北京橙天嘉禾影視製作有限公司 v. 張承勷

HCA 2481/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2481 OF 2013

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D E C I S I O N

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Introduction

1.There are two summonses before this court:

i.   The summons issued by the defendant (“D”) on 22 October 2015 for the final judgment entered into against D on 21 January 2014 be set aside on irregularity (“Setting Aside Application”);

ii.  A further summons issued by D on 24 March 2016 for retrospective leave to file a notice of intention to adduce evidence of findings and decisions made and given on questions of law of the People’s Republic of China and for leave to adduce such evidence (“Leave Application”).

Brief Background

2.P had in 2011 lodged a civil claim against D in the Beijing Chao Yang District People’s Court/北京市朝陽區人民法院 (“Chaoyang Court”) under (2011) 朝民初字 第09996号for a sum of money said to have been loaned to D by P (“PRC Proceedings”).  Subsequently, P obtained a civil judgment in its favour on 10 November 2011 (“PRC Judgment”).

3.P’s claim in the present action is based on the PRC Judgment and is essentially an enforcement of the PRC Judgment.

4.At all material times, P was and still is a company incorporated under PRC laws.  P’s former name was Beijing Chengtian Zhihong TV & Film Production Co Ltd/北京橙天智鴻影視製作有限公司 but it changed to its present name on 25 March 2010.  P is a subsidiary company of Orange Sky Golden Harvest Entertainment (Holdings) Limited/橙天嘉禾娛樂 (集團) 有限公司 (“Group”), a company publicly listed in Hong Kong.  Mr Wu KeBo/伍克波 (“Wu”) is the Chairman of the Group.

5.In the PRC Judgment, D was described as a Hong Kong citizen holding a Travel Permit for Hong Kong and Macau Residents.  It is not disputed that D holds a Hong Kong Identity Card.  However, according to D, he has been living in Mainland China since 2007 (first in Guangzhou and then in Beijing) and that he has not been physically back in Hong Kong since 2012.

6.D did not appear at the hearing before the Chaoyang Court, and it was stated in the PRC Judgment that the service of the PRC Proceedings was by way of public notice, and D’s whereabouts were unknown.  Only P’s representatives had turned up at the hearing which led to the PRC Judgment.

7.As stated in the PRC Judgment, P and D had entered into a loan agreement on 30 December 2008 under which P provided a loan of RMB 3m to D (“Loan Agreement”).  P lodged its claim against D as the loan amount had not been repaid, and under the PRC Judgment, the Chaoyang Court ordered D to pay P a total sum of RMB 3,406,191.78, being the loan principal of RMB 3m, plus interest on the loan of RMB 356,191.78, P’s lawyers fees of RMB 50,000 and the court’s case acceptance fees of RMB 34,050. 

8.It was further stated in the PRC Judgment that P had 15 days upon service of the PRC Judgment to lodge an appeal, and that D had 30 days to lodge his appeal.  There was no appeal lodged by D within the prescribed time limit.

9.The PRC Judgment became effective as from 16 March 2012 pursuant to a Certificate of Effectiveness issued by the Chaoyang Court.

10.According to D, all along he had no knowledge of the PRC Proceedings.  Then in or about June 2012, he received a call from the Chaoyang Court, asking him to pick up a letter enclosing a notice of execution/執行通知^[1].  When he picked up the letter, he was told that P was entitled to restrain him from going abroad.  Later, in July 2012, when he tried to go to Hong Kong, he was stopped by the immigration at the border and was told that he was prohibited from leaving Mainland China, including to go to Hong Kong.  According to D, he immediately consulted his legal advisers in PRC and D said it was only then he found out about the PRC Judgment^[2], and also the travel restriction applied by P and issued by the Chaoyang Court to enforce the PRC Judgment (“Travel Restriction Order”).

11.D said as he thought it was by then too late to apply for a review or to set aside or to appeal against the PRC Judgment^[3], he then tried to settle the dispute with P privately.

12.In the meantime, as P took the view that the PRC Judgment was a final and conclusive judgment and as the total amount was unsatisfied, P issued the writ in the present action on 19 December 2013 to enforce the same (“Writ”).  As at the date of the Writ, the total amount due and payable by D under the PRC Judgment was RMB 4,165,676.66 inclusive of interests (“Judgment Sum”), and this was also the amount claimed by P in the Writ plus interest and costs.  The service of the Writ will be set out later in this decision.

13.There being no notice to defend given by D, on 21 January 2014, P entered final judgment against D for the Judgment Sum plus interest and fixed costs of HK$11,045, (“Final Judgment”).

14.D’s case in his 1^st affirmation had been that he knew nothing about the Final Judgment. According to D, in August 2014, he received an email sent to him enclosing a copy of a statutory demand dated 8 August 2014 (“Statutory Demand”)^[4].  D said he thought that this was a “mere recognition” by the Hong Kong Court of the PRC Judgment, and that as it was not possible to appeal against the PRC Judgment, he thought the Hong Kong judgment was final as well.  Again, he said he tried to settle it privately with P, and that eventually at about the end of 2014 he came up with a proposal but this was rejected by P.

15.According to D, there was no more correspondence between the parties since the end of 2014 until 17 September 2015, when he received a bankruptcy petition dated 24 August 2015 (“Petition”). Upon receipt of the Petition, D said he immediately looked for legal advisers in Hong Kong, but due to the Travel Restriction Order, he was only able to meet up with them in Shenzhen on 2 October 2015, and that it was only thereafter that his legal advisers found out that the Final Judgment was a default judgment and that he was advised that the Final Judgment could be set aside as he was not physically in Hong Kong at the time of the service of the Writ.

