Xian Hongying, The Executrix of the Estate of Shew Yun, Deceased v. Man Wong and Another

HCA 2670/2016

[2024] HKCFI 784

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2670 OF 2016

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D E C I S I O N

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A.  INTRODUCTION

1.This is the hearing of the defendants’ application made by Summons dated 27 June 2023 (“Summons”) seeking to set aside the default judgment entered against them under the Order made by this court on 16 September 2019 (“Order”), pursuant to which the defendants were ordered to assign the property known as Flat D on the 9th Floor, Shun Hing Building, No. 319 Ferry Street, Kowloon (“Property”) to the estate of Shew Yun, deceased (the “Estate”), by way of deed of assignment at nil consideration.

2.It is important to emphasise at the outset that, as between the 1^st defendant and the 2^nd defendant, only the 2^nd defendant, who is ordinarily resident in Mainland China, challenges service of the Writ of Summons, and seeks to set aside the Order on the basis that the Order was irregularly obtained (in that service was attempted at a time when she was not within the jurisdiction, and in any event at an address in Hong Kong that was not her “usual or last known address”). The 1^st defendant does not challenge service.

3.On 12 December 2023, less than one week before the hearing, the defendants’ solicitors, Messrs Chan, Wong & Lam (“CWL”) received a letter from the plaintiff’s solicitors, Messrs Chan, Wong & Yip (“CWY”) indicating that the plaintiff is “prepared to consent to the 2^nd defendant’s application to set aside the judgment dated 16 September 2019 against the 2^nd defendant”.

4.In light of this concession, the only remaining issue between the plaintiff and the 2^nd defendant is costs.  By letter dated 12 December 2023, CWL proposed the usual costs order for setting aside an irregular judgment, which was not accepted by the plaintiff. The issue of costs of the 2^nd defendant will be addressed in Section E below.

5.Insofar as the 1^st defendant is concerned, he seeks to set aside the Order on the basis that he has a meritorious defence to the plaintiff’s claims (see Section D below).

B.  RELEVANT FACTUAL BACKGROUND

6.The relevant factual background has been summarised in §§7-19 of the defendants’ Skeleton Submissions as follows.

7.The late Mr Shew Yun (“Deceased”), was the uncle of the 1^st and 2^nd defendants (who are siblings).  His estate (ie the Estate) is represented by his wife and executrix Madam Xian Hongying (“Madam Xian”), the plaintiff in these proceedings.

8.In 1982, the Deceased and his ex-wife, Madam Chan Shun Yee (“Late Aunt”) became co-owners of the Property, holding the same as joint tenants.

9.After Late Aunt passed away (which the 2^nd defendant recalls to be in around 2006), the Deceased became the sole legal and beneficial owner of the Property by survivorship.

10.It is the defendants’ case that, because the Deceased did not have any children, Late Aunt had, prior to her passing, specifically instructed the Deceased to add their names onto the title deeds of the Property.

11.By a Will dated 22 May 2007, the Deceased appointed the 1^st defendant as the executor of his will and bequeathed and devised all his real and personal property to him and the 2^nd defendant in equal shares absolutely (“2007 Will”) .

12.In or around 2009, the Deceased again impressed upon the 1^st defendant and the 2^nd defendant his wish to leave the Estate to them, and he thought that, since the Property was his most valuable asset, a simple way to achieve his wish was to name them as additional joint tenants of the Property, so that the Property would pass to them automatically after he passed.

13.On 22 January 2010, following the Deceased’s suggestion and pursuant to his arrangement, the Deceased, together with the 1^st and 2^nd defendants, attended the office of Messrs Ricky Li & Co (“RLC”) for the purpose of executing the relevant legal documents necessary to achieve the Deceased’s wish.  The three of them signed and executed, on the same day, (i) a Memorandum for Sale and Purchase (“Memorandum”) and (ii) an Assignment for the transfer of the beneficial interest in the Property from the Deceased to the 1^st defendant, the 2^nd defendant and himself as joint tenants (“Assignment”).

14.The Assignment contains a “receipt clause” in Clause 1 as follows:

“In consideration of the sum of HONG KONG DOLLARS NINE HUNDRED AND EIGHTY THOUSAND ONLY (HK$980,000.00) paid by the Purchaser to the Vendor (the receipt whereof is acknowledged) the Vendor as BENEFICIAL OWNER ASSIGNS to the Purchaser the Property described in the Schedule hereto…” (Emphasis supplied)

15.It was only in April 2023 that the 1^st and 2^nd defendants became aware of these proceedings (commenced in 2016) and the fact that default judgment had been obtained by the plaintiff against them in 2019.   

16.Immediately upon becoming aware of the above, the 1^st and 2^nd defendants instructed CWL, who issued a letter to RLC dated 21 April 2023 raising enquiries relating to the circumstances under which the Assignment was executed. 

