DBS BANK (HONG KONG) LTD v. TANG HIN MING HENRY formerly t/a TANG & ASSOCIATES AND ANOTHER

HCA 664/2017

[2018] HKCFI 2598

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 664 OF 2017

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D E C I S I O N

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Background

1.  This is an appeal against the Master’s decision, whereby he dismissed the application made by the 2^nd Defendant to set aside the default judgment entered against her on 5 May 2017.

2.  The Plaintiff’s claims in this action are made against the two defendants, formerly trading as Tang & Associates (“Firm”), a law firm which the Law Society intervened in its practice in September 2016 (“Intervention”).  The 1^st Defendant was the sole proprietor of the Firm.  The 2^nd Defendant (“Wong”) was a non-equity partner of the Firm from 1 September 2010.  The Firm ceased operations since the Intervention in September 2016.

3.  The Plaintiff claims that pursuant to 2 facility letters dated 14 January 2013 and 26 July 2016 (“Facility Letters”), it had extended overdraft facilities and installment loans to the Firm, and that a total sum of $1,847,903.70 (inclusive of interest) (“Debt”) is outstanding under these facilities extended to and utilized by the Firm.  The Writ and Statement of Claim was issued on 21 March 2017, whereby the Plaintiff sought payment of the Debt, interest and costs.  On 5 May 2017, the Plaintiff obtained default judgment against the Defendants for the Debt, interest thereon, and fixed costs (“Judgment”). 

4.  On 15 September 2017, Wong applied to set aside the Judgment, on the ground that she had no proper notice of the Writ purportedly served on her, and that she has a real prospect of success in defending the Plaintiff’s claim.  She claims that she never signed the Facility Letters, any signature of hers on the Facility Letters were forgeries, and that the 1^st Defendant was not authorized to sign the Plaintiff’s Facility Letters on her behalf.  Wong further claims that as a non-equity partner of the Firm, she is not liable for the profits and losses of the Firm, nor for loans to and debts of the Firm. 

5.  Wong’s application to set aside the Judgment was dismissed by the Master, and she appeals.

Whether the Writ was properly served

6.  On the Plaintiff’s evidence, the Writ was served on Wong on 24 March and 27 March 2017.  On 24 March 2017, the Writ was inserted into the letterbox at her address in Room 601 of Hewlett Center, 52-54 Hoi Yuen Road, Kwun Tong, Kowloon (“Hewlett Center”).  On 27 March 2017, the Writ was sent by registered post to the 3 addresses of the Firm:

(1)   Unit 1210, 12^th Floor, Tower 1, Grand Century Place, 193 Prince Edward Road West, Mongkok, Kowloon (“Address 1”);

(2)   Room 1027, Nam Fung Centre, 264-298 Castle Peak Road, Tsuen Wan, New Territories (“Address 2”); and

(3)   Room 9-10, 25^th Floor, Office Tower, Langham Place, 8 Argyle Street, Mongkok, Kowloon (“Address 3”).

7.  The Plaintiff claims that prior to the institution of proceedings, demand letters dated 29 November 2016 had also been sent to Wong to Address 1, Address 2, Address 3, and to a residential address at Fairview Park.  In response, the Plaintiff received a letter from Wong dated 7 December 2016, whereby she acknowledged receipt of the demand letters, denied her knowledge of the Debt, and asked the Plaintiff to note her “correspondent address” at Hewlett Center.

8.  On Wong’s evidence, Hewlett Center was the address of her tax agent.  Address 1 was the business address of the Firm from 1 August 2016, but she had never worked there.  Address 2 was the branch office of the Firm, which had been surrendered to the landlord after the Intervention, and she had never worked at Address 2.  Address 3 was the business office of the Firm where she had worked, but those premises were taken up by another firm from 1 August 2016, and she worked in those offices from 16 September 2016 to 24 October 2016.  Wong claims that on 7 December 2016, she had written to the Plaintiff, notifying the Plaintiff that “all future correspondence” should be sent to Hewlett Center, the address of her tax agent. 

