CHAN LAP SHUN v. CHENG SHING AND ANOTHER

HCMP 185/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 185 OF 2012

(ON AN INTENDED APPEAL FROM DCCJ NO 4449 OF 2009)

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DECISION

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Hon Kwan JA (giving the decision of the Court):

1. This is an application for leave to appeal against the decision of Deputy District Judge Rebecca Lee made on 15 November 2011 in which she dismissed the plaintiff’s application to extend the validity of the writ of summons in DCCJ 4449/2009. The plaintiff applied for leave to appeal to the Court of Appeal relying on new evidence he sought to adduce. The judge refused leave to appeal in a judgment handed down on 18 January 2012.

2. The plaintiff renewed his application for leave to appeal by filing his application to this court on 1 February 2012, supported by his affirmation to exhibit the new evidence that he sought to adduce on appeal and the submissions of his counsel, Mr Kevin Poon. The opposite party, Cheng Shing (“Cheng”; the first-named defendant in the proceedings below), filed a statement of opposition to the plaintiff’s application, settled by his counsel Mr Kam Cheung.

3. Pursuant to the powers of this court under Order 59 rule 2A(5)(a) of the Rules of the High Court, this application is determined on the basis of the documents in support and the statement in opposition filed by the parties without an oral hearing. 

4. Under section 63A(2) of the District Court Ordinance, Cap. 336, leave to appeal to the Court of Appeal shall not be granted unless the Court of Appeal is satisfied that the appeal has a reasonable prospect of success, or that there is some other reason in the interests of justice why the appeal should be heard. Reasonable prospect of success involves the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”.

5. As the decision being the subject of the intended appeal involves an exercise of discretion by the judge, it is on very limited grounds, which are well established, that an appellate court will be justified to interfere with the exercise of such discretion (Kleinwort Benson Ltd v Barbrak Ltd, The Myrto (No 3) [1987] 1 AC 597 at 623C).

6. For the reasons given below, I find the exercise of the judge’s discretion impeccable and the new evidence sought to be adduced by the plaintiff does not alter the position at all. I will endeavour to deal with this succinctly as I am in agreement with the two judgments given by the judge on 15 November 2011 and 18 January 2012 as to the analysis of the evidence before the court and the law.

Background

7. The relevant background matters may be stated as follows.

8. The plaintiff’s claim is for a dishonoured cheque of $850,000 drawn by Cheng and Chan Lap Wah, both formerly trading as Yiu Wing Trading Co. Chan Lap Wah is the plaintiff’s brother. The cheque, dated 27 December 2003, was dishonoured when presented for payment on 29 April 2004. The plaintiff issued the writ against both drawers of the cheque only on 13 October 2009. The writ was served on Cheng on 15 October 2009 by inserting the same through the letter box of an address in Kam Wah Building, Cheung Sha Wan Road, Kowloon (“the Cheung Sha Wan Flat”). The process server deposed that the Cheung Sha Wan Flat “is the usual and last known address” of Cheng and that in the opinion of the plaintiff this method of service of the writ would have come to the knowledge of Cheng within seven days thereafter.

9. On 2 December 2009, the plaintiff entered default judgment against Cheng on the basis that he did not give notice of intention to defend.

10. Cheng filed a summons on 19 August 2011 to set aside the default judgment on the grounds of irregularity and on the merits. In his supporting affirmation, he deposed that:

(1)  Yiu Wing Trading Co ceased business on 30 August 2000 according to the records of business registration;

(2)  he sold the Cheung Sha Wan Flat on 27 August 2003 according to the land search record of this property;

(3)  since 2003, he had moved to Mainland China with his family. According to the travel records of the Hong Kong Immigration Department from 1 January 2003 to 8 August 2011, he was in Hong Kong for two days in 2003, three days in 2004, one day in 2008 and one day in 2011. During 5 December 2008 to 8 August 2011, he had not returned to Hong Kong at all;

(4)  he did not receive the writ served by insertion through the letter box of the Cheung Sha Wan Flat and he first became aware of the action in DCCJ 4449/2009 when he received a summons in early August 2011 from the Zhongshan City First People’s Court dated 2 August 2011 in which the plaintiff brought proceedings against him and Chan Lap Wah based on the dishonoured cheque and the judgment obtained in the Hong Kong court.

