Xie Daphne Wen v. Lee Chun Hing and Another t/a Kai Fu Electrical Parts Trading and Engineering

DCCJ 6337/ 2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6337 OF 2004

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BETWEEN

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Coram: Deputy Judge E. Yip in Chambers

Date of Hearing: 19^th July 2006

Date of Handing Down Judgment: 26^th July 2006

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REASONS FOR DECISION

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The background

1.This is the 2^nd-named Defendant’s application to set aside a default judgment obtained by the Plaintiff. 

2.Before May 1996, the 1^st-named Defendant was the sole proprietor of Kai Fu Electrical Parts Trading and Engineering (“the Firm”). 

3.In May 1996, the 2^nd-named Defendant became the partner of the Firm. 

4.Since January 1998, the 2^nd-named Defendant ceased to be its partner.  The cessation was duly registered in the Inland Revenue Department (“IRD”). 

5.The 1^st-named Defendant issued 4 cheques all dated 12 December 1998 under the name of the Firm.  All the cheques were dishonoured upon due presentment for payment. 

6.On 24 June 2004, the Plaintiff’s solicitors, Messrs. Michael Cheuk, Wong & Kee, sent a demand letter (“the Demand Letter”) [p. 131] to the 2^nd-named Defendant at an address in Wanchai (“Wanchai Address”) and an address in Sheung Wan Address (“Sheung Wan Address”).  There was no response from the 2^nd-named Defendant.   

7.On 3 December 2004, the Plaintiff served the Writ of Summons on 3 addresses that related to the 2^nd-named Defendant as follows:

(1)  127 Ma Tau Wai Road, 2/F B, Kowloon, Hong Kong (“Ma Tau Wai Address”);

(2)  57 Ma Tau Chung Road, G/F Kowloon Hong Kong (“Ma Tau Chung Address”);

(3)  2/F, 27 Maidstone Road, Kowloon, Hong Kong (“Maidstone Address”). 

8.On 28 January 2005, default judgment was entered against the 2^nd-named Defendant. 

The legal principles

On service of the Writ of Summons

9.If the Plaintiff was aware that the Defendant was no longer at the address at the time of service, that could not be a proper address for service because the Plaintiff could not properly authorize an affidavit of service to be sworn in compliance with Order 10 Rule 1(3)(b)(i) deposing to a belief that the writ would come to knowledge of the Defendant within 7 days (per Lam J. in Phillip Securities (HK) Limited v Lam Chi Bun Stanley [HCA 11645/1999] at para 9).  

On merits of the defence

10.On an application to set aside a regular default judgment, the major consideration is whether the defendant has shown a defence on the merits to which the court should pay heed, not as a rule of law, but as a matter of common sense, since there is no point in setting aside a judgment if the defendant has no defence, and because, if the defendant can show merits, the court will not prima facie desire to let a judgment pass on which there has been no proper adjudication (per Lord Wright in Evans v Bartlam [1937] A.C. 473, HL at 489; HKCP 2006 para 13/9/13). 

11.It is not sufficient to show a merely “arguable” defence that would justify leave to defend under O. 14.  The Defendant must show that he has “a real prospect of success”.  To do so, he must satisfy the court that his case and his evidence that he adduces in support of it is potentially credible and carries some degree of conviction (HKCP 2006 para 13/9/14). 

Service of the Writ of Summons

The 2^nd-named Defendant’s case

12.Before 15 May 1996, the 2^nd-named Defendant resided at the Maidstone Address. 

13.After 15 May 1996, he moved into Flat B1, 6^th Floor, Man On House, 151-163 Wanchai, Hong Kong (“Wanchai Address”).  It has remained to be his personal address. 

14.By an Annual Return [p. 89] for the Year up to 14 May 1997, he used the Maidstone Address as the registered office for a business called Full View Engineering Limited (“Full View”).  He also used it as his personal address [p. 92, 94, 95].   

15.After his notification of the change in address, the IRD issued a Notice of Salaries Tax dated 11 March 1999 which stated the Wanchai Address [p. 87]. 

16.However, he omitted to change its registered office address to a new address, 13/F., Fung Lok Commercial Building, No. 163 Wing Lok Street, Sheung Wan, Hong Kong (“Sheung Wan Address”).  Thus the Annual Return of Full View still carried the Maidstone Address for the Year up to 14 May 2000. 

17.Later, upon his accountant’s enquiries, he realized the omission.  He then changed Full View’s registered office address to the Wanchai Address in the Annual Return for the Years 2001 up to 14 May 2001 [p. 100].  He also changed his personal address to the Wanchai Address [p. 100, 103].  

18.Full View’s registered office address remained at the Sheung Wan Address [p. 104] for the Year up to 14 May 2002.  His personal address remained at the Wanchai Address [p. 107, 110].

19.Full View’s registered office address remained at the Sheung Wan Address [p. 112] for the Year up to 14 May 2003.  His personal address remained at the Wanchai Address [p. 114, 115, 118].

20.Full View’s registered office address remained at the Sheung Wan Address [p. 120] for the Year up to 14 May 2004.  His personal address remained at the Wanchai Address [p. 122] as at 23 December 2003.  On 23 December 2003, he transferred all his shares in Full View to a company. 

The plaintiff’s case

21.Pang Yiu Kwong on behalf of the plaintiff deposed [para 9-13 p. 38-39] that it was perfectly reasonable to serve the Writ of Summons on the 2^nd-named Defendant at the 3 addresses because:

(1)  The Ma Tau Wai Address was the 1^st-named Defendant’s residential address.  It was reasonable and logical to conclude that the 2^nd-named Defendant, her husband, would share the same address and the Writ of Summons would have reached him or at least come to his notice if served there.

(2)  The Ma Tau Chung Address was shown as the address of the Firm.  It was in fact the address of the 1^st-named Defendant’s mother.

(3)  The Maidstone Address was the last known business address of the Firm, and the last known and usual address of the 2^nd-named Defendant.

This Court’s findings

22.I find that the Demand Letter [p. 131] is cogent evidence that the Plaintiff had regarded the Wanchai Address (and not the Maidstone Address) to be the usual and last known address as at 23 December 2003 [p. 122].  The fact that there was no response by the 2^nd-named Defendant could mean either that it was not the 2^nd-named Defendant’s address or that he did not wish to respond.  The Plaintiff ought to have made some enquiries.  An alternative was to serve the Writ of Summons on the Wanchai Address amongst others.  The Plaintiff had taken neither of these steps. 

23.I find that the service of the Writ of Summons on 3 December 2004 was not regular because none of the 3 addresses can be regarded to be the usual and last known address of the 2^nd-named Defendant.  I am satisfied that the Writ of Summons had not come to the notice of the 2^nd-named Defendant. 

Merits of the defence

The Plaintiff’s case

24.The Plaintiff says that throughout and irrespective of the formal cessation of partnership, the 2^nd-named Defendant had held himself out as the 1^st-named Defendant’s partner. 

The 2^nd-named Defendant’s case

25.The 2^nd-named Defendant denies the Plaintiff’s allegations.       

My findings

26.The Plaintiff’s allegations were supported by very little particulars.  If such is to be the evidence at trial, the 2^nd-named Defendant may have some real prospect of success in displacing them.   

The Conclusion

27.I set aside the default judgment.  The usual rule is for costs to follow the event.  I order costs nisi to the 2^nd-named Defendant.  This order will be made absolute 14 days from today.    

Mr. Lawrence Cheung of Messrs. Michael Pang & Co. for Plaintiff.

Mr. Kwan Cheuk Kin of Messrs. Tang & Wong for Defendant.