Luen Tat Watch Band Manufacturer Ltd v. Li Shu Chung (also known as “Ken Li”)

HCA 1039/2018

[2020] HKCFI 984

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1039 OF 2018

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Before: Hon K Yeung J in Chambers

Date of Hearing:  25 September 2019

Date of Decision: 4 June 2020

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DECISION

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A.   The application

1.This is the hearing of the Summons dated 15 November 2018 (the “Setting Aside Summons”) taken out by the defendant (“Ken Li”) for an Order that the default judgment sought by the plaintiff (“Luen Tat”) by summons dated 14 August 2018, (the “Summons for Default Judgment”) and entered on 26 September 2018 (the “Default Judgment”) be set aside.  The issues before me are whether the purported service of the Writ of Summons (the “HCA 1039 Writ”) pursuant to Order 10, rule 1(2)(b) was regular, and if not, whether the Court has the jurisdiction to impose terms when setting aside the Default Judgment, and if so, whether terms should be imposed in the exercise of the Court’s discretion in all the circumstances of the case.

B.   The affirmatory evidence

2.There are before me the following affirmations:

(a)  3 affirmations of Ng Ka Hou (“Ng/1”, “Ng/2” and “Ng/3”) on service of the HCA 1039 Writ and the Summons for Default Judgment;

(b)  the affirmation of Ms Li Sin Man Seline (“Seline Li” and “SL/1”) in support of the Summons for Default Judgment;

(c)  Ken Li’s 1^st and 2^nd affirmations (“KL/1” and “KL/2”) in support of the Setting Aside Summons;

(d)  Seline Li’s 2^nd affirmation (“SL/2”) in reply to KL/1 and KL/2; and

(e)  Ken Li’s 3^rd affirmation (“KL/3”) in reply to SL/2.

C.   Facts

3.Seline Li and Ken Li are sister and brother. Their father was Mr Lee Sai Nam (the “Father”).

4.According to SL/1, the Father was a traditional Chinese entrepreneur.  He built in his life time a successful family business. He was the founder of Luen Tat as well as the Luen Tat group of companies (the “Group”).

5.Since about 2008, Ken Li started to develop dispute with the Father.  Ken Li is said to have committed a series of wrongs against Luen Tat.  One of them is the alleged misappropriation of HK$28 million from Luen Tat (the “$28m Dispute”).  As things turned out, that has become the subject matter of the present action.

6.Prior to and round about the time when the present action was commenced, the parties had been and were involved in a number of legal actions.  HCCW 497/2009 (“HCCW 497”) was one of them.  In that action, the Father through a corporate vehicle presented a petition for the winding‑up of Luen Tat.  Ken Li was the 1^st respondent, and Luen Tat the 3^rd.

7.HCA 1711/2009 (“HCA 1711”) was another of those actions:

(a)  In HCA 1711, the Father[1] was the plaintiff by original action and the 1^st defendant by counterclaim, Ken Li the 1^st defendant by original action and the plaintiff by counterclaim, and Seline Li the 3^rd defendant by counterclaim;

(b)  The subject‑matters of the claim were (1) the beneficial ownership of the shareholding in Luen Tat and a company within the Group called Pat Tat Trading Co (“Pak Tat”), and (2) the ownership of the Group’s profits and monies, and in particular, whether, as the Father contended, it was the Father who decided in his sole discretion how the profits from the Group would be distributed, or whether, as Ken Li contended, it was a matter of legal entitlements to the profits of the Group at specific sharing ratios pursuant to a series of oral agreements reached over the years;

(c)  The $28m Dispute featured in HCA 1711.  Ken Li did not dispute having received that amount.  His defence and counterclaim were that pursuant to an alleged oral agreement with the Father, he was entitled to the Group’s profits in the total sum of about HK$53.6 million, and the amount of HK$28 million was partial distribution of those profits[2];

(d)  The trial of HCA 1711 took place before Deputy Judge Simon Leung.  The Father’s claim was allowed and Ken Li’s Counterclaim dismissed.  As summarized by the learned Deputy Judge at §§199, 216 and 217 of his Judgment dated 9 December 2015:

“ 199. Ken argued that he had caused a total sum of HK$28 million to be paid out of the group to his personal account as his profits entitlement, which were arranged with Seline’s knowledge subsequent to the October 2008 meeting. The Father said that that was misappropriation of Luen Tat’s money, and the sum of HK$28 million used to form part of his claim against Ken. The claim was dropped to avoid complication as the same should now be matter for Luen Tat’s liquidators.

