Edward Wong and Co. Ltd. v. Twin Express Ltd. and Others

IN THE COURT OF APPEAL

1996, Nos. 34 & 35
(Civil)

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. These are appeals (ordered by this court to be heard together) against the refusal of Seagroatt, J. to grant any relief to Siu Kin, Kenneth and Lau Lai Kuen, the 2nd and 3rd defendants in the action, upon summonses taken out by them on 11 September 1995 and 23 October 1995. The summons of 11 September 1995 asked for an order, under O.12 r.8 of the Rules of the Supreme Court, declaring that the plaintiff's writ of summons in the action had not been duly served on them; and that a default judgment dated 22 March 1995, and a charging order absolute dated 2 May 1995, obtained by the plaintiff in the action, be set aside. The summons of 23 October 1995 asked for leave to file a notice of intention to defend out of time; and, insofar as the application made by the first summons was out of time, that time be extended to allow such application to be made.

Background

2. The facts may be shortly stated. The plaintiff had a claim against the 1st defendant for $700,608.72, the price of goods sold and delivered. The debts of the 1st defendant had been guaranteed by the 2nd and 3rd defendants. The plaintiff's claim against the 2nd and 3rd defendants was a claim upon those guarantees. The property the subject of the charging order absolute dated 2 May 1995 was the property of the 2nd defendant. The objection taken by the 2nd and 3rd defendants to the proceedings was that at the date of the purported service of the proceedings on them within the jurisdiction, the 2nd and 3rd defendants were not in fact within the jurisdiction.

The issue

3. The issue before the judge was whether or not the extension of time for which the 2nd and 3rd defendants had asked ought to be granted. That is, of course, a matter of discretion. Mr. Edward Chan, Q.C., for the 2nd and 3rd defendants, did not seek to argue otherwise. It follows that the question for us is simply this: did the judge exercise his discretion wrongly? If not, we cannot interfere.

The history of the proceedings

4. This may also be shortly stated.

5. On 21 February 1995, the writ of summons in the action was issued.

6. On 22 February 1995, the plaintiff, by its agent, caused to be inserted, into three different letter-boxes around Hong Kong, copies of the writ, intended for the 2nd and 3rd defendants. Although the plaintiff did not know it, on the date in question, 22 February 1995, neither the 2nd defendant nor the 3rd defendant were in fact present in Hong Kong.

7. On 10 March 1995, the plaintiff obtained a default judgment against the 1st defendant.

8. On 22 March 1995, the plaintiff obtained a default judgment against the 2nd and 3rd defendants, and a charging order nisi against the property of the 2nd defendant, which was made absolute on 2 May 1995; by the latter date (indeed by April 1995) the 2nd and 3rd defendants were aware of the proceedings, which is of course the whole object of "service".

9. On 12 June 1995, the plaintiff instituted proceedings by originating summons to lead to a sale of the property the subject of the charging order.

10. On 11 September 1995 and 23 October 1995 respectively, the 2nd and 3rd defendants took out the two summonses to which I have already referred.

11. On 3rd November 1995, the Registrar set aside the default judgment against the 2nd and 3rd defendants. The plaintiff appealed to the judge. On the appeal, Seagroatt, J. re-instated the default judgment.

The relevant procedural rules

12. Before turning to the judge's reasons for re-instating the default judgment, it will be helpful to refer briefly to the small number of rules of the Supreme Court which bear upon the issue which the judge had to consider.

13. O.2. O.2 r.2 provides that any application to set aside any proceedings for irregularity shall not be allowed unless it is made within a reasonable time.

14. O.3. O.3 r.5 provides that the court may, on such terms as it thinks just, by order, extend the period within which a person is required or authorised by the rules to do any act in any proceedings.

15. O.10. O.10 provides for service of originating process on a defendant within the jurisdiction.

16. O.11. O.11 provides for service of originating process on a defendant out of the jurisdiction. The leave of the court is required before such service on a defendant out of the jurisdiction can be effected.

