SUN CRYSTAL LTD v. THE INCORPORATED OWNERS OF FENG FONG BUILDING AND ANOTHER

LDBM 184/2015

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 184 OF 2015

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D E C I S I O N

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Undisputed or Indisputable Background

1.  The applicant is the registered owner of 33 out of the 43 units of the building known as Feng Fong Building (“the Building”), representing 9.1% of the owners of the Building.  The 1^st respondent is the Incorporated Owners of the Building (“IO”) whilst the 2^nd respondent, being the owner of Unit B, 4^th Floor of the Building (“the Premises”), was the chairman of the management committee of the IO in 2015.  Mr Ng Kar Yuen (“Mr Ng”) of the applicant was the secretary of the management committee of the IO at the material time.

2.  By a letter dated 8 January 2015, the applicant made a written request to the 2^nd respondent (“Written Request”), pursuant to paragraph 1(2) Schedule 3 of the Building Management Ordinance (“BMO”), to convene an owners’ meeting for the purpose of removing the existing members of the management committee and re-elect the same.

3.  The Written Request was being served on 9 January 2015 by way of :

a.   Ordinary postage to the IO, the 2^nd respondent, the vice-chairman and members of the management committee at their address at the Building;

b.   Posting up on the notice board of the IO at the ground floor of the Building; and

c.   Inserting into the letter box of the 2^nd respondent, the vice-chairman and member of the management committee at the Building. 

4.  Since no owners’ meeting had been convened by the 2^nd respondent, the applicant filed the Notice of Application (“NOA”) in this case at the Lands Tribunal on 15 July 2015 against the IO and the 2^nd respondent.  The NOA was being served on the 2^nd respondent by ordinary post to the Premises and to the IO at its registered address.  Certificated of Posting was produced as evidence in support.

5.  Neither of the respondents had filed any Notice of Opposition with the Tribunal within the time specified in law.  At the hearing on 4 September 2015, directions were given for the case to proceed to trial and for witness statements to be filed by the applicant.  The order dated 4 September 2015 as well as the witness statement was being served on the 2^nd respondent by ordinary post to the Premises.

6.  At the hearing on 20 October 2015, this Tribunal made the following orders (“the Default Judgment”):

(1)   Leave granted for the applicant to discontinue the application against the 1^st respondent with no order as to costs;

(2)   The 2^nd respondent do convene an owners’ meeting within 14 days after this order is being served and to hold the meeting within 45 days;

(3)   Penal notice to be endorsed;

(4)   The 2^nd respondent do pay the applicant costs of this Application to be assessed at District Court scale if not agreed.

7.  On 6 November 2015, a sealed copy of the Default Judgment was personally served on the 2^nd respondent at his business address (“Business Address”).

8.  On 30 November 2015, the 2^nd respondent issued the notice of meeting for an owners’ meeting to be held on 20 December 2015 and the owners’ meeting was duly held with the resolutions suggested in the Written Request being dealt with.

9.  On 2 December 2015, the 2^nd respondent filed an interlocutory application with the Lands Tribunal asking for :

(1)   The Default Judgment be set aside;

(2)   Unconditional leave for the 2^nd respondent to file and serve the Notice of Opposition;

(3)   Stay of execution of the Default Judgment; and

(4)   Costs of and occasioned by this application be to the 2^nd respondent.

10.  This is the hearing of the application by the 2^nd respondent for the setting aside of the Default Judgment.

The Law on Setting Aside a Default Judgment

11.  There is no argument on the legal principles applicable to an application for setting aside a default judgment.  In an application to set aside a default judgment, the test is whether the judgment was regular or irregular.  If the judgment is irregular, the Hong Kong position is that such judgment is to be set aside as of right (Po Kwong Marble Factory Ltd v Wah Yee Decoration Co. Ltd. [1996] 4 HKC 157). If the judgment is regular, the merit of the defence needs to be examined and the defaulting party has to show that his case and the evidence adduced in support is potentially credible and carries some degree of conviction (Premier Fashion Wears Ltd v Lee Hing Chung [1994] 1 HKC 213, 219). 

12.  In Bank of China (Hong Kong) Limited v Cheung King Fung [2007] 1 HKLRD 462, the Court of Appeal found that in an application to set aside default judgment, the burden is on the defaulting party to prove that the judgment was irregular by convincing evidence. Whether such a burden of proof is discharged is a matter of evidence.

13.  Hong Kong Civil Procedure 2016 (at para.13/9/5 at p.242) states inter alia as follows :

“When 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: see Wei Bingqing v. Xie Diangrong, unreported, HCA No. 2654 of 2003, [2006] H.K.E.C. 634).”

Regular Judgment?