…

216. It comes to where a view could be formed as to which side’s version was true. I do so, after considering the extensive analysis of the evidence and submissions by counsel, including those specifically discussed above. All considered, I prefer the evidence adduced on behalf of the Father’s side, and accept his case as fact. I reject Ken’s case that he was at any material time the beneficial owner of Luen Tat or Pak Tat. I find as a matter of fact that Ken (and Joseph) holds the shares in Luen Tat and in Pak Tat both on trust for the Father.

   217.     I find as a matter of fact that the profits distribution had at all material times been a matter of the Father’s discretion.  No realistic view could be taken in favour of any of the alleged profits sharing agreement in isolation.  I reject all of them.  The alleged profits sharing agreement, if at all existed, would not have been binding or enforceable against the Father, who was in position to change his mind.  The claim by Ken on the basis of alleged entitlement to the profits of the group arising out of the alleged profits sharing agreements fails.”

(e)  Ken Li lodged an appeal against the learned Deputy Judge’s decision (in CACV 2/2016, (“CACV 2”)).  The part of his appeal against the dismissal of his Counterclaim has subsequently been abandoned, and the part against the Father’s claim dismissed by the Court of Appeal.  As summarized by the Court of Appeal:

“ 2.33 Before the Judge there was an issue concerning the profits from the business which is no longer pursued by Ken. But it has an important bearing on the overall assessment of the case …

…

2.34 The Judge found in favour of the Father that the distribution of profits was a matter of the Father’s sole discretion and not a matter of legal entitlement of the parties pursuant to any specific agreement.

…

3.1       Although Ken lodged an appeal against the judgment on the Father’s claim and his counterclaim, shortly before the hearing of this appeal, Ken amended his notice of appeal to abandon his appeal on counterclaim.  A consent summons dismissing the counterclaim was presented and made an order of the Court …”

(f)  The $28m Dispute was also mentioned by Deputy Judge To in his judgment dated 27 November 2017 in HCCW 497 (whereby he allowed the petitioner’s application for inter alia discharge of the appointment of the joint and several liquidators).  At §§74 of the judgment, the learned Deputy Judge observed that:

“ Ken’s misappropriation of $28 million

74.   As was found in the Main Action, Ken caused Seline to pay $28 million from Yuen Hing to his personal accounts on the excuse that it was part of the $53.6 million of the Company’s profits kept by Yuen Hing.  The court found that the excuse was false as there was no such profit kept in Yuen Hing’s account; the Father had never admitted that there was such sum in Yuen Hing’s account; and that Mazars’ calculation on which Ken’s excuse was based was misconceived.  The court noted that ‘the claim was dropped to avoid complication as the same should now be matter for [the Liquidators]’.  The court also dismissed Ken’s counterclaim for the balance of $25.6 million from this sum of $53.6 million. Ken appealed against the dismissal of his counterclaim but then abandoned it and was ordered to pay indemnity costs.  On the basis of these findings, there was simply no such sum of $53.6 million profit kept in the account of Yuen Hing.  Accordingly, Ken had misappropriated the sum of $28 million from Yuen Hing, which he caused Seline to pay to him.  However, the Liquidators took no action against Ken to recover this sum.”

8.Prior to the commencement of the present action, in February 2019, Messrs Joseph S.C. Chan & Co (“JSCC”) on behalf of Luen Tat issued a number of pre‑action letters to Messrs K & L Gates (“KLG”). According to Seline Li[3], KLG had been “the solicitors for Ken Li, in respect of various affairs concerning [Luen Tat] (including the misappropriation of HK$28m million by Ken Li”. KLG were indeed the solicitors on record for Ken Li in CACV 2[4] and HCCW 497 (at least in so far as the hearing before Deputy Judge To on 13 July 2017 was concerned[5]).

9.The HCA 1039 Writ was issued on 7 May 2018.  As I have mentioned above, the claim relates to the $28m Dispute. Luen Tat seeks thereby a declaration that Ken Li holds the sum of HK$28 million on constructive trust for Luen Tat, an order for repayment and/or account of the same, all necessary account, and equitable compensation.

