TSE FUI t/a TSZ SEE HING YIP ELECTRICAL ENGINEERING v. HUNG CHEUNG KWONG AND ANOTHER

DCCJ 6336/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6336 OF 2003

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DECISION

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1.  This is an application by the Defendants, pursuance to   Order 2 rule 2 and Order 13 rule 9 to set aside judgment entered into on 4^th December, 2003 by the Plaintiff on the ground that the judgment was entered into irregularly and/ or Defendant that has a meritorious defence and/ or the amount was entered for too much.

Underlying facts

2.  The Plaintiff is and was at all material times a sole-proprietorship carrying on the business as an electrical engineering contractor in the construction industry.

3.  The Defendant is a firm of electrical engineers, providing services in engineering consultancy works.  The Plaintiff worked as a subcontractor for the Defendant.

4.  From 1999 to 2001, the Plaintiff provided the Defendants with electrical engineering services under numerous job orders.

5.  The total amount was $1,224,133.40. 

6.  The Defendant had paid $819,326.90.

7.  Outstanding balance was $404,806.50.  The Plaintiff issued a writ on 5^th November, 2003 to recover the balance.

8.  On 4^th December, 2003, the Defendants obtained judgment against the Defendants because of no notice of intention to defend from the Defendants.

9.  The Defendants took out a summons on 21^st March, 2006 to set aside the judgment.  For the purpose of convenience in this judgment, HUNG CHEUNG KWONG be the 1^st Defendant, and HUNG CHEUNG HUNG be the 2^nd Defendant.

These proceedings

10.  The Defendant had business dealing with the Plaintiff since 1999.  Since 2001, the parties had business disputes which involved demand of payment by the Plaintiff.

11.  Before the commencement of this action, the Plaintiff had already personally visited the Defendants’ Ho King Address (Old Address) with a view to collect payment from the Defendants.  On 17^th and 19^th May, 2003, 9^th June, 2003, the Defendants started to fax documents to the Defendants to dispute the actual payment and accused the Plaintiff that his fees were too high.

12.  The Plaintiff found that the Defendants’ attitude to pay the outstanding sum was evasive, the Plaintiff then instructed his former solicitor to act for him.

13.  The Plaintiff’s solicitor had done a business registration search on 11^th July, 2003 and confirmed that the Defendants were still trading at the Old Address.

14.  By July, 2003, the Defendants had received letter from the Plaintiff’s former solicitor to demand payment in a sum of HK$ 397,166.50 which has been outstanding since 2001 and threatened legal action to recover this outstanding amount from the Defendants.

15.  Between July to 4^th August, 2003, the Defendants had replied to the Plaintiff’s former solicitor in three letters.  In one of the these letters, the Defendants used the new address letter head and the other two letters used the old address letter head.

16.  Counsel for the Defence said that the Plaintiff’s solicitors  should have put on notice, at least constructive notice, that the Defendants had another trading address apart from the old one.

17.  The Defendants moved away from the Old Address on 5^th August, 2003 without notifying the Plaintiff.

18.  However, the Plaintiff did cause change of address promptly on the business registry on 5^th August, 2003.

19.  In ordinary course of business dealing, any businessman would inform others in advance of the change of address.

20.  It is obvious that the Defendants’ motive purposely not to inform the Plaintiff’s solicitor of their New Address was dubious.

21.  In the present case, there was an affidavit by Kwan Nan Chun dated 28^th November, 2003 proving due service of the writ by registered post and the writ has not been returned to the Plaintiff through the post undelivered to the addressee.  See Order 10 rule 1 (3) (b) (ii).

22.  In the present circumstances, the Plaintiff had no knowledge of the fact that the Defendants were planning to move to a New Address on 5^th August, 2003.  They had business dealing since 1999 and all the time the Defendants had been using the Old Address. Prior to the commencement of this Action, the Defendants had sent letter to the Plaintiff’s then solicitor.  It was reasonable for the Plaintiff to believe that the Old Address was the last known for the Defendants.

