DEUTSCHE BANK AG, HONG KONG BRANCH v. ZHANG HONG LI

CACV 277/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 277 OF 2015

(ON APPEAL FROM HCCL NO. 19 OF 2014)

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J U D G M E N T

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Hon Lam VP:

1.  I have read the judgment of Kwan JA in draft and I respectfully agree with her. There shall be an order in terms of para 86 below.

2.  I acknowledge that it is important for the One Country Two Systems principle that our courts should not exercise our jurisdiction to order service in the Mainland in a way that would contravene Mainland sovereignty.  However, the crucial question in this appeal is the place at which service was effected in the present case.

3.  As analysed by Kwan JA, the service at the office of RB was effected in Hong Kong. So understood, there was no contravention of Order 11 Rule 5(2) and Rule 5A or any law for service in the Mainland.  It is similar to service effected in Hong Kong pursuant to Order 10 Rule 2 (on local agent of overseas principal) or Rule 3 (contractual provision for service specifying a local address for service) in respect of a defendant who resides in the Mainland.  As such, there is no question of Hong Kong court interfering with the sovereignty of the Mainland authority.

4.  It would be a different matter if the Plaintiff had to rely on the other two methods of service pursuant to the 2^nd Order (see para 18(a) and (c) below).  For the reasons given by Kwan JA at paras 59 to 60 below, I would hold those methods to be invalid as they clearly contravene Order 11 Rule 5(2) and the Mainland law on service.

5.  Another important question in this appeal is whether the court should exercise its discretion to order substituted service in Hong Kong when the Defendant was resident in the mainland and RB did not have his instructions to accept service.  If the Plaintiff had not made an unsuccessful attempt to effect service in the mode prescribed under Order 11 Rule 5A, it would usually be inappropriate to order substituted service in such a manner.  To start with, it must be emphasized that one should not allow the use of substituted service within the jurisdiction on a defendant residing overseas (be it in the Mainland or otherwise) with the effect of circumventing the threshold requirement of Order 11 Rule 1.  That rule provides an important safeguard against the improper exercise of jurisdiction over foreign parties.  Any attempt to circumvent such safeguard is an abuse of process.

6.  Further, without such unsuccessful attempt, the court cannot be satisfied that it is impracticable to serve in accordance with Rule 5A.  But as we can see from the history in the present case, this is not the situation here.  For the reason given by Kwan JA at para 78 below, the judge was entitled to come to the view that it was impractical for personal service to be effected.

7.  On the method of service, the criterion in Order 65 Rule 4(3) is that the step should bring the document to the notice of the person to be served.  And this criterion was satisfied in the present case notwithstanding that RB had no instruction to accept service.

8.  Whilst it may also be open to a plaintiff to request for method akin to substituted service in the Mainland as discussed by Kwan JA at paras 67 and 68 below, it is a matter of discretion for the court to decide whether in the circumstances of a particular case it should direct the plaintiff to pursue such possibility before resorting to a mode of substituted service to be effected in Hong Kong.  It should perhaps be mentioned that in most cases, in respect of service upon a defendant residing in the Mainland, the usual mode of substituted service by advertisement in newspapers in Hong Kong cannot bring the proceedings to his attention and it is therefore not a viable option.

9.  On the facts of the present case, as explained by Kwan JA, I  do not regard the learned judge to have erred in the manner in which she exercised her discretion.  The appeal falls to be dismissed accordingly.

Hon Kwan JA:

10.  This appeal raised an issue on substituted service of a writ on the defendant who is a PRC national residing in the Mainland of China.  By the decision of Mimmie Chan J on 27 November 2015 (“the Decision”), it was ordered that the service of the concurrent writ of summons on a firm of solicitors in Hong Kong, Messrs Reed Smith Richards Butler (“RB”), pursuant to the order of the judge dated 3 June 2015 do stand as good and effective service on the defendant.  On 16 December 2015, the judge gave leave to the defendant to appeal against her order under the Decision.

The background

11.  The relevant background matters may be stated as follows.

12.  On 8 August 2014, the plaintiff issued a writ of summons in this action (HCCL 19/2014) against the defendant, its former employee, with a general indorsement of claim.  It was marked not for service out of jurisdiction.  The plaintiff claimed against the defendant that he acted in breach of his duties under his employment contract and his fiduciary duties, that he made misrepresentations in the course of his employment and conspired to injure the plaintiff by unlawful means.  On the same day, the plaintiff applied for leave to issue a concurrent writ and to serve the same on the defendant in the Mainland, pursuant to Order 11 rule 1(1)(d), (f) and (p) of the Rules of the High Court.

13.  On 21 August 2014, the judge made an order (“the 1^st Order”) giving leave to the plaintiff to issue a concurrent writ and to serve a copy of it and a sealed copy of the 1^st Order out of the jurisdiction upon the defendant at a residential address in Beijing or elsewhere in the PRC.  Pursuant to the 1^st Order, the concurrent writ was issued on 26 August.

14.  On 29 August 2014, the plaintiff’s solicitors made a request through the Registrar of the High Court for service of the concurrent writ on the defendant in the Mainland, pursuant to Order 11 rule 5A.

15.  On 23 October 2014, the plaintiff’s solicitors made a further request through the Registrar that the writ and sealed copy of the 1^st Order also be served on the defendant at a business address which is a bank in Beijing where the plaintiff worked currently.

