XCHRX CHEUNG SZ MI TONG with CHEUNG SHUI FAT, CHEUNG KANG CHAN and CHEUNG TSE MAN as managers v. KEEN LLOYD LIMITED

1994, No. A9640

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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Background

1. On 27 September 1994, the plaintiff issued a writ against the defendant. In the statement of claim, the plaintiff says it owns a piece of land in the New Territories upon which the defendant has committed a trespass. The plaintiff claimed vacant possession and damages. On 8 November 1994, the plaintiff obtained judgment in default of notice of intention to defend. On 15 June 1995, the defendant issued a summons seeking the setting aside of the judgment. On 28 June 1995, this application was refused by the Master. The defendant now appeals against this decision.

Irregular Judgment?

2. The defendant says that the default judgment entered against it is irregular because there was no "due proof of the service of the writ". If this is so, and the defendant is able to bring itself within Order 2, rule 2, it is entitled to have the judgment set aside. Rule 2 provides that an "application to set aside for irregularity . . . shall not be allowed unless it is made within a reasonable time". If the defendant did not make the application within a reasonable time, it must rely on Order 13, in which case it must show that its "case has a real prospect of success. To do so he must satisfy the court that his case, and the evidence he has adduced in support of it, carries some degree of conviction." It must show "a real likelihood that he will succeed on fact". (Premier Fashion Wears Ltd v Li Hing Chung [1994] 1 HKC 213).

3. There is no need to dwell at length on the plaintiff's attempts to prove due service of the writ on the defendant. A thoroughgoing mess was made of the whole thing. The first affirmation is defective, and subsequent affirmations seek to explain, not always successfully, errors made earlier. It is clear, from what the process server himself says, that he has no detailed independent recollection of what he did, and has to rely on his usual practice and his papers, but his papers are also lacking in essentials. He could not find a copy of the covering letter to the writ. This is important because he says this letter had the correct address of the defendant, although the writ itself did not. He also cannot find the post office receipt for the registered posting, so what he says about posting cannot be checked. My conclusion is that the plaintiff has failed to prove due service of the writ, and, if the defendant has applied within a reasonable time to have the default judgment set aside, he would have been entitled to this.

Within a Reasonable Time?

4. The next question to be decided is whether or not the defendant has brought itself within Order 2 by applying to set aside the judgment within a reasonable time.

5. The defendant became aware of the entry of judgment against it when the plaintiff's solicitors wrote to its solicitors on 30 January 1995. As I have said, the defendant applied to set aside this judgment on 15 June 1995; some 4½ months later.

6. The defendant sought to explain this delay.

7. In the first affirmation filed on behalf of the defendant on 21 June 1995, by Mr Chun Kam Chiu, a director of the defendant, it was said that the reason for the delay was that counsel had advised on "the merit of this case in a negative way", and, after this, the defendant had been unsuccessfully seeking further advice. The impression is given that there were no other reasons for the delay. The reason for the delay, we are told at this stage, was that the defendant was seeking advice on the merits of its case. If the defendant's case was, as it appears to be now, that it had never used the plaintiff's land at any time, it is difficult to see the nature of the problem that required such a time to solve it, why the defendant was advised "in a negative way", and why, in any event, the defendant's solicitors needed to be told by counsel whether, if the defendant never used the plaintiff's land at any time, it had a case on the merits that it had not committed any trespass.

8. In another affirmation made on 10 August 1995, Mr Chun said that he wished to add as reasons that defendant was not "concerned too much" about the plaintiff obtaining possession because it had "never made use of the trespassed land anyway". It is very difficult to believe that a party that has had a default judgment entered against it on the basis of something that it had not done would not be "concerned too much" about it. Mr Chun said that the defendant had erected a fence in about April 1994 along the line marked by the plaintiff's surveyors thus making it "absolutely clear" that the defendant did not wish to argue about the alleged trespass. What concerned the defendant, says Mr Chun, is the matter of the damages sought by the plaintiff. Much of the time between early February and 15 June was taken up "for the purpose of making sure the plaintiffs would not be proceeding with an assessment of damages". Mr Chun says - "It was only when it had become clear that the plaintiffs would be insisting on recovering damages against the defendant that the defendant knew it would be impossible for it to adopt a practical solution to the matter and legal costs had to be incurred to put things right".

9. If what concerned the defendant was not the claim for possession, because it was not in possession, but the claim for damages, I do not understand why the defendant did not apply to set aside the judgment earlier to avoid the possibility of having to pay those damages. The writ makes it perfectly clear that damages are claimed. The defendant says nothing about why it should think that there was some possibility that the plaintiff, although claiming damages in the writ, would not seek to recover any.

10. I do not accept that 4½ months is a reasonable time within which to make an application to set aside the default judgment in this case. In my judgment, the defendant has advanced no adequate reason for failing to act timeously.

