EMPEROR PRESTIGE CREDIT LTD v. KING PAK FU

HCA 1008/2019

[2021] HKCFI 403

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1008 OF 2019

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BETWEEN

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D E C I S I O N

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A. Introduction

1.  The Defendant was not in Hong Kong on the day of service of the writ. The writ was initially served by insertion into the letter box of the Defendant’s last known address and, later, by way of substituted service.  A Master set aside the service.  This is the Plaintiff’s appeal against the Master’s decision

2.  The Plaintiff is a money lender seeking to recover a debt and interest in excess of HK$250 million from the Defendant.  On 10 June 2019, Cheung & Choy (“C&C”), the Plaintiff’s then solicitors, served the writ by inserting it into the letter box of the Defendant’s usual and last known address in Deep Water Bay (“HK Address”). 

3.  On 3 July 2019, C&C received a letter from Gall.  Gall claimed that a representative from Carnival Group International Holdings Limited (“Carnival”) collected the writ from the letter box at the HK Address.  Gall was contacted by Carnival with a view to acting for the Defendant in this action.

4.  Gall did not come on record but claimed that they were unable to take instructions from and advise the Defendant.  They said that he had been out of jurisdiction since December 2018 and had been assisting PRC authorities in regulatory investigation since March 2019.  He was unable to contact any third parties by any means during the investigations at his wish but was able to make calls irregularly and intermittently.  Gall did not know when the investigations would be over but were finding means to get in touch with the Defendant.

5.  Gall further claimed that since the Defendant had been out of jurisdiction since December 2018, service could not be effected under Order 10, rule 1(2); and the Plaintiff could not validly apply for default judgment.

6.  The statement of claim was issued on 6 September 2019.

7.  On 8 October 2019, representatives of the Plaintiff met with the Defendant in person to discuss the Defendant’s outstanding liabilities to the Plaintiff, including the debt in this action.  The Defendant conceded that it was a without prejudice meeting. The meeting came to nothing.

8.  Out of abundance of caution, on 9 November 2019, the Plaintiff’s current solicitors, Woo, Kwan, Lee & Lo took out an ex parte application for substituted service under Order 65, rule 4.  Master Ho granted the Substituted Service Order on 15 November 2019.

9.  The Plaintiff effected substituted service by 3 modes:

(1) By pre-paid ordinary post to the HK Address;

(2) By leaving the writ under cover of a letter addressed to the Defendant to the care of Ms Chan Yuen Ying Stella, Carnival’s authorized representative, at the registered office of Carnival; and

(3) By despatching the writ in PDF file to the Defendant’s WeChat account.

10.  The Defendant acknowledged service on 4 December 2019.  He applied for setting aside the service of the writ on 9 March 2020.  Master Anthony HK Chan granted the application on 15 July 2020.

11.  The appeal was placed before this Court on 25 January 2021.  The Plaintiff contends that the Substituted Service Order should not be set aside because:

(1) The Defendant must have acquired knowledge of the writ after service by insertion into the letter box on 10 June 2019 and service was properly and validly effected on the day he came within jurisdiction, ie 23 August 2019.

(2) The Plaintiff was right to have invoked Order 65, rule 4(1) in lieu of Order 11 in the light of all the facts and circumstances available to it at the time.

(3) Should the Court accept either limb (1) or (2) above, the legality of substituted service through WeChat ceases to be a live issue for the purpose of this appeal.

12.  It is the Defendant’s case that:

(1) He was at the time of the purported service out of jurisdiction in Mainland China.  The Plaintiff should have applied for leave to serve the writ out of jurisdiction.

(2) Ordinary service was not impracticable, so the Plaintiff should not have applied for the Substituted Service Order.

(3) The Defendant only received the writ through Wechat, which was not a permitted mode of service in Mainland China.

(4) The Plaintiff was guilty of material non-disclosure of the matters in (1) to (3) when the Plaintiff applied, on ex parte basis, to the Master for the Substituted Service Order.

13.  This appeal thus turns on whether service under Order 10, rule 1(2) and obtaining of the Substituted Service Order were appropriate.  As this is an appeal against a Master’s decision, the judge is to treat the matter as though it came before her for the first time.  Hong Kong Civil Procedure 2021, Vol 1, §58/1/2.

