JANET ELIZABETH NICHOL v. LEE SIK PO KELVIN

HCA 2254/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2254 OF 2013

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DECISION

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I. INTRODUCTION

1.  The plaintiff (“P”) claimed she came to Hong Kong in 2003 to take up a university teaching position. In/about April 2003, she came to know a real estate agent, ie the defendant (“D”), when she looked for accommodation in Hong Kong. Since then D served as P’s estate agent for several property transactions for which he received commission from P.

2.  P claimed she bought a flat in Central Park, Tai Kok Tsui, Kowloon (“CP Flat”) via D. D then telephoned P from time to time asking her if she was interested in purchasing other properties for investment. In July 2003, on D’s advice, P bought an apartment at Hampton Place, Tai Kok Tsui, Kowloon (“HP Flat”), and sold the CP Flat to buy an apartment at The Arch. In 2003, D (who claimed to have experience in renovation works) also assisted P to renovate the HP Flat for which P paid him $32,000. P claimed she regarded D to be her friend.

3.  On the other hand, D claimed he came to know P in 2004. He helped P in her property investment, and was her agent for purchase of the CP Flat in/about March 2004 and the HP Flat in/about June 2004. D also represented P in dealings over several other properties, including 2 apartments in Aquamarine in/about March 2005. D claimed the monies P paid him were returns on their joint investments.

II.  P’s CLAIM

4.  P claimed that between December 2009 and February 2010, D twice represented to P (a) certain land in Yuen Long (“Land”) was available for purchase, (b) she could make profit by acquiring the Land, erecting a 3-storey building thereon (“Building”) and selling it as 3 separate flats (“Flats”) (“Deal”), (c) the Building could be built and the Flats sold in 1 year, (d) D would take 10% of the profits from the Deal as remuneration, and (e) D would research the details and inform P accordingly.

5.  P alleged that in/about April 2010 D telephoned to tell her the Land was available for $1,000,000 and she should advance such sum to D’s bank account for buying the Land. P claimed she appointed D to act and D agreed to act as her agent to complete the Deal, and it was D’s express/ implied duties under such agreement inter alia to (a) inform P about the progress of the Deal from time to time, (b) complete the Deal in/about 1 year or within a reasonable time, and (c) exercise reasonable care and skill throughout.

6.  On 4 May 2010, P deposited a cheque for $1,000,000 into D’s bank account with instructions for D to purchase the Land. Subsequently, pursuant to D’s request for funds to purchase building materials, P paid D a further sum of $1,000,000 (ie by depositing 2 cheques of $200,000 and $500,000 into D’s bank account and by mailing a cheque of $300,000 to D’s address on/about 17 November 2010). D knew (a) the aforesaid 4 cheques (“Cheques”) were for P’s purchase of the Land and building materials for erecting the Building, and (b) D as P’s agent was trustee of P’s properties/ assets in his possession or control. P then instructed D to have a contractor to erect the Building.

7.  P claimed that on a few occasions she asked D to bring her to see the development/progress of the Building, but D gave various excuses to fob off her requests. In/about early 2011, D told P the Building was completed, and he would sell the Flats for her. On 16 March 2011, D deposited $65,950 in cash into P’s bank account saying it was the 10% initial deposit received upon sale of the G/F Flat. P was in poor health then, so she did not bother to follow up on the purchase of the Land and/or progress of the Deal.[1]

8.  Later in 2011, P telephoned D a few times about the progress of the Deal. P also asked D for the Land’s address, and D replied he could only articulate the address in Chinese, so he would have to take P there himself. When P subsequently telephoned D about the progress of sale of the Flats or assignment of the unsold Flats to her, D replied he was busy or he was in Mainland China and would call P later.

9.  P claimed she lost contact with D since the summer of 2012 as (a) the mobile telephone line which he had used for 9 years (even when he was out of Hong Kong) ceased to be operational, and (b) there was no reply to her emails sent to D’s usual email address (but P acknowledged D was always reluctant to use email).

10.  P alleged that since the summer of 2012, D in breach of trust and/or duty (a) absconded and failed to perform his duties, (b) failed to provide information to her about the Land, (c) failed to report to her on progress of the Deal, and (d) failed to transfer to her sale proceeds of the Land or to deliver title of the Land. In/about mid-February 2013, P felt D had cheated her of her money, so she made a report (and gave her statement) to the police, who advised her to seek legal assistance.

III. D’s DEFENCE

11.  D denied P’s claim, and claimed he never persuaded P to enter into the Deal. During a casual conversation with D in/about 2009, P said she wanted to acquire land in Yuen Long for her retirement, but D did not follow up on that as he no longer worked as an estate agent and stayed in Shantou, Guangdong, Mainland China most of the time. The Cheques were P’s repayment of debts she owed D and/or P’s payment of D’s investment returns. D claimed he paid the renovation expenses for the HP Flat, but denied (a) he was P’s trustee for the sum of $1,934,050 (ie 4 Cheques in the total sum of $2,000,000 less alleged initial deposit for G/F Flat of $65,950), (b) he was liable to account to P for such sum and/or (c) he had to deliver the Land or sale proceeds thereof to P.

IV. PROCEDURAL HISTORY

12.  On 20 November 2013, P commenced the present action against D to claim for (a) the sum of $1,934,050 as money had and received by D to P’s use, (b) alternatively damages for breach of duty/trust, or (c) alternatively a declaration that D held the sum of $1,934,050 or the Land or the sale proceeds thereof on trust for P together with order that D do return to P $1,934,050 or the Land or the sale proceeds thereof together with interest and costs. The Writ of Summons gave D’s address at Room 1804, Heng Yue House, Fu Heng Estate, Tai Po, New Territories (“D’s Address”).

13.  On 25 November 2013, P’s solicitors served the Writ of Summons on D by insertion into the letterbox of D’s Address (“Letterbox”). On 19 December 2013, P’s solicitors filed affirmation of service to verify such service. D did not file any acknowledgment of service (“AS”) to give notice of intention to defend. On 30 January 2014, upon abandoning the reliefs in paragraph 12(b)-(c) above, P entered final judgment against D (“Judgment”) for $1,934,050 with interest thereon at 8%pa from 20 November 2013 to the date of judgment and thereafter at judgment rate until payment together with $11,045 fixed costs (collectively, “Judgment Sum”).

14.  P instructed her solicitors to apply for a charging order against D’s interest in D’s Address based on the Judgment. On 12 February 2014, P applied by affirmation for a charging order nisi against D’s Address held by and registered in D’s sole name based on the outstanding Judgment Sum. On 18 February 2014, a charging order nisi was granted over D’s interest in D’s Address for payment of the Judgment Sum (“Charging Order Nisi”). On 25 February 2014, P served the Charging Order Nisi and supporting affirmation on D by ordinary post addressed to D’s Address. On 17 March 2014, P secured a charging order absolute over D’s interest in D’s Address (“Charging Order Absolute”) for payment of the Judgment Sum together with costs of the application summarily assessed at $7,000.

15.  On 17 June 2014, Alan Ho & Co (“AHC”) filed Notice to Act on D’s behalf. In view of such developments, P withheld enforcement of the Charging Order Absolute as she waited for action from D.

16.  On 20 October 2014, the Director of Legal Aid (“DLA”) filed notice of D’s Application for Legal Aid in respect of the present action. On 3 December 2014, DLA filed Memorandum of Notification that a Party Has Been Refused Legal Aid (“Refusal Memorandum”) to give notice he had refused D legal aid.

17.  Since D took no action in relation to the present action, P instructed her solicitors to apply for an order for sale of D’s Address to recover the Judgment Sum as P would return to England in summer of 2016 for her long overdue retirement.

18.  On 7 January 2016, pursuant to the Charging Order Absolute, P commenced HCMP31/2016 against D inter alia for sale of D’s Address for payment of the Judgment Sum with consequential reliefs (“OS”). On 8 January 2016, the OS was served on D at D’s Address by insertion into the Letterbox.[2] Notice of Appointment to Hear Originating Summons filed on 29 January 2016 and Notice to Occupants dated 29 January 2016 were also served on D at D’s Address.[3] D was absent at the return hearing of the OS on 11 March 2016 (“OS Hearing”). On that day, DHCJ Paul Lam SC granted inter alia an order for sale of D’s Address and an order for D to deliver up vacant possession of D’s Address within 28 days with consequential reliefs (“Lam Order”).

19.  On 11 April 2016, DLA filed Memorandum of Notification of an Application for Legal Aid in respect of D’s 2^nd application for legal aid for the present action. On 10 May 2016, P secured a Writ of Possession in HCMP31/2016. On 16 May 2016, DLA filed the Refusal Memorandum to give notice he had refused D legal aid. D gave a Notice to Occupier to Quit dated 22 May 2016 and a Final Notice to Occupier to Quit on 28 June 2016 in respect of D’s Address. On 5 July 2016, notice for collection of goods and chattels inside D’s Address within 7 days was posted at the entrance of D’s Address.

