Bank of China (Hong Kong) Ltd v. Hung Chun Wai Christina and Another

HCA 69/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 69 OF 2000

BETWEEN

HCB 5837/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS

NO. 5837 OF 2003

Before : Hon Sakhrani J in Court

Date of Hearing : 3 September 2004

Date of Judgment : 3 September 2004

J U D G M E N T

1.There are two matters before me.  The first is the hearing of the bankruptcy petition presented by the judgement creditor, Bank of China (Hong Kong) Limited against the debtor on 26 March 2003 in Bankruptcy Proceedings No. 5837 of 2003.  The second is the hearing of the debtor’s application to set aside the judgment entered by the judgment creditor on 10 February 2000 in HCA No. 69 of 2000.

2.The bankruptcy petition issued on 26 March 2003 is based on the failure of the debtor to pay the judgment debt in the sum of HK$3,013,084.49 together with interest under a judgment dated 10 February 2000 in HCA No. 69 of 2000 (“the judgment”).

3.On 2 March 2001 a statutory demand was served on the debtor by advertisement in Hong Kong imail.  The statutory demand was made on the sole basis of the judgment debt.  It seems to me that I should deal with the application to set aside the judgment first.  If the judgment is set aside, it follows that the bankruptcy petition must be dismissed as the statutory demand was made on the sole basis of the judgment debt.  Mr Lam, for the creditor, accepts that is the position.  

4.The action that the bank took against Mr Hardwick was against him and Ms Christina Hung Chun Wai (“Ms Hung”) as defendants.  As the Statement of Claim shows, the Bank of China, Hong Kong Limited (“the bank”) granted a loan to the extent of HK$4,830,000 repayable on demand to Wel-Express Development Limited as the borrower.

5.As security for the loan, Ms Hung and Mr Hardwick were required to execute a deed of guarantee in favour of the bank whereby they covenanted to pay to the bank all sums owing by the borrower together with interest, costs and other expenses.  The deed of guarantee provided that the amount enforceable against Ms Hung and Mr Hardwick was HK$4,830,000 with interest and costs.

6.The borrower utilised the loan and as at 28 December 1999 the outstanding indebtedness to the bank was HK$4,631,771.74.  This was not paid.  The plaintiff brought HCA No. 69 of 2000 against Ms Hung and Mr Hardwick on 4 January 2000.

7.Judgment was entered in default on 10 February 2000 against both of them.  It was adjudged that they do jointly and severally pay the plaintiff the sum of HK$4,631,771.74 together with interest and costs.

8.Mr Hardwick has denied that he was ever served with the writ or that he had notice of the same.  His case is that he has never seen the deed of guarantee until the same was sent to him by the solicitors for the bank on 10 May 2003.  His case is that he never signed the deed of guarantee and is not liable thereunder. 

9.The writ was served on 7 January 2000 through the letterbox at 15^th Floor, Galway Court, 9 Cross Street, Wanchai (“the Galway Court address”) being Mr Hardwick’s usual and/or address last known to the bank.  That is the same address as Ms Hung and is the residential address of Mr Hardwick as appears in the annual returns of the companies that I have been referred to by Mr Lam.  It is not surprising that the bank should try to serve the writ at that address as being the address in the public documents.  However, Mr Hardwick’s case is that the writ was not properly served on him as he was no longer living at the Galway Court address when the writ was inserted through the letterbox. 

10.There is some documentary evidence supporting the fact that he was not living at that address at that time.  He has produced a tenancy agreement dated 18 June 1999 which supports his case that he was living at an address in Peng Chau as from 25 June 1999.  He maintains that he only first came to know of the writ when his own bank advised him of the proceedings and suggested that he make enquiries with the Official Receiver.

11.It is also Mr Hardwick’s case that he had no contact with Ms Hung since about the middle of 1999 before the institution of the High Court proceedings by the bank and that he had no notice of the writ or the default judgment entered against him.  He only came to know about this in about May 2003.