11. It follows that the defendant must fall back upon Order 13, and this involves an examination of the merits of the defendant's case.

The Merits

12. As to the merits, Mr Chun, in his affirmation of 21 June 1995, says only this -

"The defendant had and has never trespassed into the said land or any land of the plaintiff's in any time before, in or after July 1993. The said land was and still is, as the defendant believe, in the possession occupation and use of the plaintiff's or its managers. In fact, the plaintiff's managers . . . admitted that they were using the said land of the plaintiff's in a way in breach of the Town Planning Ordinance, Cap 131 in or before July 1993."

13. In his second affirmation dated 10 August 1995, Mr Chun refers to what he said about the merits recited above and says he has been advised that he "ought to have done better"; a view with which one can only agree wholeheartedly. He goes on to say that, by an agreement dated 1 May 1990, the defendant leased the land, "including the alleged trespassed land", from Mr Tang Yee for a period of 5 years. He says that the "actual occupier of the lands leased from Tang who uses them for open storage of vehicles has been Keen Lloyd Motors Limited and not the defendant". The plaintiff sent people to the site "on about June 1994" and made complaint that the operation had encroached upon the plaintiff's land. Surveyors employed by the plaintiff then marked the boundary of the land being trespassed upon with red paint. Mr Tse, who was "the one in charge of the car storage site on behalf of Keen Motors Limited", then, with the consent of the plaintiff, erected a fence along the line so indicated. Mr Chun then says -

"Although Keen Motors Limited had hitherto thought that Tang was entitled to let the alleged trespassed land to it since May 1990 and, as a matter of fact, had not in any way used the area fenced off by the wire prior to April 1994, the construction of the wire fence is clear evidence of the intention of Keen Motors Limited, which the plaintiff accepted, not to continue with the trespass alleged by the plaintiffs, if any."

14. I think it is fair to summarise the defendant's case in this way -

1. The first attempt articulated by the defendant was to say that the defendant had never, ever, trespassed on the plaintiff's land. In fact, the plaintiff was itself in possession of the land, and was using it unlawfully.

2. The defendant is told to do better than that. It tries by saying that the land, including the plaintiff's land, was leased to it. But -

a) the defendant did not occupy the land; an associated company did;

b) on the other hand, although the defendant thought it had a right to occupy the plaintiff's land under the lease, it did not, nor did the associated company, use the land in any way before April 1994;

c) in any event, the alleged trespass, if any, ceased after April 1994.

15. This, even on the face of it, is not impressive. It is even less impressive when one examines the defendant's case in more detail and with the evidence adduced to support it.

16. The suggestion that, if anyone was committing a trespass, it was Keen Motors Limited and not the defendant, is a red herring, and symptomatic of the slippery nature of the case being put forward by the defendant. The defendant admittedly leased the land. It says that Keen Motors Limited is in occupation, but avoids saying how it got into occupation of land leased by the defendant. The only logical inference is that, if Keen Motors Limited is in occupation, the defendant allowed it into occupation for the defendant's own purposes, and that does not avoid a trespass by the defendant.

17. The defendant has produced some photographs, taken on 18 July 1995, showing the wire fence. This fences off an area in the corner of the site; an area that is such that there is no reason at all why the defendant should not have used it if it thought that it had a right to do so. The photographs show vehicles parked immediately adjacent to the fence. It is simply not credible, as the defendant alleges, that the defendant, or its occupier, would create for itself a "no-go" area coinciding remarkably by some mysterious prescience with the area of land claimed by the plaintiff, and an invisible line marking that area over which it did not cross, when, on its own case, before the plaintiff complained, it thought it had a perfect right to use the area concerned. Mr Chun does not seek to give any reason why the defendant did not use the area fenced off with wire prior to April 1994 if the defendant thought it was entitled to use that area under the lease from Mr Tang. He does not do so, of course, because he cannot. There is no reason why the defendant should not have used this land. Mr Chun does not, either, say how it was, if not by sheer unbelievable coincidence, that the area that was not used was the very same area claimed by the plaintiff as its property.

18. There is also no explanation why the defendant, in its first attempt to raise a defence, makes no mention of the lease under which it occupied the land, and talks absolute nonsense about the plaintiff using the land. It is quite clear from what the defendant says, in its second attempt to articulate its case, that there is no question of the plaintiff using the land.

19. I cannot find that this case, in view of the evidence adduced to support it, "has a real prospect of success". It does not carry any "degree of conviction." There is, in my view, no " real likelihood" that the defendant will succeed.

20. On the merits, I conclude that the defendant has not even set up an arguable case, let alone one that has to meet the higher threshold required by the case of Premier Fashion Wears Ltd.

Conclusion

21. I conclude that the decision of the Master was correct. The appeal is dismissed with costs to the plaintiff.