WAI KAM FOO DANIEL v. WAI KAM WAH RAYMOND

HCA 957/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 957 OF 2010

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D E C I S I O N

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I.  Introduction

1.  This is an application by the Defendant to set aside the default judgment and charging order nisi obtained by the Plaintiff against him.

2.  The Plaintiff normally lives in Canada, and the Defendant is his elder brother. Wai Kam Choi (“Sister”) and Wai Kam Hing Thomas (“Brother”) are respectively their sister and brother.  Madam Helena Wong (also known as Wong Sau Ying) is the Defendant’s wife (“Wife”).

II.  Plaintiff’s claim

3.  There is no dispute that the Plaintiff was/is the owner of a 3-storey house at No.114 Sheung Keung Hau Village, Lot No.604 in DD187, Shatin, New Territories (“Subject House”) that was newly built in 1998.

4.  The Plaintiff claims that:

(a) in/about September 1998 he authorised the Defendant to enter into leases with tenants for individual floors of the House (“Tenants”) and to collect rent from the Tenants (“Rent”) on his behalf as he would be leaving for Canada later that year;

(b) he granted a written authorisation dated 28 September 1998 in favour of the Defendant to “全權處理[the Subject House]全幢三層連天台的新建成丁屋的全部租約交易及簽約事宜。本人同時授權[the Defendant]代收和處理全部租金。此授權書將一九九八年十月一日起至二零零一年十二月卅一日內有效” (“Authorisation”);

(c)  on 10 October 1998, he opened a joint savings bank account with the Defendant (“Bank Account”) for the purpose of (i) receiving the Rent and (ii) enabling the Defendant as his agent or as trustee of the Rent deposited in the Bank Account to draw money from such account to pay repair/maintenance expenses, rates, government rent and property tax in respect of the Subject House;

(d) he left for Canada in late 1998;

(e)  since 10 October 1998, 6 January 1999 and 29 December 1998 the Defendant entered into leases with the Tenants on his behalf and in his name in respect of the ground, 1^st and 2^nd floors of the Subject House respectively;

(f)   despite the expiry of the Authorisation, the Defendant continued to enter into leases with the Tenants on his behalf and in his name in respect of the Subject House until May 2010;

(g) the Tenants deposited the Rent into the Bank Account.

5.  The Plaintiff further claims that the Defendant as his agent and as trustee of the Rent deposited in the Bank Account held all such Rent on trust for him, and that it was the duty of the Defendant as his agent and/or trustee (a) to keep such Rent or money belonging to the Plaintiff separate from his own money or from that of any other person, (b) to preserve and be constantly ready with correct accounts of all his dealings and transactions in the course of his agency, (c) to produce to the Plaintiff as principal all books and documents in his hands relating to the Plaintiff’s affairs, and (d) at the request of the Plaintiff as principal to pay over and/or account for all monies deposited by the Tenants in respect of the Subject House into the Bank Account.

6.  On 18 June 2010, the Plaintiff’s solicitors Messrs Choi & Liu (“C&L”) issued a demand letter (“Demand Letter”) addressed to the Defendant at 2/F, No.117 Sheung Keng Hau Village, Shatin, New Territories (“Shatin Address”). There is no dispute that the Defendant was/is the owner of the 3-storey house at No.117 Sheung Keng Hau Village, Shatin, New Territories (“D’s House”).

7.  In the Demand Letter, C&L alleged that the Defendant as the Plaintiff’s agent/attorney was in breach of trust and fiduciary duty owed to the Plaintiff in that (a) at all material times since/about September 1998 the Defendant had failed or refused to disclose full information in respect of the lettings of the Subject House, misappropriated all monetary benefit derived from such lettings for personal use, and failed to complete and return to the Inland Revenue Department (“IRD”) property tax return and/or to settle property tax (if any) levied on such lettings, and (b) the Defendant had refused to deliver to the Plaintiff for checking the bank passbook of the Bank Account.  The Demand Letter goes on to say that by reason of the above matters the Plaintiff suffered loss and damages in respect of the Rent, and he thereby terminated any agency or any power of attorney granted in favour of the Defendant.  C&L reminded that any Rent misappropriated by the Defendant shall be held on trust for the benefit of the Plaintiff, and further gave notice that legal action would be taken unless the Defendant delivered the following documents to the Plaintiff within 7 days: (i) copies of all tenancy agreements (whether existing or expired) kept by the Defendant in respect of the Subject House, (ii) the relevant bank passbook of the Bank Account, and (iii) all account records and all the Rent derived from lettings in respect of the Subject House since/about 1998.  There was no immediate reply to the Demand Letter.

8.  On 28 June 2010, the Plaintiff commenced the present proceedings against the Defendant for breach of trust and/or fiduciary duty on the basis that since 1998 the Defendant withdrew money from the Bank Account for his own purpose and failed to pay over and/or account for the Rent deposited in the Bank Account.  The Writ of Summons with the Statement of Claim endorsed thereon (“Writ”) states that the Defendant’s residential address was at the Shatin Address.

9.  In the Amended Statement of Claim, the Plaintiff seeks the following reliefs:

(a) “account and/or repayment of the total sum [of HK$3,539,200.00 (“Total Rent Sum”) (with breakdown below)] deposited by [the Tenants] into the Bank Account, and/or the money had and received by the Defendant to the use of the Plaintiff, and/or in restitution”:

Calendar year	Ground floor (HK$)	1st floor (HK$)	2nd floor (HK$)
1998	30,000	-	21,000
1999	90,000	86,500	126,000
2000	120,000	102,000	126,000
2001	120,000	102,000	126,000
2002	120,000	102,000	126,000
2003	120,000	34,000	104,400
2004	120,000	67,500	62,400
2005	120,000	72,000	78,000
2006	120,000	73,600	93,600
2007	120,000	81,600	98,600
2008	129,000	83,400	102,600
2009	147,600	92,400	105,600
2010	49,200	30,800	35,200
Total :	1,406,000	927,800	1,205,400

(b) money had and received by the Defendant in the Bank Account;

(c)  interest on the money had and received by the Defendant to the use of the Plaintiff at half judgment rate from 10 October 1998 or the date when the Rent was first received until the date of judgment or at such rate and period as the court thinks fit;

(d) costs.

10.  On 30 June 2010, Messrs Hui & Lam (“H&L”) wrote to C&L (“H&L Letter”) as follows:

“We have instructions to act for [the Defendant]. [The Demand Letter] has been passed to us with instructions to reply thereto.

We are instructed that [the Defendant] is now working in Shanghai at the present moment and will return back to Hong Kong within the next weeks.

Under the circumstances, [the Defendant] seeks to have some time to accede to [the Plaintiff’s] request as to the detail of documents as stated in your said letter and would be grateful if [the Plaintiff] would allow [the Defendant] to have 21 days to supply you a substitute reply to [the Plaintiff’s] request.

[The Plaintiff’s] indulgence to [the Defendant’s] request would be grateful. In the meantime, please withhold any legal proceedings against and pending [the Defendant’s] reply.”

11.  On 9 July 2010, the Wife wrote to C&L (“Wife’s 1^st Letter”) referring to her residence at the Shatin Address and to the Demand Letter “sent to my residence last week”. She informed C&L that:

“Please be notified that [the Defendant] has been living separate with [the Wife] since 2006 by virtue of his job that requires him to stay in Macau and other region in PRC and overseas all the time. Therefore, [the Wife was] bound to return the said letter to [C&L’s] office through the non-delivery postal service.

As [the Defendant] is not living at my residence, please send all letter directly to him at his resident address for all his future correspondence as follows:-

AVENIDA DO NORDESTE

LA BAIE DU NOBLE BL.2

18 – ANDAR – J, MACAU [“Macau Address”]”

12.  On 10 July 2010, the Wife wrote to C&L (“Wife’s 2^nd Letter”) stating that she received another set of documents from them addressed to the Defendant (later known to be the Writ) by insertion into her letterbox at the Shatin Address.  She referred to her earlier letter and reiterated that the Defendant was not living at her residence since years before, so she was bound to return such documents to C&L for them to send those documents directly to the Defendant at “his resident address” set out in her earlier letter.

