Hra Investments Ltd v. Lee Yik Kwong

DCCJ1291/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1291 OF 2005

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BETWEEN

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Coram:   H H Judge Marlene Ng in Chambers (Open to the Public) 

Date s of Hearing:   2^nd and 10^th May, 2007

Date of Handing Down Judgment:   14^th May, 2007

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JUDGMENT

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I.       Introduction

1.The Plaintiff was/is a Canadian company carrying on business of inter alia wholesaler of jewellery and diamonds. The Defendant (also known as Stephen Lee) was/is a director and shareholder of Joytec Enterprises Limited (“Joytec”).

2.The Plaintiff claimed that between November 2002 and January 2003 Joytec trading as Perfect Collection Jewellry (“Perfect Collection”) agreed to purchase and the Plaintiff agreed to sell various quantities of diamonds evidenced by the invoices in items 4-6 and 8-11 of the Schedule annexed to this Judgment (“Schedule”) (“Invoices”). Further, in consideration and conditional upon delivery of the diamonds sold by the Plaintiff to Joytec under the Invoices, the Defendant issued to the Plaintiff 14 cheques drawn upon HSBC Canada payable to the Plaintiff (see columns F-H of items 4-6, 8-11 and 14 of the Schedule (“Cheques”)). The Plaintiff presented cheque no.1 dated 10^th January 2003 (US$55,616.00) (“1^st Cheque”) and cheque no.2 dated 14^th January 2003 (US$35,500.40) (“2^nd Cheque”) (see columns F-H of items 4-5 of the Schedule) for payment on 13^th and 15^th January 2003 respectively, but they were dishonoured due to insufficient funds.

3.On 21^st March 2005, the Plaintiff commenced the present proceedings against the Defendant to claim the sum of US$91,116.40 being the value of the 1^st and 2^nd Cheques. According to the 1^st affirmation of the Plaintiff’s solicitors’ litigation clerk Yue Tak Ming (“Mr Yue”) (“Y1 Affirmation”), he served the Writ of Summons by inserting the same through the letter box of “the last known residential address of the said Defendant” at Flat C, 5^th Floor, Block 10, Beverly Villas, La Salle Road, Kowloon, Hong Kong (“La Salle Road Address”) on 21^st March 2005. Mr Yue stated that in the opinion of the Plaintiff the Writ of Summons so served would have come to the Defendant’s knowledge within seven days. Further, the Plaintiff’s solicitor Li Adrienne May (“Ms Li”) confirmed in her 1^st affidavit that the Writ of Summons had not been returned via the Post Office’s dead letter service.

4.No notice of intention to defend was filed and default judgment was entered against the Defendant on 22^nd April 2005 for the sum of US$91,116.40 or the Hong Kong dollars equivalent at the time of payment together with interest and costs (“DC Judgment”).

5.On 20^th September 2006 (ie almost 1½ years later), the Defendant’s former solicitors filed Notice to Act in these proceedings. On 26^th September 2006, the Defendant applied under Order 19 rule 9 of the Rules of the District Court (“RDC”) (which should be Order 13 rule 9 of the RDC) to inter alia set aside the DC Judgment unconditionally on the grounds that (a) service of the Writ of Summons was irregular, (b) he had no actual knowledge of the same, and/or (c) he had a good defence or prospect of success on the merits of the defence. 

6.On 7^th March 2007, Master Lai dismissed the Defendant’s application with costs. By a Notice of Appeal dated 21^st March 2007, the Defendant appealed and sought to set aside the DC Judgment.

7.On the first day of the appeal hearing, Mr Sheppard, counsel for the Plaintiff, and Mr Cheung, counsel for the Defendant, agreed that the transcript of the hearing before the learned Master and his transcribed oral decision could be ignored since the appeal was by way of rehearing.

8.By consent of the parties, I also granted leave (a) for the Defendant to rely on his 3^rd affirmation filed on 27^th April 2007 (which in fact should be his 4^th affirmation, “D4 Affirmation”) exhibiting his 4^th affirmation dated 22^nd March 2007 filed in High Court bankruptcy proceedings HCB4043/2006 (“HCB Action”) (“D4 HCB Affirmation”), and (b) for the Plaintiff to rely on the 2^nd affirmation of Mr Yue filed on 30^th April 2007 (“Y2 Affirmation”) and the 2^nd affidavit of Ms Li filed also on 30^th April 2007 exhibiting the draft 2^nd affidavit of Itay Ariel (“Mr Ariel”) (“A2 Affidavit”) that in turn exhibited the draft 3^rd affidavit of Mr Ariel to be filed in the HCB Action (“A3 HCB Affidavit”). The finalised A2 Affidavit exhibiting the finalised A3 HCB Affidavit was eventually filed on 3^rd May 2007.

II.      Issues

9.The relevant issues are as follows :

(a)      whether the La Salle Road Address was at the material time the Defendant’s last known address;

(b)      whether service of the Writ of Summons was duly effected by bringing notice of the present proceedings to the Defendant;

(c)       whether the DC Judgment was regular or irregular;

(d)       if the DC Judgment was irregular, whether the court should exercise its residual discretion not to set aside the same or to impose conditions for setting aside the same;

(e)       if the DC Judgment was regular, whether the Defendant had shown real prospect of success on the merits of his defence.

III.      Regular or irregular DC Judgment

(a)      Undisputed facts

10.The business registration search of Joytec and/or Perfect Collection made on 17^th November 2004 prior to service of the Writ of Summons showed that Joytec’s director (ie the Defendant) applied for business registration for Joytec on 9^th June 1993. He gave the La Salle Road Address as his residential address in the section titled Certificate of Applicant (“Certificate”) on the application form and an address in Wanchai, Hong Kong for Joytec’s registered office and place of business. Joytec’s business address was updated to Unit 7, 19/F, Empress Plaza, 17-19 Chatham Road South, Tsimshatsui, Kowloon, Hong Kong (“Chatham Road Address”) on 26^th September 1994 and later to Shop 199, Grand Century Plaza, 193 Prince Edward Road, West, Kowloon, Hong Kong (“Mongkok Address”) on 9^th May 1999. The business registration records further revealed that on 15^th June 1998 and 13^th June 2000 Joytec commenced branch businesses in the name of Perfect Collection at the Mongkok Address and at Shop 16, G/F, Caroline Centre, 2-38 Yun Ping Road, Causeway Bay, Hong Kong (“Causeway Bay Address”) respectively, but such records were updated on 15^th and 30^th November 2001 respectively to show that both branches ceased business on 1^st October 2001.

