MGM GRAND PARADISE LTD v. CHIU TAK WAH

HCA 259/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 259 OF 2012

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J U D G M E N T

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Introduction

1.  This is an application by the Defendant for the following orders, as set out in his summons:-

(i) The default judgment obtained by the Plaintiff (“Default Judgment”) be set aside on the ground that, among other things:-

(a) The Default Judgment is irregular as the Defendant did not reside or work at the address at which the writ was served, and the Defendant was out of Hong Kong at all the material times;

(b) There was no proper service of the writ on the Defendant and he was not aware that there had been these proceedings against him at the time when the Default Judgment was entered;

(c) The appropriate forum, for these proceedings is Macau and not Hong Kong;

(d) The Defendant has good defence against the Plaintiff’s claim;

(ii) All the proceedings in this action in Hong Kong be stayed in favour of the Courts in Macao;

(iii) Alternatively, the Defendant be given leave to file and serve Defence to the Plaintiff’s Statement of Claim dated 20 February 2012 within 28 days hereof, and the Plaintiff to file and serve Reply within 28 days thereafter (if any).

Background

2.  The Plaintiff carries on the business of a licenced casino (“Casino”) in Macau.  By a marker signing privileges application/agreement dated 15 October 2011 (“Loan Agreement”)[1], the Plaintiff granted to the Defendant a line of credit for the sole purpose of enabling the Defendant to engage in gambling activities in the Casino subject to the terms and conditions contained in the Loan Agreement.

3.  It is the Plaintiff’s case that the Defendant has failed to make full repayment of the loan granted by the Plaintiff to him of a total sum of HK$9,301,500.

4.  Pursuant to the terms of the Loan Agreement and prior to the drawing on his line of credit, the Defendant had provided a blank cheque to the Plaintiff drawn on Hang Seng Bank bearing number 348946 as security (“Cheque”).  The Cheque was then dated 15 December 2011 with the sum of HK$9,301,500 filled in, in purported payment of the Defendant’s indebtedness to the Plaintiff.  The Cheque was presented by Plaintiff on 16 December 2011 for payment pursuant to the provision of the Loan Agreement, but was later returned by the bank unpaid and marked “Account Closed”.

5.  The Plaintiff issued the writ herein on 20 February 2012 (“Writ”). 

6.  The Writ was served in the following manner:-

(i) By inserting a sealed copy of the Writ on 20 February 2012, into the letter box of the last known business address of the Defendant in Hong Kong at Room 3, 5^th Floor, Hong Kiu Building, 311-313 Nathan Road, Kowloon (“Nathan Road Address”), which was the registered office of a company called Richful International Investment Limited (“Richful”), of which the Defendant is a director.

(ii) By posting a sealed copy of the Writ by registered post in an envelope duly prepaid and addressed to the Defendant at the Nathan Road Address.  The mail tracking service of the HK Post confirmed that the sealed copy Writ so sent to the Defendant had been delivered to the Defendant on 24 February 2012.

7.  The Plaintiff obtained the Default Judgment on 22 March 2012, no notice of intention to defend having been given by the Defendant.

8.  A sealed copy of the Default Judgment was then served by post on the Defendant c/o Richful at the Nathan Road Address on 23 March 2012.  There being no reply, on 16 April 2012, the Plaintiff applied for an examination order of the Defendant.

9.  The examination order was granted by Master De Souza on the 3 May 2012 (“Examination Order”).

10.  Thereafter the Plaintiff’s solicitors attempted personal service of the Examination Order on the Defendant at the Nathan Road Address.  After unsuccessful personal service, the Plaintiff’s solicitors conducted an updated company search against Richful on 16 May 2012.

11.  It was then found that Richful had filed a notification of change of the office address at the Company Registry on 9 May 2012 changing its registered address to an address at Flat A-B, 15/F, Real Sight Commercial Building, 122 Woosung Street, Jordan (“the Woosung Street Address”) with effect from 6 December 2011.

12.  The Plaintiff’s solicitors also conducted a business registration search of Richful on 18 May 2012 and this revealed that the registered office of Richful had been updated to the Woosung Street address on 7 May 2012.

13.  Personal service of the Examination Order was then attempted on the Defendant at the Woosung Street Address which was unsuccessful.  It was found at the time of attempting personal service the name of the occupier of the Woosung Street Address was shown as “Budaoweng Group 不倒翁飲食集團” (“Budaoweng Group”).