16.  On 21 January 2015 and 10 March 2015, the plaintiff’s solicitors wrote to the Registrar requesting the court to enquire with the PRC authorities as to the status of service and to provide the return form on the service if it had been effected.

17.  On 21 April 2015, the plaintiff’s solicitors received two letters from the Registrar advising that service of the documents could not be effected on the defendant at the residential address or the business address and enclosing a letter and a form from the Higher People’s Court of the Beijing Municipality, setting out particulars of the unsuccessful attempts to serve the defendant. In short, two representatives of the PRC court attempted service at the residential address on 4 and 12 March 2015.  Nobody answered the door on both days and the representatives left messages.  On 5 and 12 March 2015, the representatives contacted the defendant and his secretary at the reception desk of the business address and the telephone calls went unanswered.  The representatives left a message on each occasion.

18.  As the plaintiff was unable to effect service of the concurrent writ, it applied for substituted service pursuant to Order 65 rule 4, alleging that the defendant was evading service.  On 3 June 2015, the judge made an order for substituted service (“the 2^nd Order”) that service of the concurrent writ be effected by:

(a)  posting the documents marked to the attention of the defendant by registered airmail at the residential address and the business address;

(b)  delivering by hand the documents marked to the attention of the defendant care of RB at RB’s office in Hong Kong; and

(c)  emailing the documents to the defendant at his office email address of his current employer

shall be deemed to be good and sufficient service of the court documents upon the defendant on the day of completing such posting, delivering and emailing as aforesaid.

19.  On 4 June, the plaintiff effected substituted service on the defendant pursuant to the 2^nd Order, including delivering by hand the court documents to RB, who were at the time the solicitors on record for the defendant in another action (HCCL 2/2011) in which he sued as the first plaintiff and judgment was pending.

20.  RB filed an acknowledgment of service (“AS”) on behalf of the defendant on 2 July 2015 acknowledging service of the concurrent writ and stating that the defendant intends to contest the proceedings.  The plaintiff served the statement of claim on RB on 15 July 2015.

21.  On 29 July 2015, a notice of change of solicitors was filed for the defendant, stating that the current solicitors were appointed to act as the solicitors for the defendant in place of RB in this action.

22.  On 11 September 2015, the defendant issued a summons which resulted in the Decision.  By this summons, the defendant sought an order that the service of the concurrent writ on him be set aside; an order declaring that the concurrent writ has not been duly served on him; an order that the 1^st Order and the 2^nd Order be discharged or set aside; a declaration that the court has no jurisdiction over him in respect of the subject matter of the claim or the relief or remedy sought in the action; and an order staying the proceedings.

23.  In short, the defendant contended that pursuant to Order 11 rule 5A, the writ should be served “through the judicial authorities of the Mainland of China”.  Accordingly, Order 11 rule 5(1) has no application and the court has no jurisdiction under Order 11 to disregard or bypass rule 5A by the 1^st Order or the 2^nd Order.  Further or alternatively, insofar as Order 11 rule 5(1) authorises substituted service of a writ on a person to be served in the Mainland of China, it is in contravention of the Basic Law and is beyond the jurisdiction of the court.  The 1^st and 2^nd Orders should also be discharged or set aside on the ground that the plaintiff had failed to discharge its onus to show that this action does come within Order 11 rule 1(1)(d), (f) and (p).

The Arrangement and Order 11 rule 5A

24.  Before I go to the judge’s reasoning in the Decision, it will be convenient to mention the Arrangement for Mutual Service of Judicial Documents in Civil and Commercial Proceedings between the Mainland and Hong Kong Courts (“the Arrangement”).

25.  Before the reunification, between 1991 and 1997, service of judicial documents between the Mainland and Hong Kong was governed by the Hague Convention.  The Convention continues to apply to Hong Kong as part of the PRC after 30 June 1997 but being an international agreement, the Convention no longer applies for the service of judicial documents between the Mainland and Hong Kong after the reunification.

26.  Article 95 of the Basic Law provides that the HKSAR may, through consultations and in accordance with law, maintain juridical relations with judicial organs in other parts of China, and they may render assistance to each other.  Pursuant to this article, on 14 January 1999, the Chief Judge of the High Court signed a memorandum for the Arrangement with the Supreme People’s Court.  This was to re-establish reciprocal arrangement for the service of judicial documents generally along the lines of the arrangement prior to the reunification, and which reflected the principles of the Convention[1].  The Arrangement came into effect in the Mainland and Hong Kong on 30 March 1999.

27.  The Arrangement contained inter alia the following provisions:

“1. The Mainland and Hong Kong Courts may entrust to each other the service of judicial documents in civil and commercial proceedings.

2. Requests for service of judicial documents shall be made through the various Higher People’s Courts in the Mainland and the High Court of the HKSAR. The Supreme People’s Court may make direct requests to the High Court of HKSAR for service of judicial documents.

3. When requesting for service of judicial documents, the entrusting party shall produce a letter of entrustment duly sealed with its official seal. …

In the event the entrusted party considers that the letter of entrustment does not comply with the arrangement herein, it shall notify the entrusting party of the same and state the reasons therefor. Where necessary, the entrusted party may request the entrusting party to provide supplementary information.

4. The entrusted party shall serve the document attached to the letter of entrustment, regardless of whether or not the date for appearance in court or the time limit specified in the document has expired. Requests for service made by the entrusting party shall as far as practicable be made within a reasonable time.

Upon receipt of the letter of entrustment, the entrusted party shall effect service promptly, and, in any event, not later than two months from the date the letter of entrustment is received.

