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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BETWEEN

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J U D G M E N T

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A.  Background

1.  Both parties in this action are not Hong Kong citizens.  The plaintiff, a married woman, is a PRC citizen living in Zhe Jiang Province and the defendant is a Chinese business woman holding an American passport.

2.  On 9 July 2012, the plaintiff filed a writ together with a statement of claim for a total sum of $40,000,000. The claim is a cheque action in respect of the dishonor of two cheques each for the sum of $20,000,000 the defendant drew in the plaintiff’s favour.

3.  No acknowledge of service was filed, and the plaintiff obtained default judgment on 10 August 2012.

4.  The defendant issued a summons (“the Setting Aside Summons”) on 16 August 2012 to set aside the default judgment under Order 13 rule 9 and Order 12 rule 8 of the Rules of the High Court[1].

5.  By an order of Master Lo dated 20 August 2012, the parties were given leave to file affirmations; it further ordered that no evidence was to be filed without leave.

6.  Shortly before the hearing for the Setting Aside Summons, the plaintiff issued a summons dated 24 October 2012 (“Leave Summons”) for leave to file the affirmation (“Jia’s Affirmation”) of a Jia Xiaoping (“Jia”), who is the plaintiff’s husband.

7.  Since the Leave Summons is opposed, I think the best way to deal with Jia’s evidence will be to have it read de bene esse for the purpose of the Setting Aside Summons.

B.  Issues of the Setting Aside Summons

8.  The defendant contends that the judgment is irregular and it should be set aside unconditionally.  The grounds she relies on in support of this contention are three. First and the foremost is her allegation that the service of the writ was defective. The second contention concerns a dispute as to whether there was and not a letter box at the address into which the writ was allegedly inserted.   The third but the least important ground is the defendant’s dispute of jurisdiction.

9.  The plaintiff argues the otherwise and claims that the judgment is regular. It is further suggested that a court has a discretion to impose terms even if the judgment are found to be irregular.

10.  For a regular judgment, it is trait that the defendant will be required to show merits. The plaintiff submits that the defendant fails the threshold test of showing merits as required by Order 13.

11.  Thus, the issues arising for determinations are:

(1) Whether the default judgment is irregular?

(2) If the judgment is found to be irregular, whether the court should set it aside as of right or it retains a discretion to impose terms?

(3) If the judgment is regular, whether the defendant has a meritorious defence?

12.  The defendant’s first and second grounds of the application can be subsumed under Issue (I), relating to the issue of regularity of the judgment. The third ground concerning the dispute to jurisdiction under Order 12 rule 8 will be separately discussed as it is strictly not relevant to the issue of regularity.

13.  Regularity of judgment is essentially forms the core of this judgment. The determination of Issue (2) will only be necessary if the answer to Issue (1) is in the affirmative, but if however the answer is in the negative, Issue (3) will need to be considered.

C.  Issue (1): Whether the judgment is irregular?

C.1  The mode of service

14.  As provided by Order 13 rule 7(1), when applying for judgment in default of an acknowledgement of service, a plaintiff is required to file an affirmation to prove due service of writ on a defendant by deposing, among others, the mode of service.  I therefore begin the discussion of Issue (1) by looking at the plaintiff’s affirmation of service.

15.  In the affirmation of service by the process server, Ouyang Lianghui filed on 31 July 2012, it was deposed that on 9 July 2012, he served on the defendant a sealed writ of summons together with the accompanying forms for acknowledgment of service enclosed in a sealed envelope by inserting through the letter box in the defendant’s usual and last known address (which was an address in an office premises at Flat 3078, Diamond Square, Shun Tak Centre at Connaught Road Central, Hong Kong) (“the Address”).

16.  The service is therefore by insertion through the letter box.

C.1.1  Requirement for a valid service by insertion through the letter box

17.  Service of a writ is required to be effected by way of personal service. However under Order 10 rule 1(2), insertion through the letter box is permitted if the defendant is within the jurisdiction.  Order 10 rule 1(3) (a) provides a rebuttable presumption that the date of service, unless the contrary is shown, be deemed to be the seventh day (ignoring Order 3 rule 2(5)) after the date of (as in this case) insertion through the letter box.

