NG PING KUY PATRICK v. POON HON SING AND OTHERS

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JUDGMENT

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Fuad, V.-P. (giving the judgment of the Court):

1. This is an appeal from the decision of Barnett, J. dated 1st July 1991 whereby he rejected an application to restore an appeal to the Judge in Chambers which he had earlier dismissed without a hearing on the merits because the intending appellants had failed to attend, or be represented, on the date and at the time fixed for the hearing of the appeal.

2. The matter arose in this way. The plaintiff issued a writ indorsed with a statement of claim on 12th December 1990. He sued the 5 partners of a firm in their individual capacities (adding after their names "all trading as Wong Chun Chun Thai Food Restaurant") on a cheque dated 23rd August 1990 for $300,000 which had been dishonoured on presentation.

3. The 1st, 2nd and 3rd defendants filed a defence on 17th January 1991. Judgment in default for failure to give notice of  intention to defend was entered against the 4th and 5th defendants on 30th January 1991. The 3rd and 4th defendants take no part in this appeal.

4. On 26th January 1991 the 1st, 2nd and 5th defendants took out a summons to strike out the statement of claim, as against them, on the grounds that it was frivolous and vexatious or otherwise an abuse of the process of the court. By the same summons, the 5th defendant sought also to have the default judgment entered against her set aside.

5. On 21st March 1991 Master Jones dismissed the strike out application but gave leave to set aside the default judgment against the 5th defendant on condition that she paid $300,000 into court within 21 days.

6. On 26th March 1991 the 1st, 2nd and 5th defendants filed a notice of appeal to the Judge in Chambers against the master's orders and an appropriate stay order was later granted. The appeal was fixed for hearing on 10th June 1991. On that day, when the appeal was called on at 2:30 p.m., an articled clerk of the firm of solicitors acting for the appellants was present, but he was on his own. Barnett, J. dismissed the appeal with costs to be taxed and paid forthwith.

7. Had the appeal been heard on that day, the judge would have read the three affirmations which had been relied upon before the master. In a joint affirmation, the 1st and 2nd defendants deposed that since the cheque sued upon had been given to the plaintiff by the 3rd defendant on 15th March 1989, and they had not joined the partnership until 1st December that year, they could not be liable upon its dishonour. They exhibited the partnership agreement.

8. In her first affirmation, the 5th defendant also asserted that she was not liable on the cheque because she, too, had joined the partnership on 1st December 1989. She said she had retired from it on 23rd October 1990. In support of her application to have the default judgment set aside, in the same affirmation, she stated that she often travelled to Thailand for business purposes and she demonstrated, with copies of the relevant pages of her passport, that she was there between 22nd November 1990 and 6th January 1991 and between 9th January and 30th January 1991. She said all this because there was an affirmation from a clerk of the plaintiff's solicitors to the effect that he had served her by post with a copy of the writ on 13th December 1990 at the address of the restaurant. She further deposed that during the period 6th - 9th January 1991 she had not visited the restaurant or seen any of her former partners. She had known nothing about the existence of the writ until the 4th defendant had told her about it on 28th January in Thailand. When her solicitors pointed this out in their letter of 1st February 1991 to the plaintiff's solicitors, they refused to consent to the default judgment being set aside "unless you can provide us with a wholesome defence to our client's claim", missing the point completely.

9. In his first affirmation, the plaintiff stated that the 4th and 5th defendants had told him in March 1989 that the restaurant needed redecoration and new air-conditioners and so a loan of $300,000 was needed for this purpose. They said that business had been promising and that they would soon join in as partners. They assured him that the loan would be repaid within a few months after the decoration work had been completed. They then introduced the 3rd defendant to him and she confirmed what had been said. He said he followed their instructions and deposited $300,000 into the account of the 4th defendant with a branch of Citibank on 15th March 1989. When he showed the pay-in slip to all three defendants, the 3rd defendant issued the cheque dated 23rd August 1990 to him. He had filled in the particulars on it because the 3rd defendant had told him she could not write. The cheque was signed by the 3rd defendant, who put the firm's "chop" on it.

10. The plaintiff continued his affirmation by saying that he was called to a meeting by the 4th defendant on 21st October 1990 at a hotel in Nathan Road. The 1st, 4th and 5th defendants were there, and the 1st defendant's wife (he thought that she was the 2nd defendant). The 1st defendant showed him a note-book with his (the plaintiff's) name included in the list of creditors - with $300,000 written against his name. The 1st defendant promised that he would. repay the debt by instalments. When he (the plaintiff) refused to accept this proposal, the 1st defendant said he would make appropriate arrangements for the debt to be repaid to him, and, on the same occasion, the 4th and 5th   defendants apologised to him saying that had the financial situation been more favourable, his debt would have been settled as a matter of priority.

11. It must be said at once that it is clear that if what the 1st, 2nd and 5th defendants had said in their affirmations in answer to the claim on the dishonoured cheque as first formulated is correct, they had a complete defence because it is trite law that if a person joins as a partner in an existing firm, he does not become liable to any creditor of the partnership for anything done before he became a partner, in the absence of an agreement to the contrary. But the plaintiff's first affirmation, again if true, put a different complexion on the matter.

12. Moreover,   if the 5th defendant told the truth about her absence from Hong Kong at the time when it is averred that she was served, the service would have been invalid (Barclay's Bank of Swaziland Ltd. v. Hahn [1989] 1 WLR 506.) On a proper application to the court, therefore, she would have been entitled to have the default judgment against her set aside ex debito justitiae.

