XCHRX AMERICAN EXPRESS INTERNATIONAL, INC. v. TSUI YIU HONG AND OTHERS

1993, No. A10894

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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Appeal against Registrar's Order

1. This is an appeal by the Plaintiff against the Order of Mr. Registrar Betts dated the 30th May, 1994 whereby it was ordered that:-

"(a) the Judgment against the 1st Defendant entered herein in default of giving notice of intention to defend on 6th January, 1994 be set aside;

(b) the 1st Defendant do have leave to file and serve his Defence within 14 days;

(c) the prohibition order granted by Master O'Donnell on 2nd May, 1994 be discharged; and

(d) costs of this application be to the Plaintiff."

Issue raised by this appeal

2. This appeal raises the question whether judgment having been signed by the Plaintiff against the 1st Defendant in default of giving notice of intention to defend, after service on the 1st Defendant by post sent to the usual or last known address of the 1st Defendant, which, so far as the Plaintiff was aware at the time they signed judgment, was entirely regular, it is now open to the 1st Defendant, if, after that judgment was signed satisfactory proof of non-service can be adduced, to have the judgment set aside as of right and without showing that he has a defence on the merits. For present purposes, I will assume that such proof is available in this case. Miss Elaine Hui, Solicitor for the Plaintiff, contended that this question had been decided by the English Court of Appeal more than 20 years ago.

Service of the Writ

3. The Plaintiff issued the specially endorsed Writ herein on the 30th November, 1993.

4. According to the Affirmation of service made by Mr. Luk Yuk Kai filed on the 5th January, 1994 on the Plaintiff's behalf, Mr. Luk effected service of the Writ by sending by registered post 3 copies of the Writ in 3 envelopes addressed to the 1st Defendant respectively at the following 3 addresses:-

(I) c/o Gallion Credit Management Limited ("the Company"), Room 1504, Vicwood Plaza, 199 Des Voeux Road, Central, Hong Kong ("Address 1");

(ii) Room 4, 18th Floor, Block A, Greenwood Garden, Shatin, New Territories ("Address 2") and

(iii) Unit 2011, Block Q, Kornhill, Quarry Bay, Hong Kong ("Address 3");

the usual and last known addresses of the 1st Defendant. The only postal packet which had been returned was the one sent to Address 3. The Affirmation of service concluded by saying that in the opinion of the Plaintiff, the Writ so posted would have come to the knowledge of the 1st Defendant within 7 days after the date of posting.

The default Judgment

5. No Notice of Intention to Defend having been given by the 1st Defendant, the Plaintiff entered default Judgment against the 1st Defendant on the 6th January, 1994.

Ground for D1's application to set aside - irregular judgment

6. The 1st Defendant made an Affirmation on the 21st May, 1994 ("D1's Affirmation") in support of his application to set aside the default Judgment against him and to discharge the Prohibition Order dated the 2nd May, 1994 made by Master O'Donnell. For reasons which have not been explained, his Affirmation was not filed until 5 days later, i.e. on the 26th May, 1994 when a Summons was issued by Messrs. Augustine C.Y. Tong & Co., Solicitors, on his behalf applying to set aside the default Judgment "on the ground that the said Judgment was irregular in that the 1st Defendant has not been served with the Writ of Summons herein", and to discharge of Prohibition Order of the 2nd May, 1994.

7. It is clear from the 1st Defendant's Summons that his application to set aside the default Judgment was made on the sole ground that the Judgment was irregular. D1's Affirmation disclosed no merits of any defence to the Plaintiff's Claim. The only ground stated in Paragraph 8 of D1's Affirmation for setting aside the default Judgment was that service of the Writ was defective. In my judgment, no weight ought to be attached to his bare assertion in Paragraph 6 that "I believe that my account with the Plaintiff had been fully settled" (emphasis added). No particulars of any payment had been given and no copy documents (such as the Plaintiff's statements of account, cheques, or bank account statements of the 1st Defendant) had been exhibited. No ground for his "belief" had been disclosed.

D1's evidence

8. According to D1's Affirmation:-

(a) he had no knowledge about this Action until the 17th May, 1994 when he was stopped by an immigration officer while he was on his way to China on a business trip;

(b) he admitted that all 3 addresses to which copies of the Writ were posted were his "former" addresses;

(c) on 27th October, 1993 he resigned as a 5 director and secretary of the Company, sold all his shares in the Company, left the Company without telling any other director or shareholder where he was going, and had not returned to the Company's premises at Address 1 since then;

(d) he moved from Address 3 to Address 2 at the beginning of September, 1993, where he stayed until the end of October 1993 when he then moved to an address in Tokwawan; and

(e he had not received any of the 3 postal packets sent to him by the Plaintiff's Solicitors.