5. After effecting service, the relevant Mainland People’s Court shall issue a return form on the service, and the HKSAR Court shall issue a certificate of service. The return form and the certificate of service so issued shall be duly sealed with the official seals of the relevant courts.

In the event service cannot be effected, the entrusted party shall state on the return form or the certificate of non-service the reason for non-service, or, where acceptance of service is refused, the reason and date of refusal. The letter of entrustment and all documents attached to it shall be returned to the entrusting party promptly.

6. Service of judicial documents shall be effected in accordance with the law of the place in which the entrusted party is situated.

…

8. Service of judicial documents shall be effected free of charge. If the entrusting party in the letter of entrustment requires a special method of service, it shall be responsible for the charge and expenses arising from the request.

9. “Judicial documents” in this Arrangement includes: … in the case of the HKSAR, copy of originating process, copy of notice of appeal, summons, pleading, affidavit, judgment, decision or ruling, notice, court order, certificate of service or non-service. …

10. Any problem arising from the implementation of this Arrangement and any amendment to be made to this Arrangement shall be resolved through consultation between the Supreme People’s Court and the High Court of the HKSAR.”

28.  Order 11 rule 5A was added to the Rules of the High Court to implement the Arrangement.  The material provisions of rule 5A read as follows:

“5A.Service of writ in the Mainland of China through judicial authorities

(1) Where in accordance with these rules, a writ is to be served on a person to be served in the Mainland of China, the writ shall be served through the judicial authorities of the Mainland of China.

(2) A person who wishes to serve a writ under paragraph (1) must lodge in the Registry a request for such service, together with 2 copies of the writ and 2 additional copies thereof for the person to be served.

(3) The request lodged under paragraph (2) must contain –

(a) the full name and address of the person to be served;

(b) a description of the nature of the proceedings; and

(c) if a particular method of service by the judicial authorities of the Mainland of China is desired by the person making the request, an indication of that particular method.

…

(6)   Documents duly lodged under paragraph (2) shall be sent by the Registrar to the judicial authorities of the Mainland of China with a request that they arrange for the writ to be served or, where a particular method of service is indicated under paragraph (3)(c), to be served by that method.”

29.  Amendments were also made to Order 11 rule 5 and the material provisions as amended read as follows:

“5. Service of writ out of jurisdiction: general

(1) Subject to the following provisions of this rule, Order 10, rule 1(1)[2], (4)[3] and (5)[4] and (6)[5] and Order 65, rule 4[6], shall apply in relation to the service of a writ notwithstanding that the writ shall be served out of the jurisdiction, save that the accompanying form of acknowledgment of service shall be modified in such manner as may be appropriate.

(2) Nothing in this rule, rule 5A or any order or direction of the Court made by virtue of it shall authorize or require the doing of anything in a country or place in which service is to be effected which is contrary to the law of that country or place.

(3) A writ which is to be served out of the jurisdiction –

(a) need not be served personally on the person required to be served so long as it is served on him in accordance with the law of the country or place in which service is effected; and

(b) need not be served by the plaintiff or his agent if it is served by a method provided for by rule 5A, rule 6 or rule 7.

(5) An official certificate stating that a writ as regards which rule 5A or rule 6 has been complied with, has been served on a person personally, or in accordance with the law of the country or place in which service was effected, on a specified date, being a certificate –

(a) by a British consular authority in that country or place, or

(b) by the government or judicial authorities of that country or place,

(c) by any other authority designed in respect of that country or place under the Hague Convention,

shall be evidence of the facts so stated.

…”

30.  According to the available statistics[7], over the years the number of judicial documents from the Mainland served in Hong Kong and those from Hong Kong served in the Mainland under the Arrangement[8] are as follows:

	Judicial documents from the Mainland served in Hong Kong	Judicial documents from Hong Kong served in the Mainland
Up to May 2002[9]	More than 1,410	165
Up to June 2007[10]	More than 5,400	More than 390
Up to the end of 2008[11]	More than 6,700	More than 600

The Decision

31.  The judge held in §6 there is no basis to set aside the 1^st Order.  The plaintiff has established a good arguable case that its claims fall within Order 11 rule 1(1)(d), (f) and/or (p), that a serious triable issue has been established and that the case is a proper one for the exercise of the discretionary power to grant leave for service out of Hong Kong.  Besides, the 1^st Order only granted leave to issue a concurrent writ for service on the defendant in the Mainland.  It did not specify how the writ was to be served.  No issue was raised on appeal against this part of the Decision.

32.  Turning to the dispute whether Order 11 rule 5 and Order 65 rule 4 can apply to the service of the concurrent writ in this case, the judge thought it appears to have become academic, as the inescapable fact is that whatever irregularity there might have been in the service of the concurrent writ on the defendant, and despite the fact that such service was effected pursuant to the 2^nd Order, the writ was indeed brought to the attention of the defendant, who filed an AS on 2 July 2105, and he never sought to set aside the AS (§7).

33.  Before the judge and on appeal, Mr Russell Coleman, SC for the plaintiff did not seek to uphold the substituted service on the defendant by post and email to the defendant’s addresses on the Mainland, and only sought to rely on the fact of service on RB in Hong Kong (§9).

34.  At §§8 to 14, the judge considered the exercise of discretion under Order 2 rule 1 on the non-compliance of rules, noting in §§11 and 15 that Mr Andrew Liao, SC, who appeared for the defendant throughout[12], had not raised any argument that Order 2 rule 1 is not applicable or as to why the court should not exercise its discretion under that rule.  On appeal, Mr Liao has taken a different position that non-compliance with the law of the Mainland as to service would be a ground for the court not to exercise its discretion under Order 2 rule 1.