III.  Chronology of the legal proceedings

13.  On 16 July 2010, the Plaintiff filed the affirmation of his solicitor Liu Tin Chee (“Mr Liu”) to apply for substituted service of the Writ under Order 65 rule 4 of the Rules of the High Court (“RHC”) on H&L on the following basis:

(a) the Plaintiff instructed C&L that the Defendant and the Wife resided at the Shatin Address, which was said to be the Defendant’s usual and last known address;

(b) there was no reply to the Demand Letter addressed to the Shatin Address until the H&L Letter after the Writ was issued;

(c)  H&L in the H&L Letter did not confirm any instructions to accept service of proceedings, so C&L attempted to serve the Writ by insertion into the letterbox at the Shatin Address;

(d) on 12 July 2010, C&L received the Wife’s 1^st and 2^nd Letters giving the Macau Address as the Defendant’s residential address.

14.  The court raised requisitions on 22 July 2010, and C&L replied by letter on 29 March 2011.  On 6 April 2011, I directed that reply to the court’s requisitions should be by way of affidavit.  There was no response until 7 months later on 21 March 2011 when the Statement of Claim endorsed on the Writ was amended to plead the alternative claim for repayment of the Total Rent Sum (“Amended Writ”), and on 22 March 2011 when the Plaintiff filed Mr Liu’s 2^nd affirmation to seek leave to serve the Amended Writ out of jurisdiction to the Macau Address pursuant to Order 11 rule 1 of the RHC on the basis that (a) it was impracticable to effect service in the manner prescribed under Order 10 rule 1 of the RHC, and (b) Mr Liu verily believed the Defendant was residing at the Macau Address as indicated in the Wife’s 1^st and 2^nd Letters.

15.  On 25 March 2011, the court again raised requisitions. On 11 April 2011, the Plaintiff filed Mr Liu’s supplemental affirmation to answer such requisitions, and to seek leave to amend the Defendant’s address for service in the Amended Writ to the Macau Address and to issue a concurrent Re-Amended Writ of Summons under Order 6 rule 6 of the RHC.

16.  On 19 April 2011, the court again raised requisitions.  On 29 April 2011, the Plaintiff filed Mr Liu’s 2^nd supplemental affirmation to answer such requisitions.

17.  On 11 May 2011, Master K K Pang ordered that (“Order”):

(a) the Plaintiff do have leave to amend the Defendant’s address stated on the Amended Writ to the Macau Address;

(b) the Plaintiff do have leave to issue a concurrent Re-Amended Writ of Summons with Amended Statement of Claim indorsed thereon and to serve notice of the said writ out of jurisdiction “on the Defendant’s residential address in Macau” pursuant to Order 11 rule 1 of the RHC; and

(c)  the time for the Defendant to acknowledge service be 28 days after service of the concurrent Re-Amended Writ of Summons.

18.  Pursuant to the Order, the concurrent Re-Amended Writ of Summons with Amended Statement of Claim indorsed thereon (“Re-Amended Writ”) was issued on 18 May 2011.

19.  On 29 June 2011, the Plaintiff filed the affidavit of service of Raquel Ferreira Alves, who was a practising lawyer in Macau, confirming that she did on 25 May 2011 serve the Re-Amended Writ and the Order on the Defendant by insertion into the letterbox at the Macau Address, and that she verily believed such documents should come to his knowledge within 7 days after the date of such insertion.  Madam Alves goes on to say in her affidavit as follows:

“5. I hereby acknowledge that, in accordance with laws of HKSAR regulating the service of the writ of summons, lawyers are allowed to serve writs of summons by inserting the same through the letterbox at the residential address of the defendant, so long as it might be proved by any means that the service was made;

6.  As such, I understand that the adopted method/mode of service of the Concurrent Writ to the aforesaid Defendant, constitutes an adequate service of process of a summons under the laws of HKSAR, and I further affirm that in such case it does not contravene the laws of MSAR.”

20.  No notice of intention to defend was given by the Defendant. By a letter dated 12 July 2011 to the court, C&L confirmed the Plaintiff’s abandonment of the relief set out in paragraph 9(b) above for the purpose of applying for default judgment.

21.  On 15 July 2011, default judgment was entered, and the Defendant was adjudged to pay the Plaintiff the Total Rent Sum together with interest thereon at 8%pa from 18 June 2010 to the date thereof and thereafter at judgment rate until full payment with fixed costs (“Judgment”).  It is clear from the Judgment that the Plaintiff elected the relief for repayment of the Total Rent Sum with interest instead of the alternative relief for account and inquiries of the Rent deposited by the Tenants into the Bank Account.

22.  On 20 July 2011, C&L sent the Judgment to the Defendant at the Macau Address, and in the cover letter warned that unless he satisfied the Judgment within 7 days enforcement proceedings would be taken without further notice.

23.  By Mr Liu’s affirmation filed on 27 July 2011, the Plaintiff as judgment creditor applied for a charging order nisi against the Defendant’s interest in D’s House on the strength of the Judgment.

24.  On 3 August 2011, the Defendant’s present solicitors Messrs Fung & Fung filed their Notice to Act.  On the same day, the Plaintiff obtained a charging order nisi: notice to show cause against the Defendant’s interest in D’s House (“Charging Order Nisi”).

25.  On 5 August 2011, the Defendant applied by summons to set aside the Judgment unconditionally and to stay execution of the Judgment pending the outcome of such summons (“Summons”).  The Defendant filed his 1^st and 2^nd affirmations on 5 August and 14 September 2011 and also the affirmation of Chan Pak Wai (陳佰威, “Chan”) on 5 August 2011 in support of the Summons.  The Plaintiff filed his own affirmation and the Sister’s affirmation both on 31 August 2011 to oppose the Summons.

26.  On 29 August 2011, Master K K Pang ordered that the hearing of the Charging Order Nisi be adjourned to be heard together with the Summons.

IV.  Issues

27.  The following issues arise from the Summons:

(a) whether the Macau Address was at the material time the Defendant’s residential address;

(b) whether service of the Re-Amended Writ was duly effected by bringing notice of the present proceedings to the Defendant;

(c)  whether the Judgment is regular or irregular;

(d) if the Judgment is irregular, whether the court should exercise its residual discretion to impose conditions for setting aside the same;

(e)  if the Judgment is regular, whether the Defendant has shown real prospect of success on the merits of the defence.

28.  Mr Cheung, counsel for the Plaintiff, and Ms Lee, counsel for the Defendant, agree that whether the Charging Order Nisi should be made absolute or discharged should follow the outcome of the Summons.

29.  Mr Cheung’s written submissions raise a preliminary procedural objection that the Defendant has failed to specify in the Summons the grounds of objection based on irregularity as required under Order 2 rule 2(2) of the RHC (see also Hong Kong Civil Procedure 2012 Vol.1 para.13/9/20 at p.223).

30.  First, it is plain from the Defendant’s 1^st affirmation filed and served at the same time as the Summons that he contends the Judgment is irregular because service of the Re-Amended Writ was ineffective and the Judgment was entered for too much.  So the Plaintiff all along had notice of such grounds, and Ms Lee also confirmed at the hearing before me that the Defendant would not rely on any other ground of objection based on irregularity.

31.  Secondly, such procedural objection should be raised as early as possible and in any event at the call-over hearing of the Summons.  But the parties disposed of such call-over hearing by a Consent Summons filed on 9 August 2011 that was completely silent about any failure in the Summons to specify the grounds of objection based on irregularity.  The Plaintiff’s complaint in this respect was not raised until Mr Cheung’s written submissions for the substantive hearing for argument, but in the meantime the Plaintiff was able to file affirmations in opposition and Mr Cheung was able to appreciate and address in his written submissions the aforesaid grounds of objection based on irregularity.  I am not persuaded that the Plaintiff has suffered any prejudice.

32.  With commendable good sense, Mr Cheung confirmed at the hearing before me that he would not take this procedural point any further.

V.  Regular or irregular judgment

(a)  Defendant’s case

33.  It is the Defendant’s case that when the Re-Amended Writ was inserted into the letterbox of the Macau Address on 25 May 2010 and until the Judgment was entered on 15 July 2011 (“Material Period”), the Macau Address was not his residential address.  He claims he no longer lived at the Shatin Address since 2006, and he lived at the Macau Address from August 2006 to July 2009 and thereafter at Room 2005, Block 154, Huafa Shiji Cheng, 376 Cheong Sing Road, Zhuhai, PRC (“Zhuhai Address”) since July 2009.  In any event, the Defendant claims he did not receive the Re-Amended Writ until 27 July 2011 (ie after the Judgment was entered).