11.According to the company search of Joytec made prior to service of the Writ of Summons, its registered office was at the Mongkok Address. The Defendant was a director, a shareholder and the secretary of the company. Lee Tse Pik Man Virginia (“Madam Lee”) was the other director and Fan Lai Har was the other shareholder. In Joytec’s annual return of 15^th April 2004, the address for all three of them was the Mongkok Address.

12.According to the land search of the La Salle Road Address made on 28^th March 2006, the Defendant and a Lee Cheu were joint tenants of the property since in 1981.

13.According to an updated director’s search of the Defendant made on 15^th November 2006, the Defendant (a) had been a director of Citibest Enterprises Limited (“Citibest”) and a director and secretary of Success Concord Development Limited (“Success Concord”), and (b) had been and was then still a director and secretary of Top Smart Enterprises Limited (“Top Smart”).

14.Citibest was incorporated on 15^th March 1994 and dissolved on 15^th August 2003. Its registered office was in Causeway Bay, Hong Kong. The Defendant was one of two directors, and his residential address as at the date of dissolution was the La Salle Road Address.

15.Success Concord was incorporated on 9^th March 1993 and dissolved on 8^th February 2002. Its registered office was at the Chatham Road Address. The Defendant was one of two directors and also the secretary of the company. His residential address as at the date of dissolution was the La Salle Road Address.

16.Top Smart was incorporated on 18^th March 1993 and its registered office was also at the Chatham Road Address. Its directors included Madam Lee, Lee Yiu Chung Alan (“Alan Lee”) and the Defendant (who was also appointed as secretary of the company on 18^th March 1997). The address for all three directors was the La Salle Road Address. Top Smart was not yet dissolved at the time of the director search although a striking off application was pending.

17.According to a company search of Joytec made on 16^th November 2006, the then available corporate information was the same as stated in paragraph 11 above.

(b)      Within or outside jurisdiction

18.Mr Cheung expressly abandoned the argument suggested in the D4 HCB Affirmation that the Defendant might be outside Hong Kong at the time of service of the Writ of Summons.

( c)     Defendant’s case

(1) La Salle Road Address

19.The Defendant said in his 1^st affirmation dated 26^th September 2006 (“D1 Affirmation”) that his father purchased the La Salle Road Address in 1981 with his own savings/money, but put the Defendant’s name down as one of two joint owners “as a matter of convenience”. So the Defendant held such property on trust for his father.

20.The Defendant admitted in the D1 Affirmation that he once lived at the La Salle Road Address, but moved out when he migrated to Canada in 1985. “Since then, [he has] never lived therein nor used the [La Salle Road Address] as [his] residential address.” 

21.The Defendant in his 2^nd affirmation dated 22^nd December 2006 (“D2 Affirmation”) claimed that although he used to live at the La Salle Road Address prior to migration to Canada, he did not live there any more when he returned to Hong Kong for good in 1993 “due to some disputes with [his] father”. Upon his return to Hong Kong, the Defendant set up some companies and started his trading business. Since he moved around and did not have a fixed long-term residence at that time, he used the La Salle Road Address as his residential address when he incorporated his companies.

22.The Defendant in the D4 HCB Affirmation dated 22^nd March 2007 stated that the La Salle Road Address was all along his parents’ residence. In 1984 when he decided to migrate to Canada with his family, his parents vehemently opposed the idea. Since then his relationship with his parents deteriorated drastically. As far as the Defendant knew, his parents responded with indifference when visitors came looking for him, and on some extreme occasions would even say he was dead or there was no such person. “[The Defendant] verily believe there were correspondences sent to him at the La Salle [Road] Address which had been tossed away by [his] parents.”

(2) Communications with the Plaintiff

23.The Defendant in his third affirmation dated 2^nd March 2007 (“D3 Affirmation”) said he met Mr Ariel for the first time in/about August 2002 at the Plaintiff’s Vancouver office. At that time he was acting on behalf of Joytec trading under the business name of Perfect Collection, and expressly introduced himself as Joytec’s director seeking purchase of jewellery/diamonds for sale in Joytec’s Hong Kong shop.

24.The Defendant stated in the D2 Affirmation that he communicated with the Plaintiff via “Joytec’s business address”, but did not say what the address was. It was only in the D4 HCB Affirmation that the Defendant claimed (a) the Chatham Road Address (Joytec’s office address) was all along used in correspondence between the Plaintiff and Joytec, and (b) the Invoices were addressed to Perfect Collection at the Chatham Road Address. But Perfect Collection’s address mentioned in Brinks’ courier delivery invoices (as disclosed by the Plaintiff, “Delivery Invoices”) for shipments of diamonds/jewellery from the Plaintiff to Perfect Collection was “Mongkok, Kln, China” and “Kowloon, Hong Kong”.

25.In the D2 and D3 Affirmations, the Defendant said he never gave his residential address or information about the La Salle Road Address to the Plaintiff, and never communicated with the Plaintiff via such address.

(3) Other companies

26.The Defendant formed Citibest, Success Concord and Top Smart when he returned to Hong Kong for good in 1993. These companies had been dormant with no business activities for some years, and their particulars had not been updated. Citibest and Success Concord were dissolved pursuant to striking off applications, which meant they had been dormant or had failed to file company records for some time. Similarly, Top Smart was then in the course of being struck off under section 291 of the Companies Ordinance Cap.32. In the circumstances, the Plaintiff could not rely on the La Salle Road Address shown in the company records of these companies.

(4) Residential address

27.The Defendant claimed that since 1995 he had been and was still residing at Flat A, 5^th Floor, Cherish Court, Peninsula Village, Discovery Bay, Lantau Island, Hong Kong (“Discovery Bay Address”).

(5) Knowledge of the Writ of Summons

28.The Defendant claimed he had no knowledge of the Writ of Summons prior to entry of the DC Judgment. As to when he acquired actual knowledge of the Writ of Summons, he said as follows :

(a)       In the D1 Affirmation, the Defendant claimed he became aware of the Writ of Summons when he “recently” applied for a loan from “a finance company” and was informed that the Plaintiff had filed a bankruptcy petition (“Petition”) against him in the HCB Action. He noted from the Petition that the Plaintiff had also issued legal proceedings in the High Court against him in HCA1034/2005 (“HC Action”) for dishonoured cheques. (I pause here to note that Mr Ariel explained in the A1 Affidavit that after the 1^st and 2^nd Cheques were dishonoured, the remaining 12 Cheques were subsequently dishonoured upon presentation and became the subject matter of the HC Action.)

