ABEROPE PROPRIETARY LTD v. HAO, JIMMY AND OTHERS

HCA 629/2021

[2023] HKCFI 714

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 629 OF 2021

________________________

________________________

________________________

D E C I S I O N

________________________

1.  This is the 1^st and 3^rd Defendants’ application by summons dated 24 November 2022 to set aside a default judgment entered against the 2^nd Defendant.

2.  The parties have agreed that the only issue in dispute is “whether the default judgment entered against the 2^nd Defendant was entered irregularly, which depends on whether the service of the Writ of Summons on the 2^nd Defendant was bad or ineffective”.

3.  Accordingly, I directed that the summons be disposed of on paper. 

Background

4.  The Plaintiff alleges that it was the victim of a phone scam whereby it was cold called and fraudulently induced into transferring sums of money into various bank accounts in the belief that it was making investments in listed securities.  

5.  One such account belonged to Axis Asia, a partnership registered in Hong Kong which was dissolved on 29 August 2020. The three Defendants are all former partners of Axis Asia, and the 2^nd Defendant is the 1^st Defendant’s daughter. 

6.  The Defendants run a family business together in the Philippines engaged in general trading. Their case is that they honestly believed that the sums received from the Plaintiff represented payment for an invoice they issued to a company bearing an identical name to the Plaintiff’s; and Axis Asia is the account they use to receive international payments. 

7.  The Plaintiff issued a writ on 23 April 2021.  The writ was served on the Defendants on 26 April 2021 by inserting it into the letterbox at their last known address. 

8.  The 1^st & 3^rd Defendants (“D1 & D3”)  filed their defence on 23 August 2021. 

9.  The 2^nd Defendant (“D2”)  did not file an acknowledgement of service or give any notice of intention to defend within the stipulated time limit. Default judgment was entered against D2 on 24 August 2021. 

10.  Soon after, it came to D1 & D3’s attention that default judgment had been obtained against D2.  Correspondence between the parties then followed, and on 27 August 2021 D1 & D3 requested the Plaintiff to undertake not to enforce its judgment against D2.  The Plaintiff did not reply to this request.  

11.  No steps seem to have been taken by the Plaintiff to enforce its judgment against D2 since then.  On 24 November 2022, D1 & D3 took out a summons to set aside the default judgment.  D1 & D3 argue that service on D2 was bad because she was not present in the jurisdiction when the writ was served.  In gist, it is alleged that D2 has been in the Philippines since August 2019 and has since been reported missing on 9 November 2019. 

Legal Principles

12.  No application has been made by D2 herself to set aside the default judgment, however it is well-accepted that the discretion under O 13 r 9 Rules of the High Court (Cap 4A)  (“RHC”)  may be exercised by the Court even on the application of third parties. 

13.  That said, such third party must show that he has a direct interest in setting aside the judgment and must either do so in the defendant’s name or he must make the plaintiff and defendant parties to the application and ask for leave to intervene: White Book 2023 §13/9/22.  Leave is not required where the person seeking to set aside default judgment is already party to proceedings: Right Margin Ltd v Tian Liang Ltd & Ors (unrep, HCA 265/2013, 15 July 2015)  at§55 per Toh J.  

14.  Where a judgment in default has been obtained irregularly, it is liable to be set aside ex debito justitiae without consideration of the merits of the proposed defence.  The Court does not have to accept a defendant’s assertion that he has not received the writ.  It is for the defendant to show, with compelling evidence, that he had no notice of the writ at the time default judgment was entered.  Finally, even if there was no effective service, the Court retains a residual discretion to impose terms for setting aside the default judgment having regard to the parties’ conduct: Cheung Sai Lon v Cheung Sai Ha & Anor [2021] HKCFI 904 at §14 per Coleman J.  

15.  Where a defendant is not physically present in the jurisdiction when the writ was purportedly served, he is entitled as of right to have the default judgment set aside: White Book 2023 §13/9/5. 

16.  Where the defendant deposes that he has not received the writ through the post, the Court may have little option but to believe him unless there is sufficient evidence to cast doubt on his credibility or to enable the Court to disbelieve him. This does not mean that the Court must accept the defendant’s assertion no matter how improbable; whether he has succeeded in discharging the burden of proving that the judgment was irregular is still a matter of evidence: Wei Bingqing v Xie Dangrong (unrep, HCA 2654/2003, 2 August 2005)  at pp 11-13 per Chung J.  

Ds’ Locus to Set Aside the Judgment

17.  The Plaintiff has raised no objection to D1 & D3 being the parties applying to set aside the judgment entered against D2.  

18.  As D1 & D3 are co-defendants in the present action, there is no need for them to obtain leave to apply to set aside the judgment against D2: Right Margin Ltd at §55.  Their locus standi to do so, however, cannot be based on D2’s consent as D1 & D3 claim to have lost contact with her since September 2019.  Rather, it is based on a common question of the relief the Plaintiff is seeking against all of the Defendants. 

19.  It is trite a partner in a firm is jointly and severally liable for all obligations incurred by the firm while he is a partner, including all liabilities arising from wrongs committed by other partners in the firm acting in that capacity: ss 11-12 Partnership Ordinance (Cap 38).  A judgment obtained against D2 in her capacity as a former partner of Axis Asia for its receipt of the Plaintiff’s funds can therefore be enforced against both D1 & D3 jointly and severally as fellow ex-partners.  