(b)  Plaintiff’s case

34.  Mr Cheung submits that during the Material Period the Defendant might have three usual addresses (ie the Shatin, Macau and Zhuhai Addresses) which were not mutually exclusive.  He further argues that even if the Defendant were the owner of the Shatin and Zhuhai Addresses, it does not preclude the Defendant from living or working at the Macau Address during the Material Period.  Mr Cheung further argues that the Defendant has failed to provide convincing evidence to establish he was living at the Zhuhai Address and not at the Macau Address, so he has failed to discharge the burden of proving he had no notice of the present proceedings during the Material Period.

(c)  Preliminary considerations

35.  It is necessary to put the above arguments in their proper context.

36.  First, Order 10 rule 1(2) of the RHC which permits service of a writ of summons by insertion into the letterbox of or by post to the defendant’s usual or last known address is inapplicable to service of the Re-Amended Writ since such permission is only for service “within the jurisdiction”.

37.  Secondly, the Order specifies that service out of jurisdiction is to be effected by serving notice of the Re-Amended Writ on “the Defendant’s residential address in Macau”.  In suggesting that service of the Re-Amended Writ to the Macau Address is good and effective service, the Plaintiff is in effect asserting that during the Material Period the Macau Address was the Defendant’s residential address.  Whether it was so or not is the nub of contention between the parties.

38.  Thirdly, since the Re-Amended Writ was never served to the Shatin Address and/or the Zhuhai Address, the court’s ultimate concern is not whether such address(es) would also have been effective address(es) for service, but whether service of the Re-Amended Writ was duly effected by (a) insertion into the letterbox at the Macau Address as the Defendant’s residential address and (b) bringing notice of the present proceedings to him.

39.  It is always open to a defendant to demonstrate that he did not have actual notice of the writ.  It is now clear that the test for service of a writ of summons is whether it was brought to the defendant’s notice and not whether it had been delivered to his address (see Chu Kam Lun v Yap Lisa Susanto [1999] 3 HKC 378, Kwan Kam Wah v Chan Wai Ming [2000] 2 HKC 378, Cosec Nominees Ltd & anor v Lau Hon Ming Alan[2001] 3 HKC 290, Bank of China (Hong Kong) Limited (formerly known as Po Sang Bank Limited) v Hung Chun Wai Christinaand anor HCA 69/2000 and HCB 5837/2003, Sakhrani J (unreported, 3 September 2004) and Sinokawa Investment (Holdings) Limited v Li Chun [2006] 3 HKLRD 441). 

40.  Hong Kong Civil Procedure 2012 Vol.1 para.13/9/5 at pp.219-220 states inter alia as follows:

“When a defendant deposes that he has not received the writ through the post, the court has little option but to believe this save when there is sufficient material to cast doubt upon the defendant’s credibility to enable the court to disbelieve him (which is a matter of evidence dependent on the circumstances of the case: see Wei Bingqing v. Xie Diangrong, unreported, HCA No. 2654 of 2003, [2006] H.K.E.C. 634).”

41.  Tang JA (as he then was) in giving the judgment of the Court of Appeal in Bank of China (Hong Kong) Limited v Cheung King Fung [2007] 1 HKLRD 462, 469-470 said the court did not necessarily have to accept the defendant’s assertion no matter how improbable:

“It is quite clear from Forward v West Sussex County Council, cited above, that a defendant is required to provide “convincing evidence”: at 1473G. The Master of the Rolls went on to say of the judge that “He was in our view quite right to be sceptical of the contention that the 4^th defendant had not received the writ in the absence of compelling evidence to show that it had not been forwarded on to him, as would in the ordinary course be accepted”: at 1474H. Of course, how much evidence is required must depend on the circumstances of the particular case.”

42.  The Court of Appeal in Bank of China (Hong Kong) Limitedv Cheung King Fung went on to observe that in an application to set aside default judgment, the burden was on the applicant to prove that the judgment was irregular.  Chung J in Wei Bingqing added that whether the applicant discharged such burden of proof was a matter of evidence.

43.  In Cheng Chi Lun v Ng Lai Ming Juliana HCA 1611/2006 (unreported, 14 February 2007), Mr Recorder Fok SC (as he then was) also said at para.26 as follows:

“The Court of Appeal has, however, made clear that this does not mean that the court must accept a defendant’s assertion no matter how improbable: Bank of China (Hong Kong) Ltd v Cheung King Fung, Francis and Anor, unrep, CACV 66 of 2005, 5 July 2005 at § 33 per Tang JA.  “A defendant is required to provide convincing evidence; how much evidence is required must depend on the circumstances of the particular case” ibid. §34.  The relevant question is whether there is sufficient evidence to cast doubt on the Defendant’s credibility such that the court should not accept the bare allegation that she has not received the writ.”

44.  With the above principles in mind, I now turn to the affirmation evidence.

(d)  Occupation of the Macau Address

45.  The Defendant in his affirmations claims that in/about June 2006 he moved out of the Shatin Address to live at the Macau Address which he shared with his friend Wong Bo Fat (黃寶發, “Wong”).  The Defendant disclosed a Chinese tenancy agreement dated 29 July 2006 for the Macau Address made between the landlord 李惠珍 (and signed by another on her behalf, ie “施萍萍代”) on one part and the Defendant and Wong as co-tenants on the other part for a term of 2 years from 1 August 2006 to 31 August 2008 (“1^st Macau TA”).

46.  The Defendant says he resided at the Macau Address until about July 2009, and thereafter moved to the Zhuhai Address and continued to live there up to now. In the meantime, Wong found another friend Chan to take up the Defendant’s share of and to live at the Macau Address.  The Defendant disclosed a Chinese tenancy agreement dated 20 July 2009 for the Macau Address made between the landlord李惠珍 (but signed by another on her behalf, ie “施萍萍代”) and Chan and Wong as co-tenants on the other part for a term of 2 years from 1 August 2009 to 31 August 2011 (“2^nd Macau TA”).

47.  The 1^st and 2^nd Macau TAs were on printed forms which, Mr Cheung accepts, must have been bought from stationers presumably in Hong Kong since clause 16 of such printed forms provides that the laws of Hong Kong apply.

48.  Mr Cheung submits that the 1^st and 2^nd Macau TAs are “self-serving”. But the Defendant was not the sole maker/signatory of such documents.  As seen in paragraphs 45-46 above, the 1^st and 2^nd Macau TAs were made between (and personally signed by) the landlord’s agent and the co-tenants with each of them giving their identification document numbers.  I cannot see how such bilateral tenancy agreements can be regarded as self-serving.

49.  Mr Cheung complains that the relationship between the landlord and 施萍萍 was unknown.  But it is not unusual for an agent to sign tenancy agreements on behalf of the landlord.  Indeed, the Defendant himself was tasked to enter into tenancy agreements on behalf of the Plaintiff as landlord with the Tenants in respect of the Subject House.  Mr Cheung reminds that the Plaintiff has disclosed the Authorisation, but I see nothing sinister in the Defendant not having or not disclosing any written authorisation by the landlord of Macau Address in favour of 施萍萍.  After all, unlike the Subject House, the Macau Address is not the subject matter of litigation.

50.  Mr Cheung next complains of the unexplained one-year gap from September 2008 to July 2009 in between the tenancy terms of the 1^st and 2^nd Macau TAs.  The short answer is the Defendant has admitted in his affirmations that he continued to reside at the Macau Address during that year.  After all, a fresh written tenancy agreement is not a necessary requirement for continued holding over of a tenancy by the tenant after expiry of the original term.