14.  On 29 May 2012 the Plaintiff’s solicitors applied for service of the Examination Order on the Defendant by way of substituted service.

15.  Finally, on 5 June 2012 the Defendant’s solicitors filed a notice to act for the Defendant.

16.  On 6 June 2012, the Defendant issued a summons seeking various orders as set out in paragraph 1 hereof (“the Summons”). The Summons was stated to be issued under:-

(i) Order 2 Rule 2 of Rule of High Court (“RHC”)

(ii) Order 12 Rule 8 of RHC

(iii) Order 13 Rule 9 of RHC and

(iv) Inherent jurisdiction of the High Court

Defendant’s Application to Amend the Summons

17. In relation to the Defendant’s application under Order 12 Rule 8 is concerned, Mr Lai, on behalf the Plaintiff, has submitted that the Defendant has failed to obtain leave under Order 12 Rule 6(1) to give late notice of intention to defend.

18. As a result thereof, the Defendant issued a further summons on 21 September 2012 to seek leave to amend the Summons to include an application for leave to give notice of intention to defend.  It is unfortunate that the Defendant’s summons for leave to amend itself contained further typing errors.

19. Mr Lai has also attacked the Summons as being defective as the ground of the application has not been set out in the Summons pursuant to Order 12 Rule 8(3) of RHC.

20. The Summons was clearly defective in form and as pointed out by Mr Lai even the proposed draft amended summons is defective as it still does not set out the grounds.

21. However, the grounds of the Defendant’s application under Order 12 Rule 8 are clearly set out in the Defendant’s affirmations and are made known to the Plaintiff.  Having regard to the underlying objectives set out in Order 1A, I agree with Mr Ma, Counsel for the Defendant, one should look at the substance rather than the form and also the relevant and substantive merit of the Defendant’s application.

22. I will therefore grant leave to the Defendant to amend the Summons to cure the above defects, with service of the amended Summons be dispensed with.

23. Mr Lai has also argued that by including in the Summons an application to set aside the Default Judgment on defective service and including an alternate application for leave to file the Defence within 28 days, the Defendant has invoked the jurisdiction of the Hong Kong Court.  Mr Lai has referred this Court to the case of Chan Kiu v Lee Fat Trading as Fai Kee Timber[2] in which the late Jerome Chan J commented that no one could be allowed to blow hot and cold at the same time and no defendant could be allowed to invoke the court’s jurisdiction to defend the action on merit whilst denying the Court’s jurisdiction over him. In the case of Chan Kiu, the defendant took out a summons to set aside the judgment and further proceeded with the prosecution of his summons and took part in the assessment of damages, although under protest and these were held to be steps taken inconsistent with the defendant’s challenge to jurisdiction.

24. I agree with Mr Ma that the circumstances of the present case are different from that of the case of Chan Kiu.

25.Mr Ma has in the skeleton submissions asked the Court to deal with the Defendant’s stay application under Order 12 Rule 8 first because should the Court accept the present proceedings be stayed, the Default Judgment would be liable to be set aside for lack of jurisdiction and/or forum non conveniens.

26.The application for leave to file the Defence is expressively made in Defendant’s summons in the alternative.  Again the attack here by Mr Lai is more on technicality and the form of the Summons as the Summons has failed to set out clearly that the Defendant is seeking to proceed with the stay application first.  As Jerome Chan J said in the Chan Kiu case, the issue judged objectively was whether the defendant had conducted himself in such a way that he had submitted himself to the jurisdiction[3]. I am of the view that the Defendant herein has not submitted to jurisdiction by issuing the Summons in the form it was.

The Stay Application

27. I now turn to the substance of the Defendant’s application.  The Defendant’s stay application relies on the following two grounds:-

(i) Both the Plaintiff and the Defendant at the material times had agreed to submit to the exclusive jurisdiction of the Macau Court;

(ii) Macau Court is a more appropriate and convenient forum for the trial of the action and Hong Kong is not.