B. Legal principles on service of a writ

14.  Order 10, rule 1(2) provides that:

“A writ for service on a defendant within the jurisdiction may, instead of being served personally on him, be served—

…

(b) if there is a letter box for that address, by inserting through the letter box a copy of the writ enclosed in a sealed envelope addressed to the defendant.” (underline added)

15.  Order 10, rule 1(3)(a) provides that:

“[where] a writ is served in accordance with paragraph (2)—

(a) the date of service shall, unless the contrary is shown, be deemed to be the seventh day (ignoring O.3, r.2(5)) after the date on which the copy was … inserted through the letter box for, the address in question;

...”

16.  In Deng Minghui v Chau Shuk Ling [2007] 1 HKLRD 905:

(1) The Court of Appeal stated in no uncertain terms that the requirement under Order 10, rule 1(2) is that the defendant must be within the jurisdiction at the time of the service of the writ (§11).

(2) The Court of Appeal overruled the principle in Penrose Industries Ltd v Tam Yan Lung, HCA 5783/2000, [2001] HKEC 586 that “irrespective of where the defendant was at the time of the service, if he had actually acquired knowledge of the proceedings he should not be allowed to complain about the service not being irregular and effective” (at §§14-15 and 38).

(3) If, as in the present case, a writ was not properly served in the first place but subsequently came to the defendant’s notice, such notice did not make the service proper, following Barclays Bank of Swaziland Ltd v Hahn [1989] 1 WLR 506 (at §22).

17.  Order 65, rule 4 provides that substituted service may be ordered if “it appears to the Court that it is impracticable for any reason to serve that document in the manner prescribed on that person”.

18.  Where a defendant is out of the jurisdiction of Hong Kong, substituted service of a writ on him is permissible only if the requirements in Order 11 for the service of a writ out of the jurisdiction are met: 張才奎所托管中國山水投資有限公司, HCA 1661/2014, unrep, 13 May 2015 at §45.

19.  As held by the Court of Appeal in Deutsche Bank AG, HK Branch v Zhang Hong Li [2016] 3 HKLRD 303, §§5-6:

“5. Another important question in this appeal is whether the court should exercise its discretion to order substituted service in Hong Kong when the Defendant was resident in the Mainland and RB did not have his instructions to accept service. If the plaintiff had not made an unsuccessful attempt to effect service in the mode prescribed under Order 11, rule 5A, it would usually be inappropriate to order substituted service in such a manner. To start with it must be emphasized that one should not allow the use of substituted service within the jurisdiction on a defendant residing overseas (be it in the Mainland or otherwise) with the effect of circumventing the threshold requirement of Order 11, rule 1. That rule provides an important safeguard against the improper exercise of jurisdiction over foreign parties. Any attempt to circumvent such safeguard is an abuse of process.

6. Further, without such unsuccessful attempt, the court cannot be satisfied that it is impracticable to serve in accordance with r.5A …”

20.  The law of the place of service can be relevant because as a matter of Hong Kong law, if the service of documents by a particular mode is illegal per se at the place of service, such mode of service would not be valid.  For service to be effected at a place where there is a relevant bilateral agreement or international convention governing service, Hong Kong courts must have regard to the provisions of that instrument: Axa China Region Insurance Co Ltd v Leong Fong Cheng, CACV 113/2016, 28 October 2016, Lam VP, at §§25-26.

21.  A substituted service order can be set aside for material non-disclosure at the stage of the ex parte application: 胡少芬 v 葉玉枝 [2019] HKCFI 2329, B Chu J, at §§123, 127 and 129.

C. Service under Order 10, rule 1(2)

22.  There is indisputable evidence of movement records showing that the Defendant was not in Hong Kong between 12 December 2018 and 22 August 2019 for 8 months. 

23.  Applying Deng Minghui, service under Order 10, rule 1(2) was not valid.  It did not matter that the Plaintiff knew and/or believed that the HK Address was the Defendant’s only or usual or last known address.  Nor did it matter that the Defendant acquired knowledge of the writ during the time he was out of Hong Kong and brought that knowledge with him on the day he came within Hong Kong on 23 August 2019. 

