Future Best (Hong Kong) Ltd v. Chiu Sui Hing and Another
Read the full judgment text of DCCJ 539/2008 on BabelCite. This District Court judgment was delivered on 14 January 2008.
1. The Plaintiff, a licensed money lender, claimed that on 16 th January 2008 it entered into a written loan agreement with the 1 st and 2 nd Defendants (“ 1 st Loan Agreement ”) on inter alia the following :
Cites 11 cases
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DCCJ539/2008 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 539 OF 2008 ----------------------
---------------------- Coram: H H District Judge Marlene Ng in Chambers (Open to the Public) Date of Hearing: 11th March, 2009 Date of Handing Down Decision: 31st March, 2009 ---------------------- DECISION ---------------------- I. Introduction 1. The Plaintiff, a licensed money lender, claimed that on 16th January 2008 it entered into a written loan agreement with the 1st and 2nd Defendants (“1st Loan Agreement”) on inter alia the following :
2. The 1st Loan was drawndown on 16th January 2008. The Plaintiff claimed the Defendants failed to repay the 1st Loan and interest notwithstanding demand letters from the Plaintiff’s solicitors to them dated 24th January 2008 (“2nd Demand Letters”), so the Plaintiff issued the present recovery proceedings on 4th February 2008. 3. By an affirmation of service dated 27th February 2008, the Plaintiff’s process server confirmed that on 6th February 2008 he served the Writ of Summons on the Defendants under cover of a letter to each of them by ordinary post to and by insertion into the letterbox of Flat 3, 24th Floor, Block C, Hong Nga Court, 189 Pik Wan Road, Kowloon (“Property”), which documents had not been returned undelivered by the Post Office. 4. Two acknowledgments of service purportedly signed by the 1st and 2nd Defendants respectively were filed on 26th February 2008. It was stated on their face that the Defendants would not contest the proceedings. As seen in paragraph 42 below, the 1st Defendant denied having signed the Acknowledgment in her name (“D1 Acknowledgment”). 5. On 27th February 2008, the Plaintiff issued a summons pursuant to Order 83A rule 3 of the Rules of the District Court (“RDC”) for judgment against the Defendants for the sum of HK$150,875.00 (ie the 1st Loan and accrued interest up to 23rd January 2008) with interest thereon at the rate of 30% pa from 24th January 2008 until payment (“Judgment Summons”). On 3rd March 2008, the Plaintiff filed the affirmation of its director and account manager, Mr Leung Chi Yan (“Mr CY Leung”), in support (“Leung’s 1st Affirmation”). 6. By an affirmation of service dated 4th March 2008, the Plaintiff’s process server confirmed that on 3rd March 2008 he served on each of the Defendants the Judgment Summons and Leung’s 1st Affirmation under cover of a letter by ordinary post to the Property. 7. The Defendants were absent at the hearing of the Judgment Summons on 12th March 2008. Master R Lai ordered the Defendants do jointly and severally pay the Plaintiff (a) the sum of HK$150,000.00, (b) interest on the principal sum of HK$150,000.00 at the rate of 30% pa from 16th January 2008 until payment, and (c) costs assessed at HK$8,000.00 (“Judgment”). 8. Plainly, the Plaintiff did not enter the Judgment against the 1st Defendant (“D1 Judgment”) on the basis of the D1 Acknowledgment, so both Mr Chan, solicitor for the Plaintiff, and Ms Yan, solicitor for the 1st Defendant, agreed that the regularity or otherwise of the D1 Judgment would not turn on the factual dispute as to whether the 1st Defendant signed the D1 Acknowledgment. 9. On 14th March 2008, the Plaintiff by the affirmation of a clerk to the Plaintiff’s solicitors applied for a charging order nisi on the strength of the Judgment that was said to be wholly unsatisfied. Such affirmation claimed the Defendants were the registered and beneficial owners of the Property, and the Plaintiff sought to impose a charge on their beneficial interest in the Property. 10. On 25th March 2008, the Plaintiff by further affirmation of the aforesaid clerk clarified it was the 1st Defendant who was the registered and beneficial owner of the Property, so the Plaintiff sought to impose a charge on the beneficial interest of the 1st Defendant and not of the Defendants in the Property. 11. On 28th March 2008, Master R Lai granted a Charging Order : Notice to Show Cause in favour of the Plaintiff against the 1st Defendant’s interest in the Property (“Charging Order Nisi”) with a return day to show cause on 28th April 2008. 12. By an affirmation of service dated 9th April 2008, the Plaintiff’s process server confirmed he served the Charging Order Nisi under cover of a letter addressed to each of the 1st and 2nd Defendants to the Property by ordinary post. 13. The Defendants were absent at the hearing on 28th April 2008, and the Charging Order Nisi was made absolute (“Charging Order Absolute”). II. Present summons 14. On 21st November 2008, the 1st Defendant’s solicitors filed Notice to Act. On 3rd December 2008, the 1st Defendant issued a summons seeking to set aside the D1 Judgment, the Charging Order Nisi and the Charging Order Absolute, and for unconditional leave for the 1st Defendant to defend the action (“Setting Aside Summons”). 15. The Setting Aside Summons was supported by the 1st and 2nd affirmations of the 1st Defendant dated 2nd December 2008 and 2nd January 2009 (“D1’s 1st and 2nd Affirmations”). The Plaintiff filed the 2nd affirmation of Mr CY Leung (“Leung’s 2nd Affirmation”) and the affirmation of its solicitor Mr Joseph Leung Kwok Kin (“Mr Leung”) (“Solicitor’s Affirmation”) both dated 12th December 2008 in opposition. III. Issues 16. The relevant issues are as follows :
IV. Plaintiff’s affirmation evidence 17. Mr CY Leung stated that on 14th January 2008, the Defendants submitted a loan application in the Plaintiff’s standard loan application form as follows (“1st Loan Application Form”) :
Mr CY Leung said the 1st Defendant wrote down the names of the Defendants in the box next to “Name of applicant” on the 1st Loan Application Form, and he wrote down the other information according to their instructions. The Defendants then signed the form. 18. The Plaintiff issued to the Defendants a standard facility letter dated 14th January 2008 (“1st Facility Letter”) as follows :
Mr CY Leung explained that “17 day of October 2007” on the 1st Facility Letter was a typographical error, and that when he explained the contents of the 1st Facility Letter to the Defendants, the 1st Defendant signed on the second page and the 2nd Defendant followed. At that time, the Plaintiff only agreed to lend the 1st Loan to the Defendants for 7 days, and they accepted such offer. 19. Mr CY Leung said that the Defendants were asked to return to the Plaintiff’s office (“Office”) on 16th January 2008. He checked their identities against the English 1st Loan Agreement, and explained to them some of the terms (eg the amount, term and interest rate of the 1st Loan and the consequences of default in repayment). When he asked whether they understood, they said yes and raised no questions. He then asked the 1st Defendant to sign on the 1st Loan Agreement, and after she did so the 2nd Defendant also signed :