18.  The plaintiff submits that since the provisions of Order 10 rule 1(2) and (3) have been complied with, the service was valid.  By virtue of the deeming provision in Order 10 rule 1(3) (a), the deemed date of service was deemed to be the seventh day from the date of service.

19.  The plaintiff submits that by the time when the plaintiff filed the application for default judgment on 30 July 2012, the deemed date of service had already lapsed. Thus, the process server was able to depose in the last paragraph of the affirmation that “in the opinion of the plaintiff the said Writ of Summons so inserted in the letter box for the address of the defendant will have come to the knowledge of the defendant within 7 days after the said date of insertion thereof”.  By the time when the default judgment was entered on 10 August 2012, the defendant still had not filed any acknowledgement of service. It is therefore submitted that the judgment is regular.

20.  There is no dispute that the Address upon which the writ was allegedly served was the defendant’s address for service.

21.  The defendant however contends that the presumption provided in Order 10 rule 1(3)(a) has been rebutted by her evidence proving that she was in fact outside Hong Kong when the  writ was purportedly served on the Address .  The Defendant also tried to cast doubt on the alleged mode of service by insertion through the letter box by claiming that there was in fact no letter box at the Address. Thus, the defendant contends, the service by the alleged insertion could not have taken place.

22.  The contention regarding the letter box is essentially a factual dispute .As it is more straight-forward, I will deal with this first before next discuss the “out of jurisdiction” dispute, which is a mixture of law and fact.

C.1.2  Whether there was a letter box at the Address?

23.  The issue of letter box was first raised by the defendant’s solicitors (“ CGC”) in their letter to the plaintiff’s solicitors (“KCC”) on 15 August 2012.  When disputing the regularity of the service, they alleged that there was in fact no letter box affixed to the door or by the wall of the Address.  The alleged insertion by the process server could not have been valid.

24.  KCC replied on 16 August 2012 that the service was by inserting the writ into the letter box at the Address as shown in the photocopy taken by the process server they had enclosed with the letter.

25.  The allegation regarding the letter box was repeated again in two of the defendant’s supporting affirmations of a Mr Kwong, a staff of a company called Remarkable Management Limited (which had a common reception area as the defendant’s office at the Address).  Mr Kwong deposed that at the material time, there was no letter box at the Address for receiving any mails.  In the affirmation, Mr Kwong said that a shopkeeper of a shop next to the Address told him that the shopper keeper saw a process server affix to the wall of the Address a similar letter box as shown in the photo provided by KCC.

26.  Despite the filing of the evidence on the matter regarding the letter box, Mr Yip, counsel for the defendant, did not pursue this issue in either his written or oral submissions.

27.  I think it is sensible that Mr Yip decided not to further pursue this allegation because I agree with the submission of the plaintiff’s counsel, Mr Lam, that such allegation against a staff of a solicitors’ firm is extremely serious.  In my view, this kind of allegation should not be slightly made unless it is properly supported by cogent and concrete evidence.  As the said shopkeeper had not filed any evidence, the allegation by the defendant about the erection of a letter box by the process server is no more than mere hearsay.

28.  Furthermore, the defendant has also given no explanation for the omission by Mr Chiu of CGC in mentioning the absence of letter box in his affirmation filed on behalf of the defendant together with and in support of the Setting Aside Summons. Given the complaint about the letter box was only made by CGC one day (see  paragraph 23 above) before their filing of the Setting Aside Summons on 16 August 2012,  the obvious omission in Mr Chiu’s supporting affirmation, in my view, significantly weakens the defendant’s allegation.

29.  For these reasons, I cannot rely on the defendant’s evidence and am satisfied that that the mode of service was by insertion through the letter box on the Address.

C.2  Whether the defendant was within the jurisdiction at the time of the service?