51.  Mr Cheung then argues the 2^nd Macau TA does not exclude the possibility that the Defendant might have been living or working at the Macau Address during the Material Period, and further suggests that “[he] might well be staying there as a licensee”.  I do not see any basis for suggesting that the Defendant might have been working at the Macau Address when there is no evidence that the Macau Address was/is other than domestic premises.  There is also no affirmation evidence that the Defendant might have been living at the Macau Address as licensee.  This is expressly refuted not only by the Defendant’s affirmations but also by Chan who in his affirmation confirms that after the Defendant left he moved in to live at the Macau Address since about August 2009 (see paragraph 53 below), which confirmation sits well with the 1^st and 2^nd Macau TAs and lends further weight to my view that such tenancy agreements are not “self-serving”.

(e)  Notice of the present proceedings?

52.  The Defendant in his affirmations claims he did not receive the Re-Amended Writ and had no notice of the commencement of the present proceedings.  He says it was only on/about 26 July 2011 that Chan left a message for him to the effect that there was a sealed envelop with documents (later known to contain the Re-Amended Writ and the Order) (“1^st Documents”) and a letter (later known to be the Judgment with covering letter) (“2^nd Documents”) addressed to him at the Macau Address.  On/about the following day, ie 27 July 2011, he went to Macau and met Chan at a restaurant. Chan passed the 1^st and 2^nd Documents to him.

53.  Chan in his affirmation corroborates the Defendant’s case above. He confirms he lived at the Macau Address with Wong since about August 2009 after the Defendant moved away.  The Defendant later told him he had moved to live in Zhuhai in Mainland China. In/about May 2011, Chan found in his letterbox the 1^st Documents addressed to the Defendant, but could not give them to the Defendant (who had left the Macau Address since 2009) at once.  For 1-2 days he tried in vain to contact the Defendant by telephone. Later he left the matter aside, and forgot to follow up with the Defendant.  On/about 25 July 2011, he found the 2^nd Documents addressed to the Defendant in his letterbox.  This time he tried his best (through other people) to inform the Defendant there were some documents addressed to him and to ask the Defendant to contact him soonest.  Eventually, on/about 26 July 2011, Chan got in touch with the Defendant who told Chan he would come to Macau the following day.  So on 27 July 2011, they met at a restaurant in Macau, and Chan passed the 1^st and 2^nd Documents to the Defendant.

54.  Mr Cheung’s written submissions shy away from Chan’s affirmation evidence even though it goes to the very heart of the issue of whether the Defendant had notice of the present proceedings during the Material Period.  In my view, unless it can be said that Chan’s affirmation evidence is incredible or false, it necessarily supports the Defendant’s case and directly refutes any suggestion that the Defendant was still living at the Macau Address and/or that he had notice or knowledge of the present proceedings.

55.  On the other hand, the Plaintiff contends that (a) since the Defendant has given various addresses and (b) the documents disclosed in his affirmations do not support his case, the Defendant’s allegation as to his whereabouts is incredible, and he has failed to discharge the burden of proving he had no notice of the present proceedings during the Material Period. 

(f)  Other affirmation evidence

56.  I agree I must consider the totality of affirmation evidence in assessing the credibility and/or cogency of Defendant’s denial of any notice of the present proceedings prior to the date of the Judgment.  Although Mr Cheung places much emphasis on the incredulous nature of the Defendant’s allegation that he lived at the Zhuhai Address during the Material Period, the important question is whether such criticisms have the effect of upsetting the clear position in the Defendant’s and Chan’s affirmation evidence as bolstered by the 1^st and 2^nd Macau TAs that the Defendant was not at the Macau Address and did not know of the present proceedings during the Material Period.  The Defendant’s stance is not merely a bare assertion.  Further, it is the effectiveness of service of the Re-Amended Writ at the Macau Address (and not the Shatin Address, the Zhuhai Address and/or elsewhere) that is in issue.

57.  In an attempt to discredit the Defendant’s allegations, the Sister by her affirmation has disclosed (a) various correspondence from 6 December 2008 to 6 April 2009 between the Defendant and her former solicitors C&L in relation to the will of their late father Wai King Lam (“Will”) and (b) the writ of summons in the probate action over the validity of the Will (ie HCAP 18/2009) issued by the Brother against inter alia the Sister and the Defendant (being the 2^nd defendant), which gave the Defendant’s address as the Shatin Address.

58.  First, in his letter to C&L dated 6 December 2008, the Defendant states he attended C&L’s offices and received a copy of the Will, and gives the Shatin Address (being his “correspondence address”) and his two mobile telephone numbers as his contact details.

59.  The Defendant explains that at that time in December 2008 he was working in Macau under a working visa and living at the Macau Address as evidenced by his application form for a Macau identity card dated 10 December 2008 (“ID Form”) that gives the Macau Address as his address.  He explains that although he moved to live at the Macau Address in 2006, he was not sure if he would live in Macau permanently, so he only applied for a Macau identity card in/about December 2008, and his Macau identity card was eventually issued in May 2011.  The Defendant goes on to explain that the ground and 1^st floors of D’s House were let, so he put forward the Shatin Address as his temporary Hong Kong correspondence address in his letter to C&L dated 6 December 2008, but he also gave his mobile phone numbers to enable C&L to contact him directly because he was then residing in Macau and seldom came back to Hong Kong.

60.  Mr Cheung criticises the Defendant for not disclosing document(s) to show whether he has reported any subsequent change of address in Macau or elsewhere to the Macanese authorities after he submitted the ID Form. But, in my view, it is not a necessary inference from the absence of any such document before me that the Macau Address must have been the last address he gave to the authorities. I bear in mind that the Defendant’s purpose in disclosing the ID Form is to illustrate the fact that he was living at the Macau Address in December 2008, which is in line with the use of the Shatin Address merely as his “correspondence address” in his letter to C&L dated 6 December 2008.  The criticism raised and the response thereto are therefore time-specific.

61.  Secondly, C&L wrote to the Defendant at the Shatin Address in relation to the Will by letter dated 10 December 2008.  The Defendant stated in his 2^nd affirmation that he did not receive such letter.

62.  Thirdly, C&L wrote to the Defendant at the Shatin Address in relation to the Will by letters dated 25 and 31 March 2009, and the Defendant replied on 27 March and 6 April 2009.  The Defendant says his two reply letters were couriered to C&L from Macau where he lived at that time.  This is evidenced by two courier slips dated 27 March and 7 April 2009 that specified payment was by cash in Macau.

63.  Fourthly, in the writ of summons in HCAP 18/2009 the Brother’s solicitors specified the Shatin Address as the address for service of the 2^nd defendant (ie the Defendant herein), but the Defendant in his 2^nd affirmation says he did not receive such writ of summons.

64.  In my view, the above documents are insufficient to cast any incredulous aura over the Defendant’s case.

65.  The Defendant in his 2^nd affirmation states that when the Wife received the Demand Letter in June 2010, she called to tell him to deal with it, so he instructed H&L to reply to C&L, which H&L eventually did on 30 June 2010 (ie two days after issuance of the Writ).  In my view, this shows that the Wife told the Defendant about the Demand Letter and that arrangements were made to pass a copy thereof to H&L for reply to C&L, but it falls short of establishing either the Shatin Address and/or the Macau Address as the Defendant’s address at that time.

66.  Mr Cheung seizes upon the assertion in the H&L Letter that the Defendant would “return [from Shanghai where he was working] back to Hong Kong within the next weeks” to say that the Defendant’s address could not have been the Zhuhai Address.  But the Defendant’s intimation of his return to deal with his solicitors here in Hong Kong on the matters raised in the Demand Letter does not, in my view, lead to any necessary conclusion that the Defendant had a residential address in Hong Kong, especially in view of the ease of travel between Hong Kong and Macau or other parts of Mainland China.  In any event, the Shatin Address is irrelevant because the Re-Amended Writ was not served to that address.

67.  Turning to the Wife’s 1^st Letter, her assertion therein that the Defendant lived separately from her since 2006 is borne out by the Defendant’s affirmation evidence, the 1^st Macau TA and the ID Form, which show that the Defendant lived at the Macau Address since 2006. As regards the assertion in the Wife’s 1^st Letter that the Defendant’s job required him to stay in Macau, other regions of Mainland China and overseas all the time, the supporting evidence comes in the form of the Defendant’s affirmation evidence (which states that in December 2008 he was working in Macau under a working visa) and the H&L Letter (which states that he was working in Shanghai in June 2010).

