LAM YAN FONG, FLORA v. NG PAK ZING

HCA 2289/2014

[2018] HKCFI 2169

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2289 OF 2014

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DECISION

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Introduction

1.  Madam Lam brought this action to recover an alleged debt in the amount of HK$3.7 million (“the Amount”) from Mr Ng. She succeeded in obtaining a default judgment on 8 January 2015 (“the Default Judgment”). For the enforcement of the Default Judgment, Madam Lam obtained a charging order nisi and a garnishee orders nisi on 11 February 2015. She further obtained another garnishee order nisi on 19 May 2015. In this Decision, I shall refer to these three orders collectively as “the Enforcement Orders”.

2.  Upon Mr Ng’s application by two summons respectively dated 27 April 2015 and 14 October 2015, a master made an order dated 23 November 2015 (“the Order”) to set aside the Default Judgment and the Enforcement Orders on the condition that he do pay into court a sum of HK$1.85 million within 21 days from the date of the Order.

3.  By a Notice of Appeal dated 25 November 2015, Madam Lam applies to set aside the Order. On the same day, Madam Lam filed a summons for a stay of execution pending determination of her appeal and Mr Ng agrees to such a stay.

4.  On the other hand, Mr Ng filed his Notice of Cross Appeal dated 9 December 2015 seeking to set aside the Order to the extent that the payment condition should be waived altogether.

5.  This court has to determine of Madam Lam’s appeal and Mr Ng’s cross appeal. There being a heated debate as to whether Mr Ng has actually received the Writ herein together with the Statement of Claim (collectively “the Documents”) by reason of the alleged service, this court has ordered that both Madam Lam and Mr Ng do attend the hearing to be cross-examined so that this court could resolve this factual issue.

6.  At the hearing of 26 May 2016, Madam Lam was cross-examined by Ms Chan, counsel for Mr Ng whereas Mr Ng was cross-examined by the late Mr Egan, former counsel for Madam Lam. At the conclusion of the hearing, this court directed the parties to file their respective written submissions. Unbeknown to this court, the parties did so. No progress was hence made until Mr Ng’s solicitors wrote a reminder to this court in the middle of 2018.  As a result, a hearing was fixed to allow the parties to make submissions with the assistance of the transcript of the previous hearing.  At the hearing of 6 September 2018, Mr Poon Siu Bunn appeared for Madam Lam for the first time and Ms Chan continued to represent Mr Ng.

Background

7.  By way of a very brief background, Madam Lam and Mr Ng started an intimate relationship in 2009 and they broke up in or about September 2014. In her Statement of Claim consisting of 4 paragraphs only, she alleges that she advanced the Amount to Mr Ng pursuant to an oral loan agreement made on 10 August 2014 and so it should be repayable by Mr Ng on the expiry of two months.

8.  Mr Ng accepts that he received the Amount from Madam Lam but not as a loan. He alleges that it was his birthday gift and he had no obligation to repay the same to Madam Lam. Madam Lam is a litigation lawyer. As disclosed in Mr Ng’s affirmations, Madam Lam used to spend lavishly on him showering him with expensive gifts.

9.  The central issue in this appeal and cross appeal is whether the Documents were validly served on Mr Ng. If they were not, the Default Judgment was an irregular judgment. Before I resolve this issue, it is pertinent to take note of the established principles relating to service of writs. In this regard, Ms Chan helpfully draws my attention to Cosec Nominees Ltd & Anor. V Lau Hon Ming Alan [2001] 3 HKC 290. There, DHCJ Jeremy Poon (as he then was) summarized the relevant principles in the following terms:

(1) A writ for service on a defendant within the jurisdiction may be served on him by insertion through the letter box at his usual or last known address: Order 10 rule 1(2).  The date of service shall, unless the contrary is shown, be deemed to be the seventh day after the date of insertion: rule 1(3).

(2) The phrase “last known address” in rule 1(2) means the defendant’s address last known to the plaintiff.  It matters not perhaps with further inquiry, a different address might have been discovered: Law Kwok Hung v Tse Ping Man & Others [1999] 4 HKC 397. A defendant’s last known address must have been intended to be an alternative to a defendant’s usual address in case the plaintiff was unaware of a recent change in defendant’s usual address: Guangdong International Trust and Investment Corporation Hong Kong (Holdings) Ltd v Yuet Wah (Hong Kong) Wah Fat Ltd & Others [1997] 2 HKC 696.

