Ng Nim Chung, Deceased and Another v. Ng Wing Man Terry

CACV 367/2022, [2024] HKCA 577

On Appeal From [2022] HKCFI 673

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 367 OF 2022

(ON APPEAL FROM HCA NO. 2221 OF 2016)

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Reasons for Judgment

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Hon Cheung JA (giving the Reasons for Judgment of the Court) :

I.  The appeal

1.This is an appeal by the plaintiffs against the decision dated 8 March 2022 (‘the Setting Aside Decision’) of Deputy High Court Judge Simon Leung (‘the Judge’) who set aside the judgment he granted on 27 August 2021 in favour of the plaintiffs after trial in the absence of the defendant (‘the Judgment’).  We dismissed the appeal at the conclusion of the hearing.  We now give our reasons.

II.  Background

2.The background of this case is as follows.

3.The 1^st plaintiff (‘the father’) who died in 2016 was the husband of the 2^nd plaintiff (‘the mother’) and the father of the defendant who is one of the four surviving adult children of the family.  The father and the defendant are the registered owners of a residential property in Hiu Kwong Street, holding it as joint tenants. The mother lives in Hong Kong and is the administratrix of the estate of the father.  The defendant lives in the United Kingdom.  The present action is brought by the plaintiffs seeking, amongst other things, a declaration that the defendant has no beneficial interest in the property.  The defendant filed a defence denying the claim and raised a counterclaim that he has become the sole owner of the property by operation of law upon the death of the father.  The counterclaim has since been struck out by Keith Yeung J for his failure to attend a pre‑trial review of the case.

4.The trial was scheduled to be held on 16 August 2021.  On 23 July 2021, the Court received by fax a letter dated 22 July 2021 from the defendant stating that he would be unable to return to Hong Kong to attend the trial as scheduled, and sought an adjournment of the trial. His ground was that he was banned from boarding the flight on 29 June 2021 from London to Hong Kong via Amsterdam.  Subsequently, the Hong Kong Government imposed a ban on all incoming flights from the United Kingdom with effect on 1 July 2021.  He enclosed copies of 1) airline ticket confirmation for the flight on 29 June 2021; 2) hotel confirmation for booking for quarantine upon arrival in Hong Kong on 30 June 2021; and 3) certificate of COVID-19 testing dated 27 June 2021.  The letter was copied to the plaintiffs’ solicitors.

5.The plaintiffs objected to the application for adjournment.  The Judge on the first day of the trial on 16 August 2021 considered the defendant’s application for adjournment and rejected it (‘the Adjournment Decision’).  He then proceeded to hear the case.  The plaintiffs were represented by counsel and proceeded to prove their case by calling witnesses and asking them to confirm what was written in their witness statements.  The hearing finished within an hour.  The Judgment was given on 27 August 2021. 

6.The defendant then by summons dated 2 September 2021 applied to set aside the Judgment.  By the Setting Aside Decision, the Judge set aside the Judgment on conditions.  He ordered the defendant to pay the following sets of costs :

1)  the plaintiffs’ costs of and occasioned by the defendant’s application for adjournment;

2)  costs of the first day of the trial on 16 August 2021; and

3)  the plaintiffs’ costs of and occasioned by the defendant’s application to set aside the Judgment.

7.The Judge further ordered the defendant to pay into court a sum of $400,000 on account of these costs orders.

8.The plaintiffs appealed pursuant to leave granted by the Judge.

III.  Order 35, rule 2

9.The case about setting aside judgments fall into two main categories: 1) those in which judgment is given in default of appearance or pleadings or discovery, and 2) those in which judgment is given after a trial, albeit in the absence of the party who later applies to set it aside. 

10.The relevant provision for setting aside a judgment that was granted after trial in the absence of a party is Order 35, rule 2 of the Rules of the High Court (Cap.  4A) which provides that :

‘ 2.(1) Any judgment, order or verdict obtained where one party does not appear at the trial may be set aside by the Court, on the application of that party, on such terms as it thinks just.

(2)  An application under this rule must be made within 7 days after the trial.’

