CHRISTOW CORPORATION TRUST v. ASIACOM INTERNATIONAL HOLDINGS LTD AND ANOTHER

HCA 924/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 924 OF 2009

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DECISION
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1. There are two summons before the court on 15 April 2015. The first one concerns the plaintiff’s application to amend the name of the plaintiff which I have already dealt with during the hearing.

2. The second summons is the 2^nd defendant’s application to set aside the default judgment and the following is my decision.

Background

3. The case concerns an alleged loan agreement dated 3 June 2005 between the plaintiff as the lender, the 1^st defendant as the borrower and the 2^nd defendant as the guarantor.

4. The plaintiff claimed that there was a breach in the agreement and initiated action on 31 March 2009.

5. On 1 April 2009, the plaintiff sent the writ to the 2^nd defendant by registered post to his usual and last known address.  The letter was not returned by post office or otherwise.

6. As there was no acknowledgement of service, default judgment was entered on 14 May 2009 against the 2^nd defendant.

7. The application to set aside was taken out by the 2^nd defendant more than 5 years later on 2 July 2014.

The legal principle in service of writ

8. Order 10 rule 1 states: -

“…..

(2) 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 registered post to the defendant at his usual or last known address…

(3) 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… after the date on which the copy was sent to…”

9. It is not in dispute that the 2^nd defendant was outside Hong Kong from 6 March to 17 April 2009. He returned to Hong Kong and stayed for 8 days and left on 25 April.  He was back in Hong Kong on 28 April and stayed for another 2 days until leaving on 30 April.  He again returned to Hong Kong on 28 May and stayed for 1 day until 29 May when he left the jurisdiction and returned on the same day. He then stayed for another 7 days before leaving “for good” on 5 June.

10. The crux of the dispute is the meaning of “a defendant within the jurisdiction” in Order 10 rule 1(2).

11. Mr Francis Yip, counsel for the 2^nd defendant, submitted that as the 2^nd defendant was outside the jurisdiction for the period from the date of posting of the writ (1 April 2009) to the date of “deemed” service of the writ (8 April 2009), the service was irregular.

12. Mr F Yip quoted Deng Minghui v Chau Shuk Ling [2007], submitting that if the defendant was not within the jurisdiction at the time the writ was served, it was not properly served and subsequent notice of the defendant of the writ did not make it proper.

13. Mr F Yip also argued that as the 2^nd defendant was not in Hong Kong on 8 April 2009, the “deemed date of service” under rule 3(a) should not apply.

14. Mr Richard Yip, Counsel for the plaintiff, posed this question: What if the 2^nd Defendant subsequently returned to Hong Kong and came to knowledge of the writ?  Would that make the service irregular?

15. I would think that, for a modern cosmopolitan city like Hong Kong, it would not be unusual that anyone (let alone a businessman like the 2^nd defendant) who ordinarily resided within the jurisdiction would travel outside for a week or more.

16. If I can rephrase Mr. R. Yip’s question: Must a service be irregular if a defendant, who normally lived and worked in Hong Kong, happened to be, say, on a skiing holiday in Japan on the date the plaintiff posted the writ and did not return until after the “deemed date of service”?

17. My answer is that it makes no sense that Order 10 rule 1 requires the plaintiff to research on the travel plans of the defendant before attempting service, save that if the defendant subsequently produced evidence that he was outside during the period that the writ was served, it would be for the plaintiff to show that the defendant has, on balance of probability, the knowledge of the writ at some time later when he was in the jurisdiction before the writ has expired.

18. To this effect, Rule 1(2)(a) and 1(3)(a) must mean, when read together in this situation, that if the plaintiff chooses the method of service by sending a copy of the writ by registered post to the defendant at his usual or last known address in Hong Kong: -

(i) If the defendant is within the jurisdiction at the time of service, then the date of service is deemed to be the 7^th day after posting (given that it may take time for the post to arrive, some time for the post to be read etc, so the assumption is that, by the 7^th day, the defendant must come into the knowledge of the writ).

(ii) Alternatively, if ‘the contrary is shown”, e.g. by the defendant showing that he has not been in the jurisdiction during this time, then the service cannot be “deemed” to be on the 7^th day after posting.  So the plaintiff needs to show that the defendant has indeed returned to the jurisdiction at some later point of time (before the writ has expired) and the situation is such that, on balance of probability, he should have come to the knowledge of the writ.  If so, that “point of time” will be accepted by the court as the date of service.

19. Of course, if the plaintiff chooses to insert the writ into the post box, similar provisions applied.  In that case, in the scenario in paragraph 18(ii) above, the plaintiff may have a more difficult task to show the knowledge of the defendant. I can envisage a situation that a writ has been left in a post box in the open for months when the defendant may claim that it has became unrecognisable due to weather exposure, or that all his post has been stolen etc.  On the other hand, in case of a writ sent by registered post which has not been returned, it may be inferred that someone in that address knows the defendant and must have signed the receipt in the anticipation of giving him the post on his return.