10.Under cover of a letter dated 7 May 2018, JSCC sent to KLG a copy of the HCA 1039 Writ.  KLG was asked whether they had instructions to accept service on behalf of Ken Li.  No reply has been received from KLG.

11.According to Ng/1, a copy each of the HCA 1039 Writ was enclosed into a sealed envelope addressed to D and inserted (1) on 1 June 2018 into the letter box of an address at Ma Wan, the New Territories (the “NT Address”)[6], and (2) on 2 June 2018 into the letter box of another address at Tsim Sha Tsui (the “TST Address”)[7]. Both addresses have been described as Ken Li’s usual or last known addresses.

12.In respect of Ken Li’s place of residence and the NT and TST Addresses:

(a)  KLG in a letter dated 17 February 2016[8] indicated that any application against Ken Li for security of costs of the appeal in CACV 2 would be resisted, and that:

“ 1. Our client would move back to Hong Kong for permanent residence from late March 2016.

2. Our client would start his business again in Hong Kong in healthy food products.”;

(b)  In his 6^th affirmation filed in HCCW 497 on 28 November 2016, Ken Li stated the TST Address as his address;

(c)  On 14 March 2018, Ken Li commenced HCA 594/2018 (“HCA 594”) against his ex‑solicitors who acted for him in HCA 1711 for professional negligence.  In the Writ of Summons in HCA 594 (the “HCA 594 Writ”) (filed by JYJL on Ken Li’s behalf), the NT Address was stated as Ken Li’s address; and

(d)  In his 4^th affirmation of 29 November 2018 filed in HCMP 3367/2016 on 3 December 2018 (which concerned taxation of legal costs charged by his former solicitors), Ken Li again stated the NT Address as his address.

13.According to Ng/2, the Summons for Default Judgment (together with the affirmation in support) was posted to the NT Address and TST Address.  According to Ng/3, the Summons for Default Judgment posted to the NT Address was on 21 September 2018 returned and marked “addressee unknown”.

14.In KL/1 and KL/2, Ken Li claims that:

(a)  he lives in England.  He states his address as one in Surrey (the “Surrey Address”)[9];

(b)  the NT Address is the residential address of one of his children, and he has never lived there;

(c)  in respect of the HCA 594 Writ:

“ 6. … my solicitors did cite the [NT Address] as being my address. They did so because, after getting the permission of my daughter Charlotte to use her [NT Address] in the HCA 594 Writ, I had given that address to my solicitors, who had advised me that it would be preferable to cite a Hong Kong address in the HCA 594 Writ.

…

8. At the end of last year, the HCA 594 Writ was amended by deleting the reference to the [NT Address] and replacing it with my abovementioned address in England.”[10]

(d)  the TST Address is a block of serviced apartments which he stayed for short periods when he visited Hong Kong in 2016;

(e)  in a letter of 21 June 2018 (the “21 June 2018 Letter”) issued by JYJL to the solicitors acting for Seline Li (in the context of a statutory demand issued by her against Ken Li), JYJL claimed that:

“ … our client has not visited Hong Kong since October 2017.”

(f)  he only came to know about the Default Judgment after the Hong Kong solicitors who had acted for him in the earlier litigations became aware of it and informed him about it.

15.Relevant to the Surrey Address:

(a)  On 22 December 2017, Seline Li and the Father’s Estate issued a statutory demand (the “Statutory Demand”) against Ken Li for the taxed costs which he had to bear in HCA 1711 and CACV 2 (in the sum of about HK$9.8 million with interest);

(b)  The action subsequently commenced in respect of that Statutory Demand is HCB 5475/2018 (“HCB 5475”).  Seline Li has produced in SL/2 a copy of one of her affirmations filed in HCB 5475[11] (“SL/HCB 5475”);

(c)  According to SL/HCB 5475:

(i)    Attempts had been made to serve on Ken Li at the Surrey Address the Statutory Demand and the subsequent petition for his bankruptcy (the “Petition”);

(ii)   On 25 May 2018, a letter enclosing the Statutory Demand addressed to Ken Li was sent to the Surrey Address.  It was returned and marked “gone away”[12];

(iii)  The subsequent Petition filed on 24 September 2018 and sent to the Surrey Address was also returned marked with “NOT KNOWN AT THIS ADDRESS ”[13].

16.According to the Statement of Travel Records dated 29 October 2018 which Ken Li has obtained from the Immigration Department (the “Travel Records”), he last departed from Hong Kong on 1 November 2017, and that there has been “No Further Movement” since that date.

