XCHRX CHEN SHUN ZHONG v. SUCCESS CIVIL & FOUNDATION CO. LTD. AND ANOTHER

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 17041 OF 1996

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Judgment

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Plaintiffs' Claims

1. The plaintiffs in these six actions were all recruited from the mainland to work for building contractors in the construction of the new airport. After working for a short time here all their contracts of employment were terminated. On 3rd August 1996, each of them has separately brought an action against the defendants. Their claims are all identical save on some minor details. . The 2nd defendant played an active part in their recruitment and the recruitment was made through an agency company in the mainland. The 1st defendant had the necessary government quotas for them to work here. Before they came to Hong Kong, each of the plaintiffs had paid the agency company and the 2nd defendant certain sums of money which by their standard must be substantial. These sums of money were paid pursuant to their respective agreement with the 2nd defendant who guaranteed their employment for a certain period at a certain minimum wage. In breach of these agreements , all their contracts of employment were prematurely terminated before the guaranteed period expired, they are now claiming for the refund of the moneys and for damages. The damages have not been particularised.

Defence and Counterclaim of the 2nd Defendant

2. The defence is a bare denial and the 2nd defendant counterclaims for repayment of loans.

Request for Further and Better Particulars of the Counterclaim/and Reply.

3. The counter-claim is of utmost brevity. It consists of two short sentences:

" We would like the workers to return back the money lent to them through Heng Lee.

All the points made above are backed up by evidence and witnesses"

Naturally and properly the plaintiffs requested for further and better particulars. In response the 2nd defendant gave a general reply in a letter dated the 10th September 1996 explaining how the loans were made. In essence, loans were made to every worker recruited from the mainland by them , presumably including the present six plaintiffs, at the request of their respective team leaders. No other details of the loans were given. Not satisfied with the particulars given in the letter, the plaintiff again wrote to the 2nd defendant on the 26th September 1996, asking for, inter alia, further and better particulars of the counterclaim. The plaintiffs then received an anonymous and unsigned letter dated 30th September 1996 in the 2nd defendant's letter head, informing them that the director of the 2nd defendant, one Mr. Chan Yau Chi, was out of town and therefore no response could be made to the request.

Unless Orders

4. On 31st October 1996, the court on the inter partes applications of the plaintiffs, ordered the 2nd defendant to give the requested particulars as per letter dated 26th September 1996 within 7 days. These orders were not complied with. The 2nd defendant took out summonses applying for extension of time. In the affirmation in support, one Mr. Chan Sau Choy, said he attempted to contact the team leaders in China but found that they were not at their residences. He said he wanted more time. On 5th December 1996, these time summonses were heard together with the plaintiffs' applications taken out on 25th November 1996 for unless orders. At the hearing the 2nd defendant was in person represented by one Ms Chan Sau Ling Noel . The time summonses were dismissed and unless orders were granted giving the 2nd defendant 7 days to comply with the previous orders for further and better particulars. One day before the time limit expired, the 2nd defendant filed the further and better and particulars giving only the addresses and contact telephone numbers of the team leaders. Other particulars ordered were not given, most notably, the respective amounts allegedly lent to each of the plaintiffs, by whom that these loan agreements were made and the terms and conditions of these agreements.

Striking out of the Defence and Counterclaim/entering judgement

5. Upon the 2nd defendant's failure to comply with the unless orders , the plaintiffs applied ex parte to have the Defence and Counterclaim struck out and to enter interlocutory judgment against the 2nd defendant. Three of these applications were directed by Judge Whaley to be heard inter partes. The other three came before the judge who gave the unless orders. The learned judge granted the orders striking out the Defence and Counterclaim and entering judgment against the 2nd defendant with damages to be assessed. The 2nd defendant was absent at the hearing on 13th February 1997 of the inter partes applications and the court granted the applications ordering that the Defence and Counterclaim be struck out and that judgment be entered with damages to be assessed.

Applications to Set Aside the Judgments

6. The 2nd defendant had acted along in person until its solicitors filed a notice to act on 6th July 1998, about eighteen months after interlocutory judgments having been entered. On 15th September 1998, the 2nd defendant took out these summonses to set aside these judgments on grounds of irregularity. Particulars of irregularity can be summarised in order of their appearance in the amended summons as follows :

1. The applications for entering judgments were heard ex parte, or heard in the absence of the 2nd defendant when the summonses had not been properly served.

2. The unless orders were made in terms of the summons dated 25th November 1996 which summonses related only to the 1st defendant.

3. The particulars the 2nd defendant was ordered to give are particulars of the Counterclaim and not the Defence and therefore the defence should not be struck out.

