KWOK KWONG PANG v. SHUM KIT MAN ALAN

HCA 675/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 675 OF 2013

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J U D G M E N T

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Introduction

1. There are altogether 3 applications before this court :

(i)  The defendant’s Notice of Appeal issued on 11 December 2013, to appeal against the judgment of Master C Chow of 29 November 2013 (“Judgment”) wherein it was held that the default judgment obtained by the plaintiff for the sum of USD 162,000 be set aside on condition of payment into court of USD 81,000 by the defendant within 21 days (“Appeal”);

(ii)  The defendant’s summons issued on 27 February 2014, to adduce for the purposes of the Appeal further evidence (“Further Evidence Summons”);

(iii)  The defendant’s summons issued on 20 March 2014, to apply for an extension of 21 days to make payment into court of USD 81,000 in the event that the Appeal is dismissed (“Time Summons”).

2. L Chan J on 18 March 2014 had directed that the court should hear and rule upon the Further Evidence Summons first, followed by the Appeal, and, if necessary, the Time Summons.

3. The plaintiff was represented by Counsel Mr Robert Chan and the defendant by Counsel Mr Edward Chan at the hearing before the Master, and also before this court.  I shall simply refer to them as Mr R Chan and Mr E Chan respectively in this judgment.

Background

4. The plaintiff (“P”) was/is engaged in, among other things, the business of supplying swimming wear and underwear.

5. The defendant (“D”) was/is engaged in, among other things, the business of trading swimming wear and underwear.

6. In about October 2012, P came to know one Pun Wai Yin Connie (“Connie”) though a business friend, and Connie had told him that she was working for a company called McKenzie International Limited (“McKenzie”). As later found out by P, and according to the company’s annual return filed with the Companies Registry dated 18 January 2011[1], Connie turned out to be the sole shareholder and sole director of McKenzie as at 7 December 2010, and it would appear that D had never been a director or a shareholder of McKenzie.

7. Anyway, in early November 2012, P said he was invited by Connie to visit her offices at Flat A, 13/F, Hung Wai Industrial Building, 3 Hi Yip Street in Yuen Long (“Yuen Long Address”) and he saw a sign stating “Ellens Group Limited” there. According to P, when he asked Connie why the sign stated “Ellens Group Limited” and not McKenzie, he was told by Connie that she was an employee of McKenzie and that her boss did a lot of business at the Yuen Long Address.  He was further told by Connie that McKenzie was one of D’s companies and that acting on the instructions of D, she was interested in doing business with P[2].

8. Thereafter, Connie on behalf of McKenzie, and P on behalf of a company called Wang Fat Hong Industrial Limited (‘Wang Fat”), owned by P’s friend and P’s brother and run by P, entered into a number of contracts for Wang Fat to manufacture and supply swimwear and undergarments to McKenzie.

9. It was P’s case that on about 25 December 2012 Connie told P that her boss wanted to meet P.  A meeting then took place at the Hong Kong Convention and Exhibition Centre where a trade show was going on that day.  It was P’s case that he was introduced by Connie to her boss D during this meeting, and that D had, in the presence of Connie, represented to P that Connie was authorized to act for and on behalf of him in all future business dealings between P and D.  P did not obtain D’s name card at this meeting.

10. P said he then visited the Yuen Long Address a second time on 17 January 2013 when he and 2 colleagues were shown around the premises.  P took some photographs of the area of the premises where there were ten odd workstations and many sewing machines.  P said that he did not doubt what Connie had told him, namely the whole operation was being run by D at the Yuen Long Address.  P had produced those photographs taken by him at the Yuen Long Address.

11. Thereafter on about 31 January 2013, according to P, Connie, acting on behalf of D, requested P to lend D a loan for USD 162,000 as D was in urgent need of cash for his business.  P agreed to do so by an oral agreement made about the same date and D acted by Connie as agent, agreed to repay the loan and interest thereon at the rate of 36% per annum as from 1 February 2013 until repayment, which was agreed to be by early March 2013 (“Agreement”).  P then remitted a sum of RMB 1,006,830, being agreed to be the equivalent of USD 162,000 to D’s bank account at the China Construction Bank Shenzhen Branch (“D’s Bank Account”) on 1 February 2013.  On the same day, P received a copy of a letter of credit which, according to him, was meant to serve as a security for the loan (“LC”).  On the LC, Wang Fat was stated as “Second Beneficiary” while the “First Beneficiary” was Ellens Fashion International Co Limited, one of D’s companies.

12. D had since failed to repay the loan, or any interest.  A letter before action was issued by P’s former solicitors on 15 April 2013, and followed by the writ herein issued on 23 April 2013.  The writ was served by P’s solicitors on 24 April 2013 by inserting a sealed copy within a sealed envelope through the letter box of an address at Flat C, 21 Floor, Block 7, Maywood Court, Kingswood Villa, Ting Shui Wai, Yuen Long (“ 21 C Kingswood”).  No notice of intention to defend was filed by D.