16.It was D’s case that P should be at least aware of the Travel Restriction Order and that D could not come to Hong Kong, and D found it difficult to understand why P served and sent the Writ and all relevant documents in the present action to a Hong Kong address alleged by P to be D’s, while all along D was not in Hong Kong. 

17.Anyway, D’s Setting Aside Application was eventually issued some 1 year and 9 months after the Final Judgment, on 22 October 2015, which was based on the fact that D had never been physically present within Hong Kong during the period from 3 July 2012 to 31 January 2016, as seen from D’s travel record obtained from the Immigration Department^[5], and thus the Final Judgment was entered into irregularly.  The Setting Aside Application was stated to be issued under Order 2 rule 2 of the Rules of the High Court (RHC), as well as Order 13 rule 9 of RHC and also the inherent jurisdiction of the High Court.

18.It was D’s case that the Final Judgment should be set aside as of right due to irregularity as D was not physically in Hong Kong at the time of the service of the Writ, or alternatively, if the Final Judgment was entered into regularly, it should be set aside as D had a meritorious defence to P’s claim, in that (i) the PRC Judgment was not registered under the Mainland Judgments (Reciprocal Enforcement Ordinance, Cap 597 and that (ii) the PRC Judgment, not being final and conclusive, should not have been recognized  or enforced by the Hong Kong Court, and (iii) he had a meritorious defence to the PRC Judgment and that he was not liable to pay the amount claimed.

19.As for (iii) above, according to D, the RMB 3m referred to in the Loan Agreement (which was referred to D as a “Written Prepayment Agreement”) was not in fact a loan to D, but represented an investment amount injected by P into a joint venture business to be established in Mainland China, and the sum of RMB 3m was a prepayment for the agreed investment fund of RMB 27m.  According to D, it was P and Wu who subsequently unilaterally withdrew from the joint venture project, and that D had been advised and believed that, subject to the PRC legal opinion he was seeking, he would have a meritorious defence and that he would not be liable to repay the investment amount of RMB 3m.

20.Briefly, it was D’s case that in 2007, he moved to Guangzhou from Hong Kong to operate a company 廣東至尚文化傳播公司/ Guangdong Zhishang which ran 廣州電台頻道/Guangzhou Radio.  Later as he would like to expand that broadcasting business to nation-wide, he moved to Beijing in 2008, and that the plan was to start up a joint venture project and invite investors to invest in the joint venture business and that a joint venture company would be incorporated to run the business. According to D, he and Wu had an “oral joint venture agreement”, and also an “oral prepayment agreement” under which Wu agreed to prepay RMB 3m for the operation expenses of Guangzhou Radio to keep it running and to preserve its value.  The “Written Prepayment Agreement” was later signed between D and P on 30 December 2008^[6].  It was D’s case that the 1st RMB 1.5m advanced by P under the Loan Agreement was to Guangdong Zhishang’s account, and the 2^nd RMB 1.5m was by 3 payments into D’s personal account, and that these sums were not repayable by D as they represented prepayment of the investment amount.

21.Anyway, by the time of the hearing before this court, P no longer took issue with whether D was within Hong Kong during the relevant period or at the time when service was effected in Hong Kong.   P no longer opposed the setting aside of the Final Judgment, but P asked this court to exercise its discretion to impose a condition for D to pay the judgment sum into court.

22.Counsel Ms Andrea Yu appeared for P at the hearing, and Mr Jonathan Chan appeared for D.

The Legal Principles

23.Under Order 10 rule 1(2) of the Rules of the High Court (RHC), the defendant must be within the jurisdiction at the time the writ was served.

24.An application to set aside for irregularity of any judgment may be made under Order 2 rule 2 of the RHC.  Order 2 essentially deals with the effect of non-compliance with rules[7]. Under Order 2 rule 2,  such an application has to be made within a reasonable time and before the party applying has taken any fresh step after becoming aware of the irregularity.

25.Under the rules of Order 13 of RHC, a plaintiff may obtain judgment where the defendant “fails to give notice of intention to defend”^[8].   Order 13 rule 9 then provides that the court may on such terms as it thinks just, set aside or vary any judgment entered in pursuance of that Order^[9]. 

26.So far as the developments in Hong Kong on Order 13 rule 9  are concerned, it would appear that Po Kwong Marble Factory v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 is the definitive authority that an irregular judgment would be set aside ex debito justitiae ie without regard to the merits of the proposed defence^[10].

27.In particular, Sears J said in Po Kwong Marble :

“The provisions of O.13 r.9, as I have said, are wide in their context. In my judgment, whilst it can be rightly said that a judgment which has been obtained irregularly ought to be set aside as of right, in other words that the merits of the particular defence to the claim do not have to be entered into by the court, nevertheless, there is always a residual discretion in the court to have regard to the conduct of the parties. For example, if a judgment has been obtained irregularly and the writ comes to the notice of the defendant, he may delay for a certain period of time before taking any action on the writ. In my judgment, the court still has a discretion- having regard to what the defendant himself has done- to deprive him, if necessary, of that judgment or alternatively, to impose terms upon the setting aside of the judgment which accord with justice having regard to the facts of the particular case.”