“As [Mr CY Leung] noticed that the 2nd Defendant signed faster than the 1st Defendant did, [he] then asked the 2nd Defendant to sign on each and every page of the [1st Loan Agreement]”. 20. Mr CY Leung told the Defendants the Plaintiff would only draw the cheque for the 1st Loan (“Cheque”) on its account with the Hongkong and Shanghai Banking Corporation Limited (“HSBC”), so if they needed the 1st Loan on the same day they had to have an account with HSBC. The 1st Defendant told him she did not have any account with HSBC, but as they were in urgent need of cash she agreed for the Cheque be drawn solely in favour of the 2nd Defendant. Acting on such instructions, Mr CY Leung “handed them the [Cheque made payable to the 2nd Defendant] and asked them to sign on the copy of the [Cheque] as proof of receipt” (“Copy Cheque”). Mr CY Leung claimed the Defendants’ behaviour did not arouse suspicion because (a) he was told the 1st Defendant was the mother of the 2nd Defendant and (b) he did not observe any quarrel/argument between them. 21. Mr CY Leung also claimed that during the negotiations the 1st Defendant had no difficulty in communicating with him in the punti language. She willingly produced her identity card to prove her identity, but never queried in what capacity she was to sign the documents. Mr CY Leung never heard of any practice (and the Plaintiff did not have such practice) of requiring a borrower applying for a loan from the Plaintiff to provide his own witness. He claimed he never represented that the 2nd Defendant was solely liable or the 1st Defendant was not liable for repayment of the 1st Loan. 22. In respect of the loan of HK$300,000.00 which the Plaintiff granted to the Defendants on 30th June 2002 for a term of 12 months at an interest rate of 30% pa (“2nd Loan”), Mr CY Leung said it was not for repayment of the 1st Loan and irrelevant to the present claim. He claimed that the Plaintiff agreed to grant the 2nd Loan and to withhold enforcement of the Charging Order Absolute as requested by the Defendants because they “did repay certain amount of money” in respect of the 1st Loan. 23. D1’s 1st Affirmation exhibited a provisional agreement for the sale and purchase of the Property dated 1st September 2008 (“PASP”) which on its face purported to be a sale of the Property from the 1st Defendant to a Wong Wai Bun (“Purchaser”) for the price of HK$800,000.00 with acknowledgment of receipt of an initial deposit of HK$400,000.00 signed by the 1st Defendant and witnessed by the 2nd Defendant. 24. Mr CY Leung said he did not know the Purchaser and the PASP had nothing to do with the Plaintiff. Mr Leung also said the PASP had nothing to do with the Plaintiff’s solicitors, and it was a mere coincidence that Messrs Wat & Co named in the PASP as solicitors for the 1st Defendant and the Purchaser were also the firm where Leung’s 1st Affirmation and the affirmation of the Plaintiff’s process server dated 9th April 2008 (see paragraphs 5 and 12 above) were made. After all, the Plaintiff’s solicitors and Messrs Wat & Co had offices in the same building. Indeed, other affirmations filed herein were affirmed at Messrs Joseph S C Chan & Co which had offices in the same building, and at Messrs Wong Jimmy KS & Partners which firm had offices at a nearby building. 25. In the Solicitor’s Affirmation, Mr Leung said on 24th January 2008 he issued demand letters to the 1st Defendant and Mr Lin for recovery of the 1st Loan with interest (“1st Demand Letters”), but the names of the addressees were typing errors. Upon discovery of such error, Mr Leung issued the 2nd Demand Letters correctly addressed to the Defendants on the same day. He explained that usually there was a six-digit number on each despatched letter for record purpose (eg the 1st Demand Letters, and the cover letters to the Defendants enclosing (a) the Judgment Summons and Leung’s 1st Affirmation and (b) the Charging Order Nisi). The receptionist of the Plaintiff’s solicitors omitted to stamp the 2nd Demand Letters with such six-digit numbers, but it did not mean they had not been sent to the Defendants. After all, the 1st Defendant found the Writ of Summons (which were sent under cover of letters of the Plaintiff’s solicitors without the six-digit number) at the Property. Mr Leung said he was further embarrassed for failing to put his signature on the 2nd Demand Letter addressed to the 1st Defendant. V. 1st Defendant’s affirmation evidence 26. The 1st Defendant is an 81-year-old housewife with poor vision (ie blind in her right eye). She did not receive any education, and did not know how to read or write Chinese or English. She usually communicated with others in her native Chiu Chow dialect as she was not fluent enough in the punti language which was her second language. 27. The 1st Defendant married Mr Lin in Mainland China in 1947, and bore him four daughters (including her eldest daughter Madam Lin Miu Yin (“Miu Yin”) and her second daughter the 2nd Defendant) and a son. When they moved to Hong Kong, she told the Immigration Department she was born in 1932 instead of 1927 to make it easier to find work, so her identity card gave her year of birth as 1932. But she was unable to find work and remained a housewife for the past 60 years. She and Mr Lin could not afford schooling for their children, so their first four children (including the 2nd Defendant) only received initial primary education. 28. In 1998, Mr Lin and the 1st Defendant surrendered their public housing unit to the Government and purchased the Property as their residence under the Home Ownership Scheme with a mortgage loan of HK$300,000.00 advanced by HSBC (which mortgage was discharged in 2000). Mr Lin passed away in 2005, and the 1st Defendant became the sole registered owner and occupier of the Property. 29. In/about May 2002, the 1st Defendant came to know that the relationship between the 2nd Defendant and her husband had turned sour, and the 2nd Defendant moved to live in Tokwawan. The 1st Defendant all along knew the 2nd Defendant worked at a Chiu Chow restaurant, but was unaware of her earnings. However, the 1st Defendant knew the 2nd Defendant’s financial position was bad due to substantial gambling losses, and in 2006 she had lent the 2nd Defendant a total sum of HK$400,000.00 to repay “the loan shark”. 30. In/about May 2007, the 1st Defendant agreed to the 2nd Defendant’s request to live at the Property. At one evening in early 2008, the 2nd Defendant came home from work and asked the 1st Defendant for a loan of HK$150,000.00 for repayment of a debt as she was in great financial difficulty. The 1st Defendant refused, and the 2nd Defendant begged her to act as witness for a loan to be provided by a finance company, emphasising that if the 1st Defendant refused the finance company would not advance the loan and “her creditor” would chop her to death. On hearing this the 1st Defendant’s heart softened, and she acceded to the 2nd Defendant’s request. 31. On the following morning, the 2nd Defendant took the 1st Defendant to an office in Tuen Mun (ie the Office) (“1st Occasion”). A male and female received them and told them to wait in the reception area. The 2nd Defendant went inside with the male and female, and after about 10 minutes the female asked the 2nd Defendant to enter a room where the 2nd Defendant and the male were sitting at a table with certain documents placed before them. The male thanked the 1st Defendant for coming to the Office. She was concerned about the amount of the loan and asked the male how much would be advanced to the 2nd Defendant. The male told her it was HK$150,000.00, and asked her to sign at certain spaces on various documents. The male and female then left the room, and several minutes later the male returned to give a cheque to the 2nd Defendant. The Defendants then left. 32. The 1st Defendant denied any dialogue relating to any HSBC account. In fact, she maintained a savings account with HSBC under the name of Mr Lin and herself (which was still active in 2007-2008 even though Mr Lin passed away in 2005), so she claimed it was nonsensical for Mr CY Leung to say she agreed for the Cheque be payable to the 2nd Defendant because she did not have any account with HSBC. Although she recognised her signature on the Copy Cheque, she had no recollection of signing the same and believed it was probably one of the documents given to her for signing on the 1st Occasion. 