Cheung Ping v. Cheung Wai Kit

DCCJ 3618/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3618 OF 2010

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BETWEEN

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Coram: Deputy District Judge Wilson Chan in Chambers

Date of Hearing: 4 June 2012

Date of Handing Down Judgment: 29 June 2012

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JUDGMENT

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Nature of application before court

1.This is an appeal by the defendant against the order of Master I Wong dated 3 May 2012, dismissing the defendant’s application to set aside the judgment entered in default of notice of intention to defend on 10 August 2011 and amended on 31 January 2012 (“the Judgment”).

2.The defendant asks that the Judgment be set aside, the defendant be at liberty to defend this action and that the plaintiff do pay to the defendant the costs of and occasioned by the Judgment as well as the costs of the hearing below and this appeal, to be taxed if not agreed. 

3.The defendant in this action was originally Mr Cheung Che Keung alias Cheung Keung, who unfortunately passed away in early April 2012.  By the order of Master S P Yip dated 24 April 2012, his son, Mr Cheung Wai Kit has been appointed to represent the estate of Mr Cheung Che Keung for the purpose of this action.  Since it will be necessary to make regular reference to Mr Cheung Che Keung, it will be convenient if I refer in this judgment to the late Mr Cheung Che Keung as the defendant, even though that title has in fact been assumed by his representative. 

Background and Nature of the plaintiff’s claim

4.This action is concerned with the proceeds of sale of 12 lots of land in Demarcation District No 322 in Lantau Island (“the Lands”).   

5.The land research records show that save for 2 of the 12 lots of land, the Government leases of the Lands commencing on 1 July 1898 were granted to one Cheung Kwong Tsun.  The Government leases of the remaining 2 lots commencing also on 1 July 1898 were granted to one Cheung Ching Tai.  They were, however, mortgaged to Cheung Kwong Tsun and eventually became vested in him on 4 October 1907. 

6.The Lands were succeeded to by 5 persons, namely, Cheung Kai In, Cheung Kai Chung, Cheung Kai Leung, Cheung Kai Ip and Cheung Yung Fat as tenants-in-common in equal shares (ie each having a 1/5th share) on 29 April 1921 after Cheung Kwong Tsun’s death.

7.As to the 1/5th share in the Lands held by Cheung Kai Leung, each was succeeded to by the defendant on 27 February 1958. 

8.By an assignment dated 17 September 2010, the then owners (including the defendant) sold and conveyed the Lands at the price of $5,684,580.  The defendant received a sum of $1,808,602.50 out of the said proceeds of sale. 

9.In this action, the plaintiff claims a sum of $904,301.25, which represents half of the defendant’s said share of the proceeds of sale of the Lands.

10.The plaintiff so claims as beneficiary of a trust of the Lands (“the Alleged Trust”), the pleaded particulars of which are as follows:-

(1) The Lands belonged to, inter alios, 福堂, meaning the family of one 張盈全.  張盈全is one of the younger brothers of Cheung Kwong Tsun referred to above. 

(2) Both the plaintiff is and the defendant was members of the same generation of 福堂.

(3) By “custom and past practice”, the defendant always held the lands in which 福堂is interested “on trust for both himself [the defendant] and the plaintiff as beneficial tenants in common in equal shares”. 

Regular or irregular judgment

11.Order 13, rule 7(1) of the Rules of the District Court, Cap 336 provides that judgment should not be entered against a defendant under that order unless, inter alia, an affidavit is filed by or on behalf of the plaintiff proving due service of the writ on the defendant.  If a plaintiff is to enter judgment against the defendant under Order 13 for his failure to give notice of intention to defend, it must be shown that the writ was duly served on the defendant.  It is not sufficient for the plaintiff to show that, somehow, the defendant had notice of the writ.  To cite an example, if the plaintiff’s process server had dropped the writ on the street whilst on his way to serve the same on the defendant, evidence that the defendant subsequently picked up the writ from the street and read it cannot be evidence of good service of the writ on the defendant.  The burden is on the plaintiff to prove that the writ had been effectively served on the defendant. 

12.In the present case the plaintiff relies on personal service of the amended writ on the defendant, alleged to have been effected on 21 June 2011. 

13.Order 65, rule 2 of the Rules of the District Court provides that personal service of a document is effected by leaving a copy of the document with the person to be served.  In deciding whether a service process is to be regarded as an effective personal service, the court should always adopt a practical approach.  Ms Lisa Wong SC, acting for the defendant in this appeal, has correctly summarized the position as follows:-

(1) the process server should first satisfy himself that he has found the correct person on whom a copy of the writ is to be served;

(2) he should then hand to or leave with that person a copy of the writ;

(3) if that person will not take the copy, it is not necessary to leave it in his actual corporeal possession;

(4) it is sufficient for the process server to inform the person to be served of the nature of the document and throw it down in his presence in such a case;

(5) it is also sufficient for the process server to inform the defendant that the package to be served on him contained “court documents” without necessarily specifying that it is a “writ”;

(6) it is however not sufficient for the process server to hand to the defendant the copy writ in an envelope without informing him that it is a copy writ/court document.

