CHAM CHI MING JOIE v. WONG ON YU

DCCJ 586/2020

[2020] HKDC 1232

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 586 OF 2020

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BETWEEN

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DECISION

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INTRODUCTION

1.  Before me are two summonses both taken out by the defendant, whereby the following orders are sought respectively:-

(a) An order requiring the plaintiff to answer her request for further and better particulars of the Statement of Claim; and

(b) An order setting aside a default judgment entered against her.

2.  The defendant took out the 1^st summons on 11 August 2020 for further and better particulars.  In the summons, she also sought an extension of time to file and serve her defence after the plaintiff’s provision of the requested particulars.  This summons was returnable before me for a call-over hearing on 5 October 2020.  At the conclusion of that hearing, I adjourned the summons to 27 October 2020 for substantive arguments.  It should be noted that, at the call-over hearing, no extension of time was granted for the defendant to file and serve her defence out of time.

3.  On 14 October 2020, the plaintiff successfully obtained a final judgment against the defendant on the ground that the time for the service of the defence had expired and no defence had been served on the plaintiff.

4.  In light of the said final judgment, the hearing of the 1^st summons was adjourned to 15 December 2020.  It was further directed that, unless the defendant took out an application to set aside the judgment within a stipulated time, the 1^st summons would be dismissed with costs.

5.  The defendant duly took out the 2^nd summons for setting aside the judgment on 28 October 2020.  The hearing of this summons was fixed to be heard on 15 December 2020 together with the 1^st summons. 

6.  At the hearing on 15 December 2020, the defendant was represented by Mr David Mann of Messrs Yip, Tse & Tang, and the plaintiff was represented by Mr Chou of Messrs S H Chou & Co.  During the hearing, having heard the parties’ oral submissions in respect of the 2^nd summons, I decided to set aside the final judgment against the defendant and proceeded to deal with the 1^st summons for further and better particulars.  I also said at the end of the hearing that I would hand down a written decision for both summonses in a later day.  This I now do.

7.  Logically, I shall first deal with the 2^nd summons for setting aside the default judgment entered against the defendant.

APPLICATION FOR SETTING ASIDE DEFAULT JUDGMENT

8.  As mentioned, during the hearing, I have decided to set aside the final judgment against the defendant.  I held there that, while the judgment was entered regularly, the defendant’s case was meritorious with a real prospect of success.  The followings are my reasons for deciding so.

9.  O 19, r 19 of the Rules of the District Court provides that the Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of that order.  The practice and legal principles governing the setting aside a default judgment under O 13, r 9 are equally applicable for application under O 19, r 19.  Such practice and principles are well-established and need not be repeated here.

10.  In the present application, the defendant contended that the default judgment should be set aside because it was entered irregularly.  This contention was based on two grounds – namely, (1) it was entered prematurely^[1], and (2) it was entered based on material non-disclosure^[2].  Alternatively, it was submitted that, if the Court was to hold that the judgment was entered regularly, the judgment should also be set aside because the defendant had a meritorious defence with a real prospect of success^[3] and there were serious doubts in the plaintiff’s case^[4].

(1) Was the judgment entered prematurely?

11.  Mr Mann submitted on behalf of the defendant that the judgment was entered prematurely.  This submission was based on the contention that, during the call-over hearing on 5 October 2020, the plaintiff had effectively agreed that the time for the defendant to serve her defence be extended at least up to 27 October 2020^[5].  Mr Chou denied that the plaintiff had ever agreed, or entered into any consensus, for the defendant to file and serve her defence out of time.

12.  With all due respect to Mr Mann, I am not able to accept his submission.  Clearly, there is no evidence before me that the plaintiff had ever given any consent for an extension of time for the defendant to serve her defence.  I was neither referred to, nor am I aware of, any rule of law that such an agreement may be implied by the conduct of the plaintiff.  As I have pointed out during the hearing, if there were indeed such an “effective” consensus for the extension of time, there would be no reason why the defendant’s solicitors did not include such term in the draft order when they submitted it for the Court’s approval^[6]. Mr Mann did not give any cogent answer to this query.  In my view, this submission is absolutely unarguable.  I have no hesitation in rejecting it.

(2) Is there any material non-disclosure?

13.  A default judgment is applied for by way of an ex parte application.  As Mr Mann rightly pointed out, in making an ex parte application, the applicant has a duty to make full and frank disclosure to the Court^[7]. I also accept that the Court may set aside a default judgment based on material non-disclosure^[8].

