MAK HOI CHUNG v. CHENG MAN YEE

DCCJ3280/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3280 OF 2006

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D E C I S I O N

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1.  Before I deal with the application before me, it is useful to set out the background. 

2.  Defendant is and was at all material times the registered owner of the property known as Flat D, 7th Floor, 11 Nassau Street, Mei Foo Sun Chuen, Kowloon (‘the Property’).

3.  The parties entered into a Preliminary Sale and Purchase agreement dated 21 July 2005 (‘the preliminary S and P’) and later an agreement for Sale and Purchase dated 3 August 2005 (the formal sale and purchase), wherein the Plaintiff agreed to purchase the Property from the Defendant at $2.53 million.

4.  It is not disputed that as a result of Plaintiff’s request to have a completion period of four months (which was longer than usual), he offered to pay the Defendant a larger deposit in the sum of $379,500, being 15 per cent of the purchase price (‘the Deposit’) which was higher than the usual deposit of 10 per cent of the purchase price.  Defendant accepted that offer and did receive the Deposit.

5.  Later, at the requests of the Plaintiff, the completion date was postponed twice, eventually to 8 December 2005. 

6.  However, Plaintiff still failed to complete on 8 December 2005 and on the same day the Defendant gave notice to the Plaintiff to rescind the formal S and P and forfeit the Deposit.  The Plaintiff did not complain of Defendant’s forfeiture of the Deposit then.

7.  There is no evidence of any such complaint by the Plaintiff until about 7 months later when Plaintiff issued the writ in this action.

8.  Plaintiff claims that Defendant was not entitled to forfeit the Deposit in full but and his right to forfeit is only limited only to 10 per cent of the purchase price.  Plaintiff therefore claims repayment of the excess of $126,500.

9.  On 11 August 2006, Plaintiff obtained default judgment on the ground that Defendant has failed to give notice of intention to defend. 

10.  On 6 September 2006, based on the said judgment Master S T Poon also granted the charging order nisi, which was made absolute on 6 October 2006. 

11.  On 28 March 2007, Plaintiff issued an originating summons in DCMP945/2007 (‘the originating summons’) for an order of sale of the Property and associated relief.

The applications

12.  On 7 May 2007, the Defendant filed a summons (‘the first summons) and applied for inter alia, the discharge of charging order: notice to show cause dated 6 September 2006 (‘the charging order nisi) and a charging order absolute dated 6 October 2006 (‘the charging order absolute’) and the vacating of the registration of the charging order nisi and the charging order absolute against the Defendant’s interest in the Property at the land office.

13.  On 25 May 2007, pursuant to directions of Master K W Wong, Defendant filed another summons (‘the second summons’) applying to set aside the default judgment obtained by the Plaintiff on 11 August 2006 (‘the default judgment’).

14.  As the charging order nisi and the charging order absolute were granted pursuant to the default judgment, this Court must therefore first deal with the issue, i.e., whether the default judgment is liable to be set aside.  If the default judgment is set aside, discharge of the two charging orders is a matter of course.

15.  Before the hearing, counsel for the Plaintiff has considered that in this case, the defence raised by the Defendant is a matter that ought to be resolved in a trial.  The outstanding issues before this Court is therefore whether the default judgment is a regular judgment and whether if the same should be set aside, whether there should be terms attached or imposed.

Defendant’s case

16.  Defendant said that she had no notice of and had not received the writ or indeed any legal documents leading to the default judgment or the charging order nisi and the charging order absolute; not until 20 December 2006 when her estate agent informed her that the Property had been charged with charging order nisi and the charging order absolute.  She said this was the first time she became aware of the existence of the two charging orders.  She said once she was aware of the existence of the judgment and the charging orders, she instructed a solicitor Messrs Tam Pun & Yip and wrote to the Plaintiff on 31 January 2007.  In this letter, she set out her position reserving her right for a further claim against the Plaintiff for loss and damages resulting from Plaintiff’s failure to complete the sale and purchase of the Property.  She also reserves her right to apply for “striking the registration of the said order and the judgment thereof.”

17.  Again, on 20 March 2007 her solicitors wrote to Messrs Samuel Li & Co., and ascertained if they were still acting for the Plaintiff, as the address of the Plaintiff in the previous letter from the Defendant is not an accurate one, later she took out the present summonses.

18.  Defendant does not dispute that she resides at the Property and therefore the address for service has all along been a correct one.  She says however that the writ was never brought to her notice.  Defendant said the first letter she received from the Plaintiff was a letter from Messrs Samuel Li & Co., solicitors for the Plaintiff on 17 April 2007 serving her the original summons and the notice of appointment on her.  She said she then acted promptly to retain solicitors and respond.

