CHEUNG BUN v. SUNG TSZ HIN

HCA 1348/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1348 OF 2013

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D E C I S I O N

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1. The plaintiff (“Cheung”) claims for alleged outstanding loan from the defendant (“Sung”). Cheung has obtained judgment in default of notice of intention to defend and a charging order against Sung’s properties in enforcement. Sung applied for setting aside of the judgment and the charging order. The master set aside part of the judgment; and granted charging order absolute in respect of the remaining part of the judgment. Sung now appeals.

BACKGROUND

2. In July 2013, Cheung commenced the present action.  The general indorsement of claim set out the claim for the sums of RMB 24,000, US$200,000 and HK$373,529.40 being outstanding personal loan from Cheung to Sung during the period between October 2012 and April 2013.

3. On 28 August 2013, judgment in default of notice of intention to defend was given (“the Judgment”).

4. On 27 November 2013, charging order nisi was granted in enforcement of the Judgment in respect of Sung’s properties at Blocks A and B respectively of Chui Yi Fa Yuen, Yuen Long, New Territories (“the Charging Order”).

5. On 29 November 2013, the Charging Order was registered against the properties at the Land Registry.  On the same day, Sung entered into a sale and purchase agreement whereby he agreed to sell the Block B property to a third party with completion to be held in January 2014.

6. On 23 December 2013, Sung for the first time, and through solicitors, wrote to the solicitors for Cheung, complaining about the present action and the Charging Order.  At one stage, Sung through solicitors suggested that the parties had reached settlement; but the same was categorically denied by Cheung through his solicitors.

7. On 2 January 2014, Sung took out his summons (“the Main Summons”) applying:

(1)  to set aside the service of the writ;

(2)  for declaration that the writ had not been duly served;

(3)  to set aside the Judgment and all the execution thereof;

(4)  to set aside the Charging Order;

(5)  to vacate the registration of the Charging Order at the Lands Registry; and

(6)  for costs.

8. Sung has since taken out numerous other summonses.  There was the summons filed on 21 February 2014 for leave to file his 3^rd affirmation.  This was dismissed by the master on 24 February 2014 with costs to be summarily assessed[1].  On the following day, Sung took out his summons for leave to file his 4^th affirmation.  This was dismissed by the master with costs summarily assessed[2] on 26 February 2014.

9. In the same hearing on 26 February 2014, the master also dismissed his application to set aside the service of the writ and for declaration that the writ had not been duly served.  The master set aside the Judgment and the Charging Order in part, namely, that in respect of the sum of HK$373,529.40 claimed.  The master also set aside the Charging Order in respect of the Block B property so as to facilitate the completion of its contracted sale[3]. The master did so upon the undertaking by Sung to instruct his solicitors handling the sale to request for split cheque payment of the consideration and the payment of such sum into court once received upon completion.  The Charging Order in respect of the Block A property was made absolute.  Directions were also given for the service of pleadings in respect of the extent of claim so revived.  Sung was ordered to pay 80% of the costs of the Main Summons[4].

10. Purportedly pursuant to the undertaking, Sung has paid into court a sum of HK$419,856.48 in March 2014.  In April 2014, the master ordered Sung to pay an additional sum of HK$51,000 into court to reflect an unjustified shortfall.

11. Up to this stage, Sung has been represented by solicitors and counsel.

12. On 12 March 2014, Sung filed his notice of appeal (“the Notice of Appeal”).  By then, he was no longer legally represented.

13. In the Notice of Appeal, reference was made to the Judgment, and the orders dated 24 February as well as 26 February 2014[5]. Upon his clarification in court, Sung is not appealing the order dated 24 February 2014 but the Judgment and the order dated 26 February 2014.

14. For his purpose, Sung filed yet another affirmation on 13 March 2014 subsequent to the master’s decisions (“the New Affirmation”).  Cheung objects to that.

15. By summons filed on 12 May 2014, Cheung applies for payment out of court the sums paid by Sung into court as aforesaid with interest, presumably in satisfaction of the Judgment, should Sung’s appeal fails.