17. O.12. O.12 r.6 provides that, except with the leave of the court, a defendant may not give notice of intention to defend in an action after judgment has been obtained therein. O.12 r.8 provides that a defendant who wishes to dispute the jurisdiction of the court in the proceedings by reason of any such irregularity as is mentioned in r.7 (including any irregularity in the service of the writ) shall give notice of intention to defend the proceedings and shall, within the time limited for service of the defence, apply to the court for an order (in the case of an irregularity in service of the writ) declaring that the writ has not been duly served on him.

The judgment

18. The judge, apprehending that he had a discretion to grant leave to the 2nd and 3rd defendants to give notice of intention to defend the action, notwithstanding that judgment had been obtained against them (and a discretion to extend time) nevertheless decided to exercise his discretion against the 2nd and 3rd defendants. He referred to the facts, and said this, in relation to the 2nd and 3rd defendants:

"I am satisfied that they knew of these proceedings probably by 12 March and certainly by 12 April at the latest: Both defendants have deliberately avoided producing any material which suggests they are trying to do other than evade all issues which affect their liability."

He continued:

"Although these Defendants have not specifically affirmed that the reason for not giving their current residential address is to avoid being pursued by the Plaintiff, I have no doubt that, on all the evidence, that is in fact the reason."

19. He thought it was "a pointless exercise" to set aside service of the writ; it was clear that this was a case in which the court would give leave to serve out of the jurisdiction and make an order for substituted service. He added:

"The Defendants have not raised any question of merit let alone argued it. I cannot in any event see any defence."

He concluded:

"Both Defendants are liable to the Plaintiffs in respect of the company's indebtedness by virtue of a continuing guarantee. There can be no defence. None is put forward. The conduct of the Defendants' clearly disentitles them to the exercise of any discretion in their favour."

20. Was the judge right? Mr. Edward Chan, Q.C., in an attractive argument, attempted to persuade us that the nature of the irregularity here was so serious that the judge must have been wrong to exercise his discretion as he did. He did not contend that the matter was not one within the judge's discretion at all, but he said that, given that these proceedings were not served on the 2nd and 3rd defendants pursuant to any order obtained under O.11, but had been "served" on them in Hong Kong when they were not here, the judge, in taking into account the absence of any evidence from the 2nd and 3rd defendants as to the merits of their defence (if any), approached the matter on a wrong basis; and he should have exercised his discretion in their favour.

21. I cannot accept this. The jurisdiction of this court under O.11 to direct that service of the writ may be effected outside the jurisdiction is, certainly, an exorbitant jurisdiction. But the fact of the matter is that, under the rules to which I have referred, a writ may be served on a defendant either within, or without, the jurisdiction. The failure of the plaintiff, in the circumstances of the present case, to obtain leave to serve the writ out of the jurisdiction instead of attempting to serve it on the 2nd and 3rd defendants at the various addresses where the attempts to serve it were made, seems to me to be no more than an irregularity. This irregularity is one which the court can, and in a proper case will, overlook. It is difficult to contemplate a case in which it would be more appropriate than this to overlook the plaintiff's failure to obtain leave to serve the writ out of the jurisdiction.