35.  Having expressed agreement with the observations of Stone J in Transamerica Occidental Life Insurance Co (Hong Kong Branch) v King Sound Industry Co Ltd [2005] 1 HKLRD 125 at §§41, 44 and 45 – that proceedings have come to the notice of the defendants and if and in so far as there is some technical failure, that falls to be cured under Order 2 rule 1 – the judge took the view that the proceedings have “clearly and manifestly been brought to the attention of the defendant”.  She said further in §§12 and 13:

“12.… RB may not have had the defendant’s instructions initially to accept service of proceedings for the defendant in this action, but they were obviously able to notify the defendant of the issue and subsequent service of the Concurrent Writ. The defendant has never explained with candour how RB came to file the AS on his behalf. He has never asserted that the AS was filed against his instructions in July 2015 and without his authority. It would have been a simple matter for the defendant’s current solicitors to seek an explanation from RB as to how, or why, the AS had been filed, if the defendant had never authorized its filing by RB. No explanation has been given. The defendant never applied to set aside the AS. In these circumstances, I can only conclude that RB must have been acting with the defendant’s instructions at the time when they filed the AS on the defendant’s behalf on 2 July 2015, stating that “service of the Concurrent Writ is acknowledged accordingly”, and that the defendant intended to contest the proceedings.

13. The defendant has been able to engage experts to produce evidence on PRC law, and to instruct solicitors and counsel to appear in Court in these proceedings, and to file evidence on his behalf. It was only on 29 July 2015 that the defendant filed notice of change of solicitors, from RB to those now on the Court record as his solicitors. The defendant has not, at any time, asserted any prejudice which he has suffered as a result of the service of the Concurrent Writ on RB on his behalf, or how such service on him through RB in Hong Kong has affected his defence in any way in these proceedings.”

36.  For the above reasons, the judge decided to exercise her discretion under Order 2 rule 1 and to order that the service of the concurrent writ on RB in Hong Kong, as acknowledged by RB on behalf of the defendant on 2 July 2015, do stand as good and effective service.

37.  As to the contention that the service effected was in contravention of the law of the Mainland, specifically Article 277[13] of the Civil Procedure Law (“CPL”), which provides that no foreign authority or individual shall, without permission from the competent authorities of the PRC, serve process within the territory of the PRC, the judge held in §15 there is no question of contravention of, or non-compliance with, the law of the Mainland when the concurrent writ is served on the defendant in Hong Kong.

38.  The judge noted Mr Liao’s acceptance that Order 11 rule 5A(1) and the Arrangement only apply to a case where “a writ is to be served on a person to be served in the Mainland of China”, and Article 277 of CPL applies only to service of process “within the territory of the PRC”.  She did not regard any order for substituted service on the defendant in Hong Kong as a device to evade the Arrangement reflected in Order 11 rule 5A (§15).  Hence, she did not find it necessary to decide whether substituted service can ever be ordered in respect of a defendant who is in the Mainland (§16).  Nevertheless, the judge expressed disagreement with the contention that Order 11 rule 5 and Order 65 rule 4, to which reference is made in Order 11 rule 5(1), can have no application to service of writs on defendants in the Mainland (§16).

39.  She dealt with Mr Liao’s arguments on this succinctly in §17:

“Mr Liao referred to O 11 r 5 as the general provision for service out of Hong Kong, and O 11 r 5A as the specific provision for service in the Mainland. This only means that where there is conflict, the specific provision applies, the specificality being where the writ is to be served in the Mainland (by the express wording used in O 11 r 5A (1)). In a proper case, substituted service of the writ in Hong Kong may still be ordered upon a defendant who is normally resident in the Mainland, provided that the plaintiff can demonstrate that the case falls within O 11 r1(1) for service out of the jurisdiction (Tillemont Shipping Corp SA v Taitexma Enterprise Corp [1993] 2 HKC 129, CA), and further, that it is an appropriate case for substituted service to be ordered by the Court in the exercise of its discretion: eg by showing that genuine efforts to serve have been made under r 5A, but have failed, that other modes of service are “impracticable”, and that the method of substituted service asked for by the plaintiff is one which in all reasonable probability will be effective to bring notice or knowledge of the writ to that defendant (para 65/4/8, Hong Kong Civil Procedure 2016). It may still be open to a defendant, in a proper case, to argue that the manner of service actually effected under the order of substituted service made is contrary to the law of the Mainland, by reference to O 11 r 5 (2).”

The defendant’s arguments on appeal

40.  Mr Liao complained that the judge has failed to pay regard to the defendant’s case and that the Decision contained no detailed analysis of the material provisions.  This was advanced as an independent ground of appeal.  I do not think the judge has failed to give reasons for a conclusion essential to her decision.  The critical issue was that the judge did not regard an order for substituted service on the defendant in Hong Kong as a device to evade the Arrangement and Order 11 rule 5A, as the Arrangement and rule 5A only apply to a case where “a writ is to be served on a person to be served in the Mainland of China.”  Having arrived at that view, the judge did not find it necessary to address at length Mr Liao’s arguments on the construction issue of rule 5A and the Basic Law.  There is no merit in this independent ground of appeal.