(3) On a true construction of rule 1(2), service was duly effective when the proceedings were brought to the notice of a defendant and not on merely delivery of the writ to his last known address: Forward v West Sussex Country Council & Others [1995] 1 WLR 1496, followed in Desirable International Fashions Ltd v Chiang Shi Chau [1997] 3 HKC 170; Chu Kam Lun v Yap Lisa Susanto [1999] 3 HKC 378, CA; Redland Concrete Ltd v Hing Lee Construction Co Ltd & Another, HCA 8140 of 1997, unreported, (25 June 1999); Kwan Kam Wah v Chan Wai Ming [2000] 2 HKC 378.  This proposition is different from the view expressed by the Court of Appeal in Honour Finance Co Ltd v Chui Mei Mei [1989] 2 HKLR 146.  There, the emphasis of the Court was apparently place on the delivery of the original process rather than notice of that: see pp 149-150.  But after Chu Kam Lun, which is the latest judgment of the Court of Appeal reported on this subject matter, it would appear that this view is no longer preferred.

10.  There, DHCJ Jeremy Poon also held that when a default judgment was obtained irregularly because of defective service, it should be set aside without considering the merits of the defence though the court retains a residual discretion to impose conditions in setting aside the judgment, following Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1996] 4 HKC 157.

11.  Lastly, Mr Poon and Ms Chan agree on the established principle that service is effective when the proceedings are bought to the notice of the defendant and not on mere delivery of the writ to the last known address of the defendant: Chu Kam Lun v Yap Lisa Susanto [1999] 3 HKC 378.   

Parties’ respective cases on service

12.  Madam Lam’s case on the alleged service of the Documents was developed as follows. First, in support of her application for default judgment, she relied on an affirmation of Lam Yiu Fai Kennedy dated 4 December 2014 (“the Service Affirmation”). There, Mr Lam who was a clerk working for Madam Lam’s solicitors, Messrs. Lam & Co (“LC”), on 13 November 2014, personally inserted a sealed envelope addressed to Mr Ng through a letter box in the residential building known as “Le Cachet” located in Happy Valley (“the Letter Box”). The sealed envelope allegedly contained the Documents and other legal documents (“the Envelope”) and was marked the usual and last known address of Mr Ng at Le Cachet (“the Le Cachet Address”). Madam Lam regarded the Le Cachet Address as Mr Ng’s usual and last known address because it was the address which Mr Ng allegedly reported in the Form ND2B (“the Form”) filed by Profit Launch Limited (“PLL”) with the Companies Registry. Mr Ng allegedly signed the Form as the director of PLL and it was dated 27 August 2014.

13.  At the end of the Affirmation, it was claimed that in the opinion of Madam Lam, by reason of the assertion of the envelope through the Letter Box, the Documents would have come to the knowledge of Mr Ng within seven days thereafter.

14.  It should be noted that it was on this basis that the Default Judgment was granted.

15.  In reply to the allegation of Mr Ng in his first affirmation that the Le Cachet Address was in fact the residential address of Madam Lam and was never his address and that the Form was not signed by him, Madam Lam in her affirmation accepts that she resided at the Le Cachet Address but she maintains that Mr Ng had access to the Letter Box nevertheless and he used the same as his correspondence address in the course of their relationship to conceal his real address.

16.  Alarmingly, Madam Lam pointed out that when the Documents were purportedly served on Mr Ng, he was actually residing at a unit of Larvotto, Ap Lei Chau (“the Larvotto Address”). Indeed, this is agreed by Mr Ng. However, under cross-examination, Madam Lam retracted and clarified that the Larvotto Address was only found out by LC after the service of the Documents.

17.  Furthermore, it is noteworthy that Madam Lam claims that after the alleged insertion of the Envelope in the Letter Box, she has never seen the Envelope uncollected in the Letter Box. She did not state when she first checked the Letter Box after the insertion of the Envelope.

18.  In the witness box, Madam Lam accepted that Mr Ng never resided at the Le Cachet Address. However, she asserted that the Letter Box was unlocked at all material times and so Mr Ng had access to the Letter Box and he collected his mails from the Letter Box about once a month. She further alleges that she locked the Letter Box some time in December 2014.

19.  She further explained that the Envelope remained in the Letter Box on the very first day of insertion but was removed on the second or third day.

20.  Madam Lam also relies on another matter to show the knowledge of Mr Ng of the Documents. It is an allegation in a letter dated 23 March 2015 issued by LC to Messrs Or & Lau (“OL”), the solicitors of Mr Ng (“the Letter”). The Letter was made in reply to the allegation of Mr Ng that he had not received the Documents in the letter of OL dated 19 March 2015.  In the Letter, to support the allegation that the Le Cachet Address was a valid address for service and that Mr Ng had all along been aware of the present action, it was alleged that in early February 2015, Mr Andrew Lam, a partner of LC, received a call from a friend Mr Kwok. Mr Kwok told Mr Lam that a male nicknamed Shanghai Boy wanted to relay a message of Mr Ng to Mr Lam that he would like to settle the claim in this action by a payment of HK$1.5 million. Mr Lam did not respond to that offer.