28.Bokhary JA, as he then was, had also said in the Po Kwong Marble that :

“Another thing I might have done was to underline the nature of the statutory jurisdiction. ‘Ex debitio justitiae’ or as of right means without going into the actual merits of the defence. It does not mean shutting one’s eyes the circumstances surrounding the question of service and why things went wrong in that regard. The court’s statutory jurisdiction is unfettered[11].”

29.The above dicta of Sears J and Bokhary JA in Po Kwong Marble had been cited with approval in a number of subsequent cases, including Liu Chong Hing Bank Limited v Union Word (HK) Limited, unrep, CACV 285/2003, 9 December 2003^[12] and Sinokawa Investment (Holdings) Ltd v Li Chun, unrep, HCA 15641/1999, 23 June 2006^[13].

30.The approach in Po Kwong Marble had also been summarized by Waung J in Desirable International Fashions Ltd (In Liq) v Chiang Shi Chau [1997] 3 HKC 170, as follows^[14] :

“(1)  The court should not go into the merits of the defence in considering the setting aside of irregular judgment, as otherwise the distinction between irregular and regular judgement disappears and the defendant of an irregular judgment will be in an invidious position of having to go fully into the merits of the defence and such a defendant would be worse off as a result no proper service having been effected on him;

(2)  If there was such fundamental defect in the service, then the court can take such matter into account and normally would arrive at the result of setting aside without imposing any terms;

(3)  The conduct of both parties in relation to the proceedings could be taken into account in deciding whether the default judgment should be set aside and if so on what terms.”

31.There was no dispute between Counsel on the above broad principles, their disagreement being mainly what matters should be taken into account by this court when considering whether the Final Judgment should be set aside on terms.

32.It was Ms Yu’s submission that in exercising its discretion to impose a condition that the defendant pay the judgment sum into court, the court would take into consideration (i) whether there was substantial delay on the part of the defendant in applying to set aside the judgment; (ii) whether the plaintiff had suffered prejudice; (iii) whether there was a real risk that the plaintiff would ultimately fail to enforce the judgment against the defendant.

33.In this regard, Ms Yu had referred this court to Singh v Atombrook Ltd [1989] 1 WLR 810.  In this case, the judge had decided that he would only set aside the judgment under Order 13 rule 9 provided the defendants brought the full amount claimed into court^[15].  The irregularity in that case was the wrong description of the name of the defendant and it was held that the defendant was not in any way misled by this. It would also appear that the judge had decided to set aside the judgment conditional upon the payment into court on the basis that the defence as it appeared in the documents before the judge was shadowy^[16].  The Court of Appeal dismissed the appeal by the defendants.

34.Notwithstanding that the judge’s decision appeared to be based on the merits of the defence, Kerr LJ, in giving his judgment, had commented that there had been delay for several months from the time when the defendants knew about the writ and from the time the  defendants had been advised to have the judgment set aside if they wished to do so before they actually made the application , and that the view of the judge that that was an unreasonably long time in the circumstances was not open to criticism^[17].  The delay referred to was about 3 months.

35.Ms Yu had also referred this court to the Court of Appeal Judgment in Liu Chong Hing Bank case.  Mr Chan further referred to the judgment below, [2004] 1 HKC 622.  As seen in the judgment below,   Deputy Judge Longley had set aside the judgment against the 6^th defendant as being irregular but conditional upon the 6th defendant paying into the court the amount alleged by the plaintiff. Although the proceedings in that case were commenced by way of an originating summons under Order 88 and there was no equivalent of Order 13 thereunder, it was held that the principles regarding the setting aside of judgment where there had been judgment under Order 28 rule 4 were the same as if the proceedings had been begun by writ and judgment had been entered under Order 13^[18].

36.In the above case, the originating summons was served at the address of the 6^th defendant as given in the most up to date annual return of the companies of which the 6^th defendant was the majority shareholder. Judgment was given against the 6th defendant in his absence.  Later, the plaintiff’s solicitors discovered that the 6th defendant was one of the registered owners of a property at another address, and a letter of demand was sent by the solicitors to the 6^th defendant at this other address referring to the judgment.  Although the 6^th defendant had sent a fax thereafter to the plaintiff complaining of the conduct of the debt collectors, he did not instruct solicitors to set aside the judgment until a charging order nisi was served on him, some 5 months later when he received the letter from the plaintiff’s solicitors.

37.It was the 6^th defendant’s complaint that he had never resided at the address given in the annual return and that he had no knowledge of any legal proceedings prior to receipt of the charging order nisi.  Although Deputy Judge Longley accepted that the 6^th defendant had not in fact received the originating summons, he had said there was little that could be said in favour of the 6^th defendant’s conduct, and that bearing in mind his admitted conduct, one could have little sympathy for the position he was in.  The judge imposed the condition having regard to his irresponsible conduct.

38.The irresponsible conduct referred to by the Learned Judge included that the 6^th defendant signed company documents without paying attention to the address, and further on receiving the letter  from the plaintiff’s solicitors, he had apparently made no further enquiry about the matter on being told it related to a guarantee signed by him to the plaintiff.

39.On appeal, it was held that the Learned Judge’s approach to follow the judgments in Po Kwong Marble was correct.  Roger VP had said when the Learned Judge referred to the irresponsible conduct of the 6^th defendant, he clearly also had in mind that the 6^th defendant had not condescended to show any defence on the merits to the plaintiff’s claim^[19]. It was further said by Yuen JA that it was also clear from Po Kwong Marble that in the exercise of its discretion, the court would consider other relevant matters, including conduct of the defendant after he learnt of the proceedings, and where in the case before her, the defendant delayed substantially before applying to court to set aside the judgment, the court was clearly justified in setting aside the judgment on terms^[20].