20. Thus, the case of Deng can be distinguished in that the defendant was not in Hong Kong at the time of service and has never returned to the jurisdiction, and the defendant only came to the knowledge of the writ whilst she was outside the jurisdiction. Thus the service must be irregular.

21. Lord Brightman in Barclays Bank of Swaziland v Hahn [1989] 1 WLR 506 discussed the situation in paragraph 18(ii) above at some length (although that case involves the method of insertion into the post box, similar provisions apply): -

“It follows from the exception that there may be circumstances where the date of service is not the date of letter box insertion. I therefore ask myself, in what circumstances might a plaintiff or defendant be able to show that the seventh day after the date of insertion through the letter box was not the date of service; do such circumstances exist in the present case; and if so, what date of service takes place of the deemed date of service?

… I can think of nothing which is capable of giving content to the expression “unless contrary is shown” save that it refers to the defendant’s knowledge of the existence of the writ… Indeed, it is the obvious solution because the purpose of serving a writ is to give the defendant knowledge of the existence of proceedings against him; that is exactly what a defendant acquires when a writ is served on him personally…

… the copy writ came to the knowledge of Mr. Hahn late in the afternoon of 14 April, when he was with the jurisdiction. The writ was therefore properly served on him…on that day.”

22. This decision was followed in Du Huizhen v Chen Mei Huan HCA 1176/2012.  Mr F Yip criticised that Deputy High Court Judge Wilson Chan (as he then was) was wrong in paragraph 29 of the judgment when he stated: -

“…it is clear that he defendant in Barclays Bank of Swaziland case was not in England at the time when the writ was inserted through the letter box of the flat.”

23. Mr F Yip claimed that the defendant in the Barclays Bank case was in England at that time.

24. I do not agree: in the Barclays Bank case, the writ was inserted through the letter box at 15.30 hours on 14 April 1987 and the defendant’s plane did not land in England until 17.27 hours on the same day.

25. What Deputy High Court Judge Wilson Chan meant is clear when one continues to read paragraph 29 :-

“The House of Lords held that that did not make a difference, the crucial question is the whereabouts of the defendant at the time when he acquired the knowledge of the existence of the writ…”

26. Thus, it did not matter whether the defendant was in the jurisdiction at the exact hour and minute of time of insertion of the writ into the letter box (or posting of the writ as in our case), the crucial question was whether the defendant acquired the knowledge of the writ when he was within the jurisdiction.

27. Against such cases, the decision of Yongheng Nevada International Co Ltd v Chan Mau Tak [2000] 2 HKC may appear somewhat “against the grain” but I think it is not. Cheung J in that case only referred to the “deemed dated of service” provision, ie the situation I stated in paragraph 18(i) above.  Further, in that case, there was no evidence that the defendant was aware of the service of the writ until he was served with the default judgment in the Mainland.

28. In this case, I have perused the evidence and I am satisfied that the address that the writ was posted (by registered mail) to was indeed the usual address of the 2^nd defendant.  This was the work address of the 2^nd defendant at the time.

29. Although it was undisputed that the 2^nd defendant was not in Hong Kong during the time of posting of the writ, the evidence showed that he returned to Hong Kong on 17 April 2009, and although he was in and out of Hong Kong several times, he has spent around 18 days in Hong Kong until he left for good on 5 June 2009.

30. In view that the registered post was never returned, on balance of probably, I hold that the 2^nd defendant should have acquired knowledge of the writ on 17 April 2009.  The service was therefore regular and the date of service was on 17 April 2009.

Discretion to set aside a regular default judgment

31. Having held that the default judgment was regular, the court still has unconditional power to set it aside (Order 13 Rule 9).

32. Mr. F. Yip urged the Court to look at the merit of defence.

33. I need not go into the details but I note that loan agreement in question was not signed by the plaintiff and that various conditions stated on the agreement were not fulfilled.

34. The plaintiff did not dispute these, but claimed that the lack of the plaintiff’s signature did not render the contract invalid, and that the plaintiff had the right to waive such “conditions” in question.

35. I have been shown various affirmations and exhibits purported to support the plaintiff’s arguments but I should not be conducting a “mini-trial” based on evidence in affirmations.

36. I have also considered the delay in the current application (more than 5 years after the default judgment) and the 2^nd defendant’s conduct all along: ignoring the action perhaps anticipating that he was leaving Hong Kong for good.

37. On balance, however (and this is a very “close call”), I will set aside this judgment because the defence shows “a real prospect of success” and I am concerned about the risk of injustice should a judgment be passed without proper adjudication by the due process of the court.

38. Nevertheless, with regards to costs, I am critical of the 2^nd defendant’s handling of the action and my cost order will reflect this.

Order

39. I will therefore make order that:

(i) The Final Judgment dated 14 May 2009 entered against the 2^nd defendant be set aside.

(ii) The costs of and occasioned by this application be costs in the cause to be taxed if not agreed with award for certificate for Counsel.