UPBEST FINANCIAL SERVICES LTD v. PHILIP DANIEL MORAIS

DCCJ3948/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3948 OF 2006

------------------------

------------------------

------------------------

D E C I S I O N

------------------------

1. Judgment was entered on 14 September 2006 against the Defendant for default in giving notice of intention to defend. By the present Summons the Defendant applied to set aside that judgment (“Default Judgment”) and any execution thereon (the Plaintiff had embarked on Garnishee proceedings). The Defendant also asked for leave to defend the action by giving notice of intention to defend within 7 days.

2. Having listened to the legal representatives of both parties, I order that the Default Judgment and any execution thereon be set aside. I grant the Defendant unconditional leave to defend by giving notice to defend within 7 days of the date hereof. I make an order nisi that costs of and occasioned by this application be to the Defendant, to be taxed if not agreed. There will be certificate for Counsel. 

3. To put it simply, I am satisfied that the Defendant was not in Hong Kong when the Writ in this case was (purportedly) served on him. The Default Judgment is thus irregular and the Defendant is entitled as of right (i.e. without the Court looking into the merits of his defence) to defend. Quite a number of authorities were cited to me. Whilst I thank both Mr. Szeto (solicitor for the Plaintiff) and Mr. Khaw (Counsel for the Defendant) for their diligence, I really do not see the need to go into those cases in detail. I will now explain further my decision.

4. I do not propose to state here the full chronology of events as Mr. Szeto very helpfully set out in his written submission (Fig. 1: Time Line). Based on the affirmation evidence before me and for present purposes, I will merely list the following events which all occurred in 2006:

a)	4 August -	Defendant leaves Hong Kong for Australia
b)	11 August -	Writ inserted into letter box at Defendant’s residential address (“residential address”)
c)	12 August -	Writ sent by registered mail to  residential address and Defendant’s office (“office”)
d)	14 August -	Writ sent by registered mail to  residential address was delivered (see Bundle of Exhibits, page 47)
		Writ sent by registered mail to  office was delivered (see Bundle of Exhibits, page 48)
e)	22 August -	Defendant returns to Hong Kong from Australia
f)	14 September -	Default Judgment entered
g)	18 September -	Demand letter with copy of Default Judgment sent to residential address and office by Messrs. Robertsons, solicitors for the Plaintiff (“Demand Letter”)
h)	26 September -	Messrs. Johnson, Stokes and Master files Notice to Act for Defendant and writes to Messrs. Robertsons, asking for Default Judgment to be set aside
i)	19 October -	Defendant leaves Hong Kong on business
j)	19 November -	Defendant returns to Hong Kong
k)	13 December  -	Summons to set aside Default Judgment

5. It is apposite at this point to set out the relevant part of Order 10, Rule 1, of The Rules of the District Court, Cap. 336 :

“(1)   A writ must be served personally on each defendant by the plaintiff or his agent.

(2)   A writ for service on a defendant within the jurisdiction may, instead of being served personally on him, be served-

(a)   by sending a copy of the writ by registered post to the defendant at his usual or last know address; or

(b)   if there is a letter box for that address, by inserting through the letter box a copy of the writ enclosed in a sealed envelope addressed to the defendant.

(3)  Where a writ is served in accordance with paragraph (2)-         

(a)   the date of service shall, unless the contrary is shown, be deemed to be the seventh day…after the date on which the copy was sent to, or as the case may be, inserted through the letter box for, the address in question…”

6. It is clear law that the Defendant must be within Hong Kong when he is served with the Writ under Order 10 (see, for example, Barclays Bank of Swaziland Ltd. v Hahn (1898) 1 WLR 506 and Chu Kam Lun v Yap Lisa Susanto (1999) 3 HKC 378). If not, any judgment obtained will be regarded as irregular.