40.Another case referred to by Ms Yu was Kerry Freight (Hong Kong) Limited v Del Prado Asia Ltd, unrep, HCA 2660/2004, 26 July 2005 where it could be seen that the court would take also into consideration whether the plaintiff had suffered prejudice, and the court imposed condition on the defendant to pay the outstanding judgment sum into court where the plaintiff suffered prejudice in light of its pending petition to wind-up the defendant^[21].  In that case, there had been a suspicious retrospective notification of change of registered address after service of the writ and the defendant was also unreachable at its phone and fax numbers.

41.In Wing Lung Bank v Ho Man Iam [1999] 3 HKC 368, the defendant was not in Hong Kong at the relevant time of service and the evidence was that he was not aware of the default judgment until almost 2 years 5 months later but he immediately instructed solicitors after discovering that judgment had been entered against him.  Keith J weighed up all the considerations and had taken into account the fact that the lapse of time of more than 3 years between the entering of the judgment and the application to set it aside had not seriously prejudiced the plaintiff.  He concluded that, subject to the argument about waiver, that the judgment should be set aside, provided a mechanism could be found to give the bank the comfort of knowing that it would be able to execute any judgment it obtained against the defendant’s assets^[22] (emphasis added).  Thus, it would appear that the default judgment was set aside subject to a proviso.

42.As also seen in the Wing Lung Bank case, the Kerry Freight case, the Liu Chong Hing Bank case and the Sinokawa case, in considering whether the defendant delayed in his application to set aside a judgment, the court would consider when the defendant obtained knowledge of the facts which gave rise to the irregularity of the judgment.

43.Further, as seen in the Po Kwong Marble case, the court would also take into consideration whether from the conduct of the defendant there was a real risk that the plaintiff would ultimately fail to enforce the judgment against the defendant.  In that case, the court ordered the defendant to pay the outstanding sum into court where there was a real risk, as suggested by the defendant’s conduct of providing a misleading address, that any judgment which the plaintiff ultimately obtained would be an empty one if the Court did not guard against that, and that the Court found that the way to guard against it was to impose the condition that the defendant pay the judgment sum into Court.

44.In Bank Austria Aktiengesellschaft v Sukamto [2002] 1 HKC 232, where the defendant went underground and essentially adopted a “catch me if you can” attitude, the court considered there was a real risk on the facts that any judgment that the plaintiff ultimately obtained would be empty, the judgment would be set aside on condition that the defendant made payment into court.

45.Mr Chan had submitted that the key question for the court in the present case, is not whether or not there had been any delay or whether or not the D is in financial difficulty such that P may not be able to enforce its claim, but (i) whether or not D’s conduct has been shown to be an abuse; and (ii) whether or not D has contributed to what went wrong with service of the originating process, as seen in the case of Wai Kam Foo Daniel and Wai Kam Wah Raymond, unrep, HCA 957/2010, 23 November 2011.

46.Further, Mr Chan had submitted that, given that it “must be rare” that payment into court is made a condition^[23], there must be a logical connection between the imposition of a condition of a full payment into court and the circumstances of the case.  It was also submitted by Mr Chan that the rationale behind imposing condition of payment into court is to guard against the possibility that, if the default judgment is set aside unconditionally, the defendant who had a history of evading service/enforcement may “go to ground” again such that the plaintiff may face some difficulties in locating the defendant when starting the whole process again and/or in enforcing any judgment it may obtain; and hence, there is prejudice to P and/or a real risk of empty enforcement, and the imposition of a condition on the setting aside of an irregular judgment is to guard against such risk.

47.Mr Chan had referred to the Desirable case and submitted that Waung J had rejected the plaintiff’s suggestion that delay in applying to set aside and the risk of obtaining an empty judgment constituted sufficient reasons for imposing conditions for setting aside the irregular judgment^[24].  This was also referred to by Master M Ng, as she then was, in Wai Kam Foo Daniel^[25].

48.The relevant parts of Waung J’s judgment on the “Delay” and the “Risk of Empty Judgment” were, however, omitted in the report by the editor of the Hong Kong Cases^[26]. 

49.On my reading of the unedited version of Waung J’s judgment in that case^[27], what the Learned Judge had said, in relation to the delay, was that he accepted the explanations given by the defendant for the delay and he rejected the suggestion of the plaintiff that the explanations were not to be believed or were to be dismissed as being wholly without substance.  Further, what Waung J had also said was that the mere fact that there was a possibility that the money released from court would be taken out of Hong Kong by the defendant who was a foreigner, which was the basis of the plaintiff’s case of there being a risk of empty judgment, did not provide a good reason for the court to impose terms on setting aside.

50.It was under the above circumstances that Waung J did not accept the plaintiff’s Counsel’s suggestions that having regard to the conduct of the defendant, he should exercise his discretion by imposing terms on setting aside the default judgment.  In fact, the Learned Judge went so far to say that if conduct was to be taken into account, then it should the conduct of the plaintiff.  Anyway, on the issues of delay and /or risk of empty judgment, Desirable was really decided on the facts of that case.

51.In Phillip Securities (HK) Ltd v Lam Chi Bin Stanley [2002] 1 HKC 432, DHCJ Lam, as he then was, had set aside the default judgment unconditionally because the plaintiff chose to serve the writ of summons where its managing director knew the defendant was not there whilst it had knowledge of other addresses where the defendant could be contacted (emphasis added). Although the Learned Judge had said that he saw no reason why any condition should be attached to the setting aside of the irregular default judgment, he also pointed out that in that case, the plaintiff’s counsel did not submit there were any special circumstances which would merit conditions to be imposed^[28].

