HONEST BILLION INVESTMENT LIMITED v. WANG XIAN-CHOU

1996, No.A7612

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H E A D N O T E

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1. The Writ was served by inserting the Writ into the letter box of the Defendant's last known address pursuant to O.10, r.1(2)(b).

2. The Defendant was within the jurisdiction at the time of the aforesaid insertion but was out of the jurisdiction on the seventh day thereafter when apparently the aforesaid mode of service would take effect pursuant to O.10, r.1(3).

3. Defendant successfully set aside the judgment entered before a Master as being irregular.

Held : allowing the appeal

1. The judgment was regularly obtained as O.10 r.,1(3) provided that the date of service shall, unless the contrary is shown, be deemed to be the seventh day. The contrary has already been shown that he was within the jurisdiction for 4 days when the Writ was inserted into the letter box of his last known address.

2. Even if the contrary situation referred to in O.10, r.1(3) concerned only with his actual knowledge of the writ, a victim of an irregular judgment could enjoy a confident expectation that it would be set aside but not a right. The mere fact that a defendant was able to show lack of notice of the writ was not sufficient to entitle him to set aside the judgment and to defend the action, he was required in addition to show a good ground of defence. (Honour Finance Co. Ltd. v. Choi Mei-mei, [1989] 2 HKLR 146, followed; Fok Chun Hung v. Lo Yuk Shi [1995] 2 HKC 648 also considered.)

3. The Defendant as a guarantor of a debt due and owing to the Plaintiff has not disclosed what was his defence in the action herein.

1996, No.A7612

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. This case raised a few interesting points of law concerning service of the Writs of Summons by the Plaintiff's solicitors on the Defendant. The Plaintiff is the creditor of the Defendant's company, one Kong Tai (Holdings) Company Limited, ("Kong Tai"). The Defendant was the Chairman of Kong Tai and he was the guarantor for the aforesaid debt.

2. On 20 May 1996, the Defendant resigned as the Chairman of Kong Tai and he moved out of the company's property at Flat A, 5th Floor, Tower 2, Parc Oasis, Kowloon, Hong Kong ("the premises").

3. On 25 June 1996, the Plaintiff sent a letter before action to the Defendant. The Defendant, in his two affirmations before this court, did not say he had not received this letter. However, on 29 June 1996 the Defendant had left Hong Kong, as evidenced by his immigration record, but he returned on 3 July 1996. He left this territory again on 6 July 1996 for Shenzhen.

4. On 5 July 1996, the Plaintiff issued a Writ of Summons claiming against the Defendant for a sum of $1,485,600 due under a Deed of Guarantee dated 30 September 1995, with interests and costs. On the same day, a clerk of the Plaintiff's solicitors served a sealed copy of the Writ on the Defendant by inserting the same through the letter box for the premises, being the usual and last known address known to the Plaintiff according to the then latest company search made by the Plaintif's solicitors.

5. The Defendant said in his affidavits that when he returned to Hong Kong, he resided in a hotel in Hong Kong island and had not gone to his previous address at all. Therefore he did not know that a Writ has been served on him at his previous address. In fact, shortly afterwards on 18 July 1996 Kong Tai had entered into an agreement to sell the premises and the transaction was completed on 5 August 1996.

6. On 27 July 1996, the Plaintiff issued Summons under Order 83A, Rule 4, for leave to enter judgment on the Defendant's failure to give notice of intention to defend. On 5 August 1996, Mr Registrar Betts granted the Plaintiff leave to enter default judgment and the same was entered pursuant to such leave on the same day.

7. The Defendant issued a Summons to set aside the judgment on 27 January 1997 on the grounds that he had a good defence and/or that judgment was irregular in that it had not been duly served on him. The matter came before Master Jennings on 10 June 1997, and according to Miss Lisa WONG, appearing for the Plaintiff today, the only point put forward before Master Jennings was that the judgment was irregularly entered and according to all the affidavits filed, the Defendant has not shown any good defence. Master Jennings set aside the judgment with costs in the cause. The Plaintiff appealed against this order to this court today.

8. From the events as disclosed in all the affirmations before me, it is quite clear that that address was the last known address of the Defendant. In fact, the Defendant, on 12 December 1996, had issued a Writ of Summons in High Court Action No. A14256 of 1996 against one WONG Wai-chi. The address of the premises was put down as his address when, at that time, the premises had already been sold and the transaction had already been completed.

