IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 399 OF 2001
(ON APPEAL FROM HCMP NO. 5132 OF 1998)
Coram: Hon Rogers VP and Le Pichon JA in Court
Date of Hearing: 19 March 2002
Date of Judgment: 19 March 2002
Date of Handing Down of Reasons for Judgment: 26 March 2002
REASONS FOR JUDGMENT
Hon Rogers VP:
1. This is an appeal from the judgment of Mr Justice Yeung given orally on 19 February 2001. The action is an action by the plaintiffin respect of mortgages over various properties. There are 9 defendants in total but this application relates only to the 9th defendant.At the conclusion of the hearing, the appeal was dismissed with costs. This court said that it would give its reasons in writingwhich we now do.
2. There are two properties which concerned the 9th defendant. The first is Town House No. 20, Sunderland Estate, 1 Hereford Road, KowloonTong, Kowloon and the other flat A, 8/F., Hillview Court, No 30-32, Hillwood Road, Kowloon.
3. Although the 9th defendant is not the registered owner of either of these two properties, she applied to be joined as 9th defendanton the basis that she had provided the purchase monies, or at least part of them, for the Sunderland Estate property, and she hadan interest in the Hillview Court flat because it had been the matrimonial home and furthermore she had paid off the original mortgageherself. By an affirmation made in January 1999 the 9th defendant explained that as long ago as 1978 she had been fortunate to winthe Mark Six lottery. The prize money of HK $800,000 was a considerable sum in those days. By dint of paying off the mortgage onthe Hillview Court property and by purchasing five urban taxi licences the 9th defendant said that she had made sensible investmentswhich had more than kept pace with inflation.
4. It is noteworthy that in paragraph 12 of that affirmation the 9th defendant said that in 1992 she had provided her daughter withHK $1,500,000 to purchase the Sunderland Estate Town House. Whereas the 9th defendant conceded that she was aware that this propertyhad been mortgaged to the First Pacific Bank she said that she was unaware that that mortgage had been discharged and that a newmortgage had been granted to the plaintiff and that a 2nd Legal Charge had been executed in favour of Dao Heng Finance Limited. The9th defendant claimed that she had remained in actual occupation of that property at all material times. In relation to the HillviewCourt property the 9th defendant said that she was unaware that her husband had mortgaged the property to the plaintiff in 1995.She also claimed that she had remained in actual occupation of that property as the matrimonial home since 1977. She claimed in thataffirmation that the property was rented out to a tenant in or around 1996.
5. It is unnecessary to review the details of the action save to say that it was by no means speedily conducted. The 9th defendant hasrepresented herself for almost all the time after being joined as a defendant. The 9th defendant says that she is illiterate andhas left the preparation of paperwork to others. In particular she left the completion of her address for service to her son-in-law.The son-in-law who is the 4th defendant had given his company address as the 9th defendant’s address for service. It would appearthat on a number of occasions the 9th defendant had not attended interlocutory hearings but had left her representation to the 4thdefendant.
6. On 6 December 2000 a checklist hearing was heard before Yeung J. At that hearing the 1st, 5th and 9th defendant’s did not attend.On 7 December 2000 the plaintiff took out a summons for a peremptory order to strike out the defences of the 1st, 5th and 9th defendanton the ground that they had failed to provide the court with information to deal with the summons for directions. The summons wasreturnable on 20 December 2000. It was served by post on each of the 1st and 5th defendants by sending copies both to the SunderlandEstate Town House and to the 4th defendant’s office address. It was served on the 9th defendant by post to the address given as heraddress for service.
7. On the return date of the summons there was no appearance and Yeung J entered judgment in favour of the plaintiff. After the 9thdefendant had become aware of the judgment she applied to set it aside. In her affirmation in support of that application the 9thdefendant said that she had at all material times been residing at the Sunderland Estate Town House. The 9th defendant affirmed thatshe was not informed of the summons either by her son-in-law or by the 1st defendant or the 5th defendant with whom she was livingat the time. The son-in-law also made an affirmation at the same time to the effect that he had not received any post addressed tothe 9th defendant.
8. In those circumstances, the rather surprising state of affairs has arisen that no less than 5 different copies of the summons returnableon 20 December 2000 have seemingly gone astray in the post. That is not to mention the notices in respect of the call over hearingwhich was heard on 6 December 2000. Mr Khattak, who appeared on behalf of the 9th defendant, took issue with the service in respectof the 1st and 5th defendants on the basis that the affirmation in support of the service did not include “Hereford Road”. In thecircumstances, it is doubtful whether that would have affected the service, since it would be unlikely that the Post Office wouldnot locate an estate with at least 20 town houses in Kowloon Tong. Be that as it may, the service of the summons on the 1st and 5thdefendants is only a matter of passing interest.
