Zig Zig Boutique Ltd v. Wong Chiu Lam and Another
Read the full judgment text of DCCJ 2630/2011 on BabelCite. This District Court judgment was delivered on 1 February 2013.
1. There are two applications made by the 1 st defendant, Wong Chiu Lam (“D1”), and the 2 nd defendant, Lo Ting (“D2”; D1 and D2 collectively the “Ds”) before the court:
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DCCJ 2630/2011 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 2630 OF 2011 ------------------------ BETWEEN
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-------------------- DECISION -------------------- Introduction 1.There are two applications made by the 1st defendant, Wong Chiu Lam (“D1”), and the 2nd defendant, Lo Ting (“D2”; D1 and D2 collectively the “Ds”) before the court:
2.D1 and D2 respectively filed their 3rd Affirmations (for D2, the Affirmation is entitled “2nd Supplemental Affirmation of Lo Ting”) on 22 November 2012 in support of the Stay Application. After hearing the submissions by the parties’ Counsel, as I reserved the decision of the Ds’ Appeal, I made an order in term of the Stay Application with costs be in the cause of the Ds’ Appeal. 3.P was the registered owner and vendor of a property located at Flat 8, 33/F, Block E, Sunshine City, No 18 On Luk Street, Shatin, the New Territories, Hong Kong (the “Property”). By a Writ endorsed Statement of Claim dated 13 July 2011, P claims against the Ds for HK$300,000 being the initial deposit that is allegedly due from the Ds to P for the purchase of the Property under a Provisional Agreement for Sale and Purchase dated 1 June 2011 (the “PSPA”). 4.The Judgment was entered by default against the Ds, in the absence of acknowledgement of service, on 17 August 2011 for the sum of HK$300,000.00 together with interest thereon. The affirmation of one Lau Wing Fat on service was filed on 4 August 2011 (“Lau’s 1st Affirmation”) in support of P’s application for default judgment. 5.A summons was taken out by the Ds, acting in person, on 15 May 2012 to set aside the Judgment (the “Setting Aside Summons”). A short affirmation was filed by the Ds on the same day in support of the Setting Aside Summons. The affirmation of one Chan Ka Chung Jacky (陳嘉冲) (“Jacky Chan”), one of the directors of P, was filed on 22 May 2012 in reply. 6.By an Order of Registrar Lui dated 23 July 2012, the parties were directed to file further Affirmations in relation to the Setting Aside Summons. D1 and D2 respectively filed their affirmations in support on 6 July 2012 (“D1’s 2nd Affirmation” and “D2’s 2nd Affirmation” respectively), and Jacky Chan filed his 2nd Affirmation in reply on 18 July 2012. 7.On 7 November 2012, the Setting Aside Summons was heard by Master D Ho. The Master decided that the Judgment was an irregular one and made the Order on the same day. 8.By the Notice of Appeal (appeal against Master’s Decision), the Ds are now appealing against the Order, and seeking for inter alia the following orders:-
9.Ms Law, Counsel for the Ds, submitted the Ds’Appeal ought to be allowed for the following reasons:
Applicable legal principles 10.An appeal to a Judge in chambers pursuant to O.58 RDC is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. The judgewill of course give the weight it deserves to the previous decision of the Master; but he is in no way bound by it[1]. The judge in chambers is in no way fettered by the previous exercise of the master’s decision, and on appeal from the judge in chambers, the Court of Appeal will treat the substantial discretion as the of the judge, and not of the master[2]. 11.It is trite that an irregular default judgment would be set aside as of right without regard to the merits of the proposed defence[3]. 12.Circumstances in which a judgment is considered to be irregular include bad or ineffective service of the writ[4]. 13.The power to set aside a default judgment which has been entered regularly is discretionary and such power is unconditional. The defendant must normally show that he has a real prospect of success. Other relevant considerations will be considered by the court e.g. why the default occurred, the defendant’s conduct after he had notice of the proceedings, explanation for the time taken where there had been a delay in making the application, prejudice to the plaintiff, etc[5]. 14.However, where the ultimate outcome would depend on whose evidence is believed and no provisional view of the probably outcome of the action can be formed without a trial, the appropriate test to determine whether the defendant has a real prospect of success is whether the defence “could well be established” at trial[6]. 15.It is also trite law that it is the Ds’ burden to prove that the Judgment was irregular. In other words, it is their burden to prove that the writ had not been brought to their notice until after the Judgment was entered. The court does not have to accept a defendant’s assertion that he has not received the writ no matter how improbable and a defendant is required to provide “convincing evidence” to show that he does not receive the writ and he has no notice of the same. In Bank of China (Hong Kong) Ltd. v. Cheung King Fung[7], Tang JA (as he then was), whilst setting out the said legal principle, referred to and stated the following:-
