STEVENSON, WONG & CO (A FIRM) v. GOLDSENSE TECHNOLOGY LTD

HCA 2050/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2050 OF 2005

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JUDGEMENT

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Background:

1.  Stevenson Wong sues Goldsense for unpaid fees of $607,919.88, together with interest at the rate of 2% per month.  A default judgment pursuant toO 19 r 2 was entered on 17 November 2005.  The judgement is for the sum of $1,166,039.89, together with interest on the sum of $607,919.88, (that sum is for the unpaid fees, and excludes the monthly interest claim), at the rate of 9.234% per annum from 20 October 2005, until payment.

2.  Goldsense applied to set aside the Judgement on 5 January 2006.  The application was dismissed by Master De Souza on 7 July 2006.  Goldsense appealed, on the grounds that either the service was irregular, or that it has a meritorious defence.

The Issues:

3.  The first issue is the date on which the Writ was duly served.  This involves a consideration as to whether the service of the Writ was regular.  The second issue, going to merits, is whether Goldsense was an agent for and on behalf of a Goldsense Laser AV Production Limited (AV Ltd), and if so, whether Stevenson Wong was aware of such agency.  The third issue, also related to merits, is whether Stevenson Wong sues on an agreement governed by s 56 Legal Practitioners Ordinance (LPO s 56).

Irregularity of Service:

4.  Stevenson Wong’s clerk, Mr Ho Ming Wai, affirmed that he served the Writ on Goldsense on 19 October 2005.  He said he effected service by leaving the Writ at the registered office of the Defendant at “G/F, 12 Sai Cheung Street, Kennedy Town, Hong Kong”.  That address is the same as that set out in Form R1, filed at the Companies Registry on that date.  Form R1 is the form prescribed in the Companies Ordinance, Cap 32, for the notification of the location of a registered office.

5.  A director of Goldsense, Mr Siu Fai Man, filed four affirmations for the defence.  He asserted that the correct address of Goldsense “is and was Shop 12, G/F, 2 Sai Cheung Street”.  He contended that because Stevenson Wong served the Writ at “the wrong address”, Goldsense was not aware of the Writ until 24 October 2005, when Stevenson Wong attached it, with a letter sent to Goldsense through the latter’s solicitors. 

6.  If service of the Writ was effected on 24 October 2005, and not on 19 October 2005, then at the time the default judgement was entered, the time to file a defence had not yet expired and the judgement would be irregular.

7.  It is not disputed that Stevenson Wong sought to serve the Writ pursuant to s 356 Companies Ordinance.  Mr Chong, while acknowledging that O 10 r 1 does not apply, argued that O 65 r 3 must be read together with s 356.  Hence, he said, the relevant consideration is whether the personal service upon the Defendant has been effected as if the latter had been a natural person, that is, to prove due service it must be established that the Defendant had actual notice of the Writ.

8.  This is a misstatement of the law.  There can be no personal service on limited companies.  Service pursuant to s 356 is alternative to that underO 10 r 1; and O 65 r 3 becomes relevant only when service on a limited company is effected pursuant to O 10 r 1: see Hong Kong Civil Procedure 2006, Para. 10/1/18.

9.  Mr Chong next submitted that it was physically impossible to serve a Writ at the registered office of Goldsense, because, he said, that the address “G/F, 12 Sai Cheong St” did not exist.

10.  I take a purposive approach to s 356 and the description of the registered office as notified at the Companies Registry.  I first consider the practical consequences of the discrepancy between Goldsense’s registered address, and the reality of the situation.  These matters are significant:

(a)     Sai Cheung Street is a relatively short street, running southwards from No.26 Praya Kennedy Town to Belcher’s Street, with a length of about 66 metres.

(b)   I have in evidence before me a letter from the Rating and Valuation Department (“RVD”) showing that “12 Sai Cheung St.” and “2 Sai Cheung St.” are literally different by description.  However, the evidence is that apart from No “2”, no other official building numbers have been allotted on Sai Cheung Street.  There being no official building numbers other than “No 2” allocated to properties in this street, street numbers become superfluous in the identification of the office.  That is because there can be no other address than “No 2 Sai Cheong St.”.  That is so as may be seen from photographs produced identifying an individual shop as “Shop No 12, 2 Sai Cheong St.”.  The individual units comprised in 2 Sai Cheong St are plainly identified by the shop numbers.  There is no confusion as to number 12 Sai Cheong St, because it can only be shop 12 at 2 Sai Cheong St.

