LAM CHING SHEUNG v. THE PERSONAL REPRESENTATIVE OF THE ESTATE OF TAM SHUI, DECEASED AND OTHERS

HCA 2234/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2234 OF 2008

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D E C I S I O N

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APPLICATION

1. This is an application for setting aside of default judgment.

BACKGROUND

2. On 7 November 2008, the Plaintiff commenced the present proceedings against all Defendants for payment of the sum of $2,340,020.96, interest and costs.

3. All Defendants belong to one family.  They are the Wife, the Husband and the Son respectively.  The Wife (hereinafter called “the Deceased”) passed away on 26 June 2000.  No one has applied or has been willing to apply to administer her estate.

4. Briefly, it is the Plaintiff’s case that she lent 2 loans in the total amount of $2.35 m to the Deceased in 1995.  To obtain funds to make the loans, she arranged to mortgage 2 properties owned by her company Well Force.  In 1999, when she demanded for repayment, it was orally agreed that the Deceased and the Husband would repay her when construction of a development project of 33 indigenous villager homes was to commence.

5. In or about the end of 2001, the Plaintiff was made known of the death of the Deceased.  The Plaintiff then met the Husband who represented that he would continue to repay the mortgage loans of the 2 properties.  Proceedings to recover the loans were therefore withheld by the Plaintiff.

6. However, in or about November 2005, the Plaintiff was made aware that no repayment had been made since December 1999 and the 2 properties were repossessed and sold, leaving the sum of $1 m unpaid.

7. The Plaintiff then approached the Husband who referred her to the Son, as the beneficiary of the estate of the Deceased.  On 25 July 2006, the 2^nd and 3^rd Defendants orally agreed with the Plaintiff that they would pay the $1 m and interest.  However, except for the tender of a cheque of $25,000 on or about 23 August 2006, there has been no further payment.

8. As on 15 October 2008, the Plaintiff said that all the Defendants owed her $2,340,020.96.  It was made up by $975,000 principle and interest of $1,365,020.96.

“  Particulars of Interest

Principal	Monthly Interest Rate (%)	Period	Interest (HK$)
1,000,000.00	1.3	27/12/1999 to 23/08/2006	1,038,741.93
975,000.00	1.3	24/08/2006 to 15/10/2008	326,279.03

(paragraph 23 of the Statement of Claim)”

9. On 15 January 2009, the Plaintiff entered a default judgment against the 2^nd and 3^rd Defendants.  She further attempted to execute it by way of charging order.  The 2^nd and 3^rd Defendants then said that they, for the first time, came to know about the present proceedings and the default judgment.

10. On 15 April 2009, the 2^nd and 3^rd Defendants took out the present setting-side application.  It was later fixed for substantive hearing before me on 15 July and 25 August 2008.  Mr. F. Yip of Counsel represented both the 2^nd and 3^rd Defendants and Mr. B. Wong of Counsel acted for the Plaintiff.  At the end of the hearing, I reserved my decision to be handed down.  I now do so.

DISCUSSION

(I) Preliminary matter

11. In the beginning of the hearing, parties raised a procedural argument.  Mr. Wong complained that the application by Mr. Yip was defective because it did not specify the irregularities therein as per Order 2 rule 2 of the Rules of the High Court (“RHC”).  In reply, Mr. Yip asked to amend its summons.  I allowed it on a de bene esse basis in order not to waste time and costs.

12. Upon thought, I see no reason not to allow Mr. Yip’s amendment application.  Parties have been at all times prepared themselves by filing affidavit evidence on 2 questions (a) whether the default judgment was regular or irregular, and (b) merits of the parties’ case.  As such, there is no misunderstanding of the setting application and its basis.  As long as costs of the amendment, including about 0.5 hour of hearing on 15 July 2009, will be awarded to the Plaintiff, it will be sufficient to compensate her loss as well as to put the real controversy of the parties before this Court.

(II) Is the Default Judgment regular or irregular?

13. Both parties have filed quite some evidence as to how the service of the proceedings were or were not served, including whether the proper address of the 2^nd and 3^rd Defendants was “9^th Floor” or “Top Floor” at the building wherein the Defendants resided.  In my view, it is not necessary to resolve such disputes because the test is “whether the proceedings have been brought to the notice of the defendants” and not simply “whether the proceedings have been delivered to the defendants in accordance with rules”?  (Kwan Kam Wah v Chan Wai Ming [2000] 2 HKC, page 378)

14. Further, paragraph 13/9/5 of HKCP 2009 at page 176 also states that:

“When a defendant deposes that he has not received the writ through the post, the court has little option but to believe this save when there is sufficient material to cast doubt upon the defendant’s credibility to enable the court to disbelieve him (which is a matter of evidence dependent on the circumstances of the case: see Wei Bingqing v. Xie Diangrong, unreported, HCA No. 2654 of 2003, [2006] H.K.E.C. 634).”

15. In the present case, both 2^nd and 3^rd Defendants did depose that they had not received the Writ by the way as suggested by the Plaintiff’s solicitors.  Is there sufficient material before me to enable me to disbelieve them?  Upon thoughts, I do not think so, especially in light of the fact that the parties were at the material times contesting vigorously in another litigation of HCA 2203/2006.  On balance, I accept that both the 2^nd and 3^rd Defendants would also defend the present proceedings, as they did so in HCA 2203/2006, if they had been brought to the notice of the same.

16. In conclusion, I decide that the Default Judgment dated 15 January 2009 herein is an irregular one and is therefore liable to be set aside by the 2^nd and 3^rd Defendants as of right.

MERITS OF THE PARTIES’ CASE?

17. Although both Counsel did spend some effort in arguing that merits lie on their own client(s), it is not necessary for me to go into the same as the Default Judgment herein is an irregular one.

DIRECTIONS AND COSTS

18. I do not have the benefit of parties’ submission on the question of costs, but it appears that costs in the cause is appropriate in the circumstances.  So, there is an order nisi that costs of the application, including all costs reserved and Certificate for Counsel for the hearings on 15 July and 25 August 2009 be in the cause, to be taxed if not agreed, in any event.  The Plaintiff’s own costs are to be taxed in accordance with Legal Aid Regulations.

19.  I further grant leave for both the 2^nd and 3^rd Defendants to file and serve their Defence and Counterclaim (if any) within 14 days from today.  The Plaintiff is also at liberty to file and serve her Reply and Defence to Counterclaim (if applicable) 28 days thereafter.