19.  Counsel for the Defendant says that before the present action, Plaintiff did not complain of Defendant’s forfeiture of the Deposit and had never demanded from the Defendant the alleged excess of 126,500.  He said further that there was an inordinate delay of eight months before the action was commenced. 

20.  Counsel for the Defendant also submitted that the evidence of Au Kam-wah, who was responsible for serving the writ on the Defendant lacks credence, as he said he met a male aged about 20 at the Property whereas the Defendant only had one 15 year old son.

21.  The Defendant invites this Court to find that the purported service of writ on the Defendant was irregular and she is entitled to set aside the default judgment as of right without considering the merits of her defence.

22.  Counsel for the Defendant first submitted that should this Court set aside the default judgment in this case, whether as a regular or irregular judgment and that there should be no order as to costs. 

23.  He said in this case that there is no specific feature that warrants imposing conditions on the setting aside.

24.  Defendant says in this case that there is no delay on the part of the Defendant, and that once she is aware of the proceedings, she immediately reacted and instructed solicitors.

Plaintiff’s case

25.  Counsel for the Plaintiff on the other hand submitted that despite what was said by the Defendant, it remains a fact that she had failed to provide any convincing evidence to satisfy the Court that she has failed to receive notice of the proceedings. 

26.  Counsel for the Plaintiff said in this case, clerk to Plaintiff’s solicitors Au kam-wah had on 6 July 2006 served a writ on the Defendant by inserting the writ through the letterbox of the Property, i.e., the residence of the Defendant.

27.  Again, it was submitted that this Mr Au on 14 August 2006 served a sealed copy of the default judgment dated 11 August 2006 on the Defendant by ordinary post to the Property.  The sealed copy default judgment had never been returned by the post office.  Further, it was said that on 15 September 2006, Au served a sealed copy of the charging order nisi dated 6 September 2006 on the Defendant by inserting the same through the letterbox of the Property.

28.  In addition, on 17 October 2006, Au served a sealed copy of the charging order absolute dated 6 October 2006 on the Defendant by ordinary post to the Property and that the sealed copy of the charging order absolute had never been returned by the post office. 

29.  Counsel for the Plaintiff wonders why would the Defendant fail to receive all these documents.  Strangely, she said, the Defendant did receive the originating summons wherein the Plaintiff asked for an order of sale of the Property. She said that the mode of service of the originating summons is none other than inserting the same through the letterbox of the Property as before. 

30.  She submitted that all service of the writ and charging order nisi were in accordance with order 10 rule 1(2)(b) of the Rules of the District Court. 

31.  Under order 10 rule 1(3)(b)(i) of RDC, which is Rules of the District Court, the writ and the charging order nisi were deemed to have come to the knowledge of the Defendant within 7 days thereafter. 

32.  She quoted Mr. Justice Tang JA, in the case of Bank of China (Hong Kong) Ltd v Cheung King Fung 1 HKLRD462, at page 469 J to 470 B,

“	33.	We do not read this as suggesting that the court must accept a defendant’s assertion no matter how improbable.
	34.	It is quite clear from Forward v West Sussex County Council and Others [1995] 1WLR1469 that a defendant is required to provide ‘convincing evidence’: at p.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 fourth defendant had now 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 p.1474 H.
		Of course, how much evidence is required must depend on the circumstances of the particular case.”

33.  Again, Miss Kei invited this Court to adopt the stance of Mr Recorder Fok SC, when he held that the same principles applied no matter whether the mode of service is by registered post or by insertion through letter box in the case of Cheng Chi Lun v Ng Lai Ming Julianna HCA1611/2006, unreported: 

“

Whilst these means of service are different, I do not think there is any material distinction for the present purposes between a case of service by registered post and one of service by insertion in a letter box and, in my view, the principles laid down in the Bank of China are equally applicable to both such cases.”

34.  Counsel for the Plaintiff submitted that in the circumstances of this case, the Defendant had failed to tender convincing evidence to satisfy this Court why she had failed to receive the papers.  There is no evidence that she was outside Hong Kong at the time, and on her own admission, the address for the service is her residence.  There is also no evidence of stolen mail or mail lost through the post. 

35.  Furthermore, it is a case where the Defendant had only seeked to discharge a charging order after she had been repeatedly served legal process concerning the action shortly after she had noticed that the Plaintiff was seeking an order for sale of the Property.