41.  Another submission of Mr Liao may also be disposed of shortly.  This relates to his construction of Order 11 rule 5A(1).  I set out this provision again with the material words in italics for ease of understanding:

“Where in accordance with these rules, a writ is to be served on a person to be served in the Mainland of China, the writ shall be served through the judicial authorities of the Mainland of China.”

42.  The phrase “to be served” appeared twice in this provision.  Mr Liao argued that this phrase when used a second time should be construed as describing or qualifying the person to be served, not the place where that person is to be served, and should not be understood to mean that the service of the writ is to take place in the Mainland.

43.  Mr Coleman submitted to the contrary.  He reasoned that if the phrase which appeared a second time is to be removed, this may give rise to some ambiguity.  The repetition of “to be served” makes it clear that the place of service of the writ is to be in the Mainland.

44.  I would agree with Mr Coleman.  The Chinese version of rule 5A is even clearer:

“凡按照本規則須在中國內地將令狀送達須予送達的人，則該令狀須透過中國內地的司法機構送達。”

45.  Mr Liao accepted that if a Mainland resident happens to be in Hong Kong, the writ can be served on him in Hong Kong, and if he has properly instructed a solicitor to accept service and thus voluntarily submits to jurisdiction, service can be effected on his authorized agent in Hong Kong.  But that was not the situation here.  Mr Liao’s primary contention was that substituted service is not permissible having regard to the mandatory wording in Order 11 rule 5A, which is the exclusive and mandatory provision governing service on Mainland residents.  By virtue of rule 5A(1), “the writ shall be served through the judicial authorities of the Mainland of China”, so other modes of service are thereby excluded.  His alternative submission and fallback position was that even if substituted service may be ordered to effect service on a Mainland resident, the mode of service must comply with the law of Mainland China, as Order 11 rule 5(2) provides that “nothing in this rule, rule 5A or any order or direction of the Court made by virtue of it shall authorize or require the doing of anything in a country or place in which service is to be effected which is contrary to the law of that country or place.”

46.  Mr Liao asked the court to note that the plaintiff did not seek to support paragraphs (a) and (c) of the 2^nd Order (ordering substituted service of the documents by post and by email to the defendant’s addresses in the Mainland).  He reiterated that to order substituted service by delivering the writ to RB’s office in Hong Kong is effectively to bypass rule 5A.  RB would have to send the documents delivered to its office to the defendant in the Mainland to bring them to his attention.  In so doing, that would contravene the law of Mainland China, namely Article 277 of CPL, which provides that except for the circumstances mentioned in that provision, no foreign authority or individual shall, without permission of the competent authorities in the Mainland, serve process within the Mainland.

47.  Mr Liao submitted further that service of a writ out of the jurisdiction is not merely bringing the process to the attention of the defendant.  He cited Cecil v Bayat [2011] 1 WLR 3086 in which Stanley Burnton LJ said at §61 that service out of the jurisdiction is more than that as it is an exercise of the power of the court and an exercise of sovereignty within a foreign state, requiring the defendant, if he is to dispute the claim, to file an acknowledgment of service and to participate in litigation in a foreign state.  At §§62 to 64, Stanley Burnton LJ cited various dicta in these cases:

“The right of administering justice is the attribute of sovereignty, and all persons within the dominions of a sovereign are within his allegiance and under his protection. If, therefore, one sovereign causes process to be served in the territory of another, and summons a foreign subject to his court of justice, it is in fact an invasion of sovereignty, and would be unjustifiable, unless done with consent . . .” (Cookney v Anderson (1863) 1 De G J & S 365, 380 to 381, per Lord Westbury LC)

“Service out of the jurisdiction at the instance of our courts is necessarily prima facie an interference with the exclusive jurisdiction of the sovereignty of the foreign country where service is to be effected.” (George Monro Ltd v American Cyanamid and Chemical Corpn [1944] KB 432 at 437, per Scott LJ)

“As I have always understood it, service of a writ out of the jurisdiction is an exercise of sovereignty within the country in which service is effected.” (Afro Continental Nigeria Ltd v Meridian Shipping Co SA (TheVrontados) [1982] 2 Lloyd’s Rep 241 at 245, per Lord Denning MR)

“…under both English and continental legal systems service out of the jurisdiction is regarded as an interference with sovereignty.” (Molins plc v GD SpA [2000] 1 WLR 1741, §40, per Aldous LJ)

48.  Hence, Mr Liao submitted that Order 11 rule 5A should be construed against the matrix of the Basic Law which enshrines the principle of “one country, two systems” and the Hong Kong courts are not permitted to direct service of process on a Mainland resident in a manner that would interfere with the sovereignty of the PRC.  He pointed out that the PRC, like many sovereign states, has declared against the whole of Article 10 of the Hague Convention[14].

49.  Lastly, Mr Liao submitted that the judge was wrong to exercise her discretion under Order 2 rule 1 to cure any irregularity in the 2^nd Order for the non-compliance of rules, as that provision cannot apply in cases of lack of jurisdiction or where there is fundamental irregularity that goes to jurisdiction.

If substituted service is permissible where Order 11 rule 5A applies

50.  I will first deal with the primary position of Mr Liao, which is that on a proper construction of Order 11 rule 5A, substituted service may not be ordered by the Hong Kong court because this provision is mandatory and exhaustive and it cannot have been the legislative intention that Order 65 rule 4 could be deployed to bypass Order 11 rule 5A and circumvent the Arrangement.