Exclusive Jurisdiction of Macau Court

28. Mr Ma submits that the Plaintiff and the Defendant have unequivocally submitted to the exclusive jurisdiction of the Macau Court.  The relevant provisions are Clauses 15 and 16 of the Loan Agreement which provide, among other things, as follows:-

“15. Law : I agree that the Marker Signing Privileges Agreement and any draws made against my line of credit pursuant to it are exclusive governed by the laws of Macau SAR”

“16. Jurisdiction. I agree with any dispute I may raise in connection with the lawfulness, execution, validity, enforceability, performing or interpretation of the Marker Signing Privileges Agreement or of any draws made against my line of credit is submitted exclusively to the jurisdiction to the Courts of Macau SAR.  Notwithstanding, I agree that the Marker Signing Privileges Agreement and/or any personal checks, promissory notes or any other credit instructions provided by me pursuant to it or in connection with its performance may be enforced by MGM Macau towards the collection of any outstanding credit balance in the Courts of Macau or of the jurisdiction where I reside or of any other jurisdiction where my assets may be found.”

29. Further, Mr Ma submits, the marker No. M009788 (“Marker”) signed by the Defendant states as follows:-

“(4) that the Laws of Macau SAR exclusively apply to this marker and

(5) the exclusive jurisdiction for any dispute relating to this marker shall be courts of Macau SAR”

30. It is the Defendant’s case that the Marker is an integral part of the Loan Agreement in that the Loan Agreement cannot simply be a “free-standing” contract, as the Marker is expressly referred to in Clause 4 of the Loan Agreement and also the Loan Agreement is in fact headed “Marker Signing Privileges Application/Agreement”.  Further, the Loan Agreement and the Marker were both signed on the same date on 15 October 2011.  Mr Ma further submits that as the Plaintiff has relied on the date of signing of the Marker for calculation of interest rate, the effect of the Marker must be “anticipated and appreciated” by the Plaintiff at the time.

31. Mr Lai, however, reiterates that the Plaintiff is relying only on the Loan Agreement and the Marker is relied on only as evidence to prove that the Defendant has used his credit facilitates to the extent of HK$10,000,000.

32. It is quite clear from paragraph 7 of Statement of Claim that the Plaintiff’s claim is based on the Defendant’s breach of the Loan Agreement alone.

33. The issue now taken by Mr Ma appears to be the same issue taken by the defendant in the case of Wynn Las Vegas LLC v Mong Henry (also known as Meng Hengli)[4]. The defendant in that case had also relied on a similar clause in a marker which said:-

“I acknowledged that the debt for which this instrument is issued was incurred in Nevada; agree that Nevada law governs the debt and this instrument; submit to the exclusive jurisdiction of any court, state of federal, in Nevada…”[5]

This clause was relied on by the defendant in the Wynn Las Vegas case to argue exclusive jurisdiction of the Nevada court. 

34. Pursuant to the credit agreement in the above case the defendant had stated: “I agree to sign credit instrument (ie checks) in the amount of the draw” against his credit line.  The marker was stated to be a cheque and Poon J said in the above case that plainly the marker was the credit instrument that the defendant signed for obtaining the credit advantages in that case[6].

35. Similarly, in the present case the Defendant has agreed: “Each time I request a draw, I will sign a marker on a form provided to me by MGM Macau in the amount of the draw requested.  In exchange for the marker signed by me, MGM Macau will issue to me non-negotiable chips (“NN Chips”) in the amount of the marker signed.”[7]

36. In the present case, the Marker bears the words “Check Number M009788”[8]. In my view, the Marker is clearly the credit instrument that the Defendant signed for the credit advances under the Loan Agreement.  As in the above Wynn Las Vegas case, the Marker in the present case is only evidence of the advance made under the Loan Agreement.

37. In view of the above, the Defendant’s reliance on the exclusive jurisdiction clause on the Marker cannot succeed.  Mr Ma has said admittedly if only clauses 15 and 16 of the Loan Agreement are considered such clauses may well be considered as non-exclusive jurisdiction clauses.  This is quite obvious as the Defendant himself has agreed that the Loan Agreement may be enforced by the Plaintiff in the jurisdiction where he resides or in any other jurisdiction where his assets may be found.  Hence, the Defendant’s application for a stay based on the exclusive jurisdiction of Macau must fail.

Forum Non-conveniens

38. The legal principles on stay of proceedings based on forum non-conveniens have been clearly set out in Spiliada Maritime Corp v Cansulex Ltd[9]. The 3 Stage principles are well known and not disputed.

