DU HUIZHEN v. CHEN MEI HUAN

HCA 1176/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1176 OF 2012

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J U D G M E N T

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INTRODUCTION

1.  This is the plaintiff’s appeal against two orders of Master Levy both dated 27 November 2012, whereby the learned Master, inter alia:

(1) set aside the default judgment herein dated 10 August 2012, entered by the plaintiff against the defendant; and

(2) dismissed the plaintiff’s applications for garnishee order absolute and charging order absolute.

BACKGROUND

The plaintiff’s claim herein against the defendant

2.  The defendant was the general manager and proprietor of certain casino establishments in Macau, including the Greek Mythology (Macau) Casino Group Shareholdings Ltd (“Greek Mythology”).

3.  In December 2011, upon the defendant’s instigation, an agreement was reached between Mr Jia (the plaintiff’s husband) and Greek Mythology by which certain rights to operate part of a casino was sub‑contracted to Mr Jia (the “Casino Agreement”).

4.  Subsequent to the entering into of the Casino Agreement, the plaintiff and Mr Jia repeatedly injected money into an account of the casino, and the part of the casino sub-contracted to them started operation in December 2011.

5.  Thereafter, the plaintiff and Mr Jia were asked to inject further money into the casino’s account, which they did, but later found themselves unable to make use of the liquidity maintained with the said account, as promised to them by the defendant.

6.  Upon the request of the plaintiff and Mr Jia, the defendant agreed to terminate the Casino Agreement and return to the plaintiff and Mr Jia all the monies that they had injected into the casino.

7.  After the taking of appropriate accounts, it was discovered that a sum of HK$83,800,000 was due to the plaintiff and Mr Jia upon termination of the Casino Agreement.

8.  The defendant however told the plaintiff and Mr Jia that the defendant was unable to repay the sum of HK$83,800,000 at the time, as her monies were frozen due to listing regulations.  She further asked the plaintiff and Mr Jia to lend her a further sum of HK$16,200,000, and promised to repay the entire sum of HK$100,000,000 to the plaintiff and Mr Jia, with interest, within two months.  The defendant also promised to use her properties in Macau as security for the sum.

9.  The plaintiff and Mr Jia acceded to the defendant’s request, and injected four further sums, totalling HK$16,200,000, into the casino’s account.

10.  The defendant, however, failed and refused to charge her properties as security for the amount owed to the plaintiff and Mr Jia, and even refused to answer their telephone calls.

11.  The plaintiff and Mr Jia therefore intimated that a report would be made to the Macau police.

12.  Apparently in order to dissuade the plaintiff and Mr Jia from pressing charges against the defendant, the defendant executed a loan agreement and issued five cheques to the plaintiff, apparently in lieu of using the defendant’s properties as security.

The present and related actions

13.  The plaintiff’s claim in the present action arose from two of the five cheques referred to in paragraph 12 above, both issued by the defendant to the plaintiff and drawn upon the CITIC Bank International Ltd, details whereof are as follows:

(1) 1^st Cheque: numbered 000446 dated 30 May 2012, in the sum of HK$20,000,000; and

(2) 2^nd Cheque: numbered 000447 dated 30 June 2012, in the sum of HK$20,000,000.

14.  Both the 1^st Cheque and the 2^nd Cheque were duly presented for payment but were dishonoured and returned to the plaintiff marked “Refer to drawer”.  After giving due notices of dishonour, the present action was commenced by the plaintiff claiming the total sum of HK$40,000,000 represented by the said cheques.

15.  Particulars of the other three cheques (all drawn upon the CITIC Bank International Ltd) are as follows:

(1) 3^rd Cheque: numbered 000448 dated 30 July 2012, in the sum of HK$20,000,000;

(2) 4^th Cheque: numbered 000449 dated 30 August 2012, in the sum of HK$20,000,000; and

(3) 5^th Cheque: numbered 000450 dated 30 September 2012, in the sum of HK$20,000,000.