11.In Lau Kam Chuen v. Lee Ching [2003] 2 HKLRD 1018 and Joyful Sparkle Company Ltd v. Ng Pik Chu CACV 102/2012 (20 November 2013, unrep.), this Court held that it is relevant to consider the following eight factors in the exercise of the discretion to set aside the judgment given in the absence of a party :

1)  Where a party with notice of proceedings has disregarded the opportunity of appearing and participating in the trial, he will normally be bound by the decision;

2)  Where judgment has been given after a trial, it is the explanation for the absence of the absent party that is most important: unless the absence was not deliberate but was due to accident or mistake, the Court will be unlikely to allow a rehearing;

3)  Where the setting aside of judgment would entail a complete retrial on matters of fact which have already been investigated by the Court, the application will not be granted unless there are very strong reasons for doing so;

4)  The Court will not consider setting aside judgment regularly obtained unless the party applying enjoys real prospects of success;

5)  Delay in applying to set aside is relevant, particularly if during the period of delay the successful party has acted on the judgment, or third parties have acquired rights by reference to it;

6)  In considering justice between parties, the conduct of the person applying to set aside the judgment has to be considered: where he has failed to comply with orders of the Court, the Court will be less ready to exercise its discretion in his favour;

7)  A material consideration is whether the successful party would be prejudiced by the judgment being set aside, especially if he cannot be protected against the financial consequences; and

8)  There is a public interest in there being an end to litigation and in not having the time of the Court occupied by two trials, particularly if neither is short.

12.These eight factors are adopted from the judgment of Leggatt LJ in Shocked and Another v. Goldschmidt and others [1998] 1 All ER 372 which clearly stated that the exercise of the power to set aside is a matter of discretion.  This Court in Lau Kam Chuen in [10] stated that the usual procedure was for the party who failed to appear at trial to apply, under the rule, to the trial judge to set aside the judgment and, if the application was refused, to appeal.

13.The Judge in the Setting Aside Decision had also considered these eight factors.  This being an appeal against a discretionary decision, this Court will only intervene if it is shown that the decision is plainly wrong, such as, for example, it was exercised under a mistake of law, or on wrong principle or had taken into account irrelevant matters, or failed to exercise the discretion or the decision was outside the generous ambit within which a reasonable disagreement is possible.

14.There are a few matters that we need to discuss about the ambit of Order 35, rule 2. Mr Lau (together with Ms Ip) for plaintiffs referred to Yuen Toombs Stephanie Downs v. Yuen Elmer HCMC 2/2000 (12 October 2001, unrep.) where the judge had previously refused an application to adjourn and proceeded with the trial and gave judgment.  He then considered an application to set aside the judgment.  Although the judge also referred to the eight factors in Shocked, he accepted counsel’s submission that the rule is only for the situation where a party has not appeared, without explanation at the time, to give him an opportunity of explaining that non‑appearance, and the Court an opportunity of revisiting the matter if it considers the reasons for non‑appearance sufficient.   He held :

‘ 10. I accordingly find myself in full agreement with Mr Coleman that there is a wide gulf between cases such as these, which envisage a non-deliberate absence of a party from the proceedings, with a reasonable excuse, and those where a party has made an application for an adjournment, which has been refused. In the former, the party may make use of Order 35, rule 2 to request the court to reopen the matter, but in the latter, the only recourse is for him to appeal the decision of the judge refusing the application to adjourn, and the court has no jurisdiction under this rule to entertain the former application.’ (emphasis added)

15.Reference was made by the judge in Yuen v. Yuen to cases like Grimshaw v Dunbar [1953] 1 QB 408 and Re Barraclough (deceased) [1965] 2 All ER 311 which were discussed by Leggatt LJ in Shocked before he listed the eight factors.

16.We disagree with the notion that the Court has no jurisdiction to deal with a setting aside application after an adjournment application has been refused and the only avenue is to appeal against the decision which refused an adjournment.  This is contrary to the clear wording of the rule.  The reference in these earlier English cases to ‘accidental absence’ or ‘unavoidable accident’ was not in our view said in the context of jurisdiction.  Rather it is only one of the factors that the Court needs to consider in the exercise of its discretion that is now specifically embodied in Factor No. 2 which deals with deliberate absence or accidental absence or mistake of the party applying to set aside the judgment.