4. The particulars ordered are of the reply letter dated 10th September 1996 and not of the Defence and Counterclaim.

7. I fail to see any merit in the 2nd ground of irregularity. It is clear that the reference to the 1st defendant in the summonses is a typographical error. The formal perfected unless orders approved by the judge and filed with the court clearly required the 2nd defendant to give further and better particulars. The 2nd defendant was present at the hearing and could not have been under the mistaken belief that the unless orders were not made against it. In any event there was no evidence that the 2nd defendant was misled by such error in the summonses. In fact the evidence suggested that it was not so misled. One day before the period limited for giving particulars expired, the 2nd defendant purported to comply with the unless orders by supplying some of the particulars required.

8. As to the third ground, Mr. Lee argued that only the counterclaim should be struck out as the particulars the 2nd defendant failed to give did not concern the defence. Ms Ng, counsel for the plaintiffs argued that the counterclaim was interwoven with the defence. In fact apart from a bare denial of the claim, the only defence is the set off by the counterclaim. Had the 2nd defendant not raised the counter-claim, the plaintiffs may have successfully applied to have the defence struck out at some earlier stage. The proceedings of the main claim must have been delayed because of the defence of set off by the counterclaim. There is no rule that only the counterclaim should be struck out. In the particular circumstances of this case there is no irregularity that the judge struck out the defence and counterclaim.

9. The fourth ground is most absurd. Reply letters to request for further and better particulars form part of the pleadings. The first particulars so given in the reply letters in these actions form part of the defence and counterclaim. When the court ordered further and better particulars of those first particulars, the particulars so ordered can be described as the particulars of the defence and counterclaim. The wording in the unless orders constitutes no irregularity.

10. As to the first ground, the first limb relate to judgmemts entered at the hearing of the inter partes summonses the court directed the plaintiffs to issue. The services of these summonses, Mr. Lee submitted, were all defective in three ways. Firstly, they were services by ordinary post and not a personal service. Secondly the services of the summonses were required to be effected on the 2nd defendant at least two clear days before the hearing and there was no evidence to that effect. Thirdly, the affirmations of service were defective in that the summonses were wrongly dated. Mr. Lee addressed the court at length on the first two points. Without any disrespect, I do not think it necessary for me to deal with them. As to the third point, that part of the affirmations of service Mr. Lee criticised runs as follows:

"-----I,---did on the 28th day of January---serve on the 2nd defendant ---with a photocopy of Summons dated 25th day of November 1996 and a photocopy of Affidavit of Ng Kin Yuen with exhibits both filed herein on the 17th day of December 1996---"

11. No documents had been exhibited to these affirmations of service. One can only rely on the affirmations of the server to see if the correct summonses i.e. the ones dated 27th January 1997 had in fact been served. Despite the fact that Judge Barnes had on 6th October 1998, more than 9 months before this hearing, directed the filing of affirmations by the parties when the hearing was adjourned, no supplemental affirmation of the server of process had been filed to clarify the matter. In his affidavits filed on 29th December 1998, the plaintiffs solicitor in conduct of these proceedings mentioned in the passing that upon reviewing the case file he understood that the summonses dated 27th January 1997 had been duly served and he exhibited the certificates of posting and copies of the summonses with a chop impression showing the despatch date of 28th January 1997. I respect his integrity and his understanding that the summonses were duly served. However on the evidence before me, I cannot see how the mistake, if there was one, came to be made by the server when he made his affirmations of services shortly after he had served the documents. Bearing in mind all the circumstances of the case and in particular, there were in fact summonses dated 25th November 1996 taken out by the plaintiffs, I am not satisfied that the correct summonses had been served on the 2nd defendant. The other documents served on the 2nd defendant did not contain the date and venue of the hearing. It follows that the 2nd defendant would not have known the date of the hearing of the applications of striking out and was thereby deprived of a chance to be heard. This must be an irregularity.

12. The other limb of the first ground of irregularity relates to ex parte judgments. Mr. Lee submitted that an application to striking out the defence and counterclaim on ground of failure to comply with an unless order must be made inter partes. Failure to do so is an irregularity. While Ms. Ng did not concede that the application to strike out and for entering judgment should be made inter partes, she did not advance any substantial arguments to justify the failure to do so. I accept the submission of Mr. Lee that these applications should be made inter partes. While it cannot be ruled out that in an appropriate case under exceptional circumstances, an application to enforce an unless order can be properly made ex parte, the practice of hearing these applications inter pates is well established to be disturbed by a side wind. In the present case information disclosed in the affidavits in support of the ex parte applications merely recited the facts that there had been a failure to comply with the unless orders. Mere failure without more cannot justify a departure from the established practice of hearing the applications inter partes. In this sense the judgement obtained can be labelled as irregular judgments.