Stage 1: Appropriate Forum

39. Mr Ma has submitted that Hong Kong is not the natural or appropriate forum and that Macau is clearly or distinctly more appropriate than Hong Kong for the following reasons:

(i) The Loan Agreement and the Marker are governed by the Macau SAR Laws, both documents performed and executed in Macau;

(ii) All relevant events, namely signing, gambling, lending, actual spending on the games etc took place in Macau SAR at the material times;

(iii) Plaintiff is a company incorporated under Laws of Macau whereas it is the Defendant’s case that his proper address is also in Macau and he has expressly told the Plaintiff about the same at the material times.  All relevant key personnel and potential witnesses reside in Macau.

(iv) Further, the Loan Agreement is prima facie not enforceable under Hong Kong Laws on the grounds of the illegality and violation of public policy.

40. It is not disputed that the Loan Agreement and the Marker were signed in Macau and the gambling took place in Macau in the Casino.  It is further not disputed that the Plaintiff is a company incorporated under the Laws of Macau. The Plaintiff has made it clear that all its officers and staff will be able to come to Hong Kong to take part in the proceedings and any deponent of an affidavit can be cross-examined here.

41. So far as the Defendant’s proper address is concerned, although the Defendant did put down an address in Macau in the Loan Agreement, he also put down therein that he was a director of Budaoweng and gave a HKID number.  The copy of his name card bore the name of the Budaoweng Group and several addresses in Hong Kong[10]. The Defendant has reported his Nathan Road Address to the Companies Registry and the Business Registry in Hong Kong for a number of years and even the new Woosung Street Address is also in Hong Kong.  The Defendant is the single director and the single shareholder of Richful which was incorporated in Hong Kong and the Defendant holds a Hong Kong Identity Card. 

42. In the Writ the Plaintiff did put down the Defendant’s Macau address and had tried to serve the demand letter there but unsuccessful.  The Plaintiff has conducted a search of the address and found it was/is not registered in the Defendant’s name.  All the other addresses that the Plaintiff have are those of the Defendant’s in Hong Kong.  Further, on another writ of summons issued against the Defendant by another casino which the Plaintiff recently obtained from public record, the Defendant’s address thereon was one in Temple Street in Hong Kong.  Also, the Cheque which the Defendant had given to the Plaintiff as security was also drawn on a bank in Hong Kong.

43. The Defendant has alleged that it was the Plaintiff or its staff who asked him to provide an address in Hong Kong and when told that the Defendant did not work or live in Hong Kong, the Defendant said he was told to just give an address of a friend in Hong Kong.  This was denied by the Plaintiff.

44. Mr Lai has pointed out that the Defendant has very little connection to Macau and apart from one address given by him on the Loan Agreement there is no sufficient evidence of any other connection with Macau.

45. Another point which Mr Ma has argued is that if the proceedings were to continue in Hong Kong this would require evidence to be given by an expert on Macanese Laws and the central issues of the Plaintiff’s proceedings concerned the construction of Articles 8.2 and 8.6 of Ordinance No. 5/2004 of Macanese Law (“Ordinance”).

46. The Defendant’s case is that the Loan Agreement or a sample/proforma thereof has not been submitted to the Macanese Government for approval under Article 8.2 of the Ordinance, and failure to do so would render the Loan Agreement null and void by virtue of section 287 of the Macau Civil Code. 

47. Mr Ma has further submitted that, under Article 8.6 of Ordinance, the Loan Agreement must contain relevant provisions that the parties have agreed to surrender to be governed by any jurisdiction outside Macau and to be bound by the laws of Macau SAR, and thus, by taking out the present proceedings in Hong Kong, the Plaintiff is prima facie in breach of the said Article 8.6.

48. On the other hand, it is the Plaintiff’s contention that the entire Article 8 of the Ordinance does not apply to the Loan Agreement or any agreement whereby credit is extended by the Macau casino to individual patrons.

49. Article 8 of the Ordinance has in fact been considered at length in a judgment by Chu J (as she then was) in the case of Wynn Resort (Macau) S.A. v Mong Henry[11].