13. P obtained default judgment on 14 June 2013 (“Default Judgment”), and further applied for a Garnishee Order to Show Cause on 10 July 2013.

14. According to D, he only found out about the present proceedings on about 7 August 2013 when he was alerted by the Hang Seng Bank of the garnishee proceedings. 

15. D later issued a summons on 26 August 2013 to set aside the Default Judgment based mainly on the following:

(i)  The Default Judgment was irregular, in that D was no longer living at 21C Kingswood at the time of service, and that D did not have notice of the writ.

(ii)  D said he had never met P, or he did not recall any meeting with P, and he further denied having represented to P or any one that Connie was his agent, or that D had borrowed any sums from P.

(iii)  D confirmed that he was the sole director of a group of 9 companies as identified by P (“Ellens Fashion Group”), 2 out of which had ceased business, and that he was a shareholder of  the remaining 7 operating companies (“7 Companies”), being the sole shareholder of 5 out of the 7 Companies.  According to D, Connie was hired by him in about 2004 of 2005 to work for the Ellens Fashion Group.  In about 2009, Connie formed her own company McKenzie.

(iv)  Further, according to D, after formation of McKenzie, Connie continued to work as a staff of the Ellens Fashion Group until she resigned in about April 2012 to spend more time on McKenzie.

(v)  However, even after she resigned, Connie continued to assist Ellens Fashion Group in sourcing products from manufacturers.

(vi)  McKenzie had entered into a license agreement, as a licensee, in respect of the premises at the Yuen Long Address for “Virtual Office Service” for the period from 7 December 2012 to 6 December 2013 at a “rental fee” of HK$2,000 per month (“Licence Agreement”)[3]. The licensor under the Licence Agreement was a company named Ellens Fashion (Hong Kong) Company Limited, one of the 7 Companies, and “licensor” was defined in the Licence Agreement to be “the businesses centre(s) operated by Ellens Fashion (Hong Kong) Company Limited and its associates”.

(vii)  On about 31 January 2013, Connie asked D for a favour by letting her remit a sum of approximately RMB 1m into the D’s Bank Account as she had to pay a Mainland China supplier.  D agreed to do so and let her have the details of the D’s Bank Account.  On 1 February 2013, the sum of RMB 1,006,830 was deposited by P into the account, and D then made several payments out from the account in accordance with Connie’s instruction, totaling almost the same as the amount deposited by P.

(viii)  According to D, the only sign at the Yuen Long Address was “ELTEX雅迪集團”, and he produced a photograph of the sign in his 2^nd affirmation.  D said the same sign was there in November 2012, and that there was no sign of “Ellens Group Limited” as claimed by P.  D was not aware of P’s visit in November 2012.

(ix)  As for the LC being a security for the loan, D said this was a fabrication and that Wang Fat was named on the LC as a Second Beneficiary because, at the recommendation of Connie, D decided to source the goods ordered by a German customer of Ellens Fashion from Wang Fat, and that the LC had nothing to do with the alleged personal loan from P to D.

The Judgment

16. There were 3 main questions or issues before the Master.  They were (1) whether the Default Judgment was regular or irregular (“Issue 1”); (2) if the Default Judgment was regular, did D have a real prospect of success on the merits of his defence (“Issue 2”); and (3) should a condition be imposed on D if the matter were to go on trial (“Issue 3”).

17. In the Judgment, the Master concluded that the Default Judgment was regular, but having considered the merits of D’s defence, and due to the different versions of the parties about what actually happened, without the benefit of a trial where the credibility of the evidence could be tested, he was unable to say that D had no real prospect of success.  He therefore set aside the Default Judgment and allowed the matter to go to trial, but imposed a condition, namely D had to pay into court half of P’s claimed amount, namely US$ 81,000, within 21 days (“Condition”).

The Issues

18. D did not appeal against the Master’s ruling on Issue 1, namely that the Default Judgment was a regular judgment.  P submitted that such ruling was correct, which I agreed.

19. D did not appeal against the Master’s ruling on Issue 2 either. The Appeal was only in relation to Issue 3, namely on the imposition of the Condition.

20. However, as the hearing before this court was a re-hearing, although P had not filed any notice to appeal or cross appeal, P had submitted that this court should consider the Master’s ruling on Issue 2, and to find that D’s defence had no merits, or alternatively that the defence was ‘shadowy’, failing which P would invite this court to uphold Master’s ruling this issue.