17.No acknowledgment of service or defence in respect of the present action having been filed by Ken Li, Luen Tat on 14 August 2018 took out the Summons for Default Judgment.  It was taken out under Order 19 rule 7.

18.On 26 September 2018, L Chan J granted the Default Judgment in the following terms, that (1) there be a Declaration that Ken Li holds the sum of HK$28 million on constructive trust for Luen Tat, (2) Ken Li be liable to repay and/or account to Luen Tat as a constructive trustee for the said sum, (3) interest, and (4) costs.

19.On 5 October 2018, Ken Li filed an acknowledgement of service, which is expressly stated to be “without prejudice to [Ken Li’s] contention as to jurisdiction and irregularity for service”.  On 15 November 2018, Ken Li took out the Setting Aside Summons. 

D.   Parties’ stances

20.In summary, Mr Barlow, leading counsel appearing for Ken Li, submits that:

(a)  given the undisputed evidence that Ken Li was not in Hong Kong when the HCA 1039 Writ is said to have served on him, the Default Judgment being as a result irregularly obtained, Ken Li is entitled as of right to have the same set aside;

(b)  P was in breach of its duty of full and frank disclosure in its ex parte application for the Default Judgment;

(c)  as this Court has not validly assumed jurisdiction over Ken Li, it lacks jurisdiction to impose upon D any conditions for setting aside the Default Judgment;

(d)  alternatively, the Court in the exercise of its discretion should impose no condition.

21.Mr Alan Kwong for Luen Tat does not seriously argue against the setting aside of the Default Judgment[14].  Rather, the main thrust of his submissions is that when doing so, the Court should impose condition given the conduct of Ken Li.

E.   The Default Judgment irregular

22.Order 10 rule 1(2) provides that:

“ A writ for service on a defendant within the jurisdiction may, instead of being served personally on him, be served—

(a) by sending a copy of the writ by registered post to the defendant at his usual or last known address, or

(b) if there is a letter box for that address, by inserting through the letter box a copy of the writ enclosed in a sealed envelope addressed to the defendant.” (Emphasis added)

23.According to Ng/1, copies of the HCA 1039 Writ were inserted into the letter box of the NT and TST Addresses.  The mode of service permitted by Order 10 rule 1(2)(b) was sought to be invoked.

24.To invoke Order 10 rule 1(2)(b) as the mode of service, the requirement is that the defendant must be within the jurisdiction at the time of the service of the writ — see Deng Minghui v Chau Shuk Ling [2007] 1 HKLRD 905, per Cheung JA at §11.

25.According to the Travel Records, Ken Li was not within the jurisdiction when service of the HCA 1039 Writ was sought to be effected.

26.Even if Ken Li might have had notice of the HCA 1039 Writ, that still would not have made the service a good one — see Deng Minghui, per Cheung JA at §§19‑22.

27.The HCA 1039 Writ has not therefore been validly served upon Ken Li in accordance with the Rules of the High Court, and the Default Judgment was in that sense irregularly obtained.

F.   Whether to set aside the Default Judgment, and if so whether to impose terms

F.1.   THE APPLICABLE LAW

28.In Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1996] 4 HKC 157, Sears J observed at p 161D‑E that even in respect of a default judgment that has been irregularly obtained, the court may in the exercise of its discretion impose terms upon the setting aside of the same “which accord with justice having regard to the facts of the particular case”.  In the same case, Bokhary JA, when setting aside the default judgment, also imposed terms.  In doing so, his Lordship observed at p 162E that:

“ ‘Ex debito 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 statutory jurisdiction is unfettered.”

29.In Russell Peter Brown & Ors v Edward Eugene Lehman [2017] 4 HKC 6, the Court of Appeal observed at §28 that:

“ Where a default judgment is irregular, it is usually said that it will be set aside ex debito justitiae. Mr Barlow [for the defendant] submits that this means that it must be set aside. However, it was established in Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 that the court retains a residual discretion to decline to set aside an irregular default judgment, or to impose terms when setting it aside, where the circumstances of the case call for such a course to be taken.”