The cases cited

22. Mercedes Benz A.G. v. Leiduck & Another [1995] 1 HKC 448, cited to us by Mr. Chan, does not seem to me to assist in any way; the defendant there did not need to ask and did not ask for any extension of time. The one authority placed before us which is close to the present case was T.S.B. Private Bank International S.A. v. Chabra & Another [1992] 1 WLR 231. This authority, as Mr. Chan frankly admitted, is against him. In that case, too, the writ was served irregularly. In that case, too, no satisfactory explanation had been given by the defendant as to the reasons for his delay in making his application to set the proceedings aside. In that case, too, the judge felt handicapped, in the exercise of any discretion in the defendant's favour, by the absence of any indication in the evidence as to whether he had any defence to the claim against him and, if he had, what it was. In that case, too, the judge took into account, in the exercise of his discretion, that the defendant would not inform the plaintiff of his current address, as such information was likely to be used by the plaintiff in order to pursue him at that address. In that case, too, it seemed to the judge "a pointless exercise" to set aside service of the writ when it was clear that that was a case in which the court would give leave to serve out of the jurisdiction and make an order for substituted service. It is true that there are features in that case which differ from ours, but there is no substantial distinction between the two cases; and, as Mr. Chan accepted, if we were to follow the judge's reasoning in that case (as I think we should) the present appeal would be bound to fail. Further, as Mr. Pow pointed out to us in the course of his submission on behalf of the plaintiff, the 2nd and 3rd defendants' delay in prosecuting whatever claim they might have had to set aside these proceedings had they applied promptly was considerable and could not be said to be justified. The minimum period between July (when, it is said, the 2nd and 3rd defendants first realised they could make such a claim) and September 1995 was not satisfactorily accounted for.

Conclusion

23. For the reasons I have endeavoured to state, I have no doubt that the judge was right in refusing to entertain the claim for relief sought by the 2nd and 3rd defendants. I would dismiss this appeal.

Liu, J.A.:

24. I agree that the appeals should be dismissed. I merely wish to add this.

25. This is an application for extension of time to challenge service, said to have been purportedly effected, as a matter of jurisdiction. This is not an application to challenge jurisdiction. The appellants have yet to reach that stage with granted leave. Even in an application to set aside service of an originating process for irregularity, it is true that a defendant need not disclose the nature of his defence in his affidavit, but the Court would more readily accede to his application if the merits, if any, are known. On the other hand, if lack of merits appears in the documents before the Court or is otherwise evident, it would not be prudent of the defendant to ignore it.

26. When a party applies for extension of time to challenge service on the ground of irregularity, indulgence may be denied where, as here, the defendants "gave no indication of any defence and it seemed a 'pointless exercise' to set aside the service ........ (because) the Court would (in any event) give leave to serve" the defendants effectively. See 1995 White Book Vol. 1, p. 119, marginal reference 12/7 - 8/4; T.S.B. Private Bank International S.A. v. Chabra & Another, [1992] 1 W.L.R. 231, p. 236H - 237B; [1992] 2 All E R 245, p. 251 c - d.

27. The real point for our consideration in these appeals is judicial discretion which was to be exercised on all the circumstances of this case, including prospects of success, conduct, knowledge and delay. As I said, I agree with all that has been said by my Lord, Godfrey, J.A. and I, too, would dismiss these appeals consolidated for the hearing before us today.

Litton, V.-P.:

28. The question before the judge was whether his discretion should be exercised to enable the defendants to dispute the court's jurisdiction under Order 12 r8(1).

29. It is common-ground that no proper service of the writ was effected. But it is also not in dispute in this court that by 12 April 1995 at the latest, the defendants had notice of the proceedings. They took no steps until 11 September 1995 when they issued their summons under Order 12 r8(1) for a declaration that the writ had not been duly served. But, procedurally, this was wrong. They had not then obtained leave under Order 12 r6 to give notice to defend. So they took out another summons on 23 October, returnable on the same day as the earlier summons, for time to be extended to allow both applications to be made.

30. In considering the exercise of his discretion, the judge looked at all the relevant circumstances: including a very relevant fact that the defendants' application was essentially pointless, as it was clear that this was a situation where the court would in any case give leave to serve the writ out of the jurisdiction and, if necessary, make an order for substituted service. Sooner or later the defendants must deal with the plaintiff's claim in this jurisdiction. This clearly distinguishes the case of Mercedes-Benz v. Leiduck [1995] 3 WLR 718 where the key issue was whether the Hong Kong courts had jurisdiction to entertain the plaintiff's claim against the defendant.

31. I can see no error in the judge's approach to the exercise of his discretion. The result is that the appeal is dismissed.