(b)       In the D2 Affirmation, the Defendant said when he applied for a loan from “a finance company” “in or about 2006”, the loan officer informed him of the Petition that was revealed by the bankruptcy search done by the finance company. The Defendant personally obtained a copy of the Petition from the court, and discovered that it was based on the DC Judgment and the default judgment dated 28^th June 2005 against him in the HC Action for the sum of US$456,299.86 (see also the D4 Affirmation, “HC Judgment”). “Later, [the Defendant] obtained copy of the statement of claims for the two actions.”

(c)       In the D3 Affirmation, the Defendant said he did not receive the Writ of Summons until “[his] lawyer obtained a copy from the court file in late 2006”.

(d)       In the D4 HCB Affirmation, the Defendant said he only discovered the DC and HC Judgments from the “bank or finance company” when he attempted to raise some funds for his business.

29.In the D1 Affirmation, the Defendant said he made enquiries with his father who confirmed he was not aware of having received any Writ of Summons in the present proceedings and/or in the HC Action. As explained in paragraph 22 above, the Defendant claimed in the D4 HCB Affirmation that (a) on some extreme occasions his parents would tell visitors looking for him that he was dead or there was no such person, and (b) there were correspondences sent to him at the La Salle Road Address that had been tossed away by his parents.

(d)     Plaintiff’s case

(1) Defendant’s business card

30.On/about August 2002, Mr Ariel, the Plaintiff’s marketing and sales director, met the Defendant for the first time at the Plaintiff’s Vancouver office. The Defendant gave Mr Ariel a business card that held him out as trading under the business name of Perfect Collection (“Business Card”). The Business Card described the Defendant as managing director and gave the following addresses, ie (a) the Causeway Bay Address (Hong Kong shop), (b) the Mongkok Address (Kowloon shop), and (c) the Chatham Road Address (office), but did not refer to Joytec. Mr Ariel claimed that throughout their business relationship, he was unaware of the name of Joytec.

(2) Investigators’ search efforts

31.It was not until (a) the Plaintiff engaged investigators to locate the Defendant and instructed its solicitors to recover monies owing by the Defendant and (b) its investigators conducted a search at the Business Registration Office (“BRO”) on 17^th November 2004 that the Plaintiff discovered that Perfect Collection was in fact a business name used by Joytec (see paragraphs 10-11 above). Mr Ariel was surprised to learn that Perfect Collection had ceased business in 2001 when the Defendant still handed out the Business Card to him in August 2002.

(3) La Salle Road Address

32.The Plaintiff claimed the La Salle Road Address was the Defendant’s last known residential address as gleaned from the particulars in the Certificate, which accorded with the particulars of the Defendant’s residential address submitted to the Companies Registry in respect of several companies of which he was either a director or secretary (see paragraphs 13-16 above). Given that Perfect Collection ceased business in 2001, the only other address on record was the Defendant’s residential address at the La Salle Road Address.

(4) Other addresses

33.According to the Y2 Affirmation, Mr Yue attempted to serve the Writ of Summons on the Defendant personally at the Chatham Road and Mongkok Addresses on 30^th March 2005, but could not find the Defendant at either address. According to Mr Yue’s attendance note of 31^st March 2005, when he attended the Chatham Road Address, it had a different company name and the man who opened the door said the Defendant was not at that office. When Mr Yue attended the Mongkok Address, it was vacant and enquiry with the caretaker revealed that “Perfect Collection Jewellry” had moved out since January 2005.

(5) Discovery Bay Address

34.There was no updated record of the Discovery Bay Address with the Companies Registry and/or the BRO as the Defendant’s residential address. The Plaintiff claimed it was incumbent on the Defendant to notify and update the records accordingly, particularly when he continued to hold himself out under the Business Card as still trading under the name of Perfect Collection.

( e)     Defendant’s last known address

35.There was no dispute that (a) the Plaintiff inserted the Writ of Summons into the letter box of the La Salle Road Address on 21^st March 2005, and (b) the Y1 Affirmation complied with the requirements under Order 10 rule 1(3)(b)(i) of the RDC. 

36.The first question was whether the La Salle Road Address was a last known address of the Defendant at the time of service of the Writ of Summons. It was at first subject to intense debate with the Defendant claiming that the Mongkok Address (not the La Salle Road Address) was his usual and/or last known address.  However, in the course of Mr Cheung’s submissions in reply almost at the end of the second day of the appeal hearing, he conceded that the La Salle Road Address was a last known address of the Defendant at the time of service of the Writ of Summons (“1^st Concession”).

37.I am satisfied the 1^st Concession was correctly made since there was no evidence to disturb Mr Ariel’s explanation that the Plaintiff acquired knowledge of the La Salle Road Address from the Certificate, a copy of which was obtained via a business registration search by the investigators it engaged prior to service of the Writ of Summons. Although Joytec’s business address had changed over the years, there was nothing in the business and/or company registration records that would have alerted the Plaintiff to any change of the Defendant’s residential address. I am satisfied the Plaintiff acquired knowledge of the La Salle Road Address by reasonable means and such address was last known to the Plaintiff as the Defendant’s residential address where he could be reached.

38.It mattered not that the Defendant (a) did not tell the Plaintiff about the La Salle Road Address (see Law Kwok Hung v Tse Ping Man and anor [1999] 4 HKC 397, 404 and The Hong Kong Mortgage Corporation Limited v Ching Kit Yu and anor HCMP2226/2002, Deputy Judge To (unreported, 15^th April 2003), para.12) and/or (b) might have had other usual and/or last known addresses at the material time (see Guangdong International Trust and Investment Corp Hong Kong (Holdings) Ltd v Yuet Wah (Hong Kong) Wah Fat Ltd and anor [1997] 2 HKC 696, 701 and The Hong Kong Mortgage Corporation Limited’s case (supra at para.11)).

39.However, for the avoidance of doubt, I will deal with two matters raised by Mr Cheung that were not abandoned despite the 1^st Concession.

(1) Need for enquiries ?

