WELLTECH CONSTRUCTION MATERIALS LTD v. YEUNG KA WING t/a HOP LEE VEGTABLE TRADING CO

DCCJ 2993/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2993 OF 2014

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DECISION

1. This is the defendant’s application to set aside an interlocutory judgment entered herein on 13 March 2015 in default of giving notice of intention to defend on grounds of irregular service as well as meritorious defence.

2. For the present purpose, I need only state by way of background facts that the parties were parties to a tenancy agreement whereby the defendant rented a warehouse to the plaintiff for storage of construction materials from 2011 up to 2014. The plaintiff alleges that there had been water leakage from the rooftop of the warehouse causing damage to the construction materials stored therein and the parties had reached a certain agreement in 2013 whereby the defendant agreed to repair the rooftop while the plaintiff agreed to pay all rent in arrears. The plaintiff alleges that the defendant is in breach of the agreement, hence the present action to claim damages for its damage and loss arising from the water leakage.

3. On 4 August 2014, the plaintiff issued the writ of summons endorsed with a statement of claim herein.  On 5 August 2014, the plaintiff purportedly served the writ on the defendant at the latter’s usual and last known address. No notice of intention to defend having been given by the defendant, interlocutory judgment with damages to be assessed was obtained by the plaintiff on 13 March 2015 (“Default Judgment”).  On 4 September 2015, the plaintiff obtained an appointment for assessment of damages from this court and issued a notice of the appointment fixed for 6 October 2015 before Registrar Lui.

4. It is the defendant’s case that the writ had never been served on him.  Nonetheless, he received the said notice of appointment sent by ordinary post and attended the hearing when he undertook to apply for setting aside the Default Judgment while the learned Registrar adjourned the hearing to 29 October 2015 pending such application.  Upon the defendant taking out the present application, the hearing for assessment of damages has since been adjourned sine die pending final disposal of the present application.

Legal principles for setting aside a default judgment

5. It is trite law that an irregular default judgment would be set aside as of right without regard to the merits of the proposed defence although the court does retain residual discretion to impose terms by having regard to the parties’ conduct.  A judgment is irregular where service of the writ is bad or ineffective.  See: Hong Kong Civil Procedure 2016, Vol 1, §§13/9/4-5 and Po Kwong Marble Factory v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 (CA). 

6. When it comes to service of writ, the test is whether the writ “had been brought to the defendant’s notice and not whether it had been delivered to the defendant’s last known address”. Thus, where a defendant was not living at the address where it was inserted into a letterbox at that address, it was not brought to the defendant’s notice and the service was irregular.  See Sinokawa Investment (Holdings) Ltd & Anor v Li Chun [2006] 3 HKLRD 441 at §15 and Hong Kong Civil Procedure 2016, §10/1/13. 

7. Where a defendant deposes that he has not received the writ through the post, the court has little option but to believe this save when there is sufficient material to cast doubt upon the defendant’s credibility to enable the court to disbelieve him (which is a matter of evidence dependent on the circumstances of the case).  This does not mean the court must accept a defendant’s assertion no matter how improbable.  A defendant must therefore provide convincing evidence.  How much evidence is required must depend on the circumstances of the particular case.  See Bank of China (Hong Kong) Ltd v Cheung Keung Fung [2007] 1 HKLRD 462 at §§32-34 and Hong Kong Civil Procedure 2016, §10/1/13. 

8. Where a default judgment has been entered regularly, the power to set aside the same is discretionary and such power is unconditional.  The defendant carries the burden to show that he has a real prospect of success.  To do so, he must satisfy the court that his case and the evidence that he adduces in support of it is potentially credible and carries some degree of conviction.  That is not to say that a defendant who is able to demonstrate a defence which has a real prospect of success has an automatic entitlement to the default judgment set aside.  In exercising its discretion, the court will have regard to all relevant circumstances.  See: Hong Kong Civil Procedure 2016, §§13/9/12-14.

9. Where the ultimate outcome would depend on whose evidence is likely to be accepted and no provisional view of the probable outcome of the action can sensibly be formed without a trial, the appropriate test suggested is to ask whether the defence “could well be established” at trial and if the defendant’s version could well be believed at trial, the defence has a “real prospect of success”.  See El Vince Ltd v Wu Wen Sheng [2001] 3 HKLRD 445 at §25.

