WONG YAN YAN AND ANOTHER v. HUI MAN FAN CINDY aka HUI MIU AND OTHERS

DCCJ 778/2021

[2024] HKDC 424

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 778 OF 2021

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BETWEEN

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REASONS FOR DECISION

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I. INTRODUCTION

1.  Before me was the 3^rd defendant’s summons (the “Summons”) to set aside default judgment entered against it on 3 June 2021 (the “Default Judgment”). The Summons (1) involved the question of when the change of the address of the registered office is regarded as effective for the purpose of service and (2) showed the importance of stating clearly whether the service is effected under Order 10 rule 1 or section 827 of the Companies Ordinance (Cap 622).

2.  At the end of the hearing this morning, I allowed the Summons and ordered that:-

(1) The Default Judgment be set aside.

(2) Leave be to the 3^rd defendant to file and serve defence and counterclaim, if any, within 28 days.

(3) Leave be to the plaintiffs to file and serve reply and defence to counterclaim, if any, within 28 days thereafter.

(4) There be no costs on the Summons.

3.  Here are my reasons.

4.  The procedural history and the plaintiffs’ claim have been set out in my decision handed down on 18 January 2024 [2024] HKDC 116 when I was dealing with the 1^st – 4^th defendants’ summons to dispute the Court’s jurisdiction. I shall not repeat the same here, and shall adopt the same abbreviations and definitions here. Suffice to say that the plaintiffs plead that the Representation was false and was fraudulently made, because Shenzhen Club No 2 had never been set up as represented. The plaintiffs further plead that the 1^st – 4^th defendants “acted in concert appearing to be running ordinary or actual business… did not set up ‘Shenzhen Club No 2’… with no intention to perform the Contracts…” . Based on these, paragraph 22 of the Statement of Claim pleads:-

“In breach of the 1^st defendant’s Representation (whether fraudulently or otherwise) and/or the Contracts, the 1^st, 2^nd, 3^rd and/or 4^th defendants had and received the plaintiffs’ said Total Sum without or without corresponding consideration or failed to return the said Total Sum to the plaintiffs.”

5.  The plaintiffs claim specifically for refund from “the 1^st, 2^nd, 3^rd and/or 4^th defendants” of the Total Sum.

II. GROUNDS IN SUPPORT OF THE SUMMONS

6.  In its affirmation in support of the Summons, the 3^rd defendant sets out the following grounds:-

(1) The service of the writ of summons was invalid because the address of the registered office had been changed on 10 February 2021 from Ricky Centre Address to Flat S, 18/F, Block 2 Goldfield Industrial Building, No 144 Tai Lin Pai Road, Tsuen Wan, NT (“Goldfield Address”), prior to the service at Ricky Centre Address on 24 February 2021. (“Service Ground”)

(2) The 3^rd defendant is not privy to the Contracts between the plaintiffs and the 2^nd defendant.

(3) The plaintiffs are not entitled to refund of the Total Sum because lack of distribution of dividends was not a total failure of consideration, given that there had been no profits and thus no dividends, and in such circumstances, failure to distribute dividends was not a total failure of consideration.

(4) The plaintiffs repudiated the Agreement by the notice of rescission issued on 19 June 2020.

7.  For the Service Ground, the issue was when the change of the address of the registered office from Ricky Centre Address to Goldfield Address became effective. If it became effective before the service, then the service would be irregular and I ought to set aside the Default Judgment, but if it became effective only after the service, the service is regular and I should then consider the merits of the defence.

8.  Section 658 of the Companies Ordinance (Cap 622) provides that:-

(1) “A company must have a registered office in Hong Kong to which all communications and notices may be addressed.

(2) The intended address of a company’s registered office stated in the incorporation form registered in respect of the company is to be regarded as the address of its registered office with effect from the date of its incorporation until a notice of change in respect of the address is delivered to the Registrar under subsection (3).

(3) If the address of a company’s registered office is changed, the company must deliver to the Registrar for registration a notice of the change in the specified form within 15 days after the change.” (emphases added)

9.  This means that the change of the address is only effective upon the notice of change is delivered to the Companies Registrar.