24.  Mr Ismail, counsel for the Plaintiff, prays in aid Order 10, rule 1(3)(a). He submits that “unless the contrary is shown” allows for a situation where the date of service can be shown by the plaintiff to be some other date, or more precisely, the date on which the defendant had acquired knowledge of the existence of the writ.  Mr Ismail relies on Barclays Bank v Hahn, at 511C-G.

25.  In that case, the defendant claimed that he, on average, spent no more than 3 months a year in England, where his wife rented a flat.  He arrived at Heathrow Airport from Geneva 2 hours after the writ was inserted into the letter box of his home.  Being warned that the envelop with the writ had been put through the letter box, the defendant returned to Geneva the following day without having visited the flat then or at any time later that year.  The House of Lords held that the writ was properly served under Order 10, rule 1(2) since the plaintiff could show, for the purposes of Order 10, rule 1(3)(a) that the deemed service of the writ was not 7 days after service by insertion through the letter box but 14 April when there could be no doubt that the writ came to the knowledge of the defendant when he was within the jurisdiction.  The House of Lords upheld the principle that the defendant had to be within the jurisdiction at the time of service of the writ. 

26.  With respect to Mr Ismail, Order 10, rule1(3)(a) governs the date of service.  To ascertain the date of service before meeting the requirement of serving a defendant within the jurisdiction is putting the cart before the horse.  Barclays Bank v Hahn does not assist the Plaintiff.

27.  Mr Ismail invites the Court to draw the inference, on balance of probabilities, that the Defendant must have acquired knowledge of the writ in or around the time of the letter box service and, with that knowledge, came within the jurisdiction on 23 August 2019 when the writ was properly served on him.

28.  Mr Ismail relies on the fact that Carnival had notice of the writ within the month it was served at the HK Address.  Carnival was controlled by the Defendant at that time, he being a major shareholder, an executive director, CEO and joint chair of the Board actively involved in Carnival’s affairs.  The Defendant admittedly was able to take calls and had specifically been in contact with Carnival’s representatives in or around that time.  Carnival was aware that it was a legal document such that it was passed to Gall.  Gall responded to the Plaintiff by letter of 3 July 2019.  Gall was asked to prepare to act for the Defendant and were formally retained by him after the conclusion of the PRC investigations.  Gall never indicated to the Plaintiff that the existence of the writ had not been brought to the Defendant’s attention.

29.  These facts were very similar to those in Du Huizhen v Chen Mei Huan, HCA 1176/2012, 15 July 2014, an authority relied on by Mr Ismail.  However, Deng Minghui was not referred to in Du Huizhen.  Applying Deng Minghui, which is binding on this Court, the Defendant’s acquisition of knowledge of the writ was irrelevant as he was out of jurisdiction at the time of service.

D. Substituted service

30.  On the Plaintiff’s own case:

(1) The Defendant attended a meeting on 8 October 2019 with the Plaintiff’s senior management to discuss his outstanding liabilities to the Plaintiff; and

(2) The Defendant was seen to be roaming free in Hong Kong.

There had thus been ample opportunity for the Plaintiff to try and serve the Defendant whilst he was in Hong Kong.  And yet the Plaintiff had not even mentioned the existence of the proceedings at the meeting. 

31.  The Plaintiff’s contentions are fourfold.

32.  Firstly, the Plaintiff explained that it was a without prejudice meeting and it would be contrary to the spirit of settlement had the Plaintiff personally served the Defendant with the writ and statement of claim there and then.

33.  With respect, the Plaintiff could still have served the Defendant whilst offering to stay the proceedings for the purpose of the without prejudice meeting.  Alternatively, the Plaintiff could have served the Defendant after negotiation broke down.  There was one whole month between that meeting and the ex parte application for substituted service.

34.  Secondly, the Plaintiff claims that it was unable to ascertain the exact whereabouts for the purpose of service other than the HK Address.  That may be so but the Plaintiff could have at least tried to make an appointment to serve the Defendant personally at the HK Address.  The fact was that there was not even an attempt to try and serve the Defendant in Hong Kong other than the letter box service.