Discretion or No Discretion

13. Mr. Lee submitted that the 2nd defendant was entitled as of right to have all these six irregular judgments set aside for the usual and obvious reasons and there was no need to show merits in the defences. He argued that the court has no discretion but to set aside these judgements. He further argued that, for the same reasons, even if the court had a discretion, it could only be exercised in favour of the 2nd defendant setting aside the default judgments. He cited two authorities in support: Fok Chun Hung V Lo Yuk Shi [1995] 1 HKLR 420, United Smart Development Ltd. V Treasure Land Property Consultants [1995] 2HKLR 176. Ms Ng had not countered this point strongly, as she had been absorbed in reliance on her arguments that the judgments were regular and opposed their setting aside on grounds of undue delay, no merit in the defence and prejudice. In each of these two cases cited by Mr. Lee, the writ had not been properly served on the defendant, and judgment was entered in default of appearance or of intention to defend. In the premises, these defendants had been deprived of a chance of entering appearance or giving his intention to defend. Of course justice by any standard requires that the judgement be set aside in these circumstances. This is so because justice requires that he be allowed to take that very step in the proceedings i.e. entering appearance or giving notice to defend and which step he had been wrongly deprived of a chance to take. In my judgment these two cases cited by Mr. Lee can be distinguished. In the instant case, the court was invoking a sanction of the unless orders and that the sanction is a necessary forensic weapon to secure a delinquent party's compliance with the order. The step in the proceedings the 2nd defendant had been deprived of its chance to take is to appear at hearing and be heard as to : (1) whether it had or had not complied with the unless orders, (2) if it had not so complied, whether it had been contumacious or contumelious, and (3) if it had been guilty of such conduct, what appropriate order should be made. Now that he had the chance to appear and be heard on the matter, injustice that had been caused to him by the irregularity had been cured. There is no injustice if 2nd defendant is now required to show merits in contesting the applications made ex parte or made in its absence. Therefore the merits the 2nd defendant would have had in contesting the plaintiff's applications should be taken into account. It follows that the court has discretion whether to set aside the judgments. When the court exercises its discretion, overall of justice in the matters should be looked at.

Merits in Opposing Applications for Striking Out

14. Looking at the matters in hindsight for the benefit of the 2nd defendant, and having searched for materials in favour of the 2nd defendant in the three affirmations filed on its behalf for this hearing, I still cannot see how it could have successfully resisted the applications for striking out. Mr. Lee argued that the default by the 2nd defendant is not intentional, contumelious, or contumacious.

15. He said the 2nd defendant had informed the plaintiffs and the court the difficulties of tracing the witnesses and documents. What he relied on were letters and affirmations. Some of these were before the unless orders were made and some after. In those documents dated before the unless orders, only bare assertions that witnesses in the mainland had moved their addresses and therefore relevant documents could not be found. These explanations were not accepted by the judge who dismissed its summonses asking for extension of time and granted the unless orders. If the 2nd defendant were present at the hearing , to resist the applications for striking out, he had to show what he had done trying to comply with the unless orders or that he had some good excuses for not trying. The 2nd defendant filed three affirmations for this hearing, and nothing in them which , if it had had the chance to put forward to judges for consideration when making the striking out orders and entering judgment, would have added to the merits. In fact affirmations raised more questions than they purported to answer.

16. These affirmations were filed some 18 months after judgements having been entered and when the 2nd defendant was receiving proper legal advice. However there was nothing in these affirmations to show what effort if any the 2nd defendant had made to get the necessary information to enable it to give the particulars ordered by the court. In its earlier letters and affirmation, it said it wanted time until end of December 1996 to get the relevant information. Yet there is no evidence in these three affirmations concerning what effort has been made since the unless orders.

17. Mr. Chan Yau Chi in these affirmations tried to blame the default on his own ignorance and explained why he did not at the time considered the matter serious. In the last one of the three affirmations, Mr. Chan seemed to know quite a lot about the case which would have enabled him to supply, if he so chose, at least the greater part of the particulars which he failed to give, say, the respective amounts allegedly lent to each of the plaintiffs, by whom that these loan agreements were made and the terms and conditions of these agreements. It might be tedious to sort out from the documents exhibited to the affirmation by the 2nd defendant, but it was far very being difficult, and it must be within the ability of Mr. Chan Yau Chi or his staff. Some of these documents are receipts, payment records, all of which in the normal course of business must have been in the possession of the 2nd defendant and if not, explanation should have been given. All along the 2nd defendant alleged that the relevant documents it required before particulars ordered could be given were with the team leaders who were in China. They might well had copies but I do not believe that the 2nd defendant do not keep copies of loan record, receipts and the like. The other documents are labour work records at the airport site. In all probabilities the 2nd defendant would have access to such record. If it had not, explanation should be given. There was none in the affirmation. The pretext " to my information" was used many times when Mr. Chan Yau Chi disclosed further information bit by bit.

