BRILLIANT CATERING MANAGEMENT LTD v. GLAD SUCCESS INDUSTRIES LTD AND ANOTHER

DCCJ4098/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4098 OF 2007

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D E C I S I O N

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1.  The defendants apply to set aside the judgment entered in default of acknowledgment of service and intention to defend entered on 29 October 2007 for the possession of a property in Kowloon and for failure to pay rental and/or mesne profits under a tenancy agreement dated 15 June 2007.

2.  The defendants took out the summons to set aside judgment on 26 March 2008 asking for leave to defend.  At first, both defendants conceded that judgment was entered regularly.  It was so indicated in the 2nd defendant’s first affirmation of 5 April 2008.  However, both defendants at the latter part of April withdrew the concession.  The 2nd defendant claimed that she had no knowledge of the writ against her as the attorney of the 1st defendant, the tenant.  She explained the lease and assignment by the 1st defendant to the plaintiff was obtained without the knowledge of her boyfriend, the other director of the 1st defendant.  She claimed the lease and the assignment was only a vehicle for her to obtain a loan from the plaintiff to allow her to repay the mortgage and loan from the bank and a finance company.

3.  The 1st defendant company is the sole registered owner of the property.  She is and was a director of the 1st defendant, together with her boyfriend, Mr Yuen.  She further claimed that she had been in debt in order to finance her own businesses which her boyfriend had no share in, and she was under pressure from the mortgagee bank and the finance company to repay the loans.

4.  Consequently, she agreed in May and June last year to sign an assignment to the plaintiff as security of the loan to the plaintiff and the property was leased back to the 1st defendant as a tenant paying a monthly rental of $103,500 for a tenancy of two years.  She was able to execute the assignment and the lease by means of a power of attorney from the 1st defendant signed by her boyfriend, which she claimed she had obtained under false pretences.

5.  The assignment recorded the sale price as $7 million.  The 2nd defendant claimed that she had received, in fact, only $5.8 million as a loan.  She also claimed that in February 2008 she had negotiated with the plaintiff and offered to pay $6 million for the re-assignment of the property back to the 1st defendant but the plaintiff refused and demanded a payment of $7.1 million.

6.  Mr Yuen, the 2nd defendant’s boyfriend and the other director of the 1st defendant, however, claimed he was completely ignorant of the loan and the tenancy agreement.  He claimed he was deceived by his girlfriend, the 2nd defendant.  He also claimed that he had no knowledge of the writ and the judgment against the 1st defendant.

7.  Mr Tam, representing the plaintiff, agreed that the leaseback and the assignment was indeed employed as a vehicle to lend money to the 2nd defendant.  Mr Tam also admitted that the plaintiff is not a moneylender and, therefore, has no moneylender’s licence.

8.  However, Mr Tam insisted that the judgment was entered regularly based on the affidavit of service of Mr Ho Kai-hong, the legal executive of the plaintiff’s former solicitor, Messrs Yu & Associates.  Messrs Yu & Associates who happened to be the solicitor who executed both the assignment and the tenancy agreement.

9.  Order 10(2)(a) requires the plaintiff to effect service by registered post to the defendants.  The plaintiff had chosen this option as a mode of service of the writ.  The practice notes of the Hong Kong Civil Procedure 2008 Order 10/1/12 at page 93 of the Hong Kong Civil Procedure 2008 stated that once the plaintiff showed registered post service had been effected on the right person at the right address, the plaintiff has prima facie effected proper service.  However, in this case, the plaintiff is unable to produce any proof such as a registered post receipt from a post office or any evidence of the addresses and names of the persons served other than the affidavit of the server, Mr Ho.

10.  Even if the service was regular, which has yet to be satisfactorily proved, the defendants have raised issues showing the plaintiff was an unlicensed moneylender.  Further, the plaintiff does not deny the assignment and the tenancy agreement was a vehicle for money lending.  I am satisfied there are sufficient grounds to show the defendants have a good defence on merits.

11.  I am therefore satisfied the judgment should be set aside and I so order.

12.  The costs of application to be borne by the defendants.  The costs of today’s hearing to be borne by the plaintiff, to be taxed if not agreed.

(Discussion re certificate for counsel)

13.  No certificate for counsel.

(Discussion re payment out)

14.  1st defendant  may have the return of  $50,000 paid into court.

(Discussion re reserved costs)

15.  Costs of application and previous hearing to be borne by defendants.