68.  In respect of the Wife’s 1^st and 2^nd Letters, under which cover the Demand Letter and the Writ were returned to C&L with suggestion to forward them to the Defendant’s residential address at the Macau Address, the Defendant in his 2^nd affirmation explains that he lived apart from the Wife (who has continued to live at the Shatin Address) for many years and their relationship was unsatisfactory, so he did not tell her of his move to Zhuhai in 2009.  So even though the Wife was able to communicate with the Defendant (eg she informed him of the Demand Letter sent to the Shatin Address where she lived), I am not persuaded there is sufficient basis (a) to support the Plaintiff’s suggestion it was the Defendant who through the Wife put forward the Macau Address as his residential address or (b) to refute the Defendant’s claim that he did not tell the Wife about his move to Zhuhai.  In my view, it is unsurprising that the Defendant would wish to keep open a channel of communication with the Wife in respect of any correspondence that might be addressed to him at the Shatin Address, but might not wish to let his separated wife know about his property in Zhuhai.

69.  Mr Cheung reserves his strongest criticisms for the following documents disclosed by the Defendant:

(a)  arrival cards issued by the Immigration Department of the Macau Public Security Police Force during the period from 17 August to 15 November 2010 (“AC Period”) showing the Defendant’s entry into Macau on 17-18, 21, 23-27 and 30-31 August, 1-4, 7-10, 12-13, 15-16, 19, 21, 26-27 September, 6, 11-15, 18-22 and 24-30 October and 1-6, 8-13 and 15 November 2010 (collectively, “Macau Period”);

(b)  certificate by華友好紀城管理處 addressed to 珠海電視台 stating the Defendant as owner of the Zhuhai Address had completed “入伙手續” on 8 August 2009 and requesting the television station to “給予辦理開通手續”;

(c)   invoices for management and utilities fees of the Zhuhai Address for July to October 2010 and for July to August 2011 that show incurred water charges for the Zhuhai Address (as distinct from share of the water charges for common areas) for all such months except September 2010, and no usage of electricity for the Zhuhai Address after July 2010 (ie the meter reading was 55 with no change from June 2010 to August 2011).

70.  Mr Cheung says that the above information and documents, especially the lack of electricity usage at the Zhuhai Address, show it was improbable that the Defendant was living at the Zhuhai Address during the Material Period, which in turn casts doubt on the Defendant’s assertion that he was not at the Macau Address at that time.

71.  Mr Cheung submits that it was possible under the disclosed arrival cards for the Defendant (a) to have entered Macau from elsewhere other than Zhuhai or (b) to have gone from Macau to Zhuhai for lunch/dinner and be back on the same day, and such documents in any event do not show the Defendant to be in Zhuhai in the remaining 34 days of the AC Period other than the Macau Period.

72.  In fact, the interesting feature of the disclosed arrival cards is not the fact that the Defendant was in Macau during the 57-day Macau Period (or 63% of the AC Period), but rather he entered Macau on a nearly daily basis during that time.  The time and purpose of such entries into Macau are not stated on the face of the disclosed arrival cards, so those documents of themselves are consistent with the Defendant either (a) living in Macau but taking almost daily excursions outside Macau or (b) living elsewhere and making almost daily trips to Macau. One therefore needs to look at the other affirmation evidence.

73.  In my view, Mr Cheung’s postulations in paragraph 71 above are not grounded on affirmation evidence that can elevate them from mere possibilities to any real probability or likelihood.  More importantly, they are insufficient to lead to any necessary inference that the Defendant was still occupying the Macau Address during the Material Period.  On the other hand, the disclosed arrival cards on their face are consistent with (a) the Defendant’s affirmation evidence that he was working in Macau under a working visa (and that he did not have any Macau identity card until May 2011), (b) the Defendant’s and Chan’s affirmation evidence which suggests that the Defendant left the Macau Address after July 2009 to move to Zhuhai, and (c) the Wife’s 1^st Letter which states that the Defendant’s job would require him to stay in Macau, other regions of Mainland China and overseas.

74.  It is true that the Defendant did not disclose any arrival cards or immigration records in respect of his entry(ies) into Macau (if any) during the Material Period.  But even if he were in and out of Macau as before or otherwise, in view of the Defendant’s and Chan’s affirmations and the 1^st and 2^nd Macau TAs, it still does not mean that he would have been at the Macau Address during the Material Period and/or he would have had notice of the present proceedings.

75.  For the purpose of the present application, Mr Cheung does not dispute that the Defendant was the owner of the Zhuhai Address since 2009, but submits that such ownership and the Defendant’s payment of the relevant management and utility fees do not mean he was residing thereat during the Material Period.  Mr Cheung says the lack of electricity usage as shown in the management fee invoices for the Zhuhai Address is the smoking gun.

76.  But if it is suggested that the unchanged electricity meter reading in the management fee invoices is evidence to show that the Zhuhai Address was left unoccupied for a whole year from July 2010 to August 2011, it will be noted that there were water charges for the Zhuhai Address (as distinct from water charges for the common areas) in the same invoices for all months except September 2010.

77.  Even if there is some disquiet over the unchanged electricity meter reading in the management fee invoices, looking at the totality of the affirmation evidence and upon carefully considering Mr Cheung’s submissions, and in particular bearing in mind that the burden is on the Defendant to prove that the Judgment was irregular, I am not persuaded that such disquiet sufficiently overcomes the cogency of other affirmation evidence before me that shows particularly the Defendant was not at the Macau Address during the Material Period.  I bear in mind that this is not a bare assertion on the part of the Defendant, but is bolstered by Chan’s affirmation and the 2^nd Macau TA.  Further, the Defendant’s affirmation evidence that he regarded the Zhuhai Address as his home at the material time must be viewed in the context that his job required him to work and stay elsewhere, eg in Macau, other regions of Mainland China and overseas (see the Wife’s 1^st Letter) and also in Shanghai (see the H&L Letter).

78.  In the circumstances, I conclude that service of the Re-Amended Writ was ineffective, and hence the Judgment is irregular and liable to be set aside.

(g)  Judgment for too much?

79.  It should be noted from the outset the Judgment is for repayment of the Total Rent Sum with interest and not for accounts and inquiries in respect of the Rent deposited in the Bank Account.  As evident from the Amended Statement of Claim, the judgment for the Total Rent Sum is in fact the total Rent deposited by the Tenants in the Bank Account in respect of lettings for the Subject House for the 12-year period from 1998 to 2010 without any deduction.

80.  To justify the judgment sum in the Judgment, the Plaintiff must plead a complete cause of action that establishes his entitlement to the full amount of the Total Rent Sum.

81.  However, the Amended Statement of Claim pleads that the Bank Account was opened for a twofold purpose, ie for receipt of the Rent deposited by the Tenants and for withdrawal of money to defray repair/maintenance expenses, rates, government rent and property tax in respect of the Subject House.

82.  As Mr Cheung fairly concedes, the passbook and transaction records of the Bank Account show there were regular deposits and withdrawals throughout the years.  The Plaintiff claims that no property tax was paid for the period from 2004 to 2010, and he had to settle such property tax recently in the total sum of HK$264,527.00.  Yet, there is no pleaded averment (or even affirmation evidence) to the effect that:

(a) there was never any payment of repair/maintenance expenses, rates and/or government rent at all throughout the years;

(b) the Plaintiff himself paid for such outgoings and expenses; or

(c)  some third party paid for such outgoings and expenses.

In the absence of any such plea, I am not persuaded that the Plaintiff has sufficiently demonstrated his entitlement for the repayment of the whole of the total Rent received for the 12-year period from 1998 to 2010 without any deduction for outgoings and expenses (such as obvious outgoings like government rent and rates), especially when (i) there is an express plea in the Amended Statement of Claim that the money in the Bank Account were for defraying such outgoings and expenses and (ii) there were regular withdrawals of money from the Bank Account.

83.  In my view, the Judgment plainly has been entered for too much. The Plaintiff’s own pleaded case cries out for accounts and inquiries instead of repayment of all the Rent without any deduction.  As will be seen below, the Defendant alleges that Plaintiff has failed to properly give credit for repair/maintenance expenses and other outgoings/expenses.  This will be discussed further below, but in my view, even on the Plaintiff’s own pleaded case alone, there is real basis for saying that the Judgment is for too much and therefore irregular.