40.In his written submissions, Mr Cheung argued that the Plaintiff (a) could not have justifiably relied on the La Salle Road Address since it was set out in an 11-year-old document, and (b) should have made further enquiries and served the Writ of Summons at both the Mongkok and La Salle Road Addresses. Mr Cheung later agreed the Plaintiff had no legal obligation to make such enquiries, but he still insisted the Plaintiff should have done so as a matter of prudence.

41.In my view, the La Salle Road Address was not stale for the purpose of being a “last known address” of the Defendant just because it was given in a 1993 document. This was especially so when the Defendant was unable to say how the Plaintiff could have realised that such residential address had become stale or been superseded. Mr Cheung’s alternative contention that by March 2005 the La Salle Road Address might not be the Defendant’s residential address was beside the point. After all, the issue was whether such address was a residential address of the Defendant last known to the Plaintiff and not whether such address might or might not have been the Defendant’s residential address.

42.Although Mr Cheung’s stance on whether the Plaintiff should have made enquiries about the La Salle Road Address  was ambiguous (see paragraph 40 above), such enquiries were in any event irrelevant. In Law Kwok Hung’s case (supra at p.403) the 1^st defendant accountant gave an address to his professional body for public disclosure, and it was said it “mattered not that perhaps with further inquiry, a different address might have been discovered (cf National Westminster Bank v Betchworth (1975) 234 EG 675)”.

(2) Mongkok Address

43.Joytec’s annual return of 15^th April 2004 stated that its registered office and the address of its directors/shareholders (including that of the Defendant) were at the Mongkok Address. Mr Cheung at first argued that given the Plaintiff knew from the company search records of Joytec that the Mongkok Address was the Defendant’s most recent and up-to-date recorded address (ie his usual and/or last known address), the Plaintiff should have served the Writ of Summons on both the La Salle Road and Mongkok Addresses.

44.But in light of the 1^st Concession, I find such argument would not have assisted the Defendant. A defendant could have a number of usual and/or last known addresses, and a last known address would not be displaced by any other concurrent usual and/or last known addresses (see paragraph 38 above).

45.Even so, Mr Cheung maintained that an address of the Defendant could only become a “usual” address upon the Plaintiff’s knowledge about such address, so the Mongkok Address (which the Plaintiff was aware from Joytec’s annual return dated 15^th April 2004) was the Defendant’s usual address. In support of his proposition, Mr Cheung relied on The Hong Kong Mortgage Corporation Limited’s case (supra at para.13) as follows :

“I now turn to the word “usual” or “usual address”. This must mean one of the above addresses where a person may usually be reached. …… the word “usual” conveys the idea of a habitual or frequent connotation, …… thus, a person may have a number of usual addresses. He may be usually reached during office hours at his office address or during other hours at his home address. This may be one of the last known addresses …… Anyway, the “usual address” and “last known address” are alternative addresses for service under Order 10 rule 1(2) of the Rules of the High Court.” (my emphasis)

46.I disagree that the Mongkok Address was the Defendant’s “usual address” at the time of service of the Writ of Summons. The aforesaid extract from Deputy Judge To’s judgment did not say a defendant’s “usual” address depended on the plaintiff’s knowledge. If such knowledge were a necessary element, there would have been little point to have the disjunctive provision for usual or last known address. 

47.This was made abundantly clear in Guangdong International Trust and Investment Corp Hong Kong (Holdings) Ltd’s case (supra) where the writ of summons was served on the 1^st defendant company and the 2^nd defendant director by posting the same to an address in Tsimshatsui, Kowloon. The Tsimshatsui address remained as the 1^st defendant’s registered office until 14^th February 1996 when the 1^st defendant notified the Companies Registry of change of registered office. The 1^st defendant moved out of the Tsimshatsui address on 13^th March 1996. But the records at the Companies Registry were still not updated by the time the plaintiff’s solicitors conducted a company search on following day. In the circumstances, the plaintiff in that case knew about the old Tsimshatsui address but not the new registered office. Keith J said at p.701 :

“…… There is not sufficient evidence before me to enable me to come to a conclusion as to where his usual address was on 27th March. However, I do not see how his usual address can have been the address at Tsim Sha Tsui, because by then that address had ceased to be D1's principal office. If D2's usual address was where he usually worked, the closure of the office at the address in Tsim Sha Tsui meant that by 27th March D2 no longer usually worked there.

…… A defendant's last known address must have been intended to be an alternative to a defendant's usual address in case the plaintiff was unaware of a recent change in the defendant's usual address.” (my emphasis)

48.According to the Y2 Affirmation, the Mongkok Address was vacant by 30^th March 2005 and enquiries revealed that Perfect Collection had moved out in January 2005, so such address could not have been the Defendant’s usual address at the time of service of the Writ of Summons.  Mr Cheung asked me to consider the Y2 Affirmation with scepticism because Mr Yue did not mention his visits to the Mongkok and Chatham Road Addresses (which addresses were not stated on the Writ of Summons) in the Y1 Affirmation. However, it should be remembered that the Y1 Affirmation was filed in support of the Plaintiff’s application for default judgment. The Plaintiff all along relied on service of the Writ of Summons to the La Salle Road Address, so there was no reason for Mr Yue to describe the failed attempts to serve the Defendant at the Mongkok and Chatham Road Addresses in the Y1 Affirmation. But even if I were to ignore the Y2 Affirmation, there was still insufficient evidence for concluding that the Mongkok Address was the Defendant’s usual address at the material time, particularly as the business registration records showed that Perfect Collection ceased business at such address since 1^st October 2001. The Defendant’s affirmations were conspicuously silent as to whether he still worked or carried on business at the Mongkok Address at the material time.

(f) Knowledge of the Writ of Summons

49.The words “unless the contrary is shown” in Order 10 rule 3(a) of the RDC showed it was open to a defendant to demonstrate that he did not have actual notice of the writ. It is now clear that the test for service of a writ was whether it was brought to the defendant’s notice and not whether it had been delivered to the defendant’s last known address (see Chu Kam Lun v Yap Lisa Susanto [1999] 3 HKC 378, Kwan Kam Wah v Chan Wai Ming [2000] 2 HKC 378, Cosec Nominees Ltd and anor v Lau Hon Ming Alan [2001] 3 HKC 290, Bank of China (Hong Kong) Limited  (formerly known as Po Sang Bank Limited) v Hung Chun Wai Christina and anor HCA 69/2000 and HCB 5837/2003, Sakhrani J (unreported, 3^rd September 2004) and Sinokawa Investment (Holdings) Limited v Li Chun HCA15641/1999&HCA15643/1999, Sakhrani J (unreported, 29^th June 2006) at para.15).