9.  Wong alleges that at the time of the service of proceedings in March 2017, the Plaintiff knew and should have known that upon the Intervention of the Firm in September 2016, Address 1, Address 2 and Address 3 were no longer her addresses for the purpose of service of the Writ.

10.  As for the purported service of the Writ at Hewlett Center, Wong simply claims that she was informed by her tax agent that they did not receive the Writ.

11.  Although service by post and by insertion through the letterbox pursuant to Order 10 rule 1 (2) provides a workable but rebuttable presumption that the Writ so served would be brought to the notice of a defendant, I accept the submissions made on behalf of the Plaintiff, that as is made clear in Forward v West Sussex County Council [1995] 1 WLR 1469, at 1473G and 1474H, a defendant claiming not to have been served has to provide “convincing” and “compelling” evidence to that effect.  Following that decision, the Court of Appeal held in Bank of China (Hong Kong Ltd) v Fung Francis [2007] 1 HKLRD 462 that the court does not have to accept a defendant’s assertion, no matter how improbable, that he had not received the writ through the post, and it is for the defendant to provide the convincing and compelling evidence.

12.  In this case, I can accept that the Writ served at the former addresses of the Firm after the Intervention, when the Firm had ceased business, might not have been brought to Wong’s notice.  However, there is no explanation at all offered by Wong, or by Wong’s tax agent, as to why the Writ inserted through the letterbox at the Hewlett Center address was not received by the tax agent.  There is only Wong’s bare, unsupported assertion, that she had been told by the tax agent that it was not received.  From the affirmation of service and the photographs exhibited showing the envelope inserted into the letterbox, I see no probable and credible reason why the Writ could not have reached and been received the tax agent.  The Hewlett Center address was specified by Wong to be the address to which all correspondence to her were to be sent.  The Writ having been sent to the specified Hewlett Center address, there is no credible or probable reason why Wong’s designated agent there would not have forwarded to Wong the correspondence and the Writ sent there and received by the agent.

13.  Accordingly, I find that the Writ was properly served at the Hewlett Center address and that the Judgment was a regular judgment.

Whether there is meritorious defence

14.  The power to set aside a judgment entered regularly is discretionary.  Such power is unconditional, and the purpose of the discretionary power is to avoid the injustice which may be caused if judgment follows automatically on default (para 13/9/12, Hong Kong Civil Procedure).  The major consideration is whether the defendant has shown a defence on the merits, to which the court should pay heed as a matter of common sense, since there is no point in setting aside a judgment if the defendant has no defence (Evans v Bartlam [1937] AC 473).  In exercising its discretion to set aside, the court takes into consideration all relevant circumstances of the case, the dominant factor being the merits. 

15.  On merits, the burden is on Wong to show, by potentially credible evidence which carries some degree of conviction, that she has a defence with a real prospect of success (para 13/9/14) 2018 Hong Kong Civil Procedure).  In this regard, Wong asserts that the Facility Letters relied upon by the Plaintiff in its claim were not signed by her.  She claims that she did not know the person who, on the face of the Facility Letters, verified or witnessed Wong’s signatures.  She could not find a copy of his business card in her records.  She claims that the 1^st Facility Letter and the Guarantee relied upon by the Plaintiff were dated 14 January 2013 and 21 January 2013, which were Mondays, and Wong claims that she usually worked during the weekends in her practice as a marriage celebrant, so it was her practice not to return to her office on Mondays and Saturdays.  According to Wong, it would be virtually impossible for her to have signed the documents on those dates.