30.In北京橙天嘉禾影視製作有限公司 v張承勷 (unrep, HCMP 2666/2016, 11 November 2016), the Court of Appeal again described the court’s discretion to impose terms as being “unfettered”, that:

“ 16. The correct position is as stated in Po Kwong Marble Factory v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 at 161C to E and 162D to E:

(1) In setting aside an irregular judgment, even though it is as of right, the court has a residual discretion to have regard to the conduct of the parties and to impose terms upon setting aside the judgment which accord with justice having regard to the facts of the particular case. The court does not shut its eyes to the circumstances surrounding the question of service and why things went wrong in that regard.

(2) The statutory discretion to set aside a default judgment on such terms as the court thinks just is unfettered.”

31.When deciding whether to impose terms when setting aside an irregular default judgment, it is relevant to consider whether the defendant was evading service — see Bank Austria Aktiengesellschaft v Sukamto [2002] 1 HKC 232, per Deputy Judge Muttrie at 240, and First Castle Limited v Wong Chun Kit (unrep, HCA 6872/2000, 19 June 2003, per Deputy Judge Lam (as his Lordship then was) at §20).

32.On the jurisdiction of the court to impose terms, Mr Barlow submits[15] that

“ …

2.4. As this Court has not validly assumed jurisdiction over D, it lacks jurisdiction to impose upon D any conditions for setting aside the Default Judgment.

17.  Where a default judgment is irregularly obtained against a foreign defendant in respect of whom our court has never validly assumed jurisdiction, the court lacks jurisdiction to impose upon the foreign defendant conditions or terms upon the settling aside order (i.e. terms that it might have considered imposing had the defendant/applicant been a Hong Kong resident — over whom the court has jurisdiction) ...”

33.Mr Barlow has cited no direct authority in support in that proposition of his.

34.In the course of his oral submissions, Mr Barlow clarified that the effects of those submissions of his are not that the Court has no jurisdiction to impose terms “in the strict or literal sense”[16] (ie in the sense that the court has or has not the power to impose terms).  What he is seeking to submit is that the Court does not have the jurisdiction to impose terms “in the broader sense”[17] (ie in the sense that though the court may have the power to do something in the strict sense, its invariable practice is not to exercise that power in certain situations).  Mr Barlow has made clear that by the use of the word “jurisdiction” in those paragraphs of his submissions, he meant jurisdiction (or lack of jurisdiction) in that second “broader” sense.

35.In support of his submissions Mr Barlow relies on the case of Russell Peter Brown & Ors v Edward Eugene Lehman. However,

(a)  The facts in that case are very different;

(b)  The relief claimed there included an injunction to restrain the further publication of certain allegedly defamatory statements. That claim for injunction had not been abandoned before the default judgment was obtained, which hence covered that claim.  But the default judgment was obtained under Order 13, which Order does not cover a claim for injunction.  The court therefore, independent of any question of service, had no jurisdiction to grant the default judgement;

(c)  It is to be noted that even on those facts, the Court of Appeal approached the matter on the basis that the residue discretion discussed in Po Kwong Marble was still engaged.  This has been made clear by Barma JA at §29:

“ Mr Lam [for the plaintiff] submitted that having regard to the many steps that had been taken in these proceedings after the entry of the default judgment, as detailed in paragraphs 41 to 44 of the judgment below, this was a case in which the court should exercise its discretion to decline to set aside the default judgment. While we have some sympathy for this submission, we think it important to bear in mind the nature of the irregularity with which we are concerned. Given that the irregularity arises from the court’s lack of jurisdiction, under RHC Order 13 rules 1 to 6, to enter default judgment against the defendant at all, it seems to us that it would not be proper for us to exercise our discretion so as to allow a default judgment that the court had no power to give to remain in place. We therefore decline to exercise our discretion in the manner suggested by Mr Lam.”

(d)  As observed by Barma JA, the nature of the irregularity is important, and it was in the light of that that the Court of Appeal declined to exercise its discretion not to set aside the irregular judgment.