THE APPEAL

16. As far as Sung’s appeal pursuant to O.58 is concerned, this is a rehearing of:

(1)  the Main Summons (to the extent of the Judgment not having been set aside by the master);

(2)  the Charging Order to show cause (to the extent of the order not having been set aside by the master); and

(3)  Sung’s summons dated 25 February 2014 for leave to file his 4^th affirmation for the purpose of the hearing before the master.

17. For the Main Summons, if Sung succeeds in substantiating the alleged invalid or ineffective service of the writ, the Judgment would be irregular and liable to be set aside as of right.  In that case, the Charging Order will have to fall away.  In any other case, Sung will have to establish a real prospect of success on the merits before the Judgment, as a regularly obtained judgment, may be set aside.

Service

18. Sung claims that he had not been aware of the present action until he visited China Sky in early December 2013 and found the court documents concerning the Charging Order.  He challenges the validity of service of proceedings at his address in Kwai Chung and the address of his company, China Sky, in Cheung Sha Wan.

19. One can find the Kwai Chung address of Sung from the annual returns of China Sky.  However Sung alleges that Cheung has visited him at his residence in Kwai Shing at the end of 2012; and therefore knew that the Kwai Chung address was not his last known address.

20. The writ was served in July 2013.  The Kwai Chung address of Sung remained the same even according to the annual returns of Sky China dated 18 October 2013. Irrespective of whether Sung had any other address at any stage, the Kwai Chung address was indeed Sung’s address on record last known by the time of the commencement of action.  It was the sole responsibility of Sung in creating such representation to the outside world.

21. As to the service at the address of Sky China, the affirmation of service filed by Cheung’s solicitors explained that the court documents were inserted into a letterbox at that address.  Sung claims that first, there was never a letterbox at the Cheung Sha Wan address; and second, he had stopped using the address since May 2013.

22. According to the records, the Cheung Sha Wan address was always the address of Sky China for its own business well before the alleged business co-operation between the parties (or their companies).  According to Sung, the transactions pursuant to such business co-operation lasted up to mid-April 2013.  In other words, Sung is suggesting that a fortnight after the last transaction with Cheung’s company, his own business somehow ceased using the Cheung Sha Wan address all together.  The suggestion is doubtful.

23. In any event, the alleged change is contradicted by Sky China’s annual return dated 18 October 2013.  Further, Sung also gave the Cheung Sha Wan address as his address for the purpose of the sale and purchase agreement in respect of the Block B property close to the end of November 2013.  The suggestion that it had vacated from or ceased using the Cheung Sha Wan address by the time of the writ is hardly credible.

24. By asserting that there was no letterbox outside Sky China at the Cheung Sha Wan address, Sung is effectively accusing the legal representatives of Cheung of fabrication on oath. The more serious the allegation is, the heavier the burden of proof becomes.  It is Sung’s burden to adduce compelling evidence.

25. According to Cheung’s solicitors, the letterbox was made of brown cardboard and hanging on the handle of the main door to Sky China at the time of service.  In view of Sung’s allegations, the solicitors for Cheung re-visited the Cheung Sha Wan address on 28 January 2014 with a view to taking photographic evidence.  However, the letterbox was no longer seen.  Nevertheless the photograph taken then still depicts the sign of China Sky above the main door, notwithstanding Sung’s assertion that his company had ceased using the address for 9 months by then.

26. It should also be noted that in his solicitors’ letter back in late December 2013, Sung indeed made reference to the alleged service of writ by insertion into the letterbox at the Cheung Sha Wan address. Nevertheless no assertion about fabrication was ever made.  Nor was anything said about the service at Sung’s Kwai Chung address.  What he alleged then was that the Cheung Sha Wan address was no longer the last known address; and that Sung was out of jurisdiction at the time of service.  So far there has been no detail or evidence in respect of the alleged Kwai Shing residential address.  Nor has there been explanation for the apparent abandonment of the assertion that Sung was out of jurisdiction at the time of service of the writ.

27. In his submission, Sung made further contentions and suggestions in this respect that have never been revealed by properly adduced evidence.  They must be disregarded for the purpose of the present appeal.