16.It is accepted by Ms Law, Counsel for the Ds, that the Court has the residual discretion in setting aside an irregular judgment to impose terms by having regard to the parties’ conduct[8]. However, each case must be decided on its own facts and the Court will be concerned to see whether the defendant’s conduct has been shown to be an abuse and whether he has contributed to what went wrong with the service of the originating process[9]. 17.Even on setting aside a regular judgment, a condition, if imposed, should be one which the defendant can reasonably comply or else that would be tantamount to refusing him leave to defend altogether[10]. Factual Background 18.At all material times, P was the registered owner of the Property; D1 and D2 were fiancé and fiancée, and subsequently became husband and wife as they have married with each other on or about 18 June 2011 as evidenced by a certificate of marriage. 19.Pursuant to the PSPA, signed (i) by Pas the vendor of the one part and (ii) the Ds as the purchasers of the other part[11], it was stated that P agreed to sell and the Ds agreed to buy the Property at the purchase price of HK$4.45 million. 20.The PSPA was signed with the agency service provided by a real estate agent, Ricacorp Properties Limited, of which one Mr. Ryan Li Pui Wing (“Mr Li”) was responsible for preparing the PSPA and witnessed the parties’ signatures on the same. 21.Pursuant to the terms of the PSPA, the Ds shall upon signing the same (ie on 1 June 2011) pay to P an initial deposit in the sum of HK$300,000 (the “Sum”). 22.The Sum was purportedly paid by the Ds by way of a cheque dated 2 June 2011 drawn by D1 made payable to P (the “Cheque”), but it was, upon presentment for payment, returned dishonoured on 3 June 2011, for the reason of “refer to drawer”. 23.As the Ds failed to pay P the Sum, P on or about 13 July 2011 issued the writ herein claiming against the Ds for the Sum and the interest thereon. 24.Since the Ds filed no Notice of Intention to Defend, the Judgment was entered against them on 17 August 2011. 25.In about September 2011, the P’s solicitors had attended Flat 18, 5th Floor, Chung Kwan House, Chung On Estate, Ma On Shan, New Territories (“Chung Kwan House Address”)with the view to serving upon the Ds the Statutory Demands (the “SD”). 26.On about 28 September 2011, D1 contacted the P’s solicitors and thereby made arrangement with the same for personal service of the SD. 27.On 6 October 2011, the SD and the Judgment were personally served upon D1. As the Ds still made no payment to P, nor did they take out any step to set aside the Judgment or the SD, Pfiled a Bankruptcy Petition (the “Petition”) against D1 on 5 December 2011. 28.The Petition was respectively heard on 29 February, 26 March, 14 May and 28 May 2012, and was eventually adjourned to a date pending the determination of D1’s application to set aside the Judgment. 29.All along, the Ds had made no application to set aside the Judgment until 15 May 2012; by that date, D1 had already attended hearing of the Petition for 3 occasions. Discussion Whether the Judgment was obtained irregularly 30.According to Lau’s 1st Affirmation, two separate copies of the Writ were served on 14 July 2011 upon D1 and D2 respectively by inserting the same into the post box of Chung Kwan House Address. 31.Chung Kwan HouseAddress was provided by D1 as the address of his and D2 in the PSPA on 1 June 2011, ie about 6 weeks before the service of the writ. However, D2 said that she did not know that Chung Kwan House Address was used in the PSPA[12]. Hence, I think that I have to accept her evidence in this regard for the purpose of the Setting Aside Summons. 32.On or about 14 June 2011 (ie one month before the service of the Writ), the P’s solicitors had written to the Ds a letter before action (the “Letter before Action”) and sent the same to Chung Kwan HouseAddress by registered post. This letter has not been returned undelivered. 33.It is not disputed that D2’s parents were at all material times residing at Chung Kwan HouseAddress and D2 had (together with her parents) lived at the same place at least until 18 June 2011. Hence, Mr Koo, Counsel for P, submitted that D2 must have notice of the Letter before Action on or about 14 June 2011. However, I find that 14 June 2011 is a Thursday and 18 June 2011 is a Monday and only 4 days are in this period including Saturday and Sunday. It is not clear to me from the evidence at what time on 14 June 2011 the Letter before Action was sent by registered post at the Post Office and at what time on 18 June 2011, the Ds moved out from Chung Kwan HouseAddress. I am not able to conclude that D2 must have notice of the Letter before Action on or about 14 June 2011 as submitted by Mr Koo. In any event, I think that is not directly relevant to the main issue as to whether the Ds had notice of the writ. 34.D2 alleged that the writ was not brought to her notice until January 2012 on the following reasons:-