36.Mr Barlow also relies on Bank of China (Hong Kong) Ltd v Regal Link Investment Ltd [2009] 3 HKLRD 203.  In Regal Link, the Court of Appeal applied the English case of Leal v Dunlop Bio‑Processes International Ltd [1984] 1 WLR 874.  Both Regal Link and Leal v Dunlop Bio‑Processes concerned renewal of writs for service.  Leal v Dunlop Bio‑Processes was further complicated by certain limitation issues.  While Yuen JA in Regal Link did observe that the appellant, who had permanently left Hong Kong and was outside jurisdiction when the writ was purportedly served upon her at a Hong Kong address, “was not amendable to the jurisdiction of the Hong Kong court unless there was leave to serve out under O.11 r.1”[18], Her Ladyship also observed at §37 that:

“ The Court of Appeal [in Leal v Dunlop Bio‑Processes] … held that the Court had power to cure the failure to obtain leave under O.11 r.1 RSC so as to make good the service of the writ out …” (original emphasis by Yuen JA)

Given that the Court has power to cure the failure to obtain leave, I see no reason why the court does not have power to impose terms on setting aside a default judgment in a case such as the one this Court is facing.

37.Mr Barlow’s submissions on his point, and his suggested existence of the “invariable practice”, are also not supported by other authorities cited to me:

(a)  In北京橙天嘉禾:

(i)  The irregularity was the same as the present application before this Court.  As summarized by Kwan JA at §1 of the judgment:

“ The defendant brought this application for leave to appeal against an order made by B Chu J on 16 June 2016, in which she granted the defendant’s application to set aside a default judgment which was irregular (as service of the writ was effected by insertion through the letter box of the last known address of the defendant in Hong Kong when he was not within the jurisdiction at the time) but imposed a condition that he should pay into court within 28 days the entire judgment sum of RMB 4,165,676.66 or its equivalent in Hong Kong dollars. The defendant sought leave to appeal to set aside the condition imposed.”

(ii)  The defendant’s application for leave to appeal to set aside the condition imposed was dismissed on the basis that the defendant had failed to meet the threshold test for having leave (see §28 of the judgment);

(b)  In Deng Minghui:

(i)  service of the writ was set aside due to the fact that the defendant was not in HK when service was purportedly effected pursuant to Order 10, rule 1(2)(b).  The facts in that regard are the same as what we have here;

(ii)  but despite that, the Court of Appeal nonetheless adopted the approach propounded in Po Kwong Marble and considered whether terms should be imposed when setting aside the default judgment.  It was only on the facts of that case that the Court of Appeal refused to do so.  As observed and summarized by Cheung JA at §§27 and 28:

“ 27. In this case, there was nothing suspicious as far as the defendant is concerned regarding the question of service. The short and ineluctable point is that she was improperly served by the plaintiff.

28. Apart from the time taken in applying to set aside the judgment, there really is no other conduct on the part of the defendant which may justify the imposition of conditions…”

38.On the strength of the cases before me, I do not accept Mr Barlow’s submissions that this Court has no jurisdiction (in the sense as explained by him) to impose terms in setting aside the Default Judgment.

F.2.   CONSIDERATION OF THE FACTS

39.On the facts of the case, I draw the inference that Ken Li had the intent to and had been evading service of the HCA 1039 Writ:

(a)  The $28m Dispute had been a pre‑existing dispute between the parties.  Ken Li had been aware of it, and had been seeking to address it in the earlier actions.  There has further been pre‑action correspondence between the parties.  Ken Li would not have been taken by surprise by Luen Tat’s initiation of the present action;

(b)  The steps taken by Luen Tat in seeking to effect service of the HCA 1039 Writ, I have little doubt, would have successfully brought the process to the notice of Ken Li:

(i)  The distinct probability is that KLG, whilst it might not have instructions to accept service for Ken Li, would have notified him of the Writ when it received a copy of the same on 7 May 2018;

(ii)  A copy of the HCA 1039 Writ has been inserted into the postbox of the NT Address.  Even according to Ken Li’s own case, that address is the residential address of his daughter[19].  Again, the distinct probability is that his daughter would have passed the HCA 1039 Writ to him, or otherwise brought it to his attention;

(iii)  Given Ken Li’s suggestion that the NT Address is his daughter’s residential address, I find it quite incredible that the letter enclosing the Summons for Default Judgment and posted to the NT Address would have returned marked “addressee unknown”;

(iv)  The above matters would not have rendered the service of the HCA 1039 Writ a valid one under the Rules, but are circumstances which are relevant to my consideration as to how this Court’s discretion may be exercised;

(c)  Ken Li has previously indicated he would move back to Hong Kong for permanent residence from late March 2016;