28. Considering the circumstances, I am not impressed that Sung has discharged his burden of challenging due service.  In any event, service on Sung, who is the named defendant in his personal capacity instead of his company, at his Kwai Chung address as a valid address last known to Cheung sufficed.

29. The Judgment was therefore a regular one.

The 4^th affirmation of Sung

30. By appealing the order dated 26 February 2014, Sung is also challenging the master’s dismissal of his summons for leave to file his 4^th affirmation.  The summons was taken out on the day before the adjourned hearing of the Main Summons on 26 February 2014.  Whilst this is a rehearing of the summons, the application must be determined as a matter of case management in the circumstances prevailing at the time when it was before the master.  No doubt the application then was made very late.

31. In support of the Main Summons, Sung filed his 1^st affirmation on 10 January 2014.  In opposition, Cheung filed his 3^rd affirmation and the 3^rd affirmation of his solicitors on 7 February 2014.  Sung filed his affirmation in reply on 14 February 2014.  The purpose of Sung’s 4^th affirmation was to respond to the Whatsapp messages produced by Cheung.  The Whatsapp messages were by nature common documents between the parties.  Sung had the opportunity of responding to them in his affirmation in reply filed on 14 February 2014.

32. Further to the failure to respond to those messages in his affirmation in reply, Sung did not seek to do so until after the hearing on 24 February 2014, which was another 10 days later and on the day before the adjourned hearing on 26 February 2014.  According to his 4^th affirmation, he attributed that to the lack of specific reference to the Whatsapp messages in Cheung’s 3^rd affirmation.  This is incorrect.  To the extent that those messages might be said to be so self-explanatory that he could make submission out of their mere contents, Cheung needed to do no more than referring to them and exhibiting copies of them.  It should also be noted that one suggestion of Sung is that part of the Whatsapp messages disclosed were incomplete.  That allegation could have been made even without specific reference by Cheung to any particular part of the messages.

33. Sung was represented by solicitors and counsel at all times.  The master, in my view, could not be faulted for exercising her discretion against leave to Sung to file his 4^th affirmation in the circumstances prevailing at the time when the matter was before her.  I would have made the same decision in such circumstances.

Merits according to the evidence before the master

34. There is no dispute that Sung or his designate[6] has received the sums set out in the claim.  In essence, he disputes that they were or were pursuant to any personal loan by Cheung to Sung.

35. In his affirmation in support, Sung claims no knowledge how the sums of HK$373,529.40 and RMB 24,000 came about.  In his reply affirmation filed subsequently, Sung added nothing to his bare denial of the alleged RMB 24,000 loan.  As to the sum of US$200,000, it was allegedly payment pursuant to the business co-operation between Cheung’s company, Orient Team International Limited (“Orient Team”) and Sky China, and he was not involved in his personal capacity.

36. According to Sung, Sky China and Orient Team started their business co-operation in 2012.  Orient Team would import timber from places such as Indonesia for sale.  Sky China would contribute 25% of the cost; and arrange invoice financing for Orient Team.  At the end, Sky China would be entitled to the return of such cost plus 25% of the sales profits.  At about the end of April 2013, the co-operation stopped at the request of Orient Team.  He requested for settlement of accounts but in vain.  After repeated requests and demands, Orient Team eventually paid the sum of US$200,000 as partial repayment to Sky China.

37. Gathering the evidence from the parties, one finds the following movements of money[7]:

Date	Amount	Direction
8/10/12	HK$326,076.92	Sky China to Orient Team
29/10/12	RMB 24,000	Cheung to Sung
28/11/12	HK$1,000,000	Orient Team to a bank account
5/12/12	HK$740,255	Sky China to Orient Team
6/12/12	HK$700,000	Orient Team to Sky China
7/12/12	HK$510,215.96	Sky China to Orient Team
10/12/12	HK$490,000	Orient Team to Sky China
5/4/13	US$200,000	Cheung to Sky China
10/4/13	HK$805,573.94	Sky China to Orient Team
11/4/13	HK$780,000	Orient Team to Sky China
15/4/13	HK$540,425.70	Sky China to Orient Team

38. According to Cheung, the above payments by him and Orient Team were his personal loans to Sung, which were paid to either Sung or at his request to Sky China or other designated bank account.  The payments by Sky China were repayments.  The 3 outstanding sums now claimed remain outstanding.  How the personal loans, in particular the sums in US Dollar and RMB, came about was explained in Cheung’s affirmation.  On the contrary, Sung says the payments by Sky China were the company’s prepayment for the cost of purchase of timber by invoice financing for Orient Team pursuant to the companies’ alleged co-operation business.

