HONOUR FINANCE CO LTD v. CHUI MEI MEI

Headnote

(1) The Court's power to set aside a judgment entered in default of notice of intention to defend under 0 13 r 9 is discretionary.

(2) A default judgment so entered after service by post will be regarded as regular if the rules as to postal service are strictly complied with, and if at the time of entry of the judgment there "was no evidence of non-delivery of the posted documents.

(3) Such a regular judgment will normally be set aside only upon proof both of non-receipt of the process, and of an arguable defence on the merits.

Day of handing down reasons for judgment: 28 February 1989

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J U D G M E N T

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Hunter, J.A.:

1. On 28th April 1987 judgment (the judgment) was entered for the Plaintiff appellant against the defendant respondent for HK$800,200.77 and HK$2,347.73 accrued interest, no notice of intention to defend having been given by the defendant. On 25th November 1988 Master Chan set the judgment aside on the ground of irregular service of the writ of summons". On 2nd February 1969,Godfrey J dismissed the plaintiff's appeal against the Master's decision. From that dismissal the plaintiff appealed to this Court At the conclusion of the argument for counsel for the appellant, counsel for the respondent elected to address no argument to the Court or to seek to uphold the dismissal. We allowed the appeal and restored the judgement stating that we would give our reasons thereafter. This we now do.

2. The relevant facts are these. In October 1987 the defendant traded on margin so unsuccessfully upon the Hong Kong Stock Exchange, that by 30th November she had become indebted to Pak Shing Finance Co Ltd. in the said sum of HK$800,200.77. In January 1988 the plaintiff took an assignment (inter alia) of this indebtedness from Pak Shing, and gave notice thereof to the defendant.

3. On 25th March 1968 the writ of summons, indorsed with the statement of claim, was issued by the plaintiff against the defendant claiming the said sums by way of capital and interest. On the same day, 25th March 1989 the writ was sent, by way of service; by ordinary pre-paid post to the last known address of The defendant namely flat B," room K, 16th floor, Chim Terrace, 256 Jaffe Road, Wanchai, Hone Kong. The writ was not returned by the post office. No notice of intention to defend having been given by the defendant the judgment was entered on 28th April.

4. The defendant gave no notice because she was then unaware of the existence of the writ. Although she did not dispute that the address to which it was sent could properly he regarded as her last known address, she had in fact left it in November 1987 to move to Indonesia. She returned to Hong Kong on 8th March 1988 for a visit which lasted until 29th April, but she resided at another address. During this visit she made no attempt to collect or receive any mail at or from the Wanchai address. It was not until June that she caused the mail at that address, including the writ, to be handed to her solicitors. By this means and at this time she became aware of it.

5. In such circumstances a court "may on such terms as it thinks fit, set aside or vary any judgment entered in pursuance of this order" 0 18 r 9. The power is discretionary, and the issue between the parties turns upon the proper exercise of such discretion, and in particular upon whether the judgment was to be regarded as regular or irregular. The judge's finding that the defendant had failed to show an arguable defence on the merits was not in question. The plaintiff contended that the judgment had been obtained properly and strictly in accordance with the rules particularly 0 10 r l and 0 13 r 1 and 7. It was therefore a regular judgment, and upon the defendant's failure to merits, should not have set aside.

6. The judge's view was that a regular judgment requires, not only that the plaintiff should have done all he can to comply with the rules it requires him also to show that (he) has succeeded in doing so". By that we think that the judge was requiring the plaintiff to show that the rules had achieved their intended effect, and had produced not simply delivery of the writ to an appropriate address, but actual timeous receipt of such writ by the defendant. His view was that the party who chooses postal service in preference to personal service, took the risk of postal service failing for any reason to bring about such actual timeous receipt. Accordingly since the writ was not actually received by the defendant until about June, she was entitled in the judge's view to have the judgment set aside as of right, or ex debito justitiae. The difference perhaps is more significant in principle than in its effect. Upon the plaintiff's view the action remains dead Upon the judge's it lives only until Order 14 is invoked.

7. It is we think desirable to enter a caveat about the use of the these two phrases "as of right" or "ex debito justitiae". They may be convenient ways of summarising the position of a party against whom an irregular judgment has been entered, and they are frequently used. But they are not precisely accurate. In Evans v Bartlam [1937] AC 473, the House of authoritatively held that a court under the predecessor to O.13 r 9 exercised a discretion which was not and could not be fettered; and that the court's practice in relation to regular and irregual judgments only constituted "rules to guide…. the normal exercise of…. discretion"; per Lord Atkin P 480. Lord Wright was quite specific when he said:

"A discretion necessarily involves a latitude of individual choice according to the Particular circumstances, and differs from a case where the decision follows ex debito justitiae once the facts are ascertained".

p. 489. The victim of an irregular judgment therefore enjoys a confident expectation rather than a right.