(d)  He provided in the HCA 594 Writ as his address the NT Address.  He blames that on his “solicitors”.  He claims that “they” had advised him that it would be preferable to cite a Hong Kong address.  He chooses not to disclose the identities of his “solicitors”, or whether he had been advised as to why the provision of a Hong Kong address would be “preferable”.  His claim in this regard is devoid of particulars, and is incredible;

(e)  But whatever the exact reason behind it, the provision of the NT Address gives himself the opportunity, should any party be subsequently led into trying to serve any legal process upon him at that address, to claim that the attempted service is an invalid one;

(f)  Ken Li on oath provided the same NT Address in his     4^th affirmation of 29 November 2018 filed in HCMP 3367/2016 on 3 December 2018. He has given no explanation as to why he did so;

(g)  Ken Li now claims that he lives in England at the Surrey Address.  But previous attempts on the part of Seline Li and the Father’s Estate to serve the Statutory Demand and Petition upon him at the Surrey Address have met with returns marked with “gone away” or “NOT KNOWN AT THIS ADDRESS ”, and were both unsuccessful;

(h)  I borrow the words of Deputy Judge Muttrie in Sukamto at p 241, that in effect, Ken Li is saying “catch me if you can”.

40.When deciding how I may exercise my discretion, it is also relevant to consider the circumstances surrounding the question of service, and why things went wrong:

(a)  My view in this regard is that Ken Li has contributed substantially to what went wrong, and was primarily to be blamed for that;

(b)  Luen Tat has taken the reasonable course of writing to KLG on 7 May 2018.  A copy of the Writ was enclosed.  Luen Tat did not have the courtesy of a reply;

(c)  Mr Barlow’s submits [20] that:

“ What P did was to bypass the proper and necessary procedure of seeking the Court’s leave to serve out of the jurisdiction in order to obtain default judgment through the backdoor, thereby depriving D of his fundamental right to defend himself.”

I reject those submissions.  They are inconsistent with the reasonable and open attempt taken by Luen Tat to notify Ken Li through KLG of the initiation of the present action, and its further open and reasonable attempt to serve the process upon him through KLG;

(d)  On the other hand, it was Ken Li who chose (at least agreed (according to his case)) to state the NT Address in the HCA 594 Writ as his address.  He did so on 14 March 2018.  When Luen Tat started the present action on 7 May 2018, and attempted service of the process on Ken Li on 1 June 2018, Luen Tat was quite entitled to take the NT Address as a valid address for service.  That is particularly so when the previous attempts by Seline Li and the Father’s Estate to effect service at the Surrey Address had been unsuccessful;

(e)  I accept Seline Li’s evidence at §20 of SL/2, with reference to the 21 June 2018 Letter, that she had no reason to take any of Ken Li’s representations on his presence (or otherwise) in Hong Kong at face value.

G.   Material non‑disclosure?

41.The complaint centres around the non‑disclosure of the 21 June 2018 Letter.

42.I have considered that letter and the facts carefully.  In my view, it is a marginal case.  It would have been better for Seline Li to have disclosed it when applying for the Default Judgment.  It can be regarded as being relevant to the Court’s consideration of the application, though in my view, given the full facts which I have considered, the disclosure of that letter would not have affected the outcome of the application.

43.However, what is more important in my view is this. In the light of my conclusion that the Default Judgment is irregular, and as I will make clear below, I am going to set aside the Default Judgment.  The question then is whether the non‑disclosure of the 21 June 2018 Letter will, as Mr Barlow submits[21], have the effect of depriving Luen Tat of the benefit of any discretionary power which this Court otherwise has to impose terms.  In my view, it does not.  As I have observed above, Seline Li had no reason to take any of Ken Li’s representations on his presence (or otherwise) in Hong Kong at face value.  On the facts as I have discussed above, the case remains an overwhelming one for me to impose terms.

H.   Getting through the backdoor?

44.This consideration arises from Mr Barlow’s submissions that this Court has no jurisdiction to impose terms upon setting aside the Default Judgment.  He submits, borrowing the words of Slate LJ in Leal v Dunlop Bio‑Processes, that if a party “cannot properly enter through the front door of O.6 r.8 [to renew a writ], he should not be allowed to enter through the back door of O.2 r.1”[22].

45.Whilst I have concluded that this Court has the power to impose terms, it remains relevant for me to take this submission of Mr Barlow into account when deciding how my discretion should be exercised.