50.The Defendant’s claim that he had no knowledge of the Writ of Summons was premised on his bare assertion (without any supporting evidence or documents) that since 1995 he lived at the Discovery Bay Address.

51.Tang JA giving the judgment of the Court of Appeal in Bank of China (Hong Kong) Limited (formerly known as The China and South Sea Bank, Limited, Hong Kong Branch) v Cheung King Fung, Francis and anor CACV66/2005 (unreported, 22^nd July 2005) said the court did not necessarily have to accept the defendant’s assertion no matter how improbable :

“ It is quite clear from Forward v West Sussex County Council, cited above, that a defendant is required to provide “convincing evidence”: at 1473G.  The Master of the Rolls went on to say of the judge that “He was in our view quite right to be sceptical of the contention that the 4^th defendant had not received the writ in the absence of compelling evidence to show that it had not been forwarded on to him, as would in the ordinary course be accepted”: at 1474H. Of course, how much evidence is required must depend on the circumstances of the particular case.”

52.In Cheng Chi Lun v Ng Lai Ming Juliana HCA1611/2006, (unreported, 14^th February 2007), Mr Recorder Fok SC also said at para.26 as follows :

“The Court of Appeal has, however, made clear that this does not mean that the court must accept a defendant’s assertion no matter how improbable: Bank of China (Hong Kong) Lts v Cheung King Fung, Francis and Anor, unrep, CACV 66 of 2005, 5 July 2005 at § 33 per Tang JA. A defendant is required to provide convincing evidence; how much evidence is required must depend on the circumstances of the particular case” ibid. §34. The relevant question is whether there is sufficient evidence to cast doubt on the Defendant’s credibility such that the court should not accept the bare allegation that she has not received the writ.”

53.Having considered the affidavit evidence before me, I am doubtful of the credibility of the Defendant’s outright denial of having received the Writ of Summons.

54.In Sinokawa Investment (Holdings) Limited’s case (supra at para.10), Sakhrani J regarded utilities bills as “cogent evidence”. Here, although the Defendant claimed he lived at the Discovery Bay Address for about 10 years prior to service of the Writ of Summons and despite having filed four affirmations (including one for the present appeal after Master Lai’s decision) in seven months in support of the application to set aside the DC Judgment, he failed to disclose any of the usual documents that one would expect an occupier to have in relation to his residential address (eg assignment, tenancy agreement, utility bills, other invoices, management fee debit notes, etc). During his submissions on the first day of the appeal hearing, Mr Cheung made a half-hearted application to adduce further affidavit evidence, but later abandoned the attempt. In my view, there was no or no sufficient convincing or compelling evidence to show that the Defendant lived at the Discovery Bay Address at the material time.

55.I note further that the Defendant did not register the Discovery Bay Address with the Companies Registry as his address in relation to his various companies over the last 10 years. He did not offer any explanation in his affirmations as to why he did not update/notify the Companies Registry to replace the La Salle Road Address with the Discovery Bay Address as his address in relation to Citibest, Success Concord and Top Smart. The Defendant’s continued use of the La Salle Road Address as his address in the director search records of Citibest, Success Concord and Top Smart also contradicted his claim in the D1 Affirmation that after 1985 he never “used [such address] as [his] residential address”. The Defendant was therefore constrained to admit in the subsequent D2 Affirmation that he used the La Salle Road Address as his residential address when he incorporated his companies. Such evolution of the Defendant’s assertions when confronted by the incontrovertible director search records was at best unpersuasive.

56.Although the Defendant said in the D1 Affirmation that he did not live at the La Salle Road Address (which was his father’s property) after his return from Canada, his explanation that it was due to some disputes with his father only came to light for the first time in the D2 Affirmation. But even so, it appeared that his relationship with his father/parents was not too bad because (a) after 1995 he still used and held out the La Salle Road Address as his residential address in documents lodged with the Companies Registry (see paragraphs 13-16 above), and (b) he was still on speaking terms with his father, ie he checked with his father whether he had received the Writ of Summons and his father said he was not aware of having received the same.

57.But in a new twist the subsequent D4 HCB Affirmation painted a picture of drastically bad relationship between the Defendant and his parents, so much so that when visitors looked for him at the La Salle Road Address, his father would not acknowledge him and sometimes would even say he had died or there was no such person (see paragraph 22 above). Nevertheless, the Defendant continued to remain as joint owner of the La Salle Road Address with his father.

58.The D4 HCB Affirmation further attempted to underline the aforesaid drastically bad relationship by stating the Defendant’s belief that his parents had “tossed away” correspondence sent to the La Salle Road Address for him. This did not sit well with the Defendant’s earlier D2 Affirmation deposing that upon enquiry his father said he was not aware of having received the Writ of Summons. In my view, if the Defendant’s father did not receive the Writ of Summons, such document would mot have been available for tossing away.

59.As to when the Defendant acquired actual knowledge of the Writ of Summons, he failed to state clearly when he purportedly found out about the same. In the D1 Affirmation, it was said to be “recently”. In the D2 Affirmation, it was “in or about 2006”. In the D3 Affirmation it was said to be late 2006 whilst no date was given in the D4 HCB Affirmation. No explanation was given for the Defendant’s reticence, especially when the HCB Action was ongoing at that time, and the Defendant could have easily checked/verified the date when he or his solicitors bespoke copies of the Petition and the Writ of Summons from the court files.

60.Apart from the Discovery Bay Address which the Plaintiff could not have been aware of at the material time, the Defendant was careful not to say whether he could be reached at any or all of the Chatham Road, Mongkok and Causeway Bay Addresses. Joytec’s business address at the Chatham Road Address was superseded by the Mongkok Address in 1999, and Perfect Collection’s branch businesses at the Causeway Bay and Mongkok Addresses ceased in 2001. The Y2 Affirmation showed that the Defendant could not be found at either the Chatham Road or Mongkok Address.

61.Having carefully considered all the circumstances (including the metamorphosis of the Defendant’s stance described above), the Defendant has not satisfied me that he did not have notice of the Writ of Summons at the material time. I find that the Writ of Summons was properly served on the Defendant. In the circumstances, the DC Judgment was a regular judgment and there is no need to consider the issue that was raised in paragraph 9(d) above. I will now proceed to consider whether the Defendant had a meritorious defence.

