XCHRX TREASURE LAND PROPERTY CONSULTANTS (a firm) v. UNITED SMART DEVELOPMENT LTD.

No.A4225 of 1994

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H E A D N O T E

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APPEAL FROM MASTER - PLAINTIFF SUING IN WRONG NAME - AMENDMENT UNDER O.20 R.5 - WHETHER JUDGMENT PREMATURE - TIME FOR SERVICE OF WRIT ON LIMITED COMPANY - DEFENCE CASE SHOWING NO REAL PROSPECT OF SUCCESS - APPEAL ALLOWED - DEFAULT JUDGMENT RESTORED.

No. A4225 of 1994

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is the plaintiff's appeal against Master Betts' decision made on 7th December, 1994, whereby he ordered, inter alia, that the default judgment entered against the defendant on 24th May, 1994, be set aside with costs.

Background

2. By an Agreement for Sale and Purchase dated 9th December, 1993, made between the defendant, as purchaser, and Colby & Station Distributing Services Ltd., as vendor, the defendant agreed to purchase, 10th Floor, Wing On Plaza, 62 Mody Road, at the price of HK$163,954,120.00.

3. By a written agency agreement, made also on 9th December, 1993, between the plaintiff and the defendant, the defendant appointed the plaintiff as the sole selling agent in respect of the premises for a period of two months (i.e. from 9th December, 1993 to 8th February, 1994), whereby the plaintiff would be entitled to a 1% commission if a sub-sale agreement was reached during the said agency period irrespective of the source of introduction. It is the plaintiff's case that a sub-sale agreement was reached by the defendant and Henga Limited ("Henga") during this agency period and the plaintiff is therefore entitled to 1% commission (i.e. HK$1.93 million).

4. The writ was served by the plaintiff on the defendant on 5th May, 1994, by pre-paid registered post addressed to the defendant's then registered address. No Acknowledge of Service, or Intention to Defend, was filed by the defendant and judgment was entered against the defendant on 24th May, 1995.

5. On 27th July, 1994, a petition to wind up the defendant was filed, on the ground that the defendant was insolvent and unable to pay its debt.

6. On 15th September, 1994, the defendant took out a summons to set aside the judgment on two grounds, namely:

(a) the judgment was irregular in that:

(1) the plaintiff was non-existent and therefore lacking a legal entity to sue;

(2) the judgment was obtained prematurely;

(b) The defendant had a meritorious defence.

7. The defendant's summons was heard before Master Betts on 7th December, 1994, and the master set aside the judgment.

8. The plaintiff's position in this appeal is as follows:

(a) the default judgement entered against the defendant is a regular judgment;

(b) to set aside the said judgment, the defendant has to adduce proper evidence to show a defence with a real prospect of success;

(c) on the evidence adduced on behalf of the defendant, the defendant has failed to discharge that burden;

(d) alternatively, the defence and the evidence adduced is so shadowy that the said judgment should only be set aside and leave to defend granted on condition that the whole sum claimed should be paid into court.

The Plaintiff's name

9. It is common ground that the plaintiff's proper title should be "Treasure Land Investments Limited trading as Treasure Land Property Consultants" and that no firm of that name exists. Mr Lam, for the defendant, submits that, the plaintiff being non-existent at the time the writ was issued, the entire proceedings were a nullity. He relies on Dubai Bank Ltd v. Galadari & Others, The Times 23rd February 1990. In that case it was alleged that the plaintiff did not exist as a legal entity since it had failed to comply with the law of Dubai in relation to companies. That is very different to the present situation. Order 20, r.5 provides:

Amendment of writ or pleading with leave (O.20, r.5)

5.(1) Subject to Order 15, rules 6, 7 and 8 and the following provisions of this rule, the Court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct.

(2) Where an application to the Court for leave to make the amendment mentioned in paragraph (3), (4) or (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so.

In this paragraph 'any relevant period of limitation' includes a time limit which applies to the proceedings in question by virtue of the Foreign Limitation Periods Act 1984.

(3) An amendment to correct the name of a party may be allowed under paragraph (2) notwithstanding that it is alleged that the effect of the amendment will be to substitute a new party if the Court is satisfied that the mistake sought to be corrected was a genuine mistake and was not misleading or such as to cause any reasonable doubt as to the identity of the party intending to sue or, as the case may be, intended to be sued.

(4) An amendment to alter the capacity in which a party sues may be allowed under paragraph (2) if the new capacity is one which that party had at the date of the commencement of the proceedings or has since acquired.

(5) ..........

10. Mr Yuen, for the plaintiff, now seeks to make the necessary amendment by a summons returnable at the hearing of this appeal. He relies on Singh v. Atombrook Ltd. (trading as Sterling Travel) [1989]1 WLR 810, where it was held that an amendment to correct the name of a party may be allowed even after a final default judgment has been entered. The court permitted the plaintiff to substitute the correct name of the defendant for the incorrect name in which he was sued, because it was plain that the mistake was genuine and that the defendant knew that the plaintiff intended to sue him as the person against whom the claim was being made.