33. The 1st Defendant claimed that the contents of the documents she signed (including the 1st Loan Agreement) on the 1st Occasion had not been explained or interpreted to her, and she was only asked to sign and not whether she understood their contents. She never submitted and was never requested to submit documentary proof of her financial status, and no enquiries were made in respect of her repayment ability. She claimed this was plainly inconsistent with usual commercial practice of financial institutions granting loans to loan applicants. 34. The 1st Defendant denied she attended the Office prior to the 1st Occasion to sign the 1st Loan Application Form and 1st Facility Letter, or wrote the names in the box next to “Name of applicant” on the 1st Loan Application Form. Although she recognised her signatures on the 1st Loan Application Form and the 1st Facility Letter, she believed these two documents were part of the documents given to her for signing on the 1st Occasion. 35. The 1st Defendant said that some time after the Dragon Boat Festival in 2008, the 2nd Defendant returned home after work and requested the 1st Defendant to help her again by acting as witness for a loan to be advanced by the same finance company. The 1st Defendant, not wanting the 2nd Defendant to incur so many debts, asked the 2nd Defendant whether she had repaid the previous debt. The 2nd Defendant replied in the affirmative and said that was why the same finance company agreed to advance the new loan. The 1st Defendant acceded to the 2nd Defendant’s request, and went with her to the Office the following morning. 36. When the Defendants arrived at the Office (“2nd Occasion”), the same male and female received them and led them to a room. The male greeted the 1st Defendant and thanked her for coming again. He then asked the Defendants to sign on some documents, and thereafter the Defendants left the Office. On the 2nd Occasion, the 1st Defendant did not see the male or female hand over any cheque to the 2nd Defendant, and no one explained or interpreted to her the contents of the documents she signed. 37. The 1st Defendant did not receive any money from the finance company and/or from the 2nd Defendant. She never repaid any money to the Plaintiff, and the Plaintiff never told her she should make repayment. If she knew she were to be one of the borrowers of the 1st Loan and/or 2nd Loan, she would never have signed the documents. Further, had she been a co-borrower and known of the present proceedings, it would have been inconceivable for her not to ask the Plaintiff to use the 2nd Loan to pay off the 1st Loan to discharge the Charging Order Absolute. 38. In/about end of September 2008, after the 2nd Defendant did not return home for 2-3 days, the 1st Defendant received a telephone call. The 2nd Defendant was crying over the phone, and told the 1st Defendant she owed huge debts to loan sharks and her life was at stake because the loan sharks threatened to chop her to death for not repaying such debts. She repeatedly said sorry to the 1st Defendant, and further said that “should there be anything wrong with the Property, [the 1st Defendant] should open the wardrobe at her bedroom to find a piece of paper in Chinese on top of the bundle of documents and passed it to [the 1st Defendant’s] eldest daughter.” The 1st Defendant did not understand and asked the 2nd Defendant what was the matter, but the 2nd Defendant just kept crying without answering the 1st Defendant and eventually hanged up. The 1st Defendant tried calling her again, but could only reach her voicemail. 39. The 1st Defendant opened the wardrobe in the 2nd Defendant’s bedroom and found a piece of paper in Chinese writing bearing the 1st Defendant’s signature. The 1st Defendant immediately went to Miu Yin’s home, and Miu Yin told her the paper was the PASP. The 1st Defendant was shocked as she never instructed solicitors, sold the Property or received any initial deposit. As far as she knew, the market value of the Property was almost HK$2,000,000.00, and she would not have agreed to sell the Property for HK$800,000.00. 40. After discussion with her children and grandchildren, the 1st Defendant returned to the Property for a thorough search and found the following documents :
41. The 1st Defendant first became aware of the 1st and 2nd Loan Agreements and the documents referred to in paragraph 40(d) above after their contents were explained to her. She then realised she was deceived by misrepresentation into going to the Office to sign the documents provided by the male on the 1st and 2nd Occasions. 42. The 1st Defendant and her children tried to locate the 2nd Defendant in vain. Given the seriousness of the matter, the 1st Defendant wished to seek legal advice and applied for legal aid. On 30th October 2008, the 1st Defendant was served with an originating summons issued by the Plaintiff against her in DCMP2887/2008. By the OS Proceedings, the Plaintiff applied for an order for sale of the Property on the strength of the Charging Order Absolute. On 19th November 2008 legal aid was granted, and on 3rd December 2008 the 1st Defendant’s solicitors issued the Setting Aside Summons. The 1st Defendant’s solicitors discovered the D1 Acknowledgment upon search of the court file. The 1st Defendant denied signing such document, and claimed that had she been aware of the present proceedings she would have defended the same. VI. Regular or irregular judgment (a) Delivery to usual or last known address 43. There is no dispute the Property was the 1st Defendant’s usual or last known address since she actually lived there at the material time. As the 1st Defendant found the documents referred to in paragraph 40(d) above upon search of the Property, there is no doubt the Plaintiff’s solicitors did deliver them to the Property in the manner described in the relevant affirmations of service. Consequently, I have no reason to doubt the manner of delivery of the Judgment Summons and Leung’s 1st Affirmation in the relevant affirmation of service (see paragraph 6 above). Thus, the real dispute is whether service of the Legal Documents was duly effected by bringing notice of the present proceedings to the 1st Defendant. (b) Knowledge of the Legal Documents 44. It is the 1st Defendant’s case that even though the Legal Documents were delivered to the Property, she did not actually receive them, and she only discovered them in/about end of September 2008 (see paragraphs 38-41 above). 45. The words “unless the contrary is shown” in Order 10 rule 3(a) of the RDC show it is 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 of summons is whether it was brought to the defendant’s notice and not whether it had been delivered to his usual or 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 & 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, 3rd September 2004) and Sinokawa Investment (Holdings) Limited v Li Chun [2006] 3 HKLRD 441 at para.15). 46. At the hearing before me, Mr Chan confirmed he would not rely on his supplemental written submissions and the case of Re Sarah Tong Kwok Hon Wah [1988] 1 HKC 547 which are against the weight of the above authorities. I have referred the parties to Deng Minghui v Chau Shuk Ling [2007] 1 HKLRD 906 which made it abundantly clear that the ratio in Re Sarah Tong Kwok Wah has been overruled. 47. Hong Kong Civil Procedure 2009 Vol.1 para.13/9/5 at p.176 states inter alia as follows :