51.  I do not propose to recite the established tenets of construction relied on by Mr Liao and the many authorities he cited in support of these tenets – the use of the word “shall” in Order 11 rule 5A(1) denoting a mandatory requirement; the principle of generalibus specialia derogant (special provisions override general ones) such that the specific provision of rule 5A(1) should override the general provision in rule 5(1) where the two provisions cover the same subject matter; and the rule against rendering specific provisions redundant.  These principles may be useful in providing guidance to construction but they do not dictate the court’s approach.

52.  It is correct that there is no mention of substituted service in the Arrangement and Order 11 rule 5A makes no reference to Order 65 rule 4.  Mr Liao relied on the opinion of Mr Kong Qingjiang (孔慶江), the defendant’s expert in PRC law that “for the service of Hong Kong writs or other Hong Kong judicial documents in the Mainland to be legally binding, one must adopt the methods prescribed in the Arrangement.”  This opinion expressed by Mr Kong is not relevant to the proper construction of Hong Kong law as regards Order 11 rule 5A.  It would also appear to be at odds with PRC law in a case decided by the Higher People’s Court of Guangdong ((2004) 粵高法民三終字第152號) on 15 November 2005[15]. The question there was whether PRC judicial documents had been validly served on the appellant in Hong Kong, and the appellant raised the argument that the judicial documents had not been served in accordance with the Arrangement.  The PRC court rejected the argument, holding that the Arrangement did not specify that all PRC judicial documents must be served under the Arrangement and the PRC courts are free to choose an efficient way to serve the documents taking into account the circumstances of each case.

53.  In my view, the wording of Order 11 rule 5(1) is clear.  It provides that “subject to the following provisions of this rule, Order 10, rule 1(1), (4) and (5) and (6) and Order 65, rule 4 shall apply in relation to the service of a writ notwithstanding that the writ shall be served out of the jurisdiction”.  The effect of this is that subject to the provisions that follow in rule 5, a writ served out of the jurisdiction must be served personally on a defendant, and if it appears impracticable for any reason to effect personal service, substituted service may be ordered.  Rule 5(2) then makes it clear that “nothing in this rule, rule 5A or any order or direction of the Court made by virtue of it shall authorize or require the doing of anything in a country or place in which service is to be effected which is contrary to the law of that country or place.”  The requirement of personal service mentioned in rule 5(1) is qualified by rule 5(3), which provides that (a) the writ need not be served personally so long as it is served in accordance with the law of the country or place in which service is effected, and (b) need not be served by the plaintiff or his agent if it is served by a method provided for by rule 5A, 6 or 7.  I reject Mr Liao’s contention that Order 65 rule 4 does not apply to the service of process on a Mainland resident merely because rule 5(1) does not specifically mention rule 5A, unlike rule 5(2), (3) and (5).

54.  There is no conflict between the general provision in rule 5(1) and the specific provision in rule 5A(1).  The latter applies to the situation where service of a writ is to be effected in the Mainland of China, and provides that the writ must be served through the judicial authorities of the Mainland.  This is to give effect to §2 of the Arrangement (requests for service shall be made through the various Higher People’s Courts in the Mainland) and §6 (service of judicial documents shall be effected in accordance with the law of the place in which the entrusted party is situated).  The relevant law of the Mainland is Article 277 of the CPL, which governs the service of process within the territory of the PRC.

55.  If substituted service is ordered to be effected outside the Mainland, the Arrangement and rule 5A will not be engaged.  But if substituted service is ordered to be effected in the Mainland, the Arrangement and rule 5A will apply. There is specific provision for this in rule 5A(3)(c), which provides that “if a particular method of service by the judicial authorities of the Mainland of China is desired by the person making the request”, an indication of that particular method must be contained in the request for service lodged with the Registry of the High Court.  As Mr Coleman has submitted, there is no redundancy or bypassing of any rule.

56.  I would add this.  As the objective of substituted service is to bring knowledge of the writ to the defendant by such means that would reach him in all reasonable probability, in the case of a person residing on the Mainland, one would expect the methods of substituted service to involve service in the Mainland in most instances.

57.  I agree with the judge in §17 of the Decision that in a proper case, substituted service of the writ may be ordered on a defendant residing in the Mainland.  The judge has recognised that it may be open to a defendant to argue that the manner of service actually effected under the order for substituted service is contrary to PRC law, by reference to Order 11 rule 5(2).

Substituted service to be effected in the Mainland

58.  As mentioned above, the plaintiff has not sought to support the methods of substituted service to be effected in the Mainland as provided in the 2^nd Order.  Strictly speaking, here we are not concerned with substituted service in the Mainland that may be ordered by the Hong Kong court. But as submissions on this have been made at some length, it is appropriate that I should endeavour to address this issue.

59.  Where substituted service is to be effected in the Mainland, the order or direction made by the Hong Kong court must not contravene the law of the PRC, as provided in Order 11 rule 5(2).  The Arrangement and Rule 5A are engaged, and that means the applicant, who has obtained an order for substituted service, must lodge in accordance with rule 5A(3)(c) a request with the Registry of the High Court.  If a particular method or methods of service is desired to be made by the judicial authorities in the Mainland, the request must indicate the same.

60.  Mr Liao referred us to the decision of Deputy High Court Judge B Chu (as she then was) in Director of Social Welfare v HSP, HCMP 598/2013, 9 August 2013, at §§43, 70, 71 and 79.  In that case, it was held that service of the originating summons by substituted service should comply with Order 11 rules 5 and 5A and service in the Mainland would have to be effected through the judicial authorities of the Mainland.  In §79, the court noted there was no evidence that service by registered post to the last known addresses of the party to be served in the Mainland was in accordance with the laws of the Mainland and hence it was not clear whether the method of substituted service as ordered had complied with the laws of the Mainland.  This seems to me to be the correct approach.