7. Whether one looks to the date of insertion of the Writ in the letter box at the residential address, the date of posting of the Writ to the residential address or office, the dates of delivery of the Writ by post or the deemed dates of service under Order 10 Rule 1(3) as being when the Defendant was served, the Defendant was not within jurisdiction. The Default Judgment was therefore irregular. The Defendant is entitled as of right to have it set aside (see, for example, Po Kwong Marble Factory Ltd. v Wah Yee Decoration Co. Ltd. (1996) 4HKC 157 and Deng Minghui etc. v Chau Shuk Ling Elaine, CACV 309 of 2006). There is residual discretion in the Court to refuse to set aside or to impose terms when setting aside (see Po Kwong Marble Factory Ltd., supra, at page 161, Letters B to D). I think the Court should, however, be slow in exercising such discretion. It pays to bear in mind the words of Godfrey JA in Fok Chun Hung v Lo Yuk Shi (1995) 2 HKC 648, 655. In that case the writ was served by registered post. Judgment was obtained as no notice of intention to defend had been given. The writ was subsequently returned undelivered by the post office. The Court of Appeal set aside the default judgment unconditionally. In the course of giving his judgment, Godfrey JA said : “I have, for my part, no doubt that a judgment obtained in these circumstances, even if regularly obtained must be set aside unconditionally, just as it would be if it had been irregularly obtained. To take any other course would be a perversion of justice…such a course would involve treating the defendant as one who is craving an indulgence, rather than one who is (rightly) protesting at having been given no chance to be heard…” (emphasis added).

8. In his second affirmation, the Defendant explained that when he was away he had asked his driver to receive and set aside for him mail sent to the residential address. Regarding mail to the office, the Defendant had asked those working in premises one floor above to do the same. I think there is a world of difference between instructing employees or other persons to take care of one’s mail generally and appointing someone as agent for receiving writs of summons or notice of proceedings. I do not consider that the Defendant had appointed anyone to play the latter role.

9. The Defendant maintained that he had not received any writ or notice of the present action after his return to Hong Kong on 22 August. This was until he received the Demand Letter. He then sought the assistance of Messrs. Johnson, Stokes and Master.

10. Mr. Szeto pointed to the insertion of the Writ in the letter box of the residential address and delivery by registered mail. He pointed to arrangements the Defendant made with his driver and those working in premises above the office. He queried the veracity of the Defendant in stating his belated knowledge of the present action. Mr. Szeto also pointed to the Defendant’s explanation that he again travelled out of Hong Kong on business from 19 October to 19 November 2006 and the fact that the present Summons was only taken out on 13 December 2006. The suggestion was that the Defendant had been employing fabian tactics.

11. Assuming that the Defendant did receive the Writ on his return on 22 August, he had in fact instructed solicitors about a month later. Messrs. Johnson, Stokes and Master filed Notice to Act on 26 September and then corresponded with Messrs. Robertsons to set aside the Default Judgment. Whilst it is regretted that the Defendant went on a business trip for about a month from 19 October instead of paying more urgent attention to this action, the present Summons was taken out on 13 December 2006. Such a scenario does not suggest embarkation on a deliberate scheme to delay. It is hoped, however, that the Defendant will better prioritise his affairs in future.

12. The Plaintiff’s claim is based on a Letter of Appointment (“Letter”). Under this Letter, the Plaintiff was to provide certain financial services to the Defendant in return for fees. The claim is for payment of the first tranche of fees. There is no need to go into the finer details of this Letter or to consider what work, if any, had been done by the Plaintiff pursuant to it. The Defendant’s stance includes saying that before accepting and signing the Letter, he had insisted on and written in an additional term that “The fees are subject to Shroders/ Macquarie accepting our offer”. This the Defendant did in the presence of Mr. Joe Leong, Chief Executive Officer of the Plaintiff (see first affirmation of the Defendant paragraph 15). The Plaintiff never sought to challenge this part of the Defendant’s case. The hand-written term can be seen in a copy of the Letter marked as Exhibit PDM-3. It is beyond dispute that Shroders/Macquarie never accepted “our offer”.

13. I take into account matters stated in paragraphs 10 to 12 above. I also consider the fact that the Defendant lives in Hong Kong. He is not a man of straw. He has substantial investments here. He has appointed solicitors to defend the present case. The Plaintiff knows the location of the residential address and the office. The Plaintiff is aware of the particulars of the Defendant’s local investments. I do not think it appropriate to impose any terms for setting aside the Default Judgment. I certainly do not consider it appropriate to deny the Defendant his day in Court.

14. I do not think the Plaintiff could have disputed that the Defendant left Hong Kong on 4 August and only returned on the 22nd of the same month. Once that absence is recognised, the futility of objecting to the present application should have been appreciated. The Plaintiff insisted on opposing the application. In such circumstances, I consider it proper to make the order (nisi) on costs as above stated.