(See: Hong Kong Civil Procedure 2012, Vol 1, Practice Note 65/2/3 at pages 1209-1210 and Dynasty Line Limited v Sukamto Sia [2009] 4 HKLRD 454, at paras 19 to 26)

The defendant’s evidence

14.In his affirmation dated 24 February 2012, the defendant admitted that a Chinese male (presumably the process server) visited his house on 21 June 2011 at around 11:00 am.  He was asked in Cantonese if he was Cheung Che Keung.  Before he gave any reply, his son, Cheung Wai Sun (“the defendant’s son”) came to the door and took charge of the situation.  The defendant then returned to his bedroom.  No document was ever physically handed to the defendant by the process server.  A few minutes later the defendant asked the defendant’s son what had happened.  The defendant’s son told the defendant that the man had left an envelope on the doorstep.  The defendant told his son “it must be something to do with the plaintiff’s demand for money over the sale of the Lands”. 

15.The defendant’s son in his affirmation dated 24 February 2012 admitted that the process server did throw a brown envelope onto the doorstep and left. Believing that the envelope was simply another demand letter from law firm, he picked up the envelope and threw it onto the field near his house in anger. 

16.I agree with the analysis of Ms Wong that if the defence version of the service process is accepted, the purported service of the amended writ would be defective for the following reasons:-

(1) the nature of the document contained in the brown envelope was never identified either to the defendant or the defendant’s son by the process server; and

(2) the document was only left on the doorstep in the presence of the defendant’s son as opposed to the defendant.

The plaintiff’s evidence

17.Moreover, I agree with Ms Wong that even on the plaintiff’s case, there is insufficient evidence to prove on a balance of probabilities that personal service of the amended writ has been effected in accordance with the principles set out in paragraph 13 above.

(1) Whilst the process server, Mr Yam Chung Cheung of Messrs Ho, Tse, Wai & Partners (“Yam”), deposed in his 2^nd affirmation dated 4 August 2011 that he “served the Amended Writ of Summons on the Defendant by personally” after the defendant had identified himself, there was no mention of any further exchange between him and the defendant.  In fact, there was never any mention of how the amended writ was actually “personally served” on the defendant.

(2) Rather, the circumstances as to how the amended writ was served came from the plaintiff himself, in that the plaintiff deposed in paragraph 5 of his affirmation dated 28 March 2012 that he saw Yam handed the amended writ to the defendant from a distance.

(3) However, quite remarkably, this is inconsistent with what he went on to say in the next paragraph regarding what he was told by Yam afterwards, which I think is worth quoting in full:-

“I asked Mr Yam what had happened, he told me that he had identified the Defendant by his Chinese name,張志強. Mr Yam further told me that once he told the Defendant that he was a clerk of my solicitors, the Defendant denied his identity and his wife told him not to receive the Document from Yam. Yam just left the Document at the door”.

18.Thus, even on the affidavit evidence filed on the plaintiff’s behalf, Yam had never explained to the defendant the nature of the document being served upon him.  There is no evidence that Yam had explained to the defendant that the package to be served on him contained “court documents”. 

19.For the reasons stated above, in my view, the Judgment is irregular and it should be set aside ex debito justitiae, ie without regard to the merits of the proposed defence (See: Hong Kong Civil Procedure 2012, Vol 1, Practice Notes 13/9/4-5 at pages 218 to 219). 

Defence on the merits

20.If I am wrong and the Judgment is regular, I shall briefly state my view on the merits of the defence.

21.On an application to set aside a regular default judgment, the major consideration is whether the defendant had shown a defence on the merits to which the court should pay heed (See: Hong Kong Civil Procedure 2012, Vol 1, Practice Notes 13/9/12-14 at pages 221 to 222).

22.In short, in his affirmation dated 24 February 2012, the defendant denied that :-

(1) he was a descendent of 盈全or a member of 福堂;

(2) he was related to the plaintiff;

(3) the Lands belonged to 福堂;

(4) the Alleged Trust exists;

(5) Cheung Kai Leung who was his grandfather succeeded to his 1/5th share in each of the Lands subject to any trust;

(6) he himself inherited his grandfather’s interests in the Lands subject to any trust; and

(7) the plaintiff has or had any interest in his shares in the Lands.

