Tsoi Shek Leung v. Cheng Fu Ying

HCA 416/2025

[2025] HKCFI 4248

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 416 OF 2025

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D E C I S I O N

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Introduction

1.By Summons dated 12 June 2025 (“the Summons”), the Plaintiff (“P”) seeks judgment against the Defendant (“D”) in default of defence pursuant to O.19, r.7 of the Rules of the High Court, Cap. 4A (“RHC”).

Background Facts and Procedural Background

2.On 24 February 2025, DHCJ Alan Kwong granted an ex parte proprietary injunction (“the Injunction”) restraining D from dealing with, disposing of or diminishing the value of the net sale proceeds of the property known as Flat C of North Court on 36^th Floor of Tower 3 of Phase 1, Festival City, No. 1 Mei Tin Road, Tai Wai, Sha Tin, New Territories (“the Property”). The Injunction was subsequently continued on 7 March 2025 by myself and 21 March 2025 by Lisa Wong J until trial or further order of the Court.

3.On 3 March 2025, P commenced the present action by issuing a Writ of Summons against D.

4.In the Statement of Claim (“SOC”) filed on 30 April 2025, essentially, it is pleaded that:

(1)  At all material times, P and D were and are husband and wife;

(2)  Throughout the subsistence of their marriage: (a) P has always been a businessman engaged in the business of supplying, among other products, barbecue meat to restaurants in Hong Kong from the Mainland; and (b) D has always been a housewife with no financial means independent of P;

(3)  In 2010, P decided to purchase the Property as a residence and as a long-term investment;

(4)  At the time, with a view to protecting his personal asset from his current and potential business liability, and because he was always out of Hong Kong and it would be inconvenient for him to execute the paper work for the purchase of the Property and to liaise with the conveyancing solicitors personally, P arranged for the Property to be purchased in D’s name. The matter was expressly discussed between P and D, and D had no objection to the arrangement;

(5)  Therefore, prior to the acquisition of the Property, it was mutually agreed and understood between P and D that: (a) the Property shall be purchased using D’s name with the assistance of a mortgage loan; and (b) P, being the true purchaser and owner of the Property, would be responsible for paying the down payment and/or part of the purchase price not covered by the mortgage loan, the instalment of mortgage repayments, and all other costs and expenses incidental to the purchase of the Property;

(6)  Pursuant to and/or in reliance on and/or consequent upon the said agreement and understanding: (a) P caused D to sign an agreement for sale and purchase dated 30 March 2010 to purchase the Property at the purchase price of HK$10,221,000 (“the Purchase Price”); (b) the Purchase Price for the acquisition was paid for by the following arrangements: (i) part of the Purchase Price was financed by a mortgage loan obtained from the Standard Chartered Bank (Hong Kong) Limited (“the SCB Mortgage”); and (ii) P, via a corporate vehicle, provided and paid for the balance of the Purchase Price; (c) P also paid for/discharged inter alia the legal costs and stamp duty for the purchase of the Property; (d) upon the completion of the purchase of the Property, P and D moved into the Property and resided therein for a period of time; (e) P took on the sole responsibility for paying/discharging the monthly mortgage loan for the SCB Mortgage; (f) in 2014, P decided to re-finance the Property by discharging the SCB Mortgage, and replacing it with a new mortgage from the Bank of China (Hong Kong) Limited (“the BOC Mortgage”) in order to take advantage of a lower interest rate, with P and D being the borrowers under the BOC Mortgage; (g) since then and until the Property was sold, P was solely responsible for paying/discharging the monthly loan repayments for the BOC Mortgage; (h) despite being the sole registered owner of the Property, D never made any financial contribution to the Purchase Price and/or the mortgage loan repayments of the Property;

(7)  In recent years, the marital relationship between P and D deteriorated;

(8)  For the past 5 to 6 years, P and D have been sleeping in separate bedrooms;