52.I have not set out all the authorities referred to by both Counsel, but upon reading them, and as seen in those passages from Sear J and Bokhary JA in Po Kwong Marble quoted earlier, the provisions of Order 13 rule 9 are wide, and there is always a residual discretion in the court to have regard to the conduct of the parties and such discretion is unfettered.  

53.Further, as said by Rogers VP in Liu Chong Hing each case has to be decided on the particular facts thereof, and as said by Yuen JA therein, in the exercise of its residual discretion under Order 13 rule 9, the court would consider all relevant matters, including conduct of the defendant after he learnt of the proceedings. 

54.I now turn to the present case. 

Service

55.Even though P no longer opposed the Final Judgment to be set aside, it is still relevant to consider how service of the Writ was carried out.

56.First of all, for the PRC Proceedings, according to the affirmation of the Assistant Legal Manager of P’s affiliate company within the Group, Yuen Yeuk Sheung (“Yuen”), service of all the court papers in the PRC Proceedings were arranged by the Chaoyang Court and that P had never been notified by the Chaoyang Court or any other PRC authorities about D’s whereabouts, and that P had no means of checking whether D was in Mainland China or not.  As mentioned earlier, in the PRC Judgment, D’s whereabouts were said to be unknown and that the service of the PRC Proceedings was said to be by public notice.

57.Yuen had produced a copy of the annual return of a company incorporated in Hong Kong of which D was registered as a sole shareholder and director, as at 10 March 2012, but filed on 20 April 2012.  D’s address therein was given to be that at Flat 14D, Wah Fat Building in Mongkok (“Mongkok Address”).  According to Yuen, the Mongkok Address was the last known address of D, and this was the address where the Writ and other documents were served.

58.As set out later in this decision, the evidence showed that D had moved around and had changed his addresses both in Hong Kong and in Mainland China several times.  Yuen admitted that P had obtained the Travel Restriction Order against D and this was in about June/July 2012, but he said P did not know whether D was in fact in Mainland China or Hong Kong at the time when the Writ was served on 19 December 2013 at the Mongkok Address.

59.Yuen had also produced about 9 emails from 10-28 February 2014 (“9 Emails”) between D and the then Legal Counsel of the Group, Dorothy Tso (“Dorothy”).  In particular, it can be seen that Dorothy had sent a copy of the Final Judgment to D by email on 10 February 2014 at D’s then email address “[email protected]”, although there was no evidence that she or any one else had sent to D by email a copy of the  Writ upon its issue.  Anyway, in reply, on 12 February 2014, D had sent an email to Dorothy stating that he was still “locked down” in China, and that his attitude had not been evasive, and that he was suffering from serious depression “after more than 18 months under the stress of cul de sac”^[29]. He had referred to a letter he sent to another person called Kent last year, namely in 2013, and he had asked to be allowed a plan of repayment, saying that bankrupting him would bring no financial return to P.

60.Yuen had explained that some parts of the email chain concerning the 9 Emails were marked “without prejudice” as they contained discussions of D’s repayment proposal produced by Yuen and they had not been produced.  I note that there were also other communications between D and “Kent” which also had not been produced.   

61.Anyway, the 9 Emails indicated that P had D’s then email address, and that P and D had been in email communication, and further, D himself had said he was “locked down” in Mainland China, for some 18 months and asked for release of the Travel Restriction Order .

62.D admitted that the Mongkok Address was where he had lived and according to him the lease was terminated only around end of 2012.  However, there was no sufficient evidence that at the time of the service of the Writ effected in December 2013, there were other addresses of D, whether in Hong Kong or in Beijing, that P should be aware of, bearing in mind in the PRC Court, the Chaoyang Court had said D’s whereabouts were unknown in 2011.

63.Having considered the 9 Emails, I am of the view that P should nevertheless realize that D was most probably not in Hong Kong at the time of service of the Writ.  I accept, however, that P had probably no means of verifying this at the time, apart from what was said by D in his emails. 

64.The service of the Writ at the Mongkok Address was in accordance with the rules if D was within the jurisdiction.  D had produced his travel record from the Immigration Department.  Having considered that, I am prepared to accept that, on all the present evidence before this court, D did not appear to be physically in Hong Kong at the relevant time of service of the Writ.

65.As stated in the Liu Chong Hing case by Deputy Judge Longley, in order for a default judgment to be regular, there does not merely need to be service in accordance with the rules, but the proceedings must also be brought to the notice of a defendant so as to give him an opportunity to defend the proceedings^[30]. 

66.Even though P could not verify whether D was in Hong Kong or not at the time of service, in my view P could have sent a copy of the Writ to D by email to bring the Writ to his notice.  There was no evidence that P had done this. There was no evidence that D had notice of the Writ at the time of the service or prior to the Final Judgment being obtained. 

67.Having considered all the above, I am satisfied that the Final Judgment is irregular and it should be set aside under Order 13 rule 9, as of right, and without regard to the merits of the proposed defence. 

Whether to impose conditions

68.Ms Yu submitted that there should be a condition imposed that D to pay the judgment sum into court, and this was based on mainly:

(i) Substantial delay on part of D in applying to set aside the judgment, and prejudice to P;

(ii) Real risk of empty judgment.

Substantial Delay

69.As mentioned earlier, the Final Judgment was obtained on 21 January 2014, and the Setting Aside Application was issued about 21 months later.