39. There is no company financial document from Sky China in support of Sung’s assertions. However, Cheung never denies that his company had business dealings with Sung’s company.  As far as the sums in Hong Kong dollars are concerned, all (except for one) moved between the parties’ respective companies.  The documents relating to invoice financing per se do not necessarily evidence the business co-operation or its terms as alleged by Sung.  They could equally be consistent with Orient Team being the supplier of goods[8] while Sky China being the buyer; the latter arranging import loan for paying Orient Team as the shipper.  On the other hand, on the basis of what Cheung claims, the payments between the companies during the period between 28 November 2012 and 11 April 2013 represented a pattern of recurrent loans and repayments within days.  The unusual arrangement calls for inquiry.

40. As far as the sum of US$200,000 is concerned, Sung’s case (according to his 1^st affirmation) is that in about the end of April 2013, he informed Cheung of his intention to terminate the business co-operation.  He demanded for settlement of account, which had been outstanding since October 2012, but in vain.  Upon repeated requests and demands, Sky China eventually received that sum of US$200,000 as partial repayment of the amount owing by Orient Team.  In his affirmation in reply, Sung added that after receipt of such payment, the money went back to Orient Team for further order of timber.

41. The payment of US$200,000 took place on 8 April 2013, and could hardly be made only after repeated requests and demands upon communication of intention to terminate the business co-operation in the end of April 2013 as alleged.  Had the payment been made in such circumstances, it would also have made no sense for the same to go back to Orient Team for further order of timber.  The fact was that 2 further substantial sums in Hong Kong dollars were made to Orient Team afterwards.

42. Then there is the evidence of the Whatsapp messages between Cheung and Sung as well as between Sung and the assistant of Cheung.  Reading them, one gets no such impression, as alleged by Sung, that Cheung agreed to pay the sum of US$200,000 as part of what was owed to Sky China after repeated requests and demands.  Quite the contrary, namely that it was a loan to Sung, is demonstrated.

43. As far as the sum of RMB 24,000 is concerned, as mentioned, Sung claims no idea about that in his 1^st affirmation in support of the Main Summons.  He still added nothing in this respect in his affirmation in reply.  Yet in the New Affirmation filed for the purpose of this appeal, Sung for the first time purports to explain how the sum of RMB 24,000 came about and exhibits alleged documentary evidence somehow never hinted, let alone disclosed, before.  This brings me to consider the admissibility of the New Affirmation.

The New Affirmation

44. This is an attempt to adduce further evidence for the purpose of the appeal.  O.58, r.1(5) prohibits the receipt by court of further evidence (other than that as to matters which have occurred after the date on which the judgment or decision was given or made) on the hearing of the appeal except on special grounds.  By special grounds, the court refers to the conditions set out in Ladd v Marshall [1954] 1 WLR1489, namely:

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

(2)  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; and

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

45. By the New Affirmation, Sung intends to say the following matters:

(1)  All the communication, including the Whatsapp messages, between the parties was between them for and on behalf of their respective companies.

(2)  Being the sole shareholder and director of their respective companies, Cheung and Sung also made use of their personal account for company business purposes.

(3)  The sum of RMB 24,000 was reimbursement for value-added tax paid by Sky China for Orient Team during the period between June and August 2012.  Newly disclosed documents are exhibited.

(4)  The sum of US$200,000 was repayment by Orient Team to Sky China for 3 transactions during the period between October and December 2012.  They are evidenced by documents exhibited to his previous affirmation[9] and the Whatsapp messages referred to above[10].