20.  Accordingly, as with the guarantor who was sought to be made liable in Right Margin Ltd at §56, there is a clear interest on the part of D1 & D3 in having the judgment set aside.  I am satisfied that they have locus standi to make the application. 

Explanation for Lapse of Time

21.  D1 & D3 became aware of the default judgment against D2 in around August 2021, but only took out the summons to set it aside over a year later on 24 November 2022. 

22.  D1 & D3 say that they exchanged correspondence with the Plaintiff in August 2021 regarding the default judgment but eventually received no reply when they asked the Plaintiff to undertake not to enforce it. 

23.  From August 2021 to November 2022, save for a security for costs application by D1 & D3 heard in August 2022, neither party seems to have taken steps to move matters forward.  The Plaintiff has not explained why it did not seek to enforce its judgment against D2 while D1 & D3 have not explained why it took them over a year to take out the summons. 

24.  The Plaintiff does make a complaint about D1 & D3’s delay in its skeleton, but it does not point to any prejudice that it has suffered due to the lapse of time. Given that D1 & D3 have been clear throughout that they intend to set aside the judgment, in the absence of any suggestion of prejudice on the part of the Plaintiff, I do not consider the lapse of time to be so significant so as to prevent the Court from allowing the summons if indeed service on D2 was irregular.  

Whether Service was Irregular

25.  D1 & D3 claim that service on D2 was bad because she was not physically present in Hong Kong at the time the writ was served.  In support they rely on three pieces of evidence:-

(1)  A copy of D2’s passport, which is now being kept by D1 & D3 (“Passport Copy”). 

(2)  A copy of D2’s travel records obtained from the Philippines Authorities showing that D2 has not left the Philippines since August 2019 (“Travel Record”). 

(3)  A police report made to the Tubao Police Station on 9 November 2019 reporting D2 missing (“Police Report”).  

26.  The Plaintiff in its skeleton responds that the above evidence is of poor quality and/or self-serving, and so cannot discharge the burden of proving that D2 was not in Hong Kong at the relevant time.  I shall examine each piece of evidence in turn.  

The Passport Copy

27.  D1 in his affirmation in support of the summons exhibited a black and white photocopy of the pages of D2’s passport showing her personal particulars.  The Passport Copy is not a certified true copy and D1 & D3 have provided no explanation as to why they did not obtain one.  

28.  The Plaintiff complains that the Passport Copy is of low quality and does not demonstrate that D2 only has one passport.  While it is true that the Passport Copy does not show that D2 only has one passport, it would be difficult to adduce evidence to prove the negative in this case.  Nevertheless, D1 has testified in a sworn affirmation that D2 has no other passports.  

29.  As D1 is D2’s father, it is not inherently incredible that the number of passports D2 has would be within D1’s personal knowledge, and there is no evidence that D1 should be disbelieved on this point. 

The Travel Record

30.  D1 in his affirmation originally exhibited only a colour photograph of the Travel Record.  However, the Travel Record has since been couriered to D1 & D3’s solicitors and a true copy of the same is exhibited in the affirmation of Mann Zian Hsien David. 

31.  The Travel Record shows that D2 last entered the Philippines on 27 August 2019 and has not departed the country since then.  The natural conclusion, therefore, is that D2 was in the Philippines at the time of service of the writ in April 2021.  The Travel Record was not alleged to be a forgery, and there is no evidence that D2 had exited the Philippines in a way which would have resulted in her departure not being recorded on the Travel Record.  

32.  I accept that the Travel Record shows that D2 was not in Hong Kong at the time of service of the writ.  

The Police Report

33.  Finally, D1 in his affirmation exhibits a colour photocopy of the Police Report.  On its face, the Police Report seems to show that D2’s mother reported her missing on 9 November 2019 and that she was last seen on 26 September 2019.  The Police Report appears to be signed by a Filipino police officer but D1 & D3 have not produced a certified true copy of it.  Again, there is no explanation why no such copy was provided to the Court.  

34.  The Plaintiff complains that the Police Report is self-serving because the report was made by D2’s mother.  On its face, it would be natural for a mother to file a police report if her daughter went missing.  The Plaintiff does not go so far as to allege that D2’s mother had filed a false police report.   

The Judgment Should be Set Aside

35.  As shall be apparent, I take the view that the Travel Record shows that D2 was in the Philippines at the time of service of the writ and so she (or D1 & D3)  are entitled to have the judgment set aside as of right.  

Conclusion

36.  For the foregoing reasons I shall make the following orders:-

(1)  The Final Judgment entered against D2 on 24^th August 2021 be set aside.  

(2)  Costs order nisi that the Plaintiff shall bear the costs of the D1 and D3’s application to set aside the default judgment, to be summarily assessed.  The costs order nisi shall become absolute if no application for variation is taken out within 14 days.  

(3)  The D1 and D3 shall submit their statement of costs for summary assessment on or before 10 March 2023, and the Plaintiff shall submit its objection thereto on or before 17 March 2023.