11. On the travel records of Cheng, it is clear that the service of the writ by insertion through the letter box on 15 October 2009 was not in compliance with Order 10 rule 1(2) of the Rules of the District Court, as he was not within the jurisdiction at the time.

12. The plaintiff filed an affirmation to oppose Cheng’s application to set aside the default judgment. In respect of Cheng’s assertion in paragraph 8 of his affirmation (that he left Hong Kong since 2003 and moved to Mainland China with his family, that he only returned to Hong Kong occasionally and for a short period on each occasion, and that he never returned to Hong Kong from 5 December 2008 to 8 August 2011), the plaintiff said he has “no personal knowledge of the matters stated therein”.

13. At the hearing of the application to set aside the default judgment on 19 October 2011 before the judge, the plaintiff consented to an order to set aside the judgment with costs to Cheng. The judgment was clearly irregular and Cheng is entitled to have it set aside.

14. The day before the hearing, the plaintiff issued a summons on 18 October 2011 returnable before the judge for an order that the validity of the writ be extended to 26 October 2011 and that service of the renewed writ of summons on Cheng be dispensed with. This summons was issued under Order 6 rule 8 and was supported by the plaintiff’s affirmation of 18 October. In his supporting affirmation, the plaintiff merely asserted that the writ has been “properly served” on Cheng at his last known address on 15 October 2009 and was “in accordance with the Court’s rules and procedures governing the service of the same”.

The judgment below

15. It is common ground that the writ, which had expired more than two years ago on 13 October 2010, is not amenable to extension under Order 6 rule 8(2). Hence, the plaintiff relied on Order 2 rule 1 and Order 3 rule 5 to ask the court to exercise its discretion to extend the validity of the writ.

16. The judge approached the application on the basis that she would not exercise her discretion under Order 2 rule 1 and Order 3 rule 5 more favourably to the plaintiff than under Order 6 rule 8, and that the strictures imposed on the court’s discretion under Order 6 rule 8 are not to be ignored, as the plaintiff should not be allowed to enter through the back door of Order 2 rule 1 and Order 3 rule 5 if he cannot properly enter through the front door of Order 6 rule 8. This is no doubt correct (Leal v Dunlop Bio-Processes International Ltd [1984] 1 WLR 874 at 885C to D; Dixon v Grand Hyatt Hong Kong Co Ltd & Anr [1994] 2 HKC 489 at 499H to 501A; Tan Kah Eng v Tan Eng Khiam [2011] HKEC 371 at paras 39 to 41, and on appeal [2012] 1 HKLRD 329 at paras 39 and 40). 

17. It is not in dispute that by the time the plaintiff’s summons to extend the validity of the writ was taken out, the writ had expired for over two years and Cheng has an accrued right of limitation to the plaintiff’s claim, making this a category (3) case as considered by Lord Brandon in The Myrto (No 3), supra at 616A to C. That being the case, for the court to exercise its discretion to grant an extension in his favour, the plaintiff is required to show good cause or good reason and must also give a satisfactory explanation for his failure to apply for extension before the validity of the writ expired (The Myrto (No 3), supra at 622G to 623B). The discretion to extend the validity of a writ does not arise unless the plaintiff first establishes matters amounting to good reason for extension or at least capable of so amounting. Matters such as the balance of hardship only fall to be considered if the discretion to extend arises in the first place (Chow Ching Man & Ors v Sun Wah Ornament Manufactory Ltd & Ors [1996] 2 HKLR 338 at 341B to C).

18. The two affirmations filed by the plaintiff to oppose the setting aside of the default judgment and in support of his application to extend the validity of the writ did not disclose any good reason why the discretion should be exercised in his favour. Nor did he furnish any explanation, let alone a satisfactory one, for his failure to apply for extension before the validity of the writ expired. He had merely asserted, incorrectly, that the writ was properly served on Cheng. It is incumbent on him to depose to all the circumstances relied on and give a full explanation why the writ has not already been served (Hong Kong Civil Procedure 2012, vol 1, para 6/8/8). The plaintiff’s affirmations are plainly not in compliance with the requirements.