20.  On 4 July 2016, D’s present solicitors Tam, Pun & Yipp (“TPY”) filed Notice of Change of Solicitors. On the same day, D filed a summons to set aside the Judgment and Charging Order Absolute on the ground that the Writ of Summons had not been duly served on D with consequential orders, ie (a) D be at liberty to defend the present action and to file his AS within 14 days, (b) there be extension of time for 28 days from the date of the order for service of the Defence, and (c) costs of and occasioned by the application be to D (“Summons”).

21.  Pursuant to a Consent Summons filed on 19 July 2016, DHCJ Kwok SC on 20 July 2016 granted leave for filing affirmations in opposition and in reply, and adjourned “[the] substantive hearing of the [Summons] …… to a date to be fixed in consultation with Counsel’s diaries with 3 hours reserved” (“Kwok Order”).

22.  On 23 August 2016, Master Ho extended time for 21 days for P to file/serve her affirmation in opposition. On 6 October 2016, Master M Wong ordered that unless D filed/served his affirmation in reply by 4pm on 1 November 2016 he shall be debarred from filing such affirmation.

23.  On 4 July and 28 October 2016, D filed his 1^st and 2^nd affirmations in support of the Summons (“D’s 1^st and 2^nd Affs”). On 7 September 2016, P filed her affirmation (“P’s 2^nd Aff”) in opposition.

24.  On 16 May 2017, Master Hui made no order in respect of the Summons with costs reserved (“Hui Order”). I will return to the Hui Order in Part XI below. The Summons came before me for substantive hearing on 30 August 2017 (“Hearing”).

V. IRREGULAR SERVICE

until 12 May 2014,[4] so D was not in Hong Kong between 20 November 2013 and 30 January 2014, and P’s purported service of the Writ of Summons on him was irregular. D was entitled as of right to set aside the Judgment and Charging Order Absolute. Both Ms Chan, counsel for P, and Ms Yu, counsel for D, agreed there was no need for this court to delve into the merits of D’s proposed defence.

26.  The only issue at the Hearing was whether this court should exercise its residual discretion to impose a condition for setting aside the Judgment and Charging Order Absolute. P urged the court to impose a condition that D shall pay the entire Judgment Sum into court (“Condition”), but D argued no condition should be imposed at all. Ms Chan accepted it was for P to demonstrate the Condition should be imposed for setting aside the Judgment and Charging Order Absolute.

VI.  D’s AFFIRMATION EVIDENCE

[5] On 28 September 2012, D left Hong Kong for Shantou due to the imminent birth of his son, who was born in Shantou about a month later on 26 October 2012. D continued to stay in Shantou to look after his wife, daughter and newborn son. D also set up 2 restaurants in Shantou, one in early 2013 and the other in early 2014, so he stayed in Shantou to oversee his restaurant business. D claimed he was not evading service at all.

28.  On 12 May 2014 D returned to Hong Kong as his Home Visit Permit was about to expire, but he intended to return to Shantou on the same day after renewal. However, D (who had no idea then what had happened) was detained by immigration officers upon entry into Hong Kong. D was arrested/charged by the police with obtaining property by deception. On 14 May 2014, D was arraigned at Kowloon City Magistrates’ Courts in KCCC1743/2014 (“Criminal Case”) and was refused bail. The Duty Lawyer Service (“DLS”) told D he was arrested/charged because P alleging that she was unable to contact him made report to the police that he went missing in/about February 2013.

Ho”) to advise D.  Ho told D a charging order was registered against D’s Address, but said D should urgently deal with the Criminal Case as a matter of priority. D trusted Ho and focused his attention on the Criminal Case. D claimed as no one looked after his restaurant business in Shantou during his detention in Hong Kong, both restaurants closed down and he lost a considerable amount of money.

30.  D claimed he was unaware of the present action and/or the Judgment until on/about 30 May 2014 because (a) whenever he was away from Hong Kong D’s Address was left vacant and no one would check the Letterbox for him, and (b) for a short period during D’s absence from Hong Kong[6] his mobile phone was not operational as he used up the pre-paid credit and failed to top up in time.

31.  On 30 May 2014, D was granted bail in HCMA644/2014 by the High Court. He returned to D’s Address and found some legal documents (which might have included the Writ of Summons). D handed them to Ho who reiterated D should first deal with the Criminal Case. Nevertheless, Ho advised D to go to the High Court to photocopy all documents in the court file in respect of the present action.  D followed Ho’s advice, and passed the copied documents from the court file to Ho, who did not advise D what to do next. At the time D assumed that unlike the Criminal Case nothing needed to be done urgently for the present action, so he put it aside for the time being to wait for Ho’s reply.

32.  On 30 September 2014, the prosecution withdrew all charges against D.  D claimed there was nothing criminal in his dealings with P, and the police and/or prosecution authorities did not further pursue any action against D. Ho could not represent D on 30 September 2014, so D instructed a DLS lawyer to seek costs. But the magistrate refused D’s application saying he “brought suspicion upon himself” (“Costs Decision”). D was aggrieved by the Costs Decision, and soon after 30 September 2014 applied for legal aid to appeal against such decision. 

33.  At/about the same time, D also applied for legal aid to defend the present action as he (a) did not fully understand the legal procedures required to set aside the Charging Order Absolute, but (b) could not afford private lawyers as he had lost money in his restaurant business and spent money in defending the Criminal Case. D hoped to have legal aid or to recover some costs from the Criminal Case to pay for legal fees for the present action.

D claimed he only had about $42,707.14 in his savings account when he applied for legal aid, but the Means Test Report of 2 December 2014 erroneously included 3 life insurance policies under his name as his assets (which premium was paid by his wife using her own money or their daughter’s red packet money such that D considered he could not make use of the insurance policies paid with such money). On 11 December 2014, D appealed against the DLA’s decision. On 20 March 2015, his legal aid appeal was dismissed.

35.  On 31 December 2014, D appeared in person in HCMA664/2014 before DHCJ Wilson Chan (as he then was) to appeal against the Costs Decision. On 14 January 2015, the learned judge handed down judgment dismissing the appeal and upholding the Costs Decision (“Appeal Decision”).

36.  D claimed he continued to be in great financial difficulties thereafter, and it was difficult for him to get a job in Shantou, so his family of four and his mother-in-law all relied on his wife’s income of about $4,000/ month (December 2014) that increased to about $7,000/month (May 2016), which was used to defray the mortgage loan (about $1,400) and the family’s living expenses. D further claimed he continued to stay in Mainland China most of the time to look after his family, returning to Hong Kong occasionally after 23 October 2014 but usually leaving on the same or following day.[7]

37.  D claimed that (a) from time to time he wanted to do something about the present action but had no money, and (b) he had the impression from what Ho told him it would not be fatal if he did not act as quickly as he wished because he had no money.

38.  On 7 January 2016, P issued the OS in HCMP31/2016 against D, but D claimed he was unaware of it until 14 January 2016 when he returned to D’s Address.  D took a photograph of the OS and sent it by text message to Ho’s assistant Mr Tse (“Tse”) who replied “民事案件” (civil proceedings) without further comment, and D claimed to be bewildered by such reply. D claimed it was a day after the OS Hearing (ie 12 March 2016) that (a) the Notice of Appointment to Hear Originating Summons filed on 29 January 2016 and (b) the Notice to Occupants dated 29 January 2016 came to his attention. D forwarded them to Tse who told him it was too late to defend P’s claim.

39.  D claimed in/about early May 2016 he was shocked to learn that due to allegations of irregularities the Law Society had appointed another solicitors’ firm to take over AHC.  D tried to call Tse. As Tse did not answer D’s call, D again applied for legal aid in May 2016 to defend the present action. On 12 May 2016, the DLA again refused D legal aid on the basis that his financial resources were said to exceed the statutory limit. D claimed the 2^nd Means Test Report showed he had about $12,533.22 left in his savings account when he applied for legal aid, but the 3 life insurance policies (in his name but not paid by him) were again wrongly included. On/about 10 June 2016 he lodged his appeal against the DLA’s decision, but was told his appeal would only be heard on 9 September 2016.

40.  D claimed he kept on receiving legal documents from P, eg a Writ of Possession dated 10 May 2016, a Notice to Occupier to Quit dated 22 May 2016 and a Final Notice to Occupier to Quit on 28 June 2016.  Out of desperation, D borrowed around $120,000 from Bank of China in May 2016 (which he had to repay at $5,468/month by 24 instalments) to seek legal advice, and eventually TPY advised him to take out the Summons.