48. Tang JA in giving the judgment of the Court of Appeal in Bank of China (Hong Kong) Limited v Cheung King Fung [2007] 1 HKLRD 462, 469-470 said the court did not necessarily have to accept the defendant’s assertion no matter how improbable :
49. The Court of Appeal in Bank of China (Hong Kong) Limited v Cheung King Fung went on to observe that in an application to set aside default judgment, the burden was on the applicant to prove that the judgment was irregular. Chung J in Wei Bingqing added that whether the applicant discharged such burden of proof was a matter of evidence. 50. In Cheng Chi Lun v Ng Lai Ming Juliana HCA1611/2006 (unreported, 14th February 2007), Mr Recorder Fok SC also said at para.26 as follows :
51. Mr Chan argued that since only the Defendants lived at the Property and the 1st Defendant was a housewife, it was most likely that the 1st Defendant rather than the 2nd Defendant (who had to work) picked up the post (including the Legal Documents) from the letterbox of the Property. He added that because (a) the D1 Acknowledgment was filed on 26th February 2008 and (b) the 1st Defendant never complained she had not received the Legal Documents, there was sufficient material to cast doubt on the 1st Defendant’s allegations and for the court to disbelieve her assertion that she was unaware of the present proceedings. 52. I am not persuaded by Mr Chan’s arguments. At the material time, the 1st Defendant was an old lady who did not read or write either English or Chinese, but the cover letters for service of the Legal Documents were in English. There was no suggestion that the envelops enclosing such cover letters and the Legal Documents were otherwise than in English. So even if the 1st Defendant picked up letters from the letterbox of the Property, she would have no idea whether they were addressed to her unless she consulted the 2nd Defendant. Thus, she would not have known of the present proceedings unless the 2nd Defendant explained the contents of the Legal Documents to her. But on the 1st Defendant’s case, which I find below has a real prospect of success, the 2nd Defendant’s finances were in a bad way due to her gambling losses and her loans from loan sharks, and she deceived the 1st Defendant into becoming a co-borrower of the 1st Loan, so there is a real likelihood the 2nd Defendant had incentive to hide the Legal Documents from the 1st Defendant. Her subsequent disappearance and absence throughout the present proceedings (save for the purported Acknowledgment in her name) lend weight to such view. 53. Also, for the very reason that at the material time the 1st Defendant was an illiterate old lady living with her daughter who had received some education and who went to work (ie passing by the letterbox of the Property every workday), I disagree it is natural to infer that the 1st Defendant (and not the 2nd Defendant) would have collected correspondence from such letterbox. In my view, it is not unreasonable to conclude that the 2nd Defendant also had access to and would have collected correspondence from the letterbox of the Property. 54. Further, I do not find the D1 Acknowledgment (which the 1st Defendant disputed) of assistance as I find below the 1st Defendant’s case has a real prospect of success. Still further, whilst her signatures on the 1st Loan Application Form, the 1st Facility Letter, the 1st Loan Agreement and the Copy Cheque (collectively, “1st Loan Documents”) and the 2nd Loan Agreement are consistent, they are vastly different from her purported signature on the D1 Acknowledgment. I therefore cannot dismiss her assertion that she did not sign the D1 Acknowledgment. 55. I fail to understand Mr Chan’s submission that the 1st Defendant did not complain she had not received the Legal Documents. If she had not received the Legal Documents and was therefore unaware of the present proceedings, I do not see how she could have raised such complaint. Further, she explained that on becoming aware of the Legal Documents, she attempted to find the 2nd Defendant and then applied for legal aid, and when legal aid was granted her solicitors took out the present application. 56. Having carefully considered the relevant principles and evidence, I am persuaded there was sufficiently convincing or compelling evidence to show that the Legal Documents were not brought to the notice of the 1st Defendant who was unaware of the present proceedings until September 2008. In the circumstances, the D1 Judgment is an irregular judgment. There is therefore no need to consider Ms Yan’s further argument in her written submissions (which she abandoned at the hearing before me) that the D1 Judgment was entered for too much. (c) Residual discretion 57. It has been suggested that an irregular judgment will be set aside ex debito justitiae without regard to the merits of the proposed defence. But Order 13 rule 9 of the RDC gives a residual discretion to the court as to whether to set aside an irregular judgment. 58. In Po Kwong Marble Factory Ltdv Wah Yee Decoration Co Ltd [1996] 4 HKC 157, the Court of Appeal held that in the case of an irregular judgment the court had a residual discretion to take into account the conduct of the parties. Sears J said at p.161 that “[in] my judgment, the court still has a discretion - giving regard to what the defendant himself has done - to deprive him, if necessary, of that judgment or alternatively, to impose terms upon the setting aside of the judgment which accord with justice having regard to the facts of the particular case”. In that case, the problems on service were primarily due to the defendant’s method of virtually disguising its registered office, and there was a real risk that any ultimate judgment for the plaintiff would have been an empty one, so the default judgment was set aside on condition that money be paid into court. Bokhary JA (as he then was) said at p.162 that “[it] does not mean shutting one’s eyes to the circumstances surrounding the question of service and why things went wrong in that regard. The court’s statutory jurisdiction is unfettered.” 59. A number of subsequent cases followed the above approach. In Guangdong International Trust and Investment Corp Hong Kong (Holdings) Ltdv Yuet Wah (Hong Kong) Wah Fat Ltd&anor [1997] HKLR 489, the irregular judgment against 1stdefendant was set aside unconditionally. Waung J in Desirable International Fashions Ltd(in liq) v Chiang Shi Chau [1997] 3 HKC 170 rejected the plaintiff's suggestion that delay in applying to set aside and the risk of obtaining an empty judgment constituted sufficient reasons for imposing conditions for setting aside the irregular judgment.In The New China Hong Kong Finance Ltd (In Liquidation) v Shimada Limited HCA11030/1999, Cheung J (as he then was) (unreported, 23rd May 2000), no conditions were imposed as there could not be any adverse comments on the conduct of the defendant. In Cosec Nominees Ltd, the defendant filed with the Companies Registry a notification of change of his residential address. Although he did not challenge service on his old address in an earlier action and thereby led the plaintiff to believe it was an effective address for service, the court accepted his explanation and considered he should not be penalised for taking a practical stance in the earlier action. The irregular judgment was set aside unconditionally. In Phillip Securities (HK) Limited v Lam Chi Bin StanleyHCA16645/1999, Deputy Judge Lam (as he then was) (unreported, 20th November 2001), no conditions were imposed because the plaintiff chose to serve the writ of summons where its managing director knew the defendant was not there whilst it had knowledge of other addresses where the defendant could be contacted. 