21.  OL wrote back on 24 March 2015 but did not deal with the alleged indication of the intention of Mr Ng to settle the claim of Madam Lam at all.

22.  It is curious that Madam Lam in her affirmation contends that at least by the time when the alleged indication was made through his agents in early February 2015, Mr Ng became aware of this action despite her allegation that he actually took away the Documents from the Letter Box.  

23.  I should only mention the following contentions of Mr Ng. PLL is always a company controlled by Madam Lam and its sole function was to be the registered owner of a Mercede Benz car purchased by Madam Lam for the exclusive use of Mr Ng. PLL also successfully bid the car plate of “NPZ” representing the initials of Mr Ng for the said car. He has never taken part in the operation of PLL though Madam Lam transferred some shares in PLL and made him a director. Holy And Associates Limited (“Holy”) was at the material times the company secretary of PLL and Madam Lam gave instructions to Holy to take care of the administrative matters of PLL through her secretary. Mr Ng is adamant that he did not sign the Form.

24.  It was not only until Holy informed him of the Enforcement Orders served on PLL on 17 March 2015 that he became aware of this action.

25.  Mr Ng accepts that he used the Le Cachet Address as his correspondence address for a few utility bills of his. Such bills were to be settled by Madam Lam and so there was no need for him to collect them from the Letter Box. He insists that he could not gain entry to Le Cachet without the company of Madam Lam let alone having access to the Letter Box at its lobby.

26.  Mr Ng further denies any association with Shanghai Boy though under cross-examination he claimed to have met him once. He denies having asked him to indicate his intention to settle this litigation with Madam Lam to Mr Andrew Lam.

Analysis

27.  The cross-examinations of Madam Lam and Mr Ng turned out to be a very useful exercise giving this court substantial assistance in the resolution of the material factual disputes.

28.  Having considered all the evidence in the round, I cannot accept that the Le Cachet Address was a valid address for service. It could not be the usual or last known address of Mr Ng within the meaning of Order 10 r1(2). Nor am I convinced that Mr Ng has ever taken away the Envelope and the Documents from the Letter Box. The insertion of the Documents through the Letter Box did not bring the attention of Mr Ng to the present action. The service was invalid and ineffectual and hence the Default Judgment is an irregular judgment. My reasons are as follows.

29.  In the first place, without the benefit of expert evidence, I am unable to determine the authenticity of the purported signature of Mr Ng in the Form. Even if it belonged to Mr Ng, I accept his evidence that on a balance of probabilities that all of the administrative and operational matters of PLL were handled by Holy on the instructions of Madam Lam and her agents rather than Mr Ng in all the circumstances. PLL had no business and existed for the specific purpose only. Madam Lam adduced no evidence to show any other involvement of Mr Ng in the operation of PLL. It is more likely than not that the Le Cachet Address was given by Madam Lam to Holy. This is particularly so considering that the previous address purportedly given by Mr Ng to the Companies Registry, i.e. the Le Village Flat address also belonged to Madam Lam. I accept his evidence that it was not Mr Ng’s idea to give the Le Cachet Address in the Form as his address.  I do not find his failure to update his address with the Companies Registry to be suggestive of his actual use of the Le Cachet Address.

30.  The Le Cachet Address is the residence of Madam Lam only and she agrees that she never co-habited with Mr Ng there. When the alleged service was made, Madam Lam already broke up with Mr Ng and they did not see each other. Despite the Le Cachet Address was used in the Form, at the material time, the Le Cachet Address was never the usual address of Mr Ng and Mr Ng could not usually be contacted at the Le Cachet Address. It could not be a valid address for service.

31.  I accept Mr Ng’s explanation that the Le Cachet Address was used as his correspondence address in respect of certain utility bills. Madam Lam’s evidence that the Letter Box was always left unlocked and Mr Ng could enter Le Cachet and collect his mails without the key to the Letter Box is simply incredible. I cannot believe that Madam Lam could allow her own mails to be assessable to all other occupiers or visitors of Le Cachet.

32.  On the other hand, even if the Le Cachet Address could be a valid address for service, I cannot accept that the Documents were effectively served on Mr Ng and Mr Ng collected the same from the Letter Box and thereby became aware of these proceedings.