VII. P’s AFFIRMATION EVIDENCE

41.  P claimed D’s knowledge of the present action dated back to June 2014, and after he became aware of the Judgment it was wholly unreasonable for D to delay his application by way of the Summons, and also unacceptable for D to say he had no financial resources to engage lawyers to deal with the present action (when he was not granted legal aid for failing the means test). P contended that due to D’s delaying tactics she had incurred significant costs to recover her savings, so she urged the court to require D to pay the Judgment Sum into court and not to require her to bear costs of the Summons.

VIII. LEGAL PRINCIPLES

42.  In dealing with the residual discretion in setting aside an irregular judgment, Hong Kong Civil Procedure 2017 says as follows:[8]

“Although the court will not consider the merits of the defence, it does not mean that it will shut its eyes to the surrounding circumstances and why things went wrong and there is a residual discretion to impose terms for the setting aside of an irregular default judgment by having regards to the parties’ conduct ……”

43.  Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd[9] makes the point that the provisions of Order 13 rule 9 of the Rules of the High Court (“RHC”) are wide in their context. It is said that in the case of an irregular judgment, whilst the defendant has a “confident expectation” that it will be set aside, the court has a residual discretion to take into account the conduct of the parties. Sears J said at p 161 that “in my judgment, the court still has a discretion – having regard to what the defendant himself has done – …… to impose terms upon the setting aside of the judgment which accord with justice having regard to the facts of the particular case”. In that case, the problems on service were primarily due to the defendant’s method of virtually disguising its registered office, and there was a real risk that any judgment which the plaintiff might ultimately obtain would be an empty one.  The default judgment was set aside on terms that money was to be paid into court. Bokhary JA (as he then was) said at p 162 that “it does not mean shutting one’s eyes the circumstances surrounding the question of service and why things went wrong in that regard.  The court’s statutory jurisdiction is unfettered”.

44.  A number of subsequent cases followed the approach in Po Kwong Marble Factory Ltd. In Guangdong International Trust and Investment Corp Hong Kong (Holdings) Ltd v Yuet Wah (Hong Kong) Wah Fat Ltd & anor,[10] the irregular judgment against both defendants were set aside unconditionally. In relation to the 2^nd defendant there was no evidence he attempted to evade service and the fact he knew proceedings were imminent was by itself neutral.

45.  Waung J in Desirable International Fashions Ltd (in liq) v Chiang Shi Chau said in the exercise of the court’s discretion:[11]

“(1) the court should not go into the merits of the defence in considering the setting aside of irregular judgment ……;

(2) if there was such a fundamental defect in the service such as that mentioned by Godfrey JA in the Fok case, then the court can take such matter into account and normally would arrive at a result of setting aside without imposing any terms;

(3) the conduct of both parties in relation to the proceedings could be taken into account in deciding whether the default judgment should be set aside and if so on what terms.”

The learned judge rejected the plaintiff's suggestion in that case that (a) delay in applying to set aside and (b) risk of obtaining an empty judgment constituted sufficient reasons for imposing condition for setting aside an irregular judgment. On (a) above, the relevant consideration is whether there is such unexplained delay that would lead to the conclusion that the defendant has sat on his rights or that the defendant should not be given an order of unconditional setting aside. There was 4 months’ delay in taking out the application in that case, but Waung J was swayed by the consideration that the defendant was a foreigner who resided in Mainland China and not well-versed in the English language and/or Hong Kong legal system. On (b) above, Waung J considered the plaintiff attempted to bypass the requirements of Order 11 of the RHC applicable to a foreign defendant and to obtain default judgment by the backdoor, hence the mere fact that the defendant was a foreigner did not convince him to impose condition.

46.  In Wing Lung Bank Ltd v Ho Man Iam,[12] it was suggested the defendant was the author of his own misfortune because he inter alia gave a Hong Kong address to the bank as his address although he had also given a Macau address. The bank claimed it was only when there was no response to correspondence sent to the Macau address that it served the writ of summons on the Hong Kong address. Keith J did not think this would deprive the defendant of having the judgment set side. Even though the defendant could be criticised for giving the Hong Kong address as his correspondence address, he did telephone the bank after receiving correspondence sent to the Macau address, so in choosing to serve at the Hong Kong address the bank must have some other reason. The learned judge held there were reasons for the delay which did not seriously prejudice the bank.  It was said “there was always a risk in a plaintiff choosing something other than personal service for the service of a writ, and that was the risk which the bank took in this case”.

47.  In Chu Kam Lun v Yap Lisa Susanto,[13] the defendant gave an Indonesian address in an agreement even though he resided in Hong Kong at the time. The writ was inserted in letterbox of the defendant’s Hong Kong address when he was not in Hong Kong. Leong JA said:

“…… There is no evidence that the proceedings had otherwise been brought to her notice prior to 29 August 1998. …… On this alone, the service could not have been effective. But there is more to it. When the plaintiff signed the provisional agreement, he knew the defendant's address was in Indonesia and on 7 July 1998 the plaintiff became aware that she left for Indonesia and when she would be back was not known. In the circumstances, the plaintiff must have known that the Valiant Park premises could no longer be regarded as the defendant's usual address and very likely, a writ left at the Valiant Park premises would not reach the defendant at all or at least until some time later. For these reasons, service of the writ was bad and the judgment was an irregular judgment. ……”

The only conduct relied on for ordering the defendant to pay a sum into court as condition for setting aside was that he countermanded payment of the cheque (being the subject matter of the action) at the last minute just before she departed for Indonesia, and Nazareth VP at p 385 saw no substance in that.

48.  In Cosec Nominees Ltd & anor v Lau Hon Ming,[14] the defendant filed with the Companies Registry a notification of change of his residential address. Although he did not challenge service on his old address in an earlier action and thereby led the plaintiff to believe it was an effective address for service, the court accepted his explanation and considered he should not be penalised for taking a practical stance in the earlier action. The irregular judgment was set aside unconditionally.

49.  In Phillip Securities (HK) Limited v Lam Chi Bin Stanley,[15] no conditions were imposed because the plaintiff chose to serve the writ of summons where its managing director knew the defendant was not there whilst it had knowledge of other addresses where the defendant could be contacted.

50.  In L & M Specialist Construction Ltd v Wo Hing Construction Co Ltd,[16] the defendant was late in filing its defence, and whilst the defendant wrote to the plaintiff for consent to late filing, the plaintiff entered interlocutory judgment in default of defence. When the defendant applied to set aside the judgment, such application was granted on condition that he would pay the full amount of the claim into court. The Court of Appeal took into account that this was a regular judgment, the defendant’s procedural infraction was minor, it was not playing for time, and it had a defence with real prospect of success.

51.  The court found its way to impose conditions in Bank Austria Aktiengesellschaft v Suwardi Sukamto.[17] There an irregular judgment was set aside on condition payment in be made on the ground that the defendant was evading service in the special circumstances of the case, which fact was aggravated by his failure to put forward any defence. 

52.  In First Castle Limited v Wong Chun Kit,[18] DHCJ Lam (as he then was) said whether any inference could be drawn against the defendant by reference to his conduct and to what extent he contributed to what went wrong in terms of service depended on the whole of the circumstances of the case. In that case, the defendant tenant failed to pay rent after execution of the tenancy agreement and later abandoned the leased premises. He gave a correspondence address that was good only for a couple of weeks, which caused the plaintiff to serve the writ at that address. With strong indications that he was evading service and avoiding judgment, he was to a very large extent responsible for the plaintiff's failure to effect service on him, so the imposition of a payment in condition was upheld.

53.  In Liu Chong Hing Bank Ltd v Union World (HK) Ltd & ors,[19] the 6^th defendant confirmed his address (as shown in the most up to date annual returns of the 3^rd and 4^th defendants) on the guarantee he signed in favour of the bank. The writ was inserted into the letterbox at that address and subsequently judgment was obtained. The bank discovered the defendant owned another property, and the bank’s solicitors sent a demand letter to that address with no reply. After the bank served a charging order nisi at the second address, the 6^th defendant applied to set aside the judgment on the basis that he all along resided at the second address and he did not understand the demand letter (which he received) fully so he only made brief enquiries with the bank’s solicitors. It was held that his irresponsible conduct justified imposition of the condition that the outstanding sum plus interest and the bank’s assessed costs be paid into court. The Court of Appeal upheld the decision of DHCJ Longley at [2005] 1 HKC 20.