60. The court found its way to impose conditions in Bank Austria Aktiengesellschaft v Suwardi SukamtoHCA15309/1998, Deputy Judge Muttrie (unreported, 6th December 2001). There an irregular judgment was set aside on condition payment in be made on the ground that the defendant was evading service in the special circumstances of the case, which fact was aggravated by his failure to put forward any defence. In First Castle Limited v Wong Chun Kit HCA6872/2000 (unreported, 19th June 2003), Deputy Judge Lam (as he then was) said that whether any inference could be drawn against the defendant by reference to his conduct and to what extent he contributed to what went wrong in terms of service depended on the whole of the circumstances of the case. In that case, the defendant tenant failed to pay rent after execution of the tenancy agreement and later abandoned the leased premises. He gave a correspondence address that was good only for a couple of weeks, which caused the plaintiff to serve the writ at that address. With strong indications that he was evading service and avoiding judgment, he was to a very large extent responsible for the plaintiff's failure to effect service on him. So the imposition of a payment in condition was upheld. In Liu Chong Hing Bank Ltd v Union World (HK) Ltd & ors [2004] 1 HKC 622, the 6th defendant confirmed his address (as shown in the most up to date annual returns of the 3rd and 4th defendants) on the guarantee he signed in favour of the bank. The writ was inserted into the letterbox at that address and subsequently judgment was obtained. The bank discovered the defendant owned another property, and the bank’s solicitors sent a demand letter to that address with no reply. After the bank served a charging order nisi at the second address, the 6th defendant applied to set aside the judgment on the basis that he all along resided at the second address and he did not understand the demand letter (which he received) fully so he only made brief enquiries with the bank's solicitors. It was held that his irresponsible conduct justified imposition of the condition that the outstanding sum plus interest and the plaintiff’s assessed costs be paid into court. 61. Each case must be decided on its own facts. The aforesaid authorities (which were not cited by Mr Chan or Ms Yan) are merely examples of how the residual discretion was exercised in the factual matrices of those cases, but it is evident that the court will be concerned to see whether the defendant's conduct contributed to what went wrong with the service of the originating process. 62. I am unable to say in all the circumstances of the present case that being unable to get timeous receipt of the Legal Documents the 1st Defendant was the author of her own misfortune. She confirmed she lived with the 2nd Defendant at the Property and explained how she discovered the Legal Documents. The 2nd Defendant’s being badly in debt and chased by “loan sharks” and being unable to face the 1st Defendant lend credence to the 1st Defendant’s explanation. Given the 2nd Defendant’s acts of attempting to save her own skin, I am unable to say that the 1st Defendant’s conduct was an abuse that contributed to the irregular service of the Legal Documents and/or justified imposition of conditions for setting aside the D1 Judgment. (d) Summary 63. I therefore order that the D1Judgment, the Charging Order Nisi and Charging Order Absolute be set aside. But in case I am wrong and the D1 Judgment is a regular judgment, I will proceed to consider the merits of the 1st Defendant’s defence. VII. Defence on the merits (a) Legal principles 64. If the D1 Judgment is a regular judgment, the 1st Defendant must show a meritorious defence with a real prospect of success or which carried some degree of conviction (Premier Fashion Wears Ltd v Li Hing Chung [1994] 1 HKC 213). 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” (see also Tong Yi Sang & anor v Fung Law & Ng & ors [1993] 2 HKC 665). Kaplan J in Tong Yi Sang went on to say at p.672 as follows :
65. This requires the court to form some provisional view of the probable outcome of the action. Where the outcome depends on whose evidence is likely to be accepted, the appropriate test for determining whether the defendant has a real prospect of success is to ask whether the defence “could well be established” at trial or whether the defence witnesses could well be believed at trial (see Guangdong International Trust and Investment Corp Hong Kong (Holdings) Ltd, Morigood Development Ltd v Sunny Trading Co (a firm) [1999] 2 HKC 710, and L & M Specialist Construction Ltd v Wo Hing Construction Co Ltd [2000] 3 HKLRD 262). 66. There are other considerations which a court must consider in deciding whether or not to set aside a default judgment, such as the reason why default judgment was allowed to occur in the first place, any delay in setting aside and any consequent prejudice caused to the plaintiff. The court’s approach is to conduct a balancing exercise of all relevant factors (see Morigood Development Ltd and Chekiang First Bank Limited v Ng Chun Hing Benjamin HCA3473/2000, Ma J (as he then was) (unreported, 12th December 2001) para.13). 67. But as Ma J (as he then was) pointed out in para.14 of the judgment in Chekiang First Bank Limited, the critical factor and starting point are the merits of the defence. If the defence has no real prospects of success, there is no point in setting aside the same (see also Premier Fashion Wares Ltd). (b) 1st Defendant’s defence 68. The 1st Defendant relies on the defence of non est factum, which in modern language means the 1st Loan Documents were not her deeds and as such they do not have any legal effect vis-à-vis her. Such defence raises two issues : (a) whether the 1st Defendant understood the character and effect of the 1st Loan Documents, and (b) whether she has acted reasonably and with due care. To answer the question of whether the 1st Defendant has a real prospect of success on these two issues, the focus should be on how she came to execute the 1st Loan Documents. 69. It is the 1st Defendant’s case that she thought she signed the 1st Loan Documents as witness and not as co-borrower with the 2nd Defendant, ie she understood the 1st Loan Documents to be in relation to a loan advanced by the Plaintiff to the 2nd Defendant. Such understanding plainly means she would not take up any personal obligation for such loan, but in fact the 1st Loan Documents purport to grant the 1st Loan to the Defendants as co-borrowers. The 1st Defendant therefore contends that her mind did not go with her pen. 70. For the purpose of the present application, Ms Yan fairly accepted there was no duty on the part of the Plaintiff to give proper advice as to the effect of the 1st Loan Documents or to tell the 1st Defendant to seek independent legal advice (see Chekiang First Bank Limited at para.18(2) and Citibank NA (花旗銀行) v Poon Pong Fat (潘邦發) & ors HCMP2618/2003, Lam J (unreported, 20th May 2004) para.25). (c) Legal principles on non est factum 71. There is no dispute that a person relying on the defence of non est factum bears a heavy burden. The leading authority is Saunders v Anglia Building Society [1971] AC 1004 where Lord Reid said as follows at p.1016 :
Viscount Dilhorne also said as follows at p.1022 :
72. In Kincheng Banking Corp v Kao Yu Kuei [1986] HKC 212, the Court of Appeal held that whether the guarantor understood all the contents of the document was not relevant. The burden was on the guarantor to show he thought he was signing a document of a different nature; it was not for the other party to establish the guarantor did not know the contents of the document. 73. Lam J in Wan Chow Ki v Wan Chow Kan HCA1490/2002, Lam J (unreported, 16th January 2004) said as follows at paras.11-12 :