17.We also disagree with Mr Lau’s submission that it is an abuse of process to allow the defendant who had failed in his adjournment application, a further opportunity to re‑litigate the issue by applying to set aside the judgment with the introduction of additional evidence.  There is nothing in the rules or in the authorities that says Order 35, rule 2 is not intended to be available in a situation like the present.  Mr Lau relied on Standard Chartered Bank (Hong Kong) Ltd v Nie Hai Yan Annie [2021] 2 HKLRD 425 where the 2^nd defendant (a key witness in an action who resided in Beijing) made an application to give evidence by way of video conferencing facilities (VCF) on the basis of health concern due to COVID 19 shortly before trial.  The judge refused the application.  The trial took place subsequently and the 2^nd defendant did not give evidence.  After her application for leave to appeal was refused by the judge, the 2^nd defendant renewed the application for leave before the Court of Appeal.  Lam VP (as he then was) stated that :

‘ 23. As far as the prejudice to the 2nd defendant is concerned, as the Judge rightly noted, she was the author of her own misfortune. There is no material difference between her situation and that of a defendant who deliberately chose not to come to court to give evidence hoping but failing to convince the court to receive her evidence by VCF. Such a defendant could hardly complain that the court adjudicated the case without the benefit of her evidence.

24.   As regards the other evidence in the trial and the plaintiff’s reliance on the hearsay evidence of the 1st defendant, it should not have bearing on the outcome of the 2nd defendant’s application.  This was in any event not a point taken before the Judge when the application was heard on 5 January 2021.’

18.The issue before Lam VP was not about the application of Order 35, rule 2.  We do not consider that an application under the rule after the application to adjourn had been refused is by itself an abuse of process when the rule is the specific provision which applies if a party does not appear at the trial and which gives that party a potential right to a new trial.

19.In our view Yuen v Yuen was incorrectly decided and should not be followed.

20.The other matter that we would like to discuss is that Ms Chong for the defendant relied on Rule 39.3 of the Civil Procedure Rules (‘CPR’) of the United Kingdom which provides that :

‘ (3) Where a party does not attend and the court gives judgment or makes an order against him, the party who failed to attend may apply for the judgment or order to be set aside.

(4) An application under paragraph … (3) must be supported by evidence.

(5) Where an application is made under paragraph … (3) by a party who failed to attend trial, the court may grant the application only if the applicant‑ (a) acted promptly when he found out that the court had exercised the power to strike out or to enter judgment or make an order against him; (b) had a good reason for not attending the trial; and (c) has a reasonable prospect of success at the trial.’

21.It is plain that CPR rule 39.3 is different from our Order 35, rule 2.  For a start, as Lord Neuberger of Abbotsbury MR observed in Bank of Scotland plc (formerly Governor and Company of the Bank of Scotland) v Pereira (Practice Note) [2011] 1 WLR 2391 (‘Pereira’) and quoted in Family Channel Ltd v. Fatima (Riaz, third party) [2020] 1 WLR 5104 :

‘ 24. …An application to set aside judgment given in the applicant’s absence is now subject to clear rules. As was made clear by Simon Brown LJ in Regency Rolls Ltd v Carnall [2000] EWCA Civ 379, the court no longer has a broad discretion whether to grant such an application: all three of the conditions listed in CPR r 39.3(5) must be satisfied before it can be invoked to enable the court to set aside an order. So, if the application is not made promptly, or if the applicant had no good reason for being absent from the original hearing, or if the applicant would have no substantive case at a retrial, the application to set aside must be refused.’