54.  In Kerry Freight (Hong Kong) Limited v Del Prado Asia Ltd,[20] DHCJ L Chan (as he then was) cast suspicion on the defendant’s conduct: (a) it operated at the original registered office when the writ was served but submitted retrospective notification of change of registered office to the Companies Registry on the following day, (b) it had ceased operation and became unreachable but the company installed at its original registered office was owned/controlled by the same group of people who owned the defendant, and (c) it delayed taking out application to set aside the irregular default judgment for almost 3 months when the petition for its winding up was to be heard 11 days later, all of which showed the defendant took steps to manufacture a case of defective service and to avoid execution of judgment. The delay in taking out the application to set aside the default judgment also caused prejudice to the plaintiff who had forged ahead with petition for winding up the defendant. L Chan J set aside the irregular default judgment on condition that the defendant paid the judgment sum into court.

55.  In Sinokawa Investment (Holdings) Ltd & anor v Li Chun,[21] the defendant did not take out application to set aside the default judgment until some four years after becoming aware of the default judgment, and the explanation given for the substantial delay was very unconvincing and unsatisfactory.  Further, the defendant had himself to blame if creditors were led to believe that his address at the time was the one used by the plaintiff to attempt service because documents filed with the Companies Registry in respect of various companies showed the defendant’s address at the material time as being such address. In all the circumstances, having regard to the defendant’s conduct, the default judgment was set aside subject to a condition that the defendant pay the sum claimed by the plaintiff into court.

56.  In Deng Minghui v Chau Shuk Ling,[22] the plaintiff served the writ of summons at the defendant’s last known address when he had been living in the United States. When he became aware of the proceedings in the following month he instructed solicitors to write to the plaintiff’s solicitors to dispute service on the basis that he was not in the jurisdiction. Subsequently the plaintiff obtained judgment, and a few months later the defendant applied to set aside such judgment. The Court of Appeal held the default judgment should be set aside without any condition because (a) there was nothing suspicious as far as the defendant was concerned regarding the question of service, and (b) there was no question of delay because when the defendant’s solicitors wrote to ask for documents the plaintiff’s solicitors did not even disclose that judgment had already been entered against the defendant.

57.  In Keung Shek Cheung & ors v PT Arpeni Pratama Ocean Line Tbk & anr,[23] Chung J reiterated it is a matter of discretion whether to impose terms for setting aside a default judgment, which discretion should be exercised judicially, and “the factors most commonly considered when deciding how to exercise the discretion include: (a) the reason(s) which caused the applicant to earlier fail to comply with the procedural rules; (b) the applicant’s conduct after becoming aware of the default, ……” In that case, Chung J upheld the master’s decision to grant leave to defend upon payment of 70% of the claimed sum being made.

58.  In 北京橙天嘉禾影視製作有限公司 (formerly known as 北京橙天智鴻影視製作有限公司) v 張承勷 (also known as 張承襄 or Cheung Shing-Sheung or Carl Cheung or Carl Chang),[24] B Chu J discussed the authorities and reiterated that the exercise of residual discretion under Order 13 rule 9 of the RHC required the court to consider all relevant matters, including the conduct of the defendant after he had learnt of the proceedings. In that case, the learned judge exercised her discretion to impose condition for granting leave to set aside the default judgment on the ground (a) there was very substantial delay by the defendant in taking out the application to set aside the judgment without reasonable explanation,[25] (b) there was prejudice to the plaintiff in that considerable time and costs had been incurred in its attempts to enforce the judgment debt, (c) the defendant had been evading enforcement of the PRC judgment on which the default judgment was based by being evasive as to his actual address or his physical whereabouts in Mainland China, and (d) there was real risk of empty judgment given the defendant’s evasive conduct and overall behaviour that did not suggest a genuine intention to contest the proceedings rather than an intention to delay and evade enforcement.

59.  When B Chu J declined to grant leave to appeal,[26] the Court of Appeal held on renewed application for leave to appeal as follows:

“15. …… as stated in Liu Chong Hing Bank Ltd v Union World (HK) Ltd [2005] 1 HKC 20 at §§13 and 15, each case has to be decided on the particular facts thereof and the court would consider all relevant matters, including the conduct of the defendant after he learns of the proceedings.

16. The correct position is as stated in Po Kwong Marble Factory v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 at 161C to E and 162D to E:

(1) In setting aside an irregular judgment, even though it is as of right, the court has a residual discretion to have regard to the conduct of the parties and to impose terms upon setting aside the judgment which accord with justice having regard to the facts of the particular case. The court does not shut its eyes to the circumstances surrounding the question of service and why things went wrong in that regard.

(2) The statutory discretion to set aside a default judgment on such terms as the court thinks just is unfettered.

17. Substantial delay is clearly a factor the court may take into consideration. Whether this factor alone may justify the imposition of a condition of payment into court of the judgment sum would depend on the particular circumstances of the case. Nor is it necessary in every case to show there was a history of the defendant evading service or enforcement. If there was substantial delay and the circumstances indicate that the defendant had no genuine intention to contest the proceedings or there was real risk of an empty judgment, it may well be appropriate to impose such a condition for setting aside the judgment. After all the relevant factors have been ascertained, it is up to the judge to give such weight as he thinks fit to each of them in the particular circumstances in considering whether any condition should be imposed in the exercise of his discretion.

18. In any event, in the present case, the judge did not take into account substantial delay alone.  As we have mentioned earlier, she took into account other relevant cogent factors, including the defendant’s evasion of enforcement of the judgment debt over a long period of time.”

60.  Each case must be decided on its own facts. The aforesaid authorities (some of which were not cited by the parties) are mere examples of how the residual discretion was exercised in the context of the factual matrix of those cases. But it is evident from such authorities that the court is concerned to see whether the defendant’s conduct has been shown to be an abuse, whether any unjustified delay on his part has caused prejudice to the plaintiff, and whether he has contributed to what went wrong with service of the originating process.

IX. DISCUSSION

(a) Circumstances as to service

61.  P’s conduct  Ms Yu submitted it could be inferred P knew or must have known or turned a blind eye to what was said to be the obvious fact or at least grave suspicion that D was not within the local jurisdiction at the time when the Writ of Summons was purportedly served in late November 2013, hence no condition should be imposed. I disagree, and find the factors Ms Yu relied on, whether individually or collectively, did not lead inexorably to such conclusion as to P’s knowledge or inference.

62.  First, it was said P and D, who were friends, had known each other since about 2003, and their dealings dated back also to about 2003. But this would not give P any clue that D would be in Mainland China between November 2013 and January 2014. Secondly, it was said D’s Statement of Travel Records confirmed that since January 2012 he travelled frequently through Lo Wu (presumably to Mainland China) and stayed away from Hong Kong for extended period of time for 1 or 2 months every time. Again, this did not give rise to any inference that P knew D would be in Mainland China between November 2013 and January 2014. There was no suggestion P was aware of D’s travel record, and despite D’s previous occasional visits to Mainland China, he could be reached on his mobile telephone even he was outside Hong Kong and he did return to Hong Kong. It was also common ground that D acted as his estate agent, and D alleged he made joint investments with P, which activities were all in Hong Kong. The fact P regarded D as her friend as a result of ongoing commercial relationship for some years did not mean (and there was no affirmation evidence from either P or D to such effect) that P was privy to D’s personal and familial circumstances.

63.  Thirdly, Ms Yu submitted that D’s frequent travels to Mainland China happened before P had lost contact with him in the summer of 2012, and, according to P, when she telephoned to chase D about progress of sale of the Flats or assignment of the unsold Flats to her, D told her he was busy or he was in Mainland China and would call her later. Fourthly, it was said P also mentioned she used to be able to contact D on the mobile telephone line that he had used for 9 years even when he was out of Hong Kong. In my view, these matters cast no sinister light on P’s conduct.

64.  It must be remembered D was a Hong Kong permanent resident with a self-owned residential address in Hong Kong which was admittedly his residence when he was in Hong Kong (ie D’s Address), and he had a Hong Kong bank account in which P deposited the Cheques. On P’s case, D was supposed to help her acquire the Land, construct the Building and market the Flats (all of which property and activities were in Hong Kong). The fact P was aware on occasions when she telephoned D that he was in Mainland China could not give rise to any inference that P knew D had left Hong Kong for extended stay in Mainland China. D did not even say in D’s 1^st and 2^nd Affs that he had told P that his wife/family were in Mainland China and/or he would leave Hong Kong to live in Mainland China for an extended period.

65.  Fifthly, it was said P alleged that (a) since the summer of 2012 D’s mobile telephone line ceased to be operational and he had “absconded”, and (b) in/about mid-February 2013 P made a report to the police because she felt D cheated her and went missing. But in my view, this was a far cry from saying P knew had gone to Mainland China for a long stay. On P’s case, she had been pressing D about the address of the Land, the construction of the Building, the progress of the Deal, and the transfer of the sale proceeds of the Flats or assignment of the unsold Flats to her, but D was shy in his responses to such enquiries by saying he was busy, he was in Mainland China and he could call her later, and eventually P lost contact with him. On P’s case, it was not unnatural for P to have thought D was evasive and avoided her because he cheated her of her money, but this did not mean P would have known he was holed up in Mainland China for a good long while. Ms Yu even suggested the police’s actions (or more likely, inactions) would help inform P that D was most probably not in Hong Kong on 25 November 2013. This contention had no merit when there was nothing to show that the police would have told P its investigation efforts, and it must be a matter of common sense that suspects being at large do not necessarily mean they are outside Hong Kong.