I V.      Defence on the merits

(a)       Law

62.Since the DC Judgment was a regular judgment, the Defendant must show a meritorious defence with a real prospect of success or which carried some degree of conviction (Premier Fashion Wears Ltd v Lee Hing Chung [1994] 1 HKC 213, 219). Godfrey JA said at pp.219-220 that “[it] seems to me that unless potentially credible affidavit evidence from the defendant has demonstrated a real likelihood that he will succeed on fact, he cannot have shown that he has a real prospect of success.”This required the court to form some provisional view of the probable outcome of the action.

63.Where the outcome depended on whose evidence was likely to be accepted, the appropriate test for determining whether the defendant had a real prospect of success was to ask whether the defence “could well be established” at trial or whether the defence witnesses could well be believed at trial (Guangdong International Trust and investment Corp Hong Kong (Holdings) Ltd’s case (supra), Morrigood Development Ltd v Sunny Reading Co (a firm) [1999] 2 HKC 710 and L & M Specialist Construction Ltd v Wo Hing Construction Co Ltd [2000] 3 HKLRD 262).

64.On the first day of the hearing, I referred both counsel to S Y Chan Ltd v Choy Wai Bor [2001] 4 HKC 285 and Lam Tai Kwan v Lo Wai Kit CACV353/2006 (unreported, 10^th January 2007) whereupon Mr Cheung confirmed that the Defendant would no longer maintain the defence arguments that the 1^st and 2^nd Cheques were issued merely as gestures of sincerity/good faith and that they were delivered to the Plaintiff as a matter of convenience on the understanding they would not be presented for payment (“2^nd Concession”).

(b)    1st Cheque

65.In such circumstances, Mr Cheung accepted there was no defence to the Plaintiff’s claim in respect of the 1^st Cheque (“3^rd Concession”).

(c)     2nd Cheque

66.In respect of the 2^nd Cheque, the Defendant contended there was total failure of consideration on the ground that the corresponding lot of diamonds being the subject matter of Invoice no.500381 marked on the face of the 2^nd Cheque (ie columns A-D of item 5 of the Schedule) had not been delivered to Joytec and/or the Defendant. However, I do not find such assertion convincing or compelling.

67.In the seven months since the Defendant issued the present application to set aside the DC Judgment, the Defendant’s purported “defence” of total failure of consideration had evolved.

68.Despite the plain averment by the Plaintiff in paragraph 3 of the Statement of Claim that it had delivered the diamonds sold under the Invoices to Joytec, the Defendant did not clearly allege any non-delivery or total failure of consideration in the D1 Affirmation apart from a general denial of being indebted to the Plaintiff for the sum of US$91,116.40. The focus of the D1 Affirmation was on the now abandoned arguments under the 2^nd Concession.

69.Long before the purported defence of total failure of consideration was specifically raised, Mr Ariel in the A1 Affidavit said the diamonds were selected/purchased by and delivered to the Defendant as follows :

(a)         the Defendant came to the Plaintiff’s Vancouver or San Francisco office to personally select the diamonds and negotiate the purchase price, and once the price was agreed upon, the diamonds were packed, sealed, signed and sent to his office in Hong Kong, or

(b)        the Defendant came to the Plaintiff’s Vancouver or San Francisco office to personally select the diamonds and negotiate the purchase price, and once the price was agreed upon, he or his son took the diamonds with him.

70.Mr Ariel said that in each instance after the Defendant selected the diamonds at the Plaintiff’s showroom/vault and agreed on the purchase price, the Plaintiff’s staff would pack and seal the diamonds in a box for the Defendant to sign his name on the seal to ensure the box would not be tampered with. If the Defendant or his son did not collect such boxes of diamonds personally, the Plaintiff would arrange for Brinks and/or Federal Express to deliver them to the Defendant.

71.Mr Ariel confirmed that the diamonds under the Invoices had been sent and received by the Defendant. “[The Defendant’s] personal post-dated [Cheques] were payment for the diamonds he either took with him or were subsequently delivered to him. All the diamonds that were purchased by and delivered to [the Defendant] remain unaccounted for.”

72.But despite Mr Ariel’s aforesaid verification that the diamonds under the Invoices had been delivered and received, the defence of total failure of consideration was again not raised in the D2 Affirmation in December 2006. Further, although the Defendant in the D1 Affirmation reserved the right to make further affirmations if necessary after sorting out and locating relevant documents of Joytec, he deposed in the D2 Affirmation that he could not locate or find further information and documents in respect of the Invoices due to the long lapse of time.

73.In the D3 Affirmation in March 2007, the Defendant said that for the first sale and purchase transaction between the Plaintiff and Joytec, the Plaintiff packed and delivered the first lot of diamonds to Joytec in Hong Kong. “Some diamonds ordered were delivered to Joytec later by lots”. For the first time, the D3 Affirmation mentioned that “[the] Plaintiff later ceased delivery the other lots of orders to Joytec. Unknown to [the Defendant], the Plaintiff continued to present [his] personal cheques to settle Joytec’s outstanding amount.” Interestingly, the Defendant concluded in the D3 Affirmation that there was no monetary consideration for both the 1^st and 2^nd Cheques (ie not just the 2^nd Cheque), which was inconsistent with the 3^rd Concession, but no explanation was given for such discrepancy.

74.In the D4 HCB Affirmation, the Defendant agreed the Plaintiff had previously presented three other personal cheques issued by him to settle the price of some diamonds previously purchased for Joytec, but Joytec had reimbursed him subsequently. “The first payment was for diamonds which [the Defendant] picked out and brought back to Hong Kong after [his] first trip. The 2^nd and 3^rd payments were for goods shipped and delivered to [the Defendant] by Brinks and Federal Express in Hong Kong respectively on 14^th September 2002 and 27^th September 2002” (see items 1-3 of the Schedule).

75.The Defendant expanded on the defence of total failure of consideration in the D4 HCB Affirmation. He claimed that according to the three Delivery Invoices from Brinks and Federal Express disclosed by the Plaintiff, the shipments were from door to door, so Joytec would have signified receipt of the shipments. But the Plaintiff did not disclose any receipt/acknowledgement signed by Joytec’s staff. Further, although the Plaintiff claimed there were more than ten transactions between the Plaintiff and Perfect Collection/Joytec, only three Delivery Invoices were disclosed. The Defendant had requested his solicitors to inspect the Invoices and Delivery Invoices because he had grave doubts as to their genuineness. He claimed it would necessary to cross-examine Mr Ariel at trial to reveal the truth.

