XCHRX Leung Yuk-kit, Pecky v. Tse Wai-kei, Wicky

DCCJ426/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 426 OF 2001

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J U D G M E N T

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1. In this matter, the defendant seeks to set aside a default judgment dated 21 February this year. The action relates to an agreement in writing dated 10 April 2000 entered into by the parties whereby the defendant was to carry out extensive design and decoration works at the plaintiff's home in Yuen Long. For reasons which do not matter for present purposes, the defendant withdrew from the contract leaving much of the work unfinished. The plaintiff now claims for the costs of completing that work and for consequential losses caused by the defendant's alleged breach of contract.

2. The writ was issued on 8 January this year and service was purportedly effected on the defendant by Mr Tsoi Chi-kin, a clerk employed by the plaintiff's solicitors. He has affirmed in an affirmation dated 31 January 2001 (page 23 of the bundle) that on 9 January the writ was served "by inserting the same through a letter box for the address of the said defendant enclosed in an envelope duly and properly addressed to the said defendant at 6A King's Power Building, 409 Jaffe Road, Causeway Bay, Hong Kong, being the usual and last known address of the defendant".

3. The defendant did not file a notice of intention to defend and, on 21 February 2001, an interlocutory default judgment was entered in favour of the plaintiff with damages to be assessed. Those damages were subsequently assessed by Judge Yung on 27 July 2001 in the sum of $420,253. In relation to that and the interlocutory orders made in preparation for the assessment, Mr Tsoi has also affirmed that on 17 May (page 31), 9 July (page 322) and on 24 July (page 325), he served the defendant, on this occasion by ordinary post, with all the relevant papers at the same address.

4. The defendant says that he has never lived at this address and that he never received the writ nor the subsequent orders and/or notices. Accordingly, it is submitted on his behalf by Mr Maurellet that the judgment is irregular and that he is therefore entitled to have it set aside ex debito justitiae.

5. Alternatively, if I were to hold that this was a regular judgment, service having been properly effected, then I am invited to exercise my discretion to set it aside on the ground that he has a good defence to the claim on its merits, subject to any terms that I might impose as to costs and payment-in of the whole or part of the claim.

6. The rule as to what is good service appears in Order 10 of the Rules of the High Court. The primary situation is governed by Order 10, Rule 1(i) which is to the effect that a writ must be served personally on each defendant by the plaintiff or his agent. Order 10, Rule 2 offers a plaintiff alternatives in these terms:

"A writ for service on a defendant within the jurisdiction may, instead of being served personally on him, be served (a) by sending a copy of the writ by registered post at his usual or last known address; or (b) if there is a letter box for that address, by inserting through the letter box a copy of the writ enclosed in a sealed envelope addressed to the defendant."

The note to the rule, paragraph 10/1/11 indicates the following rationale:

"It is entirely the option of the plaintiff which mode of service he chooses to adopt in any particular case. The virtue of personal service is that it brings the proceedings to the notice of the defendant. The alternatives of service by registered post and of service by insertion through a letter box are allowed because they are based on a good-working but rebuttable presumption that they will bring the proceedings to the notice of the defendant."

In relation to service through a letter box, the note at paragraph 10/1/13 makes clear that:

"The expression through the letter box properly excludes the insertion of a sealed envelope under the door or through an open window, or its delivery to a caretaker or other person at the premises in question, for example, by delivery to the wife of the defendant who has opened the door to the process server."

7. Before I turn to the particular circumstances of this matter, it is important to realise that the underlying principle on service is not on delivery of the writ, but on receipt or at the very least notice of it so as to allow the defendant the opportunity to be heard (see, for example, Kwan Kam-wah v Chan Wai-ming [2000] 2 HKC 379 and Consec Nominees Limited v Lau Hon-ming [2001] 3 HKC 290).

8. In support of this summons, the defendant has filed two affirmations. The first at page 360 relates specifically to the issue on service. He says that he has never lived at the address served, that the building at 409 Jaffe Road is a commercial building, office premises mainly, and that the particular unit may be a clinic of some sort. He says that at the time when service was effected, he lived at a flat in Kowloon and that currently he lives at Sheung Wan.

9. Against that, the plaintiff relies on two matters in particular. Firstly, it appears from the affirmation of Mr Lo, the plaintiff's solicitor, affirmed on 12 December 2001, that the defendant had given the plaintiff his business card for Asia Home Limited, a company of which he is a director, which gives the address at 409 Jaffe Road. Then Mr Lo also draws attention to the results of his company search for Asia Home Limited which gives the defendant's residential address as 409 Jaffe Road and that was still the address as at 3 December this year, which was when this search was made.

10. The defendant deals with this in his first affirmation (see page 363). He says that he filled in the company registration forms incorrectly thinking that the address to be filled in was that of the company. He goes on to affirm that the plaintiff herself knew that he did not reside there because he had told her in April 2000 that this address was a temporary address for the company until he found something more permanent for it. He also says that the plaintiff had his mobile phone number and that she or her solicitors could have very easily contacted him in the way which was ultimately done when Mr Lo telephoned him to say that judgment had been obtained and that bankruptcy proceedings were being initiated, and that he should arrange to collect the statutory demand relating to those proceedings from his offices.

11. Quite apart from the issue as to whether 409 Jaffe Road was the defendant's usual or last known address, there has been a late flurry of activity and consequent affirmations as the parties have sought to establish one way or the other whether unit 6A was provided with a letter box, which of course is a necessary accoutrement to the premises if proper service is to be effected under Order 10, Rule 2. Mr Tsoi, of course, says they did (see page 23).

