XCHRX WELLGLOW ASSOCIATE CO. LTD. v. NG JIT MAN

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

Action No.A2704/1995

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J U D G M E N T

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Ryan, J. :

1. In March 1995, the respondent issued a writ against the appellant to recover $1 million being, it was claimed, a loan made to the appellant by the respondent and not repaid. Service was effected by post pursuant to the rules and when no notice of intention to defend was filed, judgment in default was entered. Subsequently, the envelope containing the writ was returned to the respondent's solicitors and, very properly, the respondent had the default judgment set aside.

2. The respondent was unable to locate the appellant at his last known address in Hong Kong and proceeded to apply for an order for substituted service. That order was made and after service had been effected by substituted service and no notice of intention to defend filed, judgment in default was entered on 11th August 1995. The respondent then applied for a Prohibition Order to prevent the appellant from leaving Hong Kong and the Order was made by Master O'Donnell on 1st September 1995. That Order has subsequently been renewed each month. The appellant now applies to set aside the default judgment and to have the Prohibition Order discharged.

3. It is the appellant's case that the respondent did not make full disclosure when applying for the order for substituted service, that the judgment is therefore irregular and that the appellant is accordingly entitled as of right to have the judgment set aside. Prior to the making of the order for substituted service, Master Jones had ordered that an attempt be made to effect personal service on the appellant at his address in Tai Po. The respondent's solicitors were unable to effect such service, being told at the time by a female residing at the premises that the appellant had moved out and that she had no idea of his new address. These facts were set out in an affirmation in support of the application for substituted service. What the respondent did not reveal in the affirmation was that Mr Chan of the respondent company was aware of an address of the appellant in Macau and had in fact visited the appellant there. In addition, a Letter of Intention to sue had been sent both to that address and to the address in Tai Po. The address in Macau was a business address but nevertheless the respondent was aware that there was a chance of service being successfully completed in Macau. This should have been disclosed to the Master who may well have required an application for service out of the jurisdiction to be pursued before entertaining the application for an order for substituted service. This in my view was a material non-disclosure by the respondent.

4. Mr Kwong, who appears for the appellant, argues that such a finding means an end to the matter and that the appellant is entitled as of right to have the judgment set aside and to be given leave to defend.

5. Mr Hingorani for the respondent relies on the judgment of the Court of Appeal in Honour Finance Co. Ltd. v. Chui Mei Mei [1989] 2 HKLR 146 to argue that even if the judgment is irregular, the appellant is not as of right or ex debito justitiae entitled to have the judgment set aside. In that case, Hunter J., giving the judgment of the court, considered the two terms and came to the view at p.148 that :

"The victim of an irregular judgment therefore enjoys a confident expectation rather than a right."

He was referring to a right to have the default judgment set aside. In my view, that is the sensible approach. There would be no point in setting aside a judgment in the case where the appellant is unable to show that the defence has a real prospect of success. I therefore turn now to consider the merits of the appellant's defence.

6. There is no dispute that the appellant on 7th July 1993 signed a memorandum evidencing an agreement between the respondent and the appellant whereby the respondent agreed to advance $1 million to the appellant for a term of three weeks. It is further not disputed that the respondent remitted $1 million to a company in Beijing named Beijing Tongda Communication Engineering Co. Ltd. The defence case is that the $1 million agreed to be advanced by the respondent to the appellant was never sent by the respondent to the Beijing company on behalf of the appellant. The appellant said that he and the respondent in May 1993 set up a company called Wonderfair Limited and that this company was a joint venture with the Chinese authorities dealing with pagers. As the Chinese authorities required $1 million from both the respondent and the appellant and as at that time the appellant was short of money, the respondent agreed to lend to the appellant his share in the joint venture, namely, $1 million, and that the memorandum signed was evidence to this effect. It is the appellant's case that the respondent remitted its share to the Beijing authorities but did not, as agreed, advance and send the appellant's share, namely, $1 million.

7. The respondent, while agreeing that Wonderfair was set up with the appellant, states that this was a company dealing in tiles and has nothing to do with a joint venture with Chinese authorities in China dealing in pagers. The appellant has produced no documents to support his claim to such a joint venture. The appellant further claims that he subsequently sent his share in the joint venture to the Beijing authorities by telegraphic transfer. He has exhibited no documents to support this claim. The respondent produced copies of a debit note and a cheque to show that the appellant had paid to the respondent $21,870.55, being interest on the loan monies. The appellant denies that that payment was for interest and claims it to have been for his share in the cost of setting up Wonderfair Limited. The respondent in reply to this claim has exhibited a cheque for $50,000 paid to it by the appellant which the respondent claims is the appellant's share of the cost of setting up Wonderfair Limited. There has been no response from the appellant relating to this cheque. The cheque was drawn on CitiBank (Hong Kong) although the appellant has claimed to have had no bank accounts in Hong Kong during the relevant period. The respondent further claims that the cheque has not been presented for payment as the appellant advised the respondent that he had insufficient funds in his bank account.

8. On 19th October 1995, the appellant telephoned Mr Leung of the respondent's solicitors advising that he wished to settle the matter by paying $300,000 on 25th October 1995 and the balance of the judgment debt with interest by four monthly instalments. The appellant does not dispute that this conversation took place, his explanation being that he was finding the Prohibition Order oppressive and agreed to pay so that it would be lifted. That is an explanation which I find unbelievable. Mr Mok, a friend of the appellant who introduced him to Mr Chan of the respondent, says that prior to the issue of the writ he told the appellant of the pending action and the appellant stated that he would pay the sum claimed at a later date. Again, the appellant does not dispute that this conversation took place but says that Mr Mok misunderstood him and that what he had said was that he wished to settle the matter.

9. In his affirmation the appellant made references to the Chinese authorities and to the Beijing company. In an affirmation filed shortly before the hearing, the respondent was able to show that the appellant is the president of Tongda Communication Engineering Co. Ltd., the company to which the respondent remitted $1 million. The Tongda company is one of the companies listed on the appellant's business card. There is no evidence of the respondent having any business connection to that company whatsoever. The appellant did not reveal in his affirmation the close connection which he has with the company in Beijing and indeed he was at pains to give the impression that he had no connection whatsoever with that company.

10. The appellant has failed comprehensively to show he has a defence which has any real prospect of success.

11. The appeal to set aside the judgment is therefore dismissed. As agreed at the hearing, I will now hear counsel on the application to discharge the Prohibition Order and as to the costs order.

(T.J. Ryan)

Judge of the High Court