14.  In the present application, Mr Mann submitted that, in applying for the default judgment, the plaintiff failed to disclose the letter of the defendant’s solicitors dated 21 July 2020^[9] and deliberately misquoted their letter dated 17 August 2020^[10].

15.  The letter dated 21 July 2020^[11] was the original request made by the defendant for further and better particulars.  It was submitted that this letter had made it clear that the lack of particulars of the Statement of Claim had prevented the defendant from pleading her defence properly.  The defendant was therefore not at fault for the failure to file and serve her defence within the statutory time limit.  Mr Mann further submitted that there was no reasonable ground for the plaintiff to hold the belief that the defendant’s seeking of further and better particulars was “purely a delaying tactics”, as it was deposed in the affirmation in support of the entry of the default judgment^[12].

16.  Mr Mann also complained that the plaintiff had taken a sentence of the letter dated 17 August 2020 out of context, in that the defendant was made seemingly to hold the view that the application for further and better particulars would delay the filing of the defence and counterclaim^[13]. He further elaborated this point at the hearing that the plaintiff’s solicitors had misled the Court by failing to emphasize the defendant’s intention to push forward the case, and such an intention was manifested by the fact that the defendant asked the plaintiff to give consent for answering the request for further and better particulars in the first place.

17.  In considering this ground, I propose to begin with the relevant provision for entering a judgment in default of defence.  O 19, r 2(1) of the Rules of the District Court provides that, where the plaintiff’s claim against a defendant is for a liquidated demand only, then, if that defendant fails to serve a defence on the plaintiff, the plaintiff may, after the expiration of the period fixed by or under these Rules for service of the defence, enter a final judgment against that defendant for a sum not exceeding that claimed by the writ in respect of the demand and for costs.  Accordingly, the precondition for entering a final judgment in default of defence is that the defendant fails to serve a defence after the expiration of the period fixed by and under the rules.  As Mr Chou rightly pointed out, Mr Justice Ma J (as the Chief Justice then was) had made it clear in the Schindler Lifts case^[14] that a mere application for an extension of time would neither prevent time from running nor render a default judgment obtained before the application for extension was heard, liable to be set aside.

18.  In the present case, there is no dispute that, at the time when the final judgment was entered, the relevant statutory period for the defendant to serve her defence has expired and there was no extant order of the Court for an extension of time.  Accordingly, the precondition for entering a default judgment was fulfilled. 

19.  It follows that the question whether or not the defendant has engaged in a delaying tactics is not a material consideration for the entry of a default judgment.  I do not understand it was Mr Mann’s suggestion that, if the Court took the view that the defendant did not engage a delaying tactics, a default judgment would not have been made against her.  Clearly, the allegation of engaging “delaying tactics” is therefore not material when the Court considers entering a default judgment.  Whether or not the plaintiff’s solicitors had grounds to believe that the defendant had engaged in a “delaying tactics” is neither here nor there.

20.  Hence, neither the belief of the plaintiff’s solicitors that the defendant had engaged delaying tactics nor the defendant’s intention to push forward the case would have any material influence on the outcome of the application for a default judgment against the defendant in this case.  In my view, none of these matters could satisfy the materiality test rendering the final judgment against the defendant liable to be set aside.

21.  Mr Mann also argued at the hearing that the plaintiff’s solicitors failed to disclose to the Court the fact that they had “effectively” consented for an extension of time for the defendant to file and serve her defence.  In light of my previous ruling against the existence of such a consensus, I reject this argument without any hesitation.

22.  For the aforesaid reasons, none of the matters pinpointed by Mr Mann constituted material non-disclosure.  There was no irregularity in the final judgment entered against the defendant.  I therefore held that the judgment was a regular one.

(3) Should the judgment be set aside?

23.  Although the judgment against the defendant was entered regularly, I consider it to be fair and just to set it aside.  It is well-established that the Court’s power to set aside a regular judgment is discretionary in nature and such power is unconditional.  As Mr Mann pointed out, the purpose of such power was to avoid injustice that might be caused by the entering of judgment in default.  Two underlying principles are in play.  On the one hand, a party should observe procedural rules with judgment entered against him in default; and, on the other hand, a party should not be deprived of an adjudication of the case on its merits.  Accordingly, the major consideration in setting aside a regular judgment is whether the defendant has demonstrated a defence on merits to which the Court should pay heed, not as a rule of law, but as a matter of common sense^[15]. 