30.  This sub-issue substantially makes up the bulk of both counsel’s arguments.

31.  The defendant’s evidence is that between the period of 1 June 2012 to 20 August 2012, she was only in Hong Kong on 20 July 2012 for 1 day.  A copy of the statement of her travel record issued by the Immigration Department exhibited to the supporting affirmation of a Mr Chan of CGC appears to be corroborating her assertion.  According to this travel record, the defendant entered Hong Kong through the HK International Airport at 10:20 on 20 July 2012 and departed on the same day at 19:29, also through the same airport.  There is no evidence of her being in Hong Kong at any other days during this period.

32.  The extracts of the defendant’s American passport show that on 20 July 2012 the defendant in fact came from Taipei and subsequently also left for Taipei.  The travel records extracted from her passport show that during this period the defendant travelled frequently between Taipei and different parts of China.

33.  The plaintiff attempted to refute the defendant’s assertion by making reference to the Jia’s Affirmation in which Jai alluded to a criminal complaint he had filed with the Macao Police against the defendant.  In it, Jia further referred to an alleged sighting of the defendant on 30 July 2012 in Macau when her travel records show she was supposedly to be in China.  Jia further alleged that the defendant also held passports issued by the Republic of Guatemala and the Republic of the Marshall Islands.  Since the defendant had more than one passport, Jia therefore suggested that it would have been possible for the defendant “to have entered into, or left Hong Kong under different passport(s) or even under different name(s)”.  Jia further cited a piece of hearsay information allegedly by the Jiangxi Police in PRC that the defendant could move “in and out” of China in its different cities through “her means of travel documents”.  This seems to suggest that the defendant had used illegal means.

34.  I find the information contained in Jia’s Affirmation, as shown  above, is at best hearsay, and at worst, highly prejudicial.  When an allegation pertaining to a criminal nature, it must be well supported by documents.  It would not be desirable for a court to accept and rely on such kind of prejudicial evidence without supporting documents.  I therefore decline to rely on Jia’s evidence.

35.  According to my understanding of the plaintiff’s case, I do not think Mr Lam is in serious dispute of the defendant’s suggestion that she was in Hong Kong only on 20 July 2012.  As a matter of fact, it seems that his arguments are largely developed from the defendant’s admitted one-day’s presence in Hong Kong on 20 July 2012. In his written submission, Mr Lam submitted that, the service “was validly effected on that date at the latest, if not before”[2]. He went on to say that the time limited for the acknowledgement of service, by virtue of Order 12 rule 5(a) would have been on 2 August 2012.  Since no such acknowledgement was filed, the default judgment on 10 August 2012, Mr Lam submitted, was validly entered.

36.  When looked at the travel records the defendant produced and considered all the evidence in the round, I am satisfied that the defendant has produced sufficient evidence showing that she was only present in Hong Kong for one day on 20 July 2012.

C.3  Was the service defective if the defendant was not present in Hong Kong when the writ was served?

C.3.1  Legal requirement

37.  As already discussed in Section C.1.1 above, Order 10 rule 1(2) permits service by insertion through the letter box provided a defendant is within the jurisdiction at the time when the writ is served, as well-established in the English Court of Appeal in Barclays Bank of Swaziland Ltd v Hahn [1989]1 WLR 506, which has been applied and followed by Hong Kong courts.  According to this case, the rebuttal presumption for a deemed date of service to be the seventh day after the date of insertion through the letter box can be displaced by a plaintiff or a defendant by proving that the defendant acquired knowledge of the writ at some other date (Barclays Bank at 511F).

38.  Relying on Barclays Bank, Mr Lam submits that even if the defendant was able to prove that she was not in Hong Kong on the deemed date of service, service would not be defective when the evidence in fact shows that the defendant had notice of the writ after the deemed date of service. So for as the evidence in this case is concerned, Mr Lam suggested that an inference could be drawn from the evidence that the defendant had indeed had knowledge of the writ, and the service was therefore valid.

39.  I do not think that it is disputed that the defendant had knowledge of the writ sometime before the default judgment was entered.  The first correspondence exchanged between the solicitors was on 30 July 2012, in which CGC challenged the validity of the service.  Thus, on the defendant’s admitted evidence of her one-day’s presence in Hong Kong on 20 July 2012, I accept that the defendant would have had notice of the writ between the period between 20 July 2012 (the admitted one-day’s presence) and 30 July 2012(the first letter by CGC).