50. As pointed out by Chu J, Article 8.1 of the Ordinance expressly relates to “Promoter Contracts” and “Agency Contracts”.  It was argued by the defendant in the above Wynn Resort (Macau) case that it did not necessarily follow that the scope of the remaining clauses in Article 8 were limited to only those two types of contracts.  Chu J has, however, said that although Article 8.2 contains no express words that limited its scope to Promoter Contracts and Agency Contracts, Article 8.2 is one of a series of clauses within an Article dealing with contract[12]. Further, according to Chu J, Article 8.2 cannot be read in isolation in establishing what contracts are covered by it, and that the references to “contract” in Articles 8.2 to 8.7 should bear the same meaning as that in Article 8.1 and references to “document” are references to documents supplemental to the two types of contracts referred to in Article 8.1[13]. Chu J then concluded Article 8.2 of Ordinance Number 5/2004 had no application to a credit agreement made between a concessionaire or sub-concessionaire and a gambler[14].

51. Mr Ma has sought to distinguish the facts of the above case from the present one and submits that Chu J’s judgment only concerns Article 8.2 and not Article 8.6 or the rest of the Article 8.  This is clearly not correct as seen from above and the judgment.

52. Mr Ma then sought to argue that as the Defendant has signed a settlement form headed “Promoter Settlement” and “Junket Promoter Final Settlement”[15], this means the Loan Agreement is actually a “Promoter Contract”.  However, as clearly pointed out by Chu J in her judgment in the above case, only contracts made between a gaming promoter and concessionaire or sub-concessionaire are called “Promoter Contracts”[16].

53. There is no evidence that the Defendant is a gaming promoter or it engages in credit business.  He has not produced copy of any licence of a gaming promoter.  The Defendant is in my view simply a gambler or a punter who is the borrower under the Loan Agreement, and not a gaming promoter.

54. Mr Ma has referred the Court to several authorities to support his submission as the case involves Macanese Law, the appropriate forum is Macau. In particular he refers to the following paragraph in Dicey and Morris “The Conflict of Laws”[17]:- “If the legal issues are straight forward, or if the competing fora have domestic forum which are substantially similar, the government law will be a factor of little significance.  But if the legal issue are complex, or the legal systems very different, the general principle that a court applies its own law more reliably than does a foreign court will help to point to the more appropriate forum, whether English or foreign…..”

55. Mr Ma has also referred this Court to what Chu J indicated in her earlier judgment[18] in the same Wynn Resort (Macau) case concerning the defendant’s application for leave to appeal out of time, that in relation to the merits of the intended appeal, she would have granted leave had it been made within time :-

“In particular, I had in mind Miss Lam’s submissions on the risk of injustice that may result from the Hong Kong court reaching a wrong conclusion on central issue of the construction and application of an Article 8.2 of Ordnance 5/2004, a matter has thus far not received judicial attention in the Macau SAR and Hong Kong and may involve appreciation of the policy and intention underlying the Ordinance”.

56. Notwithstanding her above earlier comments which were obiter Chu J subsequently went on in the same case to consider the construction of Article 8 after, in particular, considering the Macanese expert evidence on each side and the policy and intention underlying the Ordinance and she gave summary judgment for the plaintiff in the Wynn Resort (Macau) case.  In the present case, as pointed out by Mr Lai, the Defendant has not issued any proceedings against the Plaintiff in Macau in relation to the proper construction of Article 8 of the Ordinance. Further in the present application the Defendant has not filed any expert opinion evidence on Article 8 of the Ordinance. 

57. As observed by Deputy High Court Judge Lok in the case of MGM Grand Paradise Limited v Wong Sing Wah[19], it has been repeatedly emphasized in various judicial decisions that the Hong Kong Court is accustomed to deal with aspects of foreign law.

58. Mr Lai has also referred this Court to what Mr Recorder G Ma, SC (the he then was) has said in the case of Rambas Marketing Co., LLC v Chow Kam Fai[20] that:

“The courts in Hong Kong (particularly the Commercial Courts and the Admiralty Court), given the international identity and nature of the type commercial litigation and litigants here, are often accustomed to dealing with aspects of foreign law.  It does not therefore follow at all that once it is shown that issues of foreign law arise, that this will necessarily be a powerful, much less a decisive, factor in favour of a stay.”

59. Further, credit agreements similar to the Loan Agreement have been enforced in Hong Kong in a number of cases.  Having considered all the circumstances I conclude that the Defendant has not discharged the burden of showing that Hong Kong Court is not the natural or appropriate forum and that the Macau Court is clearly and distinctly the more appropriate forum to deal with the present action.