74. As explained above, the defence of non est factum is not available to a person who is careless in signing a document. Unless there is good evidence to explain why it is reasonable for him to do so, a person is regarded as careless in simply signing any document placed before him and without making enquiry as to its nature and effect. 75. From the above authorities, one can extrapolate the following requirements for the defence of non est factum :
(see Wan Chow Ki para.10 and Chitty on Contracts 13th ed Vol.1 para.5-104 at p.486). (d) Discussion 76. The first question is whether the 1st Defendant has any real prospect of success in establishing that she thought she signed the 1st Loan Documents as a witness. In my view she has. 77. The 1st Defendant knew the 2nd Defendant had substantial gambling losses and poor finances as evident by her loan to the 2nd Defendant to repay “the loan shark” in 2006 and her willingness to take in the 2nd Defendant to live at the Property in 2007. The 2nd Defendant was obviously financially desperate when she asked the 1st Defendant in vain for a loan of HK$150,000.00 in early 2008. Against such background, it is not improbable that the 2nd Defendant would have deceived the 1st Defendant (with pleas of “loan sharks” and fears of personal safety) into accompanying her to the Office to sign documents purportedly as witness but in actual fact as co-borrower for a loan to be advanced by the Plaintiff. I note there would arguably be incentive for the 2nd Defendant to do so because, as Mr Chan submitted, the 1st Defendant’s ownership of the unencumbered Property would be an attraction to the Plaintiff in the event of default in loan repayment. The plausibility of the 2nd Defendant’s deception is also borne out by her subsequent disclosure to the 1st Defendant of the PASP kept in the wardrobe in her bedroom that purported to sell the Property belonging to the 1st Defendant to the Purchaser. Such PASP, which the 1st Defendant claimed she was unaware and which provides for an unusually large initial deposit of 50% of the price, speaks volumes of the 2nd Defendant’s financial troubles and the probability and/or propensity of her deception to obtain funds. 78. At the same, it is also not improbable for the 1st Defendant as mother of the 2nd Defendant who well knew of the latter’s financial problems to accede to her request to act as witness for her application for a loan from a finance company. At the material time, she was an old lady of almost 80 years old who was uneducated and illiterate. Even though she must have had signed some mortgage loan documents in 1998 for securing the mortgage loan to purchase the Property, it would not have been surprising for her to be unaware of the practice of executing loan documents for loans granted by financial institutions. 79. As to what happened when the 1st Defendant attended the Office, there are clear disputes of fact that turn on whose evidence is likely to be accepted. In such circumstances, the true question is whether the 1st Defendant’s contentions could well be established at trial. 80. First, Mr CY Leung claimed the Defendants attended the Office on 3 occasions, ie 14th January 2008 and the 1st and 2nd Occasions. The 1st Defendant denied she attended the Office on 14th January 2008, and claimed she must have signed the 1st Loan Application Form and the 1st Facility Letter on the 1st Occasion. I am unable to say such contention has no real prospect of success. 81. In my view, Mr CY Leung’s insistence that the 1st Defendant attended the Office on 14th January 2008 raises some as yet unanswered questions. He claimed to have explained the contents of the 1st Facility Letter to the 1st and 2nd Defendants on that day, but it was strange that he failed to note and, more importantly, correct some obvious errors in the 1st Facility Letter (and no explanation is forthcoming in Leung’s 2nd Affirmation). First, although the 1st Loan was an unsecured personal loan, the caption of the 1st Facility Letter is the address of the Property. Further, such document refers to (a) an application for “All Monies” credit facilities and “mortgage loan”, (b) approval for the 1st Loan being subject to “the approval of the title of the Property” and “the execution of all the security documents”, and (c) acceptance by the Defendants on “17 day of October 2007”. All of the above matters are plainly wrong because even on the Plaintiff’s case the 1st Loan was a personal loan without security and the 1st Facility Letter was accepted on 14th February 2008. Although Mr CY Leung claimed “17 day of October 2007” was a typographical error, he did not explain why he failed to correct such obvious error when he explained the contents of the 1st Facility Letter to the Defendants. It is also inexplicable why the 1st Facility Letter referred to the Property and mortgage loan when there was no mention of the property owner’s name and the mortgage property’s address in the 1st Loan Application Form. 82. In respect of the 1st Occasion, Mr CY Leung claimed he explained some of the terms of the 1st Loan Agreement to the Defendants who confirmed they understood, had no questions and then proceeded to sign as co-borrowers. The 1st Defendant claimed she was asked to be a witness, and there was no explanation of the contents of the 1st Loan Documents to her. She asked about the amount of loan advanced to the 2nd Defendant, and upon being told it was HK$150,000.00 she signed various documents. 83. Again, I find the 1st Defendant’s case plausible. First, her willingness to show her identity card to prove her identity is a neutral fact which does not suggest that her signature must necessarily be that of a borrower and not a witness. Secondly, even though the Plaintiff claimed the Defendants were co-borrowers only the 2nd Defendant (but not the 1st Defendant) initialled the bottom of each page of the 1st Loan Agreement, which is prima facie consistent with the 1st Defendant’s contention that she thought the 2nd Defendant was the sole borrower and she was a mere witness. Notwithstanding Mr CY Leung’s explanation that he only asked the 2nd Defendant to initial on each page, I find the 1st Defendant’s stance could well be established at trial. Thirdly, although Mr CY Leung claimed he explained some terms of the 1st Loan Agreement to the Defendants, he did not explain why he did not spot/correct obvious errors in the 1st Loan Agreement. For example, clause (2) of the recital provides that the borrower (ie the Defendants) was the registered owner described in the Second Schedule, but there is no Second Schedule and no evidence before me that the 2nd Defendant was a registered owner of any property. Further, clauses (5) and (6) refer to execution of a legal mortgage and deed of guarantee, but the Plaintiff did not request such security documents and there is no evidence that the Plaintiff ever requested documentary proof of the 1st Defendant’s financial ability to repay. Fourthly, the Cheque was made payable to the 2nd Defendant even though the Plaintiff claimed the Defendants were co-borrowers. Mr Chan submitted that nevertheless the 1st Defendant signed the Copy Cheque and did not dispute the arrangement for the Cheque to the drawn in favour of the 2nd Defendant only. But the 1st Defendant did deny Mr CY Leung’s explanation (ie the Cheque drawn on HSBC was payable to 2nd Defendant because the Defendants needed the 1st Loan urgently and the 1st Defendant did not have any HSBC account). In my view, such explanation is arguably doubtful because the 1st Defendant did have an active HSBC savings account in the names of Mr Lin and herself. 84. In my view, although the 2nd Occasion was after the execution of the 1st Loan Documents, it may still have impact on the overall credibility of the Plaintiff’s witnesses. I am of the further view that the 1st Defendant’s case in relation thereto could well be established at trial. 