12. The defendant says that was not the case and Mr Choi, another Mr Choi, a clerk at the defendant's solicitors office, was despatched to 409 Jaffe Road on 14 December to see if there was a letter box for 6A. His affirmation was affirmed on 17 December, the day of this hearing. He has taken photographs which are exhibited to it. On 14 December, 6A was vacant although perhaps that does not matter very much when I am concerned with service on 9 January, nearly a year earlier. As to the letter box, he found a paucity of those on the five floors of the building which he visited and certainly 6A had no letter box, nor were there any on the ground floor lobby of the building.

13. Mr Lo's fourth affirmation no less, dated 17 December, is also about letter boxes at 409 Jaffe Road. He confirms that unit 6A was vacant when he went there in the afternoon on 15 December. He says that units 20B, 14A, 1A and the space between 19A and 19B had letter boxes which, again, can hardly assist on whether 6A had a letter box appended to it on 9 January. His industry in this regard cannot assist one way or the other.

14. Mr Tsoi, who purportedly served the writ through the letter box, was then asked to go on oath for a fifth time, on this occasion also on 17 December. He says that 6A had a letter box although he is not bold enough to say precisely where! He affirms that it was near the doorbell to unit 6A. He was referred to photograph 4 of Mr Lo's fourth affirmation which shows the door to 6A and the doorbell, and he says it was close to that. It is fair to say that there are two holes in the wall which may once upon a time have played a part in the fixing of a letter box but beyond that one cannot go.

15. Mr Tsoi is the only person who went to this unit on 9 January and he has affirmed (see page 23) that he inserted the envelope into the letter box. He repeated that on oath a second time in his fifth affirmation. Mr Maurellet cautions me to attach very little weight to this evidence. How could he possibly recollect, asks Mr Maurellet rhetorically? These affirmations of service are rather pro forma and no process server would now say that he was wrong in his preparation of his affirmation of service.

16. But, in my judgment, a statement on oath of this sort is worthy of serious condition. It cannot be dismissed as worthless or of little weight without more. In this case, it is entirely uncontradicted by any other evidence. Mr Tsoi had no particular axe to grind when he served this writ on 9 January. If there was no letter box, I expect he would have returned to Mr Lo and told him so. I am satisfied therefore that Mr Tsoi's affirmations are both truthful and accurate. There was a letter box on 9 January and he inserted the envelope containing the writ into it.

17. This disposes of the point on the letter box but not whether this address is to be taken as the defendant's usual or last known address. As to that, I am perfectly satisfied that on 9 January he did not live there but at the address at Hung Hom, Kowloon. I am also satisfied that this was a temporary business address for Asia Home Limited and not a place which the defendant frequented as he might if it were his daily place of work.

18. The real issue here is not delivery of the writ, about which I have no doubt, but receipt of it so as to have afforded the defendant the opportunity to return the notice of intention to defend and to subsequently be heard in the action. As to that, I am forced to the conclusion on the evidence before me that the defendant did not learn of this action until Mr Lo started the enforcement proceedings and when he and Mr Lo spoke on the telephone.

19. Accordingly, this judgment is to be categorised as an irregular judgment and that it must therefore be set aside as of right. The position in Hong Kong with an irregular judgment is that the defendant will not be required to show that his defence is one with a real prospect of success, which would be the case had the judgment been found to have been regularly obtained.

20. Unfortunately, in this case, the plaintiff's solicitors have rather allowed themselves to be misled by the fact that they had a business card for the defendant in the name of his company and elected to serve, by delivery, at the address shown on the card. In this agreement, the defendant was contracting personally and not through his company. Fairly basic enquiries would have enabled the plaintiff's solicitors to either serve him personally or at his home. They did after all have a telephone number for him but, I suppose, it is always easier to be wise after the event.

21. In view of the fact that I have held this to be an irregular judgment and have set it aside as such, I do not propose to go on and consider what has now become an entirely hypothetical matter as to whether the defence is one which passes muster on its merits according to the demanding standards required by the case of The Saudi Eagle [1986] 2 Ll. R. 221 and the numerous Hong Kong authorities which approve it.

22. In the event that he were to succeed on the ground that he has, Mr Maurellet has rather confidently asserted that he ought to have his costs in any event, for that of course is the usual order. Nevertheless, on this occasion there are features which have persuaded me to take a different course and to say that the appropriate order for costs is costs in the cause.

23. In this case the defendant has been, to a real extent, the author of his own misfortune. He gave the plaintiff his business card with this address and, perhaps not unreasonably, service was attempted there although, as I have found, ineffectively. Secondly, he completed the company returns showing these premises as his residence, although I have accepted that this was a mistake, and not so.

24. I appreciate that in deciding to serve there, Mr Lo had not then referred to these company returns. He made his search after the event, on 3 December, but had he done so, he would have been reinforced by this information that this was the correct address to effect service on. As Mr Lo has rightly observed, these addresses on the company return constitute announcements to the world at large that this is where the individual directors reside. For these reasons, the defendant has deprived himself of an order for costs on this occasion.

25. This order for costs will be an order nisi. I will also give certificate for counsel. The matter was sufficiently complex to justify counsel on the argument which has involved both possible limbs on an application such as this. In view of the fact that I have set aside the judgment as of right, I will not direct the defendant to file his defence earlier than the rules provide but I anticipate that he will be doing so sooner than later in view of the fact that it has already been prepared.

(Discussion re charging order and filing of defence)

26. Time for filing defence to run from today and in accordance with the rules. Charging order set aside with costs in the cause. Costs in the cause to include costs reserved before the Master.