35.On the other hand, D1 alleged that the writ was not brought to his notice until September 2011 on the following reasons:-
36.Mr Koo, Counsel for P, submitted thatassuming that the Ds did move out of Chung Kwan House Address when the writ was served, it is apparent that D2’s parents would have forwarded the envelopes (containing copies of the writ) to the Ds or notified them of the same. Mr Koofurther submitted that apart from the Ds’ mere allegation of no communication between the parents and them, they have produced no convincing evidence to prove that the parents did not notify them of the envelopes or forward to them the same. In my view, Mr Koo’s submission seems logical and reasonable in normal situation when the Ds were in good term with D2’s parents. Nonetheless, as the Ds had already said that they had some disputes with D2’s parents on holding a wedding banquet, it is not entirely unbelievable that at the material times, D2’s parents had not forwarded the envelopes (containing copies of the writ) to the Ds or notified them of the same. 37.In addition, Mr Koo, Counsel for P, contended that Ds have failed to produce documentary evidence, such as a copy of tenancy agreement, utility bill or bank statement, to prove that they (or at the least D2) had moved of Chung Kwan House before 14 July 2011 and that the certificate of marriage is not evidence of “moving out” at all. It is the evidence of the Ds that they first moved to Tin Shui Wan in June 2011 after their marriage on 18 June 2011. The Ds then moved to “Flat C, 15th Floor, Tower 5, Lake Silver, No 599 Sai Sha Road, Ma On Shan, Sha Tin, New Territories” (“Silver Lake Address”) in or about August 2011. I think that as the Ds just stayed in the house at Tin Shui Wan for about 2 months, it may be difficult or a bit harsh for them to produce copy tenancy agreement, utility bill or bank statement. 38.I am aware that when the Ds firstly took out the Setting Aside Summons, they did not say in their joint affirmation that they did not have notice of the writ or the proceedings, or they had not received the writ; they merely alleged that they had not received the notice of hearing of the proceedings[13].Nevertheless, I am of the view that I shall take into account of fact that they had not sought any legal advice at the time when preparing this joint affirmation. In my view, failing to mention that they had not received the writ does not mean that they had received it. 39.It is undisputed that D1 had been served with the Judgment and the SD on 6 October 2011. Mr Koo, Counsel for P, argued that it is unbelievable that that D1, being the husband of D2, would not have mentioned to her anything about the present proceedings, which involved both of them and a considerable sum of HK$0.3 million, for almost half a year, ie from about September (or October) 2011 to January 2012. In my judgment,it cannot be said such evidence totally unbelievable in view of D2’s pregnancy with a large fibroid and her poor health conditions. 40.The Ds alleged that they had (after marriage on 18 June 2011) moved from Chung Kwan House Address to Tin Shui Wai. Mr Koo for P challenged that D1’s address providedin his affirmation filed on 6 July 2012 was still Chung Kwan House Address. On the other hand, it is noteworthy that in the earlier joint affirmation filed on 15 May 2012, Silver Lake Address had already been used by the Ds. It is very likely that D2’s parents are still residing at Chung Kwan House Address and that they may allow D1 to use this address in his affirmation filed on 6 July 2012. 41.The fact that the Ds had taken no action whatsoever to set aside the Judgment until May 2012is not directly relevant to the main issue as to whether the Ds had notice of the writ. In my opinion, the Ds’ conduct as such may be relevant to the next question whether I should exercise my residual discretion to impose terms upon setting aside an irregular judgment. 42.I consider that the Ds’ explanation that they moved out of the D2’s maiden home right after their marriage was not incredible. In the circumstances, I am satisfied that the Ds had no notice of the writ at the material time and conclude that the Ds have discharged their burden to prove the Judgment was irregular, which shall be set aside as of right. Whether this court should exercise residual discretion to impose terms 43.Although I will not consider the merits of the defence, it does not mean that I shall shut my eyes to the surrounding circumstances. It is trite that I have residual discretion to impose terms upon setting aside an irregular judgment by having regard to the parties’ conduct[14]. 