76.First, I note with interest that the Defendant gave different descriptions as to how the diamonds purchased pursuant to the first transaction were delivered. The D3 Affirmation said they were delivered to Joytec in Hong Kong. But the D4 HCB Affirmation said the Defendant picked out and brought back diamonds to Hong Kong after his first trip, which was consistent with the Plaintiff’s stance. Such discrepancy illustrated the unreliability of the Defendant’s evidence in relation to the delivery of diamonds purchased under the Invoices.

77.Secondly, although the Defendant applied to set aside the DC Judgment in September 2006, he did not complain of non-delivery of the diamonds purchased and of total failure of consideration in his affirmations until March 2007. The Defendant affirmed he was unable to locate or find any information or documents in respect of the Invoices, and he did not explain what caused him to purportedly recollect some time in March 2007 (ie the D3 Affirmation) that the Plaintiff failed to deliver inter alia the relevant lot of diamonds for the 2^nd Cheque. From the details particularised in the D4 HCB Affirmation, it appeared that the foundation for such purported defence was only the Defendant’s surmise premised on his interpretation of the absence of the Delivery Invoices and receipts signed by Joytec’s staff for all transactions under the Invoices. However, the Defendant carefully did not say in his affirmations whether he personally picked up and took away any of the diamonds purchased (apart from the first lot) notwithstanding Mr Ariel’s affirmation as to the manner of delivery in the A1 Affidavit.

78.Mr Ariel responded to the Defendant’s defence contentions in the A3 HCB Affidavit as follows :

(a)         Prior to receiving the 14 personal post-dated Cheques from the Defendant, the Plaintiff also accepted four personal cheques from him for previous sales of diamonds under the invoices in columns A-D of items 1-3 of the Schedule and these cheques were all honoured upon presentation.

(b)        The diamonds sold under the invoices in columns A-D of items 2, 3 and 6 of the Schedule were delivered via Brinks and Federal Express. The Defendant personally collected the diamonds under the other Invoices from the Plaintiff’s Vancouver or San Francisco offices.

79.In respect of (a) above, this must be contrasted with the Defendant’s assertions of having previously given three (not four) personal cheques to the Plaintiff to settle the price of some previous purchases of diamonds for Joytec (see paragraph 74 above). But in the A3 HCB Affidavit, Mr Ariel disclosed copies of four (not three) cheques previously issued by the Defendant and their corresponding deposit slips. I therefore prefer Mr Ariel’s contentions in this respect and find the Defendant’s assertions unreliable.

80.In respect of (b) above, Mr Ariel explained in the A3 HCB Affidavit that the invoices in columns A-D of items 1-3 of the Schedule had been settled by the aforesaid four personal cheques previously issued by the Defendant. These three invoices were for the first lot of diamonds (see item 1 of the Schedule) and for two further lots of diamonds that the Defendant acknowledged had been received in the D3 Affirmation and the D4 HCB Affirmation (see paragraphs 73-74 above). For the two further lots, the Defendant agreed the diamonds pertaining to the relevant invoices dated 9^th September 2002 (see columns A-D of items 2-3 of the Schedule) had been received, and the corresponding deliveries on 14^th and 27^th September 2002 were evidenced by the Delivery Invoices from Brinks and Federal Express respectively (see column I of items 2-3 of the Schedule and paragraph 74 above).

81.In respect of the Invoices, the Defendant admitted in the D4 HCB Affirmation that (a) the diamonds pertaining to the Invoice dated 11^th November 2002 (see columns A-D of item 4 of the Schedule) that was the subject matter of the 1^st Cheque had been received, and (b) the diamonds pertaining to the Invoice dated 15^th November 2002 (see columns A-D of item 6 of the Schedule) had been received, which delivery was evidenced by a Delivery Invoice from Brinks (see column I of item 6 of the Schedule).

82.In the D4 HCB Affirmation, the Defendant further acknowledged that the diamonds pertaining to the Invoice dated 12^th December 2002 (which Mr Cheung informed me should be referable to 2^nd December 2002) (see columns A-D of item 8 of the Schedule) had been delivered and received.

83.In light of the above admissions by the Defendant, I do not understand why he would doubt the genuineness of the three Delivery Invoices from Brinks and Federal Express disclosed by the Plaintiff (see columns I of items 2, 3 and 6 of the Schedule). There is no merit in such assertion.

84.I further find the Defendant’s alleged disbelief as to the genuineness of the Invoices to be nothing more than a bare assertion raised for the first time half a year after he entered appearance in these proceedings. In any event, there was no reason to doubt the Invoices in columns A-D of items 4, 6 and 8 of the Schedule since the Defendant admitted that the corresponding shipments of diamonds had been received. If the remaining Invoices were not genuine (ie there were no such transactions or orders for diamonds purchased from the Plaintiff), the Defendant did not explain why he had given his personal Cheques in columns F-H of items 5 and 9-11 of the Schedule to the Plaintiff. According to the D2 Affirmation, he gave his personal Cheques to the Plaintiff as security arrangement for “payment for jewellery ordered by Joytec” (my emphasis) and such Cheques were to be returned to him if (a) the purchase transactions were not concluded, (b) the diamonds were not delivered, or (c) Joytec did not settle payment for the delivered diamonds by its own cheques. However, the Defendant did not say in his affirmations that any of the purchase transactions had been cancelled. What was left was a bare assertion of non-delivery for “other lots of orders to Joytec” which I find unconvincing.

85.Surprisingly, there was no evidence of any complaint by the Defendant (whether in writing or otherwise) of non-delivery of diamonds for the Invoice dated 14^th November 2002 (see column A-D of item 5 of the Schedule) for over five years from November 2002 until March 2007, especially when there was also no evidence of cancellation of the relevant purchase transaction. More interestingly, the Defendant did not offer any explanation for the absence of any complaint for non-delivery of the diamonds under such Invoice when the diamonds pertaining to the Invoices dated 11^th and 15^th November and 2^nd December 2002 (ie Invoices issued just before and after the Invoice dated 14^th November 2002, see columns A-D of items 4, 6 and 8 of the Schedule) had been received.

