Felix’s historical financial dependency on Jonathan, and also the familial context that Jonathan knew Felix was at that time finalising his divorce with Yuki which meant he required suitable accommodation for the Children during his access time.

69.Mr Chang next suggested there was no reason for Jonathan to give the 2^nd Assurance at the small housewarming party at the Property in/about January/February 2009. This was an occasion that marked Felix having settled down at the Property, and the 2^nd Assurance was given in the context that he could stay at the Property for as long as he wished and that Felix should leave space at the Property for the Children to use/stay if they required it. This harked back to the 1^st Assurance in which Jonathan also addressed the matter of letting Felix stay at the Property as long as he wished in the context that there would be accommodation for the Children if needed. At this interlocutory stage and in the context described above, I am not persuaded the 1^st/2^nd Assurances were contrary to common sense and/or there was no basis for making such assurances. It is quite inappropriate for this court to come to any definitive view of witness credibility at this juncture.

70.The Jonathan Aff denied the 1^st/2^nd Assurances on the basis that permission for Felix to occupy the Property was solely because of Jonathan’s parental/moral obligations to his son Felix, and it was alleged in his affirmation filed in HCMP1716/2015 that Felix was at that time under tremendous stress. But such assertions were not inconsistent with Felix’s case that such assurances were made out of “a mix of fatherly love and the fact that [he was] at the time finalising [his] divorce with [Yuki] who [his] father had disapproved”. At this interlocutory stage it remained an open question (based on respectable contentions) whether the permission for Felix to stay at the Property on rent-free basis was for as long as he wished (according to Felix) or for temporary basis (according to Jonathan).

71.For the 3^rd Assurance (which was said to be catalyst of a significant part of the detriment Felix suffered in reliance thereof), as Mr Leung submitted, Jonathan offered no express refutation of the 3^rd Assurance or the circumstances in which Felix said the 3^rd Assurance had arisen even though Jonathan ought to have been in a position to do so.

72.In respect of Mr Chang’s criticisms in paragraphs 64(a)-(b) above about the unreliability of the allegation of a Chan family culture/ tradition of passing properties to the family, I note that whilst Jonathan denied such culture/tradition, it was a bare denial without giving particulars about the relevant factual matrix that supported such denial and without addressing the particular examples in relation to various family members (one of whom was Jonathan himself) that Felix gave in some detail in the Felix Affs. This raised the question whether Jonathan’s denial was of substance, especially when the thinness of the denial might arguably lend weight to the inherent credibility of Felix’s case. In the end, the relevant consideration was whether it was reasonable for Felix to think that the Property was given to him to occupy on such/similar basis. In my view, looking at the available affirmation evidence, I have no hesitation in coming to a provisional view with some degree of conviction that there was real prospect of success in Felix’s contentions as to the 3 Assurances.

73.But Mr Leung went further to argue that even if Jonathan had not expressly made the 3 Assurances, the affirmation evidence before the court was sufficient to raise a case of passive encouragement that had a real prospect of success to support a plea of proprietary estoppel. Mr Leung referred to Elements of Land Law as follows:

“The representation which generates an equity of estoppel may be express or implied; it may be ‘active or passive’. A proprietary estoppel can arise in either case if the representee was led to believe that he either had or would acquire rights over the land in question. The determining factor in this context is the impact which the assurance or encouragement had upon the mind of the claimant as a reasonable person. It is irrelevant that the representor did not himself realise the legal implications of his informal concession of rights ……”

74.Actually, passive encouragement that generates an equity of estoppel has been described by Mr Recorder H Wong SC in Best Star Holdings Limited v Lam Chun Hing & ors[45] as “proprietary estoppel by standing by”. Fry J in Willmott v Barber[46] formulated the 5 “probandas” or usual elements for considering a proprietary estoppel of this kind:

(a)	the plaintiff must have a mistaken belief as to his legal rights;
(b)	the plaintiff must have expended money or done some act on the faith of his mistaken belief (ie detrimental reliance);
(c)	the defendant must know of the existence of his own legal right which is inconsistent with the right claimed by the plaintiff;
(d)	the defendant must know of the plaintiff’s mistaken belief of his legal rights;
(e)	the defendant must have encouraged the plaintiff in his expenditure of money or in the acts which he has done, either directly or by abstaining from asserting his legal rights.

