財通國際證券有限公司 v. 楊國紅

HCA 1757/2016

[2019] HKCFI 2149

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1757 OF 2016

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D E C I S I O N

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1.  This is an appeal by the Defendant from the Order of Master J Chau dated 11 June 2019 by which a final judgment against the Defendant obtained by the Plaintiff in default of Notice of Intention to Defend dated 25 October 2016 was set aside on the condition that the judgment sum, HK$15,257,569.48, be paid into court as security.

2.  The only issue in this appeal is whether the condition was appropriate.  It is not in dispute that the service of the Re-amended Writ on the Defendant at a Hong Kong address, which was provided by the Defendant to the Plaintiff in a Margin Account Opening Form dated 27 July 2015, was defective in that the Defendant was not in Hong Kong at the relevant time. 

3.  In the written submissions of the parties, there was no argument that the imposition of condition is a matter within the residual discretion of the court where a default judgment is to be set aside as of right due to irregularity.  However, Mr Cheung, who appeared for the Defendant, in his viva voce submission suggested that there is no scope for the imposition of condition where a judgment is to be set aside as of right.  I am inclined to agree with Mr Singh for the Plaintiff that on this court there is a binding authority by the CA in Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1996] 4 HKC 157, 161C-D.

4.  In my view, the residual discretion should be exercised in this case in favour of imposing a condition for the set aside. The reason is that there is a strong case that the Defendant is trying to evade the long arms of the law.

5.  This is a claim by the Plaintiff against the Defendant for payment of outstanding balance in a Margin Account.  That account was governed by, inter alia, a Margin Account Client Agreement dated 27 July 2015. 

6.  The relevant events began sometime between February to December 2016 when a director of the Plaintiff, Mr Qian, contacted the Defendant via his Mainland mobile phone, the number of which was provided by the Defendant in the Opening Form, to discussion the settlement of the outstanding debt.  In that conversation, the Defendant rejected Qian’s suggestion of meeting to discuss the matter.  Since that call, the Plaintiff had been unable to contact the Defendant.

7.  In his evidence, the Defendant claimed that he had no recollection of the conversation.  He said that he ceased using the number he provided to the Plaintiff in January 2016 without explaining why he had done so or why he had not informed the Plaintiff of the change. 

8.  Plainly, the Plaintiff’s evidence is inherently probable.  The Defendant must be fully aware that he had not settled a large debt owed to the Plaintiff, and yet he seemed to be suggesting that he was not aware that the Plaintiff was trying to chase him to settle the same.

9.  In any case, there are undisputed correspondence exchanged between the solicitors for the Plaintiff and those for the Defendant that from 7 March to 31 May 2016 the Plaintiff was trying to engage the Defendant in negotiation over the outstanding debt, and the latter was warned about the Plaintiff’s intention to institute proceedings against him. 

10.  On 20 June 2016, the Defendant’s solicitors were asked if they had instruction to accept service of proceedings on his behalf. No reply was given to the Plaintiff’s solicitors. 

11.  On 5 July 2016, the Plaintiff issued a Writ against the Defendant for the recovery of the debt.  The Writ was amended on 7 July 2016 and re-amended on 13 September 2016.  All 3 Writs were served on the Defendant at his Hong Kong Address, which was stated in the Opening From to be his residential address, by way of insertion into the letterbox. 

12.  It should be mentioned that at the time the Defendant opened the Margin Account with the Plaintiff, he had provided the latter with a copy of his bank statement which also showed the Hong Kong Address.  As accepted by Mr Cheung, the statement was probably provided as an address proof.

13.  After obtaining the default judgment on 25 October 2016 (without satisfaction), the Plaintiff launched proceedings in the Jiangxi Nanchang Intermediate People’s Court for recovery of the debt.  The writ in the Mainland proceedings referred to the Defendant’s Mainland address in Nanchang.  That Mainland Address was stated in his Mainland identity card as his residential address.  According to the Defendant, he had provided a copy of his Mainland identity card to the Plaintiff as identity proof. 

14.  The relevant documents of the Mainland proceedings were served by the Nanchang Court on the Defendant at his Mainland Address. However, those documents were returned because of refusal of the recipient to accept them. 

15.  Consequently, the Nanchang Court published an announcement in the People’s Court Dairy on 26 November 2017 as substituted service to take effect 60 days from the announcement.  No response was made by the Defendant to the service of proceedings.

16.  On 10 March 2018, the Nanchang Court published another announcement about the trial which was to take place on 14 March 2018. The trial proceeded in the absence of the Defendant. 

17.  On 11 June 2018, a Decision was given by the Nanchang Court in favour of the Plaintiff in the sum of HK$14,357,050.48 with interest and costs.  After an unsuccessful attempt to serve the Decision on the Defendant at the Mainland Address for the same reason as stated in para 14 above, on 5 July 2018 the Nanchang Court published its Decision in an announcement on the “Service of Court Papers” website as substituted service. 

18.  On 23 November 2018, the Nanchang Court issued a certificate stating that the Decision was deemed served on the parties on 19 September 2018, taking effect on the next day.

19.  The Defendant’s evidence in his 2^nd Affirmation is that he was aware of neither the Mainland nor the Hong Kong proceedings until February 2019 when his Mainland bank account was suspended and he went to the local court to retrieve all the relevant documents. 

20.  However, that version is not consistent with his 1^st Affirmation where he stated that he was not aware of the Mainland proceedings until the beginning of December 2018 when he received an order or enforcement notice from the Nanchang Court dated 30 November 2018 to declare his assets.  After obtaining a copy of the Decision, he then knew of the Hong Kong proceedings. 