10. The court may set aside a regular judgment on terms. If a condition is imposed, however, it should be one with which the defendant can reasonably comply or else it would be tantamount to giving judgment for the plaintiff notwithstanding the court’s opinion that there was an issue or question which ought to be tried.   See: Hong Kong Civil Procedure 2016, §§13/9/15.

Whether the Default Judgment was a regular judgment or an irregular one

11. To prove due service of the writ, the plaintiff filed an affirmation of Chan Kwok Fai (“Chan”), clerk to Messrs Joseph Leung & Associates in which Chan deposed that he served the writ by inserting the same through the letter box for the usual and last known address of the defendant at “2A Chuk Yuen Village Hop Hing Road No. 500 Pat Sha Village Yuen Long New Territories” (“Served Address”).

12. There is no dispute that the Served Address in fact comprises two separate addresses, namely, 2A Chuk Yuen Village, Hop Hing Road, Ta Kwu Ling (“2A Address”) and No. 500 Pat Sha Village, Yuen Long (“No. 500 Address”). 

13. The fact is that the defendant’s address as per the business registrations of his company from 2006 to 2015 was “2A Chuk Yuen Village Hop Hing Rd c/o 500 Pat Sha Village Yuen Long NT” (“Registered Business Address”).  One will note that the “c/o” (or “care of”) is missing from the Served Address.

14. The defendant says the 2A Address used to be his father’s business address.  On taking over the business about 10 years ago, however, he “added” the No. 500 Address, which is his residential address, to the business registration of the company as a correspondence address due to the fact that the 2A Address, which is said to be around 40 minutes driving distance from the No. 500 Address, is hard to locate.  By his email of 5 May 2013, the defendant provided to Ms Maranda Cheung of the plaintiff the No. 500 Address as his mailing address.  That being so, even if Chan indeed managed to locate the correct 2A Address in Ta Kwu Ling, that was not his usual and/or last known address.

15. The defendant has also pointed out that there is a Chuk Yuen Village near San Tam Road and suggested that Chan might well have served the writ thereat rather than either of the addresses comprised in the Served Address. 

16. As I see it, Messrs Joseph Leung & Associates must have been aware of the existence of the two addresses as their letter dated 15 July 2014 sent to the defendant by ordinary post was addressed to both the Registered Business Address and the No. 500 Address.

17. That said, it is not immediately clear from Chan’s affirmation as to whether Chan himself was actually aware of the fact that the Served Address comprises two addresses at different locations when Mr Joseph Leung (“Leung”) has not deposed as to whether Chan was told or otherwise reminded of there being the two addresses.  Chan’s knowledge, however, cannot be ascertained with him personally because, according to the affirmation of Leung, Chan is no longer under the employ of Messrs Joseph Leung & Associates and no contact can be made with him. 

18. Leung has nonetheless deposed that he verily believes the writ had actually been served to the No. 500 Address “because on or about 5 August 2014, Mr. Chan reported to me…that he had been to Pat Sha Village in Yuen Long to serve the Writ of Summons to the Defendant…I am certain that Mr. Chan did not report to me in any way that he had served the Writ to ‘Chuk Yuen Village in Yuen Long’ as alleged by the Defendant in paragraph 44 of his Affirmation.”

19. Mr Law, counsel for the plaintiff, submits that the Served Address is not a wrong address but is one that consists of two accurate addresses of the defendant, namely, the 2A Address and the No. 500 Address.  Since “c/o” signifies an intermediary (the No. 500 Address here) for transfer of any mail to the final address (the 2A Address here), he submits, it is very unlikely for any reasonable man, a delivery clerk in particular, to have been so confused as to think the two addresses represent one single location.  He also highlights the solicitors’ knowledge of there being two addresses as revealed by their letter of 15 July 2014 as aforesaid. 

20. The main plank of Mr Law’s argument is that from the affirmation of Leung, it is clear that Chan knew the defendant’s address was in Pat Sha Village, Yuen Long and that Chan did not go to “Chuk Yuen Village in Yuen Long”.  In this regard, Mr Law highlights the fact that Leung’s evidence is direct instead of hearsay evidence as to Chan’s knowledge about the Pat Sha Village Yuen Long address.  He goes on to submit that it is inherently improbable for Chan to have deliberately served the writ on a wrong address and lied to Leung his principal.