40.  However, the fact that the defendant had had knowledge of the writ subsequently, accordingly to Mr Yip, would not render a defective service valid if the defendant was not in Hong Kong when the writ was served.  He contends that it is a fundamental requirement that the defendant must be within the jurisdiction when the writ was served, referring to the Court of Appeal decision of Deng Minghui v Chau Shuk Ling [2007] 1 HKLRD 905, and citing a passage from the judgment of Cheung JA at 910E-F:

“The plaintiff was invoking O 10 r 1(2) (b) as the mode of service. The requirement is that the defendant must be within the jurisdiction at the time of the service of the writ. This is clear from the wording of r 1(2). Lord Brightman in Barclays Bank of Swaziland Ltd v Hahn [1989] 1 WLR 506 put the matter beyond doubt by stating that in order to invoke O 10, r 2(a), a defendant must be within the jurisdiction at the time when the writ is served. As the defendant was not in Hong Kong at the time of the service of the writ it was not served on her.”

C.3.2  Discussion

41.  The wording of Order 10 rule 1 (2) makes it plain that a defendant must be within the jurisdiction when a plaintiff has chosen an alternative but viable mode of service by inserting through the letter box. Both the Court of Appeals in UK (in Barclays Bank) as well as in Hong Kong (in Deng Minghui which also cited an earlier decision of Chu Han Lun v Yap Lisa Susanto [1999] 3 HKC 378, in which the court held that the defendant must be within the jurisdiction for an Order 10 rule 1(2) service to be effective) have firmly confirmed this pre-requisite for a valid service when service is to be effected by this mode.

42.  The deemed date of service can be rebutted by either a plaintiff or a defendant by proving that the service date has been effected on a date earlier than the deemed date of service as discussed in Barclays Bank.  It however does not change the requirement that a defendant must be present when the service is effected.

43.  In the case of Barclays Bank, the Court of Appeal held that the plaintiff could “show the contrary” by establishing the deemed date of service ought to have been displaced by some other date.  In that case, on the very date when the plaintiff effected service, the defendant came to England and acquired knowledge of the writ even though there was no evidence that the defendant had actually gone into the flat where the writ was served.  The defendant was found to be within the jurisdiction on the very day when the writ was served rather than the deemed date of service, ie the seventh day after the insertion through the letter box. The Court of Appeal therefore found that the deemed date of service was displaced by a date earlier than the deemed date,ie on the very date when the writ was actually served on that defendant’s last known address in England.

44.  In Deng Minghui, the Court of Appeal came firmly to the view that the writ was irregular when the evidence disclosed that the defendant was in fact living in the States when the writ was served by inserting through the letter box of the defendant’s property in Hong Kong even though she only became aware of the writ about a year later.  

45.  On the facts of Deng Minghui, Cheung JA found that since the defendant was not within jurisdiction when service was effected, the judgment was irregularly obtained even though the defendant had notice of the proceedings subsequently.  He further held that the holding by Yeung J (as he then was ) in Penrose Industries Ltd v Tam Yan Lung (unrep., HCA No 5738 of 2000, [2001] HKEC 586 that service to be regular irrespective of where the defendant was at the time of the service, if he had actually acquired knowledge of the proceedings was incorrect (Deng Minghui at 911D-E).

46.  Applying the principles encapsulated in the authorities discussed above to the facts of this case, I think the defendant has adduced sufficient evidence that the defendant was not in Hong Kong either on the date of the service on 9 July 2012 or the deemed date of service (namely 16July 2012).  Her subsequent notice of the writ is not sufficient (as discussed in Deng Minghui above) to render an otherwise defective service of the writ valid. I therefore find the service was defective, and the default judgment irregular.

C.4  Conclusion

47.  Since the judgment is found to be irregular, it ought to be set aside.

D.  (Issue 2): Whether the judgment should be set aside as of right or on terms?

D.1  Conflicting authorities

48.  I will now consider the issue of whether a court has a residual discretion to impose terms when setting aside an irregular judgment. The conflicting authorities in this regard however mean that this area of law is still rather unsettled.