44.As to the conduct of D2, I think that she has much less to be blamed than D1 save that when she has notice to the writ in January 2012, she and D1 only took out the Setting Aside Summons on 15 May 2012 to set aside the Judgment. There is about 4-month delay which although not a very long one, still it is an unreasonable delay. Besides, only D1 but not D2 has applied for legal aid in March 2012. No explanation was given by D2. I am of the view that this court shall exercise residual discretion to impose terms upon setting aside the Judgment. 45.Regarding D1, I am of the view that his situation is even much worse than that of D2. First, the PSPA was signed by him and D1 alleged that he also signed it on behalf of D2 as stated in the PSPA. Nonetheless, D2 contended that D1 had no authority to sign on her behalf. In this regard, their evidence seems conflicting. The issue as to whether D1 has the necessary authority, impliedly or apparent, from D2 is a very serious factual dispute, which I am not in a position to resolve at this stage. 46.Secondly, D2 also alleged that Chung Kwan House Address was used and provided by D1 as the correspondence address in the PSPA without her knowledge. As a result, the writ was served on the Ds at such address. Thirdly, the Cheque was drawn by D1 rather than D2 and was, upon presentment for payment, returned dishonoured. 47.Thirdly, it is undisputed that it was D1 but not D2 who signed the authorization letter dated 1 June 2011[15] in favour of the estate agent, Mr Li. 48.Last but not least, on about 28 September 2011, D1 contacted the P’s solicitors and thereby personal service of the SD was arranged. On 6 October 2011, the SD and the Judgment were personally served upon D1 who still failed to take out any step to set aside the Judgment or the SD. Then, Pfiled the Petition against D1 on 5 December 2011 which was heard on 29 February, 26 March, 14 May and 28 May 2012, and was eventually adjourned to a date pending the determination of D1’s application to set aside the Judgment. D1 did not inform D2 of the present proceedings immediately until January 2012. 49.After D1 had already attended hearing of the Petition for 3 occasions, he and D2 eventually made application to set aside the Judgment on 15 May 2012. There is about 7-month delay which I do think is a very long period. No explanation is offered by D1 as to why he only decided to apply for legal aid in March 2012 but not earlier when he has been personally served with the Judgment in October 2011. 50.In my view, D1’s conducts are extremely unreasonable as a whole. I must exercise my residual discretion to impose terms upon setting aside the Judgment. 51.I agree that if term is imposed, it should be one which the Ds can reasonably comply or else that would be tantamount to refusing them leave to defend altogether[16]. 52.Ms Law, Counsel for the Ds, referred me to the 3rd Affirmation of D1 and 3rd Affirmation of D2 in support of the Stay Application and submitted as follows:
53.In my judgment, if the Ds intend to vary the condition on the purported ground of their limited financial means, they should frankly disclose and produce sufficient documentary proof of incomes, bank statements, tax returns or any other documents to show their alleged limited means instead of mere-say-so. They have the chance to do so when filing the supporting affirmations for the Stay Application, but did not and no explanation was given. 54.It is not in dispute that the Ds or at least D1 had planned to acquire a property of their own as their matrimonial home after marriage in June 2011. According to the affirmation of D1, the purchase price of the Property shall be less than HK$4.45 million (inclusive of agency commission pursuant to the authorization letter dated 1 June 2011), 30% down payment of which would amount to about HK$1.3 million. It means that D1 shall be able or was ready to make payment of this HK$1.3 million at that time if the estate agent can successfully bargain with P the purchase price of the Property inclusive of agency commission below HK$4.45 million. Furthermore, according to the plain wordings of the said authorization letter, Mr Li was authorized to pass on the initial deposit to P[17]. Thus, when D1 drew the Cheque for HK$300,000 as initial deposit of the Property on 2 June 2011, he must have the ability to honour at least this HK$300,000. 55.In the circumstances, I am not satisfied that D1 is unable to pay a sum of HK$300,000. Concerning D2, I accept her Counsel’s suggestion of HK$50,000. I allow the Ds’ Appeal and set aside the Order. I now order that:
56.Concerning the question of costs[18], I disagree that the Ds are plainly not to be blamed for the state of affairs that led to the irregular judgment, in particular Chung Kwan House Address was provided by D1 in the PSPA and the Ds did reside there before 18 June 2011. Thus, I exercise my discretion to order costs of the Setting Aside Summons, the Stay Application and the Ds’ Appeal be costs in the cause including all costs reserved and costs before Master D Ho.