The Further Evidence Summons

Master’s reasons for the Condition

21. The Master’s decision to impose the Condition was based on, among other things, there being a real risk that P would only get an empty judgment at the end of the day[4].  In fact, the Master had said that there was grave doubt as to whether P could safely rely on the claim that the residential address of D was, as given by him, at 1/F, Black F, Tourmaline Villa, Kam Tin, Yuen Long (“Tourmaline Address”)[5].

22. According to P, before the writ was served, a search of the records of the Companies Registry was carried out.  The residential address of D as shown from the records of the Companies Registry before service of the writ was at 21C Kingswood.

23. Further, in an annual return personally signed by D on 18 August 2011 (the annual return was also made up to that date) and filed in respect of Ellens Fashion International Company Limited (“2011 AR”)[6], D’s address was again stated to be that at 21C Kingswood.  The name of an alternate director on the 2011 AR was one Shum Yau Sang, and the residential address given for him was also that of 21C Kingswood.

24. The registered office of Ellens Fashion International Company Limited was an address in Central in the 2011 AR, which appeared to be the address of the then corporate secretary Beas Limited, and it was not the Yuen Long Address.

25. According to a search carried out at the Land Registry by P’s solicitors at that time, the property at 21 C Kingswood which was previously held by Shum Wan Man, Shum Yau Sang and Tsang Sau Lan jointly was assigned on 27 August 2010 to Mulan Investment Limited and subsequently assigned to other parties in January 2011, and later in February 2011.

26. Shum Wan Man is D’s elder brother, Shum Yau Sang, the alternate director of Ellens Fashion International Company Limited according to the 2011 AR, is D’s father, and Tsang Sau Lan is D’s mother.

27. According to the 1^st affirmation filed by D in support of his application to set aside the Default Judgment, all of the 7 companies of which he was a director were incorporated in or before 2008 when he was still residing at 21C Kingswood.  However, since the property at 21C Kingswood was sold to Mulan Investment Limited on 27 August 2010 by his family members, he moved to the Tourmaline Address[7].

28. D said it was due to his oversight that he forgot to update records of the Companies Registry, and in his 1^st affirmation, he produced a D2B form, ie “Notification of Change of Particulars of Secretary and Director” (“D2B Form”) in respect of each of 2 of the 7 Companies, namely Ellens Fashion (Hong Kong) Company Limited and Ellens Fashion International Company Limited filed on 13 August 2013, updating his residential address to the Tourmaline Address, effective from 12 August 2013.

29. P had relied on the record at the Companies Registry, in particular the 2011 AR, indicating D’s residential address at 21C Kingswood for service.  The Master was of the view that the 2011AR contained “false information”, and there was no explanation from D on how such a mistake came to be made.  

30. By the time of the hearing before the Master, the updating had been done by D in respect of 2 of the 7 Companies but such updating did not correspond with D’s account that he had moved to the Tourmaline Address since August 2010.  The Master had also pointed out that there had been no updating of the record of the residential address of his father Shum Yau Sang, the alternate director of Ellens Fashion International Company Limited.  Further, the Master concluded that D had not produced anything to support his claim that he was not aware of the service of the writ by P, and that the absence of compelling or convincing evidence from D was resounding[8].

31. It was in the above circumstances that the Master imposed the Condition.

The new evidence

32. Under the Further Evidence Summons, D sought leave to file a 3^rd affirmation[9].  In this new affirmation, D attempted to explain some of the matters raised by the Master in the Judgment.  He also disclosed for the first time that it was in about July 2010 that he moved out of 21C Kingswood, and after he moved out, he in fact moved to another floor in the same building/block as 21C Kingswood, namely Flat H, 9 floor, Block 7, Maywood Court, Kingswood Villa, Yuen Long (“9H Kingswood”), and that it was only in about March 2013 that he moved to the Tourmaline Address.

33. D tried also to explain in his 3^rd affirmation his inadvertent failure to update his residential address with the Companies Registry and claimed that when the staff at the corporate secretary Beas Limited asked him if there were any changes to the annual return, and whether he was still residing at 21C Kingswood, he replied positively, as he inadvertently thought the staff of Beas Limited was referring to his address at 9H Kingswood.

34. D also explained that the reason as to why the residential address of his father, the alternate director of Ellens Fashion International Co Ltd was not updated was because his father had ceased to be such a director on 8 April 2013.

35. There were 3 new documents D produced in his 3^rd affirmation which were the following –

(i)  A Water Bill of 9H Kingswood for 21 March 2010 – 23 July 2010[10];

(ii)  A Water Bill of the Tourmaline Address for 11 December 2013- 24 January 2014[11];

(iii)  Form D2A of Ellens Fashion International Co Ltd filed with the Companies Registry on 17^th April 2013 showing that D’s father Shum Yau Sang had resigned as a director on 8 April 2013[12].