46. There is no explanation by affirmation why the new evidence contained in the New Affirmation could not have been reasonably obtainable with diligence previously.  As mentioned, Sung had at all times before this appeal the assistance of a full legal team.  Likewise there is no reason why the new evidence with reference to documentary evidence already exhibited could not have been adduced previously. Specifically the allegations now made in relation to the sum of RMB 24,000 claimed by Cheung are raised for the first time.  The allegations now made in relation to the sum of US$200,000 claimed by Cheung with reference to the Whatsapp messages are effectively repeated attempt to adduce what he stated in his 4^th affirmation.  As mentioned, leave to file his 4^th affirmation was refused by the master; and I come to the same decision now.

47. For his purpose, Sung has not even started to satisfy the first condition laid down by Ladd v Marshall mentioned above.

Conclusion

48. I refuse leave to Sung to rely on the New Affirmation.  Based on the evidence before the master, I come to the conclusion that Sung fails to demonstrate a real prospect of success in his defence in respect of the sum of US$200,000 and RMB 24,000 claimed by Cheung.  I am prepared not to rule out defence in respect of the sum of HK$373,529.40 claimed.  On this basis, the appeal fails.

PAYMENT OUT

49. Cheung applies for payment out of the sums paid by Sung into court, in satisfaction of the Judgment, should Sung’s appeal fails.

50. The Charging Order was made in respect of both Blocks A and B properties of Sung in enforcement of the Judgment.  Following the setting aside of the Judgment to the extent of the sum of HK$373,529.40, the Charging Order (in respect of both properties) was accordingly discharged to the same extent.  The court further discharged the Charging Order in respect of the Block B property entirely for the purpose of catering for the imminent completion of its contracted sale.  The court did so on terms of payment into court of the net proceeds of sale of that property.  Now the Block A property stands charged for the judgment debt of US$200,000 and RMB24,000 (or HK$1,548,000 and  HK$30,240 respectively pursuant to the Charging Order made absolute on 26 February 2014)  with interest from the date of writ until payment and costs.

51. Sung argues that the sum in court should remain pending the resolution of the remaining claim and counterclaim.  I do not agree.  First, in view of the circumstances in which the court discharged the Charging Order in respect of the Block B property, I do not see how Cheung should be deprived of his expectation to look to the proceeds of sale of that property, which would have been subject to the Charging Order, in satisfaction of Judgment.  Second, the primary contention of Sung is that the dispute has to do with the business dealings between the respective companies of the parties, for which he is not personally liable.  In the circumstances, the enforcement of the part of the Judgment against Sung personally and his personal properties, which now remains intact, could not be affected by the dispute between the companies or any claim that Sung’s company may lodge against Cheung’s company. Both companies are in fact yet to be parties to this action.

ORDER

52. The appeal is dismissed; and the order of the master stands.

53. I make an order in terms of Cheung’s summons for payment out; and upon such payment, the Charging Order absolute dated 26 February 2014 shall be varied to the extent of the amount so paid out of court.

54. I make a nisi order that Sung pay Cheung his costs of and occasioned by the appeal and Cheung’s summons.  Costs shall be taxed, if not agreed, with certificate for counsel.  In the absence of application in 14 days to vary, the costs order shall become absolute.

As indicated during the hearing, this decision is written in English.  The interpreter’s assistance, if requested by the defendant, could be arranged for the purpose of handing down.

[1] Assessed during the hearing on 26 February 2014 at HK$2,343.32.

[2] Assessed during the hearing at HK$3,011.

[3] Which was postponed from January 2014.

[4] Summarily assessed at HK$124,533.33.

[5] Counsel for Cheung explains in court that the order dated 26 February 2014, presumably drafted by the then solicitors for Sung, had not been served on his side.  That order is reproduced in the Notice of Appeal.

[6] Mainly Sky China.

[7] As to the payments to Cheung/Orient Team, the figures put forward by the parties bear minor differences.  As Orient Team was the recipient of those payments, I adopt Cheung’s figures.

[8] Albeit assignee of the goods from the ultimate supplier as evidenced by the isolated bill of lading disclosed by Sung.

[9] Exhibits STH-6; STH-7

[10] Exhibit CB-7.