23.  In the opinion of the Plaintiff that the Defendants would have come to the service of the knowledge of the service of the writ. Order 81 rule 3 (2) (b) (i) (ii). 

24.  However, Order 81 rule 3 of the Rules of the District Court governs the service of writ to a partnership that the writ may be served by registered post at the principal place of business of the partnership within the jurisdiction.

25.  Order 10 rule 1 (2) (c) provides that a writ for service on a Defendant within the jurisdiction may instead of being served personally on him, be served by sending a copy of the writ by registered post to the Defendant at his usual or last known address.

26.  In Kwan Kam Wah v Chan Wai Ming (2000) 2 HKC 378, the Court held that the test for service of a writ was whether it had been brought to the Defendant’s notice and not whether it had been delivered to the Defendant’s last known address.

27.   Further, when the writ was served on the Defendant, it was clear that the Old Address was no longer the principal place of business, as the Defendants had been trading at the New Address for 3 months.

28.  The result is that I find that the Writ had not been served in compliance with Order 81 r.3 (1) (c) and the judgement had been entered irregularly.

Delay

29.  When a judgement was entered into irregularly, the Court should not consider the merit of the defence. The question remains whether the judgement should be set aside as of right? 

30.  The Defendant took out the summons on 21.3.2006 for an application to set aside the judgment which was obtained on 4^th  December, 2003.  The Plaintiff says there was a 2 years and 3 months delay.

31.  The Defendants states that they did not have knowledge of the writ or the judgement until 29^th April, 2005.

32.  The judgement was obtained on 4^th December, 2003, 4 days later the Plaintiff’s then solicitors send a copy of the judgement to the Defendants Old Address by post.  The 2nd Defendant then wrote back to the Plaintiff’s solicitor on 29^th December, 2003. There was a gap of 5 months between 5th August, and 29^th December, 2003. Between these 5 months, there was no communication between the parties and with in 3 weeks of sending of the judgement to the Defendant, the 2^nd Defendant picked up correspondence with the Plaintiff’s solicitors.

33.   I noted that the content of these letters did not address to the issue of the judgement, but the Defendant was referring to the Plaintiff’s claim of the outstanding amount.

34.  The reasonable inference was that the Defendants had had notice of the judgment by at least 29^th December, 2003.

35.  In the 29^th December, 2003 letter, the 2^nd Defendant had made known to the Plaintiff’s solicitor of his residential address for purpose of further correspondence.

36.   On 27^th January, 2004, the Plaintiff’s solicitor advice the Defendants to file a defence to the claim if they so wish.  But no defence was forth coming.

37.  If I were wrong that the Defendants were aware of the judgment by December, 2003, they should have notice of the proceedings by February, 2003.

38.  On 4^th February, 2003, a letter from the Plaintiff’s then solicitors to the 2^nd Defendant’s Saddle Bridge address to notify him to show cause of charging order not to be made absolute.

39.  The 2^nd Defendant was absent on the hearing date.  The Charging Order was made absolute on 20^th February, 2003.

40.  The Defendants said that the Saddle Ridge Address was the residential address of the 2^nd Defendant.  He was admitted into Hospital for treatment between 2^nd February to 15^th March, 2003.  The 1^st Defendant had no actual knowledge of the letters.  His 80 years old father who lives in the same address would not be able to deal with these legal documents.

41.  The 1^st Defendant further argued that the 2^nd Defendant was transferred to the Day Hospital between 16^th March 2003 to 11^th July, 2004.  The doctor also advised the 2^nd Defendant to rest.

42.  The affirmation of the 1st Defendant dated 21^st March, 2006 and at paragraph 16 and 17 was trying to impress the Court that the 2nd Defendant’s health condition was so poor that he was only discharged from the Day Hospital on 11th July, 2005 and that he was not able to manage the business affairs of the partnership.

43.  The fact that the 2nd Defendant was admitted into the Day Hospital did not mean that he had no knowledge of the legal documents sent by the Plaintiff’s solicitor.

44.    Day Hospital means the patient only stays in the hospital during daytime. It does not equate with the facts that the patient stays in the Hospital over night.