(c)     The evidence is that there is no name plate in Sai Cheung Street displaying the Defendant’s name.  However, that does not establish that the office of the Defendant could not be located.

(d)    In fact, a letter addressed to Goldsense at “12 Sai Cheung St”, dated 7 July 2005, was sent by the Plaintiff to the Defendant via registered post.  There is no evidence of mis-delivery or non-delivery.  Although non-delivery of other documents was asserted in evidence for Goldsense, there was no assertion that that letter had not been received.

11.  It is the statutory duty of Goldsense, under s 92 Companies Ordinance, to file its notice of registered office.  In order to discharge that duty the proper address must be contained in the notice.  Form R1, containing an address described by Mr Chong “as a non-existent address” was signed by Mr Siu in his capacity as a director of Goldsense.  It can be no answer to the service for Mr Siu or Goldsense to say that the address given by them was a non-existent address.  Neither Mr Siu nor Goldsense should be permitted to rely upon their own default in incorrectly describing the address, (if it is incorrect), especially in circumstances where there is no real doubt as to the actual address intended.

12.  In this respect it is relevant that another company in which Mr Siu is the majority shareholder and a director, Huge Gain Holdings Ltd, has its registered office at “Shop 12, 2 Sai Cheong St”.  It is plain that in registering the address “12 Sai Cheong St”, Mr Siu intended to refer to Shop 12 at 2 Sai Cheong St.  This is plainly not a case where someone quite unrelated to Goldsense has been receiving documentation in relation to the company.  Documentation has been going where it was always intended.

13.  I accordingly conclude that any discrepancy in the registered address, from the correct postal address, makes no practical consequence to the service of Writ.  I am left in no doubt that the Writ duly came to the notice of Goldsense on 19 October 2005.  I am satisfied that good service was effected on 19 October 2005, when Stevenson Wong left the Writ at Shop 12, 2 Sai Cheong St.  To hold otherwise would be a triumph of pure technicality over substance.

Entry of judgement by default:

14.  On 11 November 2005, Stevenson Wong duly gave notice to Goldsense’s solicitors pursuant to O 19 r 8A of the intention to enter judgement upon the expiry of two clear days from the date of the notice or the expiry of the time for service of the defence, whichever was later.  That notice was duly served.

15.  The response of Goldsense’s solicitors was to issue a summons for time on 16 November 2005.  That summons was set down for hearing on Friday 18 November 2005.  No defence having been filed, and the time summons not having been dealt with, default judgement was entered on 17 November 2005.

16.  The burden on a defendant faced with an application under O 19 r 8A is clearly set out in Schindler Lifts (Hong Kong) Ltd v Ocean Joy Investments Ltd [2003] 1 HKC 438.  It is quite clear that a defendant cannot file a summons for an extension of time and sit back and assume that judgement will not be entered, pending the hearing of that summons.  Plainly, no complaint can be made by Goldsense that the judgement was entered by default.

17.  A judgement entered pursuant to O 19 may be set aside on such terms as the Court thinks just: see O 19 r 9.  If there is no merit in the defence put forward, there will rarely be a basis to set aside the judgement if a defendant has failed to firle the defence after proper service of notice under O 19 r 8A.  I propose therefore to consider the merits of the defence.

Merits of the Defence:

18.  A regular default judgment can be set aside in the exercise of discretion, if the Defendant can show, not only a merely arguable defence, but a defence with real prospect of success.  See Po Kwong Marble Factory v Wah Yee Decoration Co. Ltd. [1996] 4 H.K.C. 157.

19.  Goldsense’s case is that it is wrongfully sued, because in all its dealing with Stevenson Wong, it was merely acting as an agent for AV Ltd, an associate company in the Goldsense Group, but a completely independent corporate entity.  Mr Chong argued that, not only were all the services rendered for AV Ltd, oral instructions had also been given to Stevenson Wong to bill AV Ltd instead of Goldsense, yet Stevenson Wong ignored those instructions.

20.  The argument is bound to fail.

21.  First, it is not true that all the legal services were rendered to AV Ltd, as clearly Stevenson Wong acted for Goldsense, in the latter’s own right, for its own purposes, in two High Court actions.

22.  Further, in the parties’ course of dealing, over a period of two years:

(a) 27 invoices were issued, addressed to Goldsense, with the caption to the invoices describing the work as being patent applications

“in the name of (AV Ltd)”.