9. The service relied on by the Plaintiff was Order 10, Rule 1(2) where it is provided that:

"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, or

(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."

10. The Plaintiff's solicitors obviously relied on sub-paragraph (b).

11. The next question to decide was whether the Defendant was within this jurisdiction at the time of service. The time of service was provided by the next paragraph (3), where it is provided 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 Order 3, Rule 25) after the date on which the copy was sent to, or as the case may be, inserted through the letter box, for the address in question;"

12. Obviously, according to this paragraph, the date of service was the seventh day after the insertion of the Writ through the letter box, i.e., 12 July 1996, unless the contrary is shown. If it was 12 July 1996, the Defendant had already left Hong Kong and he was not within the jurisdiction, however he was within the jurisdiction at the time of insertion of the writ into the aforesaid letter box.

13. It has been decided in the case of Barclays Bank of Swaziland Limited v Hahn, [1989] 1 WLR, 506, that the Defendant was within the jurisdiction at the time of service when the letter had been inserted into his letter box as he had been warned that the envelope had been put through the letter box but he did not go to the flat and returned to Geneva the next day.

14. This case, of course, is distinguishable from our case where the Defendant here was not warned that the said writ had been inserted through his letter box and he was not given due notice of the same. However, Order 10 concerned also with the situation of whether he was within the jurisdiction or not at the time of service. I consider that the phrase unless the contrary is shown concerns with both whether he knew service of writ was effected on him, i.e. the existence of the Writ, and/or secondly, whether the contrary is shown as far as the fact that he was within the jurisdiction is concerned. Undoubtedly, from the evidence produced by the Defendant according to the immigration records, which the Plaintiff could not dispute, the Defendant was within the jurisdiction at the time of insertion of the Writ into the letter box.

15. Accordingly as far as Order 10 is concerned, the service was regular.

16. Further assuming I am wrong on this point, the service was irregular in the sense that Paragraph (3) only covered the situation where the Defendant knew of the existence of the Writ when he was within the jurisdiction at the time of insertion of the letter box or shortly thereafter but before the expiration of the seventh days, I then have to decide what should this court do on a judgment entered irregularly.

17. I am afraid in this area there are apparently conflicting authorities in the Court of Appeal. In Honour Finance Company Limited v CHOI Mei-mei, (1989) 2 HKLR 146, per Cons VP Hunter JA and Mortimer J (as he then was), on appeal from Godfrey J (as he then was), it was decided that:

"The victim of an irregular judgment enjoys a confident expectation that it will be set aside but not a right. The mere fact that a defendant was able to show lack of notice of the Writ was not sufficient to entitle him to set aside the judgment and to defend the actions he was required in addition to show a good ground of defence. Here, service was effected by ordinary post to the last known address of the Defendant. It was not returned by the Post Office and no notice of intention to defend having been given by the Defendant, the Plaintiff entered judgment. The Defendant was unaware of the existence of the Writ and only in June 1988, after the judgment had been entered, did she become aware of the Writ which she then gave to her solicitors. Here, the Court of Appeal decided that service by post was a permissible variance to personal service and was not a second-class variance but an effective variance, given proper compliance with the rules. A default judgment entered pursuant to such service was regular and would only be set aside upon proof both of lack of timeliness, receipt and on the merits."

18. In FOK Chan-hong v LOW Yuk-shi, [1995] 2 HKC, 648 per Power VP, Mortimer and Godfrey, JA, the Writ was issued and served on the Defendant by registered post on 24 May 1994. By 14 June 1994 when the Appellant's time for acknowledging service of the Writ and for giving notice of intention to defend the action had expired, the Appellant had not given such notice. The reason for such a failure was that the Respondent's attempts to serve the copy Writ by registered post had not succeeded. On 22 June 1994, the Respondent obtained judgment against the Appellant as no notice of the intention to defend having been given by the Appellant. However, on 1 July 1994 the copy Writ was returned undelivered by the Post Office. A charging order was obtained on 6 July 1994 on the basis of the judgment obtained on 22 June.