70.There were 2 affirmations signed by D before a China Attesting Officer in the Jingan Attesting Office in Shanghai, the 1^st one on 3 November 2015, and the 2^nd one on 26 February 2016.  Both affirmations were thus signed in Shanghai although in the affirmations, D gave his address to be one in Beijing. 

71.D had said that many of the correspondence between the parties were done via email and were stored in his Gmail account, and that in around December 2014, Google had shut down its email service in Mainland China and he had not been able to access his Gmail account since then. He had further said many of his documents were stored in a storage place in Hong Kong, and as he was not able to come to Hong Kong, he could not go personally to retrieve any documents.

72.Anyway, D’s explanation in his 1^st affirmation for the delay in taking out the Setting Aside Application was as follows:

(i)   He was only aware of the Final Judgment when he received the Statutory Demand in August 2014[31];

(ii)  He did not have knowledge of the particulars of the present action until he received the Petition on 17 September 2015, and the Writ with the endorsed statement of claim which his solicitors obtained from P’s solicitors on 19 October 2015, and although he had received the Statutory Demand in August 2014, he was not aware of the particulars of the claim[32];

(iii) He was under a misapprehension that the Statutory Demand was a mere recognition of the Mainland Judgment by the Hong Kong Courts[33].

73.After Yuen filed his affirmation and produced the 9 Emails showing that a copy of the Final Judgment had been sent to D on 10 February 2014, D in reply then said in his 2^nd affirmation:

(i)   He did not remember receiving a copy of the Final Judgment or the email on 10 February 2014 sent by Dorothy or replying to that email on 27 February 2014 (sic), and that he was unable to verify this because he no longer had access to his Gmail account[34];

(ii)  He maintained he was not aware of the irregularity until he had been told by his legal advisers in October 2015, and before that he did not know that he could set aside the Final Judgment on the ground that he was not physically present in Hong Kong at the time of service, and that he had acted reasonably and promptly after receiving legal advice.[35]

(iii) He further maintained that he had never received any court papers, whether from P or the Chaoyang Court in relation to the PRC Proceedings[36]

74.So far as (iii) above and  the PRC Proceedings were concerned, on his own evidence, D had found out about PRC Judgment and also the Travel Restriction Order in July 2012[37].  He did not do anything about appealing, or applying for review/retrial, notwithstanding he did instruct legal advisors at that time.

75.As for the present action, Dorothy’s email of 10 February 2014 indicated that a copy of the Final Judgment had been sent to D. As mentioned earlier, D claimed he could not remember the email of 10 February 2014, and his reply of 27 February 2014.  He did not say he could not remember the others of the 9 Emails.  Further, he himself seemed to rely on those emails as evidence that he was far from being evasive[38]. 

76.D’s non- recollection appeared to be selective. In any event, at this stage, I can see no sufficient evidence that the 9 Emails produced by Yuen were not in fact sent by Dorothy or received by D.

77.The Final Judgment sent to D clearly bore the present action number and the parties’ names, and moreover, it was clearly stated that the judgment was obtained as “no notice of intention to defend having been given by the Defendant herein.”  

78.The evidence shows that D is not un-educated. He has at least a reasonably good command of English as all the email communications with P were in English.  Furthermore, both his two affirmations were in English and he did not require any interpretation prior to signing.  Wu had in his affirmation said according to his understanding, D had been the Chief Executive Officer of the Hong Kong listed company of Tom.com, and that D was well experienced in management of enterprises.  D did not seem to have denied what was said by Wu.

79.Upon receipt of the Final Judgment, D should realize that the judgment was obtained on there being no intention to defend having been filed by him, and further Dorothy had told him that P would file bankruptcy petition unless a sensible settlement proposal was received from him by the deadline imposed.  D could have sought legal advice at that time, but he had chosen not to, and instead, he entered into discussion with Dorothy in relation to a repayment schedule trying to seek a release of the Travel Restriction Order[39].

80.Later, it would appear from D’s email of 21 March 2014 that he was not able to meet what appeared to be an agreed scheduled payment but he said he would try to make it within the next couple of weeks and he had asked for leniency and more time from P[40].  In this email, he had also told Dorothy that it would be totally understandable if P were to proceed with whatever action P decided to take.

81.In any event, even on D’s own case, at the latest, he did receive an email from P enclosing a copy of the Statutory Demand in August 2014[41].  According to P, this was sent to D on 8 August 2014 and D confirmed receipt thereof on 21 August 2014[42].

82.The particulars of the debt were stated in the Statutory Demand, and the Final Judgment was referred therein.  Although the debt amount was stated in Renmembi, there was no reference in the Statutory Demand to the PRC Judgment. D claimed he thought it was a “mere recognition” of the PRC Judgment, and that it was not possible to appeal.   D did not explain why he thought the Statutory Demand would be a “mere recognition” of the PRC Judgment and there was no basis for what he thought.

83.In any event, whether the Statutory Demand was a “mere recognition” or enforcement of the PRC Judgment or not, D could have sought legal advice then.  Yet, again he failed to do so, and according to him, all he did was to engage in further rounds of correspondence with P until end of 2014.    

84.When D eventually sought legal advice, it was some 20 months after he had been first been sent a copy of the Final Judgment, or some 12 months after he had received a copy of the Statutory Demand.   I do not find his alleged “mistakes of law” to be a reasonable explanation for not seeking legal advice earlier.   