75.But such is the nature of the equity under the doctrine of proprietary estoppel that the true test is whether it will be unconscionable for the defendant to deny that which he has allowed or encouraged the plaintiff to assume to his detriment rather than “whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour”.^[47] But Rogers JA in Tong Tim Nui & ors v Hong Kong Housing Authority accepts that “the more formalised test of Fry J … remains a good starting point”.^[48] Indeed, in Best Star Holdings Limited the learned judge was not sure whether the 3rd probanda was satisfied, but he still held that it would be unconscionable for the 1st and 2nd defendants to take advantage of the expenditure incurred by the plaintiff on property development, they having stood by and raised no objection to the construction of the small houses.^[49]

76.I agree with Mr Leung that upon taking into account the following matters there was credible basis to suggest a case of passive encouragement:

(a)	Jonathan did not suggest he had at any time before P’s demand for repossession of the Property expressly denied Felix would have any rights in the Property;
(b)	Felix had continually occupied the Property on rent-free basis for close to 9 years;
(c)	P had redecorated the interior of the Property to suit Felix’s taste and requirements (eg to facilitate to pursue his yoga career) before Felix moved in;
(d)	the Property was developed by Felix’s grandparents and since then it was apparently regarded as family property;
(e)	according to Felix, there were similar dispositions of family properties to family members;
(f)	Jonathan must have known Felix was likely to undertake detrimental reliance action in thinking he was acquiring some entitlement over the Property on the strength of Jonathan’s inaction or standing by,[50] especially when, according to Felix and not directly refuted in the Jonathan Aff, he had discussed with his parents in 2014 about taking back custody of the Children from Yuki in Korea and caring for them in Hong Kong such that Jonathan must have known Felix would make life-changing decision (by adjusting pursuit of personal career/interests and taking up care and custody of the Children) in reliance of expected entitlement to the Property.

77.Given the aforesaid analysis and at this interlocutory stage, the family context as explained above was not inconsistent with the 3 Assurances. Further, Mr Leung submitted that the wealth of the Chan family was derived from property development by Felix’s grandparents, which wealth was held in various family properties and companies that supported the Chan family members. Mr Leung questioned whether, in light of such background, the Chan family was comparable to an average Hong Kong family as suggested in paragraph 64(h) above, but I find it sufficient for the present purpose that the family nature of the present dispute would not detract from the inherent vitality of Felix’s defence, which ought not to be summarily dismissed at this stage.

VII.  DISCUSSION: DETRIMENTAL RELIANCE

78.Mr Chang reminded that Felix must show he had relied on the Assurances to his detriment such that it would be unconscionable for P to now renege on the promises.[51] Mr Chang referred to McFarlane, The Law of Proprietary Estoppel as follows:

“The need for ‘substantial’ detriment should be understood simply as meaning that B’s detriment cannot be notional, fanciful, or trifling. The court’s imposition of a duty on A is premised on the need to avoid particular harm to B and so the court’s intervention cannot be justified in cases where B would suffer only a trivial or insubstantial detriment were A free to act as A wishes”.

The learned textbook cited Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd[52] as an example of the requirement of “substantial” detriment being of importance in the commercial context (not the present familial context). In that case,

“…… B, a vendor of property, attempted to argue, inter alia, that A was estopped from rescinding the contract of sale. B claimed that it had relied by permitting A to have the benefit of particular rents. Hedigan J viewed any detriment arising as ‘notional’ only as the parties had always intended that the benefits of those rents would go to A. As a result, B had failed to show any prospect of suffering the ‘substantial disadvantage’ required to establish a claim of detriment.”

79.But it must be remembered that “[the] categories of relevant ‘change of position’ are not closed. The disadvantage incurred by the relier may be land-related, but there is no requirement that the claimant’s change of position should necessarily …… comprise any form of expenditure related to land at all. The paradigm ‘change of position’ found in the modern case law characteristically involves not the physical improvement of realty, but rather the rendering of various kinds of personal assistance. …… It may instead take the form of …… the abandonment of an existing job and home in order to live with or near the representor, or indeed the undergoing of any sacrifice which is not of exclusively emotional significance. The disadvantage incurred may comprise a forgoing of opportunities for alternative employment …… a failure to purchase or retain other land for use as a home …… stepping off the ‘property owning ladder’, or any conduct which indicates that the claimants ‘deprived themselves of the opportunity of trying to better themselves in other ways’” (my emphasis).[53]

