VICTORY SUCCESS TRADING LTD v. CHEUNG KIN YING

DCCJ 714/2020

[2022] HKDC 440

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 714 OF 2020

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DECISION

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1.  This is the defendant’s application to set aside a default judgment on the grounds of irregular judgment or, alternatively, that the defendant has a meritorious defence.

Background

2.  This is a water leakage case.

3.  It is not in dispute that the plaintiff is the owner of a flat of G/F & Cockloft Store, No. 73 Yu Chau Street, Kowloon (“P’s Property”) on the floor immediately below the flat owned by the defendant, which is 1^st Floor & Flat Roof, No. 73 Yu Chau Street, Kowloon (“D’s Property”). D’s Property has been rented out and occupied by her tenant, Mr. Fok Chi Wah (“Mr. Fok”).

4.  It is also not in dispute that the plaintiff has been complaining about water leakage from D’s Property to P’s Property since 2015 and the defendant was aware of this complaint since around that time.

5.  The plaintiff issued a writ on 13 March 2020 which was served on the address of D’s Property on 20 March 2020. However, the defendant did not file an acknowledgement of service or a defence.

6.  The plaintiff applied for default judgment on 29 July 2020 and on 4 September 2020, Her Honour Judge Phoebe Man entered judgment with damages to be assessed.

7.  The defendant has taken out the current application on 29 April 2021. Originally, the case was fixed before Deputy Judge Norman Nip SC on 15 October 2021 but this was adjourned because of some discussion on whether oral evidence needed to be called. The file was subsequently passed to this court and after some consideration, I am of the view (with agreement with both parties) that oral evidence is not required and the application can be dealt with by paper disposal.

Legal Principles

8.  The legal principles are trite and as summarised by Hon Coleman J. in Cheung Sai Lon v Cheung Sai Ha and Anor [2021] HKCFI 904 at paragraphs 14 and 15:

“14. A default judgment entered irregularly (in the sense that it was obtained without good and effective service of the writ), is liable to be set aside ex debito justitiae, and the Court does not have to consider the merit of the proposed defence. The Court does not have to accept a defendant’s assertion that he has not received the writ, which the defendant must show by compelling evidence. The relevant time is the time at which the default judgment was entered; therefore, it is for the defendant to show that he did not have notice of the writ at that time…even if there was no effective service, the Court retains a residual discretion to impose terms for setting aside, having regard to the parties’ conduct…

15. However, if the judgment is regular, the Court may set it aside if a meritorious defence can be shown by the defendant. The defendant must show a real prospect of success, meaning a defence which is one that could well be established at trial, requiring clear and objective evidence casting doubt on the claim. The power to set aside…is discretionary and unconditional, and the Court should have regard not just to the merit of the defence…but to all relevant circumstances…why default occurred; the defendant’s conduct after he had notice of the proceedings; the explanation for the time taken where there has been delay in making the application; and any prejudice that would be caused to the plaintiff…”

Whether the service was regular

9.  The defendant’s case was that the service was irregular on the basis that, firstly, the plaintiff failed to serve the Writ on defendant at her “last known and usual address” and secondly, that the Writ was not brought to the defendant’s attention.

10.  The defendant first argument was that the plaintiff was aware that D’s Property was rented out and that she did not reside there. Further, according to paragraphs 6, 13 and 14 of the defendant’s Affirmation (Hearing Bundle A, page 49 and 51), the defendant has “previously mentioned to Choi (Choi Yuk Kai, the director of the plaintiff, “Mr. Choi”), and he is fully aware, that I operate and can be found at the Foot Massage Parlour” which is “within three to four minutes walking distance” from D’s property, and therefore “Choi should have known that if the plaintiff were to send anything to me by post, any such mail would only reach me if it were sent to the address of my Foot Massage Parlour.”

11.  This alleged conversation was denied by Mr. Choi (paragraphs 7 and 8 of the 2^nd Affirmation of Choi Yuk Kai).

12.  My view is that the defendant’s evidence is simply a bare assertion: it lacks details as to the dates, locations and circumstances of this alleged conversation. Even when the defendant got a second chance to “flesh up” her story, she could only say (paragraph 7 in her Affirmation in Reply) that:

“I remember that a few years ago, in one of the initial encounters with Choi, I have told Choi that I am operating a Foot Massage Parlour at the Parlour Address and told him that he can visit it when he is free with a view… for business….”

13.  Thus, even if the defendant did mention anything about her Massage Parlour, on her own case, it was only in the context of touting for business. She did not claim that she mentioned to Mr. Choi something like: “if you wish to send me anything by post, I could only be reached at the Massage Parlour address so please note the address down.”

14.  As such, even if this alleged conversation actually took place, Mr. Choi would only be notified that the plaintiff has another usual address besides D’s Property.