36. P opposed leave being granted to D for filing his 3^rd affirmation.

The Legal Principles

37. D’s Counsel, Mr E Chan, had referred this court to a pre Civil Justice Reform decision of Core Resources (Far East ) Ltd and Sky Finders Ltd HCA A6920 of 1991, 5 December 1991, where it was held by Kaplan J that:

“(1) Whilst there are very few appeals from the Master where fresh evidence is not put in, leave of the court is required and that leave is not given as a matter of course; and although the hearing before the judge is a de novo hearing, it was by way of an appeal and the reception of fresh evidence has to be considered in that light. (2)Where the losing party before the Master finds some additional documents or another deponent to deal with a matter which should have been dealt with below, the court will usually allow these to be put in but different considerations arose where it is sought to place before the court a completely different defence which it is said arose only after the hearing before the Master; application of this nature must be examined with particular care. (3) It would not be fair or just, in the light of the issues raised in this case, to permit the defendant to adduce new evidence in order to place before the Court a wholly different defence to that which had not found favour with the master”[13].

38. After the introduction of the Civil Justice Reform, Order 58 rule 1(5) of the Rules of the High Court now provides that no further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal unless on special grounds.

39. As stated in paragraph 58/1/3 of the Hong Kong Civil Procedure 2014, the phrase “special grounds” is the same expression as in Order 59 rule 10(2) of RHC and requires the conditions laid down in Ladd v Marshall [1954] 1 WLR 1248 to be satisfied, namely:

(i)  that the evidence could not have been obtained with reasonable diligence for use at the hearing below;

(ii)  the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive;

(iii)  the evidence must be such as is presumably to be believed.

40. Mr E Chan, however, highlighted the part of paragraph 58/1/3 in which it was stated that the Ladd v Marshall conditions would require some modification in the situation of an appeal from a summary judgment, referring to what Lord Bridge had said in Langdale v Danby [1982] 1 WLR 1123 (HL).

41. It was said by Lord Bridge, referring to the Ladd v Marshall conditions that :

“In the situation arising on an appeal to the Court of Appeal from a summary judgment, the application of these conditions and perhaps the conditions themselves will require some modification. It may well be that the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial. The second and third conditions will no doubt be satisfied if the further evidence tendered is sufficient, according to the ordinary principles applied on applications for summary judgment, to raise a triable issue. But I can see no injustice at all in requiring a defendant to use such diligence as is reasonable in the circumstances to put before the judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced.” [14]

42. What was said by Lord Bridge above was referred to by Kwan JA in Fortis Insurance Company (Asia) Limited v Lam Hau Wah Inneo, unreported, CACV 86/2010, 28 October 2010[15].  In that case, the defendant had applied to file further evidence on appeal to the judge against the summary judgment entered against him which was turned down by the judge, and on appeal to the Court of Appeal, he was granted leave to file certain further evidence, and he was also granted unconditional leave to defend. 

43. The comments made by Lord Bridge in Langdale were also referred to DHCJ Le Pichon[16], as she then was, in Citibank NA v Dayaram Nanik, unreported, HCA 2145/ 2011, 15 March 2013.

44. In Citibank, the defendant was given unconditional leave to defend on the plaintiff’s application for summary judgment, and the plaintiff sought leave to adduce further evidence on appeal to the judge. The defendants had sought to distinguish Langdale on the basis that those observations made by Lord Bridge were directed at a defendant who was under time pressure, and it was said that a plaintiff applying for summary judgment had all the time in the world to prepare its case and the Langdale observations were inapposite.  DHCJ Le Pichon was of the view that the critical matter was whether on the facts of the particular case the party seeking leave to adduce new evidence had acted with reasonable diligence[17]

45. Mr E Chan had submitted the observations and comments made by Lord Bridge in Langdale would be equally applicable for setting aside a default judgment, in that given setting aside default judgment was not a trial, but an application under time pressure, it was natural and only fair that certain latitude was to be given to the defendant in presenting the evidence.

46. However, as pointed out by P’s Counsel, Mr R Chan, and as stated further in paragraph 58/1/3 of the Hong Kong Civil Procedure 2014, after quoting what was said by Lord Bridge in Langdale:

“Practitioners should however be reminded that the above approach in Langdale does not simply mean a more relaxed approach towards the admission of new evidence under the rule when it appears appropriate to do so, in view of the litigation culture preferred by the court since the introduction of the CJR: see… Falcon Insurance Co (Hong Kong) Ltd v Flagship Underwriting Management Ltd [2011] 1 HKLRD 489…”

47. Bearing in mind the above guidance, I turn to the present application.

1^st Ladd v Marshall condition

48. In relation to the 1^st condition, the issue was whether D had acted with reasonable diligence.  I accept that the law does not require litigants to be perfect.  Mr E Chan submitted that D had tried diligently to remedy the deficiency (if any) in his case, and even if D had not acted with reasonable diligence, the court could order D to bear the costs and admit the new evidence in the interest of justice.