19. Counsel who appeared for the plaintiff at the time sought to make up for the deficiency in evidence by submissions. It was contended that the plaintiff had “good reason” to believe Cheng was properly served on the Cheung Sha Wan Flat as Cheng’s usual and last known address in Hong Kong and that the plaintiff had only learnt on 19 August 2011 when Cheng served his affirmation to set aside the default judgment that Cheng was out of the jurisdiction at the time of service of the writ. Counsel argued that the plaintiff had no notice or knowledge Cheng was out of the jurisdiction within the limitation period.

20. It is not surprising that on the evidence before the court the judge was not satisfied the first time the plaintiff learnt that Cheng was outside the jurisdiction was when he received Cheng’s travel records as provided by the Immigration Department exhibited to Cheng’s affirmation of 19 August 2011. The judge formed the view that the plaintiff could not simply assume without verification that Cheng was properly served with the writ and just let time run its course. According to the plaintiff’s affirmation to oppose the setting aside of the default judgment, he knew that his brother and Cheng had set up a fabric business in Zhongshan as early as 1997, and exhibited to his affirmation a judgment in a civil litigation between his brother and Cheng in 2004 in which an address in Zhongshan was given as Cheng’s residential address. Further, a land search of the Cheung Sha Wan Flat would have shown that this property was sold in August 2003 and a business registration search would have revealed that Yiu Wing Trading Co had ceased to exist since August 2000. On the travel records of Cheng, the judge held that the plaintiff should have applied under Order 11 rule 1 to serve the writ on Cheng in the Mainland.

21. I should mention that according to the pleading filed by the plaintiff dated 11 July 2011 against Cheng in the Zhongshan City First People’s Court, it was stated that as Cheng has no assets in Hong Kong, the plaintiff has not been able to enforce the default judgment against Cheng in Hong Kong in December 2009. This would appear to indicate that the plaintiff has knowledge the Cheung Sha Wan Property had been sold by Cheng. It is not known when this came to the plaintiff’s knowledge but the certificates signed by the plaintiff’s solicitors for the purpose of the proceedings in Zhongshan were dated 12 May 2011. The pleading also stated that on 11 July 2011, the plaintiff ascertained from the Land Resources Bureau (國土資源局) of Zhongshan City that Zheng held three properties in that city, owning a half share in two of the properties.

22. The submission that the plaintiff only learnt in August 2011 that Cheng was outside the jurisdiction is rightly rejected by the judge.

23. The judge held on the evidence the plaintiff has failed to show good reason for the renewal of the writ, nor did he give satisfactory explanation for his failure to apply for renewal before the validity of the writ expired. She formed the view that the writ was served on the Cheung Sha Wan Flat by reason of subjective knowledge on the plaintiff’s part without verification, when the plaintiff clearly had knowledge or at least suspicion that Cheng might be out of the jurisdiction. The judge did not find it necessary to embark on weighing the balance of hardship or prejudice on both sides but indicated that she would have exercised her discretion in Cheng’s favour as he would be deprived of an accrued limitation defence if the validity of the writ had been extended. For completeness sake, she mentioned that there were no exceptional circumstances as in Bank of China (Hong Kong) Ltd v Chen Jianren [2009] 3 HKLRD 163 which warranted the exercise of discretion in the plaintiff’s favour, as the plaintiff had not made good and reasonable efforts to serve the writ on Cheng and unlike the defendant in Chen Jianren, Cheng has an accrued limitation defence.

24. On the evidence available to the judge at the time of the hearing, there is no basis for the appeal court to interfere with the exercise of her discretion in refusing to extend the validity of the writ.

The new evidence

25. What happened was that after the judge gave judgment on 15 November 2011 dismissing the plaintiff’s application to extend the validity of the writ and to dispense with service of the writ on Cheng, Cheng lodged a statement of appeal dated 21 November 2011 in the court in Zhongshan in which he gave the Cheung Sha Wan Flat as his address in Hong Kong and asserted that the court in Zhongshan should have no jurisdiction over the claim brought by the plaintiff against him as he is a Hong Kong resident and his usual residence is not in Zhongshan. He claimed that the properties in Zhongshan held by him are just commercial properties held as investment.