35.  Thirdly, the Plaintiff contends that the Defendant’s reliance on Zhang Hong Li was misconceived because in that case, the defendant was residing in Mainland China such that an unsuccessful attempt to serve under Order 11, rule 5A was held necessary prior to seeking substituted service.  However, in the present case, there was nothing to contradict the Plaintiff’s belief that the Defendant was still residing in Hong Kong despite a temporary absence.  His nationality was irrelevant.

36.  With respect to Mr Ismail, Order 10, rule 1(2) has no “residency” requirement.  The relevant requirement is that the defendant is “within the jurisdiction”.

37.  Compare this to Order 11, rule 1(1)(a), which expects a service out order to be obtained even in respect of a person who is domiciled or resident within the jurisdiction.  This is said to be wider than the English equivalent and is relevant, in particular, in establishing jurisdiction over defendants who have left Hong Kong upon alleged wrongdoing coming to light or have been imprisoned in a jurisdiction outside Hong Kong: Johnston & Harris, The Conflict of Laws in Hong Kong, 3^rd ed, 2017, §3.064.

38.  In the present case, even if the Defendant were a resident in Hong Kong in 2019, he had left Hong Kong and had been under restriction from coming to Hong Kong.  In the light of the principles in paragraphs 36-37 above, Order 11, rule 1(1)(a) applied to him.

39.  Fourthly, Mr Ismail contends that Order 65, rule 4(1) affords a discretion such that a plaintiff can apply for a substituted service order without having to apply for service out to a defendant who is physically out of the jurisdiction.  Mr Ismail relies on the obiter dicta of Waller LJ in Myerson v Martin [1979] 1 WLR 1390:

“I agree with Mr Gee that the rule gives a discretion, but in my view it would be impossible for this court to say, in view of the strength of those authorities, that the discretion is not sufficiently circumscribed to avoid the conflict between RSC, Ord.65, r.4(1), and Ord.11, r.1. But, as Lord Denning MR has said, that does not mean that the discretion has entirely vanished and there may well be cases where an application may be made relating to somebody who may be briefly outside the jurisdiction at the time of the issue of the writ but who is nevertheless domiciled within the jurisdiction and wholly resident within the jurisdiction when there would be no conflict between the provisions of RSC, Ord.65, r.4(1), and Ord.11, r.1, and where it might be perfectly proper for the court to exercise its discretion in favour of allowing substituted service. That would cover the extreme example which was put in the course of argument of a man who was temporarily absent for two or three days from the country and a writ being issued on one of those days when all the rest of the time he was residing within this country.” (at 1395G-H) (underline added)

40.  With respect, Waller LJ in fact agreed with the long line of authorities established for 90 years that there could not be substituted service on a defendant who was in fact outside the jurisdiction at the time the writ was issued (p1396A) and that was why he referred to the words underlined in his dicta above as an “extreme example”. 

41.  Even if I were to disregard the Defendant’s bare assertion that he was no longer resident in Hong Kong, his absence for over half a year from Hong Kong could not be said to be temporarily absent for 2 or 3 days as would justify exercise of the discretion described by Waller LJ.

42.  For the reasons given in Section D, the Plaintiff has not shown that service in Hong Kong was impracticable or that attempted service out of jurisdiction was unsuccessful.  It had no grounds to apply for a substituted service order.  Service of the writ must set aside.

E.  Other matters

43.  There are other submissions of the Defendant which I have considered but they would not affect my decision.  Briefly, the contention that service by WeChat was not a lawful mode of service is only relevant if the purported service was pursuant to a service out order.

44.  I do not think it could be said that the Plaintiff was guilty of material non-disclosure just because it had taken a wrong view of the facts/law or was not aware that WeChat was not a recognized mode of service in Mainland China.

F.  Conclusion

45.  The appeal is dismissed.  On a nisi basis, I order the Plaintiff to bear the Defendant’s costs, summarily assessed at $55,000 on the basis of one fee earner.

46.  I thank counsel for their assistance.