Stage 2: Deprivation of judicial advantage

60. Having come to my conclusion under Stage 1 above, I do not in fact need to proceed to Stage 2.  I will just mention briefly that Mr Lai has submitted that the Plaintiff will be deprived of judicial advantages if the present action is not tried in Hong Kong.  The Defendant has filed an affirmation from a witness Madam Tse who lives in Hong Kong and the Plaintiff will not be able to summonse Madam Tse to go to Macau to give evidence.  The Defendant has provided the Plaintiff the Cheque drawn on his bank account at Hang Seng Bank.  It is not clear whether this bank account was closed before or after the Cheque was presented. The Plaintiff has submitted that there is no way for the Plaintiff to summonse the bank officer to go and give evidence in Macau.

61. The Plaintiff’s witnesses are all willing to come to Hong Kong to give evidence.  So far the Defendant has not provided any evidence about any assets in Macau.  Mr Lai has submitted that there is no treaty between Hong Kong and Macau in relation to enforcement or reciprocal enforcement of judgment and if the Plaintiff were to obtain a judgment in Macau against the Defendant, the Plaintiff would need to issue a fresh action again in Hong Kong for the enforcement of the Macau judgment.

62. Having considered Mr Lai’s submissions, I am satisfied that the Plaintiff has demonstrated to this Court that it will be deprived of judicial advantages if the present action is not tried in Hong Kong.

Stage 3: The Balancing Exercise

63. In the Rambas case Mr Recorder G Ma, SC (as he then was) has also said as follows:-

“There is of course the final stage of the court being satisfied in the overall circumstances and justice of the case whether it would be right to stay the action.  It is, at this stage that the court will consider features such as the conduct of the parties.  For example, the applicant may has led the other party to believe that it was willing to litigate in Hong Kong or had taken steps to submit to the jurisdiction so that it has waived the right to apply for a stay or that would be unconscionable in the circumstances.”[21]

64. Mr Lai has asked this Court to consider the conduct of the Defendant in the present case which includes late reporting of his addresses to the relevant authorities, providing a cheque from a bank account which is now closed.  Mr Lai has further argued that the handing out of a name card with Hong Kong addresses has led the Plaintiff to believe that Hong Kong is the only natural forum to litigate with the Defendant.

65. Although it is not necessary for me to consider Stage 3 in view of my conclusions under Stage 1 and Stage 2 above, I am of the view that in any event in the overall circumstances and justice in this case it would not be right to stay this action.

Irregular Judgment

66. It is Defendant’s alternative contention that the service of the Writ was defective under Order 10 Rule 1(2) of RHC as the Defendant was not within jurisdiction.

67. Under Order 10 Rule 1(2), the Defendant must be within the jurisdiction at the time the Writ was served.  The letters containing the sealed copy of Writ were inserted and posted on 20 February 2012.  The affirmation as to service stated that in the opinion of the service clerk the copy of the Writ would have come to the knowledge of the Defendant within 7 days thereafter, i.e. before 28 February 2012.  From the travel record produced by the Defendant[22], he left Hong Kong on 2 February 2012 and returned to Hong Kong on 2 March 2012. He was therefore not within jurisdiction at the material times.  The Default Judgment should be set aside as of right.

68. The Plaintiff has asked this Court to impose conditions upon setting aside the Default Judgment.

69. This Court has residual discretion to impose terms in setting aside an irregular judgment under Order 13 Rule 9 of RHC:- 

“Although the Court will not consider the merit 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 judgment by having regard to the parties’ conduct[23]….”

70. The Plaintiff’s complaints of the Defendant’s conduct have been mentioned earlier.

71. Mr Lai has referred this Court to the case of Po Kwong Marble Factory Limited v Wah Yee Decoration Co Ltd. [1996] 4 HKC 157.  The problem on service in that case was held to be 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 obtained would be an empty one. The default judgment was set aside on terms that money was to be paid into court.  I note that in that case the defendant had already paid the sum to the plaintiff and the plaintiff had no objection to the payment into Court.  I also note,  however, Nazareth V-P had said in that case that he had misgivings about the propriety of setting aside an irregular judgment conditionally.