49. The present case was not in relation to an application by P for summary judgment.  It was D who took out an application to set aside the Default Judgment.  According to D, he found out about the writ when alerted by the bank on 7 August 2013, and he issued his application to set aside the Default Judgment about 2 ½ weeks later, on 26 August 2013.  The hearing before the Master took place on 29 October 2013.  Some 2 ½ months had thus passed from when D said he learned about the writ to the hearing before the Master.  There was in my view no sufficient evidence of any “time pressure” on the part of D in preparing his case.

50. D’s 1^st affirmation was not a brief one but he produced only 2 supporting documents, namely the land search and the D2B Forms.  As pointed out by Mr R Chan to the Master, D had to explain by convincing or compelling evidence why the writ was not brought to his knowledge and the court was not bound to accept a bare assertion of no knowledge without any supporting evidence or documents[18].  Thus, the key question was where D was residing at the time of service.  As mentioned earlier, the Master had in fact said that the absence of compelling or convincing evidence from D was resounding.  As D was legally represented throughout, he should thus be aware that when he moved out of 21C Kingswood and where he was residing thereafter would be a very relevant issue. As the Master had pointed out, D could not simply rely on the land search record of the date of assignment by his family members of 21C Kingswood.

51. In his 1^st affirmation, all D said was that he moved out since the property at 21C Kingswood was sold at end of August 2010 to the Tourmaline Address, but the D2B Forms produced by him showed that the Tourmaline Address was only effective as from 12 August 2013.  Although D filed a lengthier 2^nd affirmation in reply to P’s affirmation, there was again no supporting evidence as to when he in fact moved out of 21C Kingswood and where he had been residing since moving out.

52. Now, in his 3^rd affirmation, D suddenly said he in fact moved out of 21C Kingswood in July 2010 and not in August 2010, and he further disclosed that he in fact moved to 9H Kingswood in the same block, and it was only in about March 2013 that he moved to the Tourmaline Address.  There was no proper explanation from D as to why he did not disclose this information earlier in his 1^st or his 2^nd affirmations.  Such information must be within his personal knowledge prior to the hearing before the Master.

53. There was also no proper explanation as to why D could not have produced the copies of the water bills earlier, or the information that that his father had resigned as an director/alternate director of Ellens Fashion International Co Ltd.

54. Mr E Chan had submitted that D had tried diligently to remedy any deficiency.  However, even if he had, this was after the Judgment.  There was in fact no or no sufficient evidence from D that the new evidence contained in his 3^rd affirmation could not have been obtained with reasonable diligence by him prior to the hearing before the Master. In my view, D was not able to satisfy the 1^st of the Ladd v Marshall conditions at all, even if the standard of diligence was not as high as that required in preparing for a trial.  Further, in light of the CJR, it would not be ‘in the interest of justice’ to admit a further round of evidence from D following the Master’s unfavourable decision, particularly when the evidence in question was within D’s personal knowledge and readily obtainable prior to the hearing before the Master.

The 2^nd Ladd v Marshall condition

55. On the 2^nd condition, Mr R Chan had submitted that the new evidence would not have an important influence because “Master held (at paras 25, 32 and 35 of Judgment) that D has not merely defaulted in the timely filing of annual returns but has given false information”[19].  Mr E Chan submitted, however, that giving false information was a serious allegation, and that failure to update was an omission and not the same as giving false information.

56. As pointed out by Mr R Chan, it was the Master who had said :

“Default in filing annual returns may be a fairly common occurrence, but it is nonetheless an infraction of the law. What we have here is however not a mere default on the timely filing of annual returns, but the giving of false information… I do not think the giving of the address in the 2011 AR could be explained away as mere oversight or inadvertence.”[20]

57. Thus, Mr R Chan was therefore not exaggerating as submitted by Mr E Chan.  

58. The two water bills only showed D’s residential address during those two periods covered by the bills, namely D was at 9H Kingswood from 21 March 2010 to 23 July 2010 and D was at the Tourmaline Address from 11 December 2013 to 24 January 2014.

59. D’s latest explanation in the 3^rd affirmation was that he had misunderstood the question from the staff at Beas Limited in relation to his then residential address, and this again was a bare assertion on D’s part.  In any event, the 2011 AR was signed personally by him.  

60. Having considered the new evidence contained in D’s 3^rd affirmation, I am of the view that D had not satisfied the 2^nd of the Ladd v Marshall conditions, namely that the new evidence must be such that, if given, it would probably have an important influence on the Master’s decision.