85. The 1st Defendant claimed the 2nd Defendant again begged her to act as witness for a loan to be advanced by the same finance company, but she only acceded to the request after she queried and the 2nd Defendant confirmed the previous loan to the 2nd Defendant had been repaid. Such contention is bolstered by the fact that the 1st Defendant did not see any cheque change hands on the 2nd Occasion. In my view, it is not surprising that she would want to help her daughter who was financially in dire straits and/or that she would believe her daughter’s tale that the finance company was prepared to grant a further loan because she had repaid the previous one. 86. According to the Charging Order Absolute, the 1st Loan was still outstanding as at 28th April 2008. Leung’s 2nd Affirmation asserted there were some repayments by 30th June 2008 (ie the 2nd Occasion), but did not give any particulars of such repayments. According to the Plaintiff, the outstanding balance of the 1st Loan was still unpaid for over 5 months notwithstanding vigorous legal action by the Plaintiff. Even though the Defendants were credit risks as a result of such non-payment, the Plaintiff claimed it still granted to them a new unsecured personal loan that doubled the amount of the 1st Loan for a term of 12 months (as compared with 7 days for the 1st Loan) without evidence of even any casual mention of the existing indebtedness on the 2nd Occasion at all. 87. Although Mr Leung claimed the addressees in the 1st Demand Letters were typing errors, and the 1st Loan is a personal loan with no mention of the Property, questions arise as to why, without any mention of Mr Lin in the 1st Loan Application Form and the 1st Facility Letter, the Plaintiff’s solicitors addressed the 1st Demand Letters to the 1st Defendant and Mr Lin. This also echoes the unexplained references to the Property, mortgage loan and other security in the 1st Facility Letter and the 1st Loan Agreement, and raises questions over the Plaintiff’s case. 88. In summary, I am satisfied that notwithstanding the factual disputes that depend on whose evidence is to be believed at trial the 1st Defendant’s argument that she thought she signed the 1st Loan Documents as witness could well be established. But is such contention sufficient to demonstrate real prospect of success for the defence of non est factum? 89. At the time she signed the 1st Loan Documents, the 1st Defendant was almost 80 years old, illiterate and blind in one eye. She claimed to have been a housewife for over 60 years and was more comfortable in her native Chiu Chow dialect rather than the punti language. Mr CY Leung’s contrary contention that he had no difficulty in communicating with her in the punti language cannot be resolved on affidavit and does not detract from the prospects of the 1st Defendant’s case. It has been argued and I accept for the purpose of this application that the signer’s unfamiliarity of the English language is no defence in cases of non est factum (see Union Bank of Hong Kong Limited v Ng Yin Hung [1975] HKLR 26 and Chekiang First Bank Limited at para.26). 90. Mr Chan cited a number of authorities, eg Kincheng Banking Corp, Chekiang First Bank Limited, The Bank of East Asia Limited v Nei Wai Foo HCMP186/2000, Yeung J (unreported, 27th July 2001), Citibank NA (花旗銀行), Pan Global Limited v Silver Tech International Limited & ors CACV377/2005 (unreported, 25th July 2006), and Bank of Communications Co Ltd 對 Leung Shu Fan & ors HCMP1225/2006, Deputy Judge L Chan (unreported, 30th September 2008). In all these cases, the relevant defendant(s) knew he/they signed as obligor(s) on a guarantee and/or legal charge, ie document(s) by which he/they undertook obligation(s) in relation to personal liability, but claimed he/they did not appreciate the full extent of his/their liability thereunder. 91. But given my conclusion that the 1st Defendant has real prospect of success in respect of or could well establish at trial her contention that she thought she signed the 1st Legal Documents as witness only, the above authorities which are premised on the signer knowing he undertook some personal obligation are not of material assistance. 92. I find Lewis v Clay (1897) 67 LJQB 224 cited by Mr Chan more helpful. In that case, the defendant was induced to sign a promissory note by fraudulent misrepresentation that he was witnessing a deed, and at the time he signed it he believed he was witnessing a deed, and had no knowledge of the existence of the promissory note, and since there was no negligence on his part in so signing the document, he was entitled to rely on the defence of non est factum. Lord Russell of Killowen CJ said at pp.227-228 as follows :
93.I also referred the parties to James Conrad Louey v Wong Yat Sang HCA12759/1995, Mr Recorder Kotewall SC (unreported, 25th February 2000). In that case, the plaintiff claimed for repayment of a loan pursuant to a loan agreement. The defendant claimed that the plaintiff entered into a business arrangement with a third party for arranging letters of credit to be opened and for paying a sum of money (ie the amount in the loan agreement) to the third party as handling charges. The plaintiff wanted some security and requested the third party to sign an agreement stating the payment was a loan to him but it need not be repaid if letters of credit were successfully opened. The defendant claimed the third party signed an English agreement and the plaintiff requested the defendant (who introduced the third party to the plaintiff) to sign as witness. The defendant insisted he did not borrow or receive any money from the plaintiff nor did he intend to assume liability under the loan agreement. The learned judge held he was unable to rule out that and possibly another defence based on misrepresentation on the affirmation evidence. 94. These two cases suggest that where a person knew the document was a loan agreement, if he thought he signed it as witness rather than an obligor, then he would not have had a contracting mind. So if it turns out that the loan agreement stipulates any payment obligations on the signer, then such loan agreement is not the signer’s deed because his non-contracting mind never went with the contracting nature of the deed. 95. In my view, since I have found that the 1st Defendant has shown real prospect of success or could well have established at trial that she signed the 1st Loan Documents as witness, I am persuaded there is also real likelihood of the 1st Defendant establishing a defence of non est factum. 96. However, Mr Chan submitted that such defence is excluded by the 1st Defendant’s carelessness even on her own case. First, Mr Chan complained that on the 1st Occasion the 1st Defendant merely asked the male about the amount of the loan and not whether she would be liable under the signed documents. I am not persuaded this necessarily evidences carelessness. According to D1’s 1st Affirmation, the 1st Defendant asked the male the amount of the loan to be advanced to the 2nd Defendant, so she made clear by her question that she thought the 1st Loan was for the 2nd Defendant. In such circumstances, it is unsurprising that she did not ask about any personal liability on her part. According to the 1st Defendant, the male told her the loan was HK$150,000.00 without disabusing her belief that the 1st Loan was for the 2nd Defendant and then proceeded to ask her to sign the documents. In my view, it is clearly plausible that the 1st Defendant was not negligent. 