24.  In light of these principles, it is necessary for me to consider the plaintiff’s claim and the intended defence of the defendant. 

25.  In the present action, the plaintiff claims against the defendant for the repayment of loan in the sum of $161,500.  The Statement of Claim is a short one, consisting only of 6 paragraphs plus prayers.  In paragraph 1, it is averred that the relevant loans were made in pursuance of “various oral agreements” between June 2017 and March 2018. Paragraph 2 sets out the dates and amounts of deposits that the plaintiff allegedly paid to the defendant.  Paragraph 3 states that the defendant breached the said oral arguments by refusing to repay the loan.  It is further stated in paragraph 4 that the defendant remained her refusal to repay despite repeated demands made by the plaintiff and his solicitors.  Paragraphs 5 and 6 are the usual interests and jurisdiction clauses.

26.  While the defendant has yet to file and serve her defence, she has set out the background in her affirmation for setting aside the default judgment^[16]. According to her, in about late 2016, she and the plaintiff had started to develop a romantic relationship.  Since March 2017, because her income was not steady at the time, the plaintiff started to help her out financially and would deposit money into her account when she needed it^[17].  The plaintiff gave her cash gifts and subsidized her various expenses, such as holiday trips and her birthday dinner^[18]. He had also subsidized her rents in or around August 2017.  She said the plaintiff also bought her flowers and small gifts in order to please her^[19].  However, their relationship subsequently deteriorated, although the plaintiff had continued to send her cash gifts.  In late 2017, the defendant met another man and ended the relationship with the plaintiff.  He stopped supporting her financially since about March 2018. 

27.  The defendant denies that she is indebted to the plaintiff.  She states that, at one point, she had paid for the hospital bill of the plaintiff’s wife, of whom she was the insurance agent. The plaintiff later repaid her for that in about a month later^[20].

28.  While Mr Chou rightly pointed out that the appropriate test is whether the defence could well be established at trial^[21], he submitted on behalf of the plaintiff that the defendant’s defence ought not to be believed, because the evidence adduced by the defendant in this application failed to substantiate her case^[22].

29.  With all due respect, I do not agree with Mr Chou’s approach.  This approach is tantamount to asking the Court to make assessment on the defendant’s credibility based on affidavit evidence alone.  In my view, such an approach is plainly wrong.  Even if I accept that the defendant has failed to adduce sufficient evidence to substantiate her case in this interlocutory application, it does not follow that she is bound to fail to establish her defence at trial. 

30.  As mentioned, the real test is whether the defendant’s defence “could well be established at trial”, instead of whether I should believe the defendant’s defence at this preliminary stage. In other words, what I need to be satisfied is whether the defendant is believable at trial, not whether she is believed presently.  In the present application, there is nothing implausible or inconsistent in the defendant’s case that I can conclude that it is not possible for the defendant to establish it at trial.  In my view, there are some prospect of success and some degree of conviction in the defendant’s case which can only be shown to be right or wrong by a proper evaluation of the evidence at trial. 

31.  For completeness, I should also mention that Mr Mann also referred to some alleged inconsistences in the plaintiff’s affirmation in opposition to the set aside application, where the plaintiff denies that he and the defendant had ever had a romantic relationship and that the monies paid to the defendant were gifts.  With all due respect, this submission is again tantamount to asking the Court to assess the plaintiff’s credibility based on affidavit evidence alone.  As explained, this cannot be the correct approach in this kind of application.

32.  For the aforesaid reasons, I decided to the set aside the final judgment against the defendant in this case.  At the hearing, I have not dealt with the costs of this application. But, before I do that here, it is more convenient for me to turn to the defendant’s application for further and better particulars first.

APPLICATION FOR FURTHER AND BETTER PARTICULARS

33.  At the conclusion of the hearing on 15 December 2020, I reserved my judgment in respect of the defendant’s summons for further and better particulars.  Having considered the written and oral submissions of the parties, I come to the conclusion that the request is neither necessary nor desirable to enable the defendant to plead her case.  I will explain why.

