AIA INTERNATIONAL LTD formerly known as AMERICAN INTERNATIONAL ASSURANCE COMPANY (BERMUDA) LTD v. FONG LOK YEE formerly known as FONG KIT YEE

DCCJ 4183/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4183 OF 2013

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REASONS FOR DECISION

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1.  This is the defendant’s appeal under Order 58 of the Rules of the District Court (“RDC”) against the Master’s decision dated 7 April 2014 dismissing her application to set aside a default judgment against her with costs.

Background

2.  The defendant was an insurance agent working for the plaintiff.  The plaintiff’s claim is that the defendant had wrongfully retained sums of money received by her between 7 December 2006 and 5 January 2010 from an insured Kings View Airconditioning Engineering Company Limited (“Kings View”) who placed orders for or renewed insurance policies.  Of the total sum of $598,364 received by the defendant, she only deposited a sum of $146,382 into Kings View’s insurance accounts with the plaintiff, having retained a balance of $451,982 (Statement of Claim; para 3). As a result the plaintiff was obliged to make refund to Kings View.  The plaintiff sues in this action for a sum of $305,176.16 which it says the defendant was liable to repay or account to the plaintiff.

4.  The writ of summons together with the Statement of Claim was issued on 29 October 2013.

5.  The plaintiff obtained a default judgment for the sum claimed plus interest against the defendant on 13 January 2013.

6.  By summons dated 21 January 2014, the defendant applies to set aside the default judgment.

7.  Her application was dismissed with costs by the Master on 7 April 2014.

8.  The defendant applied for Legal Aid on 4 November 2013 in respect of the present proceedings.  She explains in her 2^nd Affidavit her misunderstanding that upon receipt of the writ of summons, she had thought the Director of Legal Aid would deal with or take over the defence on her behalf.  She was mistaken as Legal Aid was never granted; her application for Legal Aid was refused on 17 February 2014, and before that default judgment was entered on 13 January 2014.  She did not even file an Acknowledgement of Service so no notice of intention to enter default judgment was served on her prior to the plaintiff’s application to enter default judgment.

9.  The defendant sought to adduce some new documentary evidence which was refused by the Master.  In her 3^rd affidavit dated 14 April 2014, she proposes to adduce such new evidence comprising some tables compiled by her, bank slips and payment receipts of the plaintiff.  She argues this new evidence supports her defence that she had duly returned to the plaintiff all premium received by her from Kings View.

10.  It is the first time the defendant raised this defence argued that she had returned all premium received from Kings View due to the plaintiff.  She did not mention this in her 1^st and 2^nd affidavits, nor at the hearing on 7 April 2014 before the Master.

11.  Flying in the face of the defence now raised is the defendant’s criminal conviction dated 18 December 2012, after trial, of fraud contrary to section 16A of the Theft Ordinance, Cap 210 for which she was sentenced to 6 months imprisonment (KTCC 3337/2012).  The particulars of the offence relate to wrongful retention by the defendant of $451,982 which act had resulted in benefit to herself or in prejudice or a substantial risk of prejudice to the plaintiff.  This is the subject matter of wrongful retention by the defendant in the present action, namely the balance of $451,982 due and owing to the plaintiff (Statement of Claim; para 3).  She is appealing against the conviction.

12.  In her 1^st and 2^nd affidavits dated 21 January 2014 and 3 March 2014, the defendant states that she does not understand how the claim amount was calculated by the plaintiff.  Regarding the criminal conviction, she states that the case is pending appeal.  This is the basis of her arguments that the criminal conviction should not be taken into account in my consideration of her application to set aside the default judgment.

The legal principles

13.  An appeal against the master’s decision pursuant to Order 58 of RDC is by nature of a re-hearing of the defendant’s application to set aside the default judgment.