49.  At one stage, it was trite that a defendant was always entitled to have an irregular judgment set aside as of right without any conditions being imposed.  This long-standing principle however has since become less clear since the English Court of Appeal decision in Faircharm Investment Ltd v Citibank International Plc [1998] Lloyd’s Rep Bank 127.  Nowadays, a court will invariably be asked to consider whether a defendant is entitled to have an irregular judgment set aside as of right or only enjoyed “a confident expectation that it will be set aside but not a right” (per Cons VP, Hunter JA and Mortimer J (as he then was) in Honour Finance Co. Ltd. v Chui Mei Mei [1989] 2 HKLR 146 applied by Yam J in Honest Billion Investment Ltd v Wang Xian Chou [1997] 3 HKC 161 at 164F-G).

50.  In this regard, I must respectfully defer to the detailed exposition and extensive discussion by Deputy Judge Poon (as he then was) of the conflicting authorities both before and after the decision of Faircharm in the case of Cosec Nominees Ltd. & Anor. v Lau Hon Ming [2001] 2 HKLRD 581.  Given the already detailed analysis of the position of this unsettled area of law by the learned Judge, I would likewise, as the learned Judge did, refrain from expressing any definitive view in this conflicting legal issue by preferring one line of authorities to the other.

51.  Having considered all the matters discussed above, I’d be inclined to set aside the default judgment unconditionally.

D.2  Conduct - a relevant consideration?

52.  Very often, a court will also take into account a defendant’s conduct in deciding whether a judgment should be set aside or whether terms should be imposed for the court is entitled to consider all the circumstances of a case.  The purpose is to avoid the injustice which may be caused by the judgment following automatically on default.  A defendant’s conduct in matters such as how the default occurred etc can be relevant to the exercise of a court’s discretion. However, I do not think that the consideration of conduct should only be restricted to that of a defendant’s.  I consider that the court is entitled - and perhaps also required by the underlying objectives under Order 1A to ensure fairness between the parties- to look at all the circumstances of a case, including the conduct of the parties or their legal representatives when considering if terms should be imposed (or in a suitable case perhaps whether the judgment should be set aside).

53.  The discussion of conduct should be begun with the first letter of 30 July 2012 I have mentioned above CGC wrote to KCC objecting to the validity of the service of the writ.

54.  The first letter was followed by the second letter on 1 August 2012 in which KCC were asked to respond to their allegations regarding the defective Statement of Truth endorsed on the Statement of Claim and defective service already mentioned in their letter on 30 July 2012.

55.  On 7 August 2012, KCC sent the first reply to CGC’s letter of 1 August 2012.  It is a short letter, and I set out the relevant part  of the letter below:

“We are instructed to serve a Writ of Summons upon your client personally this Friday 10^th August 2012. We should be grateful if you would advise whether your client will be in Hong Kong, or alternatively that your firm has instructions to accept service.” (Emphasis added)

56.  On 9 August 2012,CGC replied that they had instructions to accept service of the writ.

57.  On 13 August 2012, KCC replied, and I think it is convenient to set out the relevant part of the letter in full:

“We wish to put on record that by our letter dated 7 August 2012(last Tuesday), we intended to take out and to serve a Writ of Summons upon your client personally last Friday 10 August 2012, to seek confirmation from you that your firm had instructions to receive service on behalf of the Chen Mei Huan. We did not receive your reply on or before last Friday, 10 August 2012. Subsequently, last Friday (10 August 2012) we took out a Writ of Summons under HCA No. 1416 of 2012 but we could not serve the same either on your client, or on your firm (without your letter of confirmation).

As regards your letter dated 30^th July 2012 on our service of the Writ of Summons under HCA No, 1176 of 2012 to your client, we wish to say that at the time when you issued your letter of 30^th July 2012, your client must have come into notice of the said Writ of Summons served on her by us on 9^th July 2012, which means that at all material time, your client was aware of the said Writ of Summons served on her. In the circumstances, the service of the Writ of Summons is not, as you alleged, irregular. In any event, (you (or your client) chose not to file the Notice of Intent, (not even the Notice to Act), notwithstanding the said knowledge. Further, from the communication between your client and our client and other persons, your client confirmed that she was aware of a civil proceedings initiated in Hong Kong against her in respect of the dishonoured cheques…  Accordingly, if you have instructions to act for your client in HCA No. 1176 of 2012, please file the Notice to Act accordingly.”