80.DHCJ Cooney SC in Szeto Chak Mei (the sole administratrix of the unadministered properties of the late Szeto Chiu, deceased) v Chan Lam Shan & ors said as follows:[54]

“41. …… to look at the question of detriment in the round, a court must consider countervailing benefits acquired by the claimant as a result of the course of conduct by which the claimant has satisfied the reliance element of his claim. Such benefits must be taken into account because the detriment element is established only when that conduct means that, if the promisor were free to act as he wishes, the claimant would then be worse off overall than if he had not acted as he did. If the countervailing benefits are sufficiently substantial they may prevent the claimant establishing a proprietary estoppel claim. See: The Law of Proprietary Estoppel, McFarlane, paras 4.113 – 4.115 and 4.121.”

81.Elements of Land Law states there must be “sufficient causal link” between the representation and change of position which constitutes the detriment to the representee.^[55]The issue of detriment must be judged at the moment when the representor seeks to go back on it.^[56] With the above principles in mind, I turn to the parties’ respective contentions.

82.Mr Chang submitted that Felix appeared to rely on 3 categories of purported detriment:

(a)	in respect of Felix agreeing to and moving into the Property in late 2008 and early 2009 in reliance upon the 1st Assurance and allegedly expending about $100,000 upon moving in to further furnish the Property (which became Felix’s residence and where the Children stayed from 2009 to 2014 when Felix had access), Mr Chang complained there were no details/documents of such expenditure, and such claim was incredible when prior to moving into the Property Jonathan had caused the Property to be redecorated to suit Felix’s specific taste and requirements (according to Mr Chang’s written submissions), or such redecoration did not amount to any detriment since Felix would have to spend money to furnish his residence in any event irrespective where he lived (according to Mr Chang’s oral submissions);
(b)	in respect of Felix’s allegation that he refrained from purchasing a HOS flat from 2008 onwards, Mr Chang submitted there was no claim by Felix that as a result of his reliance on his licence at the Property he is now unable to apply for a HOS flat, and Felix was still admittedly eligible given his limited income;
(c)	in respect of Felix’s claim that he had taken back custody of the Children in reliance of having a residence at the Property, Mr Chang submitted such decision was related to Yuki’s inability to take care of them (because her business in Korea failed and she thereafter asked Felix to take the Children) and unrelated to the Property and/or Assurances, and it would be incredible to suggest Felix would have left the Children without care had the Property been unavailable, and nonsensical to suggest caring for the Children (being a paternal obligation) was somehow a detriment.

83.In respect of Mr Chang’s arguments in paragraph 82(a) above, I am unable to say that lack of invoices/receipts and details of furnishings in a domestic context would be wholly incredible (especially when these matters took place about 10 years ago). In any event, I cannot see how Jonathan having caused P to clean up and redecorate the Property to Felix’s requirements would necessarily obviate Felix’s personal need for enhancement of the Property for his own occupation/use.

84.Further, the suggestion that there could not be any detriment because Felix would have to spend money to furnish his residence (wherever it might be) in any event was even less easy to understand. This was tantamount to a suggestion that Felix’s expenditure would only amount to detriment if it exceeded what he would have expended in further furnishing his residence elsewhere (although where such residence and what those furnishings might be and what amount would have to be expended on them were unknown since Felix never took up another residence). Mr Chang did not cite any authority for such proposition.[57] In my view, as explained in Li Yuk Ying, whether there was change of position or detrimental reliance that was causally linked to the representations/assurances is a question of fact to be determined on the facts of the particular case, which did not sit well with Mr Chang’s interesting suggestion. But even if Mr Chang were right, the factual investigation would be a matter for trial, and it would not justify summary dismissal of Felix’s contentions at this stage.

85.Mr Chang tried to argue that any detriment might be eliminated if Felix obtained a substantial benefit through reliance on the Assurances such that it would no longer be inequitable to allow the Assurances to be retracted. Such contention in essence suggested that the equity might be extinguished when the benefits offered by the representor outweighed or erased any potential detriment to the representee, which concerned the issue of relief and unconscionability discussed below rather than the question of existence of any detrimental reliance. In my view, this would not take the matter further.