36.  It was also pointed out that the Defendant was fully aware of the legal proceedings against her by her former solicitors had allowed judgment to be entered against her and not satisfying the same, allowing charging order registered against the Property. 

37.  In the light of the evidence before this Court, counsel for the Plaintiff submitted that the default judgment entered by the Plaintiff against the Defendant is a regular one.  She went on to say that if the Court decides to give Defendant an opportunity to have the merits decided in a trial, and therefore setting aside the judgment, the Court should impose terms in so doing and that the usual and normal order is to require the Defendant to pay to the Plaintiff, all the wasted costs to be taxed if not agreed, and paid forthwith.  Wasted costs, she means costs from the application of the default judgment up to today’s hearing and including the costs of today.

38.  She invited this Court to consider the case of Dah Chong Hong (Engineering) Limited v Baldwin Construction Company Limited HCA1291/2002, unreported where Mr. Justice Ma says: 

“	32.	In my view, the default judgment was regular and the defendant had no reason to suppose the plaintiff would not pursue the action to its logical conclusion and take all appropriate steps….
	33.	It was therefore hardly surprising that the plaintiff obtained the default judgment and took steps to levy execution.  In my view, the fault (if that is the right term) for the default judgment being entered, laid with the defendant.
	34.	In these circumstances, as the defendant is seeking an indulgence from the court, the normal order should follow and this is reflected in the cost order I have made.”

39.  She said the Defendant should be ordered to pay the costs of and occasioned by the application for default judgment, the application for changing order nisi and the charging order absolute, the application for an order for sale in DCMP945/2007, and the application to set aside the default judgment up to and including today’s hearing be to the plaintiff, to be taxed if not agreed and paid forthwith.

Conclusion

40.  It is clear in this case that the Plaintiff had complied with the rules of the District Court order 10 rule 1(2) when effecting service of writ on the Defendant.

41.  As counsel for the Plaintiff has pointed out, the address for service is the residence of the Defendant, even up to today’s date.  When none of the papers had been returned through post, I am afraid the Defendant had failed to satisfy this Court in adducing any convincing evidence and thus failed to satisfy this Court why she had failed to receive the papers.  I accept the submission by counsel for the Plaintiff regarding the issue of regular judgment in this case, and I so rule.

42.  Having ruled this is a regular judgment, the Plaintiff having accepted from the start that the defence raised an issue to be tried at trial, I will set aside the default judgment. 

43.  In this case, the Defendant had, on her own evidence, had been brought to notice of the default judgment and the charging order in December 2006, yet she has only seeked to discharge the same in early May 2007 and had only seeked setting aside the default judgment in mid May 2007. 

44.  Despite the fact that she had instructed solicitors shortly after December 2006, she did not seek promptly for the discharge of the charging order nor setting aside of the default judgment. 

45.  There was four odd months delay.

46.  The originating summons was served on the Defendant on or about 17 April 2007 and the Defendant had decided only to take out the first summons to discharge the charging order on 7 May 2007.  This in my view is not a coincidence.

47.  Her allegation of not having received any of these papers served through the previous service by Au in connection with the present proceedings in the circumstances of this case is again not believable.

48.   I am of the view the Defendant is well aware of the proceedings and had only chosen to react when the Plaintiff had taken out the originating summons seeking an order for sale. 

49.  As counsel for the Plaintiff has pointed out, it remains a fact that she allowed the proceedings against her by her former solicitors to lead up to registration of charging order nisi and charging order absolute against her interest in the Property at land office.

50.  Although Mr Lui, Counsel for the Defendant said the case of Dah Chong Hong should be distinguished from the present case as in that case the Defendant had notice of the proceedings as he responded by his letter dated 14 April 2002. With the finding of this Court that the Defendant having notice of the proceedings herein, Dah Chong Hong case is equally applicable here. 

51.  In this case, on the Defendant’s own evidence as I have pointed out earlier, she had notice of this charging order in December 2006 and has only taken the steps to vacate the same in May 2007.

52.  In the circumstances of this case, I order therefore that

(a)	default judgment entered against Defendant on 11 August 2006 be set aside;
(b)	Defendant be given leave to defend;
(c)	there be order in terms of paragraph 1, 2, 3 and 4 of the first summons dated 7 May 2007.

53.  I also order that the Defendant should be ordered to pay the Plaintiff the costs of and occasioned by the application for default judgment, the application for charging order nisi and the charging order absolute,  the application for order for sale in DCMP945/2007 and the application to set aside the default judgment up to and including today’s hearing (including also costs reserved) with certificate for counsel, the same to be taxed if not agreed and be paid forthwith.