45.  When all the legal documents were sent to 2^nd Defendant’s resident address, section 18 of the Partnership Ordinance comes into operation.

46.  Even if the 2^nd Defendant could not handle legal documents, it did not prevent the 2^nd Defendant to pass on the legal documents to the 1^st Defendant for him to take care of the matter and/ or to appoint a solicitor to act for them.

47.        I note that the 1^st Defendant had never disclosed his residential address in this legal action.  He told the Plaintiff’s solicitor not to write to him in his employer’s (Chun Wu) address, but he chose to use his employer address in filing his affirmation.

48.  The Defendants had done nothing to set aside of the judgement only when the Plaintiff tried to serve the statutory demand on the 1^st Defendant. The Plaintiff’s solicitors have pressed upon the Defendants’ solicitors to arrange a personal service of the statuary demand on the 1^st Defendant with reference to two letters dated 10^th March and 15^th March, 2006.

49.  The Defendants’ solicitors took out a summons to set aside the judgement on 21^st March, 2006.

50.  It is clear to me that there is no reasonable ground for such a long delay, I refuse to set aside the judgment under Order 2 rule 2 (1) of the District Court Ordinance which governs the application to set aside for irregularity that “an application to set aside for irregularity …………… shall not be allowed unless it is made within a reasonable time.”

51.  In Cheung Sz Mi Tong & Another, HCA009640/1994, the Court considered 4 ½ months delay in the application to set aside judgement was unreasonable.

52.  “A Defendant who applies to set aside an irregular judgment three months after learning of the judgment may be too late to rely on Order 2 rule 2 (1) and to have the judgment set aside as a matter of right, instead he may have to seek the exercise of the discretion of the court order Order 13 rule 9”, See Hong Kong Civil Procedure 2006 §2/2/2 at p.38 and Singh v Atombrook Ltd. 1989 1 W.L.R. 810. 

53.  Order 13 rule 9 gives the Court a wide discretion to set aside the judgment on “such as it thinks fit”. 

54.  In Po Kwong Marble Factory Ltd. v Wah Yee Decoration Co. Ltd.  1996 4 HKC 157. Sear J. stated that at P.5.

“The provisions of O.13, r.9, as I have said, are wide in their context.  In my judgment, whilst it can be rightly said that a judgment which has been obtained irregularly ought to be set aside as of right, in other words that the merits of the particular defence to the claim do not have to be entered into by court, nevertheless, there is always a residual discretion in the court to have regard to the conduct of the parties.  For example, if a judgment has been obtained irregularly and the writ comes to the notice of the defendant, he may delay for a certain period of time before taking any action on the writ.  In my judgment, the court still has a discretion – having regard to what the defendant himself has done – to deprive him, if necessary, of that judgment or alternatively, to impose terms upon the setting aside of the judgment which accord with justice having regard to the facts of the particular case.”

55.  I have to regard to what the Defendants themselves have done or their conduct in pursuing to set aside the default judgment.

56.  It is clear to me that the Defendants have left the judgment totally unattended and making excuses that the 2nd Defendant was admitted into Day Hospital between March 2003 to July 2005, that he was unfit to take care of this matter.  Although I do not accept that the Defendants came into notice of the judgment and the writ at about 29^th  April, 2005, from the Defendants’ point of argument, 29^th April 2005 to 16^th March, 2006, there was still a delay of 10 ½ months.

57.  The Defendants claimed that they came to the notice of the judgement in April, 2005, but they only instructed their solicitor to act for them on 9^th August, 2005.  The summons was taken out in March, 2006.

58.  There is simply no reasonable explanation for such a long delay.  This long period of delay does not come within the meaning of “reasonable time”.

59.  Anyone in the Plaintiff’s position would have a legitimate expectation that the matter was settled since the judgment was obtained in December, 2003.

60.  With all these factors in mind, I do weight against the Defendants’ application to set aside the irregular judgment.

Order

61.  The Defendants application to set aside the judgment is refused. The Defendants’ summons be dismissed with costs, together with Counsel’s certificate, to the Plaintiff. Cost order nisi and be made absolute in 14 days.