58.  On 15 August, 2012, CGC wrote, referring to both this action as well as HCA 1416 of 2012.  They told KCC that they learned of the default judgment entered on 10 August as well the Charging Order Nisi obtained against the defendant on 13 August 2012.  They protested about the service and invited KCC to agree to have the judgment set aside.

59.  The correspondence exchanged between solicitors outlined above tends to show, in my view, that KCC were trying to create an impression to CGC that they would be serving the writ again on the defendant personally (See letter in para 55). By virtue of KCC’s further inquiries from CGC about accepting service and the latter’s confirmation of the same (see letters in paras 56 and 57),   CGC would be entitled to expect KCC to serve on the defendant by serving on CGC.

60.  It is therefore unbecoming in KCC to apply on 30 July 2012 for default judgment when CGC had already written to KCC about the defendant being out of jurisdiction at the time of the service.  In my view, whether or not the plaintiff or KCC accepted the defendant’s assertion does not matter as it would be necessary for them to take steps to verify if the statement of belief as deposed in the affirmation by the process server mentioned in para 19 above that the writ would have come to the knowledge of the defendant within 7 days thereafter could have been properly made.

61.  A judgment obtained through a default regime is not based on merits but a pre-supposition that a defendant properly served with a writ has no intention to resist a claim.  In my view, a party, when applying for default judgment, will be required to act in utmost good faith by making disclosure of all matters that are relevant to a court’s consideration. This requirement is the cornerstone of our legal system.

62.  After the filing of the affirmation of service on 30 July 2012, KCC, when being told of the objections by CGC, neither informed the latter of the application for default judgment nor the High Court Registry to withhold the entry of the judgment.  The ensuing correspondence even shows that when KCC made the application for default judgment, they could not have asserted in the affirmation that “the defendant will have come to the knowledge of the defendant within 7 days after the said date of insertion thereof” as deposed by the process server (discussed in para 19 above).

63.  The assertion made in their letter of 13 August 2012 about their reference to a different action of HCA 1416 of 2012 would not lessen the culpability of KCC.  In all the letters that have been discussed above, with the exception of the letter of  15 August 2012, the reference to this action is clearly stated in the title of all letters of CGC, and it reads likes this: “Re: HCA1176 of 2012, Plaintiff: Du Huizhen, Defendant: Chen Mei Huan”.

64.  In the only two letters KCC wrote on 7 August 2012 (see para 55) and 13 August 2012 (see para 57) in reply to the letters of CGC, instead of copying the same title reference of the letters sent by CGC, the title reference in these letters simply state, “Re: Claim by Du Huizhen against Chen Mei Huan”.

65.  Solicitors are usually required, on a daily basis,  to deal with a large number of cases and litigations.  Thus, their correspondence, for easy identification, usually has a title reference referring to a case or to a matter under discussion in the correspondence. A reply letter will, for the same reason, also quote the same reference.  The two letters written by KCC clearly do not appear to have followed such practice as they did not event quote the same reference action number from the letters of CGC.  I believe this could not have been the letter-writing style of KCC, rather it would appear to have been a deliberate attempt to obfuscate the matter in question.

66.  From the surrounding circumstances, I’d be inclined to find that while KCC were giving CGC an impression that they would be serving on the defendant (personally or through CGC as disclosed in their correspondence), they however surreptitiously proceeded with the application for default judgment.  I find such conduct wholly inappropriate.

67.  When the correspondence is read objectively, I would say that CGC would have been perfectly entitled to come to a view that the KCC would serve the writ on them after KCC had confirmed with them if they had instructions to accept service of the writ on behalf of the defendant and CGC had so confirmed. Why should they be required to file a ‘NOTICE OF INTENT’ (which I guess meaning notice of acknowledge of service) or a Notice to Act as suggested in KCC’s letter of 13 August 2012 (see para 57) when the defendant (or at least in the mind of CGC) has not yet been vexed with the service of the proceedings?