21. Able as Mr Law’s argument may be, however, the fact remains that Leung’s evidence is indeed hearsay evidence insofar as the same is tendered as evidence to prove that Chan had in fact served the writ at the No. 500 Address.  When compared to the direct evidence of the defendant himself as to his lack of notice of the writ, such hearsay evidence can hardly carry more weight. 

22. More importantly, Leung’s belief about due service having been effected at the No. 500 Address is premised on Chan’s report to him that he had been to Pat Sha Village in Yuen Long to serve the writ to the defendant.  Such loose reference to geographical location must be considered in light of Chan’s direct evidence by way of affirmation that he inserted the writ into the letter box at the Served Address which he had indisputably presented as one single address without “c/o” in between.  Without Chan’s clarification, there is no way one can be sure if Chan had in fact inserted the writ into the letter box at the No. 500 Address. 

23. In the circumstances, Chan’s affirmation together with Leung’s evidence would hardly suffice to discredit the defendant’s denial of having been served with the writ so as to enable the court to disbelieve him.  As the evidence from both parties now stands, I can hardly find anything to cast any serious doubt on the defendant’s denial of having notice of the writ so as to disbelieve him. 

24. In this connection, I share Ms Cheung’s observation that the defendant has a money claim against the plaintiff in relation to rental arrears of not an insignificant amount and would not have done nothing at all if he had actually received or otherwise had notice of the writ.

25. As a fallback argument, Mr Law submits that insertion of the writ into the letter box of the 2A Address would nonetheless be good service under Order 10, rules 1(2)(b) and 1(3), Rules of the District Court because the defendant has only said he “added” the No. 500 Address to the business registrations of his company without asserting that he no long owned or had access to the 2A Address.  Furthermore, the addition of the No. 500 Address as an intermediary address does not exclude the 2A Address from being a usual and last known address of the defendant.

26. This fallback argument must be rejected.  It is the defendant’s uncontroverted evidence that he has since 2006 been using his residence at the No. 500 Address as his correspondence address, which was made known to the plaintiff as early as May 2013. 

27. The “addition” by the defendant of the No. 500 Address to the business registrations was done by presenting the same address as a “care of” address.  For all practical purposes, the defendant has made known to the whole world that it is the No. 500 Address but not the 2A Address where the defendant could be reached or to which all correspondence should be directed.  Otherwise, the whole exercise would have served no meaningful purposes. 

28. In any event, that both the 2A Address and the No. 500 Address have continued to be featured in the business registrations is neither here nor there when the test is whether the writ had been brought to the defendant’s notice and not whether it had been delivered to the defendant’s last known address.  Nor does the defendant’s access, if any, to the 2A Address matter for the present purpose when the evidence clearly points to the defendant having all along used the No. 500 Address as correspondence/mailing address on top of its original function as his residence.

29. More importantly, without Chan’s clarification, one can only make assumptions but will never be sure as to which letter box Chan had in fact inserted the writ into.  Given the serious consequence of a default judgment to the defendant whom I am satisfied is clearly minded to defend the plaintiff’s claim independently of his potential counterclaim for rental arrears, the court should not base its decision on assumptions.

30. Nor do I think the fact that the Notice of Appointment for Assessment of Damages sent by ordinary post to the Served Address managed to reach the defendant assists the plaintiff’s case here.  As Ms Cheung, counsel for the defendant submits, and I agree, this can be accounted for by the fact that the said notice was delivered by a different person and that the postmen might stand a chance of being more familiar with the area.

31. As to the defendant’s suggestion that Chan might well have served the writ at Chuk Yuen Village near San Tam Road rather than either of the addresses comprised in the Served Address, I agree with Mr Law that this is pure conjecture and see no need to deal with the same given my finding above.

Conclusion

32. In light of the above, it is my conclusion that service of the writ herein was bad and ineffective and the Default Judgment is irregular.  That being so, the merits of the intended defence need not be considered.

33. The Default Judgment is accordingly set aside.  So is the Notice of Appointment for Assessment of Damages.  The defendant do have leave to file and serve an acknowledgement of service of writ duly giving notice of his intention to defend within 14 days from the date hereof.  The costs of and occasioned by the Default Judgment, the enforcement thereof and the summons to set aside the same are to be paid by the plaintiff to the defendant with certificate for counsel.