北京橙天嘉禾影視製作有限公司 v. 張承勷

HCMP 2666/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 2666 OF 2016

(ON AN INTENDED APPEAL FROM HCA NO. 2481 OF 2013)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the court):

1.  The defendant brought this application for leave to appeal against an order made by B Chu J on 16 June 2016, in which she granted the defendant’s application to set aside a default judgment which was irregular (as service of the writ was effected by insertion through the letter box of the last known address of the defendant in Hong Kong when he was not within the jurisdiction at the time) but imposed a condition that he should pay into court within 28 days the entire judgment sum of RMB 4,165,676.66 or its equivalent in Hong Kong dollars. The defendant sought leave to appeal to set aside the condition imposed.

2.  The judge gave a comprehensive judgment on 16 June 2016 referring to many of the authorities cited to her (“the Judgment”).  She refused leave to appeal in a decision handed down on 22 September 2016 (“the Leave Decision”).

3.  The defendant renewed his application to the Court of Appeal by a summons issued on 5 October 2016, with a draft notice of appeal annexed.  The grounds of appeal in the draft notice are exactly the same as those advanced before the judge and were fully considered in the Leave Decision.  The defendant also sought stay of execution of the judge’s order pending the determination of his intended appeal.

4.  Having considered the relevant documents placed before us, we have decided to exercise the power under Order 59 rule 2A(5)(a) to determine his application without a hearing on the basis of the written materials.

5.  The defendant’s solicitors filed a 7^th affirmation on 5 October 2016 to exhibit a 5^th affirmation of the defendant “in draft but approved form” as the defendant is in the Mainland.  This latest draft affirmation of the defendant has not been affirmed and notarised at the time we consider his application on paper.  There is not even a proper application before us for leave to adduce new evidence.  The draft 5^th affirmation adds nothing of significance to the draft 3^rd and 4^th affirmations of the defendant placed before the judge at the earlier hearing of his application for leave to appeal.  We have considered the draft 5^th affirmation de bene esse.

6.  The principles for granting leave to appeal to the Court of Appeal are well established.  The defendant would need to establish that his intended appeal has a reasonable prospect of success, that the prospects are more than fanciful, without having to be probable.  Mr Jonathan Chan, who appeared for the defendant throughout, acknowledged that the intended appeal is against the judge’s exercise of discretion.  It need hardly be emphasised that generally, an appeal court will not interfere with a judge’s exercise of discretion unless the judge has misunderstood the law or the evidence or the exercise of discretion was plainly wrong that it was outside the generous ambit within which a reasonable disagreement is possible.

7.  Mr Chan contended before us that the judge’s exercise of discretion was plainly wrong.

8.  We do not propose to set out the background leading to the defendant’s application to set aside the default judgment.

9.  In summary, the judge exercised her discretion to impose the condition for granting leave to set aside the judgment for these reasons:

(1)  There was very substantial delay of the defendant in taking out the application to set aside the judgment without reasonable explanation (21 months since default judgment was entered; 20 months since a copy of the default judgment was emailed to him; some 12 months after he had received by email a copy of the statutory demand issued by the plaintiff which referred to the default judgment giving his last known address in Hong Kong as his address) (Judgment, §§84 to 85).

(2)  There was prejudice to the plaintiff in that considerable time and costs had been incurred in the plaintiff’s attempts to enforce the judgment debt. Judgment was first obtained against the defendant in the PRC in November 2011 and later in Hong Kong in January 2014 (Judgment, §§86 to 87).

(3)  The defendant had been evading enforcement of the PRC judgment and the Hong Kong judgment.  He had been evasive as to his actual address or his physical whereabouts in Mainland China.  The judge drew the inference this was because he did not wish the plaintiff to ascertain his actual address, in order to avoid service and/or enforcement (Judgment, §§88 to 94).