9. The plaintiff relies for service on the 9th defendant on the address given on behalf of the 9th defendant as her address for service.No criticism was made of that by Mr Khattak. Mr Khattak, however, took issue with the affirmation of service on the basis that itdid not state that the summons had not been returned. That, however, is not part of the requirements of Order 65 rule 5. Serviceis complete if the document has been sent by post. Although it is a matter of caution and good practice to state in the affirmationof service that the document has not been returned, the failure to do so does not render the service bad service. Even if the summonsreturnable on 20 December 2000 had not been received by the 9th defendant and she was unaware of the hearing to take place that day,the service of the summons was technically good and has been verified by affirmation. In those circumstances the court would in itsdiscretion be prepared to set aside any order made in default of appearance on that summons should it be satisfied that the 9th defendanthas a defence on the merits to which the court should pay heed.
10. When the matter came before Yeung J on 19 February 2001 he was of the view that the 9th defendant did not have a good defence tothe claims. In my view he was correct in this matter and his judgment should not be disturbed.
11. In respect of the Sunderland Estate Town House, there is a fundamental difficulty that in the 9th defendant’s first affirmation sheclaimed only to have paid $1.5 million. In the defence filed she claims to have paid $7,500,000, which was said to be the full purchaseprice. In the Land Registry records, as acknowledged by Mr Khattak in the course of argument, the purchase price for the propertywhen it was first purchased by the 1st defendant was given as $7,300,000. In argument before us, Mr Khattak told the court that itwas the 9th defendant’s instructions to him, on inquiry, that she had only paid $1,500,000. It was said that the mistake in the defencewas the fault of the 4th defendant who had drafted and filed the defence on behalf of the 9th defendant.
12. One difficulty, however, is that there is no documentary evidence of any nature to support her claim that she provided the purchasemoney for the property. The major difficulty facing the 9th defendant is as to whether she could show that she had acquired any proprietaryinterest in the property. On the face of the matter she made a loan to her daughter which was only approximately 20 per cent of thepurchase price of the property. In her first affirmation the 9th defendant said that her daughter had promised her that in returnfor financial assistance the 9th defendant and her husband could live at the property for the rest of their lives.
13. Mr Khattak, on behalf of the 9th defendant, sought to rely upon general statements in the affirmation to the effect that it was the9th defendant’s case that all investments made with the use of the prize money would be made in the names of the immediate familymembers on the clear understanding that they were to hold such investments in trust for the 9th defendant and that the 9th defendantremained the true beneficial owner. That would seem an unsustainable claim in respect of the Sunderland Estate Town House. The MarkSix payment had been received by the 9th defendant in 1978. The purchase of the Sunderland Estate Town House was not until 1992.Furthermore, it is clear that the balance of the purchase money no doubt came on mortgage. If the 9th defendant were to claim thatthe Sunderland Estate Town House was beneficially owned by herself she would have to establish that she had contributed all moniestoward its purchase. In contrast, the 9th defendant said later in her affirmation that she had a beneficial interest in the property.The only beneficial interest which on the face of the affirmation would appear to have existed would have been a licence to the 9thdefendant and her husband to reside at the property. That was at best an equitable interest which was unregistered.
14. Furthermore, it is clear that on the purchase of the property in 1992 the 9th defendant was well aware and consented to the factthat there was a mortgage to the First Pacific Bank in respect of all monies due. As indicated above, that mortgage was dischargedand a further mortgage and legal charge were executed in favour of the plaintiff and its associated company the following year. Itis clear on considering the Land Registry records that the discharge of the first mortgage and the execution of the mortgage in favourof the plaintiff were effected simultaneously. Furthermore, from the witness statements prepared on behalf of the plaintiff by itssolicitors and their employees and from the exhibits thereto it is clear that they were careful to ascertain from the 9th defendant’sdaughter, Tam Siu Ping Christine, the 1st defendant and Li Chiu Fan her husband, the 4th defendant, that they were the sole personsin occupation of the property. In my view, there is no reasonable prospect of the 9th defendant establishing that the plaintiff wasput on notice as to any interest which might have been held by the 9th defendant.
15. In respect of the Hillview Court property, the 9th defendant said in her affirmation that she was unaware that the 5th defendanthad mortgaged the property. In her defence she claims that both she and the 5th defendant had no knowledge that the property hadbeen mortgaged. In respect of this property the 9th defendant’s claim is dependent upon the fact that the she alleges that she wasin occupation of the premises. This assertion is somewhat surprising to the extent that it is the basis of the 9th defendant’s claimsthat she was in occupation of both properties subject to the claims against her. However, there is before the court a copy of a leaseshowing that at the time of the mortgage of the Hillview Court property, 1 September 1995, the property was let out to Planet Hollywood.The assertion that the plaintiff would or should have been put on notice as to any rights the 9th defendant had in respect of thisproperty, therefore, falls to the ground.
16. In those circumstances I have no hesitation in holding that this appeal must fail.
Hon Le Pichon JA:
17. I agree.
Ms June Wee, instructed by Messrs S K Wong & Lee, for the Plaintiff/Respondent
Mr Shahmim K Khattak (alias Kelly Lam), instructed by Messrs Poon & Cheung, for the 9th Defendant/Appellant