17.By RLC’s reply letter dated 25 April 2023 and through a subsequent meeting (“Meeting”) between Mr Lee Wai Wah (“Mr Lee”) of CWL and Mr Ricky Li (“Mr Li”) of RLC, Mr Li confirmed, inter alia, that (i) a Wu Yuen Yee (“Ms Wu”) signed in the witnessing and interpretation clause of the Assignment, (ii) Ms Wu was a clerk (who has since left RLC), (iii) the Deceased and the defendants’ signatures on the Assignment had been witnessed by Ms Wu, whose signature was in turn verified by Mr Li, and (iv) there was nothing which caused him to have any suspicion about the Assignment (at the time of its execution).

18.The details of the Meeting are set out in Mr Lee’s 1^st Affirmation §§8-11, and the conference note exhibited thereto.

19.Thereafter, the defendants proceeded to issue the Summons on 27 June 2023.

C.  RELEVANT LEGAL PRINCIPLES

20.To set aside a regular judgment, the major consideration is whether the defendant has shown a defence on the merits which the court should pay heed, not as a rule of law, but as a matter of common sense.

21.The court will have regard to all relevant factors in the exercise of its discretion, including, inter alia, why the default occurred and any prejudice that would be caused to the plaintiff or to third parties if the default judgment were to be set aside.  The dominant factor would be the merits of the case.  See: Hong Kong Civil Procedure 2024, Practice Note 13/9/13.

22.On the issue of merits, the defendant has to show he has a “real prospect of success”.  In considering this, the court should consider “whether the defence ‘could well be established’ at trial”: Hong Kong Civil Procedure 2024, Practice Note 13/9/14.

23.As explained in Maryo Development Ltd v Tsang Yau May, CACV 101/2015(unrep, 11/01/2016) at §13 (per Harris J), the court is not required to undertake a mini-trial on the affirmations as to the likely outcome if the matter goes to trial.  Instead, the correct approach is for the court to have to form a provisional view as to “whether or not the defendant has a realistic prospect of successfully defending the action”.  The assessment has to be carried out “mindful of the interlocutory nature of the application and with a sense of proportionality”.

D.  WHETHER THE DEFENDANTS’ CASE HAS A REAL PROSPECT OF SUCCESS

24.The defendants’ case, in a nutshell, is that the Property was gifted to them by their uncle, the Deceased, with whom they had a close relationship.  The gift was, at the Deceased’s direction, devised through the mechanism of an execution of the Assignment whereby the defendants were both added as owners of the Property.

25.Bearing in mind the court is not to conduct a mini-trial on affidavit, I agree that the defendants’ defence as outlined in the various affirmations filed has real prospect of success, considering the context, in particular the 2007 Will, which contemporaneously evidenced the Deceased’s relationship with his nephew and niece at the time and his intention that the Property be bequeathed to them.

26.It is equally inherently probable that the Deceased would have gone a step further by adding the defendants’ names to the title in addition to preparing the 2007 Will, if only for convenience sake (as he represented to the defendants in around 2009).

27.In answer to the above, the plaintiff’s first response was to contend that the defendants’ version of events concerning the Deceased’s wishes was “illogical and entirely untrue”.  However, as submitted by the defendants:

(1)  The short answer is that, ultimately, the contention turns on whether the defendants’ narrative is considered credible by the court, especially given that Madam Xian herself has no personal knowledge of the relevant matters (and does not suggest that she has any positive case against the defendants as to their defence of a gift).

(2)  Even bearing in mind the need to scrutinise the defendants’ claim with considerable care as it involves claims made against the estate of a deceased person who cannot give evidence against such claims, at this juncture there is no basis for the court to reject the defendants’ version of events outright.  It is also noteworthy that the defendants have set out their account as early as 19 March 2014 in a police statement.

(3)  Nor would the defendants’ assertions lead to “inexplicable queries” as suggested by the plaintiff.  First, the reason for the Assignment notwithstanding the 2007 Will was that the Deceased had indicated this was a “simple way” to enable the Property to automatically pass to the defendants upon his death (as opposed to the operation of a will requiring the grant of probate), in the same way it had passed to him after Late Aunt’s death.  Second, the 2^nd defendant has further explained that the Deceased had concerns when preparing the relevant papers that a Deed of Gift might create potential defects to the title of the Property in the event of bankruptcy, which was why ultimately RLC prepared the Assignment to effect the gift instead.

(4)  Although it is also claimed that in light of the Deceased’s marriage with Madam Xian on 27 October 2009 there was “no good reason” why the Deceased would want to gift the Property to the defendants, this again comes down to a question of credibility and inherent probabilities which must be assessed at trial.  That is particularly so when the plaintiff has not put forward evidence suggesting any change of mind on the part of the Deceased (for example, in respect of his decision to leave all his assets to the defendants, or any fracturing of the relationship between them at least as of 2009/2010).

28.In her Skeleton Submissions, the plaintiff has in particular taken three points against the defendants on the merits.

D1.  Delay by the 1^st defendant in raising his defence (paragraph 21 of the plaintiff’s Skeleton Submissions)

29.This has been answered by the 1^st defendant in paragraph 9 of the defendants’ Note of Reply.