46.I do not accept that Luen Tat could not properly have entered through the front door.  This case was unlike Russell Peter Brown & Ors v Edward Eugene Lehman where the grant of an injunction by default is outwith Order 13. There is indeed no submission on behalf of Ken Li that Luen Tat could not have entered through the front door via one of the gateways permitted by Order 11 rule 1(1). 

47.As to why things went wrong, I have set out my view above.

I.   Ken Li’s case “reasonably arguable”?

48.At §2.5 of his written submissions, Mr Barlow submits that Ken Li has a “reasonably arguable defence”.  He submits further[23] that it is not necessary for an applicant such as Ken Li to demonstrate that he has an arguable defence on the substantive merits.  He nonetheless, “out of abundance of caution”, as he puts it, summarises the nature of Ken Li’s proposed defence at Annex A to his written submissions.

49.In his written submissions[24], Mr Kwong submits that “[i]nsofar as may be necessary”, Luen Tat also asks the Court to take into account the fact that Ken Li has no defence to Luen Tat’s claim.

50.There is no need for me to go into the relative merits of parties’ respective cases in any details.  Given my analysis above, I also do not see any need to do so.  Doing so may also not be the appropriate approach to adopt — see Deng Minghui, per Cheung JA at §29.  I have however set out the relevant parts of (1) the Judgment of Deputy Judge Leung in HCA 1711, (2) the Decision of Deputy Judge To in HCCW 497, and (3) the Decision of the Court of Appeal in CACV 2.  Whilst Mr Barlow might technically be correct in submitting[25] that “[there] has not been any final and conclusive ruling by the Court, whether in those proceedings or otherwise, on [Luen Tat’s] entitlement of the HK$28M in question”, I am of the view that this Court can take into account the fact that the basis of Ken Li’s counterclaim in HCA 1711 (as I have summarized above) has been dismissed, and his appeal to the Court of Appeal in that regard abandoned.  

J.   Setting aside the Default Judgment on terms

51.For the reasons set out above, I rule that the Default Judgment is an irregular one and is liable to be set aside.  There is in my view insufficient basis for me to exercise my discretion not to set it aside, which I do.  However, given my analysis of the facts in Sections F to I above, I have decided, in setting aside the Default Judgment, to impose the condition that Ken Li should pay into court within 28 days the entire sum of HK$28,000,000.00.  In making that decision, I have considered the full circumstances of the case as set out above which in my view call for such a course to be taken.

K.   HCB 5475

52.I have mentioned HCB 5475 above. 

53.When parties appeared before me, that action had been heard before Au‑Yeung J.  Her Ladyship had not by then handed down her decision.  Mr Kwong invites me to heed the outcome of that case.  He submits that the relevance is two‑fold:

(a)  if Ken Li is adjudicated bankrupt, “it would be for the trustee‑in‑bankruptcy to handle the affairs of [Ken Li’s] estate” and

(b)  whether Ken Li used false residential address is a live issue in that action.

54.On 14 October 2019, solicitors for Luen Tat wrote in and informed me that Ken Li had indeed been adjudicated bankrupt.

55.Despite the adjudication, I have not received any submissions on the implication of the same upon the application before me. In my view, the better course is for me to proceed first to render my judgment on the materials before me, which I now have.  Should parties be of the view that any consequential direction is necessary from me as a result of the adjudication, eg on the manner in which the payment‑in which I have ordered is to be made, I grant parties liberty to do so within 14 days from the date hereof.

56.In respect of the 2^nd reason which Mr Kwong submits why HCB 5475 is relevant, I note that the issues before Au‑Yeung J are slightly different from those that are before this Court.  I prefer to concentrate on the materials and submissions that have been placed and made before me, which I have done.

L.   Costs

57.Ken Li is partially successful in the Setting Aside Summons.  I make a costs order nisi that should Ken Li be able to meet the condition I impose, the costs of the Setting Aside Summons be Ken Li’s costs in the cause of the main action; if not, Luen Tat will have the costs of the application.  The costs are to be taxed if not agreed.  Should any party seek any variation of the same, submissions should be made within 14 days from the date hereof, response within 14 days of receipt, and reply within 7 days. 

Mr Alan Kwong and Ms Stephanie Wong, instructed by Joseph S C Chan & Co, for the Plaintiff

Mr Barrie Barlow SC, leading Mr Justin Lam, instructed by Johnnie Yam, Jacky Lee & Co, for the Defendant