68.  On the other hand, , I find that the defendant has acted promptly as CGC immediately make the application to set aside the judgment as soon as they realized that the default judgment had been entered.

69.  In light of the above, given the circumstances surrounding the obtaining of the judgment, I am of the firm view that I should set aside judgment unconditionally without imposing terms.

E.  Other Ground- disputing jurisdiction

70.  For completeness, I should also mention the other ground the defendant relies on in her application to set aside. This contention is based on a reference to clause 14 in the said loan agreement as referred to in Section F below stipulates Macau to be the governing jurisdiction of the agreement.

71.  This contention can be quickly disposed of without going into the merit. Order 12 rule 8 provides that before a defendant can dispute jurisdiction, it is a prerequisite that a notice of acknowledge of service has to be filed first. Since no such notice has been filed in this action, the Order 12 rule 8 challenge is simply not available to the defendant at this stage.

72.  If however I am found to be wrong to come to the conclusion that the service is valid and the defendant is required to show merits, I would briefly discuss below the defendant’s defence.

F.  Issue (3): Whether meritorious defence?

73.  Since I find the judgment to be irregular and order it to be set aside, my discussion on the merits of the defence should be brief.

74.  The defendant’s defence, according to the affirmation of Mr Chiu filed in support of the Setting Aside Summons, is based on an alleged failure of consideration in respect of the cheques that had allegedly been dishonoured. It was asserted that the cheques in question were delivered to the plaintiff for the purpose of securing the repayment of a loan in the sum of $100,000,000, which the defendant claimed that she had never received.

75.  Mr. Lam submitted that the defendant’s defence is untenable by referring to the evidence contained in the affirmation the plaintiff filed in relation to the application for Mareva injunction.  The background of the loan agreement to be discussed below is, for convenience, respectfully lifted from Mr Lam’s written submission.

76.  According to the plaintiff, the circumstances leading to the signing of a loan agreement is this.  Greek Mythology owns certain casino establishment and the defendant is its proprietor (which meaning the shareholder of the company) and general manager.  Jai entered into an agreement with Greek Mythology on his own behalf and on behalf of the plaintiff for them to be granted certain rights to operate one of the gambling halls of the Casino.  The plaintiff and Jia therefore injected funds for that purpose.

77.  Eventually, the plaintiff and Jia agreed with the defendant to terminate their casino agreement (which is the agreement about the operation of the gambling hall referred in para 76 above).  The defendant allegedly agreed to return to the plaintiff and Jia all monies – which were then agreed to be at HK$83,800,000, which amount they claimed they had injected into the casino. However, it was alleged that not only the defendant was not able to return the said sum of $83,800,000 but went on to borrow a further loan of HK$16,200,000. The defendant agreed to return the total sum of HK$100,000,000 to the plaintiff and Jia with interests within two month.

78.  However, the defendant failed to repay the amount of HK$100,000,000 and the plaintiff and Jai reported the matter to the Macau police.  It was alleged that a loan agreement was then executed and the 5 cheuqes were given as security for the loan in order to dissuade the plaintiff and Jia from pressing charges against the defendant.

79.  Whilst the plaintiff’s claim ex facie looks straight-forward (at least on the Statement of Claim), the circumstances giving rise to the giving of the cheques in question are not.  The evidence filed on behalf of the plaintiff herself seems to be suggesting that the underlying transaction was not between the plaintiff and the defendant, but rather it was between Jia and the defendant or between Jia and the plaintiff and the defendant.

80.  I therefore cannot say at this stage that the defendant’s defence of failure of consideration does not have a good prospect of success and it would  not be fair in all the circumstances to let the default judgment stand and deprive the defendant  a chance to properly defend the action.

G.  Conclusions and orders

G.1  The Setting Aside Summons

81.  For the aforesaid reasons, I find that the service on the defendant was invalid and the default judgment is irregular, and set it aside unconditionally.