26. The plaintiff sought leave to adduce Cheng’s statement of appeal in this intended appeal against the judge’s dismissal of his summons to extend the validity of the writ. Mr Poon submitted this comes within the exception of “evidence as to matters which have occurred after the date of the trial or hearing” in Order 59 rule 10(2). In order not to disturb the principle there should be finality in litigation, for such evidence to be admitted, the court has to be satisfied that the change such further evidence seeks to show must substantially affect a basic assumption made at the hearing and the matter is one of degree (Hong Kong Civil Procedure 2012, vol 1, para 59/10/13).

27. Mr Poon contended that the new evidence showed the judge was wrong in her findings. The fact that Cheng still used the Cheung Sha Wan Flat as his address in his statement of appeal filed in November 2011 showed that the sale of this property in 2003 is of no relevance. The new evidence demonstrated that Cheng could still be reached at the Cheung Sha Wan Flat and this address could be “an address for the purpose of service for the legal proceedings in Hong Kong”. Mr Poon submitted that in the light of the new evidence, the judge was wrong to find that the writ did not come to the knowledge of Cheng when it was served by insertion through the letter box of the Cheung Sha Wan Flat. He argued that this new evidence has significant impact on whether the plaintiff could show good reason for extension of the writ and is satisfactory explanation for the plaintiff’s failure to apply for renewal before the validity of the writ expired. The new evidence also undermined seriously Cheng’s credibility and showed him to be untruthful and evasive. In the light of the new evidence, Mr Poon contended that the judge was wrong to hold the plaintiff should have applied under Order 11 rule 1 to serve the writ on Cheng in Zhongshan. He further submitted the judge was wrong to find that the plaintiff had knowledge of Cheng’s address in Zhongshan.

28. I am not persuaded the new evidence would have affected any basic assumption for the judge’s finding that the plaintiff has failed to show good reason for the extension of the writ or to provide a satisfactory explanation for his failure to apply for extension before the expiry of the writ. The fact remains that service of the writ at the Cheung Sha Wan Flat would not be proper service and that leave to serve Cheng out of the jurisdiction is required, as Cheng was not and is not residing within the jurisdiction, as borne out by the official travel records. Whatever Cheng has asserted in the proceedings in Zhongshan does not alter the fact that during 2003 to August 2011, he was not residing in Hong Kong. Service of the writ at the Cheung Sha Wan Flat could not be effected by post or by insertion through the letter box under Order 10 rule 1(2) as Cheng was not within the jurisdiction. Whether Cheng would have known of the writ served at the Cheung Sha Wan Flat is wholly immaterial. The subsequent assertion by Cheng in the Zhongshan proceedings regarding his usual residence does not alter the fact that the writ was served at the Cheung Sha Wan Flat without verification and that the plaintiff had not made good and reasonable efforts to serve the writ on Cheng. Even if Cheng’s subsequent assertion is suspicious, if not dishonest, as stated by the judge in the judgment on 18 January 2012, the new evidence does not substantially affect the basic assumption at the hearing that the plaintiff had failed to do proper investigation before service of the writ and did not substantiate his belief that the Cheung Sha Wan Flat was Cheng’s last known and usual address.

29. I agree with the judge that the new evidence is unlikely to be admitted in the intended appeal and that the appeal does not have a reasonable prospect of success, nor is there any other reason in the interests of justice why the appeal should be heard.

Conclusion and orders

30. For the above reasons, I would dismiss the application for leave to appeal to the Court of Appeal. As the application is entirely without merit, I would make a further order pursuant to Order 59 rule 2A(8) that no party may under rule 2A(7) request the determination to be reconsidered at an oral hearing inter partes.

31. I would make an order nisi that the plaintiff is to pay Cheng’s costs of this application, to be assessed on a gross sum basis. For the purpose of a gross sum assessment, I would direct Cheng’s solicitors to submit a skeleton bill within 14 days hereof and that the plaintiff do have leave to respond within 7 days thereafter.

Mr Kevin Poon, instructed by Messrs J Chan & Lai, for the plaintiff (applicant)

Mr Kam Cheung, instructed by Messrs Winnie Leung & Co, for the first-named defendant (respondent)