18. Further in the letter of 29th July 1999 to the plaintiffs' solicitors, the 2nd defendant disclosed that Mr. Chan Yau Chi had left for Canada at the end of 1996 and spent several months there. According to this letter, no one else would be handling the litigation for the 2nd defendant in Hong Kong during his absence. When Mr. Chan left Hong Kong, he must have been aware that he had not given sufficient particulars and in the premise had not complied with the unless orders. The excuses of being ignorant and having acted in person in these matters are unacceptable excuses. Ms. Ng described the conduct of 2nd defendant as chevalier and it is not an understatement. The 2nd defendant just did not bother.

19. From the evidence I draw the conclusion that it was the intent on the part of the 2nd defendant to flout the unless orders and its conduct is nothing less than contumacious and contumelious.

Merits of the defences

20. Mr. Lee addressed me at length on the merits of the defence. Most of his argument was directed to the issue who the employer was. He referred to various exhibits, employment contracts, payment records etc. to make his point that the only 1st defendant was the employer. The documentary evidence referred to quite clearly established that that the 1st defendant was the employer. However, even if this issue is decided in favour of the 2nd defendant at the trial, it would still not effectively dispose of the claims against the 2nd defendant. The crux of the claim, is the liability of the 2nd defendant under the alleged guarantee for full employment for a certain period at a minimum wage.

21. The 2nd defendant's defence to this is a bare denial. Mr. Lee argued that the allegation of guarantee was a bare assertion and a bare denial was a sufficient answer to show merit of the defence. What he has omitted is such assertion by the plaintiffs has the support of circumstantial evidence. These workers came from China and by their standard they had paid substantial amounts of money before they could make their journey to Hong Kong to work. One could not help but ask what induced them to make such financial commitments. Some sort of job security as alleged is not unlikely at all. The contracts of employment with the 1st defendant did not provide for any security longer than 7 days. Clause 23 provides that the 1st defendant can terminate the contract on given 7 days' notice, the minimum notice required by Employment Ordinance. The 2nd defendant took an active part in recruiting the workers. He must have derived some substantial benefit in doing so. He collected deposits and other moneys and forwarded the sums so collected to the agency company in the mainland. In his last affirmation Mr. Chan Yau Chi said he only acted as an interpreter for and rendered assistance to the 1st defendant. In an earlier affirmation he said so assisted the 1st defendant because (to quote the exact words) " the 1st defendant had said to the 2nd defendant that the 1st defendant had contracting work for the 2nd defendant". This could not explain why the workers had to pay the 2nd defendant totalling at least one million for it to forward to the mainland agency. There must some other arrangement among the defendants and the agency which the 2nd defendant did not wish to disclose. There might be reasons for this. There is no basis the court to draw any inference in favour the 2nd defendant from its lack of candour. Further it would not be difficult to draw an inference that the 2nd defendant would derive some form of financial gain from this recruitment exercise and even much greater one if the mission was successful. All these circumstances would not be overlooked by the court at the trial. It would not simply be a case of one man's words against the other. The plaintiffs' allegation of guarantee is supported by documentary evidence of payments and by circumstantial evidence. On the other hand it would be difficult for the key defence witness, Mr. Chan Yau Chi to convince the court that he is a credible witness on the main issue for reasons given above. In the premises I come to the conclusion that in none these six actions the 2nd defendant has made out a meritorious defence.

Conduct of the plaintiffs

22. The plaintiffs' solicitors misled the court into granting the ex parte orders. They were also at fault that inter-parties were not properly served. All these, I find, are unintentional slips.

Conclusion

23. To sum up, it is the court's discretion whether to set aside these judgments. The 2nd defendant has been given an opportunity to be heard as if it had been present at the hearing when the orders in question were given. The prejudice apparently caused to the 2nd defendant by the procedural defect has been cured. In view of the lack of merit in both the defence and in resisting the order for striking out and in view the conduct of the defendant, and taking all the above matters into account, overall justice requires me not to exercise my discretion to set aside the judgments. The applications by the 2nd defendant are hereby dismissed and in each action I now make an order nisi for costs that the 2nd defendant do pay the costs of the plaintiffs of these applications with certificate for counsel to be taxed if not agreed. The order nisi be made absolute in six weeks. There be liberty to apply.