Mr Ernest Koo instructed by Simon CW Yung & Co, for the plaintiff Ms Deanna Law instructed by Wong & Tang, for the 1st defendant and also instructed by Hon & Co, for the 2nd defendant [1] (per Lord Atkin in Evans v Bartlam [1937] AC 473 at 478) [2] See: Hong Kong Civil Procedure, 2013, Vol 1, §58/1/2 [3] See: Hong Kong Civil Procedure 2013, Vol 1, §13/9/4; Po Kwong Marble Factory v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 (CA), 161C-E; Cosec Nominees Ltd v Lau Hon Ming [2001] 1 HKLRD 581 (DHCJ Poon, as he then was), 594D-H [4] See: Hong Kong Civil Procedure 2013, §13/9/5 [5] See: Hong Kong Civil Procedure 2013, §§13/9/12-14 [6] See: Hong Kong Civil Procedure 2013, §13/9/14; O Mark Polythene Products Fty Ltd v Reap Star Ltd [2000] 3 HKLRD 144, 148F-H (CA); El Vince Ltd v Wu Wen Sheng [2001] 3 HKLRD 445, §25 (Kwan J, as she then was) [7][2007] 1 HKLRD 462 [8] See: Hong Kong Civil Procedure 2013, §13/9/10 [9] See: Wai Kam Foo Daniel v Wai Kam Wah Raymond (HCA 957/2010, unrep, 23 Nov 2011), §93 (per Master Marlene Ng) [10] See: Hong Kong Civil Procedure 2013, §13/9/15; MV Yorke Motors (a firm) v Edwards [1982] 1 WLR 444, at 449B (per Lord Diplock); Wu Cho Mei t/a Mui Far Chung Restaurant v Wang Siau Yu [1994] 1 HKC 188, 189D (per Godfrey JA, as he then was); Hwang Yiou Kwa Victor v Morgan Guaranty Trust Co of New York [1985] 1 HKC 294, 295I-296A (per Kemster JA) [11] remarks: D1 signed for himself as well as on the behalf of D2 according to the PSPA [12] See: §22 of D1’s 2nd Affirmation filed 29 June 2012 and §§8-9 of D2’s 2nd Affirmation filed 22 November 2012 [13] The exact wordings in Chinese are “ …並沒有收到有關上述案件之上庭通知” [14] See: Hong Kong Civil Procedure 2013, §13/9/10 [15] See: Exhibit “WCL-1” to D1’s affirmation filed 29 June 2012 [16] See: Hong Kong Civil Procedure 2013, §13/9/15; MV Yorke Motors; Wu Cho Mei; Hwang Yiou Kwa Victor [17] Original wordings in the authorization letter are “轉付訂金予業主”. [18] See: Hong Kong Civil Procedure 2013, §13/9/11, “The court, however, retains a discretion as to costs in that terms might be imposed as a condition of giving costs to the defendant……” In Liu Chong Hing Bank Ltd. V Union World (HK) Ltd, CACV285/2003, the Court of Appeal dimissed the appeal from the order made by Deputy Judge Looney who ordered, inter alia, that costs be costs in the cause as an order nisi. | |||||||||||||||||||
Cases cited in this judgment