33.  While the evidence in the Service Affirmation is not contradicted, this court has no reason to disbelieve that Mr Lam did once place the Documents inside the Letter Box on 13 November 2014. However, this court cannot understand why Madam Lam had to rely on the deeming provision as to the date of service in Order 10 r1(3) if she actually found the Envelope to have been removed from the Letter Box within the following two days. She could simply make an affirmation to depose to such alleged removal to prove effective service of the Documents on Mr Ng. Instead, in her affirmation filed in opposition to Mr Ng’s application, she merely said she had never seen or noticed the Documents uncollected in the Letter Box. There is no reason why she left it until cross-examination to disclose the same for the first time.

34.  This court must reject the evidence of Madam Lam in regard to service.  Even if the Documents had been inserted through the Letter Box, it is more likely than not that the Documents were removed by her subsequently. She must have known very well that the Documents sitting in the Letter Box could not possibly reach Mr Ng and the insertion of the same was done merely to go through the motions. It was not a bona fide exercise.

35.  I also find force in Ms Chan’s submission that Madam Lam should have made an effort to adduce evidence from the management office of Le Cachet including any CCTV footage of the lobby covering the material time. Mr Ng might be featured to have entered the building and tampered with the unlocked Letter Box. There is no reason why no such effort has been made at all.

36.  I thus conclude that no valid service of the Documents has ever been made on Mr Ng. Madam Lam simply made use of the Le Cachet Address to procure a swift victory of her claim and then proceed expeditiously to obtain the Enforcement Orders.

37.  Now I turn to the allegation concerning Shanghai Boy in the Letter.  I agree with Ms Chan that it involves multiple hearsay and there is no reason why Mr Andrew Lam has not made an affirmation to depose to what he actually heard from Mr Kwok. It does appear to me to be strange that Mr Ng did not find it necessary to refute this allegation by replying to the Letter. Nor did he do so in his affirmations. However, the allegation in the Letter alone can hardly be prima facie evidence of the actual knowledge of Mr Ng of this action. I am inclined to accept Mr Ng’s denial of any instruction given to Shanghai Boy to settle the action. His evidence in this respect was not shaken under cross-examination.

38.  Even if Mr Ng had knowledge of this action, it does not mean that it is likely that he acquired such knowledge from the Documents in the Letter Box given the foregoing observations.

39.  Further, even if he heard about this action and wanted a settlement in early February 2015, there is no evidence that he knew the existence of the Default Judgment and the Enforcement Orders.  In any event, I do not find that the delay of Mr Ng’s application to set aside the Default Judgment and the Enforcement Orders to be substantial.

40.  Having concluded that the Default Judgment is an irregular judgment, I should set aside the Order and the Enforcement Orders without examining the merits. The appeal of Madam Lam should be dismissed.

41.  The remaining question is whether the Default Judgment should be set aside on terms. Mr Poon submits that given the delay, the shadowy defence advanced and the evasive conduct of Mr Ng, a payment condition should be justified.

42.  For the delay, I am inclined to accept Mr Ng’s evidence that he was only informed of these proceedings in mid-March 2015 by Holy. There is little delay in his attempt to set aside the Default Judgment.

43.  I do not consider the defence advanced shadowy despite the cogent submission of Mr Poon. I have taken into account all the matters pointing to the conclusion that the Amount was indeed a loan but I do not think that the defence should only be allowed to prove that it was a free gift upon making payment into court. I decline to impose payment condition on merits.

44.  However, I agree that there is a genuine concern as to how Madam Lam could effect valid service on Mr Ng. Under cross-examination, Mr Ng indicated that he was unwilling to disclose his address for service purpose and his address in Japan was not his usual address. Ms Chan, after taking instructions, submits that Mr Ng is able and willing to provide a valid address for service in Hong Kong as a condition for the setting aside of the Default Judgment and the Enforcement Orders.

45.  Mr Poon and Ms Chan agree that this court can impose such a condition when setting aside the Order under Order 13 r.9.

Conclusion and orders

46.  For the reasons given above, I dismiss the appeal of Madam Lam. The Default Judgment and the Enforcement Orders must be set aside.

47.  On the other hand, the cross appeal of Mr Ng should be allowed to the extent that the payment condition should be replaced by the condition that Mr Ng do within 21 days from the date of this Decision provide Madam Lam’s solicitors a valid address for service in Hong Kong.

48.  Costs should follow the event. Madam Lam should pay Mr Ng’s costs. The Default Judgment and the Enforcement Orders were obtained, to say the least, improperly.   I find it to be an abuse of process. The Service Affirmation was even contradicted by the evidence of Madam Lam. To mark this court’s disapproval of such sharp practice, indemnity costs are in my view well justified. I make an order nisi that costs of the appeal and the cross appeal including all costs previously reserved if any be paid by Madam Lam to Mr Ng on an indemnity basis, to be taxed if not agreed.

49.  Lastly, I thank counsel on both sides for their helpful assistance.