66.  In my view, none of the above matters (whether individually or collectively) would lead P to actual knowledge, imputed knowledge or grave suspicion that D was not in Hong Kong at the material time, and it was telling that D did not even depose in D’s 1^st and 2^nd Affs he ever told P his whereabouts. Ms Yu was constrained to urge the court to draw inference from a thin basis which I reject.

67.  That being the case, I see no merit in the argument that P had to take the consequences of insisting on serving the Writ of Summons in reliance of Order 10, rule 1(2)(b) of the RHC when she could/should have applied for service out of jurisdiction under Order 11 of the RHC and/or substituted service under Order 65 of the RHC and inherent jurisdiction of the court.

68.  As said in Wing Lung Bank Ltd (see paragraph 46 above), P ran the risk by choosing a mode of service other than personal service for the Writ of Summons, and she accepted she had to pay for such risk by having the Judgment and Charging Order Absolute set aside, but this did not mean her conduct as to service would draw criticism. In my view, on the affirmation evidence before this court, D’s Address was plainly D’s last known address, ie D’s address last known to P. There was no obligation on P to check with D to verify his address before effecting service of the Writ of Summons, especially when D’s mobile telephone line was no longer operational and he was reluctant to use email. Further, as explained in Cosec Nominees Ltd & anor at p 587, it mattered not that perhaps with further inquiry, a different address might have been discovered. Anyway, there was no other address here because (a) D did not depose to any other address in Hong Kong, and (b) there was nothing to show P was aware D stayed in Shantou let alone his address there. Ms Yu made some half-hearted submission that P would somehow (but it was quite unclear how) gain access to D’s Registration Form for Temporary Residence for Visitors (see footnote 5 above) and find out his address in Shantou, but there was nothing to say public search of such forms was permissible, and if so, why and how P would be alerted to conduct such search at 廣東省汕頭市公安局 as the issuing authority. This made the present situation quite different from Chu Kam Lun (see paragraph 47 above), Phillip Securities (HK) Limited (see paragraph 49 above) and/or Deng Minghui (see paragraph 56 above) where the plaintiff actually knew the defendant (a) was not at the address where the writ of summons was served or (b) was out of Hong Kong.

69.  In the circumstances, but for the fact that unbeknownst to P D was not within the jurisdiction from November 2013 to January 2014, service of the Writ of Summons could have been effected on D by insertion into the Letterbox at D’s Address as it was admittedly his address in Hong Kong. In all the circumstances, I am unable to say P deliberately bypassed the more stringent requirements under Order 11 of the RHC and obtained the irregular Judgment by the backdoor. Indeed, the present situation was quite unlike that in Desirable International Fashions Ltd (in liq) which involved a foreign defendant unversed in the English language and/or Hong Kong legal system. Here, D was a Hong Kong permanent resident, and (as seen below) had some knowledge of the English language and was able to handle court proceedings himself. It must also be remembered Desirable International Fashions Ltd (in liq) was decided 20 years ago, and use of Chinese language in the judicial process had made great strides since then, making it more openly accessible to the general public.

70.  Ms Yu also cast suspicion on the affirmation of service filed by P’s solicitors in respect of the service of the Writ of Summons. I see no basis for any suspicion. D’s Address was D’s self-owned residence in Hong Kong. Further, despite D’s extended stay in Mainland China from 28 September 2012 until 12 May 2014 and his allegation that no one would check the Letterbox for him, he did not say when he checked the Letterbox on 30 May 2014 it was overflowing with letters or showed any sign that the occupant had been away for long time. In short, there was nothing to show the process server of P’s solicitors would have been alerted to D’s Address being unoccupied.

71.  D’s conduct  Ms Yu argued there was nothing “surrounding the question of service” on D’s part and/or other circumstances that would prevail upon the court to impose the Condition. It was said there was no suspicious conduct to show D (who did not know P intended to sue him) was evading service, and he gave legitimate/unchallenged explanation for leaving Hong Kong on 28 September 2012 for an extended stay in Shantou (see paragraph 27 above), which was supported by contemporaneous documents (eg the birth certificates of his children and his Registration Form of Temporary Residence for Visitors dated 10 August 2011).

72.  On the other hand, Ms Chan submitted that even though D had family in Shantou and even if his extended stay in Shantou after 28 September 2012 was a planned move, P contacted him frequently about the Land before he left for Shantou on 28 September 2012, and he knew there were unresolved matters between them, but he never told P of his intended long-term stay in Mainland China. Ms Chan reminded there was no documentary support for D’s alleged restaurant business in Shantou apart from D’s bare assertions.

73.  It is convenient to start with the Criminal Case that concerned the same subject matter as the present action. It was evident from the Appeal Decision as follows:

“2. 於有關時段，上訴人職業是一名地產經紀。65 歲英藉女士為香港居民（下稱 “NICHOL”），她是上訴人的其中一名客戶。於2004 年至2009 年間，上訴人曾協助NICHOL完成多宗地產買賣交易。

3. 約於2009 年10 月，上訴人游說NICHOL購入元朗一塊土地。NICHOL經考慮後，口頭同意，並於2010 年5 月至2011 年5 月期間，以四張支票向上訴人支付合共約 $2,041,600，打算用作買該元朗土地用途。但最終該交易從未完成。NICHOL從沒獲得任何土地或獲得款項的歸還。及後，NICHOL找不到上訴人，上訴人更於2012 年9 月離開香港，而戶口大部分款項亦已被提走。NICHOL當時患癌症，直至2013 年2 月才報警，警方將上訴人放在通緝名單上。當上訴人於2014 年5 月13 日回港時被捕。在律師陪同警誡下，上訴人承認認識對方，但拒絕進一步回答。”

74.  It was interesting to note that by the Costs Decision the magistrate found D brought suspicion upon himself as a result of undisputed facts: “(1) [P]將合共200多萬港元以支票存入[D]之銀行戶口；(2) [D]從他銀行戶口提取絕大部分款項；(3) 他提取款項之後離開香港並失去聯絡一段長時間(停用電話及搬離住址) ……”[27] DHCJ W Chan (as he then was) agreed, and said at paragraph 13 of the Appeal Decision that “但事實上，[D]從他有關的銀行戶口中提取大部份款項之後，便離開香港一直沒有回來，亦從未主動聯絡過[P]。本席同意裁判官之裁斷，[D]的行為，根據上述第5(1)至(3) 段本身，的確是自招嫌疑，那程度已足夠駁回訟費申請”.

75.  Ms Chan submitted that, notwithstanding D had family in Shantou, D’s manner of departure from Hong Kong (by withdrawing most of his funds from his bank account and not telling P of his whereabouts), his bare assertions in relation to his restaurant business, and the lack of information as to use/disposal of the funds he had withdrawn from his bank account raised legitimate suspicion that D’s move to reside with his family in Shantou as just a haven for his evasion. I can see the force in this contention especially when it was evident from D’s Registration Form for Temporary Residence for Visitors that even though his temporary residence in Shantou was approved in August 2011, he did not move to Shantou for lengthy stay until more than a year later in September 2012.

(b) Delay in application to set aside

76.  The Judgment was obtained on 30 January 2014, and the Summons was filed 2½ years later on 4 July 2016. Ms Chan reminded the Summons was some 28 months after the Charging Order Absolute was granted, some 26 months after D first learned of the Charging Order Absolute, and some 6 months after the OS was issued and came to D’s attention. On any view, the time taken for D to file the setting aside application was significant.

77.  D’s explanation for such delay was that (a) he was not in Hong Kong from 28 September 2012 to 12 May 2014 and only became aware of the Judgment and Charging Order Absolute on/about 30 May 2014, and (b) shortly thereafter he handed to AHC the documents in respect of the present action sent to D’s Address but AHC did not advise him what to do afterwards.

78.  It was interesting to note that whilst D was detained in custody immediately upon arrival in Hong Kong (and hence could not check the Letterbox), Ho was able to tell D a charging order (ie the Charging Order Absolute) was registered against D’s Address. One could only surmise Ho obtained such information from a public land search or from the police since D claimed he was unaware of the present action at that time. Ho as a solicitor must have known about the present action and the Judgment from the Charging Order Absolute. But even if Ho was not so aware then, he would have known shortly thereafter because (a) D checked the Letterbox after he was released on bail on 30 May 2014 and passed the legal documents inserted therein to Ho, and (b) at Ho’s request D photocopied all court documents from the court file in the present action and passed them to Ho.