14.  It is the contention of the 2^nd respondent that the Default Judgment is an irregular judgment in the sense that the 2^nd respondent had never received the NOA through postage since the 2^nd respondent had not been living at the Premises since about October 2014, hence the NOA has not been brought to his attention.  In support of such contention, the 2^nd respondent produced the electricity bills for the Premises between June 2014 to March 2015 to show that the electricity consumption per month had dropped significantly from the range of 800 to 1000 units in the earlier months to only around 100 units or even less starting from about November 2014.  Relying on the case of Sinokawa Investment (Holdings) Ltd & Another v Li Chun [2006] 3 HKLRD 441, counsel for the 2^nd respondent submitted that the electricity bills are cogent evidence showing that the 2^nd respondent was not residing at the Premises and the Premises has remained vacant since about October or November 2014.

15.  It is also the evidence of the 2^nd respondent that he had never received any documents relating to the compulsory sale proceedings taken out by the applicant that had been purportedly been sent to the Premises by ordinary post as well.  He said he could manage to answer to the compulsory sale proceedings because his fellow neighbours who were the other respondents in the same proceedings told him about the application.  Counsel for the 2^nd respondent submitted that the circumstances under which the 2^nd respondent learned about the compulsory sale proceedings are wholly different and are inapplicable herein by analogy.

16.  Upon careful consideration of the affidavit evidence as well as submissions, I found the 2^nd respondent has failed to discharge the burden of proof that he did not have notice of the NOA.

17.  I do not accept that the electricity bills produced by the 2^nd respondent can be considered cogent evidence to show that he was not residing at the Premises at the material time.  I agree with the observation by counsel for the applicant that the bills did not cover the period when the NOA was being served.  The NOA was being served in July 2015 but the electricity bills only covered a time before March 2015.  If the 2^nd respondent is relying on the electricity bills to prove his case, why can’t he produce the bills at the material time but chose to produce the bills months before.  There is no plausible explanation offered from the 2^nd respondent. 

18.  In any event, the electricity bills did show there was still consumption at the Premises, albeit a decrease in the readings.  This is inconsistent with the fact that the 2^nd respondent was not residing at the Premises and the Premises was remained vacant.  It is not the 2^nd respondent’s case that there was someone other than him still residing at the Premises to explain why there was still monthly consumption of electricity at the Premises.

19.  Furthermore, it is the evidence of the 2^nd respondent that he did go back to the Premises at infrequent intervals after October 2014 and did check on the letter box.  And he had in fact been back and checked on the letter box in August 2015 but had not seen the NOA.  There is no evidence from the 2^nd respondent that there had been occasions where letters had gone missing from the letter box before this incident.  It is utterly incredible that only the legal documents for this case (and also for the compulsory sale case) had not reached the 2^nd respondent.

20.  In his submission, counsel for the 2^nd respondent submitted that the affirmation of service filed for and on behalf of the applicant (B/23-24) failed to show that the NOA sent by post is “not returned by the post office” to be in line with the requirement under Para. 65/5/4 of Hong Kong Civil Procedure 2016.  Given the content of the affirmation of service is incomplete by only stating the fact that the document was being sent by ordinary post to the Premises, the applicant had failed to adduce prima facie evidence that the NOA has been duly delivered in the ordinary course of postage.

21.  This is an attack on the content of the affidavit of service filed upon service of the NOA by ordinary post.  Order 10 rule 1(3)(b) of the Rules of High Court (“RHC”) which stipulated the requirement of an affidavit proving due service as follows :

“(b)   any affidavit proving due service of the writ must contain a statement to the effect that -

(i)   ...

(ii)   in the case of service by post, the copy of the writ has not been returned to the plaintiff through the post undelivered to the addressee.”

22.  However, the Lands Tribunal Rules (“LTR”) has its own provision as far as affidavit of service is concerned.  Under Rule 10 LTR, it says :

“Where service of notice of an application is effected under rule 7, ... the party required to effect such service shall, within 3 days of service, file with the registrar an affidavit or affirmation of service in accordance with Form 30, unless the party so served has filed with the registrar a notice of opposition to the application.”

One can see from the Form 30 shown in the LTR that there is no requirement similar to the one under O.10 RHC about the confirmation of no returned postage.  The affirmation prepared in this case is by and large in line with the format of Form 30. 

23.  I am satisfied that the affirmation of service filed in this case by the applicant is in line with the requirement under Rule 10 LTR.

24.  And according to Rule 7(2) LTR, “where service of a document is effected by ordinary post such service, unless the contrary is proved, shall be deemed to have been effected at the time at which the document would be delivered in the ordinary course of post” (emphasis added).  With such deeming provision, unless the 2^nd respondent proved to the contrary, there is prima facie evidence to show that the NOA had been served on him.  Since it is the findings of this Tribunal that the 2^nd respondent has failed to establish that he did not receive the NOA, it must be deemed that the service of the NOA had been effected in the ordinary course of post.