86.Mr Cheung submitted that the Defendant’s truthfulness was reflected by his open admission of receipt of shipments of diamonds in respect of the Invoices in columns A-D of items 1, 4 and 8 of the Schedule even though the Plaintiff did not disclose any corresponding Delivery Invoices. However, I note that apart from the first transaction in respect of which the Defendant gave conflicting evidence as to the mode of delivery (see paragraph 76 above) and despite Mr Ariel’s clear evidence in the A1 Affidavit as to manner of delivery of the diamonds under the Invoices, the Defendant carefully did not say in his affirmations about how the diamonds pertaining to the Invoices dated 11^th November and 2^nd December 2002 (see items 4 and 8 of the Schedule) were delivered and received. In my view, there was no sufficient evidence to refute the Plaintiff’s evidence that the Defendant collected them from either the Plaintiff’s Vancouver or San Francisco office, which cast doubt on the Defendant’s surmise as set out in paragraph 77 above.

87.Mr Sheppard submitted that several emails received by the Plaintiff after the 1^st and 2^nd Cheques were dishonoured showed that the Defendant had acknowledged his personal responsibility for payments under the Cheques. Mr Cheung on the other hand submitted that the emails were from “Albert Lee” and “Anita” and not the Defendant, so their evidential value was limited. In my view, even without such emails, I am not satisfied that the Defendant has demonstrated real prospects of success in respect of the defence arguments of non-delivery of the diamonds pertaining to the 2^nd Cheque and total failure of consideration. However, for completeness, I will briefly consider the emails.

88.In the A1 Affidavit, Mr Ariel explained that on/about 16^th January 2003 the Plaintiff received notice of dishonour from its banker in respect of 1^st Cheque, so he sent an email to notify the Defendant. On 17^th January 2003 he received an email from “Anita”, the Defendant’s former wife as follows :

“Dear Itay,

Thank You for your email. Sorry that I did not return earlier. Stephen is still at a hospital in China for treatment on his gallbladder stone. He knows that he has to take care a few payment to your company and he know the urgency in settle them. Please give him a little time to settle this. He will contact you once as soon as he can.

With regard to Anita”

89.Subsequently, the 2^nd Cheque was dishonoured upon presentation. Mr Ariel received an email from the Defendant (which was sent from Alan Lee’s email address) on 7^th February 2003 as follows :

“Itay,

It has been a while since we last touch base, please excuse me that for not responding to your messages for this period.

Since I was suffering from cholelitheasia, and I was scheduled to have my operation in late February as I am now staying in Sh anghai.

I would take care my responsibility once I come back to Hong Kong.

Kung Hei Fat Choy!

Regards,

Stephen Lee”

90.On 26^th March 2003, there was another email from the Defendant to Mr Ariel (which was again sent from Alan Lee’s email address) as follows :

“Dear Itay,

Referring to our tele-conversation earlier, firs t of all, I have to thank you for the support and consideration of our business relationship. As most of our distribution of diamonds and jewelry are assigned to a listed company in Shanghai, the company is currently undergoing the expansion project in their retail outlets in which they are tight in cashflow. We are still in negotiation with them for their delay payment of our receivables.

As we expect we could resolve this situation in the meantime, we hope we could establish a long-term relationship with your company.

Regards,

Stephen Lee”

91.The Defendant never denied (a) Mr Ariel’s evidence that “Anita” was his former wife or (b) he knew Alan Lee. In fact, Alan Lee together with the Defendant and Madam Lee were the shareholders of Top Smart and they all gave the La Salle Road Address as their address in the director search records. “Albert Lee” as referred to by Mr Cheung did not appear in the emails.

92.In my view, the Defendant’s contentions in relation to the emails were feeble. There was no suggestion that the contents of the emails were untruths. In the D2 Affirmation, the Defendant only said he had no idea of such emails. But in the D4 HCB Affirmation, he opined that upon reading of the emails any acknowledgment of liability therein (if any) was made on behalf of Joytec. I disagree. A plain reading of the emails showed that at least two emanated from the Defendant albeit sent to Mr Ariel from the email address of Alan Lee who was commercially associated with the Defendant. In my view, the contents of the emails (which were issued in the close timing to the dishonour of the 1^st and 2^nd Cheques) referred to the Defendant’s illness and dealt with the non-payment of the Defendant’s personal liabilities under the 1^st and 2^nd Cheques. The Defendant clearly stated “I would take care my responsibility once I come back to Hong Kong” (my emphasis). I am not persuaded by the Defendant’s bare denial of the emails.

V.   Conclusion

93.It therefore remains for me to dismiss the Defendant’s appeal, which I now do. There is no reason why costs should not follow event. I therefore grant a costs order nisi that the Defendant do pay the Plaintiff costs of the appeal (including all costs reserved, if any) to be taxed if not agreed with certificate for counsel.

Representation:

Mr Andrew Sheppard instructed by Messrs Barlow Lyde & Gilbert for the Plaintiff.

Mr Lawrence Cheung instructed by Messrs C O Chan & Co for the Defendant.

Schedule

Legend :

1  The invoices were addressed to Perfect Collection at the Chatham Road Address.

2  See paragraph 7 of A3 HCB Affidavit and paragraph 79 of this Judgment.

3  See paragraph 7 of A3 HCB Affidavit and paragraph 79 of this Judgment.

4  1^st Cheque.

5  2^nd Cheque.

6  See paragraph 7 of A3 HCB Affidavit, paragraph 5 of D3 Affirmation and paragraph 76 of this Judgment.

7  See paragraph 7 of A3 HCB Affidavit and paragraphs 18 and 22 of D4 HCB Affirmation. The Delivery Invoice stated that the shipment was from the Plaintiff’s San Francisco office to Perfect Collection at Mongkok, Kowloon, China.

8  See paragraph 7 of A3 HCB Affidavit and paragraphs 18 and 22 of D4 HCB Affirmation. The Delivery Invoice stated that the shipment was from the Plaintiff’s San Francisco office and received by Stephen Lee of Perfect Collection at the Mongkok Address.

9  See paragraph 22 of D4 HCB Affirmation and paragraph 9 of A3 HCB Affidavit.

10  See paragraph 22 of D4 HCB Affidavit. The Delivery Invoice stated that the shipment was delivered to Perfect Collection at Kowloon, Hong Kong.