(1) The defendant’s submissions

34.  In the defendant’s requests for further and better particulars, she asks the plaintiff to provide details in respect of the alleged oral agreements, including the nature, purpose and reason behind the alleged loan^[23], the details (time, place, and manner) of the making of the alleged oral agreement^[24], as well as the terms of the agreement^[25]. The defendant also requests the plaintiff to specify the details in respect of the plaintiff’s alleged demands for repayments^[26]. While the defendant has originally asked for factual evidence in support of the plaintiff’s allegation^[27], Mr Mann confirmed at the hearing, and I think correctly, that the defendant would withdraw her request for the production of evidence.

35.  First of all, Mr Mann referred to the Lam Yee Hung case^[28] and submitted that, where an oral agreement was pleaded, it is necessary to set out the relevant terms relied upon by the plaintiff.  Mr Mann also relied on the Wheelock Marden case^[29] for the principles of pleadings and, based on those principles, complained that the brevity of the Statement of Claim would:-

(1) Render the defendant to be uninformed of the nature of the plaintiff’s case;

(2) Cause the defendant to be taken by surprise and to be unable to know what evidence she ought to prepare;

(3) Fail to limit the generality of the plaintiff’s claim;

(4) Fail to define the issue to be tried; and

(5) Fail to tie the hands of the plaintiff so that he could not without leave go into any matters not included in the claim.

(2) Legal principles

36.  O18, r 12(5) of the Rules of the District Court provides that an order under the rule shall not be made before service of the defence unless, in the opinion of the Court, the order is necessary or desirable to enable the defendant to plead or some other special reason.  As Jenkins LJ said in Ross v Blakes Motors Ltd, the order made under this rule is an exceptional one^[30].

37.  Mr Mann also submitted that particulars given before defence are desirable when the defendant would otherwise be prejudiced or embarrassed in his pleading^[31]. 

38.  Accordingly, the questions before me are:-

(1) Whether the particulars sought, or any of them, are necessary or desirable to enable the defendant to plead;

(2) Whether without them, or any of them, the defendant would be prejudiced or embarrassed in her pleading; and

(3) Whether they, or any of them, ought for any other special reasons to be given before defence.

(3) Analysis

39.  I would answer all these questions in the negative.  Mr Mann argued that, in absence of the nature of alleged oral agreements and the terms thereof, the defendant was placed in an impossible position to plead her defence.  I must admit that, at the first glance, this argument is attractive, especially when one focuses on the orality of the alleged agreement.  However, upon further reflection, it becomes clear to me that the essence of the plaintiff’s claim is one for money lent.  In this kind of claim, upon pleading the fact that payment was advanced, the term of repayment is either presumed or implied, without the necessity of pleading it explicitly.  This proposition is supported by the following passage from Bullen & Leake & Jacob’s Precedents of Pleadings^[32]:-

“…A claim for money lent is a claim on a debt. Where it can be shown (by proof or admission) that A has paid money to B, then in the absence of any presumption of advancement, there is prima facie an obligation to repay upon B; the onus is upon B to establish that the money was intended as a gift.”

40.  Applying the said principles to the facts of this case, I do not accept Mr Mann’s contention that the plaintiff’s Statement of Claim does not convey the nature of his case.  The essence of the plaintiff’s claim is the payment of money to the defendant, which had duly set out in paragraph 2 of the Statement of Claim.  There is therefore prima facie an obligation for the defendant to repay the sum.

41.  As the defendant disclosed in her affirmation in support of the setting aside application^[33], her defence is that the money paid by the plaintiff was intended as gifts to her.  The onus is on the defendant to establish that intention, and it is for her to set out the particulars that the money was intended as gifts in her defence.  Accordingly, it is not arguable that the defendant would not be able to know what evidence she ought to prepare at the trial.  In such circumstances, I do not find that the requests being sought are either necessary or desirable to enable the defendant to plead her defence.  Nor can I see how, in absence of the requested particulars, the defendant would be prejudiced or embarrassed in her pleadings.

42.  The learned editors of Bullen & Leake & Jacob’s Precedents of Pleadings^[34] goes on to state that, where money is lent without any stipulation as to the time of repayment, a present debt is created which is generally repayable at once without prior demand.  Accordingly, besides the fact that the same had been pleaded by the plaintiff, it is difficult to see how the time and the manner of the plaintiff’s demand for repayment would go into the nature of the claim.  In my view, the request for particulars in this respect is neither necessary nor desirable to enable the defendant to plead her defence.  Nor would the defendant be prejudiced or embarrassed in her pleadings in the absence of such particulars.