The Registrar's decision

9. The 1st Defendant's Summons came before the learned Registrar on the 30th May, 1994. The 1st Defendant was represented by his Solicitors. The learned Registrar made the Order set out above.

The 1st Defendant's appeal

10. By a Notice of Appeal, dated the 6th June, 1994, the Plaintiff appealed against the Order of the learned Registrar. The estimated time was 30 minutes, and the appeal was listed to be heard by me at 9:20 am on the 21st June, 1994. The ddischarge of the Prohibition order had been superseded by events and the Plaintiff did not appeal against this part of the Order of the learned Registrar.

D1's Change of Solicitors

11. A Notice of Change of Solicitors dated the 18th June, 1994 was filed on the 20th June, 1994 giving notice that the 1st Defendant was acting in person.

Service of Notice of Appeal

12. The 1st Defendant had not turned up by 9:35 a.m. My clerk very helpfully checked and/or caused to be checked both outside my Court room and on the Ground Floor of the Supreme Court Building to see if the 1st Defendant was there.

Hearing in D1's absence

13. As the 1st Defendant was still absent by 9:45 a.m. I called on Miss Hui who told me that the Notice of Appeal had been served on the 6th June, 1994 on Messrs. Augustine C.Y. Tong & Co. (who were then still representing the 1st Defendant) and drew my attention to the receipt chop of that firm on the backsheet of the Notice of Appeal (p. 2 of the Pleadings Bundle). Miss Hui also undertook on behalf of her firm to file and serve by 4:00 p.m. on the 22nd June, 1994 on Messrs. Augustine C.Y. Tong & Co. and on the 1st Defendant an affidavit of service of the Notice of Appeal. As I was satisfied that the 1st Defendant had been served with notice of this Appeal, I heard Miss Hui's submission in the absence of the 1st Defendant.

The authorities cited

14. Counsel, or Solicitor appearing as an advocate, plays a vital and indispensable role in the administration of justice. The Court relies heavily on the assistance of Counsel, or Solicitor appearing as an advocate, particularly in an appeal from a decision of the Registrar where the Solicitors saw fit to give 30 minutes as the estimated time of hearing. Miss Hui drew my attention to Order 10 Rule 1 (2)(a) and (3)(b), and Order 13 Rule 7(1)(b); mentioned Cap. 1 without identifying or reading the relevant provisions; cited Saga Ltd. v. Avalon Promotions Ltd., noted in [1972] 2 All E.R. 545, at p. 547 a - c and p. 548 b - c, and A/S Cathrineholm v. Norequipment Trading Ltd. [1972] 2 All E.R. 538, at p. 540 f - h, p. 541 e - f, and p. 541 h - 542 a. These 2 cases made up Miss Hui's List of Authorities which was dated the day before the hearing of the appeal. I found out after the hearing that these 2 cases are reported in the Law Reports, the former in [1972] 2 QB 325 and the latter in [1972] 2 QB 314.

Plaintiff's contentions

15. Miss Hui contended that as the postal packets sent to Address 1 and Address 2, being the usual and last known address of the 1st Defendant, had not been returned, service of the Writ was regular; that the default Judgment was regularly entered, and that the 1st Defendant was not entitled to have the default judgment set aside without showing merits which the 1st Defendant had made no attempt to and had made no application to set aside on the ground that he had a meritorious defence.

Saga Ltd. v. Avalon Promotions Ltd.

16. In Saga Ltd. v. Avalon Promotions Ltd., the question was whether a default judgment obtained before the envelope containing the Writ was returned was irregular on the ground of bad service. At pp. 546 - 547 of the All England report [and at p. 326 H - 327 H of the QB report], 10 Salmon L.J. gave the following reasons for his opinion that the judge was wrong in holding that the service of the Writ was bad:-

"Section 437(1) of the Companies Act 1948 is in these terms:

'A document may be served on a company by leaving it or sending it 15 by post to the registered office of the company.'

It has long been accepted that 'a document' referred to in that section includes a writ. Under s. 26 of the Interpretation Act 1889 it is provided:

'Where an Act passed after the commencement of this Act authorises or requires any document to be served by post, whether the expression "serve", or the expression "give" or "send", or any other expression is used, then, unless the contrary intention appears, the service shall be deemed to be effected by properly addressing, prepaying, and posting a letter containing the document ...'

Then there follow some words which are admittedly irrelevant to this appeal. It is not arguable that s. 437 of the Companies Act 1948 expresses any contrary intention. Accordingly, since this writ was sent through the post in a prepaid envelope to the defendant ["Avalon" in place of "defendant" in the QB report] company at the address of its registered office, it is deemed to have been properly served.