61.  Here, we have some evidence of alternative modes of service in the CPL and in Interpretation No. 5 [2015] of the Supreme People’s Court on the Application of the Civil Procedure Law adopted on 18 December 2014.

62.  Relevant provisions in Section 2 of the CPL that provide for alternative modes of service are found in Articles 86, 87, 88, 90 and 92.

63.  Article 86 governs the situation where the person to be served refuses to receive process or his or her cohabiting adult family member refuses to receive process.  The process server may leave the process at the domicile[16] of the person to be served upon compliance with certain steps as specified in that provision.

64.  Article 87 provides that with the consent of the party to be served, a People’s Court may serve process by fax, email and other means capable of confirming receipt by the person to be served, except for a judgment.

65.  Article 88 provides that where direct service of process is difficult, service may be entrusted to another People’s Court or be conducted by post.  If process is served by post, the date of receipt stated on the service acknowledgment shall be the date of service.

66.  Article 90 provides that where the person to be served is incarcerated, process shall be served on the person through the incarceration facility.

67.  Article 92 provides that where the whereabouts of the person to be served is unknown or service of process is not possible by other means set out in Section 2, process may be served by public announcement and process shall be deemed to be served 60 days after the date of public announcement.  The reasons for and the course of service of process by public announcement shall be recorded in the case file.

68.  By Article 138 of Interpretation No. 5 [2015] of the Supreme People’s Court, it is provided that for the service of process by announcement, an announcement shall be posted on the bulletin board of the court or at the domicile of the person to be served.  An announcement may also be published in newspaper, information networks and other media.  Where a People’s Court posts an announcement at a domicile of the person to be served, the process of posting shall be recorded by photograph, video and other means.

69.  The defendant’s expert in PRC law, Mr Kong, referred to some of the above provisions in his opinion and apparently accepted that judicial documents from Hong Kong courts may be served in the Mainland by methods other than direct delivery.  He only stipulated that “the Higher People’s Court in the Mainland must have officially accepted the entrustment of the Hong Kong High Court before the relevant Mainland court can choose a method of service on its own discretion for delivering documents.”

70.  On the available materials, there are clearly ways and means by which substituted service to be effected in the Mainland can be made to comply with the Mainland laws.  It is up to an applicant to adduce suitable evidence to satisfy the court in Hong Kong and a Higher People’s Court in the Mainland that the alternative method or methods by which process is proposed to be effected in the Mainland by the judicial authorities is appropriate in all the circumstances.

Substituted service to be effected in Hong Kong

71.  I turn to consider the situation in the present case, in which substituted service was ordered to be served on the office of RB in Hong Kong, when RB had not been authorised by the defendant to accept service.  There are two issues here: is this within the jurisdiction of the Hong Kong court and if so is it appropriate to so order.

72.  As mentioned earlier, it may not be usual to order substituted service in Hong Kong for a defendant residing in the Mainland, but I see no reason why such an order is not within the jurisdiction of the Hong Kong court.  I reject Mr Liao’s submission that the order is in contravention of the Arrangement or rule 5A as RB would have to forward the writ to the defendant in the Mainland to bring it to his attention, so in that sense there would be service on the defendant in the Mainland not effected through the judicial authorities.  As submitted by Mr Coleman, the same could be said if RB had been authorised to accept service for the defendant.  It could not be suggested in that situation there was contravention of PRC law for RB to send the writ to the defendant in Beijing.

73.  As for the submission that such an order is inappropriate as an interference with the sovereignty of Mainland jurisdiction, I note that even in Cecil v Bayat, Stanley Burnton LJ accepted at §65 that substituted service, other than the mode of service permitted under the Hague Convention, may be permitted in special and exceptional circumstances.  In general, the desire to avoid the delay inherent in service by the methods permitted under the Convention would not be a sufficient reason for an order for service by an alternative method (§§66 and 67).  But service by alternative means may be justified by facts as where there are grounds for believing that the defendant has sought or will seek to avoid personal service (§68)[17].

74.  The various dicta quoted by Stanley Burnton LJ on the interference with sovereignty of a foreign jurisdiction in earlier cases must now be read in light of the judgment of Lord Sumption JSC in Abela v Baadarini [2013] 1 WLR 2043 at §53 (with whom Lord Neuberger of Abbotsbury PSC, Lord Reed and Lord Carnwath JJSC agreed):