16.  On the part of the Plaintiff, there is an affirmation of Kwok Chun Hei (“Kwok”), who claimed to have witnessed the signature of Wong and of the 1^st Defendant when they signed the Firm’s account opening documentation with the Plaintiff, the 1^st Facility Letter as well as the Guarantee and Indemnity also dated 21 January 2013 in favor of the Plaintiff (“Guarantee”).  Kwok’s evidence is that he had checked the identity cards of the defendants to verify their identities when they signed the documents in front of him.

17.  Wong admits to having signed the account opening documentation with the Plaintiff, although she denies that she had signed them before Kwok.  Despite maintaining that the signatures purported to be hers on the 1^st Facility Letter and the Guarantee were not in fact hers but were forgeries, she did not provide any specimen signature of hers for authentication purposes or to adduce expert evidence thereon (save as provided for in paragraph 18 below).  Her excuse, that she could not do so whilst the police are still investigating her report, does not make sense and is not credible.  She claims that she used 2 specimen signatures, one for documents issued in the name or with the chop of the Firm, and one for documents such as marriage certificates issued in her own capacity.  The latter would comprise her name “Elisa”.  She claims that the signature appearing in the 1^st Facility Letter differs from her usual signature used for signing documents on behalf of the Firm, and further suggests that one of the signatures appearing on the 1^st Facility Letter should have been signed in her personal capacity, but was not.

18.  The only document Wong has produced as a specimen of her standard signature is a bill issued by the Firm, with her standard signature used for documents signed by her on behalf of the Firm.    The allegedly different signature appearing in that one bill was issued in 2011.

19.  At this stage of the evidence, there are no discernible or apparent differences in the signatures which appear on the Plaintiff’s bank account opening form dated January 2013, which are admitted by Wong to have been signed by her, and those which appear on the 1^st Facility Letter and the Guarantee, also dated January 2013, which are disputed by Wong.

20.  The fact that Wong could no longer find Kwok’s name-card cannot be conclusive evidence of her not having signed the 1^st Facility Letter before Kwok.  In any event, if the account opening documentation, the 1^st Facility Letter and Guarantee were signed by Wong, it is immaterial where they were signed.

21.  In short, I am not able to say that Wong’s defence, on the basis that the 1^st Facility Letter and Guarantee contained her forged signatures, carries the adequate degree of conviction to amount to a defence with real prospects of success. 

22.  Materially, even if Wong has prospects of establishing her claim of forgery, I agree with Counsel for the Plaintiff that she has no defence to the Plaintiff’s claim against her as a partner of the Firm, on the basis of the 1^st Facility Letter signed by the 1^st Defendant - Wong’s partner at the material time of the loan.  It is not disputed by Wong that she signed the account opening form with the Plaintiff, purporting to be a partner of the Firm, and that she was held out to the Plaintiff, and to the world at large, as a partner of the Firm.  The 1^st Defendant, as partner, would have the usual authority to sign documents on her behalf for the Firm.  Wong’s assertion that as a non-equity partner, it was understood and agreed between the 1^st Defendant and herself that she would not be liable for the debts and liabilities of the Firm, as she was not responsible for the profits and losses of the Firm, is no answer to the claim made by the Plaintiff, a third-party dealing with the Firm and to whom Wong was held out (with her consent) to be a partner.  At most, Wong would be entitled to seek indemnity from the 1^st Defendant. 

23.  The Statement of Claim pleads (paragraph 1 (b)) that the 1^st and 2^nd Defendants were trading as the Firm. It makes it clear that the loans were made to, received and utilised by the Firm pursuant to the Facility Letters.  Wong disputes her signatures on the documents relied upon by the Plaintiff in her evidence filed in support of her application to set aside the Judgment, but if, after considering the merits of the Plaintiff’s case, Wong has no real defence to the claims made against her as a partner for the debts of the Firm, there is no point to the setting aside, and no injustice in the exercise of the discretion of the Court, not to set aside the regular judgment. 

24.  For these reasons, the appeal against the Master’s refusal to set aside the Judgment is dismissed, with costs to the Plaintiff, summarily assessed at $125,000.