14.  There is no evidence or suggestion of any irregularity of the default judgment. 

15.  In applying to set aside a regular default judgment, the defendant has the burden of satisfying the court that its defence carries a real prospect of success: see L&M Specialist Construction Ltd v Wo Hing Construction Co Ltd [2000] 3 HKLRD 266; Hong Kong Civil Procedure 2014, Vol 1 at [ 13/9/12-13/9/14 ].

16.  The defendant seeks to adduce new documentary evidence for purpose of this hearing by way of her 3^rd affirmation dated 14 April 2014.  She alleges that the new evidence goes to support her defence that she had returned all premium to the plaintiff.

17.  Order 58 rule 1(4) RDC provides that no new evidence may be received except on “special grounds”, and this term refers to the conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 as follows:-

“Leave to adduce further evidence on appeal will only be granted (1) if it is shown that the evidence could not have been obtained with reasonable diligence for use at the trial, (2) if the further evidence is such that, if given, it would probably have an important influence on the result of the case, thought it need not be decisive, and (3) if the evidence is such as is presumably to be believed.”

See also commentaries in Hong Kong Civil Procedure 2014, Vol 1 at 58/1/3 on the equivalent rule.

18.  The criminal conviction is admissible in the present civil proceedings by operation of section 62 of the Evidence Ordinance, Cap 8 for the purpose of proving, where to do so is relevant to any issue in the present proceedings, that the defendant had committed that offence.  It must be regarded as imposing on the defendant a burden of rebutting what is presumed against her by the conviction (see Stupple v Royal Insurance Co Ltd [1971] 1QB50).

Discussion

19.  It is not disputed that the defendant first disclosed or served the new evidence at the hearing before the Master. She explained in court that she had not been able to find the documents earlier.  These documents were put together with a lot of her other documents and records in 8 or 10 carton boxes which she retained after termination of her service contract by the plaintiff in 2010.  She arranged for these carton boxes of documents and records to be stored in her friend’s office in Chai Wan.  She had access to them, but had not been able to find the bank slips and payment receipts, ie the new evidence until shortly before the hearing before the Master on 7 April 2014.  She agreed that had she made a thorough search she should have been able to find them. 

20.  It is unthinkable that had the new evidence been so important as to proving that the defendant had returned all premium received from Kings View due to the plaintiff, why she had not made a thorough search for these documents during the past few years particularly when she was facing the criminal prosecution.

21.  Having heard the defendant’s explanation and considered the overall evidence, I am not satisfied that she comes within any of the Ladd v Marshall “special grounds” justifying granting of leave for her to adduce the new documentary evidence.  The documents had been in her possession all along.  She could not give a satisfactory explanation as to why she did not raise the defence of having returned to the plaintiff all premium received from King’s View and adduce the documentary evidence earlier.  

22.  I refuse leave for her to adduce the new evidence.

23.  Even if I was wrong on this and that the defendant should be allowed to adduce this new documentary evidence, a careful review of the new evidence, as observed by plaintiff’s counsel Mr Lung, goes no more than supporting that some of the payments made by Kings View were paid into its insurance accounts with the plaintiff.  This is in fact not inconsistent with the plaintiff’s pleaded case that she had wrongfully retained part of but not all of the sums received from Kings View.  The alleged defence of full return of all sums received from Kings View to the plaintiff cannot be made out from the new evidence.

24.  There is no evidence enabling the defendant to discharge the burden of rebutting what is presumed against her by the criminal conviction.

25.  In the light of the overall evidence and particularly the criminal conviction, the defence raised falls far short of carrying any real prospect of success.  I accept the helpful submissions of plaintiff’s counsel Mr Lung and have no hesitation dismissing the defendant’s appeal to have the default judgment set aside.

26.  I have been informed that the plaintiff has issued a Statutory Demand against the defendant which is the subject matter of other proceedings in HCSD 16/2014.

Order

27.  The defendant’s appeal is dismissed and the order of the Master dated 7 April 2014 stands.

28.  Costs should follow the event.  I order that costs of and occasioned by this appeal be to the plaintiff, with certificate for counsel, summarily assessed at $36,000.