(4)  Having regard to the defendant’s evasive conduct, the judge was satisfied there was a real risk of empty judgment.  On the defendant’s own evidence, he had learned about the PRC judgment in July 2012 when he consulted his PRC lawyers, and yet he had never tried to appeal or apply for a review or a retrial or to set aside that judgment.  His overall conduct did not suggest a genuine intention to contest the present proceedings rather than an intention to delay and evade enforcement (Judgment, §§95 to 102).

10.  In our view, the above matters taken into account by the judge would provide cogent reasons for the exercise of her discretion.  The defendant has to overcome a high hurdle in seeking to impugn the exercise of that discretion.

11.  The four grounds of appeal, as summarised by the judge in §3 of the Leave Decision, are as follows:

“(1)  That this court erred in finding that D was evasive and/or that D did not wish P to ascertain his actual address, to avoid service and/or enforcement (“Inference of Evasiveness”);

(2)  Further or alternatively, this court erred in holding that P had probably no means of verifying whether or not D was or was not in Hong Kong at the service of the Writ;

(3)  Further or alternatively, this Court erred in failing to have proper regard to the underlying reason as to why an imposition of a condition of full payment into court would be justified and thus giving undue and excessive weight on the issue of delay when considering whether to impose condition or not;

(4)  Further or alternatively, this court erred in failing to consider that D is currently facing bankruptcy proceedings in HCB 6679/2015 (“Bankruptcy Proceedings”).”

12.  Having considered each of the grounds, the judge concluded that the defendant does not have any reasonable prospect of success in his intended appeal.  We do not propose to repeat the reasons she gave in the Leave Decision, with which we agree.

13.  In the renewed application before us, Mr Chan changed the focus and submitted that his primary ground is ground 3 (before the judge, his main ground was ground 1).  He contended that the condition imposed in granting leave to set aside the judgment was wrong in principle.  He argued that on the authorities he cited in §3(a) of the draft notice of appeal, the underlying objective of imposing a condition of full payment into court is to guard against the risk that the defendant may evade service or enforcement again and absent any evidence of evasiveness, substantial delay alone does not constitute a sufficient basis for the condition to be imposed.  So the condition should only be imposed where the defendant has a history of evading service or enforcement and may “go to ground” again.  He further contended that in this instance the defendant was just being evasive in that the plaintiff was unable to locate him, and the defendant was not being evasive because he had no money to pay.

14.  These arguments were ventilated more than once before the judge, see the Judgment at §§45 to 46, Leave Decision at §§20 and 6 to 8.

15.  We have considered the many authorities relied on by Mr Chan but do not think the court’s discretion under Order 13 rule 9 (that it may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order) is so fettered.  We do not propose to cite the cases he relied on because, as stated in Liu Chong Hing Bank Ltd v Union World (HK) Ltd [2005] 1 HKC 20 at §§13 and 15, each case has to be decided on the particular facts thereof and the court would consider all relevant matters, including the conduct of the defendant after he learns of the proceedings.

16.  The correct position is as stated in Po Kwong Marble Factory v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 at 161C to E and 162D to E:

(1)  In setting aside an irregular judgment, even though it is as of right, the court has a residual discretion to have regard to the conduct of the parties and to impose terms upon setting aside the judgment which accord with justice having regard to the facts of the particular case.  The court does not shut its eyes to the circumstances surrounding the question of service and why things went wrong in that regard.

(2)  The statutory discretion to set aside a default judgment on such terms as the court thinks just is unfettered.

17.  Substantial delay is clearly a factor the court may take into consideration.  Whether this factor alone may justify the imposition of a condition of payment into court of the judgment sum would depend on the particular circumstances of the case.  Nor is it necessary in every case to show there was a history of the defendant evading service or enforcement.  If there was substantial delay and the circumstances indicate that the defendant had no genuine intention to contest the proceedings or there was real risk of an empty judgment, it may well be appropriate to impose such a condition for setting aside the judgment.  After all the relevant factors have been ascertained, it is up to the judge to give such weight as he thinks fit to each of them in the particular circumstances in considering whether any condition should be imposed in the exercise of his discretion.