23.One important issue on the merits before the court is therefore whether the defendant held his 1/5th share in the Lands subject to the Alleged Trust. While the plaintiff may have little difficulty in proving that the defendant and before him his grandfather (Cheung Kai Leung) had succeeded to their 1/5th share in the Lands through family ties, it is altogether a different proposition for the plaintiff to suggest that they held the share in the Lands subject to the Alleged Trust during their respective life times.  Just because the share in the Lands was acquired by succession through family ties, it does not mean that it was acquired subject to a trust. 

24.This is a question of fact, the determination of which would very much depend on whose evidence is likely to be accepted at trial. 

25.In this regard, I agree with Ms Wong that the plaintiff’s case suffers from the problems set out in paragraph 17 of her Notes of Submission for this appeal.  For ease of reference, I set out below those points in full:-

(1) The defendant and before him since 29 April 1921, his grandfather (Cheung Kai Leung), were the successive registered owners of a 1/5th share in each of the Lands; 

(2) The capacity in which Cheung Kai Leung and the defendant succeeded to the Lands was not in any way qualified;

(3) In the absence of other evidence, the beneficial ownership goes with the legal title;

(4) In addition to the onus that rests on the plaintiff, the burden of proving a trust falls upon the party asserting that the equitable right is not consistent with the legal title (See: eg, Re Superyield Holdings Limited [2000] 2 HKC 90 at 108D-E and 110H); 

(5) The plaintiff has not produced any deed of the Alleged Trust or other instruments or documents evidencing or even alluding to the existence of the same;

(6) Nor were Cheung Kai Leung or the defendant registered as the manager of any t’ong in holding a 1/5th share in each of the Lands.  Had they really been trustees, they could have been registered as such or as t’ong managers under section 15 of the New Territories Ordinance, Cap 97;

(7) Save with the use of the formula “practice and custom” without condescending to any particulars of the alleged practice or custom, the plaintiff has been completely silent about on how the Alleged Trust was constituted in the first place;

(8) The plaintiff is not assisted by the evidence of his witnesses as they likewise just made bare assertions of some unidentified “practice and custom”;

(9) Indeed, it would appear that neither the plaintiff nor any of his witnesses have any personal knowledge of the precise circumstances giving rise to the Alleged Trust.  All of them are clearly speaking from hearsay;

(10) In the absence of any particulars of the specific “practice and custom” that is being referred to and relied upon by the plaintiff, it is impossible for the defence to answer the plaintiff’s case with any details;

(11) The difficulties of the plaintiff’s case is further compounded by the fact that (a) the pleadings and affirmations filed on his behalf spoke confusingly about 2 different t’ongs; and (b) further, in the 2 letters allegedly written to the District Officer of the Island District Office by the plaintiff and his father in 1996 and 1997, the defendant was stated to be a descendant and member of yet another different t’ong called 張蓮江堂;

(12) Even if one were to focus on the plaintiff’s case as set out in his affirmation, none of the records of the Lands show that they had ever been vested in 禮三.  As stated above, the earliest records available are of the grant of the Government leases of the Lands commencing on 1 July 1898 to Cheung Kwong Tsun and Cheung Ching Tai. 

26.In short, I am satisfied that the defendant has established a credible defence which could well be established at trial to the plaintiff’s claim of the existence of the Alleged Trust.  Therefore, I would have set aside the Judgment even if it were a regular judgment.

Conclusion

27.For the foregoing reasons, I will allow the appeal and set aside the order of Master I Wong dated 3 May 2012.  In place thereof, I order that the Judgment be set aside, and there be unconditional leave for the defendant to defend this action.  I also grant the following directions:-

(1) there be leave to the defendant to file acknowledgment of service within 7 days from the date hereof;

(2) there be leave to the defendant to file and serve his defence within 28 days thereafter.

Costs

28.I see no reason why costs should not follow the event.  Bearing in mind that the Judgment was an irregular judgment, I order that the plaintiff do pay to the defendant in any event the costs of and occasioned by the Judgment; the costs of the hearing below (with certificate for counsel); and the costs of this appeal (with certificate for two counsel), such costs to be taxed if not agreed.

29.My decision on granting the certificate for counsel is primarily based on the fact that the plaintiff’s claim in this action is very near the top end of the jurisdiction of the District Court.  The costs order is nisi and shall become absolute in the absence of any application within 14 days to vary the same. 

30.Lastly, I thank counsel on both sides for their helpful assistance in this matter.

Mr Y L Cheung, instructed by Messrs Ho, Tse, Wai & Partners for the plaintiff

Ms Lisa K Y Wong, SC leading Mr Shu Wun Lee, instructed by Messrs Tony Kan & Co for the defendant