86.In respect of Mr Chang’s arguments in paragraph 82(b) above, I note Felix did not just claim that he decided against purchasing a HOS flat some years ago in reliance of the Assurances, he also claimed he had positioned his life differently by taking back custody of the Children and adjusting his career with (as Mr Leung described) reduced income, foregone opportunities and altered lifestyle. By taking back the Children, Felix claimed he had to shift his focus away from pursuing his career and interests. Mr Chang argued that Felix admitted he was spoiled by Jonathan and had no career to speak of. But I agree with Mr Leung that the fact Felix was spoiled did not detract from the Assurances. It was true he was largely financially dependent on Jonathan, but he did have a side income that came from teaching yoga. He gave yoga classes at the Property (which was why P installed large mirrors at the living room walls for him), and a viable argument could be made that Felix’s agreement to take back the Children (who were still schoolchildren) and to have them live at the Property might crimp his lifestyle as well as his yoga-teaching career.

87.In relation to the HOS flat, I am afraid it would not be a sufficient answer to say Felix still remained eligible to apply for such flat. What happened was that on Felix’s case he had forgone the opportunity to apply for purchase of such flat years ago by reason of the Assurances, and was thereby pushed off the “ladder” of property ownership and would have to wait for processing of such application even if he were to make such application now. In my view, there was good prospect of success to show detrimental change of position and relevant causative link with the Assurances.

88.As for Felix positioning his life differently, I note in particular that he claimed that by relying on the Assurances (especially the 3^rd Assurance) and thereby feeling confident that he had secured accommodation and would be able to financially manage, he agreed to Yuki’s request in late 2014 to take back custody and care/control of the Children, and took care of and lived with the Children at the Property in 2014-2015. By now Betty had custody of the Children, but to evict Felix from the Property would mean his ability to make future access and care arrangements in respect of the Children might be circumscribed.

89.Mr Chang tried to brush this aside by saying that taking back custody of the Children in 2014-2015 was simply an act incidental to Felix’s parental duty and could not amount to any detriment. But as explained above, whether there was change of position or detrimental reliance is a question of fact to be determined on the facts of the particular case, and in my view, a respectable argument with prospect of success could be mounted for saying when Felix was faced with choices as to whether or not to exercise his parental right, he actually made a choice to take back the Children premised on the comfort of the Assurances that he could be sure he could provide suitable accommodation and shelter for the Children.

90.Mr Chang then submitted that Felix in discharging his parental duty would have taken back the Children in any event, and could have lived elsewhere with them and cared for them on his income. In my view, on Felix’s case, even if Yuki felt she could not look after the Children because of her business failure, had Felix not have the Assurances and was thereby unable to secure suitable rent-free accommodation for the Children (thus sparing his available income to support the 3 of them), the ex-couple might have to re-negotiate their arrangements for the Children (via court procedure if necessary) and the end result might not necessarily be what had actually happened (ie Felix taking back the Children). Again, detrimental change of position is a question of fact and not speculation of what might have been.

91.As Mr Leung submitted, the Jonathan Aff did not address Felix’s case on detrimental reliance. In my view, having considered the above matters, I am not persuaded there was sufficient basis to suggest Felix’s evidence in this respect was not potentially credible.

VIII.  DISCUSSION: RELIEF

92.Mr Chang submitted that the court must weigh any detriment suffered against the benefits obtained by the defendant as a result of the promise, and is entitled to refuse relief if it would be disproportionate to the detriment suffered.[58] In Seldmore v Dalby, it was held that Dalby who had had 18 years of rent-free occupation of the property would not be entitled to relief given the substantive benefits already enjoyed.[59] But this was a fact-sensitive matter as the English Court of Appeal considered the present needs and situation of Mrs Sledmore[60] and balanced those against the present use of the property by Dalby and his need for it[61] in order to answer the question of whether it was still inequitable to allow Dalby’s expectation to be defeated by permitting Mrs Sledmore to enforce her legal rights as the house’s owner. The Court of Appeal came to the view that Mrs Sledmore was vulnerable as she was liable to lose her present accommodation and had a pressing need for the house, but Dalby had lived rent-free in the house for over 18 years, his current use was minimal, and he had accommodation elsewhere and was in employment. It was no longer inequitable to allow the expectation created in Dalby’s mind to be defeated.