79.  In my view, by early June 2014 D must have known about the Judgment and Charging Order Absolute. D used to work as an estate agent so he must have been licensed, and he must have a fair command of the English language as he handled property dealings for an English-speaking client (ie P). He must have known or Ho must have told him what the Charging Order Absolute meant and that it was premised on the Judgment against him in the present action by the time his attention was drawn to its existence. Even though D claimed Ho advised him to deal with the Criminal Case first, (a) both Ho and D must have known from the papers found in the Letterbox and/or the Criminal Case the subject matter of the present action and the Criminal Case was similar, and (b) it would not have involved significant cost and time for either P himself or AHC on his behalf to intimate to P or P’s solicitors by telephone, email or letter that D objected to the Judgment and Charging Order Absolute, and such step would not have detracted from any priority given to the Criminal Case. Notwithstanding AHC’s alleged advice to deal with the Criminal Case first, I find it strange that D did not tell AHC of his stance in relation to the Judgment and Charging Order Absolute and his anxiety to make that position clear to P by the time he had access to the relevant papers in the present action and knew the existence/effect of the Judgment and Charging Order Absolute.

80.  But in any event, by September 2014, the Criminal Case was at an end. The outstanding question of recovery of costs was merely D’s claim against the police / prosecution. D knew despite the outstanding costs issue, he should turn his attention to set aside the Judgment and Charging Order Absolute in the present action (as evident from his application for legal aid in respect of the present action in October 2014). Ms Chan complained the subsequent delay on D’s part was significant and inexcusable.

81.  In this respect, D said he passed the photocopies from the court file in the present action to AHC and waited for their reply.  But he did not explain why he did not follow up with AHC as to what should be done with those court documents and what to do next after closure of the prosecution.  After all, AHC were still solicitors on the record for D in the present action.

82.  Nevertheless, D claimed he could not have afforded private lawyers as he had lost money in his restaurant business and spent a lot of money on legal costs in the Criminal Case. However, other than D’s bare assertions, there was paucity of objective or documentary evidence as to (a) D’s restaurant business in Shantou, (b) D’s financial commitments in such restaurant business, (c) the collapse and time of collapse of D’s restaurant business, (d) the amount of monies lost as a result, and (e) the amount spent on legal costs in the Criminal Case.

83.  According to the land search records, D took out a mortgage loan of $220,600 for the purchase of D’s Address on 16 July 2010. D did not explain the market value of D’s Address in 2014/2015, the equity in D’s Address after payment of the mortgage payments up to 2014/2015, and why he could not have raised money on further mortgage or re-mortgage on D’s Address. He also did not explain why he could not have let D’s Address to earn rental income between 2014 to 2016 if his intention was to stay in Shantou. In face of the above, D’s allegation that he was in financial difficulties after the Criminal Case, that it was difficult to get him a job in Shantou, and that his family was reliant on his wife’s income which was used to pay the mortgage loan and living expenses wore thin. He also did not explain (a) why he did not take up his previous career as an estate agent in Hong Kong to earn income to support his legal expenses, and (b) why he could not have taken out a personal loan in 2014 as he did in May 2016 when on D’s case there was not much change in his personal circumstances.

84.  D also did not explain why (a) AHC remained as solicitors on the record for him in the present action if, as he alleged, he had no further instructions for them due to financial reasons, and (b) why he did not file Notice to Act in Person and take the initiative to inform the court, P and/or P’s solicitors by telephone, email or letter about his stance in relation to the Judgment and/or Charging Order Absolute irrespective whether or not he knew the legal procedures for setting aside. In my view, (b) above was completely within D’s ability as evidenced by the detailed and meticulous manner in which he prepared his written application for leave to appeal against the Appeal Decision to the Court of Final Appeal which set out clearly and succinctly the background events and his arguments. I do not accept D’s suggestion that as he did not fully appreciate the legal procedures required to set aside the Judgment and Charging Order Absolute he could not have acted in person. The fact he did not even take the simple step of telling P or P’s solicitors of his stance (when he was shown to be capable on his own to make his stance known orally and/or in writing in legal proceedings) until the bailiffs were at the door was telling.

85.  D referred to the time taken by his application for legal aid which spanned the period from 17 October 2014 (when he made his 1^st application) until refusal of legal aid on 2 December 2014 and dismissal of his legal aid appeal on 20 March 2015 to account for part of the delay.  But the Court of Appeal has said in a number of judgments that a litigant relying on the time taken for application for legal aid as explanation for delay must give an account of the time taken in that process in the manner as explained in BI v Director of Immigration:[28]

“131. …… We however agree with the Judge on his observations as to the lack of proper explanation for the delay in the documents lodged at the leave stage. We would particularly endorsed what he said:

“[103]. In my view, if an applicant wishes to rely upon the time taken to obtain legal aid as an explanation for the delay in making his leave application, the applicant should in his notice of application for leave to apply for judicial review provide a full chronology regarding his legal aid application. Generally, I would also expect the chronology to be verified or confirmed by the relevant legal aid officer who may provide such further information and explanation as may be appropriate or necessary either in a letter or by way of an affidavit: see X v Torture Claims Appeal Board, HCAL 143/2013 (4 September 2014), at paragraph 13 per Zervos J. I hardly need to point out that an applicant in any ex parte application is required to observe the obligation to make full and frank disclosure, and this obligation should likewise be observed by the legal aid officer.” (my emphasis)

This approach was further endorsed by the Court of Appeal in 黃得煒與懲教署署長,[29] 黃得煒及懲教署署長,[30] AIA International Ltd v Lam Che Wah,[31] and Ma Wah Yan and Wong Chi Leung, the Administrators of the estate of Bai Yu Shu alias To Lun alias Priest To-Lun alias Shin To Lun alias Sik To Lun alias Sih To Lun, deceased v Dharma Realm Buddhist Association, Inc & ors.[32] Here, there was no verified/confirmed chronology from the relevant legal aid officer who would have provided appropriate and necessary information to the court as to whether there was prompt cooperation by D to justify the full period from October 2014 to March 2015.

86.  This was especially of concern when it was apparent from D’s Statement of Travel Records that he returned to Hong Kong only occasionally after 23 October 2014 but usually leaving on the same or following day. It was also pertinent that when D disagreed with DLA’s inclusion as his disposable income 3 life insurance policies in his name worth $252,751.80. Relevant information might have been provided by the DLA as to such policies and payment therefor and the DLA would have known the time D took to provide necessary information to DLA, when especially in the present application D did not provide objective information/documents as the amount of premium and/or the payment out of his wife’s monies. Further, the 2^nd Means Test Report only dealt with D’s disposable income and capital (calculated under the provisions of the Legal Aid (Assessment of Resources and Contributions) Regulations Cap 91B (“Regulations”)) and did not assess his capital assets generally nor his ability to raise monies and earn income. I repeat the observations in paragraph 83 above. I note in particular regulation 5 of the Regulations provides that in computing the financial resources, income, disposable income or disposable capital of the legal aid applicant “there shall be excluded the value of the subject matter of the dispute in respect of which application has been made”. This put paid to D’s suggestion that from time to time he wanted to do something about the present action but he had no lawyers and no money.

87.  But even on D’s case, his inaction was inexplicable. He knew about the Judgment and Charging Order Absolute which he disagreed, so when legal aid was refused and on his case he was unable to afford lawyers, one would have expected that he would act on his own (as he did for his appeals against the Costs Decision and Appeal Decision) to make enquiries with the court about the relevant procedures and to inform P or P’s solicitors of his stance (and if he did he would have been told he had to apply to court for setting aside the Judgment and Charging Order Absolute). Instead, he did nothing and just continued to stay in Mainland China most of the time. During the period from 23 October 2014 to 10 June 2016, D on 19 occasions departed for Mainland China, 13 of which were “same-day travel” (ie arriving and departing Hong Kong on the same day). He spent 8 nights in Hong Kong between 21 November 2014 and 21 March 2015, and not a single night in Hong Kong since 12 April 2015. This was especially of concern when there was to D’s knowledge pressing litigation in Hong Kong, but on D’s case nothing particularly pressing in Shantou (even though his family was there) and he had no job in Mainland China.

88.  In my view, there was force in Ms Chan’s complaint that despite D’s awareness of the present action and the Judgment and Charging Order Absolute against him, D failed to take active steps to participate in the action and make his stance known (whether by telephone, email or letter to P or P’s solicitors) after learning of the Charging Order Absolute in May 2014, when applying for legal aid in October 2014 or upon refusal of legal aid in December 2014 and/or March 2015, and instead he spent little time in Hong Kong and conveniently attributed his inaction to AHC. I see no basis for D’s bare assertion that he had the impression from what Ho told him it would not be fatal if he did not act as quickly as he wished because he had no money. Even on D’s case, all Ho told D was that he should deal with the Criminal Case as a matter of priority, and the Criminal Case came to an end when the prosecution withdrew charges against him in September 2014. By then, D himself also turned his attention to the present action as evident by his 1^st application for legal aid. To do nothing thereafter (for a better part of the year 2015) was, in my view, quite irresponsible.