13. We mention here that the plaintiff purported to amend his statement of claim very considerably on 9th April 1991. It would seem that by virtue of RSC O.18, r.20, the pleadings had closed on 31st January 1991 and so when O.20 rr.3 and 5 are read together, the leave to amend which was required was neither sought nor given.

14. To return to the procedural history of the matter, on 24th June 1991, the 1st, 2nd and 5th defendants issued a summons praying that their notice of appeal dated 26th March be restored. On 1st July Barnett, J. rejected the application.

15. When the application to restore the appeal which had not been heard on its merits came before Barnett, J. on 1st July, it was supported an affirmation made by Mr David Leung, an articled clerk of the solicitors' firm representing the defendants. He had had the conduct of the proceedings on their behalf. He said that although the case had been handled by a different Counsel when the defence of the first three defendants had been filed, Mr Rimsky Yuen  had been briefed for the application to set aside the default judgment and to strike out the statement of claim.  When Master Jones had dismissed the application on 21st March, an appeal had been filed on the clients' instructions. Paragraphs 4, 5 and 6 of Mr Leung's affirmation are as follows:-

16. According to the agreed note of the reasons given by the learned judge for his decision, he began by saying that before the court exercised its discretion to restore the appeal, it was the duty of the defendants to give a full explanation as to why they were absent on 10th June when the appeal was due to be heard. He said that having gone through Mr David Leung's affirmation he was satisfied that it failed to provide a clear and unambiguous explanation on the matters that needed to be explained.

17. The judge went on to point out that even if the appeal were not restored, the applicants could still defend the plaintiff's claim, although the 5th defendant could only do so if she paid $300,000 into court. The defendants were thus not shut out from the proceedings and would not be prejudiced. In the circumstances he was not satisfied that he should exercise his discretion to restore the appeal. In refusing the relief sought, he ordered the costs of the application to be paid by the applicants' solicitors personally on an indemnity basis, to be taxed and paid forthwith.

18. We respectfully agree with the learned judge that the Leung's affirmation could have been clearer but, bearing in mind that Mr Leung's first language is obviously not English, it seems to us likely that more detailed reasons for the failure of Counsel to attend might have been available had the judge decided to call for them. Since the articled clerk was present, it was plain, however, that a mistake had been made and one for which the lay clients bore no responsibility. Mr Samuel Chan, who appeared both before the judge and on this appeal, did not suggest that the plaintiff had been prejudiced by what had happened in a way that could not be compensated for by an order for costs of the kind which was in fact made.

19. The learned judge did not refer, in his reasons, to the merits of. the abortive appeals, and there is mention only of, Mr David Leung's affirmation in the Order drawn up  to reflect the judge's decision refusing to restore the appeal. We do not know how the matter was argued before the judge but we were told that there was some discussion of the merits. In our judgment, the merits of an appeal which has been dismissed without a hearing must be a relevant consideration when a decision has to be reached whether or not it is just that the appeal be restored to the list. It seems to us that this must be a major consideration as it is when a default judgment which is regular is sought to be set aside.

20. By the time the application to reinstate the appeal  came on for hearing on 1st July, each of the applicants had filed further affirmations in response to the plaintiff's affirmation, and the averments made in the new version of the statement of claim, amended, as we have seen, without leave. We have read all the affirmations which address the question whether or not any or all of the three appellants are liable to repay the $300,000 to the plaintiff, and we are unable to say that, on the evidence as it now stands, any of them has shown that he or she has a reasonable" prospect of having the action struck out under 0.18, r.19(1)(b) or(d). The appellants have not persuaded us that the judge's decision, as it affects the strike out application, should be disturbed.

21. We now turn to consider the position regarding the default judgment against the 5th defendant. As we have seen, she filed an affirmation on 11th April 1991 which, if true (and much supporting evidence was exhibited) shows that she is quite unable to meet the condition imposed by Master Jones on 21st March 1991. It appears that the affirmation was not read to the judge, and therefore it is not suprising that he was not influenced by considerations of the 5th defendant's lack of means when deciding whether to restore the appeal against that part of the master's order.

22. We are convinced that the justice of the case demands that the issue whether or not she was served in accordance with the Rules of Court should be further investigated, as it would be, if that part of the appeal were to be reinstated. It will probably turn out, as we have indicated, that she had the right to have the default judgment set aside ex debito justitiae.

23. When the judge mentioned her position in his reasons, pointing out that she could defend the claim if she paid the $300,000 into court, he did not know that she might well be unable to meet the condition which had been imposed.

24. For the reasons we have given, we dismiss the appeal of the 1st, 2nd and 5th defendants against the judge's order as it affects their abortive appeal against the master's order refusing to strike out the action as against them. We allow the appeal of the 5th defendant to the extent only of restoring her appeal to the Judge in Chambers against the default judgment entered on 30th January 1991. We grant her a stay of execution of the judgment until her appeal is determined, or until further order. We express the hope that the parties can come to terms about the default judgment to save time and costs

25. In handing clown this judgment, we make an order nisi that the three appellants shall pay the costs of the appeal as it relates to the restoration of the "strike out" appeal to the  Judge in Chambers. We also make an order nisi that the costs of this appeal in relation to the restoration of the 5th defendant's appeal concerning the default judgment entered against her shall be paid by the respondent.