85.D has ignored the PRC Judgment since 2011, ignored the Final Judgment and ignored P’s warning about issuing bankruptcy proceedings since February 2014, failed to make any payments pursuant to an agreed schedule, told P to go ahead with taking whatever action it wished in Mach 2014, ignored the Statutory Demand in August 2014 and then suddenly decided to seek legal advice after all this time and only upon receipt of the Petition.  His conduct of not seeking legal advice earlier was not justifiable and he only has himself to blame for the situation he is now finds himself.  In my view, there has been substantial delay on D’s part in seeking legal advice.  Little can be said in favour of D’s conduct in his substantial delay in seeking legal advice.

Prejudice

86.P’s case was due to D’s substantial delay, it had been greatly prejudiced:

(i)   Costs had been incurred in P’s attempts to enforce the Final Judgment, and if D had applied to set aside the Final Judgment after learning of it in early 2012, P would not have initiated the Bankruptcy Proceedings against him;

(ii)  The Judgment Sum had been outstanding since November 2011.  Until now, D had not repaid any part of it.

87.I accept that considerable time and costs had been incurred in P’s attempts to enforce the Final Judgment, and there has been prejudice to P in the substantial delay.

Evading enforcement

88.According to D, he had not been evading enforcement of the Final Judgment and the PRC Judgment as alleged by P as, among other things, that:

(i)   Although in the 9 Emails, D had purportedly acknowledged his liability to P, D was at that time not properly advised and operated under “mistakes of law” he did not know that he had the right to set it aside for irregularity, and did not know that  the PRC Judgment might not be final and conclusive;

(ii)  On the evidence, D was far from being evasive, as he had always been reachable by P and had always been responsive to P, as seen from the 9 Emails, and he had never provided with P with incorrect contact information, and had all along been trying to negotiate with P for settlement with respect to the PRC Judgment.

(iii) D denied P’s allegation that he had no genuine intention to defend the proceedings

89.First of all, D appeared to have two email addresses at one stage.  D’s email address in February 2014 as seen in the 9 Emails was “[email protected]”, but his email sent on 21 March 2014 to Dorothy was from another email address “[email protected]” , which was the email address which was stated by P in the Petition

90.Although D appeared to be contactable by email, on his own evidence his communications with P had come to an end by end of 2014 and there was no more correspondence between him and P since end of 2014 until 17 September 2015 when he received the Petition.  Further, according to D, Google had shut down its email service in Mainland China around December 2014, and thus on D’s own case, it would appear that his Gmail addresses would no longer be available thereafter.  In any event, D was vague as to whether he was still contactable by email after December 2014 at his Gmail addresses.  There was no new email address provided by him in his 2 affirmations.

91.More importantly, D had given 3 addresses in Beijing and 2 address in Hong Kong in the past :

(i)    D had said that he had been in Mainland China (first in Guangzhou and then in Beijing) since 2007. 

(ii)   In the Loan Agreement, signed on 30 December 2008 by him, D had provided his residential address  to be北京市建國路89号華貿公寓9号樓306 (“Jianguo Address”) in Beijing, and a mobile telephone number  in Mainland China .

(iii)  In the Letter of Authorisation dated 13 September 2009, D had provide two addresses, one in Beijing namely北京朝陽區棗營北里38号2306 室 (“Chaoyang Address”), and one in Hong Kong, namely 香港黄金海岸37 座 25樓B (“Gold Coast Address”).

(iv)  In 2011, as seen in the PRC Judgment, his address was stated by the Chaoyang Court to be unknown, and that service had to be by public notice.  Although D had said that none of the documents in the PRC Proceedings had reached him, he had never disclosed his then address and was vague as to why the Chaoyang Court said his whereabouts were unknown.

(v)   D did not deny that the Mongkok Address on the annual return was his last known address in Hong Kong in March 2012.  He had said that the Mongkok Address was the address of the flat where he rented and lived in Hong Kong before he moved to Mainland China (not clear whether he meant before 2007 or not), but his evidence was that the rental agreement was only terminated towards end of 2012[43]. 

(vi)  In his 2 affirmations in support of the Setting Aside Application, respectively of 3 November 2015 and 26 February 2016, D had given his address to be 303, No 17 South Lane, Jian Chang Hutong Beijing PRC (“South Lane Address”).

(vii) However, both affirmations were signed by D in the presence of the Attesting Officer’s Office in the Shanghai JingAn District.

92.According to P, both the Statutory Demand and the Petition were served at the Mongkok Address[44].  The Statutory Demand had been sent by email by P to D at his then Gmail address.  D had confirmed receipt of the Statutory Demand through email.  Upon receipt in August 2014, D would have known that the Mongkok Address was the address stated on the Statutory Demand to be his address[45]. There was no evidence that during the communications between D and P thereafter, D had informed P that the Mongkok Address was no longer valid or that D had ever provided P with another valid address.  Further, D had said he had received the Petition on 17 September 2015.  He did not reveal how he received the Petition.

93.Although D had said P had his contact information in Mainland China, and that P had his telephone number which had not changed since 2004, he was vague as to what contact information he meant other than his Gmail addresses and his mobile telephone number. Even if in 2012, he was contactable by email by P, by end of 2014, this did not seem to be the case.  He had also not explained why his 2 affirmations were signed in Shanghai when his latest address was given in Beijing.  In fact, D had not provided any address proof as to his current address in Beijing, such as a copy of the lease or copies of utilities bills.

94.All the above conduct of D indicated that D had been evasive as to his actual address or his physical whereabouts within Mainland China, and I have come to the view that this was because D did not wish P to ascertain his actual address, to avoid service and/or enforcement.