12.Mr Lam has referred me to the company documents in the exhibits bundle.  In the case of the companies Keen Choice Industrial Limited, Seekon (Hong Kong) Limited and Wel-Express Development Limited, Mr Hardwick was also a director and shareholder of those companies.

13.The registered office of those companies was stated to be the Galway Court address.  However, all the notifications of situation of registered office for those companies were all dated 20 July 1999 and were signed by Ms Hung, not Mr Hardwick.  

14.Also, those companies and another one, Asia Pacific Agents Limited, had facilities from various banks in respect of properties purchased by them and it was submitted that Mr Hardwick as one of the two directors of those companies would have signed loan documentation to obtain facilities.  It was submitted that the Court should infer that it is likely that Mr Hardwick would have had notice of the writ and his mail sent to the registered office of the companies and that he would have made inquiries of his mail there even after he moved out in June 1999.  Thus it was submitted that he did have notice of the writ.

15.I am unable to accept the submissions that I ought to infer that it is likely that he would have had notice of the writ yet did nothing before entry of judgment.  Mr Hardwick’s evidence is that he moved out of the Galway Court address in June 1999 and that he has not been in touch with Ms Hung since the middle of July 1999 until very recently when he tried to sort out the problems that he finds himself faced in as a result of these proceedings. 

16.Mr Hardwick has also said that his regular mail had been directed to his new address.  As far as he was concerned the Galway Court address was his residential address at the time he lived there and not a business address.  He had no knowledge that Ms Hung had used the Galway Court address as the registered office of the company as demonstrated by the notification signed by her on 20 July 1999.

17.His case is that he has never signed any loan documents or documents involving financial transactions for any of those companies. 

18.It seems to me that the service of the writ on him was defective.  He did not have actual notice of the writ before judgment was entered against him.

19.Mr Lam accepts that, for the purpose of the proceedings before me, pursuant to O.10, r.1(2)R.H.C. service is duly effective when the proceedings are brought to the notice of a defendant and not merely on delivery of the writ to his last known address.  O.10, r.1(3) provides that the date of service shall, unless the contrary is shown, be deemed to be the seventh day after the date on which the copy was inserted through the letterbox.  However, this is a rebuttable presumption as it is open to a defendant to show the contrary that he did not in fact have notice of the writ.  The words “unless the contrary is shown” in O.10, r.1(3) are important.

20.The salutary principle is that proceedings must be brought to the actual notice of a defendant unless it is shown to be impracticable. 

21.In Forward v. West Sussex County Council & Others [1995] 1 WLR 1469 it was held that on a true construction of O.10, r.1(2) service was duly effected when the proceedings were brought to the notice of a defendant and not on mere delivery of the writ to his last known address.  A defendant could show the contrary by showing that the writ had not come to his notice at all. 

22.In Cosec Nominees Limited & Another v. Lau Hon Ming [2001] 2 HKLRD 581 it was held, inter alia, that since the defendant only became aware of the writ after the default judgment had been obtained the service was defective and the default judgment was irregular.  It was also held that where a default judgment was obtained irregularly because service of the writ was defective, the defendant was entitled as of right to have the judgment set aside without showing a defence on the merits.

23.Here the defendant Mr Hardwick’s case is that he has never signed the guarantee and is, therefore, not liable on it. 

24.It seems to me that the service of the writ was defective and the defendant is entitled as of right to have the judgment set aside.  Therefore I order that the judgment entered against Mr Hardwick be set aside.

25.The costs should follow the event.  Costs of the application to be costs to Mr Hardwick against the bank.  

26.As the judgment has been set aside it follows that the bankruptcy petition must be dismissed.  I dismiss the bankruptcy petition with costs to Mr Hardwick.

Mr Douglas Lam instructed by Mesrs Tony Kan & Co., for the Plaintiff in HCA 69/2000 and the Petitioner in HCB 5837/2003

Mr. Hardwick appearing in person