There is no evidence, except Mr Siu’s unsubstantiated assertion, that Goldsense objected to such billing.  All instructions as to the patent applications in the name of AV Ltd. were, on the face of the accounts, given by Goldsense;

(b) There is only one invoice addressed to AV Ltd, in the sum of HK$800, that dated 10 March 2000, for notarial service rendered in relation to a power of attorney; that account was paid by Goldsense;

(c) Costs on account of HK$200,000.00 were paid by Goldsense on 10 March 2000.  There was, at the time of payment, no suggestion that Goldsense paid as an agent for AV Ltd;

(d) All disbursements to the HKSAR Government in relation to the patents were paid by Goldsense, with cheques drawn in its own name;

(e) The name cards given by the individuals giving instructions to Stevenson Wong showed only the names of Goldsense officers, not those of officers of AV Ltd.

23.  Over a period of two years Goldsense received the invoices and never once challenged the situation in Writing.  The plain and overwhelming inference to be drawn from the foregoing facts is that Goldsense wished to obtain patents and to have them held in the name of AV Ltd. 

24.  Mr Siu makes an assertion that verbal requests were made to send the invoices in the name of AV Ltd.  Mr Siu said in his affidavit:

“11.   As agent, the Defendant had verbally notified the Plaintiff on several occasions that those invoices and bills should be made in the name of (AV Ltd) instead of the Defendant.  However the Plaintiff did not listen to and comply with the instructions and continued issuing invoices and bills to the Defendant in the Defendant’s name.

12.    With laymen’s perception, the Defendant did not put the verbal notifications on record in order to protect its interest for the latter stage where there might be disputes and/or litigations between the Defendant and the Plaintiff.  Therefore the Defendant is in disadvantageous position by being unable to produce documentary evidences to support what the Defendant had verbally notified to the Plaintiff.” (sic)

25.  Notwithstanding that, those cheques which were issued in payment of accounts, were issued by Goldsense.  It is difficult to determine just what Mr Siu means by paragraph 12 of the affidavit.  If, as he asserts, repeated instructions were given orally and ignored, it is plain that even a layman would put the matter in writing.

26.  Against all the direct evidence that the work was undertaken for Goldsense, there is merely the assertion of Mr Siu that he repeatedly told Stevenson Wong that invoices should be addressed to AV Ltd.  That is a mere assertion which is doomed, in the face of the overwhelming evidence to the contrary, to be disbelieved.  I am satisfied that there is no real prospect of success in the defence of agency.

The Law Practitioners Ordinance argument:

27.  No statement of defence has yet been filed, and the argument under s 56 LPO was first raised by Mr Chong in his submissions filed on 13 November 2006, three days prior to the hearing.

28.  The argument was not raised in the course of the affidavits filed by Mr Siu, who simply asserted that neither he nor Goldsense were aware that interest at the rate of 2% per month would be charged.  That is an assertion which is plainly untenable in the light of the unchallenged evidence establishing the endorsement of the requirement for interest on unpaid accounts on every account, including those which had been paid by Goldsense.  Both Mr Siu and Goldsense were plainly aware of the requirement, and, by paying some accounts and not others, and continuing to instruct Stevenson Wong, they plainly agreed to the condition.

29.  The LPO point, having been taken only shortly prior to the hearing, Mr Sheppard, while addressing me on the matter, plainly had not had a proper opportunity to fully consider the issue.  Counsel’s research in the short space of time available had produced only one authority, that not directly in point.  Mr Chong accepted that the argument is one which can apply only to the interest component of the claim.

30.  I am satisfied that while there is no defence on the merits available to Goldsense, in so far as the fees component of the invoices is concerned, it is arguable that s 56 LPO may provide a defence to the interest component of the claim.  The issue is one of pure law and may appropriately be dealt with under O 14A.

31.  Judgement in respect of the sum of $607,919.88 must stand and Stevenson Wong are at liberty, pending any further application, to enforce that judgement.  The balance of the judgement is set aside.  I direct, pursuant to O 14A r 1(1), that the matter shall come before me for argument on the question as to whether the provisions of s 56 LPO constitute a bar to Stevenson Wong’s claim for interest at the rate of 2% per month, on the outstanding accounts.  I will hear of that argument at 10 a.m. on Friday 12 January 2007.  No further affidavits may be filed as there are no further facts which may be relevant.  Skeleton arguments and authorities are to be exchanged by counsel prior to the hearing in the usual way.

Costs:

32.  All questions of costs are reserved.