ALPHA STAR ENTERPRISES LTD. v. The Personal Representative of TANG MEI SHIN, deceased

HCMP 3206/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3206 OF 2001

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J U D G M E N T

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Introduction

1. The plaintiff asks in this action for the following relief:-

"An order and/or a declaration that the Mortgage recorded/ registered in the Schedule of Block Government Lease (previously known as Block Crown Lease) of Demarcation District No. 129 dated 24th January 1905 in favour of Tang Mei Shin for $28.00 against, touching and concerning ALL THAT piece or parcel of ground registered in the Yuen Long New Territories Land Registry as Lot No. 2664 in Demarcation District No. 129 (hereinafter called "the said Lot") is incapable of subsistence or taking effect or is otherwise unenforceable by reason of the limitation of action for over 12 years".

2. The defendant, if he/she ever existed, was absent at the hearing of this action. This is simply because the defendant could not be located by the plaintiff and was never actually served with the documents relating to this action. The plaintiff has, based on its inability to locate the defendant, earlier obtained orders allowing it to serve the documents by way of substituted service pursuant to RHC Ord 65 r 4.

3. The background facts in support of this action have been concisely summed up in the 5th affirmation of Anthony Ming Fong Ko dated 27th July 2002 and are these. By virtue of an assignment dated 28 April 2001, the plaintiff became a registered co-owner of half share of Lot No. 2664 in Demarcation District No. 129, Yuen Long , New Territories ("the suit property"). There was recorded in the Yuen Long Land Registry the following entry:-

"AS STATED IN THE BLOCK GOVT. LEASE THE LOT IS SUBJECT TO MORTGAGE IN FAVOUR OF TANG MEI SHIN FOR $28".

It is the plaintiff's case that the said mortgage was created in 1905. The relevant copy document kept by the Yuen Long Land Registry in support of the above was hand-written and not quite legible. However, counsel for the plaintiff accepts for the purpose of this action the above record to have accurately set out the hand-written document. If investigation of title has properly been undertaken when the plaintiff became a co-owner of the suit property, the plaintiff should be aware of the 1905 mortgage.

4. The plaintiff seeks the above relief relying on ss. 19(1) and (2), Limitation Ordinance (Cap. 347). Those provisions read:-

"(1) No action shall be brought to recover any principal sum of money secured by a mortgage or other charge on property, or to recover proceeds of the sale of land, after the expiration of 12 years from the date when the right to receive the money accrued. (Amended 31 of 1991 s. 8)

(2) No foreclosure action in respect of mortgaged personal property shall be brought after the expiration of 12 years from the date on which the right to foreclose accrued: (Amended 31 of 1991 s. 8)... ".

The plaintiff's case is essentially that the defendant's rights under the mortgage have accrued for more than 12 years and are now time-barred by reason of s. 19, Cap. 347.

5. There are at least 3 possible ways in which a mortgage document may provide for the repayment of the mortgage debt. First, the mortgage may provide for a prescribed time (or time schedule) for the debt to be repaid. Secondly, the mortgage may provide for the debt to be repaid upon demand. Thirdly, the mortgage may contain no express provision for the time of repayment. In the last-mentioned situation, it may be argued that the debt is repayable after the lapse of a reasonable period of time.

6. The burden is on the plaintiff to prove that the mortgagee (defendant) has been time-barred from claiming against the mortgagor and/or the suit property. There is a complete lack of evidence as to which of the above 3 situations was applicable to the mortgage in question. For this reason, I cannot be satisfied on a balance of probabilities that the plaintiff has established its case.

7. The plaintiff relies on a number of authorities in support but none of them can assist the plaintiff. Fung Kam Cheung & others v. Kwok Yiu Wing & others [1991] 1 HKC 321 was a vendor-purchaser summons where the mortgage created in 1931 contained terms which provided that the last repayment should be made by 1942. Cheng Tin Loi & another v. Li Yung Hing & another, HCMP No. 1892 of 1998 was concerned with a case where the land was subsequently mortgaged to another mortgagee. Based on that, the court inferred that the earlier mortgage (created in 1905) had been discharged. As for the remaining two authorities, Chan Ma Choi & another v. Chan Sheung Ki, HCMP No. 789 of 1998 and Tang Kam Sui & others v. Tang Shui Ki, HCMP No. 5111 of 2000, the exact basis upon which the courts concluded that the mortgagee's claims had been time-barred is unclear.

8. Counsel for the plaintiff emphasised at the hearing (a) the relatively small amount involved (in terms of money value as at today) and (b) the lengthy inaction on the mortgagee's part. They may be matters relevant to an argument that the mortgagee has abandoned or waived the mortgage debt. But this is not the issue before the court. As stated above, the plaintiff's case is premised on ss. 19(1) and (2), Cap. 347.