30.As pointed out by the defendants, the delay has been explained by the 1^st defendant himself in his affirmation.  In the absence of cross-examination of the 1^st defendant, this court cannot find that he has lied about his explanations, not least when the motive for lying is not apparent at all.    

D2.  The defendants’ case is unbelievable (paragraphs 23-24 of the plaintiff’s Skeleton Submissions)

31.This has been answered by the 1^st defendant in paragraph 10 of the defendants’ Note of Reply.

32.As submitted by the defendants, which I accept, it is unhelpful for the plaintiff to come up with “alternatives” as to what the Deceased could have done.  The question which this court needs to ask is not whether it was possible for the parties to have effected a transfer of the Property in another manner, but whether the explanation given by the 1^st defendant for the adopted mechanism is so incredible that it should be dismissed without a trial.  The answer is clearly “no”.  In particular, in the absence of any evidence and/or suggestion that the Deceased’s signature on the Assignment was forged,[1] there is no reason for the court to disregard the existence of the Assignment as a relevant piece of “contemporaneous evidence” in support of the defendants’ case.

D3.  The account given by Mr Li in respect of the Assignment cannot assist the 1^st defendant (paragraphs 27-30 of the plaintiff’s Skeleton Submissions)

33.This has been answered by the 1^st defendant in paragraph 12 of the defendants’ Note of Reply.

34.The absence of any affidavit from Mr Li, whilst unfortunate, is clearly beyond the defendants’ control.  In fact, in light of Madam Xian and the Deceased’s repeated visits to Mr Li’s firm, which culminated into a complaint to the Law Society, one can only understand why Mr Li would be hesitant to take active steps to assist the defendants in the present proceedings.  In due course, there is nothing to prevent the defendants from issuing a subpoena to compel Mr Li to testify at trial (if so advised). 

35.Further, the fact that the plaintiff’s complaint to the Law Society resulted in a disciplinary action commenced against Mr Li should not be taken too far.  All that came out of that action was a resolution that a “letter of regret” be sent to Mr Li for his failure to “provide a copy of a Memorandum in Chinese signed by [the Deceased]” despite his requests.  There was no finding of negligence or anything which comes close to suggesting that the Deceased did not knowingly or voluntarily sign the Assignment.

36.For the reasons stated above, I find that the defendants have a meritorious defence with a real prospect of success based on their case of a “gift” of the Property.

37.In the circumstances, the issue regarding the effect of a “receipt clause” (see: paragraph 14 above) does not arise.

38.Further, I need not discuss the further point made by the 1^st defendant that, in a multiple defendants case, where one of those defendants is in default of filing a Defence, Order 19, rule 7 of the Rules of the High Court simply does not permit judgment to be entered against the defendant in default unless the claim against that defendant is severable from the claim against the other defendants.  As the defence of the 1^st defendant has merits, the judgment against him should be set aside on that basis.

E.  COSTS OF THE 2^ND DEFENDANT’S SETTING ASIDE APPLICATION

39.As to costs, it is well established that, in the case of the setting aside of an irregular judgment, the usual costs order is for the plaintiff to bear his own costs of signing the irregular judgment and further to pay the defendant’s costs of the application to set aside the judgment: Hong Kong Civil Procedure 2024, Practice Note 13/9/11.  Given the plaintiff’s last-minute concession not to defend the regularity of the service attempted on the 2^nd defendant, there is no reason why the plaintiff should not bear the costs of the setting aside application vis-à-vis the 2^nd defendant.

40.Given it is the plaintiff’s own decision not to defend its service of the Writ on the 2^nd defendant, there is no reason why the usual costs order for setting aside an irregular judgment should not apply.  In particular,  whether the state of the law is uncertain on the question of service on the 2^nd defendant is not the 2^nd defendant’s or the court’s concern regarding costs.  The objective fact remains that the plaintiff consented to the 2^nd defendant’s setting aside application on her own volition.  The plaintiff cannot, on the one hand, decide not to pursue a point due to some perceived “uncertainty” over it, but, on the other hand, disavow any costs consequences by claiming that she may be correct if the point had been pursued. 

F.  CONCLUSION

41.For the reasons set out above, I make the following order.

Regarding the 2^nd defendant:

(1)  The judgment entered against the 2^nd defendant under the Order made by Wilson Chan J on 16 September 2019 be set aside.

(2)  The plaintiff do pay forthwith to the 2^nd defendant her costs of and occasioned by the Summons, such costs are to be taxed if not agreed.

Regarding the 1^st defendant:

(1)  The judgment entered against the 1^st defendant under the Order made by Wilson Chan J on 16 September 2019 be set aside.

(2)  The plaintiff do pay forthwith to the 1^st defendant his costs of and occasioned by the Summons, such costs are to be taxed if not agreed.

Regarding both defendants:

(1)  The 1^st defendant and the 2^nd defendant do have leave to file and serve their Defence within 28 days from the date of this order.

42.The above order as to costs regarding the 1^st defendant is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

43.Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.