(h)  Irregular judgment

84.  In my view, the Judgment is irregular and it should be set aside ex debito justitiae, ie as of right without regard to the merits of the proposed defence (Fok Chun Hung v Lo Yuk Shi [1995] 1 HKLR 420, Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 and Kerry Freight (Hong Kong) Ltd v Del Prado Asia Ltd [2005] 3 HKLRD 804).

VI.  Residual discretion

85.  In Hong Kong Civil Procedure 2012 Vol.1 para.13/9/10 at p.220, it is said that:

“Although the court will not consider the merits of the defence, it does not mean that it will shut its eyes to the surrounding circumstances and why things went wrong and there is a residual discretion to impose terms for the setting aside of an irregular default judgment by having regards to the parties’ conduct ……”

86.  Po Kwong Marble Factory Ltd made the point that the provisions of Order 13 rule 9 of the RHC are wide in their context.  The Court of Appeal expressed the view that in the case of an irregular judgment the court has a residual discretion to take into account the conduct of the parties.  Sears J went on to say that “in my judgment, the court still has a 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 the facts of the particular case” (p.161).  It was held in that case the problems on service were primarily due to the defendant’s method of virtually disguising its registered office and there was a real risk that any judgment which the plaintiff might ultimately obtain would be an empty one.  The default judgment was set aside on terms that money was to be paid into court. Bokhary JA (as he then was) said at p.162 that “it does not mean shutting one’s eyes to the circumstances surrounding the question of service and why things went wrong in that regard.  The court’s statutory jurisdiction is unfettered”.

87.  A number of subsequent cases followed the approach in Po Kwong Marble Factory Ltd.  In Guangdong International Trust and Investment Corp Hong Kong (Holdings) Ltd Yuet Wah (Hong Kong) Wah Fat Ltd & anor [1997] HKLR 489, the irregular judgment against 1^st defendant was set aside unconditionally.  Waung J in Desirable International Fashions Ltd(in liq) v Chiang Shi Chau [1997] 3 HKC 170 rejected the plaintiff's suggestion that delay in applying to set aside and the risk of obtaining an empty judgment constituted sufficient reasons for imposing conditions for setting aside the irregular judgment.

88.  In Wing Lung Bank Ltd v Ho Man Iam [1999] 3 HKC 368, it was suggested that the defendant was the author of his own misfortune because inter alia he gave a Hong Kong address to the plaintiff bank as an address for him although he had also given a Macau address.  The bank claimed it was only when there was no response to correspondence sent to the Macau address that it served the writ of summons on the Hong Kong address.  Keith J did not think that this consideration would deprive the defendant of having the judgment set side.  He found that the defendant telephoned the bank after receiving correspondence sent to the Macau address, so in choosing to serve at the Hong Kong address the bank must have some other reason.  Although the defendant could be criticised for giving the Hong Kong address as his correspondence address, “there is always a risk in a plaintiff choosing something other than personal service for the service of a writ, and that was the risk which the bank took in this case”.

89.  In The New China Hong Kong Finance Ltd (In Liquidation) v Shimada Limited HCA11030/1999, Cheung J (as he then was) (unreported, 23 May 2000), no conditions were imposed as there could not be any adverse comments on the conduct of the defendant.  In Cosec Nominees Ltd, the defendant filed with the Companies Registry a notification of change of his residential address.  Although he did not challenge service on his old address in an earlier action and thereby led the plaintiff to believe it was an effective address for service, the court accepted his explanation and considered he should not be penalised for taking a practical stance in the earlier action.  The irregular judgment was set aside unconditionally.  In Phillip Securities (HK) Limited v Lam Chi Bin Stanley HCA16645/1999, DHCJ Lam (as he then was) (unreported, 20 November 2001), no conditions were imposed because the plaintiff chose to serve the writ of summons where its managing director knew the defendant was not there whilst it had knowledge of other addresses where the defendant could be contacted.

90.  The court found its way to impose conditions in Bank Austria Aktiengesellschaft v Suwardi Sukamto HCA15309/1998, DHCJ Muttrie (unreported, 6 December 2001).  There an irregular judgment was set aside on condition payment in be made on the ground that the defendant was evading service in the special circumstances of the case, which fact was aggravated by his failure to put forward any defence.  In First Castle Limited v Wong Chun KitHCA6872/2000 (unreported, 19 June 2003), DHCJ Lam (as he then was) said that whether any inference could be drawn against the defendant by reference to his conduct and to what extent he contributed to what went wrong in terms of service depended on the whole of the circumstances of the case. In that case, the defendant tenant failed to pay rent after execution of the tenancy agreement and later abandoned the leased premises.  He gave a correspondence address that was good only for a couple of weeks, which caused the plaintiff to serve the writ at that address.  With strong indications that he was evading service and avoiding judgment, he was to a very large extent responsible for the plaintiff's failure to effect service on him.  So the imposition of a payment in condition was upheld.

91.  In Liu Chong Hing Bank Ltd v Union World (HK) Ltd & ors[2004] 1 HKC 622, the 6^th defendant confirmed his address (as shown in the most up to date annual returns of the 3^rd and 4^th defendants) on the guarantee he signed in favour of the bank.  The writ was inserted into the letterbox at that address and subsequently judgment was obtained.  The bank discovered the defendant owned another property, and the bank’s solicitors sent a demand letter to that address with no reply.  After the bank served a charging order nisi at the second address, the 6^th defendant applied to set aside the judgment on the basis that he all along resided at the second address and he did not understand the demand letter (which he received) fully so he only made brief enquiries with the bank’s solicitors.  It was held that his irresponsible conduct justified imposition of the condition that the outstanding sum plus interest and the plaintiff’s assessed costs be paid into court.

92.  In Sinokawa Investment (Holdings) Ltd, the defendant did not take out application to set aside the default judgment until some four years after becoming aware of the default judgment, and the explanation given for the substantial delay was very unconvincing and unsatisfactory.  Further, the defendant had himself to blame if creditors were led to believe that his address at the time was the one used by the plaintiff to attempt service because various documents filed with the Companies Registry in respect of different companies showed the defendant’s address at the material time as being the address used by the plaintiff to attempt service.

93.  Each case must be decided on its own facts.  The aforesaid authorities (some of which were not cited by the parties) are mere examples of how the residual discretion was exercised in the context of the factual matrix of those cases and are not binding on me.  However, what is evident from the aforesaid authorities is that the court will be concerned to see whether the defendant’s conduct has been shown to be an abuse and whether he has contributed to what went wrong with service of the originating process.

94.  Mr Cheung submits that even before the commencement of the proceedings, the Defendant was already concealing his whereabouts in that: (a) he sent a letter dated 6 December 2008 to the Sister’s former solicitors C&L giving the Shatin Address as his “correspondence address” when according to him he was living at the Macau Address, (b) he did not give any address in his letters dated 27 March and 6 April 2009 which were in reply to C&L’s letters sent to him at the Shatin Address, (c) he did not disclose his address on the courier slips for his letters to C&L dated 27 March and 6 April 2009, and (d) he did not mention either the Macau Address and/or the Zhuhai Address in the H&L Letter that was in reply to the Demand Letter.

95.  However, I am unable to read anything sinister into the above matters. I have in paragraphs 58-60 above dealt with the matter raised in (a) above.  In respect of the matters in (b) and (c) above (see also paragraph 62 above), the Defendant promptly responded to C&L’s letters to him, and there can be no suggestion that he was evasive. In respect of (d) above, the H&L Letter was a holding reply, and I cannot see how the Defendant’s indication therein that he would return to deal with his solicitors here in relation to the Demand Letter is unreasonable even if he regarded Zhuhai as his home at that time.  I am unable to agree with Mr Cheung’s submission that the Defendant has been concealing his whereabouts since late 2008.

96.  I also refer to paragraphs 67-68 above and reiterate that I am unable to “infer that the Defendant was evading service through his wife as his agent” just because the Wife did not know the Defendant left the Macau Address after July 2009 when she sent the Wife’s 1^st and 2^nd Letters recommending C&L to forward documents to the Macau Address as the Defendant’s residential address.