93.In my view, as to the nature of the relief if the estoppel is made out, the court needs to look at all the circumstances in each case to determine how the equity can best be satisfied, and it has a wide discretion as to the order which it may make. When exercising discretion in all the circumstances to formulate the relief in terms of the minimum equity to do justice to the plaintiff,[62] there must be proportionality between the remedy and the detriment which is its purpose to avoid.[63] The essence of the relief is to avoid an unconscionable result.[64]

94.Mr Chang argued that on any view Felix’s purported detriment was insubstantial when balanced against (a) his uninterrupted occupation and enjoyment of the Property on rent-free basis for more than 10 years as at the date of the Appeal Hearing, and (b) his current eligibility to apply for purchase of a HOS flat. Mr Chang also argued that Felix could pursue his career, and he would not be denied access to the Children even if he were evicted from the Property. It was said his claim for relief against P simply did not have any real prospect of success.

95.In my view, Mr Leung was right in saying this issue was about the extent of the suitable relief (assuming Felix established the estoppels). In my view, it would only be appropriate to address this matter after necessary findings of fact made after trial. Mr Leung fairly pointed out it might well be the trial would reveal the detriment Felix suffered was reduced by benefits he received (which Felix disagreed) such that equity might entail that he be entitled to an interest smaller than life despite the Assurances that he could stay at the Property for as long as he wished. On the other hand, it was also possible the trial might reveal that without the Property Felix would not be able to afford suitable accommodation for the Children to enable him to seek reasonable stay over access. In my view, the court had to weigh any detriment suffered against the benefits obtained to assess the extent of any relief or the appropriate remedy to be granted, and this balancing exercise ought to be done at trial. I bear in mind that although Felix had stayed at the Property for 10 years by the time of the Appeal Hearing, P was financially sound and held other properties with no evident need to let/sell the Property to meet any deficit. In short, P was nothing like Mrs Sledmore, and I am unconvinced Sledmore necessarily provide useful guidance given the fact-sensitive nature of the enquiry. In any event, Felix’ s case was not so obvious that there was no reasonable prospect of success of establishing some equity in his favour.

IX.  DISCUSSION: OTHER CONSIDERATIONS

96.Mr Leung reminded that Felix gave notice of intention to defend even though he failed to file/serve his Defence due to his unfamiliarity with legal procedure and his misunderstanding as to the effect of an application for legal aid, and he was held up by the Wardship Hearing, but he did act with alacrity in filing the Summons 2 days after the Judgment.

97.Felix claimed that Jonathan in causing Kin Fung to cease giving him financial support by way of monthly “salary” on 28 September 2016 (effective 1 November 2016), P in demanding Felix to vacate the Property failing which he was required to pay mesne profits at $28,000/month as from 1 December 2016, P in commencing the present action on 4 February 2017 just 4 days (including the weekend) before the Wardship Hearing, and P in serving Notice of Intention to Enter Judgment on 6 March 2017 when the deadline for filing the Defence only fell on 17 March 2017 at the earliest,[65] the present action was a litigation tactic calculated to gain forensic advantage at the Wardship Hearing as evident from the fact the DHCJ Lee took into account the reduction in Felix’s income and his possible eviction from the Property as practical difficulties to restoring the Children to him which led the learned judge to conclude that wardship should continue subject to a review in about June 2018.

98.Mr Leung further submitted there was no evidence of discernible prejudice to P that might be caused by setting aside the Judgment save for the disappointment that the litigation would continue.

99.Mr Chang did not address any of the above matters in his written/oral submissions. That being the case, it suffices for me to say that having carefully considered the above matters, I find Felix’s default excusable and there was nothing that detracted from my conclusion that the Judgment should be set aside. I accept the main consideration remained the merits of Felix’s case, but in light of the above discussions I am of the view that if Felix’s allegations were established at trial (and there clearly was a realistic prospect of this happening), they would be capable of giving rise to an equity under the estoppels that would enable the court to grant relief (whether a life interest or less) upon its balancing exercise. At this interlocutory stage, there was nothing inherently incredible about Felix’s case in the context of how the involved parties conducted the family affairs, which might also explain the paucity of documentary evidence, and the thin rebuttal in the Jonathan Aff to Felix’s assertions.

X.  CONCLUSION

100.In the circumstances, the Appeal is dismissed. There is no reason why costs should not follow event. I therefore grant a costs order nisi that P should pay D’s costs of and occasioned by the Appeal (including all costs reserved if any) to be taxed forthwith if not agreed.

Mr Jonathan Chang, instructed by Ng & Partners, for the plaintiff

Mr Dan Leung, instructed by Ng & Co, for the defendant