21.  There is no explanation by the Defendant of the inconsistent versions.  Judging by Travel Records Application made by the Defendant to the Immigration Department dated 14 January 2019 (exhibited to his 1^st Affirmation), he must be aware of the default judgment by then.  The correspondence address stated on the Application was the address of his solicitors marked “c/o” and “Attn Ben Ho”.  Mr Ho was a consultant of that firm.

22.  The D’s application to set aside the default judgment was not issued until 1 March 2019 (dated 28 February 2019), although the immigration records were provided to the Defendant’s solicitors on 13 February 2019.

23.  In respect of the Hong Kong Address, the Defendant said that it was a correspondence address at which he could be contacted. However, the person(s) who lived there did not pass to him the Plaintiff’s documents.  There is no explanation why the documents were not passed to him or why he could not be contacted at the Address.

24.  In the Opening Form, it was stated that the Defendant was self-employed and the “name of employer” was stated to be Hong Xing Shen Yan Hang Co Ltd.  It appears from the company search of that company made up to 30 May 2016 that its registered office was a workshop in Tsing Yi, Hong Kong.  The Defendant was its sole director and shareholder.  His residential addressed was stated to be one in Guangzhou.  The location appears to be commercial premises.

25.  As regards the Mainland Address, the Plaintiff had obtained a certificate dated 27 February 2018 from the residents committee to which the Mainland Address belonged that, upon investigation, it was found that the Defendant had never resided in the area. 

26.  In his evidence, the Defendant said that the Mainland Address was also a communication address.  He said that he had not resided there “for a good number of years” but he owned the property, and it remained his “registered address” in the Mainland which therefore appeared on his identity card.  He alleged that he could not change the address on his identity card simply because he had moved away.  I find this allegation surprising and hard to believe.

27.  There was no explanation by the Defendant why, if he did not reside at the Mainland Address but only use it as a communication address, the person(s) residing there had refused to accept the documents served on him by the Nanchang Court. 

28.  The Defendant said that he could now be contacted at another address in Guangzhou (different to the one referred on para 24 above), which also appears to be commercial premises.  However, both the Defendant’s Affirmations referred to the Mainland Address as his address. 

29.  It is self-evident from the evidence stated above that the Defendant is doing everything he can to evade his liability to the Plaintiff.  He has still not revealed where he lives.  He continues to use an ineffective Mainland Address in the supporting evidence for his setting aside application.  This is unacceptable.   

30.  Nor do I accept his story that he was not aware of the Plaintiff’s proceedings both in Hong Kong and the Mainland.  There is no reason to believe that his solicitors would not have consulted him about the Plaintiff’s request to them to accept service of proceedings back in May 2016. The weight of the evidence is that he continued to evade those proceedings until effective enforcement action was taken against him in the Mainland. 

31.  As pointed out by Mr Singh, the Defendant’s own evidence is that he received notice of enforcement procedure from the Nanchang Court (see para 20 above).  Although there is no explanation by him how such notice was received, the evidence is that the only address which the Nanchang Court had was the Mainland Address.  The inference is therefore that it is likely that the Defendant had notice of the attempts by the Nanchang Court to serve documents on him at the Mainland Address.

32.  Mr Cheung said that the Defendant habitually resided in the Mainland.  Taking that assertion at face value, it was not inconsistent with the proposition that the Defendant maintained also a residence in Hong Kong.  He had not made clear to the Plaintiff that the Hong Kong Address was only a correspondence address.  

33.  More importantly, the Defendant never explained why the Hong Kong Address had become ineffective, if that be so; what alternative address he had been using since; and why he had not informed the Plaintiff of the alternative address.  If the Hong Kong Address remained effective, then the Defendant should have had ample notice of the Hong Kong proceedings and he chose not to defend them.  Neither scenario reflects well on the Defendant.

34.  The Plaintiff bears no blame in this situation. It asked the Defendant’s solicitors whether they would accept service and when no reply was forthcoming, served the court documents on the address provided by the Defendant.  Even now, there is no effective address disclosed by the Defendant on which he can be served.

35.  I am inclined to agree with Mr Singh that although the evidence does not allow the court to pinpoint when the Defendant had notice of the Hong Kong proceedings or the Mainland proceedings, the weight of the evidence is that he had such notice, or turned a blind-eye to the same, long before receiving the enforcement notice.  Therefore, the delay in this setting aside application is inordinate.

36.  The dicta in Bank Austria Aktiengesellschaft v Sukamto, p 242 A-B may be applied in this case:

“Here it seems to me that if the judgment is set aside unconditionally the plaintiff is returned exactly to the position it was in when the defendant went to ground in late 1998. It will have to start the whole process of service out of the jurisdiction and substituted service over again; and because the defendant has been successful in evasion. Further, as in Po Kwong Marble Factory Ltd there is a real risk that any judgment that the plaintiff ultimately obtains will be empty and the plaintiff is entitled to some protection against this. The way to provide that protection is by setting aside the judgment on terms, as did the master.”

37.  I take into account the Defendant’s right to defend this action.  On the other hand, I believe that he had chosen to evade dealing with it.  Also, there is no indication of any defence to this action.

38.  Taking into consideration all relevant circumstances identified above, I fully agree with the imposition of condition as ordered by the learned Master. 

39.  This appeal is out of time by 7 days.  There is no explanation for the delay, save for an assertion from the Bar table that the Defendant’s solicitors had difficulties contacting the Defendant who was in the Mainland.  In this day and age, such an explanation is obviously unacceptable. Further, given the lack of merit in this appeal, I see no reason to grant the extension of time (see Postwell Ltd v Cheng Kap Sang [2004] 2 HKLRD 355, §33).

40.  For these reasons, I dismiss this appeal.  There is no issue that costs should follow the event and I order that the costs of and occasioned by this appeal be to the Plaintiff.