FIRST CASTLE LTD v. WONG CHUN KIT

HCA 6872/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6872 OF 2000

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J U D G M E N T

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1. This is an appeal against the decision of Master Woolley made on 29 May 2003 by which the Master ordered that the final and interlocutory judgment entered against the Defendant on 17 August 2000 be set aside and the Defendant was granted leave to defence on condition that the Defendant made a payment of $250,000 into court within 28 days. The Defendant is now seeking to appeal against that order and basically what the Defendant argued was that the judgment should be set aside unconditionally.

2. From the written submissions filed with the court before this hearing, it is clear that both parties accept that the default judgment should be regarded as irregular due to the lack of notice on the part of the Defendant about the proceedings at the time when default judgment was entered.

3. I need not repeat what I said in the case of Phillips Securities v Lam Chi Bin Stanley [2002] 1 HKC 432 as to the effect of service by insertion in letter box addresses. In the light of the law as stated therein I am of the view that the concession by the Plaintiff's counsel that the judgment was irregular is properly made. The only question in this appeal is bearing in mind that this is an irregular judgment whether the court should impose any condition for the setting aside of that judgment.

4. Counsel for the Plaintiff submitted that it is correct for the Master to impose condition in the circumstances of this case. On the other hand, Mr Ma, counsel for the Defendant argued that because of the lack of notice of the proceedings, an irregular judgment should be set aside as of right and unconditionally unless the court is satisfied that there are special circumstances to evoke its residual discretion to impose conditions. He also submitted that bearing in mind the irregularity that is, the Defendant received no notice of the proceedings, it would require very strong and cogent evidence before the court would impose condition for setting aside the default judgment in this case.

5. Mr Ma accepted that in this sort of situation if the court can conclude that there was attempt by the Defendant to evade service that would be one of the scenarios where conditions could be imposed. Another scenario where the court can impose condition is where the court is satisfied by cogent and sufficient evidence that there was a real risk that judgment the Plaintiff may ultimately obtain would be an empty one if this is not guarded against.

6. He made these submissions by reference to Guangdong International Trust and Investment Corporation v Yuet Wah Ltd [1997] 2 HKC 696 and Po Kwong Marble Factory Limited v Wah Yee Decoration Co. Ltd [1996] 4 HKC 157. I take the law in this regard from Po Kwong Marble Factory Ltd which is a Court of Appeal's decision and has been held in subsequent cases to be the law in Hong Kong. The relevant passages in the judgment of that case can be found in the following dicta of Sears J at page 161C to E:

"The provision of O. 13 r. 9 as I have said, are wide in their context. In my judgment, whilst it can be rightly said that a judgment which has been obtained irregularly ought to be set aside as of right, in other words that the merits of the particular defence to claim do not have to be entered into by the court, nevertheless, there is always a residual discretion in the court to have regard to the conduct of the parties. For example, if a judgment had been obtained irregularly and the writ comes to the notice of the defendant, he may delay for a certain period of time before taking any action on the writ. In my judgment, the court still has the discretion - having regard to what the defendant himself has done - to deprive him, if necessary, of that judgment or alternatively, to impose terms upon the setting aside of the judgment which accord with justice having regard to facts of the particular case."

7. Then at page 162, this is the judgment of Bokhary JA (as he then was) at C-F, His Lordship said:

" As I, too, would impose a condition proposed by my brother Sears. That can be done. The decision of this court in Fok Chun Hung v Lo Yuk Shi [1995] 1 HKLR 420 could be read as suggesting otherwise. But I am driven to accept that the court might have done otherwise than it did if I make myself clearer sitting at first instance as an additional judge of the High Court in that case. In particular, I could have underlined the decision at the Court of Appeal in England in Singh v Atombrook Ltd [1989]1 WLR 810.

Another thing I might have done was to underline the nature of the statutory jurisdiction. 'Ex debito justitiae' or as of right means without going into the actual merits of the defence. It does not mean shutting one's eyes the circumstances surrounding the question of service and why things went wrong in that regard. The court statutory jurisdiction is unfettered.

Here, there is a very real risk - suggested by the Defendant company's strange way of doing things - that any judgment which the Plaintiff company may ultimately obtain would be an empty one if we do not guard against that. The way to guard against it is to impose the condition proposed by my brother Sears. And there is jurisdiction to do so."

8. These principles had been applied in a number of cases, one of which is the case decided by the Deputy Judge Muttrie in Bank Austria v Sui Kam To [2002]1 HKC 232. His Lordship imposed condition in setting aside an irregular judgment. In that case, by application of these principles, on the facts of that particular case, His Lordship came to the view that there were evidence justifying a conclusion that the Defendant was evading service or what His Lordship described at page 241, "That the stance of the defendant is that "catch me, if you can.""

9. For today's purposes, the main issue is therefore whether on the material before me having regard to the circumstances of the case, I can draw any inference against the Defendant by reference to his conduct. Another consideration is to what extent had the Defendant contributed, to using the word of Bokhary JA, what went wrong in terms of service.

10. In this connection, it is important to bear in mind this is a case in which the Plaintiff sues the Defendant for arrears of rent and management fees regarding a premises leased to the Defendant under a Tenancy Agreement dated 18 September 1999. The Plaintiff's case is that ever since the execution of the lease, the Defendant did not pay anything. The tenancy commenced from 12 July 1999 for a term of one year. The Defendant gave the Plaintiff the address which has been described as the Ma On Shan address in the documents. Mr Ma accepted that was the only address given by the Defendant to Plaintiff although he argued that this was for the purpose of identification of the Defendant in the lease.