18.  In any event, in the present case, the judge did not take into account substantial delay alone.  As we have mentioned earlier, she took into account other relevant cogent factors, including the defendant’s evasion of enforcement of the judgment debt over a long period of time.

19.  As for the distinction drawn by Mr Chan that the defendant was merely evasive but not evasive because he had no money to pay the judgment debt, we do not think this is a realistic proposition in view of the judge’s findings.

20.  Ground 3 has no prospect of success.

21.  The next matter Mr Chan developed at some length is ground 4.  Here, he complained that the judge failed to consider that the defendant is currently facing bankruptcy proceedings brought by the plaintiff on the judgment debt in the default judgment.  He sought to rely on the draft 5^th affirmation of the defendant regarding his financial position and inability to pay the amount ordered in the condition imposed.  He cited Morigood Development Ltd v Sunny Trading Co (a firm) [1999] 2 HKC 710 at 717E to F in which Keith J said:

“... at the end of the day, I have to balance the injustice to the defendant (if the judgment is not set aside) of being denied an opportunity to defend a case in which I have found she has a real prospect of success against the prejudice to the plaintiff (if the judgment is set aside) in having incurred costs in the bankruptcy proceedings which were completely avoidable.”

22.  He submitted that the judge should have carried out a similar balancing exercise.  But as apparent from the above quotation, Morigood is clearly distinguishable in that the defence was considered to have a real prospect of success.  For the reasons given in §31 of the Leave Decision, that is not the position here.

23.  Besides, the defendant chose not to adduce evidence at the hearing of the setting aside application that he was impecunious (Leave Decision, §23).  We see no reason why we should admit the 5^th draft affirmation of the defendant as the requirements in Ladd v Marshall [1954] 1 WLR 1489 are plainly not satisfied.  The judge has refused to admit the 3^rd and 4^th draft affirmations of the defendant for the reasons given in §§24 to 28 of the Leave Decision.  Similar considerations apply to the latest draft affirmation.

24.  The case of The Decurion [2012] 1 HKLRD 1063 cited by Mr Chan is of no assistance.  The statements of Cheung JA at §11 were made in a very different context.  The court was concerned with the discretion to extend time for service of a defence, in a situation where the plaintiff had delayed in serving the statement of claim for five months.

25.  There is no merit in ground 4.

26.  The judge has considered ground 1 at §§5 to 15 of the Leave Decision.  Mr Chan renewed his attack that the judge was wrong to infer evasion of service and/or enforcement, contending that the judge’s inference was a “non-sequitur”.  We do not accept his contentions.  The judge has considered a whole range of factors before she concluded that the defendant did not wish the plaintiff to ascertain his actual address in order to avoid service and/or enforcement, for the cogent reasons she gave in §§88 to 102 of the Judgment.  This conclusion is open to the judge on the evidence before her.  There is no proper basis to impugn her conclusion.

27.  As for the remaining ground in ground 2, we agree with the judge it must be rejected for the reasons given in §§17 to 19 of the Leave Decision.

28.  The defendant has failed to meet the threshold test for granting leave to appeal.  We dismiss his application for leave and the application to stay execution of the judge’s order pending the proposed appeal.

29.  We make a further order pursuant to Order 59 rule 2A(8) that no party may under rule 2A(7) request the determination to be reconsidered at an oral hearing inter partes.

30.  Costs of this application should follow the event.  We have considered the statement of costs submitted by the plaintiff for summary assessment.  We take into account that the grounds of appeal are identical to those argued before the judge earlier and the same counsel have been instructed.  We propose to reduce the costs claimed from $63,026 to $49,500.  We make an order nisi that the defendant is to pay the plaintiff’s costs of this application in the sum of $49,500.  Any party who wishes to vary the order nisi shall lodge a written submission within 7 days of this judgment.