22.In our view there is no room to rely on a different procedural rule like CPR rule 39.3 which is not applicable to Hong Kong.  It is of note that Lord Neuberger MR further observed :

‘ 37. …where the defendant is seeking a new trial on the ground that she did not attend the trial, then even though she may have other possible grounds of appeal, she should normally proceed under CPR r 39.3, provided she reasonably believes that she can satisfy the three requirement of CPR r 39.3. The fact that she wishes to raise other arguments for attacking the trial judge’s decision should not preclude her proceeding under CPR r 39.3, because that is the specific provision which applies if she did not appear at the trial (and gives her a potential right to a new trial) … Further, if she has a retrial, the other arguments which she wishes to raise could be raised at the retrial (and they may be considered by the judge who hears her CPR r 39.3 application).’

IV.  Merits of the appeal  

23.Dealing with the merits of the appeal, in respect of the reason for the absence of the defendant, the Judge had considered further evidence from the defendant in which he produced, amongst other things, the letter from the airline confirming that he was indeed refused to board the plane to Hong Kong due to ‘lack of necessary documents (valid covid 19 test)’ and his hotel booking in Hong Kong for his 21 nights quarantine. This is evidence that the Judge was entitled to take into account that puts a different complexion on his earlier refusal to adjourn the trial.  Considering the ever fluctuating policies then in place in terms of COVID test requirements and entry requirements of different countries, the Judge clearly was entitled to hold that :

‘ 21. This court needs no reminder of the balance between the desirability of finality instead of re‑opening of legal proceedings and the justice of affording all parties the fair opportunity to advance their case in court. This court has considered the further explanation and evidence in support of such explanation for the defendant’s absence. While criticism of the defendant from the plaintiffs must be expected, this court does not consider that the defendant’s further explanation and evidence are all liable to be rejected for being allegedly inconsistent and self-contradictory.’

24.Mr Lau relied on Au Yeung Pui Chun v Cheng Wing Sang [2020] HKCFI 1940 where G Lam J (as he then was) refused an application by the defendant to adjourn a trial.  The grounds of the adjournment are stated in the judgment as follows :

‘ 6(1) The defendant and his wife reside in Switzerland. To travel to Hong Kong for the trial they would be subject to quarantine requirement for 14 days under the Compulsory Quarantine of Certain Persons Arriving at Hong Kong Regulation (Cap 599C), and may be subject to a similar requirement upon their return to Switzerland after the trial, which would cause “severe practical hardship and serious prejudicial effects” to them as they would have to leave their respective work for at least 43 days all together including travelling time.’

25.The facts of each case are different. Unlike the defendant in Au Yeung Pui Chun the defendant in the present case had actually adduced evidence that he intended and had made provisions to come back to Hong Kong but was precluded from taking up the journey.  When the whole world then was facing the COVID crisis and the uncertainty of international travel, it is unrealistic for the plaintiffs to argue that the defendant could have made alternative arrangement to come back to Hong Kong through some other countries with different quarantine requirements.

26.As to the argument that the defendant could avail himself of video conference facilities (‘VCF’), it is of note that notwithstanding the defendant’s request to adjourn which was received by the Court on 23 July 2021, the request was only dealt with on the day of the trial on 16 August 2021, with the lawyer for the plaintiffs indicating that they would file the written submission to oppose the adjournment on 2 August 2021 or if so directed by the Court on 30 July 2021.  We are of the view that with this short time frame, any reference to the defendant not availing himself of the VCF is academic.  As to the plaintiffs’ argument that the defendant could have arranged for the VCF for the trial, the fact remains that the defendant had intended and made arrangements to attend the trial personally.

27.In terms of the merits of the parties’ case on beneficial ownership of the property, notwithstanding the fact that the Judge had already given judgment for the plaintiffs, he still set aside the Judgment and held that :

‘ 10. As much of the dispute between the parties was factual, one would not conclude, on the basis of the contentions and materials before the court, that the defence would have had no real prospect of success in any event, had the defendant attended the trial and subject the plaintiffs’ evidence and witnesses to challenge in court. General indication (4) above will have to be considered in such light in the circumstances.

…

22.  The trial that took place involved the plaintiffs’ witnesses confirming and adopting their statements under oath without cross examination. The trial finished within the morning session of the first day.  The concern about repetition of the trial process, if the Judgment is set aside, under general indication (8) above will have to be considered in such light in the present case.’