15.  It is trite that the term “usual address” under Order 10, rule 1(2) means one of the addresses where a person may be usually reached. A person may have a number of usual addresses and there is no requirement for the plaintiff to serve on every address that is known to him (AIA International Limited v Cheng Chung Sing [2017] HKEC 1011).

16.  As for the defendant’s argument that the plaintiff knew that D’s Property was rented out and that the defendant did not reside there, it is also trite that:

“The word “address” does not confine to a person’s residence, but essentially means a location where a person may be reached or where contact or communication in written form, such as letter, could be established.” (Lau Ying Sau Sailing and Tang Suet Fan Sinly v Wan Kwan Cheung DCCJ 1405/2010)

17.  The defendant herself confirmed that she first received the water leakage complaint through her tenant Mr. Fok back in 2015. She also recalled on divers date in 2019 that Mr. Choi complained about water leakage again (paragraphs 9 and 10 of the defendant’s Affirmation, page 50 of Hearing Bundle A).

18.  The plaintiff has also made complaints to the “Joint Office for Investigation of Water Seepage Cases set up by the Food and Environmental Hygiene Department and the Building Department” (“the Joint Office”) which resulted in various investigations and tests conducted in October 2015 to February 2016, including ponding tests done at D’s Property on 2 December 2015.

19.  The said Joint Office Investigation Report (the “2015 Report”) is exhibited as “PC-3” (Hearing Bundle B, page 31-50).

20.  Mr. Choi claimed that the water leakage problem persisted despite the defendant’s apparent remedial work so he made further complaints to the Joint Office through his lawyers.

21.  The Joint Office conducted another round of investigations including another ponding test done at D’s Property on 27 August 2019. The second Joint Office Investigation Report (“the 2020 Report”) is exhibited as “PC-8” (Hearing Bundle B, page 168-208). A letter from the Joint Office to Mr. Choi dated 11 February 2020 confirm the issuing of a nuisance notice to the owner of D’s Property is exhibited as “PC-7 (Hearing Bundle B, page 166).

22.  In fact, over time, the Joint Office had conducted repeated investigations and had released 3 investigation reports in total.

23.  Yet, the defendant now claimed that Mr. Fok did not pass any letters from the Joint Office to her and she has never received such letters by any means.

24.  If so, one would question how the Joint Office arranged the various investigation tests and how the defendant became aware of the Nuisance Notice. The Joint Office would have sent letters to D’s Property. Mr. Fok claimed that he was illiterate so presumably could not even read these letters. Further, he did not state in his Affirmation that he had, as a tenant, took it upon his own initiative to allow all such investigations on D’s Property without the consent or notification of his landlord. I see no reason why a tenant would do so, especially from a tenant who, apparently, did not even bother to pass on any letter or correspondence to his landlord.

25.  This is simply not credible.

26.  Instead, I find it more likely that, all through these years, the Joint Office have contacted the defendant via letter correspondence at D’s Property.

27.  As such, it is clear that all through these years, the address of D’s Property must be “a location where the defendant may be reached or where contact or communication in written form, such as letter, could be established.”. The defendant has simply failed to provide any compelling evidence to suggest otherwise.

28.  The defendant’s second argument was that the Writ was not brought to her notice. In support, she relied on Mr. Fok’s Affirmation (paragraphs 3 and 4, Trial Bundle A, page 61) that Mr. Fok:

“did recall receiving documents served by the plaintiff’s solicitors to the Property since around 2020. However, I am illiterate and have failed to realise the nature and importance of those documents…at all material times, I did not know that legal proceedings were commenced…and I did not bother to pass and did not pass the court papers onto the defendant.”

29.  If Mr. Fok is illiterate as he claimed, this would not be the first written document he came across in his life living in Hong Kong. There must have been plenty others: legal documents (e.g. tenancy agreements), bank and financial documents, application forms (mobile phone, utilities), correspondence (e.g. utility bills, letters from various government departments, messages on mobile phone), restaurant menus, restaurant bills etc.

30.  Unless Mr. Fok has been living like a recluse in a bubble (he did not give such evidence), I fail to see how he could cope with life all these years if he simply ignored all these written documents. Instead, I would expect that any reasonable person would be aware of this disadvantage and be careful to develop a system to cope to make sure that he would not miss anything important.

31.  To draw a parallel example, if a blind person has to regularly cross a busy street, he would be very aware of this disadvantage and developed a fairly fail-safe “coping system” very early on. If this system was not good enough and he got injured, he would quickly refine the system otherwise he would be injured or killed long ago. As such, if one day he got hit by a car crossing the street, he would not merely claim that he was hit because of his blindness, but would be able to explain what his apparent fail-safe “coping system” was, and why it had failed on this one occasion, or otherwise the reasons why he was perhaps reckless on this occasion and did not use the “coping system” all.