9. To conclude, the relief sought should be refused.

10. Before leaving, I should mention the evidence relating to the plaintiff's ex parte application for substituted service. The affirmations in support were made by Mr Ko of solicitors. Among other things, he referred to the Court of Appeal judgment in Chan Yeuk Mui v. Ng Shu Chi, CACV No. 254 of 1998 and deposed that he honestly believed that the defendant was within the jurisdiction. The relevant parts of that judgment are:-

"Service of the writ

The Plaintiff made application shortly after the commencement of the proceedings for substituted service of the writ. There is no dispute that the Plaintiff established by her affidavit that it had been impossible to locate the Defendant whether at any of the addresses known for the Defendant or through inquiry of any local persons. In the circumstances, there is no dispute that the Plaintiff had established that it was impracticable to serve the writ personally on the Defendant.

Order 65 rule 4 of the Rules of the High Court permits the Court to make an order for substituted service where it appears that personal service is impracticable. Sub-rule 3 provides :-

'Substituted service of a document, in relation to which an order is made under this rule, is effected by taking such steps as the Court may direct to bring the document to the notice of the person to be served'.

The order made by the Registrar was that the service should be "effected by advertising a notice of these proceedings once in Sing Tao Daily, a Chinese newspaper published and widely circulating in Hong Kong" and that such service should be deemed to be good and sufficient service of the writ on the Defendant.

There is no dispute that the newspaper in question is a widely circulated newspaper in Hong Kong. It was also accepted that the Defendant was likely to be in Hong Kong. After the conclusion of the hearing in the Court below, the Recorder's attention was drawn to the decision of Deputy Judge Chung in Chan Kam Kee v. Chan Kam Man dated 15th July 1998. Since this occurred before any Judgment was given, the Recorder called for further argument.

In the Chan Kam Kee v. Chan Kam Man decision, the Deputy Judge referred to the decision of Carnwath J. in Abbey National plc v. Frost (Solicitor's Indemnity Fund Ltd. intervening) [1998] 2 All ER. 321 which, in turn, had referred to a decision of a seven-man Court of Appeal (the eighth member having died 2 days before Judgment was delivered) in the case of Porter v. Freudenberg [1915] 1 KB 857.

The Porter v. Freudenberg decision involved 3 quite separate cases in which proceedings were brought against enemy aliens. The issues involved included whether enemy aliens could be parties to a suit in time of war and, if so, how process should be served upon them. Considerations there involved persons who not only were not in the country at the time but who would clearly be unlikely to read English newspapers. In the course of delivering the Judgment of the Court, the Chief Justice said at page 888 that for substituted service to be permitted, it must be clearly shown that :

'the writ is likely to reach the defendant or to come to his knowledge if the method of substituted service which is asked for by the plaintiff is adopted'.

That is a passage which was cited by Carnwath J. However, the Judgment of the Court then went on to say :

'The Court may then make an order as may seem just: Order IX., r.2. (equivalent to Order 65 r.4). The terms of this rule are of very wide application, and give a very wide discretion which we are not inclined to limit'.

I do not read this as going any further than the general rule that in considering the exercise of the discretion to permit substituted service, the Court must consider whether the form of service proposed would be effective. Sub-rule (3) seems, to my mind, to go no further than that.

The Abbey National case concerned the service of process in proceedings against a solicitor who was believed to have gone to Thailand by serving the documents on the Solicitors' indemnity fund from which it was hoped to make recovery in default of the solicitor honouring any judgment. Clearly, those were circumstances where it was hardly contemplated that the solicitor should receive or come to hear of the process. In the Chan Kam Kee case, the country of residence, not to say whereabouts of the party sought to be served, was unknown.

The Court in granting an order for substituted service must then take into consideration the requirement of bringing the particular document to the notice of the person being served. It is, after all, not an order that service be dispensed with. The first consideration must be where the person is likely to be found. If the person to be served is likely to be found abroad, then obviously different considerations will apply and this is recognised in the notes in the White Book ... " (emphasis supplied).

11. The last known fact concerning Tang Mei Shin was contained in the said Land Registry record where Tang was the mortgagee of the mortgage said to have been created in 1905, about 96 years ago. It was unknown where the mortgagee was residing at that time, let alone thereafter. It is more probable than not the mortgagee has passed away by the commencement of this action, but it is unknown if he/she was residing within the jurisdiction at the time of death. It is also unknown if any personal representative(s) has/have been appointed and if so whether he/they resided within the jurisdiction.

12. In these circumstances, there was no reasonable ground for believing that the defendant is within the jurisdiction. The deponent has carefully stated that he honestly believed that to be so. But, even if such an honest belief could be held, no basis was given in support of the belief. It is at least arguable that the court is effectively left to speculate if the proposed mode of substituted service would bring the documents to the defendant's notice.