The 3^rd Ladd and Marshallcondition

61. On the 3^rd condition, Mr R Chan submitted that the new evidence could not be believed because D made no reference to moving to 9H Kingswood in his previous affirmation.

62. On the other hand, Mr E Chan submitted that the address at 9H Kingswood was simply a matter of background, and that D had made an admission against his interest that there was an “interim” address at 9H Kingswood after he moved out of 21C Kingswood and before he moved into the Tourmaline Address, and that what was important was that going forward he would be residing at the Tourmaline Address, and hence the new evidence should be believed.

63. As submitted by Mr R Chan, P and the Master had been led to believe by D’s 1^st and 2^nd affirmations that he had moved to the Tourmaline Address in August 2010, after 21C Kingswood was sold. There was a lack of satisfactory explanation in relation to D’s omission to mention he in fact moved to 9H Kingswood.

64. The difficulty I have with D’s 3^rd affirmation is that it did not really provide sufficient supporting evidence as to when exactly D moved out of 21C Kingswood and where exactly he had been residing since, in particular there was no sufficient supporting evidence to show where D was residing at about the time of service of the writ on 24 April 2013.

65. By way of comparison, in the case of Sinokawa Investment (Holdings) Ltd v Li Chun [2006] 3 HKLRD 441, Sakhrani J had accepted that the utilities bills produced for the period, were cogent evidence to support the evidence of the defendant in that case and his secretary that the defendant was living at another address, and not at the address where the writ was served in September 1999[21].  It would seem that in that case the utilities bill covered the period of the time of service, and there was also supporting evidence from the defendant’s secretary.  As said by DJ M Ng, as she then was, in HRA Investments Limited and Lee Yik Kwong DCCJ 1291/2005, 14 May 2007, the “usual documents” that one would expect an occupier to have in relation to his residential address would be an assignment, a tenancy agreement, utility bills, other invoices, management fee debit notes etc[22].  In the Judgment, the Master had pointed out that D had not produced any utility bills or correspondence relating to his claims of residence at the Tourmaline Address since August 2010 (emphasis added).

66. The 1^st water bill addressed to D at 9H Kingswood covered the period from 21 March 2010 to 23 July 2010 and did not support D’s case that he moved there in July 2010 as he claimed in his 3^rd affirmation, or August 2010 in his 1^st affirmation.  The 2^nd water bill addressed to D at the Tourmaline Address only covered a period of about 1 ½ months from 11 December 2013 to 24 January 2014.  It would not support D’s case that he moved to the Tourmaline Address in about March 2013 as he was then claiming in his 3^rd affirmation, or after August 2010 as claimed initially in his 1^st affirmation, or that he had been residing there since moving there.  Further, from those QQ messages from Connie produced by P, it appeared that D was in Europe for a trip for some weeks since early March 2013, and did not seem to be back even by about end of March 2013, and seemed only to have returned on 9 April 2013[23]. 

67. At this stage, based on the evidence before this court, D’s evidence in his 3^rd affirmation, in particular his bare assertion that he moved out of 21C Kingswood to 9C Kingswood in July 2010 and that he moved to the Tourmaline Address in March 2013 was unsupported by evidence and did not seem credible.  D had not satisfied the 3^rd of the Ladd v Marshall condition.

 Conclusion on the Further Evidence Summons

68. In light of the above, I will dismiss D’s Further Evidence Summons.

69. I will also add even if I were to grant leave for D to adduce further evidence by way of his 3^rd affirmation, this will not affect my decision on the Appeal, as his 3^rd affirmation would raise even more queries on D’s evidence on where he had been residing after July/August 2010.

The Appeal

70. The Appeal was essentially on the Condition imposed by the Master.

71. There was no dispute between the parties about the court’s power to impose conditions, nor was there any dispute in relation to the general legal principles on imposing conditions as set out by the Master in the Judgment.

72. Both Counsel had cited a number of authorities, but it was not disputed that each case would depend on its own facts.

73. Among the cases, Mr E Chan in particular relied on what was said by Ribeiro JA as he then was in L & M Specialist Construction v Wo Hing Construction Co Ltd [2000] 3 HKLRD 262 (CA), as follows[24]:

“In my view, it must be rare that a payment into court is made a condition of setting aside a judgment. It may in theory do so, as the court apparently did in the relatively old case of Richardson v Howell, where the defence is considered shadowy and in what one might call ‘conditional leave to defend territory’. However, there is a certain logical tension between a court deciding that the defendant has real prospect of succeeding in this defence and the court considering at the same time that the defence is in shadowy realms. While I do not consider such an outcome impossible, I would expect it to be exceedingly rare. I do not consider the present case to come within that category.

