PAPAYA FOOD & BEVERAGE LTD v. WONG HO YUEN also known as WONG HO YUEN BARRY

DCCJ 179/2017

[2018] HKDC 235

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 179 OF 2017

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DECISION

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1.  On 22 February 2018, the plaintiff obtained a post-judgement Mareva injunction from Deputy District Judge Lawrence KF Ng restraining the defendant from removing from Hong Kong any of his assets up to the value of HK$450,000 and requiring the defendant to disclose the information of his assets in Hong Kong (“the ex parte injunction”). Today is the return date of the ex parte injunction, and the plaintiff seeks an order (“the inter partes injunction”) in terms of its inter partes summons dated 23 February 2018 (“the summons”) to continue the injunction up to the satisfaction in full of the judgment debt (including interest and costs) as stated in the judgment in favour of the plaintiff and made on 20 December 2017 (“the Judgment”).

Background

2.  I would first set out the background facts.

3.  In these proceedings, the plaintiff sues the defendant for HK$205,694.07.  According to the plaintiff, the defendant is liable to pay this sum to the plaintiff under a franchise agreement dated 27 October 2014 made between the parties.  The defendant has filed a defence to the plaintiff’s claim, and the defendant has also raised a counterclaim.

4.  Initially, the defendant was legally represented in these proceedings.  However, on 25 October 2017, his legal representatives obtained leave to cease to act for the defendant under Rules of the District Court (“RDC”) Order 67 rule 6(1).  Thereafter, the defendant is unrepresented and has failed to respond to any correspondence from the plaintiff’s solicitors or to appear in any hearing.

5.  On 17 November 2017, Master D To made an order that unless the defendant filed and served his list of documents within 14 days from the date of service of the order, the defendant’s defence and counterclaim would be struck out and final judgment would be entered for the plaintiff and against the defendant.  The defendant has failed to comply with this unless order.  As a result, the Judgment was entered on 20 December 2017.

6.  The plaintiff estimates that the total of the judgment sum (including interest and costs) would be slightly over HK$400,000 in late February 2018.

7.  The defendant owns the following properties (“the Properties”) in Hong Kong:-

(a) Flat D on 13^th Floor of Tower Block No 8, No 23 Greig Crescent, Nan Fung Sun Chuen, Hong Kong (“the Residential Unit”); and

(b) Car Parking Space No 230 on 3^rd Lower Ground Floor of the Car Parking Complex, Nan Fung Sun Chuen, No 2 Greig Crescent, Hong Kong (“the Car Parking Space”).

8.  Both the Residential Unit and the Car Parking Space are subject to mortgages and charging orders obtained by judgment creditors in other proceedings (“the Other Encumbrances”).

9.  Apart from the Properties, the defendant owned a property known as Car Parking Space No 44 on 4^th Floor, Winner Centre, No 333 Chai Wan Road, Hong Kong.  However, that property was sold by the mortgagee under a power of sale on 11 October 2017 at a consideration of HK$870,000.  The plaintiff says that the Properties are now the only valuable assets of the defendant which the plaintiff is aware of and able to locate.

10.  On 13 December 2017 (ie 7 days before the entering of the Judgment), the defendant entered into a provisional sale and purchase agreement (“the PSPA”) with a purchaser (“the Purchaser”) to sell the Properties at a consideration of HK$9,500,000.  Completion is scheduled to take place on or before 10 March 2018.  There is a special provision in the PSPA stipulating that if the purchase price as stated in the PSPA is not sufficient to discharge all the indebtedness owed by the defendant before the completion of the sale and purchase, the transaction shall be cancelled and the defendant shall refund all the deposits paid to the Purchaser (“the Special Provision”).  The PSPA was registered in the Land Registry on 18 January 2018.

11.  On 6 February 2018, the plaintiff obtained a charging order nisi (“the Charging Order Nisi”) against the Properties for the purpose of enforcing the Judgment.  The Charging Order Nisi was registered in the Land Registry on 12 February 2018.

12.  On 12 February 2018, the plaintiff’s solicitors wrote to the law firm whose name appeared on the PSPA as the solicitors acting for the defendant in the transaction, notifying them about the Charging Order Nisi.  However, the law firm replied and said that they were no longer acting for the defendant in the transaction.

13.  On 12 February 2018, the plaintiff’s solicitors also wrote to the Purchaser’s solicitors and enclosed a sealed copy of the Charging Order Nisi.  The plaintiff’s solicitors requested the Purchaser’s solicitors to confirm within the next 3 days that the Purchaser would stakehold part of the purchase price which would be sufficient for the purpose of discharging the charging order and pay the sum to the plaintiff’s solicitors upon completion of the transaction.  There is no reply from the Purchaser’s solicitors.

14.  On 12 February 2018, the plaintiff’s solicitors further wrote to the defendant to demand for payment of the judgment sum and enclosed a sealed copy of the Judgment in that letter. The letter and the sealed copy of the Judgment were sent to the Residential Unit.  There is no reply from the defendant.