19. The Appellant applied to have the said judgment set aside unconditionally by reason of his not having been served with the Writ. The judge set aside the judgment and discharged the charging order on condition that the Appellant made a number of undertakings and paid the Respondent's costs of the application. The Appellant appealed. The Court of Appeal allowed the appeal and decided that the Respondent should have made an application under Order 13, Rule 7(3) as soon as the copy of the Writ was returned to him undelivered on 1 July 1994 and before taking any further step in the action for enforcement of the judgment, either requesting that the judgment should be set aside on the ground that the Writ had not been duly served, or for directions that notwithstanding the return of the copy of Writ, it should be treated as having been duly served.

20. It is provided in Order 13, Rule 7(3) that:

"Where, after a judgment has been entered under this order against the Defendant purporting to have been served by post under Order 10, Rule 1(2)(a), the copy of the Writ sent to Defendant is returned to the Plaintiff through the post undelivered to the addressee, the Plaintiff shall, before taking any step or further step in the action or the enforcement of a judgment, either -

(a) make a request for the judgment to be set aside on the ground that the Writ has not been duly served, or

(b) apply to the court for directions."

21. This case obviously is distinguishable from our case since the service was not effected by post but by hand, by inserting the writ into the letter box of the Defendant's last known address and obviously it would not have been returned undelivered through the post to the addressee. In other words, Order 13, Rule 7(3) has no application here.

22. However, in aforesaid case of FOK Chan-hong, Godfrey JA said, at page 653, that:

"In support of his argument that we should take the opposite view, counsel for the Plaintiff cited to us the local case of Honour Finance Company Limited v CHOI Mei-mei, (1989) 2 HKLR 146, in the Court of Appeal (in which the court did not have the benefits of adversary argument). To that, counsel for the Defendant reported that the case could not stand with the subsequent decision of the House of Lords in Barclays Bank of Swaziland Limited v Hahn (1989) 1 WLR 506. I think there is much force in this, but the question does not arise for decision in the instant case and should be left to be considered on some other occasion. It does not arise for decision in the instant case because, in the local case, the service had been by ordinary post (as it was then allowed) and the copy of the Writ had not in fact been returned, so the case is distinguishable both on its facts and because the provisions of Order 13, Rule 7(3) did not fall to be considered by the court. It is however, worth adding that part of the court's reasoning in the local case is inconsistent with that of the English Court of Appeal in Willowgreen Limited v Smithers (cited above) in which Nourse LJ (with whom Thorpe J agreed) said this (at P5389):

'The judgment having been obtained in proceedings initiated by a summons which was not properly served on the Defendant, it seems plain that it must be set aside ex debito justitiae. [Counsel] has submitted that there is some sort of discretion in the matter but it is clear both on principle and from White v Weston that it was not the case.'"

23. Apparently the paragraph cited herein before was an obiter. Both decisions in Honour Finance and FOK Chan-hong were based on a different matrix of facts, i.e. where the Writ was not returned by the Post Office after judgment had been entered in Honour Finance even though the Defendant was actually unaware of the existence of the Writ, whereas in FOK Chan-hong the Writ was returned undelivered by the Post Office after judgment had been entered and Order 13, Rule 7(3) came into play and thus the Plaintiff therein must, according to the Rule, take either step (a) or (b).

24. As far as I am concerned, in this case I consider the service was a regular one and the Defendant was within jurisdiction at the time the Writ was inserted into the letter box of his last known address. Even if the Defendant was not within the jurisdiction if the effective date of service should be on the seventh day thereafter, the case of Honour Finance decided that "victim of an irregular judgment enjoys only a confident expectation that it will be set aside but not a right".

25. The application of the Defendant herein was taken out pursuant to Order 13, Rule 9 which provided that:

"Without prejudice to Rules 7(3) and (4), the court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order."

26. This gives the courts a discretion to set aside the judgment entered pursuant to Order 13. The discretion must of course be exercised judicially.

27. In this case the Defendant did not show any reasonable chance of success at all. In fact the Defendant did not show even a triable issue or did not give any indication what defence he would have as a guarantor of the debt. For that reason I consider that the Plaintiff is entitled to judgment and it should not be set aside.

28. Accordingly, the appeal is allowed with costs to the Plaintiff here and in the court below.