  As the Court of Appeal in City Construction Contracts (London) Ltd v Adam pointed out, there may be other reasons for requiring payment into court.  There, it was a perceived need ‘to encourage the proper future conduct of the litigation and to provide a measure of security for the plaintiff’.  As I have pointed out, the procedural infraction in the present case is very minor and no basis has been made out for providing the present plaintiff with security, either for its claim or for its costs.”

74. However, as seen from L & M that, among other things, in that case, the procedure infraction was considered very minor, and it was held in that case that there was nothing in that case which provided a foundation for a stringent condition.

75. In Sinokawa, in addition to the long delay in that case, it was also held that 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 and various documents filed with the Companies Registry showed the defendant’s address in September 1999 as being the address used by the plaintiff to attempt service[25], and the condition eventually imposed was for the full amount being claimed under two separate actions.

76. Delay was not a ground relied upon by P for the imposition of a condition, and in fact the Master accepted that there had not been a substantial delay in applying for the Default Judgment to be set aside.

77. The Master imposed the Condition on mainly the following bases:

(i)  there was a real risk that should P succeed at trial he would be left with an empty judgment, which was based on the absence of any proof of a residential address or personal assets in Hong Kong and D’s failure to update the records of the 7 Companies of which D was a director;

(ii)  D had contributed to what went wrong with the service of the writ, based on his own failure to update the records of the 7 Companies

78. D’s case was that the failure to update the Companies Registry records was due to “oversight” or “inadvertence” and that he “did not intend to mislead anyone”, but as stated earlier, the Master had referred to it as “not a mere default…, but the giving of false information”.  This was based on the fact that the 2011 AR was personally signed by D on 18 August 2011.  As further mentioned earlier, in the 3^rd affirmation, D had purported to explain that at the time of the preparation of the 2011 AR, when the staff at Beas Limited was asking him whether he was still residing at the 21C Kingswood, he “inadvertently” said yes as he thought she was referring to 9H Kingswood.  I have already pointed out that he never disclosed this in his earlier affirmations, and even in the 3^rd affirmation, had it been admitted, he only asserted that he had moved to 9H Kingswood.  Even in his 3^rd affirmation, there was no explanation by D as to why the address of his father , the alternate director, was given to be 21C Kingswood as at 18 August 2011, when according to D, that property was sold a year earlier. D’s father only resigned as an alternate director on 8 April 2013.

79. In any event, D’s case, whether before the Master and before this court, was that neither he nor his father was residing at 21C Kingswood as at 18 August 2011, and therefore the information provided in the 2011 AR was clearly incorrect.

80. There was no evidence that any amended annual returns were filed in respect of any of the 7 Companies.  The “Effective Date” of the change of address in the D2B Forms filed on 12 August 2013 was again incorrect, as the Tourmaline Address should be effective as from August 2010 according to D’s 1^st and 2^nd affirmations, and from March 2013, if according to his 3^rd affirmation, if allowed.  There was no evidence that any amended D2B Forms had been filed.

81. The D2B Forms were only filed in respect of 2 of the 7 Companies, and it was not certain as to whether any was filed in respect of the other 5 of 7 Companies.

82. By the hearing before this court, D had had ample opportunities to rectify or amend the incorrect information he had provided to the Companies Registry.

83. Mr E Chan had submitted that D had been legally represented since August 2013 and had been contesting this case all along, and that there was simply no valid reason to doubt that his case that his current residential address would be the Tourmaline Address.  Mr E Chan also said D’s oversight or inadvertence was 3 years before the present action, and it was not his deliberate attempt to mislead anyone. 

84. There seemed to be at least 4 occasions of alleged oversight or inadvertence on D’s part as a director, firstly, in July/August 2010 when he failed to report to the Companies Registry when he and/or his father moved out of 21C Kingswood, and secondly, in August 2011 when he signed the 2011 AR providing incorrect information on the residential address of both himself and his father, and then thirdly, in March 2013 when he failed to report on his change of address in March 2013 when he said he moved to the Tourmaline Address, and finally fourthly, in August 2013, when he failed to report correct “effective date” on the D2B Forms as to his Tourmaline Address. There was also no sufficient evidence of anything being done about reporting his change of address for 5 out of the 7 Companies.

85. It was the conduct of D in failing to provide satisfactory explanation of his alleged “inadvertence” or “oversight”, and the absence of satisfactory evidence from D as to where he was residing after August 2010 which resulted in the Master saying that he had grave doubt as to whether P could safely rely on the claim that D’s residential address being that of the Tourmaline Address at the time of the hearing before the Master.  No tenancy agreements had been produced, and there had been no supporting evidence from other witnesses as to D’s address, and as I have said, the 3^rd affirmation, if admitted, would not have assisted D’s case, and in fact in my view, raised even more questions on his credibility and when he moved to the Tourmaline Address and why there was no other supporting evidence as to his residential address after August 2010, save for a water bill for about 6 weeks from December 2013 to January 2014. 