25.  It is also the submission of the counsel for the 2^nd respondent that since the 2^nd respondent had once gave his name card to the applicant showing the address of his Business Address when they first met, and the applicant can manage to find the Business Address of the 2^nd respondent in serving the Default Judgment, the applicant “certainly could (and arguably should) have at least tried to effect service of documents at his clinic or resort to alternative ways to get in contact with R2 at a much earlier stage” (at §18 of Written Submission).  I found this is a misconceived contention.  There is nothing to show that the applicant was well aware of the fact that the 2^nd respondent was no longer residing at the Premises and it can no longer be the last known address of the 2^nd respondent.  The 2^nd respondent being the chairman of the IO, should be duty bound to alert the other members of the IO of the fact that he was no longer living at the Premises and his other means of contact.  There is no evidence that the 2^nd respondent had alerted anyone of the IO.

26.  Even if the applicant was aware of the Business Address of the 2^nd respondent at the time of the service of the NOA, there is nothing to stop the applicant in serving the NOA at the Premises which, as far as the applicant is concerned, was the last known address of the 2^nd respondent.  To require the applicant to serve the NOA on the Business Address of the 2^nd respondent or to find out the Business Address of the 2^nd respondent is imposing on the applicant a burden not in line with the requirement under Rule 7 LTR.

27.  I find the NOA was properly served on the 2^nd respondent and the Default Judgment was a regular judgment.

Meritorious Defence

28.  I found the 2^nd respondent had failed to raise a meritorious defence in the sense that the evidence adduced in support is potentially credible and carries some degree of conviction.

29.  The defence raised by the 2^nd respondent is that :

a.   He had moved out from the Premises and denied receiving or otherwise having any knowledge of the Written Request;

b.   The applicant has not discharged the burden to prove due service of the Written Request on the evidence available;

c.   The service of the Written Request on the 1^st respondent served no real purpose since key to the letter box of the IO was kept by Mr Ng; and

d.   No logical reason why the applicant could not have looked for the address of his Business Address at an earlier opportunity and attempt to effect service of the Written Request.

30.  There is no requirement that the Written Request must be served on the chairman in person.  It is the findings of the Court of Appeal in Leung Ho Sing & others v Shum Yiu Tung & others (unrep., CACV 108/2006 21 July 2006) that :

“...I do not think that a request for the convening of a general meeting must be addressed and delivered personally to the chairman. It would be adequate if it is addressed to the Management Committee of which the chairman is a member, and delivered where it can reasonably be expected to reach him. Having said that, the prudent practice must be to deliver the request to the chairman personally ... and personal delivery would enable precise calculation of the deadline” (at §24).

31.  So, the consideration should be that the Written Request must be delivered to where it can reasonably be expected to reach the chairman.  In this case, there is no evidence that the applicant is aware of the fact that the 2^nd respondent was no longer living at the Premises nor had the 2^nd respondent told anyone of the IO about this.  In any event, it is my findings above that the 2^nd respondent had failed to establish that he was no longer living there.  By sending the Written Request to the Premises by post as well as by inserting into the letter box of the Premises, it must be reasonable to conclude that the Written Request can reasonably be expected to reach the 2^nd respondent.  The denial by the 2^nd respondent that he had not received the same is just a bare assertion without any evidence in support.  I found the applicant had discharged the burden of establishing that the Written Request had been served on the 2^nd respondent.

32.  I do accept that service of the Written Request on the IO in this case cannot be reasonably expected to reach the 2^nd respondent and cannot be considered an effective service.  But given the findings above, this means of service, though not effective, has no bearing on this case.  And if service of the Written Request on the Premises is expected to be effective, the 2^nd respondent cannot raise the defence that the applicant must look for his Business Address for the service of the Written Request.

33.  I found the 2^nd respondent had failed to establish a case that could well be believed at trial or that there is reasonable prospect that the intended defence would succeed and be accepted at trial.

Stay of Execution

34.  The 2^nd respondent asked for a stay of execution of the Default Judgment.

35.  With the application for setting aside of the Default Judgment being dismissed, there is no justification for a stay of the execution.

Conclusion

36.  Having considered all the arguments raised by the 2^nd respondent, I found the Default Judgment is a regular judgment and the 2^nd respondent has also failed to discharge the burden of showing a meritorious defence which had a real prospect of success. The Default Judgment should not be set aside and the application by the 2^nd respondent must be dismissed.

Costs

37.  Costs of this setting aside application be to the applicant, to be taxed at District Court scale if not agreed, with certificate for counsel.  This is a costs order nisi.  Unless any of the parties apply by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.