The law on this point appears to me (if I may say so with respect) to be correctly set out in a passage from the judgment of Denning LJ in R v. Appeal Committee of County of London Quarter Sessions. ex parte Rossi:

To sum up, when service of process is allowed by registered post, without more being said on the matter, then if the letter is not returned, it is assumed to have been delivered in the ordinary course of post and any judgment or order by default obtained on the faith of that assumption is perfectly regular. It will not as a rule be set aside except on payment of costs and showing of merits ... If, however, ["But if" in place of "If, however," in the QB report] the letter is returned undelivered and nevertheless, notwithstanding its return, a judgment or order by default should afterwards be obtained, it is irregular and will be set aside ex debito justitiae.'

In the present case, the judgment by default was obtained not after but before the writ came back through the dead letter office; and, in my view, the service of this writ was undoubtedly regular. I therefore cannot agree with the decision reached by the learned judge."

A/S Cathrineholm v. Norequipment Trading Ltd.

17. A/S Cathrinehols v. Noreqoiqment Jrading Ltd. was a case where the plaintiff effected service by post addressed to the registered office of the defendant as shown in the companies register. The defendant had moved out of that address 4 weeks ago but failed to give notice of change of registered address. The envelope containing the Writ had not been returned. The defendant applied to have the default judgment set aside on the ground that it was obtained ex debito justitiae on the ground that it had been obtained irregularly. The Court of Appeal held that the defendant was not entitled to have the judgment set aside, ex debito justitiae.

18. At pp. 541 - 542 of the All England report [and at p. 322 B - F of the QB report], Lord Denning M.R. said:-

"This brings me to deal with judgment in default of appearance. RSC Ord. 13, r. 9, provides:

The Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order.'

That rule gives the court a discretion; but the way in which the discretion is exercised is well settled. If the judgment is regular, it is almost an inflexible rule that there must be an affidavit of merits, that is, an affidavit stating facts showing a defence on the merits. But if the judgment is irregular - that is, one which ought not to have been signed at all - then the defendant is entitled ex debito justitiae to have it set aside. That is the practice, as we all know, in chambers and as set out in the White Book. When the plaintiff has obeyed all the rules entirely properly and entered judgment accordingly, I think it should be treated as regular.

Returning now to the two decisions, I prefer Saga of Bond Street Ltd. v. Avalon Promotions Ltd. to Thomas Bishop Ltd. v. Helmville Ltd. Accordingly 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 be delivered. If no appearance is entered in due time, the plaintiff is acting quite regularly in signing judgment. If the defendant should seek to set it aside, he ought to explain the circumstances and go on to show that he has merits, i.e. there is a triable issue.

In this case the plaintiffs signed a perfectly regular judgment. The defendants have brought it all on themselves by their own fault."

19. Roskill L.J. said at pp. 542 - 544 of the All England report [and at p. 323 B - p. 325 A of the QB report]:-

"It seems to me that the difficulty on the authorities arises because (if I may say so with all respect) too much attention has been paid to s. 437 of the Companies Act 1948 and s. 26 of the Interpretation Act 1889 and too little to RSC Ord. 13, r. 9, which is the relevant rule of the Supreme Court, pursuant to which any application to set aside a default judgment must be made. That rule provides:

'The Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order.'

...

Finally, I come to the most recent case, Thomas Bishop Ltd. v. Helmville Ltd, a decision of Salmon and Buckley LJJ, Orr LJ dissenting. ... Orr LJ disagreed and I would quote and adopt the following passage in Orr LJ's judgment:

'As to the effects of a judgment signed in default of appearance in the High Court or obtained in default of the defendant's attendance in the county court, the statement, which I have earlier quoted, of Denning L.J. in Rossi's case involves that 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 that 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, although 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.'

Orr L.J. 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 be applied in accordance with well established principles. In general the only circumstance in which there is a right to have a default judgment set aside ex debito justitiae is where that judgment has been irregularly obtained. Where, as in the present case, it has been regularly obtained it seems to me that in that case too the defendant must show that he has a defence on the merits before he is entited to have the judgment set aside. The court has a discretion which it will exercise in the light of the particular facts of the particular case before it. Therefore, I think, with the greatest respect to the views of Salmon and Buckley LJJ (that court did not have the advantage of the full citation of authorities that we have had), that their conclusion was incorrect and that the minority view of Orr LJ was right."

Documentary evidence against D1's case

20. Miss Hui was critical of the 1st Defendant's allegation that he had not been served with the Writ as what he said about his change of addresses summarised under (d) above was contradicted by documents exhibited by the 1st Defendant and/or apparently signed by the 1st Defendant.