86. I accept that the risk of empty judgment is something that any plaintiff has to face. 

87. In my view, D’s infraction of the law on more than one occasion and in relation to more than one company was not minor.

88. Mr E Chan also submitted by imposing the Condition on D to defend this matter, the Master was unjustly improving P’s position to the disadvantage of D, and that it was open for P to seek a Mareva injunction if P could demonstrate necessary requirements.

89. As pointed out by Mr R Chan, the Master distinguished the present case from that of Desirable International Fashions Ltd (in liq) v Chiang Shi Chau HCA 7069/1995, 18 June 1997, and he had referred to those cases considered in the Wai Kam Foo Daniel case where conditions had been imposed upon the setting aside of default judgment, as the Master had said, the courts in those cases had reasons to be concerned with the conduct on the part of the defendants, and in particular the extent that they had contributed to what went wrong in terms of service, and that in the exercise of discretion to impose conditions, the courts in such cases were not hampered by the fact that the plaintiffs had not sought any Mareva injunctions[26].  I agree with what was said by the Master.

90. Further, the Master did not treat D’s application to set aside the Default Judgment as if it were a summary judgment and gave ‘conditional leave to defend’ on that basis. The Master adopted the correct test, namely whether D’s defence had any real prospect of success, and that this could not be assessed without a trial as matters of credibility were involved.

91. Mr R Chan further informed the court that D never complied with the Master’s order in relation to the Condition, nor had he applied for any stay pending appeal, there being no automatic stay under Order 58, rule 1(4) of the Rules of the High Court (Cap 4A), not even after P took steps to enforce the Master’s order.

92. Having considered all the evidence so far before this court,  I agree with the Master’s decision in imposing the Condition.

Issue 2

93. I have read through those QQ message and email records between P and Connie in Bundle 3.

94. These messages showed that Connie told P that she was only an employee for about 9 years since about 2004, her boss was called Alan, who was described by her as a young American Overseas Chinese, and that there was a meeting between her, her boss and P on 16 January 2013 at a coffee shop in a hotel near the Convention Centre. D said he was born in Mainland China and came to Hong Kong before he was one year old, and had been residing here since.  He said he was not an American Overseas Chinese.

95. I further note that on 31 January 2013, when Connie requested for the loan, she asked P “可唔可以幫到我”[27] (emphasis added), and later she said “我希望你不要誤會, 我是一個很交代的人, 你的,我一定會還齊的.” [28](emphasis added).  There were quite a number of messages when Connie used “I”.

96. I accept later on Connie had also referred to her boss /“Alan” being away and that his approval was needed for money transfer, and that Connie did not correct P when he was chasing the money and referring to it being the loan to “Alan”.  Connie had in fact suggested that P attended her office to have a meeting with “Alan” on 10 April 2013, which was to discuss, but this was rejected by P who insisted on the repayment of the loan first. 

97. As said by the Master, apart from the fact that there had been the remittance of a sum of RMB 1,006,830 by P into D’s Bank Account on 1 February 2013, there was no agreement at all between the parties on what had truly happened.  Even if there had been a meeting between P and D on 16 January 2013, that seemed to be the only direct contact between the two of them, and there was no agreement that D had ever authorized Connie to handle any matters on his behalf or that she was his agent.

98. P had sought directions from the Master on the adding of Connie as a party, if the Master were to find that Connie had no authority to act on behalf of D and there had been no loan from P to D.  The Master had declined as there was no proper application taken out by P.

99. As matters now stand and the evidence before the court, I agree with the Master that without an assessment of the credibility of the competing evidence of the parties, it would be difficult to say that the defence advanced had no real prospect of success.

100. I agree and will uphold the Master’s ruling on Issue 2.

The Time Summons

101. D sought a further 21 days from the date of this judgment to meet the Condition.  D had had plenty of time by now to come up with the payment of USD 81,000.  I am only prepared to allow him an extension of 14 days from today.

Order

102. In the above circumstances, my order is as follows:

(i)  D’s summons filed 27 February 2014 is hereby dismissed;

(ii)  D’s notice of appeal filed on 11 December 2013 is hereby dismissed.

(iii)  D shall be granted an extension of 14 days from today to make payment into court of US$81,000 pursuant to the Judgment dated 29 November 2013.

Costs

103. As P is generally the successful party, I see no reason to depart from the general rule that costs to follow the event.  I order D to pay P the costs of all three summonses.  This is an order nisi, which shall be made final after 21 days.

104. Lastly, I would like to thank both Counsel for their assistance to this court.