KO SIN YUN v. CHAN CHUEN AND ANOTHER

DCCJ6693/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6693 OF 2004

D E C I S I O N

1.  In this action the plaintiff obtained interlocutory judgment against the 1st defendant for the recovery of a loan of $600,000 on 15 February 2005 in default of Notice of Intention to Defend.  The 1st defendant applied to set the judgment aside by a summons dated 16 November 2005. 

2.  The ground of the 1st defendant’s application was that the service was irregular or defective.  Both the 1st defendant and the plaintiff filed affirmations on the circumstances of the service of the Writ of Summons.  The second affirmation of Chu Hei Chun, filed on 16 November 2005, was particularly detailed in so far as the incident of the service of the Writ of Summons was concerned.  In paragraph 5 of his second affirmation the service on 14 January 2005 at the 1st defendant’s workplace, was described in great details. 

3.  Mr Chu is and was the solicitor representing the plaintiff, on that day of service he had attended the restaurant with the plaintiff and his wife.  The restaurant was where the 1st defendant worked, and it is Mr Chu’s evidence on affidavit that he effected service on the 1st defendant personally after explaining to him the purpose of his visit and the contents of the Writ of Summons.

4.  The 1st defendant admitted the meeting with Mr Chu and the plaintiff on 14 January 2005, but he denied that he had accepted service of the Writ of Summons on that day. 

5.  The circumstances of the personal service incident on 14 January 2005 clearly established the 1st defendant had knowledge of the proceedings against him.  He had refused to take over the document served on him in the process.  However, it is clear that he had knowledge of the proceedings and that was the purpose of the visit of Mr Chu, accompanied by the plaintiff whom he recognised immediately.

6.  There are a number of Hong Kong authorities that establish the manner for personal service and the manner of Mr Chu’s service of the writ to be sufficient service deemed to be effected.  Order 65/2/3 of the Hong Kong Civil Procedure 2006, on page 989 says:

“If the defendant refuses to take the copy writ it is not necessary to leave it in his actual corporeal possession but it is sufficient to inform him of its nature and throw it down in his presence”.

7.  The 1st defendant claimed that he ran away as soon as he was told the purpose of Mr Chu’s visit and he did not take the documents.  I do not accept his version of his making his escape as he saw the plaintiff with Mr Zhu in a restaurant where he worked in a senior position.  The burden is on the 1st defendant to show the service was irregular and the circumstances described by Chu satisfied Order 65/2/3.  I find Mr Chu has given a credible account of the service and I am satisfied the service was a regular one.  

Merits of the 1st defendant’s defence

8.  The statement of claim in its present form stated that it is demanding repayment of a loan of $600,000.  Evidenced by a memorandum dated 25 September 1998, the 1st defendant was able to show in the documents exhibited that in fact the loan was made not on 25 September 1998 but some months before.  He exhibited two previous IOU’s dated 26 January 1998 and 25 May 1998 and a cheque for $600,000 dated 25 September 1998.  He also exhibited a large number of cheques and evidence of transfer of funds to the plaintiff.  These cheques exhibited were for the sum of $18,000 which the 1st defendant claimed to be monthly repayments of the loan of $600,000.  The 1st defendant further claimed that he had repaid $622,000 by January 2002.  The plaintiff, in his affirmation, replied that those payments were interests on the $600,000 loan at 3 per cent per month.  The plaintiff admitted that there was an agreement, when the loan was made, the interest of 3 per cent per month would be paid by the 1st defendant to the plaintiff, hence those various payments.

9.  Mr Ngai also demonstrated through the documents that a number of those cheques, particularly the first six or seven payments, were made by post-dated cheques following in sequence the numbers of the cheques.  Clearly, the evidence shows they were monthly payments and they do look like they were payments similar to a 3 per cent per month on the $600,000 loan.  However, it is not a matter that the court should decide at this stage whether they were interest payments or repayments of loan.  The fact of the matter is, the statement of claim of the plaintiff relied on a memorandum of 25 September 1998 which is admitted, and not denied by the plaintiff, that the loan was made well before 25 September 1998.

10.  The statement of claim, as it stands, made no mention of the payment of interest as part of the agreement between the parties when the loan was first made.  This issue of what was the agreement for the loan must be an issue that should be decided in a trial before a decision can be reached.  Mr Ngai submitted that the statement of claim can be amended and the court should allow it to be amended.  There was no application to amend the statement of claim today or at any stage.

11.  Mr Ngai relied on the Hong Kong Civil Procedure 2006, page 164, Order 14/1/5, which says:

“The statement of claim must be complete and good in itself.  Any defect or omission cannot be corrected or supplemented by the plaintiff’s affirmation or affidavit.”

12.  Mr Ngai claimed that since the plaintiff is not asking for recovery of interests on the loan, the plaintiff need not plead the interest agreement.  He claimed this may be true only if the plaintiff is looking for recovery of interests on the loan as well as the principal. 

13.  But what the ruling really meant is the statement of claim cannot be supplemented by affidavit evidence.  It also meant that defects cannot be corrected by evidence on affidavit, and since the 1st defendant’s affidavit disclosed a much fuller story behind the loan that has gone beyond the memorandum of 25 September 1998.

The evidence

14.  The defendant has shown evidence on monthly payments.  He has shown evidence with exhibits of cheques and money transfers.  The plaintiff did not deny there were such payments except he claimed they were payments of interest while the defendant claimed that they were repayments of the capital of the loan.  Clearly, these are facts in dispute which supported the 1st defendant’s claim that he has a good defence.  In order to determine whether there was an agreement for interest to be paid and to determine what were the terms of the loan in the first place, a full hearing shall be necessary with witness evidence.

15.  For these reasons, I would set aside the judgment with costs to be borne by the 1st defendant, to be taxed if not agreed, with certificate for counsel.

 (Discussion)

16.  Leave to the plaintiff to amend the statement of claim within 14 days hereof and leave to the 1st defendant to file and serve a defence within 14 days thereafter.