Real Risk of Empty Judgment

95.Ms Yu submitted that based on D’s conduct so far, P was extremely concerned that D all along had no intention to pay P the sums due.  As Ms Yu had submitted, the Final Judgment was essentially an enforcement of the PRC Judgment. 

96.The underlying dispute between the parties in the PRC Judgment and the Final Judgment was the loan due to P under the Loan Agreement.

97.There was no evidence that what D had said about the sum of RMB 3m not being a loan but an investment amount for which he had no liability to repay had ever been raised by D prior to his filing his 1^st affirmation.  Until the filing of his 1^st affirmation, there was no evidence that D had disputed the amount of RMB 3m being a loan as set out in the PRC Judgment.  In fact, his position had always been that he fully intended to pay the Judgment Sum.

98.As submitted by Ms Yu, which I accept, D had adopted conflicting attitudes towards P in relation to the PRC Judgment and/or the Final Judgment in that notwithstanding what D had said in the 9 Emails or subsequently about coming up with proposals to pay, the fact remains that since P obtained the PRC Judgment in January 2011 up until the hearing, D had not paid to P one single cent.  There was not even an endeavour to make any part payment although there seemed to have been an agreed payment schedule in February 2014.  

99.And, now he says he intends to contest the present proceedings and he also said he decided to seek PRC legal opinion as to whether he could lodge an application for a review/retrial or to appeal against the PRC Judgment out of time.

100.The PRC Judgment was entered in November 2011.  D had never tried to appeal or to apply for a review or a retrial or to set aside the PRC Judgment even though he had sought legal advice in about July 2012.  Notwithstanding what he had said in his 1^st affirmation about seeking PRC legal advice and that he would provide further information in this regard later[46], up until the hearing before this court which was some 5 months after his 1^st affirmation,  there had not been any actual application made by D. 

101.P’s solicitors had written on 17 March 2016 to make enquiry about further information in relation to D’s seeking PRC opinion, but in reply D’s solicitors said D had not been able to do so as the documents in his possession were not sufficient to enable the PRC lawyers to give advice for the purpose of these proceedings.  There was no sufficient evidence that D had in fact contacted any PRC lawyers.  It was also not clear what documents, if any, were provided to the PRC lawyers.  There were no supporting documents produced, such as a letter from the PRC lawyers confirming that they had been instructed/contacted by D in relation to apply for a retrial/review/appeal out of time, and/or setting out a list of documents/information the PRC lawyers required from D for providing such advice. 

102.I have earlier came to the view that D was evasive as to his proper address to avoid service and/or enforcement.  I accept what was submitted by Ms Yu, that D’s overall conduct did not suggest a genuine intention to contest the present proceedings rather than an intention to delay and evade enforcement.  I am thus satisfied that there is a real risk of empty judgment having regard to D’s evasive conduct.

Conclusion

103.In light of all the above, I have come to the conclusion that the Final Judgment should only be set aside on condition of the payment of the Judgment Sum into court.

The Leave Summons

104.D has issued the Leave Summons for him to adduce in these proceedings evidence of findings and decisions made in 7 judgments by Hong Kong Courts for the purpose of proving the PRC law in respect of  two issues:

(i)   The existence of the supervisory function of the Supreme People’s Procuratorate, the protest system and the trial supervision system under PRC law;

(ii)  Whether or not the existence of the supervisory function of the Supreme People’s Procuratorate, the protest system and/or the trial supervision system under the PRC law render a PRC judgment inconclusive and not final.

105.Even though the issue of merits is now academic in light of P’s concession to the Final Judgment being set aside for irregularity, D still seeks leave to D to adduce such findings and decisions pursuant to section 59 of the Evidence Ordinance for the purpose of proving the relevant PRC law.

106.Ms Yu submitted that the application has no merits, and she has relied, among other things, on s.6 of the Mainland Judgments (Reciprocal Enforcement) Ordinance, Cap 507, which came into effect after 4 of the 7 judgments including the Lee Yau Wing v Lee Shui Kwan [2007] HKLRD 749.  Although, P’s present claim is not based on that Ordinance, in that the PRC Judgment has not been registered under the Ordinance, whether the statutory definition of which Mainland Judgments are final and conclusive has any impact on the 7 judgments is not quite clear.  Further, there has not yet been any trial on this issue, or any clear determination after a trial in Hong Kong.  In Chiyu Banking Corp v Chau Tin Kwan [1996] 2 HKLR 395, the review procedure had in fact already been commenced.  Having considered the 7 judgments, I am of the view that the parties will still need to provide further expert opinion on at least the current PRC law and cannot simply rely on the findings and decisions in the 7 judgments.

107.Having said this, if the matter does proceed to trial, the issue of whether the PRC Judgment is final and conclusive will have to be decided and the findings and decisions in the 7 judgments cannot be said to be irrelevant at this stage.  For what it is worth, I am prepared to grant leave to D as sought.

Order

108.My order is as follows:

(i)   The Final Judgment entered into against D shall be set aside on condition that D pays the sum of RMB4,165,676.66 or its HKD equivalent into court within 28 days;

(ii)  Order in terms of D’s Leave Summons issued on 24 March 2016.

109.I make an order nisi that costs of both applications be costs in the cause.  The order shall be made final within 28 days.

Ms Andrea Yu, instructed by Holman Fenwick Wilan, for the plaintiff

Mr Jonathan Chan, instructed by Tang & So, for the defendant