43.  I do not think it is right to criticize the Statement of Claim on the basis that it fails to limit the generality of the plaintiff’s case, to tie the hand of the plaintiff, or to define the issue to be determined at trial.  In this respect, I remind myself of the following passage from the Final Report of Chief Justice’s Working Party on Civil Justice Reform:-

“269. As emphasised in McPhilemy v Times Newspapers Ltd [1999] 3 All ER 775, given the modern practice of requiring witness statements, expert reports and so forth to be exchanged, satellite litigation merely to clarify the pleadings is seldom necessary. A pleading which conveys the nature of a party's case, stating the material facts, should not attract an application for particulars even if certain details (which are peripheral or likely to emerge in the usual course) are not disclosed.”

44.  As Mr Chou rightly pointed out, the Lam Yee Hung case is clearly distinguishable in that that case concerns the provision of particulars after the service of the defence.

45.  Finally, in this application, Mr Mann did not pinpoint any other special reason why particulars should be given before the service of the defence.  I cannot see any such reason either.

46.  Notwithstanding the aforesaid, there is of course nothing that will prevent the defendant from seeking further and better particulars at a later stage.

47.  For the above reasons, I am not satisfied that the requests being sought are either necessary or desirable to enable the defendant to plead her defence.  Nor can I see how, in the absence of any of such requested particulars, the defendant would be prejudiced or embarrassed in pleading her defence.  There is also no other reason that I should order particulars at this preliminary stage.  Accordingly, I would dismiss the defendant’s summons for further and better particulars.

48.  To avoid any further procedural hiccups, I would also grant leave to the defendant to file and serve her defence within 28 days from the date of this decision.  The plaintiff may file and serve his reply within 28 days thereafter.

COSTS REGARDING THE SETTING ASIDE APPLICATION

49.  In view of my decision to set aside a regular judgment, Mr Chou submitted that the costs of the application should be to the plaintiff in any event.  Mr Mann argued on the other hand that the costs should be in the cause since the defendant was not at fault.

50.  I do not accept that the defendant was totally blameless.  The final judgment was entered as a result of the defendant’s failure to secure an order for extension of time in the first place.  I have also rejected Mr Mann’s argument that there was an “effective” agreement for the extension of time.  I think it is fair to order the defendant to bear the plaintiff’s costs of the application.

51.  That said, in view of my ruling in respect of the merits of the defendant’s defence, the plaintiff should not have opposed the application, even though he was right to contend that the judgment was entered regularly.  In all the circumstances of this case, I hold that there should be an overall 50% discount of the plaintiff’s costs of the setting aside application.

52.  In the revised statement of costs lodged with the Court on 16 December 2020, the plaintiff’s costs of the setting aside application amounted to $58,600.  By a broad-brush approach, I fix the costs at $40,000.  Applying 50% discount to that figure, I would order that the defendant should be liable to pay in any event the plaintiff’s costs of the setting aside application summarily assessed at $20,000.

COSTS REGARDING THE APPLICATION FOR PARTICULARS

53.  I believe both Mr Mann and Mr Chou would agree that costs should follow the event in respect of the application for further and better particulars, although Mr Chou had argued at the hearing that, the costs should be in the cause if the Court was minded to order particulars in the defendant’s favour. 

54.  In view of my ruling as aforesaid, I would order that the defendant should pay the plaintiff’s costs of the application for further and better particulars.  According to his revised statement of costs, the plaintiff’s costs of the application for further and better particulars amounted to $28,585.  By a broad-brush application, I fix the costs at $20,000.

DISPOSITION

55.  For the aforesaid reasons, as regards the defendant’s summons filed herein on 28 October 2020, I make the following order:-

(1) The final judgment entered against the defendant dated 14 October 2020 be set aside; and

(2) The plaintiff’s costs of this summons be paid by the defendant, summarily assessed at $20,000, payable in any event.

56.  As regards the defendant’s summons filed herein on 11 August 2020, I order that:-

(1) Paragraph 1 of the summons be dismissed;

(2) Leave be granted to the defendant to file and serve her defence within 28 days from the date of this decision;

(3) The plaintiff may file and serve his reply within 28 days thereafter; and

(4) The defendant shall pay the plaintiff’s costs of this summons, summarily assessed at $20,000, payable forthwith.

57.  Lastly, I would like to thank Mr Mann and Mr Chou for their assistance rendered to this Court.