16.  Thus, it is readily apparent that all five cheques were issued pursuant to one and the same transaction between the parties, and under exactly identical circumstances

17.  The 3^rd Cheque was the subject of the plaintiff’s claim against the defendant in HCA 1416/2012, and the 4^th Cheque in HCA 345/2013.  No action has yet been commenced in relation to the 5^th Cheque.

18.  On 19 June 2013, summary judgments were granted by Master K Lo in favour of the plaintiff in both HCA 1416/2012 and HCA 345/2013.

19.  The defendant appealed against the said summary judgments, seeking to argue that the delivery of the cheques was conditional on the non-performance of the payment by Greek Mythology under the loan agreement and that the plaintiff has not shown that Greek Mythology has defaulted on that agreement.  The defendant’s appeals were dismissed by Deputy High Court Judge Seagroatt on 28 November 2013.

20.  In the circumstances, I agree with Mr Simon K C Lam, counsel for the plaintiff, that so far as the merits of the defendant’s defence in relation to the five cheques are concerned, the matter is already res judicata.  The defendant is clearly estopped from raising any defence to the plaintiff’s claim under the five cheques, including the two cheques which are the subject matter of this action.

Service of the Writ of Summons and the obtaining of default judgment

21.  The Writ of Summons herein was served at the usual or last known address of the defendant in Hong Kong, namely, Unit 3078 , 3/F, Diamond Square, Shun Tak Centre, No 200 Connaught Road Central, Hong Kong (the “Address”), by insertion through a letter-box at the Address on 9 July 2012.

22.  The defendant disputes the manner in which the Writ was served on her.  She also alleges that she was out of Hong Kong at around that period of time, save for 20 July 2012.

23.  Significantly, it is however undisputed/admitted by the defendant that:

(1) the staff at the Address had immediate notice of the Writ;

(2) they knew that it was a “Court document”;

(3) it was immediately forwarded to the responsible person for handling; and

(4) the defendant’s solicitors were able to respond to the Writ as early as 30 July 2012.

24.  From the foregoing, although there is no express admission by the defendant to that effect, in my view an inference can be drawn on the balance of probabilities that the defendant had acquired knowledge of the Writ some time before she was admittedly within the jurisdiction on 20 July 2012.  My view is fortified by the fact that the defendant has never denied early knowledge of the existence of the Writ.  The assertion of the process server to the effect that, in the opinion of the plaintiff, the Writ would have come to the knowledge of the defendant within seven days after the date of insertion through the letter box, is never challenged or denied by the defendant.

25.  The defendant, however, chose not to file any acknowledgement of service in the action, resulting in default judgement being entered on 10 August 2012.

WHETHER DEFAULT JUDGMENT REGULAR

26.  Service of the Writ herein was effected by the plaintiff pursuant to Order 10, rule 1(2)(b) of the Rules of the High Court, whereby a writ for service on a defendant within the jurisdiction may be served by inserting through the letter box of the defendant’s usual or last known address.

27.  By Order 10, rule 1(3)(a), the date of service shall, unless the contrary is shown, be deemed to be the seventh day after the date on which the copy of the writ was inserted through the letter box.

28.  The position has been fully explained in the English House of Lords’ decision in Barclays Bank of Swaziland v Hahn [1989] 1 WLR 506.  In that case, the plaintiff issued a writ against the defendant claiming that he owed it some £12 million under a guarantee executed in Swaziland.  The defendant and his wife lived in various places, visiting their family in South Africa for part of the year and travelling in Europe.  The defendant’s wife rented a flat in England.  The plaintiff sought to effect service in England.  At about 15:30 hours on 14 April 1987, believing that the defendant was at the flat or would be there on that day, the plaintiff’s agent inserted a copy of the writ in a sealed envelope through the letter box.  The defendant arrived at Heathrow airport from Geneva at 17:27 hours, having crossed the French coast at about 17:05 hours.  Being warned that the envelope had been put through the letter box, the defendant did not go to the flat, returning to Geneva the next day.

29.  From the foregoing, it is clear that the defendant in the Barclays Bank of Swaziland case was not in England at the time when the writ was inserted through the letter box of the flat.  The House of Lords held that that did not make a difference, the crucial question is the whereabouts of the defendant at the time when he acquired knowledge of the existence of the writ, after the same had been inserted through the letter box.