8. The legislative background in the light of which the discretion falls to be exercised is to be found in section 8 of the Interpretation and General Clauses Ordinance (Can 1) and 0 10 r 1. The material provisions are:

"S .8. Where any ordinance authorises or requires any documents to be served or any notice to be given by nose or by registered post whether the expression "serve" "give" or "send" or any other expression is used, the service notice shall he deemed to be effected by properly addressing prepaying the postage thereon and dispatching it by Post or by registered post as the case may be, to the last known postal address of the Person to he served or given notice, and, unless he contrary is proved such service or notice shall he deemed to have been effected at the time at which the document; or notice would be delivered in the ordinary course of post".

"0 10(1)(i) a writ must he served personally on each defendant by the plaintiff or his agent.

(ii) a Writ for service on a defendant within the jurisdiction may, instead of being served personally on him, be served -

(a) by sending a copy of the writ by ordinary post to the defendant at his usual or last known address….

In (a) "ordinary post" means post which has been pre-paid or in respect of which prepayment is not required.

(b) 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 7th day (ignoring 0 3 r 2(5)) after the date on which the copy was sent to … the address in question".

9. An identical legislative frame exists in England. The Rules of the supreme Court are the same, as in substance are the respective terms of section 26 of the Interpretation Act 1889 and section 8 of Cap 1. This particular has been considered upon occasions by the Court of Appeal in England, and most recently in A/s Cathrineholm v Norequipment [1972] 2 OB 314. The Court had then to consider and resolve a conflict between earlier decisions of that Court, and came down firmly in favour of the views expressed in Reg v London County Quarter Sessions Appeals Committee, Ex Parte Rossi [1956] 1 OR 682; Cooper v Scott-Farnell [1969] 1 WLR 120; and Saga of Bond Street Limited v Avalon Promotions Limited (1972] 2 OR 325; and rejected the majority views to the contrary expressed in Thomas Bishop Ltd. v HeJmville [1972] 1 OB 464. Authority of this nature, although not strictly binding in Hong Kong, constitutes at least highly persuasive authority, which in our view should only he departed from in exceptional circumstances and for most cogent reasons. They do not in our view here exist.

10. The considered view of the English Court of Appeal sufficiently appears from two citations from the judgments in A/S Cathrineholm v Norequipment. First Lord penning MR said at n 322:-

"When the plaintiff has obeyed all the rules entirely properly and entered judgment accordingly, I think it should he treated as regular.

…. When the plaintiff sends a copy of the writ by prepaid post to the registered office of the company, and it is not returned - and he has no intimation that it has not been delivered - it is deemed to have been served on the company - and to have been served on the day on which it would ordinarily he delivered. If no appearance is entered time, the plaintiff is acting quite regularly in signing judgments. If the defendant should seek to set it aside, he ought to explain the circumstances and go on to show that he has merits that is that there is a triable issue".

Then at p 324, Roskill LJ cited with approval the following passage from the dissenting judgment of Orr LJ in Thomas Bishop Ltd. v Helmville Ltd. namely :

"The point of time to be looked at in deciding whether the judgment was regularly obtained is the time when the judgment was given or signed, and if at that time there is nothing known to the court (or to the plaintiff whose duty it would be to communicate it to the court) which indicates that the relevant process has not been delivered in the ordinary course of post, it is to be deemed to have been so delivered for the purposes of that judgment, tough it will be open to the defendant to apply to have the judgment set aside in the court's discretion on the ground, inter alia, that he was not served or was not served in time".

Roskill LJ went on :

"Orr LJ was in effect saying that the authorities before Thomas Bishop Ltd. v Helmville Ltd did not in any way fetter the discretion of the court but that the matter always was and remained discretionary, that discretion to he exercised in accordance with well-established Principles".

11. The result so brought about by the combined effect of the presumptions in section and in 0 10 r 1 seems to us to be identical to that which the Court developed for itself in relation to substituted service. Any legal system has to operate within the parameters of tactical realities. When a court orders substituted service, eg by advertisement, it can do no more than its best to bring the proceedings to the notice of the particular defendant No one, court or party, would for one moment guarantee success. But if the judge's views on risk were correct the defendant would only have to show failure, to secure the setting aside of any default judgment "as of right". This view was rejected by the court in Watt v Barnett [1878] 3 ORD 363. Compliance with an order for substituted service was there treated as "equivalent for all purposes to actual service" per Jessel MR p 366. Accordingly the mere fact that the defendant was able to show lack of notice was not sufficient to entitle him to be let in to defend. He was required in addition to show "a good ground of defence".

12. At that time service by post was recognised form of substituted service. Now it is a permissible variant to personal service. It is not a second class variant, but an effective variant, given proper compliance with the rules. Then the deeming provisions give service by post a quality again "equivalent to actual service" in the absence of evidence to the contrary. A default judgment entered then is regular, not in the language of Lopes LJ in Anlaby v Preatorius [1988] 20 OBD 764, 171

"A wrongful act, not an act done within any of the rules."

Such a judgment will then only be set aside upon proof both of lack of timeous receipt and merits. In short we can find no support in the authorities (and even on the facts of this case in Thomas Bishop Ltd. v Helmville itself) for the judge's conclusion and his view on risk.

13. In these circumstances we concluded that the judge fell into error in this case (and in his earlier similar decision in Attorney-General v Geoffrey Watson 1988 Nov 1988, unreported) and allowed this appeal.