72. Mr Ma has referred the Court to the case of Wai Kam Foo Daniel and Wai Kam Wah Raymond[24]. In the case of Wai Kam Foo, Daniel, Master Marlene Ng has set out a number of cases in relation to how the court has exercised its discretion on whether to impose terms.  As Master Ng has said each case must be decided on its own fact.  She went on to say further that:-

“what is the evidence from the aforesaid of the authority, she said the court will be concerned to see whether the defendant’s conduct has been shown to be an abuse or whether he has contributed and whether he has contributed to what went wrong with the service originating process.”[25]

73. Mr Ma has further referred to the case of Desirable International Fashion Limited (in liquidation) v Chiang Shi Chau[26] where Waung J rejected the plaintiff’s suggestion that delay in applying to set aside and the risk of obtaining an empty judgment constituted sufficient reasons for imposing conditions for setting aside the irregular judgment.

74. Waung J in the Desirable case had also made it clear that the exercise of discretion was not restricted and he had said as follows:-

“(i) The court should not go into the merits of the defence in considering the setting aside of irregular judgment, as otherwise the distinction between irregular and regular judgment disappears and the defendant of an irregular judgment will be in an invidious position of having to go fully into the merits of the defence and such a defendant would be worse off as result of no proper service having been effected on him;

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

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

75. Mr Lai has relied on the dishonoured Cheque as part of the Defendant’s conduct but this issue in my view goes to the merits of the defence.

76. Although the Defendant filed the Notification of Change of registered office of Richful only on 9 May 2012, 5 months after the effective date of change on 6 December 2011, the Annual Return filed on 23 March 2012 already showed the new Woosung Street Address.  There was no sufficient evidence that the Defendant had “disguised” the registered office of Richful as in the Po Kwong case, or that the Defendant was taking steps to manufacture a case of defective service as in the case of Kerry Freight (Hong Kong) Ltd and Del Prado Asia Ltd[27].

77. As has been said, there is always a risk in a plaintiff choosing something other than personal service for the service of a writ.    Having considered all the circumstances I will set aside the Default Judgment without imposing any terms.

78. I further give leave to the Defendant to file and serve a Defence to the Plaintiff’s Statement of Claim dated 20 February 2012 within 28 days hereof, and the Plaintiff to file and serve Reply within 28 days thereafter (if any).

79. The Defendant has failed in his stay application and costs would normally following the event.  As for the costs of the setting aside of the Default Judgment, the usual order is for the Plaintiff to bear his own costs of signing the irregular judgment and to pay the Defendant’s costs of the application to set aside[28]. Costs of amending the Summons should normally be borne by the Defendant.  Most of Mr Ma’s and Mr Lai’s submissions, whether written or oral, are in connection with the stay application.  Having considered all the circumstances, I will order overall the Defendant to pay 80% of the Plaintiff’s costs, which include costs of the amendment.

80. This is an order nisi to be made absolute and final after 21 days. The Plaintiff is to submit a statement of costs for summary assessment within 21 days after order made final.

[1] DB: 213

[2] Reasons for Judgment dated 2 May 1997, HCPI 126 of 1995

[3] Page 10, Chan Kiu case

[4] Decision dated 24 June 2009 in HCA 190/2009

[5] Para 12, Wynn Las Vegas case

[6] Para 14 Wynn Las Vegas case

[7] Clause 4, Loan Agreement

[8] DB:231

[9] 1987 AC 460

[10] DB: 234

[11] Judgment dated 12 February 2010 in HCA 192/2009

[12] Para 33, line F, page 12, judgment dated 12.2.2010, HCA 192/2009

[13] Para 33, as above

[14] Para 37, as above

[15] DB:373

[16] Para 17, page 5, judgment

[17] 13^th Edition at 12-029 pages 478 to 479

[18] Judgment of Chu J, dated 10 August 2009, HCA 192/2009

[19] Para 17, page 8-9, Reasons for Decision dated 21 May 2012, HCA 2140/2011

[20] Judgment dated 16 May 2001, HCA 10190/2000, at page 23

[21] Page 4 of Judgment dated 16 May 2001, HCA 10190/2000

[22] DB: 354

[23] Hong Kong Civil Procedure 2012 Vol. 1, para 13/9/10, page 220

[24] Judgment dated 23 November 2012 of Master Marlene Ng in HCA 957/2010

[25] Para 93, page 32 line R

[26] [1997] 3 HKC 170

[27] Judgment dated 26 July 2005 in HCA 2660/2004

[28] Hong Kong Civil Procedure 2012 Vol 1, para 13/9/11, page 221