(9)  Unbeknownst to P, until around mid-February 2025, in the absence of any prior consent or permission of P and in breach of trust: (a) on 17 November 2024, D signed a preliminary sale and purchase agreement to sell the Property to a Wong Man Sze and Wong Kwok Keung (“the Purchasers”) for the price of HK$12.6M; and (b) on 29 November 2024, D further signed a formal sale and purchase agreement for the sale of the Property (“the Sale”);

(10)  P only discovered the Sale on 11 February 2025 after an estate agent having the conduct of the Sale visited the Property;

(11)  Upon learning of the Sale, P confronted and/or inquired with D a few times about the situation but D refused to engage in any meaningful dialogue or explain the situation to P;

(12)  P decided not to stop the Sale to avoid any potential legal dispute between P and/or D on the one hand and the Purchasers on the other hand but made it clear to D that she must give up and delivery up the net sale proceeds derived from the Sale but D ignored P’s demands;

(13)  P therefore had no alternative but to immediately apply for and obtained the Injunction;

(14)  Upon service of the Injunction on solicitors acting for D in the Sale (“D’s Solicitors”), D’s Solicitors confirmed that they would stakehold the sale proceeds of the Property pursuant to the Injunction pending further order of the Court;

(15)  The Sale was completed on 27 February 2025;

(16)  P claims inter alia by reason of the matters above there was: a common intention between P and D that D was holding her title and/or interest in the Property on trust on behalf of P, and D had no beneficial interest in the Property (“the Common Intention”); P acted to his detriment in reliance of the Common Intention; and it would be unconscionable for D to assert beneficial interest in the Property;

(17)  P seeks the following relief: (a) a declaration that D did or do at all material times hold her interest and/or title and/or share of and in the Property on trust for and on behalf of P; and (b) an order that the sale proceeds of the Property derived from the Sale be applied in the following order and priority: (i) in payment of the discharge of any prior encumbrance affecting the Property; (ii) in payment of all necessary transaction costs, conveyancing costs, legal costs and disbursements and/or other reasonable and incidental expenses incurred for the purpose of or in connection with the conduct of the Sale; and (iii) the remaining net balance be paid to P by D; (c) all necessary and appropriate orders and consequential directions; and (d) costs.

Service of process and non-appearance of D

5.I am satisfied from the affirmations of service filed on behalf of P that: (a) the Writ of Summons and the SOC were served on D on 5 March 2025 and 30 April 2025 respectively; and (b) the Summons was also served on D on 12 August 2025.

6.D has not filed or served any Acknowledgement of Service or defence.

7.Furthermore, given that I am satisfied that the Summons was properly served on D, I am of the view that it is expedient to proceed with the hearing of the Summons under O.32, r.5 of RHC notwithstanding the absence of D at today’s hearing.

8.Mr Lam, counsel, appeared on behalf of P at today’s hearing.

Applicable principles

9.The applicable principles for default judgment under O.19, r.7 of RHC are well-settled. The power to grant judgment under O.19, r.7 is discretionary. The court is required to scrutinize whether the matters pleaded in the Statement of Claim entitle the plaintiff to the judgment sought. The court’s decision is made on the basis of pleaded facts, rather than on evidence. This is because where no defence is filed, the court will assume that the Statement of Claim has been impliedly admitted. See Hong Kong Civil Procedure 2025, Vol.1, §§19/7/1, 19/7/11 and 19/7/14.

10.Moreover, the principle that a declaration will not be granted when giving judgment in default of defence is a rule of practice and not of law, and will give way to the paramount duty of the court to do fullest justice to the plaintiff to which he is entitled. Indeed, where declaratory relief is the only and substantial relief sought by the plaintiff, it may be necessary to make a declaration to do justice to the plaintiff. However, the declaratory relief to be granted should not be in terms wider than what the plaintiffs are entitled to and what is necessary to do justice to them: see ibid, §§19/7/14 and 19/7/20.