11. Mr Lam points out that the plaintiff was aware of the defect prior to the last hearing before Master Betts but failed to take the appropriate steps promptly. He cited Clark v. Wray [1886]31 Ch.D.68. In that case leave to amend a defence and counterclaim was refused because the application was made three months after joinder of issue and after notice of trial. In James v. Smith [1891]1 Ch.D.384 the defendant was refused leave to amend his pleading after the point of law in question had already been argued. In both these cases the litigation was at a late stage, when time is a prime consideration, which is not the case in a default judgment.

12. The real point here is whether the misnomer was a genuine mistake and, if so, whether the defendant was thereby misled. As to the first, Mr Lam says there is no evidence by way of explanation. That is so. I ignore Mr Yuen's explanation from the Bar, which was provoked by comments critical of the plaintiff's solicitors that fell from the Bench, and is not evidence.

13. However I am entitled to ask myself if there is any other reasonable explanation for the error. When I put this question to Mr Lam, he submitted that it might have been a deliberate ploy to avoid paying costs if the plaintiff failed in the action. I do not accept this. No plaintiff, in an action of this kind, would intentionally commence proceedings in the wrong name, anticipating losing the case and, moreover, creating execution problems for himself if successful. In spite of the absence of evidence, therefore, I am satisfied that this was a case of misnomer arising out of a genuine mistake.

14. Mr Lam has not sought to persuade me that the defendant was in any way misled. In these circumstances O.2, r.1 and O.20, r.5 apply and the proceedings are not invalidated by the irregularity. I am satisfied that it would be just to allow the amendment and I so order.

Premature judgment

15. Was the judgment premature? The writ was sent by registered post on 5th May.

16. Section 356 of the Companies Ordinance, Cap.32 provides :

356. Service of documents on company

A document may be served on a company by leaving it at or sending it by post to the registered office of the company.

17. Section 8 of the Interpretation and General Clauses Ordinance, Cap.1 provides:

8. Service by post

Where any Ordinance authorizes or requires any documents to be served or any notice to be given by post or by registered post, whether the expression "serve" or "give" or "send" or any other expression is used, the service or notice shall be deemed to be effected by properly addressing, pre-paying 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 be served or given notice, and, unless the contrary is proved, such service or notice shall be deemed to have been effected at the time at which the document or notice would be delivered in the ordinary course of post.

18. Neither section says anything about the time of effective service by post.

19. In England there is a Practice Direction to the effect that, subject to proof to the contrary, delivery in the ordinary course of post is effective, in the case of first class mail, on the second working day after posting and, in the case of second class mail, on the fourth working day after posting. In Hong Kong there is no such thing as first or second class mail and consequently no such Practice Direction. In such circumstances, Mr Lam submits, the date of service can only be ascertained by reference to O.10, r.1 which provides :

General provisions (O. 10.r.1)

1.(1) A writ must be served personally on each defendant by the plaintiff or his agent.

(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 ordinary first-class 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.

In sub-paragraph (a) 'first-class post' means first-class post which has been pre-paid or in respect of which prepayment is not required.

(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 (ignoring Order 3, rule 2(5)) 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.

(b) .........

(4) .........

(5) .........

(6) .........

(7) .........

In the White Book Note 5 to this rule reads :

..... The rules have in no way changed the method of service on a limited liability company, service on whom will continue to be governed by s.725 of the Companies Acts 1985, i.e. by leaving the writ or other originating process or document at or sending it by post to the registered office of the company.

20. This, says Mr Lam, is based on the English legislation and Practice Direction and is of no assistance in determining the time of service. Nor does O.65 assist. We are therefore, he argues, thrown back onto O.10, r.1. The seventh day after posting was 12th May. Under O.12, r.5 a defendant has 14 days after service of the writ (including the date of service) to file an Acknowledgement of Service. Since judgment was entered on 24th May, it was premature.

21. I do not think this is right. Order 10 r.1 is not intended to apply to service on a limited company. The date of service must be determined in accordance with s.8 of Cap.1. What then is the ordinary course of post? In the absence of a Practice Direction, this is a matter of evidence, of which there is none.

22. I believe the White Book note at O.65/5/6 is significant. It reads: "Under s.725 of the Companies Act 1985 (which provides that a document may be served on a company by leaving it at or sending it by post to the registered office) ordinary or registered post may be used. It should perhaps be emphasised that service by post on a limited liability company under s.725 ... will be deemed to have been effected at the time at which the letter would be delivered in the ordinary course of post and not at the later time when service of a document is effected by post on an individual under O.10, r.1(2)."