30.  At page 511D, Lord Brightman posed the question as follows:

“It follows from the exception that there may be circumstances where the date of service is not the date of letter box insertion. I therefore ask myself, in what circumstances might a plaintiff or defendant be able to show that the seventh day after the date of insertion through the letter box was not the date of service; do such circumstances exist in the present case; and if so, what date of service takes the place of the deemed date of service?

31.  Lord Brightman went on to provide the answer at pages 511E to 512B:

“ My Lords, in the case of letter box service I can think of nothing which is capable of giving content to the expression “unless the contrary is shown” save that it refers to the defendant’s knowledge of the existence of the writ, nor was the appellant’s counsel able to suggest any other solution.  Indeed, it is the obvious solution because the purpose of serving a writ is to give the defendant knowledge of the existence of proceedings against him; that is exactly what a defendant acquires when a writ is served on him personally; and it is exactly what I would expect that procedural rules would require when service is impersonal and not personal.

So I answer the first question which I have posed by saying that a plaintiff or a defendant may displace the deemed date of service by proving that the defendant acquired knowledge of the writ at some other date.

I turn therefore to my second question, and ask myself whether in the instant case the bank can “show the contrary,” ie establish that the deemed date of service (namely 21 April) ought to be displaced by some other date. In my opinion the answer is clearly, “yes,” and that date is 14 April. For on that day, after Mr Hahn had landed at Heathrow, he acquired knowledge of the copy writ…

In the result the bank is able to show the contrary, and establish without a scintilla of doubt that the copy writ came to the knowledge of Mr Hahn late in the afternoon of 14 April, when he was within the jurisdiction.  The writ was therefore properly served on him under Ord. 10, r. 1(2)(b) on that day.” [emphasis supplied]

32.  In the Barclays Bank of Swaziland case, the writ was held to have been properly served on the defendant on 14 April, not because that was the date on which the writ was inserted through the letter box, but because that was the day on which the writ came to the knowledge of the defendant (after the same had been inserted through the letter box), when he was within the jurisdiction. 

33.  In the present case, on my finding set out in paragraph 24 above, the defendant had acquired knowledge of the existence of the Writ (after the same had been inserted through the letter box at the Address), and with that knowledge, she admittedly came within the jurisdiction of this court on 20 July 2012.  In my view, no distinction can be drawn between that and the situation where the defendant actually acquired knowledge of the Writ whilst in Hong Kong.  It follows that the service of the Writ in this action was properly and validly effected on 20 July 2012, and the default judgment was a regular judgment.

34.  It is, of course, trite law that on an application to set aside a regular default judgment, the major consideration is whether the defendant has shown a defence on the merits to which the court should pay heed, not as a rule of law, but as a matter of common sense, since there is no point in setting aside a judgment if the defendant has no defence. In the present case, for the reasons stated in paragraphs 13 to 20 above, the defendant is estopped from raising any defence to the plaintiff’s claim under the five cheques delivered by the defendant to the plaintiff, including the two cheques which are the subject matter of this action.  In the circumstances, the defendant is clearly not in a position to put up any defence on the merits to the plaintiff’s claim in this action with any real prospect of success.

DISPOSITION

35.  For the reasons set out above, I would allow the plaintiff’s appeal and make the following orders:-

(1) The Order of Master Levy dated 27 November 2012 setting aside the default judgment entered herein on 10 August 2012 be set aside;

(2) The defendant’s summons filed on 16 August 2012 be dismissed;

(3) The Order Nisi of Master Levy dated 27 November 2012 (whereby the plaintiff’s (a) Garnishee Order to Show Cause dated 21 August 2012, and (b) Charging Order to Show Cause dated 23 August 2012 were dismissed and discharged) be set aside;

(4) The costs of and occasioned by the applications below (including the costs of the hearing on 29 October 2012) be paid by the defendant to the plaintiff (with certificate for counsel for the hearing on 29 October 2012); and

(5) The costs of this appeal be paid by the defendant to the plaintiff.

36.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

37.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.