97. Secondly, Mr Chan argued that in the 1st Loan Application Form, 1st Facility Letter and the 1st Loan Agreement the 1st Defendant’s signature was on the same level as and not beneath the 2nd Defendant’s signature (which was the usual place for a witness’ signature), so the 1st Defendant should have queried whether she was signing as a witness. However, there is no affidavit evidence before me as to the usual industry practice for standard forms for loan applications, loan facility letters and loan agreements to support this argument. Indeed, this point was not raised in Leung’s 2nd Affirmation at all. Eventually, Mr Chan conceded that I could not take judicial notice of the alleged usual practice, and I see no substance in this argument. 98. Thirdly, Mr Chan complained that the 1st Defendant never mentioned that she witnessed the 2nd Defendant’s signature on the 1st Loan Agreement before she signed her name thereon. This argument assumes that the 1st Defendant knew that in the capacity of a witness she should witness the borrower’s signature on the loan document. However, the evidence suggests that the 2nd Defendant begged the 1st Defendant to act as a witness for a loan to be granted by a finance company, and it is quite plausible that the 1st Defendant might not have been aware that she had to witness the signature of the 2nd Defendant. 99. Fourthly, Mr Chan argued the 1st Defendant and Mr Lin must have signed mortgage loan documents when they borrowed the mortgage loan from HSBC to purchase the Property in 1998. I have no quarrel with that. But Mr Chan went on to argue that by virtue of such experience the 1st Defendant should have taken extra precaution when she signed the 1st Loan Documents. However, according to the 1st Defendant, this time the 2nd Defendant asked her to act as witness, so although she knew the 1st Loan Documents were in relation to a loan from a finance company, she believed it was loan to the 2nd Defendant and not to her. So it is clearly arguable that she was not careless in not making further queries as to the scope of her liability. 100. Fifthly, it was suggested that even on the 1st Defendant’s case the 2nd Defendant had previously borrowed monies from the 1st Defendant and from loan sharks before approaching the Plaintiff for the 1st Loan, but there was no mention that the 2nd Defendant brought her own witnesses for the previous loans. The short answer in respect of loans from loan sharks is that there is simply no evidence of how such loans were effected or of the similarity/difference in the lending practice of loan sharks and licensed moneylenders. For previous loans from the 1st Defendant, one cannot ignore her mother-daughter relationship with the 2nd Defendant, and it is plainly plausible that their familial arrangement would be different from commercial transaction for the 1st Loan. 101. Sixthly, Mr Chan claimed that the 1st Defendant did not explain why she would not have signed the 1st Loan Agreement if she had known she was a borrower. Whilst I have no quarrel that the 1st Defendant did so state in paragraph 8 of D1’s 1st Affirmation, Mr Chan’s argument fails to take into account the 1st Defendant’s affirmation evidence as to the chronology of events as set out above (see Part V above), and I am unable to accept such blinkered approach. It is plainly obvious that the 1st Defendant contends that she thought she signed as witness and not as borrower, and therefore would not have signed the 1st Loan Agreement had she known otherwise. 102. Seventhly, it was argued that the 1st Defendant was careless in not reading the 1st Loan Documents. But the 1st Defendant claimed she was illiterate. In my view, it is highly plausible that an old lady close to 80 years would not be able to read English, which was the language in which the 1st Loan Documents (except the 1st Loan Application) were written. 103. In all the circumstances and looking at the totality of the affirmation evidence, I am of the view that the 1st Defendant has discharged her burden in showing a defence which has a real prospect of success or which she could well have established at trial, ie her mind did not go with the transaction in respect of the 1st Loan and she has not been careless in signing the 1st Loan Documents. VIII. Conclusion 104. I therefore order that the D1 Judgment, the Charging Order Nisi and the Charging Order Absolute be set aside, and there be unconditional leave for the 1st Defendant to defend this action. I also grant the following directions :
105. It is apparent from the D1’s 1st and 2nd Affirmations that the 2nd Defendant no longer resided at the Property, thus it is doubtful whether the Property still remains her usual or last known address. In light of the scheduled CMS Hearing, the Plaintiff should give early attention to the proper mode of service on the 2nd Defendant of the order made herein as well as other documents. Parties should also comply with Order 25 of the RDC and Practice Direction 5.2 which will come into effect on 2nd April 2009. 106. Mr Chan asked for costs of the Setting Aside Summons on the basis that the Plaintiff was not at fault in serving the Legal Documents to the Property, which the 1st Defendant admitted was her usual and last known address. On the other hand, Ms Yan asked for costs to be in the cause since neither party was at fault. 107. Hong Kong Civil Procedure 2009 Vol.1 para.13/9/11 at p.178 states as follows :
108. In Kwan Kam Wah, Deputy Judge Chu (as she then was) held that neither party was to be blamed for the state of affairs that led to the irregular judgment. The plaintiff acted in compliance of the rules in serving the writ of summons on the defendant who had moved away from the address unbeknownst to the plaintiff. On the other hand, the defendant had given notification of his removal to the Companies Registry albeit several months after the removal. The learned judge considered a fair costs order would be costs of the application in the cause. 109. In Redland Concrete Limitedv Hing Lee Construction Company Limited & anor HCA8140/1998 (unreported, 25th June 1999), Chung J ordered that costs up to and including the day when the 2nd defendant filed his affirmation in support which disclosed the irregularity be the 2nd defendant’s costs in the cause of the action between the plaintiff and the 2nd defendant, and those costs thereafter to the date of the hearing be to the 2nd defendant in any event. 110. In Cosec Nominees Ltd, Deputy Judge Poon (as he then was) noted the defendant filed two affirmations in support of the setting aside application and by the time the 2nd affirmation was filed all matters relied on had been disclosed. He held it was unreasonable for the plaintiff to have opposed the application, and ordered costs up to the filing of the defendant’s 2nd affirmation be costs in the cause and thereafter costs be to the defendant in any event. 111. Bearing in mind that the D1 Judgment is an irregular judgment which turns not on the address adopted for serving the Legal Documents but on the 1st Defendant’s ignorance of such documents, I am of the view that neither party is at fault, so a fair order is for costs in the cause. I therefore grant a costs order nisi that save and except that there be no order as to costs in respect of the preparation, lodging into court and service of Mr Chan’s supplemental written submissions (which Mr Chan conceded as he did not rely on such submissions at the hearing), costs of the Setting Aside Summons (including all costs reserved if any) be costs in the cause to be taxed if not agreed. There be legal aid taxation of the 1st Defendant’s own costs.
Representation: Mr Ivan Chan of Messrs Joseph Leung & Associates for the Plaintiff. Ms Jamie Yan of Messrs Simon C W Yung & Co for the Defendant. |
Cases cited in this judgment