15.  On 22 February 2018, the plaintiff applied for and obtained the ex parte injunction.

16.  On 23 February 2018, a clerk employed by the plaintiff’s solicitors (“the clerk”) went to the Residential Unit and attempted to effect personal service of the ex parte injunction, the affirmation and the skeleton submissions placed before the court in the ex parte hearing, and the summons (“the Documents”) on the defendant.  When the clerk arrived at Block 8 of Nan Fung Sun Chuen (“the Building”) at about 6:50 pm, he was stopped by a Ms Wong, the security guard on duty (“Wong”).  Wong told the clerk that the defendant had given instruction to the security guards of the Building that they should not allow anyone to approach the Residential Unit or leave any document at the unit.  After some negotiation, Wong allowed the clerk to press the intercom.  No one answered.  Wong then accompanied the clerk to go to the Residential Unit.  The clerk pressed the doorbell and knocked on the gate intermittently for about 10 minutes.  There was no response, save that there was a dog barking inside the Residential Unit.  Wong did not allow the clerk to leave any document at the Residential Unit. However, there was a letter box for the Residential Unit (“the Letter Box”). Wong allowed the clerk to insert the Documents into the Letter Box, and the clerk did so.  Thereafter, the clerk left the Building.

17.  On 26 February 2018, the clerk went to the Building at about 6:42 pm to try to serve the Documents on the defendant personally.  The clerk saw Wong again.  The clerk pressed the intercom but no one answered.  Wong then accompanied the clerk to go to the Residential Unit.  The clerk pressed the doorbell and knocked on the gate intermittently for about 5 minutes.  No one answered but there was a dog barking inside the Residential Unit.  Before leaving, the clerk checked the Letter Box and found that the Documents placed therein on 23 February 2018 were no longer there.

18.  On 26 February 2018, an assistant solicitor of the plaintiff’s solicitors left a voice message in the defendant’s mobile phone, notifying him the ex parte injunction and the terms of the same. The assistant solicitor also sent the Documents to the defendant by email and by WhatsApp.

19.  On 1 March 2018, the clerk went to the Building at about 8:20 pm to try to effect personal service of the Documents on the defendant.  The clerk met another security guard this time, who was a Mr Cheng (“Cheng”).  The clerk pressed the intercom but no one answered.  Cheng then accompanied the clerk to go to the Residential Unit.  The clerk pressed the doorbell and knocked on the gate for about 13 minutes but there was no response.  Again there was a dog barking inside the Residential Unit.  The clerk then left the Building.

The principles

20.  It is well established that there can be a post-judgment injunction in aid of execution where there are grounds for believing that the judgment debtor intends to dispose of assets in order to avoid execution^[1].

21.  The court is more ready to grant a post-judgment Mareva injunction for the plaintiff is entitled to enforce the judgment by executing the same on the defendant’s assets.  As said by To J in Menno Leendert Vos v Global Fair Industrial Ltd^[2]:-

“9. The nature of Mareva relief is such that the majority of applications are made at a very early stage, sometimes even before commencement of action. However, a Mareva injunction may also be granted to a judgment creditor in aid of execution of his judgment even if he had not applied for or obtained one originally: see Gee on Mareva Injunctions and Anton Piller Relief, 4th Ed at 26-30 generally and Deutsche Schachtbau-und Tiefbohr-Gesellschaft MBH v Shell International Petroleum Co Ltd [1990] 1 AC 295. The courts are much more ready to grant post-judgment Mareva injunctions because the plaintiff is a judgment creditor entitled to enforce the judgment by executing on the assets of the defendant and even to make him bankrupt or in the case of a corporation to have it wound up. As observed by Sir John Donaldson MR in Deutsche Schachtbau-und Tiefbohrgesellschaft MmbH v R’as Al Khaimah National Oil Company (No 1), [1990] 1 AC 295, such an injunction was not, strictly speaking, an injunction which fell into the Mareva category, but was an injunction granted as protection for a judgment creditor, under a jurisdiction recognised before the emergence of the Mareva jurisdiction.”

Analysis

22.  While the ex parte injunction has to be served on the defendant personally, the summons may be served by leaving the same at the proper address of the defendant^[3]. As a result of the order allowing the defendant’s former solicitors to cease to act for the defendant in these proceedings, the defendant’s last known address is regarded as the proper address for service^[4]. As far as the plaintiff is aware, the Residential Unit is the only residential property owned by the defendant in Hong Kong.  Accordingly, the Residential Unit is the defendant’s address last known to the plaintiff, and is the defendant’s proper address for service.  I am satisfied that by leaving the summons in the Letter Box on 23 February 2018, the summons has been validly served on the defendant on that date.  There are more than 2 clear days from 23 February 2018 to now^[5]. In my judgment, the hearing today is a properly constituted inter partes hearing.

23.  I am satisfied that in the absence of the inter partes injunction sought by the plaintiff, there is a real risk that the defendant would dissipate his assets with a view to frustrate the execution of the Judgment.

(a) Just 7 days before the entering of the Judgment, the defendant sold the Properties, being his only valuable assets in Hong Kong.