21. The 1st Defendant exhibited a change of directors or secretary, an instrument of transfer, and Bought and Sold Notes, in relation to Shares in the Company. They were dated the 10th November, 1993, and they all gave Address 2 as the address of the 1st Defendant, contradicting his assertion on oath that he moved out of Address 2 "since end of October 1993".

22. Further, according to a Return of Allotments dated 10th June, 1993, apparently signed by the 1st Defendant, his address was at Address 2. According to a Return of first directors and secretary dated the 11th June, 1993 and filed on the same date, Address 2 was given as the 1st Defendant's Address. Likewise, the address of the 1st Defendant given on a Notice of change of directors or secretary or in their particulars dated the 10th June, 1993 and filed on the 11th June, 1993, was Address 2.

23. Thus, the documents showed that the 1st Defendant had been at Address 2 for a longer period than what he claimed in his Affirmation - he was there before the time when he said he moved in (beginning of September, 1993), and he was still there after the time when he said he moved out (end of October 1993). In my judgment, I found his allegation that he had not been served with the Writ wholly unreliable.

The relevant HK rules

24. Order 10 Rule 1(2)(a) provides that:-

"(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 ..."

25. Section 8 of the Interpretation and General Clauses Ordinance, Cap. 1, provides that:-

"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."

Concluston

26. For these reasons, and on the authority of the 2 English Court of Appeal decisions cited to me by Miss Hui, I allowed the Plaintiff's appeal; set aside Paragraphs (a), (b) and (d) of the Order of the learned Registrar dated the 30th May, 1994; dismissed the application in the 1st paragraph of the 1st Defendant's Summons dated the 26th May, 1994, struck out the Defence dated the 10th June, 1994 and filed on the 15th June, 1994 on behalf of the 1st Defendant; and ordered that the costs of the appeal and before the learned Registrar be paid by the 1st Defendant to the Plaintiff, to be taxed, if not agreed. As I told Solicitors for the Plaintiff, my written Judgment would be handed down in Court on the 29th June, 1993.

Postscript

27. I must draw attention to the following authorites which only came to my notice after I had allowed the Plaintiff's appeal. Miss Hui had made no submission on these authorities which I only came across in the course of writing the reasons for my decision made on the 21st June, 1994.

28. Firstly, Order 13 Rule 9 was amended and sub-rules (3), (4) and (5) of Rule 7 were enacted after the 2 cases cited to me by Miss Hui had been decided - compare the 1979 and 1982 Editions of the White Book to see the change to the English rules.

29. Order 13 Rule 9 now reads:-

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

30. Order 13 Rule 9 is now subject to Rule 7(3) and (4). In 1972, Order Rule 9 was not subject to these 2 sub-rules which were enacted afterwards.

31. Sub-rules (3), (4) and (5) of Rule 7 provide that:-

"(3) Where, after judgment has been entered under this Order against a defendant purporting to have been served by post under Order 10, rule 1(2)(a), the copy of the writ sent to the 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 the 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.

(4) A request under paragraph 3(a) shall be made by producing to an officer of the Registry and leaving with him for filing, an affidavit stating the relevant facts, and thereupon the judgment shall be set aside and the entry of the judgment and of any proceedings for its enforcement made in the book kept in the Registry for that purpose shall be marked accordingly.

(5) An application under paragraph 3(b) shall be made ex parte by affidavit stating the fact on which the application is founded and any order or direction sought, and on the application the Court may -

(a) set aside the judgment; or

(b) direct that, notwithstanding the return of the copy of the writ, it shall be treated as having been duly served; or

(c) make such other order and give such other direction as the circumstances may require."

32. The QB report of A/S Cathrineholm v. Norequipment Trading Ltd. contains a note at p. 315 (which is not found in the All England report) that White v Weston [1968] 2 QB 647 had been cited in argument. On the question of service, Russell LJ said in White v Weston at p. 658 that:-

"But a summons addressed to an address with which the defendant has had no connection for five months or more cannot be said to be properly addressed.

The function of service is primarily to bring to the attention of the person to be served the fact that he is being sued, and particular language is in my judgment required if something short of that is to constitute service."

33. At p. 660, Sachs LJ said:-

"It follows that only an explicit and clear provision in a statute or in rules having statutory forice, can operate to deprive a citizen of his right to receive notice of the commencement of the process against him; and to permit service other than personal at an address which is not in fact his abode (to use the word employed, for instance, in rule 19(b) of the Magistrates' Courts Rules, 1952) nor his residence, nor his business address would be a provision clearly calculated to deprive him of that right."