11. I have drawn his attention to clause 7(5) at page 35 of the Tenancy Agreement which provides as follows:

"Any notice required to be served on tenant should be sufficiently served if delivered to or despatched by registered post to or left at the premises or at the registered office or at last known address in Hong Kong of tenant. And any notice required to be served on the landlord shall be sufficiently served if delivered to or despatched by registered post to or left as the registered office of landlord in Hong Kong or any other address which the landlord may notify the tenant from time to time."

12. Hence, it is clear that the address given by the Defendant was also meant to be a correspondence address and I think Mr Ma also accepted this. What he said was this: that is only for the purpose of notice to be given under the Tenancy Agreement, it does not cover service of writ which is not a notice under the Tenancy Agreement. He might be right as to that but I am entitled to take into account of the fact that this was an address given by the Defendant as his correspondence address.

13. Mr Ma submitted that that address was in fact an accurate address at the material time because the address was given on 9 July 1999 to the Plaintiff when the Defendant was still residing at the premises although shortly thereafter he moved to another premises due to the fact that he had sold that particular premises. With regard to that transaction, the sale and purchase agreement was entered on the 17 June 1999 and it was completed on 20 July 1999.

14. So at the material time, that is on 9 July 1999, the position was that the Defendant had already entered into a sale and purchase agreement to sell the premises although the sale had not yet been completed. I think I can draw inference from the fact that in view of the impending sale, he still gave this address (which I would accept as a technically correct address at that moment in time) to the Plaintiff for correspondence purposes.

15. Mr Ma also emphasised that the change of address or residential address on the part of the Defendant had been explained by the fact that he had sold the premises, so one should not draw any inference against the Defendant in that regard.

16. In my judgment, whether I can draw any adverse inference or inference against the Defendant depends on the whole circumstances of the case. I am prepared to accept that solely on the change of that declared address alone, by reason of the sale of property, I could not conclude that the Defendant was evading service. But as I said I have to take into account of other relevant circumstances.

17. Mr Ma submitted that there is no obligation on the part of the Defendant to notify the Plaintiff as to his change of address and he cited the case of White v Weston [1968] 2 QB 647 to support this proposition. I think there is a distinction between whether the Defendant has any obligation legally to inform the Plaintiff as to his change of address and whether looking the matter in the light of all the circumstances of the case, the court can draw an inference that what the Defendant did at that stage was to evade service.

18. Although I should not go into the merits of the defence bearing in mind that this is a setting aside of an irregular judgment, it is relevant to consider the circumstances under which the Defendant had conducted himself with regard to the leased premises. These are matters that I can take into account to consider whether the Defendant was evading service and also on the question whether there is any risk that if leave to defend is given to the Defendant, at the end of the day the Plaintiff would be unable to get anything out of the judgment it might get.

19. As I said, the evidence showed that the Defendant had not paid anything after the execution of tenancy agreement and in about November 1999 the Defendant had abandoned the leased premises. The Plaintiff had attempted to levy distress at the leased premises but nothing of value was recovered.

20. In my judgment, in the light of all these, there are strong indications that the Defendant was well aware that he would be sued by the Plaintiff and his conducts suggested that he was trying to avoid that. Viewed in that light, the fact that he gave the Plaintiff a correspondence address which he knew to be good only for a couple of weeks undoubtedly shows that he was trying to evade service. In short, he was trying to avoid the consequences of his intended failure to comply with the terms of the tenancy agreement in terms of payment of rents and management fees. Of course, the Defendant might have some explanation as to that but the Defendant chose not to file any evidence to explain about his conducts in this regard. Mr Ma accepted that these are relevant considerations that the court might take into account in assessing whether the Defendant was evading service and yet the Defendant chose not to say anything.

21. I do not accept that the Defendant can explain this by saying that these are matters going to the merits and in the context of this application, merits should not go into and therefore, the Defendant was entitled to remain silent in this regard. That might be so with regard to the merits of the defence but as Bokhary JA pointed out in Po Kwong Marble, ex debito justitiae does not mean that the court could not look into circumstances surrounding the question of service and why things went wrong in that regard. Clearly, in the context of the present case, the conducts of the Defendant with regard to the leased premises are highly relevant to those issues that this court should take into account.

22. Thus analysed, the fact that the Defendant chose to say nothing about his conducts regarding the leased premises, particularly in the light of the fact that similar submissions had been made at the hearing before the Master and the Defendant still chose not to say anything by way of further affirmation filed for the purpose of this appeal, speaks volume of the case against the Defendant.

23. In the light of that, I do not think the Defendant can complain about the court drawing adverse inference against him with regard to his intention as to the supply of an address which was only good for couple of weeks to the Plaintiff for the purpose of correspondence. Clearly, it was due to the fact that such an address was provided to the Plaintiff that had caused the Plaintiff to serve the writ at that Ma On Shan address. So the Defendant was to a very large extent responsible for the Plaintiff's failure to effect service on him.

24. I also conclude from these circumstances that there is a high risk that any judgment which the Plaintiff may ultimately obtain would be an empty one and this should be guarded against by the imposition of condition for setting aside the judgment.

25. For these reasons, I dismiss the appeal as I think the Master was entirely correct in imposing condition for setting aside the judgment.