23. In R. (Petty) v. Down County Court Judge [1946] N.I.12 it was held that there was no rule requiring judicial notice to be taken of the ordinary course of post and that in every case it was a question of fact to be proved by evidence. It is certainly a question of fact but, although a judge is not required to take judicial notice of a fact, it is open to him to do so in a proper case.

24. The writ was posted in Central. The defendant's registered office was at that time in Causeway Bay. It would have been different had it been at say Tai O. I am satisfied that I can take judicial notice of the fact that a registered letter does not take more than four days to reach Causeway Bay from Central in the ordinary course of post. Allowing four days for the post, the Acknowledgement of Service should have been filed on 22nd May. The judgment on 24th May was therefore not premature.

Merits of the defence

25. Faced with a regular judgment, the defendant to succeed has to show a defence with a real prospect of success. It is not sufficient simply to show an arguable defence. Premier Fashion Wears Ltd. v. Chow Cheuk Man, Civ.App. Nos.177 and 178 of 1993.

26. Mr Lam's submissions on this aspect of the appeal are also technical. He first argued that the contract is caught by s.3 of the Conveyancing and Property Ordinance, Cap.219 :

3. Land contract to be in writing

(1) ..., no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose.

27. Henga and the defendant have an enforceable agreement in writing dated 4th March, 1994. The fact that there was an earlier unenforceable oral agreement between Henga and the defendant, which the defendant denies, is irrelevant to this argument. The plaintiff is suing on a simple contract of agency.

28. Mr Lam then says that the plaintiff cannot succeed because the sub-sale to Henga was not due to any efforts by the plaintiff. But clause 2 of the agency agreement states :

"In the event that a Sub-sale and Sub-purchase Agreement is entered into during our sole agency period, irrespective of the source of introduction (emphasis supplied), we shall be entitled to a fee equivalent 1% of the agreed purchase price payable by your firm to this firm upon the signing of a legally binding agreement of Sub-sale and Sub-purchase of the captioned premises between the Confirmor and the Purchaser or his nominee or sub-purchaser."

29. Mr Lam's main point is that the sub-sale agreement between Henga and the defendant - the only agreement produced in evidence - is dated 4th March, 1994 and is hence outside the sole agency period stipulated in the agreement between the plaintiff and the defendant, i.e. 9th December 1993 - 8th February 1994.

30. That is not disputed by Mr Yuen, who relies on the manner of payment provided for in the sale and purchase agreement of 4th March to show that there must have been an agreement between Henga and the defendant in respect of the property well before 10th February. That would bring the defendant within clause 2, even though it was only the later agreement that was enforceable by the vendor or purchaser.

31. Part III of the First Schedule to that agreement reads :

"	PART III
Manner of Payment:	(a)HK$5,000,000.00 being initial deposit and in part payment of the purchase price has already been paid by the Purchaser to the Vendor's solicitors prior to the signing of this Agreement;
	(b)HK $23,950,000.00 being further deposit and in further part payment of the purchase price shall be paid by the Purchaser to the Vendor's solicitors on or before the 10th day of February 1994;
	(c)HK$14,475,000.00 being the further deposit and further part payment of the purchase price shall be paid to the Vendor's solicitors on or before the 28th day of February 1994;
	(d)HK$14,475,000.00 being the further deposit and further part payment of the purchase price shall be paid to the Vendor's solicitors on or before the 31st day of March 1994; and
	(e)HK$135,100,000.00 being balance of purchase price shall be paid on completion;
	(f)(i)All deposits and balance of purchase price and other monies payable by the Purchaser under this Agreement to the Vendor shall be delivered to the Vendor's solicitors on the date on which such payment is required to be made in accordance with the directions given by the Vendor's solicitors to the Purchaser's solicitors on or before completion to the Vendor or to such person(s) as the Vendor's solicitors may specify in such directions in the form of a cashier order in the relevant amount issued by a licensed bank in Hong Kong or a solicitor's cheque in favour of the Payee thereof. (ii)The Purchaser shall not be deemed to have discharged his obligation to make payment under this Agreement unless he shall have complied with this provision."

32. The defendant has exhibited five cheques representing the deposits referred to in paras a), b) and c), but which have been issued by the defendant's solicitors, not those of the vendor. There is no evidence as to when these payments were made to the defendant's solicitors. The latter were to hold the deposits as stakeholders under the agreement with Henga and not release them to the defendant unless and until Henga had accepted title. One would expect a prudent prospective purchaser to make proper enquiries about the title. One would also expect intervals of time between the three deposits. Yet the defendant is silent as to when the first $5 million was paid by Henga. That is information easily obtainable from the defendant's solicitors. In its absence and there being no suggestion that Henga is in breach of its agreement with the defendant, I infer that there was an agreement with Henga before 8th February, 1994.

33. As matters stand, therefore, the defendant is a long way from showing that it has a real prospect of success were this action to go to trial. The appeal is allowed and the judgment against the defendant restored. I make an order nisi against the defendant in respect of costs both here and before the master.