28.Mr Lau submitted that the Judgment should not be set aside unless the defendant enjoys real prospects of success and the Judge erred in applying a negative test of whether the defendant ‘would have had no real prospect of success’ at retrial, instead of a positive test with the burden on the defendant.  He argued that mere existence of ‘factual’ disputes is insufficient.  The Court is not obliged to suspend its critical faculties and assume the defendant’s evidence is accurate; if the defendant’s defence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real defence: Wong Ling Pan v. Team Building Ltd [2021] HKCFI 336 at [22‑23].

29.We do not consider that it is fair to characterise that the Judge had adopted a negative rather than a positive approach in considering the merits of the appeal.  He certainly did not hold that the defendant’s defence is incredible in any material respect.  The defendant is a registered joint tenant of the property together with his father.  As stated by the Judge in the Judgment, the starting point is that equity follows the law, and there is a presumption that the beneficial interest follows the legal interest.  The plaintiffs carry the burden of showing on balance of probabilities that the real intention of the parties differs from what the registration of the legal interest in the property apparently suggests.  The defendant, without disputing that it was his parents who arranged for the repayment of the mortgages, is contending that he had also, unknown to the family, contributed to the purchase of the property by way of cash payment to the father a fixed monthly sum of $5,000.  We are not prepared to say that the Judge is plainly wrong on this aspect.

30.As to the prejudice to the plaintiffs, the Judge held that :

‘ 26. A major concern of the plaintiffs apparently is the prejudice in the form of the uncertainty of the ability of the Widow in her current physical condition to testify again in court. Different from the stage when the evidence, oral and documentary, was yet to be verified and adopted in the trial, the oral evidence of the Widow in terms of her statement was as a matter of fact confirmed and adopted on oath in court. Insofar as necessary, appropriate direction could be sought and given for the purpose of adducing such evidence already given under oath in court similar to that by way of an affirmation or deposition.’

31.Mr Lau criticised the Judge’s suggestion on the procedural directions as infeasible in that the evidence given at the first trial is generally inadmissible in the retrial or trial de novo.  Only a deposition taken ‘in pursuance’ of an order granted Order 39, rule 1 can be received as evidence in trial.  As for affirmation, the 2^nd plaintiff has not filed any affirmations.  It is also not practicable to apply Order 38, rule 2 where the evidence will be strongly contested.  Mr Lau also criticised the defendant for suggesting without any supporting evidence the reason why his mother was not registered as a joint tenant was because of her relationship with another man.

32.In our view the Judge had clearly taken into account the prejudice to the mother who is over 90 years of age.  But he had also taken into account other relevant factors when he exercised the discretion in favour of setting aside the Judgment.  What happened at the trial was that the plaintiffs’ witnesses merely confirmed what was contained in their witness statements without any cross‑examination and the trial finished within one hour.  There is no substantial wastage of the Court’s time.  Despite the incorrect procedural suggestion we do not consider that the Judge was plainly wrong.  The way forward is for the plaintiffs to proceed expeditiously to set down the case for the retrial or to apply to take a disposition of the mother’s evidence when she is still able to do so. 

V.  Conclusion

33.Accordingly the appeal was dismissed.

VI.  Costs

1)  Costs below

34.As the defendant only succeeded in his application to set aside by new evidence, the costs order made by the Judge on the Setting Aside Decision should not be disturbed.

2)  Costs of the appeal and leave to appeal

35.The Judge ordered costs of the application for leave to appeal be in the cause of the appeal.  Although the defendant succeeded in this appeal, we considered that it is appropriate to order the defendant’s costs of the appeal be in the cause of the retrial.  In other words he is only entitled to have the costs of this appeal if he succeeds in the retrial.  We shall make an order nisi accordingly.  As the 2^nd plaintiff is legally aided, her own costs should be taxed according to the Legal Aid Regulations.

Mr Kerby Lau and Ms Ragina Ip (pro bono basis), instructed by Hampton, Winter and Glynn for the Plaintiffs

Ms Sezen Chong, instructed by Jackson Ho & Co, for the Defendant