G.2  The Leave Summons

82.  I have already mentioned in paragraphs 33-34 above that the evidence contained in the Jia’s Affirmation is highly prejudicial.  Further, the plaintiff has given no explanation at all for the late adducing of evidence, let alone providing good reason for doing so.  The court’s disapproval of a filing of late evidence can be found from a passage in Fortune Asset Development Limited v De Monsa Investments Ltd, HCA 167 of 2009, a case Mr Yip aptly cited. In that case, the learned Justice Saunders stated (in paras 10-11) that when the court had ordered that no further affirmation should be filed without leave of the court, any last-minute evidence would only be allowed in exceptional circumstances.

83.  Not only the plaintiff has failed to show any exceptional circumstances, I also find that almost all the materials in the Jia’s Affirmations should have been known to the plaintiff at the time when the plaintiff filed the opposition affirmation by her solicitor Mr Cheung on 17 September 2012.  The loan agreement mentioned in paragraph 4 of the Jia’s Affirmation was dated 22 February 2011; the Investigation Reported in paragraph 6 was dated 3 July 2012 and the Agreement for Sale and Purchase in paragraph 8 was dated 29 June 2012.

84.  Thus, it is abundantly clear that most of the materials contained in the Jia’s Affirmation were already available to the plaintiff and should have been included in the affirmation of Mr. Cheung filed on 17 September 2012 .  A sufficiently compelling reason should be given before a court considers whether discretion should be exercised to grant leave. Since no reason is given, I refuse to grant leave and dismiss the summons.

G.3  Costs

85.  Since the defendant succeeds in both applications, I grant a costs order nisi that the defendant should have the costs of both summonses, including all costs reserved, and certificate for counsel. The costs will be summarily assessed on paper in lieu of taxation.

86.  Should parties fail to agree to costs within 7 days from the date of the costs order nisi becoming absolute, the defendant do lodge and serve a statement of costs within 7 days, and the plaintiff do likewise lodge and serve a list of objections within 7 days thereafter.

G.4  Outstanding Applications

87.  When I was preparing this judgment, I note there are in fact a number of outstanding applications:

(1)  The plaintiff’s application for garnishee order to show cause dated 21 August 2012;

(2)  The plaintiff’s application for charging order: Notice to show cause dated 23 August 2012;

(3)  The defendant’s summons for stay of execution of the default judgment dated 24 August 2012;

(4)  The defendant’s summons on 28 August 2012 for stay of execution of the garnishee order to show cause filed on 23 August 2012 and of the Charging order to show caused filed on 24 August 2012.

88.  By the order of Master de Souza dated 29 August 2012, he adjourned the applications under paragraphs (3) and (4) above to a date to fixed for argument with 1 hour reserved.  I understand that no date has been fixed for a hearing yet.

89.  I must confess that I find the disposal of the aforesaid applications and summonses confusing.  I am not sure if an order for stay of execution has been granted yet despite repeated applications for a stay of execution.  In the Setting Side Summons, the defendant in fact also includes an application for stay of execution. However, despite the repeated applications for a stay of execution of the judgment, I do not seem to be able to find an order granting a stay until the disposal of the Setting Aside Summons, which I believe was really the defendant’s purpose of filing such applications. I also find the defendant’s summonses in paragraphs (3) and (4) above are, if I may respectfully say so, superfluous.  Since the charging order and the garnishee order are only nisi orders, the summonses for stay of the charging order nisi and garnishee order nisi are wholly unnecessary and a waste of costs.

90.  As I have now set aside the judgment, these applications should also fall by the wayside.  For the purpose of furthering the underlying objectives of the Civil Justice Reforms for the sake of procedural economy and saving costs, I will also dispose of these summonses and applications at the same time.

91.  I dismiss all the applications and order the plaintiff to pay costs of the applications under paragraphs (1) and (2) and the defendant to pay the costs of the summonses under paragraphs (3) and (4) above, including all costs reserved.  Likewise, the costs will be gross-sum assessed in the same way as directed above.

92.  As the parties have not given an opportunity to address me on these outstanding summonses and applications, the orders that I made are nisi.

93.  Lastly, I wish to thank counsel for their able assistance in this case.