11.As for the principles concerning common intention constructive trusts, these were succinctly summarized by Coleman J in Lam Ka Kui v Choi Yuen Ling [2020] HKCFI 2647 at §§8-12:

“8. Where a common intention constructive trust has arisen, ownership in the property is split into legal ownership and beneficial ownership. The trustee holds the legal title on trust for the beneficiary: see, for example, Luo Xing Juan Angela v Estate of Hui Shui See Willy, deceased [2009] 12 HKCFAR 1 at §38.

9. Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the three elements of (1) the common intention, (2) the claimant’s detrimental reliance on their common intention, and (3) the unconscionability of the property owner departing from it.

10. The burden of proving each element of common intention, detrimental reliance and unconscionability is on the person seeking to show that the beneficial ownership is different from the legal ownership. The focus is on the intention of the parties at the time of acquisition of the asset. Contemporaneous conduct is inherently more likely to be a reliable indicator of intention, to be given greater weight, than are words and conduct after the event.

11. Common intention can be expressed or implied. It can be deduced or inferred objectively from the parties’ conduct. As a matter of common sense, it is easier to infer such an intention prior to the acquisition of property which results in an obvious change in legal ownership (rather than after such an acquisition where there is no change in legal ownership and a change in beneficial ownership is not otherwise apparent).

12. In Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at §§2.3-2.4, Cheung JA identified two situations where a common intention constructive trust may arise. The first is where at any time prior to acquisition, or exceptionally at some later date, there is an agreement, arrangement or understanding reached between the parties on how the property is to be held beneficially. The finding of such an agreement or arrangement can only be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. The second situation is where there is no evidence to support a finding of an agreement or arrangement on the beneficial ownership of the property, and the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention on the beneficial ownership of the property and as the conduct relied on to give rise to a constructive trust. In this situation, direct contributions to the purchase price by the party who is not the legal owner, whether initially or by mortgage instalment payments, will readily justify the inference necessary to the creation of a constructive trust.”

Analysis and Disposition

12.Having carefully considered the SOC and the submissions of Mr Lam, I am satisfied that based on the pleaded facts, the Property is held on constructive trust by D for P. D is taken to have impliedly admitted the matters pleaded in the SOC in default of filing any defence. Notwithstanding a resulting trust has also been pleaded in the SOC, it is not necessary to resort to resulting trust.

13.I am satisfied that, in all the circumstances, it is appropriate to exercise my discretion to grant default judgment against D.

14.Furthermore, I am satisfied that as the declaratory relief is the only and substantial relief sought, there is a genuine need to grant the declaration sought to do fullest justice to P.

15.Moreover, I am satisfied from the cases cited by Mr Lam that there is jurisdiction to order, and in many instances the court has ordered, a post-judgment injunction in an application for default judgment: see e.g. Minebea Cambodia Co., Ltd. v Zhao Jin Fang [2022] HKCFI 3325 at §30; Masterwork Group Co., Ltd. v Rieckermann International Limited & Ors [2023] HKCFI 3266 at §9; Nikkei America, Inc. & Anor v Jialong Trade Limited & Ors [2020] HKCFI 957 at §21; and Specialty Metals Resources SA v Hunan Chuangda Vanadium Tungsten Co., Limited & Anor (unrep) HCA 369/2016, 22 March 2016, §9. I am also satisfied that the Injunction (with the variation sought to allow for payment out from the proceeds of the Sale) should be continued post-judgment in aid of execution and that it is appropriate in the circumstances of this case where there remains a risk of dissipation despite this Judgment.

16.D should pay the costs of this action, including the costs of the Summons, to be summarily assessed. Adopting a broadbrush approach, I have summarily assessed P’s costs of this action, including the costs of the Summons, at HK$280,000.

17.Accordingly, I shall grant the order sought in the Summons as amended by me.

18.I am grateful to Mr Lam for his assistance.

Mr. Timothy Lam, instructed by Arthur Hong LLP, for the Plaintiff

The Defendant was not represented and being absent