97.  Mr Cheung says the Plaintiff should not be blamed for having served the Re-Amended Writ to the Macau Address based on the information given in the Wife’s 1^st and 2^nd Letters.  However, there is no evidence before me that after receipt of the Wife’s 1^st and 2^nd Letters on 10 July 2010, the Plaintiff or C&L made enquiries with H&L (who made clear in the H&L Letter sent not more than 10 days before the Wife’s 1^st and 2^nd Letters that they were the solicitors acting for the Defendant) whether they had instructions to accept service of legal proceedings on behalf of the Defendant, and if not, whether the Defendant was residing at the Macau Address as suggested by the Wife.  On the affirmation evidence before me, after receipt of the Wife’s 1^st and 2^nd Letters, there was a complete hiatus until 7 months later when the Plaintiff attempted to serve the Re-Amended Writ to the Macau Address.  Still there is no evidence that either the Plaintiff or C&L have made any enquiries with H&L as to the Defendant’s whereabouts prior to the Plaintiff’s application for service out of jurisdiction or at all.  In my view, it is strange indeed that the Plaintiff chose to rely on information as to the Defendant’s address given by his separated wife who says she has lived apart from him since 2006, but not make any obvious enquiries with the solicitors who were acting for the Defendant at the material time.  On the other hand, the Defendant has taken prompt action to make the present application upon being aware of the Judgment.  I also bear in mind that there is little risk of the Plaintiff obtaining an empty judgment given the Defendant has assets within the jurisdiction (ie D’s House).

98.  Further, bearing in mind my conclusion that the Judgment is irregular not just because of ineffective service of the Re-Amended Writ, but also because the default judgment was entered for too much, it is inappropriate to accede to Mr Cheung’s suggestion that the Judgment should be set aside on condition that the whole of the Total Rent Sum be paid into court.

99.  In all the circumstances and upon consideration of the totality of the pleadings and affirmation evidence, I am of the view that the Judgment being irregular should be set aside unconditionally.

VII.  Defence on the merits

100.  If I am wrong and the Judgment is regular, the Defendant must show a meritorious defence with a real prospect of success or which carried some degree of conviction (Premier Fashion Wears Ltd v Li Hing Chung [1994] 1 HKC 213).  Godfrey JA said at pp.219-220 that “[it] seems to me that unless potentially credible affidavit evidence from the defendant has demonstrated a real likelihood that he will succeed on fact, he cannot have shown that he has a real prospect of success” (see also Tong Yi Sang & anor v Fung Law & Ng & ors [1993] 2 HKC 665).  Kaplan J in Tong Yi Sang went on to say at p.672 as follows:

“…… I believe that there is a substantial onus on an applicant who seeks to set aside a regular judgment. This is clear from the Saudi Eagle [1986] 2 Lloyds Rep. 221. In a case such as this, I would expect a defendant to condescend to particulars of his Defence on the merits in his own words. …… What is far more preferable (and I leave over the question whether it is strictly necessary) is an affidavit in narrative form explaining precisely what the proposed defence will be so that the court can be assisted in forming a value judgment as to whether it can be satisfied that there is some degree of conviction and a real prospect of success in the proposed defence.”

101.  This requires the court to form some provisional view of the probable outcome of the action.  Where the outcome depends on whose evidence is likely to be accepted, the appropriate test for determining whether the defendant has a real prospect of success is to ask whether the defence “could well be established” at trial or whether the defence witnesses could well be believed at trial (see Guangdong International Trust and Investment Corp Hong Kong (Holdings) Ltd, Morigood Development Ltd v Sunny Trading Co (a firm) [1999] 2 HKC 710, L & M Specialist Construction Ltd v Wo Hing Construction Co Ltd [2000] 3 HKLRD 262 and El Vince Ltd v Wu Wen Sheng [2001] 3 HKLRD 445).

102.  There are other considerations which a court must consider in deciding whether or not to set aside a default judgment, such as the reason why default judgment was allowed to occur in the first place, any delay in setting aside and any consequent prejudice caused to the plaintiff.  The court’s approach is to conduct a balancing exercise of all relevant factors (see Morigood Development Ltd and Chekiang First Bank Limited v Ng Chun Hing Benjamin HCA3473/2000, Ma J (as he then was) (unreported, 12 December 2001)).

103.  But as Ma J (as he then was) pointed out in para.14 of the judgment in Chekiang First Bank Limited, the critical factor and starting point are the merits of the defence.  If the defence has no real prospects of success, there is no point in setting aside the same (see also Premier Fashion Wares Ltd).

(a)  Defendant’s affirmation evidence

104.  The Defendant believes the reason behind the present proceedings brought after a lapse of 12 years since the Authorisation was because he took a tough stance in HCCA1733/2009 in relation to the Will by entering a caveat against the Sister’s application for a grant of probate in respect of their father’s estate.

105.  The Defendant further claims that two of the three heirship houses (House Nos.38 and 40, Sheung Keung Hau Village, Lot No.604 in DD187, Shatin, New Territories) were respectively sold at substantial undervalue to the Plaintiff and to the Plaintiff and the Sister.  The Plaintiff and the Sister wanted him to surrender his 1/5 share/interest of the heirship house at House No.39, Sheung Keung Hau Village, Lot No.604 in DD187, Shatin, New Territories so they could own the three houses together and thereby increase their market value, but he refused to accommodate their wishes.

106.  In respect of the Plaintiff’s claim in the present proceedings, the Defendant says in his 1^st affirmation the Plaintiff’s claim for repayment of the Total Rent Sum with interest thereon comprising the total Rent for the lettings in respect of the Subject House from 1998 to 2010 is excessive as it fails to give credit (a) for numerous payments made by the Defendant out of monies in the Bank Account for repair/maintenance expenses arising from serious water seepage as well as for other outgoings/expenses, and (b) for all the monies he refunded to the Plaintiff during the period from 1998 to 2010.  The Defendant claims he requires more time to identify/gather relevant information and documents, but his rough estimation of such payments should be around at least HK$1,600,000.00

107.  In his 2^nd affirmation, the Defendant explains that he has helped the Plaintiff in various ways in earlier years.  When the Defendant was in his twenties, his late mother requested him to introduce the Plaintiff (who did not finish secondary education) to work at the “mechanic company” where he previously worked as personnel administrator.  He successfully arranged for the Plaintiff to work at the company’s construction site.  After two years, the Plaintiff was charged with and convicted of gambling at the construction site, and his employment was terminated soon after.  In/about 1985, the Plaintiff and the Defendant jointly invested in the gold market but made losses of about HK$1,000,000.00 that was paid off by the Defendant.  When their mother passed away in/about 1987, the Defendant suggested to the Plaintiff to migrate to Canada, and he helped the Plaintiff technically and financially throughout the migration process.  The Brother also helped the Plaintiff, who eventually obtained Canadian citizenship. In/about 1994, they were informed by their village chief that the application for small house was granted on a preliminary basis.  The Defendant helped the Plaintiff throughout the application process, and the Subject House was built in/about 1998.  In/about 1998, the Defendant ran into financial problems, and in gratitude for the Defendant’s past efforts/assistance, the Plaintiff agreed with the Defendant that all Rent from the Subject House would be deposited into the Bank Account with the Defendant being entitled to withdraw money for his own use, to settle all necessary expenses, to pay pocket money to their father until he died in 2007, and even to pay for gifts to relatives for seasonal greetings and marriage events.  Further, various repair/maintenance works (at least 5-6 times) were carried out to remedy the serious water seepage at the Subject House from 1998 to 2010, and each time it would cost about HK$100,000.00.  The Defendant withdrew money from the Bank Account to settle such expenses.

108.  The Defendant says the Plaintiff could have freely withdrawn money from the Bank Account any time he liked (and the Defendant had no authority to disallow that), but the Plaintiff did not make any such withdrawal over the past 12 years.

(b)  Plaintiff’s affirmation evidence

109.  The Plaintiff argues that although the Defendant says he made numerous payments out of the Bank Account amounting to HK$1,600,000.00, no breakdown or document has been produced. In fact, he had to come back to Hong Kong in May 2010 to deal with the IRD concerning the property tax for the Subject House.  He was informed by the IRD that no one had ever completed/returned property tax returns, and that it was an offence for failing to do so.  After he explained the circumstances, the IRD decided not to levy penalty against him, but he had to pay all the property tax for the Subject House from 2004 to 2010 amounting to HK$264,527.00.