89.  D admitted he received the OS on 14 January 2016, and a brief enquiry with Tse elicited the observation “民事案件” which caused bewilderment on D’s part. In my view, D would have known from the OS that P was asking him to pay a large sum of money and seeking leave to sell D’s Address. It was irresponsible for D not to take active steps to allay his “bewilderment” by, say, either following up with Tse by telephone enquiry or personal attendance at AHC’s office, or taking heed of the bilingual notice attached to the OS that gave the following warning and making enquiries with the court registry, or (if he wished and if there was valid basis) applying for legal aid again:

“This is a legal document. The consequences of ignoring it may be serious. If in doubt, you should enquire as soon as possible at the Registry of the Court issuing the document, namely, (Court of First Instance, LG1, High Court Building, 38 Queensway, Hong Kong.) You should also consider taking the advice of a Solicitor or applying for Legal Aid.” (my emphasis)

D also ignored the explanatory instructions and guidance notes for filing AS that set out the procedure for contesting the OS. He did not even intimate to P or P’s solicitors of his objection by telephone, email or letter. No convincing explanation/excuse was given by D for such inaction and delay.

90.  D made his 2^nd application for legal aid in April 2016. In my view, he only had himself to blame by not (a) taking prompt action upon receipt of the OS (see the above paragraph), (b) making arrangements to regularly/frequently check the Letterbox and/or (c) liaising with P’s solicitors to ensure he would be notified on timely basis to pick up legal documents from the Letterbox or to arrange for collection of legal documents by other means.

91.  Even when D found out on 12 March 2016 that the OS Hearing took place the day before, he took no action and left for Mainland China on the same day. He claimed he made enquiry with Tse who told him it was too late to defend P’s claim. I find this quite implausible when there was nothing to show that at that time either Tse or D knew of the outcome of the OS Hearing. The Lam Order was not perfected/sealed until 18 March 2016. Even on D’s case that he was told of the alarming news that it was too late, he made no attempt to find out from the court, P or P’s solicitors what was the outcome of the OS Hearing that was too late to upset. Further, it was obvious D did not accept Tse’s observation that it was too late for him to object because in April 2016 he made his 2^nd application for legal aid. There was no sufficient explanation as to why D could not have made his 2^nd application for legal aid before then if he was serious about challenging the Judgment, Charging Order Absolute and OS. Again, even though D relied on time taken for this legal aid application (which was refused on 12 May 2016 with pending legal aid appeal to be heard in September 2016) to account for part of the delay in taking out the Summons, D did not comply with the requirements set out in BI as explained in paragraph 85 above, and he did not explain how such 2^nd application for legal aid would assist him when he knew his disposable income and capital would exceed the financial eligibility limit under the means test. After all, he knew from the outcome of his 1^st legal aid application (concluded upon dismissal of his legal aid appeal) that irrespective of his subjective stance, the DLA considered the 3 insurance policies in his name should be included rather than excluded from calculating his disposal capital, and such view was upheld by the court. There was force in Ms Chan’s submission that D in making his 2^nd legal aid application on the same basis as before which he must have known was doomed to fail was a poor attempt to put up excuse for his inaction/delay.

92.  Indeed, it was not until D received a Writ of Possession dated 10 May 2016 (and eventually a Notice to Occupier to Quit dated 22 May 2016 and a Final Notice to Occupier to Quit on 28 June 2016) that in mid-June 2016 he took out a loan of $120,000 to engage TPY. Interestingly, D did not say how his financial status in June 2016 was different as compared with that in 2014/2015. According to the 1^st and 2^nd Means Test Reports, his bank balance reduced from $42,707.14 to $12,533.22, and yet D was able to secure the bank loan in 2016. Surely he would have been able to do the same had he made such effort in 2014/2015.

93.  In my view, D failed to give any convincing or sufficient explanation for his inaction/delay for over 2 years until the very last moment when P was about to possess and sell D’s Address. The above analysis reflected badly on D’s conduct, and suggested inexcusable delay and inaction.

94.  Ms Yu submitted D was not responsible for the delay of 2 years from mid-June 2014 to mid-June 2016 or his delay was excusable because (a) he was following AHC’s advice, (b) “it was inherently tricky for him, as a lay person not well versed in the English language and the Hong Kong legal system to organize a setting aside application”, and (c) he spent time to borrow money. I have dealt with (a) above. In respect of (b) above, I do not understand how this submission could be made when D did not say he was unversed in the English language, and when he acted as estate agent for English-speaking P. Further, I am unconvinced by D’s allegations as to his unfamiliarity with the Hong Kong legal system. He was no stranger to the legal system and was unafraid to deal with the appeal against the Costs and Appeal Decisions on his own (including attending court hearing). As explained in paragraph 69 above, the use of Chinese in legal proceedings and by the courts had much improved since 1997, and D should have no difficulty in expressing his stance in either English or Chinese as he wished (as evident from his Chinese written application for leave to appeal against the Appeal Decision). In any event, such contention wore thin when D did not even attempt to make enquiries with the court, P and/or P’s solicitors about the relevant procedure or intimate his objection to the Judgment and Charging Order Absolute to any of them.

(c) Prejudice caused by delay

95.  Ms Chan submitted P was prejudiced by D’s substantial delay of 2½ years as P had incurred costs in enforcing the Judgment. Had D applied to set aside the Judgment and Charging Order Absolute after learning about them in May 2014, P would not have initiated separate proceedings in HCMP31/2016 to seek an order for sale in January 2016. I am persuaded D led P up the garden path by his inaction/delay in intimating his objection to the Judgment let alone taking out the Summons which caused P to incur substantial time/costs in attempting to enforce the Judgment. For reasons explained in paragraphs 61-70 above, I reject Ms Yu’s response that P incurred such costs at her own risk because P proceeded with service of the Writ of Summons under Order 10 rule 1(2)(b) of the RHC when she all along knew or must have known D was probably not within the jurisdiction.

(d) Risk of empty enforcement

96.  Ms Yu submitted that risk of empty judgment is not a reason for imposing condition because it was common ground that the Judgment was to set aside for irregularity, and before judgment was validly entered against D he should be entitled to do whatever he wanted with his money. I disagree. As explained by the Court of Appeal as recently as in 北京橙天嘉禾影視製作有限公司 (formerly known as 北京橙天智鴻影視製作有限公司) (see paragraph 59 above), Po Kwong Marble Factory Ltd highlighted the court’s residual discretion to have regard to the conduct of the parties and to impose terms upon setting aside the irregular judgment “which accord with justice having regard to the facts of the particular case”, and the particular factual matrix of each case might include substantial delay (even when there was no history of the defendant evading service or enforcement). It was said that “[if] there was substantial delay and the circumstances indicate that the defendant had no genuine intention to contest the proceedings or there was real risk of an empty judgment, it may well be appropriate to impose such a condition for setting aside the judgment” (my emphasis). In any event, the circumstances of the present case were a far cry from those in Desirable International Fashions Ltd (in liq) (see paragraphs 69 and 94 abvoe).

97.  In my view, D’s inexcusable delay and “strange ways” in applying to set aside the Judgment and Charging Order Absolute suggested a manoeuvred approach to delay/avoid execution, and raised the spectre of risk of empty enforcement even if P was successful at the end of the day, especially when (a) D displayed a tendency of staying in the Mainland China and (b) D might further encumber or sell D’s Address upon lifting the Charging Order Absolute as he practically did not live there. In my view, there was a real risk that any eventual judgment P might ultimately obtain would be empty if nothing was done to guard against that.

(e) Alleged impecuniosity

98.  P asked the court to exercise its residual discretion to impose the Condition for setting aside of the Judgment and Charging Order Absolute. Ms Yu submitted this was evidently burdensome on D who could not comply with the same.

99.  If D wished to avoid or limit a financial condition for setting aside the Judgment or Charging Order Absolute by virtue of his own impecuniosity, he “must put sufficient and proper evidence before the court and make full and frank disclosure; moreover he cannot complain that the condition is difficult for him to fulfil, only that it is impossible for him to fulfil (M V Yorke Motors v. Edwards, above; Law Kwok Hung v Tse Ping Man & Another [1999] 4 H.K.C. 397 at 407F-I)”.