32.  As such, if Mr. Fok really had failed to pass on the court documents as he claimed, I would expect him to claim not only that he was illiterate, but to explain and give particulars as to what “coping system” he has to help with his illiteracy and why it failed on these particular occasions (and not just once) when court documents were served.

33.  Further, on the defendant’s own evidence, Mr. Fok has been her tenant since at least 2015. If it was true that Mr. Fok had a habit of not passing on any letter correspondence, it would be unlikely that the defendant only discovered this in 2021, some 6 years later. She should have her own “coping system” to ensure that she, as the registered owner of the property, would not miss any important documents. If she failed as such, it would be entirely her own fault.

34.  In any case, as above, there is clear evidence to suggest that there must have been some “coping system” or at least arrangements over the years between Mr. Fok and the defendant regarding letter correspondence sent to D’s Property.

35.  As to the Affirmation of Chan Sau Ying where Ms. Chan gave evidence as to how she, as a neighbour, discovered the letter from the plaintiff’s lawyers in late January 2021 and in particular how, when she notified the defendant, the defendant commented that “she had never heard of the plaintiff’s solicitors.” I would think that the comment was non-specific and at best hearsay.

36.  In view of the above, I find that the defendant has failed to produce convincing and compelling evidence that she did not receive or have notice of the Writ at the relevant time. I would therefore find that the service was regular.

Whether there was a meritorious defence

37.  I will now consider whether there is a meritorious defence for the court to consider exercising its discretion.

38.  The plaintiff has exhibited 4 expert reports: 3 reports commission by the Joint Office in 2015, 2019 and 2020 and one report commissioned by the plaintiff which appeared to span the period from September 2018 to December 2019 (exhibited as “PC-6”, Hearing Bundle B, page 60-159). Further, all 3 Joint Office reports were compiled after comprehensive investigative tests like ponding tests.

39.  I need not go into details but all reports are in general agreement that water did seep from D’s Property to P’s Property: the source was from the floor slab and enclosing walls of a bathroom in D’s Property.

40.  Against these reports, the defendant only relied on a report by Million Construction & Engineering International Company Limited (“MCE Report”) to suggest that the water seepage problem was caused by leakage in the common pipes of the building.

41.  Significantly, the MCE Report is no more than a preliminary assessment based upon visual inspection. No investigation including ponding test was done to investigate whether the previous water seepage from the floor slab and enclosing walls of the bathroom in D’s Property has now been repaired.

42.  This serves no more than a suggestion that there may be an additional source of water leakage and clearly does not say anything to eliminate the possibility that there is water leakage from D’s Property at the same time.

43.  Furthermore, the inspection was conducted around from November 2020 to April 2021. The defendant admitted that she has performed various repair work for water leakage both in the toilet and the ceiling “in or about 2020” (paragraph 28 of the defendant’s Affirmation, Hearing bundle page 54).

44.  Thus, even if the MCE Report’s preliminary assessment is correct and, further, no other sources of water leakage are found, it cannot assist the defence that there has been no water leakage from D’s Property to P’s Property from 2015 to the time of the repair in 2020.

45.  As such, the defendant has failed to show that she has a meritorious defence. I find no real prospect of success in the defence.

46.  On entering judgment by default, the relevant orders given by HH Judge Phoebe Man (“Judge Man’s Order”) were:

(1)  An injunction restraining the defendant by himself (herself), his(her) servants agents tenants/occupants or otherwise from continuing the water seepage at the D’s property;

(2)  An order that the defendant do carry out all necessary rectification works at the D’s Property to stop the water seepage from the D’s Property to P’s Property;

(3)  An order that at the defendant’s costs, the plaintiff’s agent(s) be allowed to carry out all necessary investigations and tests at D’s Property to ensure that the rectification works are complete; and

(4)  Damages to be assessed.

47.  As such, if the defendant really relies on the MCE Report and trusts that her repair has been as effective as she claims, she has already complied with paragraphs (1) and (2) of Judge Man’s Order. There is no reason why she should be concerned now.

48.  Paragraph (3) of Judge Man’s Order would be in any case be necessary for damages assessment. If the investigations and tests will actually show that there are now no more water leakages from D’s Property, it will only confirm that the defendant’s repair work in 2020 has adequately stopped the water leakage from D’s Property and that any further damages from that time onwards may well be from the common pipes as opined in the MCE Report. If so, the damages to be assessed should only be limited to damages to P’s Property in the period prior to this.

49.  I therefore see no reason to set aside the default judgment and Judge Man’s Order.

Order

50.  I would dismiss the defendant’s application and award the costs of the application to the plaintiff with certificate to counsels, to be taxed if not agreed.