(c)  Discussion

110.  Mr Cheung submits that the Defendant’s contention that the Plaintiff should give credit for payments amounting to HK$1,600,000.00 was shadowy.  Apart from the repair/maintenance expenses, no particulars have been given in respect of the various sums which, according to the Defendant, the Plaintiff should have given credit.  Even for the repair/ maintenance expenses, there are no detailed particulars about the time/ location/circumstances of the water seepage, details of the repair/ maintenance works, and identities of the payees. Mr Cheung says there is no convincing or credible defence.

111.  I reiterate paragraphs 79-83 above, and find there is a credible argument even on the Plaintiff’s own pleaded claim that repayment of the whole of the Total Rent Sum is excessive.

112.  There is no dispute there has been regular withdrawals of money from the Bank Account throughout the years, and that the purpose of withdrawals from the Bank Account as pleaded by the Plaintiff is for defraying outgoings and expenses in respect of the Subject House, such as repair/maintenance expenses, government rent, rates and property tax.

113.  Although the Plaintiff says there has been no payment of any property tax, there has been no denial by the Plaintiff of any payment of repair/maintenance expenses, government rent and rates despite (a) the matters referred to in the above paragraph and (b) the Defendant’s affirmation evidence that money has been withdrawn from the Bank Account to pay for outgoings/expenses in respect of the Subject House.  Mr Cheung reminds that the bank passbook and transaction records of the Bank Account do not show 5-6 payments each in the sum of HK$100,000.00 that match the repair/maintenance expenses as alleged by the Defendant, but, in my view, it cannot be assumed that payments for repair/maintenance works must necessarily be settled by sums withdrawn from the Bank Account in the exact amounts as the repair/maintenance charges and not by funds from the regular withdrawals from the Bank Account.

114.  In my view, the above analysis is sufficient for establishing a credible defence with a real prospect of success to the Plaintiff’s claim for repayment of the Total Rent Sum on which the Judgment is based.

115.  There is therefore no need for me to go further into other lines of defence raised by the Defendant, namely, that (a) he has made refunds of money to the Plaintiff, and (b) by agreement with the Plaintiff he is entitled to withdraw money from the Bank Account for his own use, to settle all necessary expenses, to pay pocket money to their father until he passed away and to pay for gifts to relatives for seasonal greetings and marriage events.

116.  In respect of (a) above, Mr Cheung submits that the Defendant’s 2^nd affirmation no longer alleges that the Plaintiff has ever been paid out of the monies from the Bank Account.  But by not repeating in the Defendant’s 2^nd affirmation such contention already made in his 1^st affirmation, it is not necessarily an abandonment of such assertion.

117.  In respect of (b) above, Mr Cheung submits that the intimation of a gift over of the Rent deposited in the Bank Account in favour of the Defendant goes beyond an agency arrangement and is therefore inconsistent with the Authorisation and the purpose for opening the Bank Account.  Ms Lee argues that (b) above is consistent with the wide power given in the Authorisation to “代收和處理全部租金”.  Whilst I accept that the Authorisation must be given a purposive interpretation in the context of its own factual matrix, it is not easy to regard “處理全部租金” as tantamount to permission for the Defendant to use the Rent deposited in the Bank Account for his own personal purpose or for purposes extraneous to the Subject House when such provision is read ejusdem generis with “代收……全部租金”.  But as I said, there is no need for me to form a definitive view on this line of argument.

118.  In all the circumstances and looking at the totality of the affirmation evidence, I am of the view that the Defendant has discharged his burden in showing a defence which has a real prospect of success or which he could well have established at trial.

VIII.  Conclusion

119.  I therefore order that the Judgment be set aside and the Charging Order Nisi be discharged, and there be unconditional leave for the Defendant to defend this action. I also grant the following directions:

(a) leave be granted to the Defendant to file acknowledgment of service within 7 days from the date hereof;

(b) the Defendant do file and serve his Defence within 28 days thereafter, and such Defence shall be accompanied by its statement of truth;

(c)  leave to the Plaintiff to file and serve his Reply (if so advised) within 28 days thereafter, and such Reply (if any) shall be accompanied by its statement of truth;

(d) the parties do serve  List of Documents within 21 days thereafter, and there shall be inspection of documents within 7 days thereafter;

(e)  within 28 days after the close of pleadings, the Plaintiff and the Defendant do respectively file and serve timetabling questionnaire on each other.

The Plaintiff and the Defendant should comply with Order 25 of the RHC and, where appropriate, the Plaintiff should promptly take out a case management summons.

120.  As regards costs, Hong Kong Civil Procedure 2012 Vol.1 para.13/9/11 at p.221 states as follows:

“The usual costs order is for the plaintiff to bear his own costs of signing the irregular judgment and further to pay the defendant’s costs of the application to set aside judgment ...... The mere making of an order that the costs of the application to set aside an irregular judgment be costs in the cause was held to be improper as having in effect imposed a term on the defendant and qualified or subtracted from his absolute right to have the judgment set aside ...... The court, however, retains a discretion as to costs in that terms might be imposed as a condition of giving costs to the defendant ......”

121.  In Kwan Kam Wah, DHCJ Chu (as she then was) held that neither party was to be blamed for the state of affairs that led to the irregular judgment.  The plaintiff acted in compliance of the rules in serving the writ of summons on the defendant who had moved away from the address unbeknownst to the plaintiff.  On the other hand, the defendant had given notification of his removal to the Companies Registry albeit several months after the removal.  The learned judge considered a fair costs order would be costs of the application in the cause.

122.  In Redland Concrete Limited v Hing Lee Construction Company Limited & anor HCA8140/1998 (unreported, 25^th June 1999), Chung J ordered that costs up to and including the day when the 2^nd defendant filed his affirmation in support which disclosed the irregularity be the 2^nd defendant’s costs in the cause of the action between the plaintiff and the 2^nd defendant, and those costs thereafter to the date of the hearing be to the 2^nd defendant in any event.

123.  In Cosec Nominees Ltd, DHCJ Poon (as he then was) noted the defendant filed two affirmations in support of the setting aside application and by the time the 2^nd affirmation was filed all matters relied on had been disclosed.  He held it was unreasonable for the plaintiff to have opposed the application, and ordered costs up to the filing of the defendant’s 2^nd affirmation be costs in the cause and thereafter costs be to the defendant in any event.

124.  Bearing in mind that the Judgment is an irregular judgment which turns on the Plaintiff’s ignorance of the non-viability of the Macau Address, I am of the view that initially neither party is at fault, but after the filing and service of the Defendant’s 2^nd affirmation, the Plaintiff should not have continued to oppose the Summons. So a fair order is for costs to be in the cause up to the filing of the Defendant’s 2^nd affirmation and costs to the Defendant thereafter in any event.

125.  However, I must say a few words in respect of the preparation of the agreed hearing bundle.  The agreed hearing bundle that was initially lodged with the court does not specify in the section for court documents the Re-Amended Writ, the ex pate applications by affirmations for substituted service and for service out of jurisdiction, the Order, the affidavit of service of the Re-Amended Writ and/or the Judgment.  I therefore directed that the hearing bundle be properly revised. Pursuant thereto, further documents were inserted into the hearing bundle. It later transpired that some of the requested documents were exhibited to the Plaintiff’s affirmation and marked as an exhibit and not as itemised court documents in the index to the hearing bundle.  Not only is it an unnecessary exercise in costs to annex court documents as exhibits to an affidavit (see paragraph 4(c) of Practice Direction 10.1), it is unhelpful to the hearing tribunal who comes fresh to the case to trace court documents hidden away as an exhibit to an affirmation in the hearing bundle.

126.  I therefore grant a costs order nisi that:

(a)  there be no order as to half of the costs of and occasioned by the preparation, lodging and service of the hearing bundle;

(b)  subject to (a) above, costs of the Summons and the Charging Order Nisi (including all costs reserved if any) be costs in the cause up to the date of the filing of the Defendant’s 2^nd affirmation on 14 September 2011, and thereafter costs be to the Defendant in any event to be taxed if not agreed (with certificate for counsel).