(b) If the defendant has any intention to pay the judgment debts by using part of the proceeds obtained from the sale of the Properties, he would have given a reply to the plaintiff’s solicitors’ demand letter dated 12 February 2018.  However, he has completely ignored that demand letter.

(c) The transaction as per the PSPA would be completed at a time on or before 10 March 2018.  In the light of the above, if the inter partes injunction sought by the plaintiff is not granted, there is a real risk that the defendant may remove the sale proceeds from Hong Kong or dissipate the same to prevent the plaintiff from getting any sum by virtue of the Judgment.

24.  I am aware of the fact that the plaintiff has obtained the Charging Order Nisi.  In my view, if the inter partes injunction sought by the plaintiff is not granted, the plaintiff would not have sufficient protection.

(a) In Ho King Yim v Lau King Mo^[6], the charging order was registered after the registration of the sale and purchase agreement but before the assignment.  The Court of Appeal held that at the time of the registration of the charging order, the beneficial interest in the property had already been transferred to the purchaser by the sale and purchase agreement. The vendor still retained a limited beneficial interest in the property, which was capable of being charged.  However, at the time of the assignment, that interest would have served its purpose and would have gone out of its existence.  The registration of the charging order would not affect the purchaser’s beneficial interest in the property, which had been transferred to the purchaser by the prior registered sale and purchase agreement.  The Court of Appeal at the same time also held that upon receipt of actual notice of the charge, the purchaser became liable to account to the chargee for the balance of the purchase money.

(b) The PSPA would take priority over the Charging Order Nisi by reason of its prior registration.  Although the assignment to be executed by the defendant and the Purchaser would be registered at a time subsequent to the registration of the Charging Order Nisi, the Purchaser would still be able to take the Properties free from the Charging Order Nisi as the Purchaser has obtained the beneficial interests in the Properties from the PSPA.

(c) I am aware of the fact that the plaintiff’s solicitors have given notice of the Charging Order Nisi to the Purchaser’s solicitors on 12 February 2018, and by reason of this, the Purchaser would be liable to account to the plaintiff for the balance of the purchase price to be paid upon completion.

(d) However, if the inter partes injunction sought by the plaintiff is not granted, the plaintiff would have to immediately commence another set of proceedings against the Purchaser to hold the Purchaser liable to account to the plaintiff for the balance of the purchase price.  If the plaintiff has to do this, further substantial costs would be incurred and the matter would be complicated.  In my view, bearing the underlying objectives laid down in RDC Order 1A rule 1 in mind, the court should not deprive the plaintiff of the protection of an injunction against the defendant in these proceedings and force the plaintiff to commence another set of proceedings against the Purchaser.

(e) Further, all the Other Encumbrances have been registered in the Land Registry prior to the registration of the Charging Order Nisi.  The total of the indebtedness secured by all the Other Encumbrances is unknown.  In the event that the total of these indebtedness exceeds the balance of the purchase price, and for some reason the defendant and the Purchaser still complete the sale and purchase notwithstanding the Special Provision, the plaintiff would not be able to get any sum from the balance of the purchase price.

(f) For these reasons, the inter partes injunction sought by the plaintiff is indeed necessary.

25.  I am prepared to grant the inter partes injunction sought by the plaintiff.  Ms Casarinna Man, counsel for the plaintiff, also makes an application for substituted service.  I am of the view that the plaintiff has used its best endeavour to try to effect personal service of the ex parte injunction on the defendant but to no avail.  The transaction as per the PSPA may be completed very soon, ie within a few days. It is of utmost importance that the inter partes injunction granted by the court today would bind the defendant and can be enforced against the defendant.  Taking all these into account, I am of the view that it would be impractical to require the plaintiff to serve the inter partes injunction personally on the defendant.  Pursuant to RDC Order 45 rule 7(7) and Order 65 rule 4(1), I make an order for substituted service that the plaintiff may serve the inter partes injunction and all the documents relating to the injunction on the defendant by inserting the same into the Letter Box, and the plaintiff may enforce the injunction against the defendant after doing so.  

26.  Ms Man submits that the figure “HK$250,000” in paragraph 2(1) of the draft order annexed to the summons in fact should be replaced by “HK$25,000”, so that paragraph 2(1) of the order would be requiring the defendant to disclose information of all his assets of an individual value of HK$25,000 or more in Hong Kong.  In my view, this is reasonable.  I accept this.

27.  At an earlier time, a case management conference has been fixed to take place on 27 March 2018 at 2:30 pm.  As a result of the Judgment, it would not be necessary to have any further case management conference in these proceedings.  I direct that the hearing of the said case management conference be vacated.

28.  Costs should follow the event. I order that costs of the application for the ex parte injunction, costs of the summons and costs of the application for substituted service be to the plaintiff forthwith, with a certificate for counsel, to be taxed if not agreed.

Disposition

29.  For the reasons above, I make an order in terms of the summons with amendments indicated in this decision.

30.  I thank Ms Man for the assistance rendered to the court.