10.  In the present case, the notice of the change (Form NR1) was filed only on 1 March 2021, and the service of the writ was effected by way of ordinary post. However, it is not clear from the affirmation of service whether the service was effected pursuant to section 827 of the Companies Ordinance or Order 10 rule 1. The difference is this: if it is effected pursuant to the former, evidence would have to be produced to satisfy the Court as to when an ordinary post would have reached the address, and that time would be the date of effective service: see Hong Kong Civil Procedure 2024 Vol 1 para 10/1/18. If the service is effected pursuant to Order 10 rule 1, then the deeming provision under rule 1(3) that service is deemed effective within 7 days after the post would mean absent any evidence of earlier knowledge of the writ, the service would be deemed effective 7 days after the post.

11.  Here, the affirmation of service does not provide any evidence as to when the ordinary post would have reached the address. On the contrary, the affirmation of service specifically stated the affirmant’s opinion that the writ would have come to notice of the 3^rd defendant within 7 days after the post, which are wording along the line of Order 10 rule 1(3). Thus, in my view, the service was effected 7 days after the post on 24 February 2021, that is, 5 March 2021 (excluding Saturday and Sunday in-between: see Order 3 rule 2(4)). This was after the effective change of the address of the registered office by way of filing of Form NR1 on 1 March 2021. Thus, the service was irregular, and I ought to set aside the Default Judgment.

12.  For completeness sake, even assuming that the service was regular, I would still set aside the Default Judgment on merits. The plaintiffs’ claim against the 3^rd defendant appeared tenuous to me:-

(1) There were no particular as to how the 3^rd defendant “acted in concert” as pleaded, and the 1^st – 4^th defendants’ evidence that 許社輝 (being 監事 of the 3^rd defendant) was responsible for the entire negotiation process of the Contracts (as mentioned above) does not assist the plaintiffs, because (a) the negotiation process was irrelevant because not part of it was pleaded as related to any conspiracy or the 3^rd defendant acting in concert; and (b) the Contracts were eventually contracts between the plaintiffs and the 2^nd defendant only.

(2) It appeared groundless for the plaintiffs to claim against the 3^rd defendant for the refund of the Total Sum when the Total Sum was, even on the plaintiffs’ own case, received by the 1^st and 4^th defendants only. Here, I note that the claim against all the defendants, as appears in paragraphs 22 and 23 of the Statement of Claim, is the refund of the Total Sum, but not damages. Thus, even if I assume that the plaintiffs have a good case against the 3^rd defendant on conspiracy, the cause of action of conspiracy against the 3^rd defendant could only be damages, because the 3^rd defendant never received the Total Sum.

13.  Therefore, if the service were regular, I would be satisfied that there is a real prospect of success of the 3^rd defendant’s defence, and would still set aside the Default Judgment.

14.  In setting aside the Default Judgment, I was fully aware of the inordinate delay from the service (March 2021) until the Summons filed on 13 July 2023. The 1^st defendant, on behalf of the 3^rd defendant, alleged that the Default Judgment only came to notice on 1 March 2023 when a debt collection agent sent the 1^st defendant an image of the Default Judgment on 24 February 2023 whereupon the 1^st defendant instructed solicitors to search the court file and obtain the Default Judgment on 1 March 2023. However, back on 21 June 2021, the plaintiffs’ solicitors delivered by hand a demand letter against the 3^rd defendant to the Goldfield Address with a copy of the Default Judgment attached to it, and that demand letter was received by a man coming out of the office telling the serving clerk that the responsible person of the 3^rd defendant was not in office and he would tell the responsible person afterwards. That man also signed on a copy of the said letter to acknowledge receipt. There is no traverse from the 3^rd defendant about this receipt. On balance, in my view, the 3^rd defendant had notice of the Default Judgment in June 2021.

15.  At the hearing, the representative of the 3^rd defendant explained that she was not in Hong Kong during that time and the two years thereafter, and thus the Default Judgment was just put on a table in the office for 2 years. I do not accept this explanation because the 3^rd defendant must have had arrangement with the recipient to ensure that she should be informed of at least important documents such as legal documents. If she really did not make such arrangement and would be content not to be informed of any important documents when she was not in Hong Kong, the 3^rd defendant only had itself to blame.

16.  Despite the delay, given that the service was irregular, and in any event there is a real prospect of success in the 3^rd defendant and the plaintiffs’ claim would have to proceed further as it involves the other defendants, I would still have set aside the Default Judgment. However, I would award no costs given such delay.

17.  Further, given the delay, I think it appropriate to award no costs on the Summons.

III. ORDER

18.  In the circumstances, and having heard parties’ submissions on the timeline for filing pleadings, at the end of the hearing, I made the order as set out in paragraph 2 above.