100.  As explained in paragraph 74 above, the Appeal Decision noted the following undisputed facts: “(1) [P]將合共200多萬港元以支票存入[D]之銀行戶口；(2) [D]從他銀行戶口提取絕大部分款項；(3) 他提取款項之後離開香港並失去聯絡一段長時間(停用電話及搬離住址) ……” There was no explanation about what happened to the funds D took with him to Mainland China in 2012. If D alleged it was expended on his restaurant business that later collapsed, there was no objective or documentary evidence of the same. D did not even produce copies of his bank statements or insurance policies.

101.  It was said D’s 2^nd Means Test Report in May 2016 gave some idea of his current financial position. I have a few observations. First, the 1^st and 2^nd Means Test Reports dealt with disposable income and disposable capital in the manner prescribed by the Regulations and did not give D’s whole financial picture (see paragraph 86 above). Secondly, the 2^nd Means Test Report was a dated report and did not reflect D’s current financial status. Thirdly, the 2^nd Means Test Report did not reflect D’s ability to raise funds as evidenced by the ease with which he secured the bank loan in June 2016 without need for putting up any security or collateral. D also did not explain how he was able to service the monthly repayment of $5,468 for such loan when he claimed his wife’s monthly income of $7,000 was used to pay for the mortgage loan of $1,400 and living expenses for 3 adults and 2 children. Fourthly, D was silent as to the outstanding balance of his mortgage loan of $220,660 and the current value of D’s Address. However, it appeared D’s Address had significantly increased in value since paragraph 3 of the Lam Order imposed a reserve price of $2,300,000 for forced sale of such property by public auction. There was no reason why D could not have raised funds by further mortgage or re-mortgage of D’s Address. In all circumstances, I am wholly unconvinced D was unable to pay any financial condition because of impecuniosity.

(f) Condition to be imposed

102.  Bearing in mind the Judgment was irregular but given D’s irresponsible conduct and inaction/delay, the prejudice to P who had waited a decent period for D to take action before taking steps to enforce the Charging Order Absolute by application for an order for sale, and also the risk of future enforcement, I agree it would be appropriate to impose financial condition but not for the whole Judgment Sum to be paid into court. Whilst D should not be shut out from defending the present action, the aforesaid factors and considerations, especially the lack of credible reason for D’s inaction/delay over a long period of time, I consider it just that a financial condition in a substantial amount be imposed and the appropriate quantum would be 75% of the Judgment Sum.

X. CONCLUSION

103.  In the circumstances, I grant the following orders:

(a) the Judgment, Charging Order Nisi and Charging Order Absolute be set aside on condition that D pays 75% of the Judgment Sum into court within 35 days from today;

(b) upon compliance with (a) above, leave is granted for D (i) to file his AS within 14 days thereafter, and (ii) to file/serve his Defence within 28 days thereafter;

(c) upon compliance with (a) above and subject to (d)-(e) below, there be a costs order nisi that (i) P do pay D costs for signing the Judgment and costs of the Summons, and (ii) costs of P’s application for the Charging Order Nisi and Charging Order Absolute be costs in the cause;

(d) there be no order as to costs of and occasioned by the hearing before Master Hui on 16 May 2017;

(e) there be a costs order nisi that D do pay P costs of and occasioned by the Hearing;

(f) upon non-compliance with (a) above within the prescribed time and subject to (d) above, there be a costs order nisi that D do pay P costs of and occasioned by the Summons.

I will deal with (d) above in Part XI below. In respect of (e) above, there was no reason why costs should not follow event when P sensibly restricted argument to the matter of the Condition at the Hearing.

104.  Ms Yu asked me to deal with costs in relation to HCMP31/2016 upon setting aside the Judgment and Charging Order Absolute. If D complies with the condition in paragraph 103(a) above within the prescribed time, of course P will not be able to secure or retain possession of D’s Address or to sell such property under the order for sale in the Lam Order. However, D did not apply before this court in HCMP31/2016 to formally set aside the Lam Order or to ask for formal disposal of costs in those proceedings before this court. I do not consider it appropriate to make orders in relation to costs in HCMP31/2016 when those proceedings were not before me. The parties should come to some sensible agreement on costs should D comply with the condition in paragraph 103(a) above. If this cannot be resolved amicably, either party may apply by summons to this court for a short hearing with 30 minutes reserved without filing/serving any affidavit.

105.  I cannot leave the issue of costs without saying a few words on the hearing bundle. The hearing bundle was perplexing in that the exhibits were put in chronological order of the documents exhibited and not in the order of the exhibits specified in D’s 1^st and 2^nd Affs and P’s Aff. This was unhelpful as it made it quite impossible to look for a relevant exhibit unless the reader scrolled through the index in front every time. Indeed, Ms Yu suffered the same difficulty when she tried to find an exhibit in the course of her oral submissions.

106.  I have debated how I should deal with costs in relation to such unhelpful bundle. On this occasion, given the cost order nisi in paragraph 103(e) above, I have refrained from making a separate order of costs in relation to the hearing bundle. However, practitioners are reminded that the duty to prepare a useful hearing bundle to facilitate the court (who may be reading the papers on the case for the first time) and to the parties in dealing with the application/hearing is of fundamental importance in the administration of justice and in serving the CJR goals of effectiveness and efficiency in modern litigation. The advocates should also be alert to any defects in the hearing bundle (which they must note when preparing written submissions), and should forthwith arrange to have the defects rectified as soon as possible prior to the hearing. To ignore the problems and simply work on a poorly prepared bundle is, quite simply, unhelpful. In future, the court will not smile kindly on unhelpful or poorly prepared hearing bundles that may be visited with costs sanctions that may not necessarily fall on the lay clients.

XI.  RESERVED COSTS UNDER HUI ORDER

107.  Applications to set aside irregular judgment (especially when the issue as here is confined to whether a condition ought to be imposed) are commonplace in hearings before masters. There is no question that masters have jurisdiction before hear such applications.

108.  The Kwok Order adjourned the Summons for substantive hearing to a date to be fixed in consultation with counsel’s diaries with 3 hours reserved. There is no express direction that the hearing should be heard before a judge or master, and as explained above a master clearly has jurisdiction to hear the Summons. Indeed, notwithstanding the Kwok Order, Master Ho and Master M Wong dealt with applications for extensions of time in relation to directions granted under the Kwok Order (see paragraph 22 above).

109.  The parties attended before the Listing Clerk and fixed the substantive hearing of the Summons before Master Hui on 16 May 2017. Ms Chan and Ms Yu were briefed to appear at such hearing. The hearing bundle was prepared, served and lodged. Skeleton submissions were also lodged and served by both counsel. When counsel and their instructing solicitors appeared before the learned master on 16 May 2017, both sides were quite ready to proceed with substantive arguments. However, Master Hui took the view it must have been implicit in the Kwok Order that the hearing of the Summons should be heard by a judge and not a master. I am unable to so read the Kwok Order. But be that as it may, both Ms Yu and Ms Chan informed this court at the Hearing that they both urged upon Master Hui to hear them as (a) the learned master had jurisdiction to hear the Summons, (b) they were quite ready to proceed, (c) court hearing time had been allotted for substantive hearing of the Summons that day and (d) irrespective of any view taken of the Kwok Order both parties had no objection for the Summons to be heard by a master. Master Hui did not accede to such submissions, and made no order in respect of the Summons with costs reserved. I do not understand why the learned master did not deal with costs of the hearing before him since the decision to make no order on the Summons did not turn on the ultimate merits of the Summons and was a matter privy to him rather than the eventual tribunal for the substantive hearing of the Summons.

110.  Indeed, D tried to ameliorate the consequences of the Hui Order by having his solicitors write to P’s solicitors on 19 May 2017 proposing “in light of the observations made by Master during the hearing that implied in paragraph 4 of [the Kwok Order] is a direction that the hearing be fixed before Judge and not Master” to file a consent summons for the Summons to be heard before a master.  But no doubt as a matter of prudence arising from Master Hui’s observations that instilled concern over the implied effect of the Kwok Order (although I do not read such order that way), P’s solicitors replied on 23 May 2017 that it would be better to re-fix the hearing before a judge as soon as possible.

111.  Thus, the consequence of the Hui Order was that costs incurred by both parties for the hearing on 16 May 2016 were wasted, and the hearing of the Summons was deferred for 3½ months until the Hearing on 30 August 2017. By the time the Summons came before this court, there was, of course, no help for it (as both Ms Yu and Ms Chan recognised and accepted) but to grant the cost order in paragraph 103(d) above. Given the pragmatic, efficiency-oriented and cost-saving CJR culture which should have prevailed by now, it is, however, a sad waste of time, cost and effort to adjourn when the parties were ready to and indeed wished to proceed, and when the tribunal had hearing time and jurisdiction, and if there was any concern (which I disagree) all that was needed was an order by consent for the Summons to be heard by the master (which again would be a matter within the jurisdiction of the master).