“In his judgment in the Court of Appeal, Longmore LJ described the service of the English court’s process out of the jurisdiction as an “exorbitant” jurisdiction, which would be made even more exorbitant by retrospectively authorising the mode of service adopted in this case. This characterisation of the jurisdiction to allow service out is traditional, and was originally based on the notion that the service of proceedings abroad was an assertion of sovereign power over the defendant and a corresponding interference with the sovereignty of the state in which process was served. This is no longer a realistic view of the situation. The adoption in English law of the doctrine of forum non conveniens and the accession by the United Kingdom to a number of conventions regulating the international jurisdiction of national courts, means that in the overwhelming majority of cases where service out is authorised there will have been either a contractual submission to the jurisdiction of the English court or else a substantial connection between the dispute and this country. Moreover, there is now a far greater measure of practical reciprocity than there once was. Litigation between residents of different states is a routine incident of modern commercial life. A jurisdiction similar to that exercised by the English court is now exercised by the courts of many other countries. The basic principles on which the jurisdiction is exercisable by the English courts are similar to those underlying a number of international jurisdictional conventions, notably the Brussels Convention (of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters (OJ 1978 L304, p 36)) (and corresponding Regulation (EC) No 44/2001 (OJ 2001 L12, p 1)) and the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters of 30 October 2007 (OJ 2009 L147, p 5). The characterisation of the service of process abroad as an assertion of sovereignty may have been superficially plausible under the old form of writ (“We command you . . .”). But it is, and probably always was, in reality no more than notice of the commencement of proceedings which was necessary to enable the defendant to decide whether and if so how to respond in his own interest. It should no longer be necessary to resort to the kind of muscular presumptions against service out which are implicit in adjectives like “exorbitant”. The decision is generally a pragmatic one in the interests of the efficient conduct of litigation in an appropriate forum.”

75.  Lord Clarke of Stone-cum-Ebony JSC expressed separate agreement with the approach of Lord Sumption. He said this at §45:

“I do not agree that for the court to make an order under rule 6.15(2) is “to make what is already an exorbitant power still more exorbitant”. I recognise of course that service out of the jurisdiction has traditionally been regarded as the exercise of an exorbitant jurisdiction. That is a consideration which has been of importance in determining whether permission to serve out of the jurisdiction should be granted, although in this regard I agree with the approach set out by Lord Sumption JSC in his judgment. In any event, in this case, it is now accepted that it was proper to serve the claim form out of the jurisdiction. The rules as to the method of service set out above seem to me to have the legitimate sensibilities of other states in mind. It is for that reason that CPR r 6.40(4) provides that nothing in CPR r 6.40(3) or in any court order authorises or requires any person to do anything which is contrary to the law of the country of service[18]. I have already expressed my view that the order recognising the delivery of the claim form as alternative service under English law is not contrary to Lebanese law. …”

76.  I consider that the statements of Lord Sumption apply by and large to the kind of situation we are concerned with.  Hong Kong has always adopted the doctrine of forum non conveniens.  The Arrangement, which reflected the principles of the Hague Convention, re-established the reciprocal arrangement for the service of judicial documents generally along the lines as before.  So taking a realistic view of the situation, it is correct to say that in the great majority of cases where service on a person in the Mainland of China is authorised, there will have been either a contractual submission to the jurisdiction of the Hong Kong court or else a substantial connection between the dispute and Hong Kong.  Similarly, litigation between the residents of the Mainland and Hong Kong has become a routine incident of our commercial life.  To adopt the words of Lord Sumption, service on a person in the Mainland should be regarded as a pragmatic decision in the interests of the efficient conduct of litigation in an appropriate forum.  And to paraphrase Lord Clarke in the passage quoted, our rules on methods of service have the legitimate sensibilities of the Mainland jurisdiction in mind, in that nothing in our rules or any court order made by virtue of the rules authorises or requires the doing of anything contrary to the laws of the Mainland.

77.  For the above reasons, I reject Mr Liao’s arguments that to order substituted service to be effected in Hong Kong would be to interfere with the sovereignty of the Mainland courts and would thereby contravene the Basic Law.

78.  On the available evidence, there is sufficient material to find that a case for substituted service was made out in that it would appear impracticable for personal service to be effected on the defendant in Beijing.  The representatives of the Higher People’s Court in Beijing attempted to effect personal service twice at the defendant’s work place.  They contacted the defendant and his secretary by telephone at the reception desk of his business address and the calls went unanswered.  There was no reason to think that the defendant did not receive the messages left for him on each of those occasions. He did not respond to any of the messages.

79.  Although RB had not been authorised to accept service in this action, RB remained the solicitors on record for the defendant in another action in which he sued as one of the plaintiffs.  There was reason to think that by delivering the writ to RB’s office marked to the attention of the defendant care of RB, the writ would have come to the notice of the defendant in all reasonable probability.

80.  There is no issue on appeal that the plaintiff has established a good arguable case that its claims fall within Order 11 rule 1(1)(d), (f) and/or (p).

81.  I see no basis to impugn the order for substituted service to be effected in Hong Kong made in the exercise of the judge’s discretion.

The exercise of discretion under Order 2 rule 1

82.  The judge exercised her discretion under Order 2 rule 1 insofar as there was non-compliance of the rules to cure any irregularity that may arise, for the reasons given in §§12 and 13 of the Decision.

83.  I do not find it necessary to deal with the arguments that the AS filed by RB constituted an implied warranty they had instructions to accept service mentioned in §9 of the Decision.  There is sufficient material for the judge to exercise her discretion in favour of the plaintiff without relying on these arguments.

84.  For the reasons I have given earlier, I reject Mr Liao’s submission that the discretion in Order 2 rule 1 may not be invoked for want of jurisdiction.  I reject the argument that the entirety of the 2^nd Order should be set aside because parts of the order do not comply with Order 11 rule 5(2) as they contravene PRC law.  The fact that the 2^nd Order provided for three methods of substituted service and two of them do not appear to comply with rule 5(2) is just the kind of situation where the failure to comply with the rules should be treated as an irregularity and should not nullify the proceedings.

85.  I agree with the judge for the reasons she gave in §§12 and 13 of the Decision, there is no basis to interfere with the exercise of her discretion.

Conclusion

86.  I would dismiss the appeal with an order nisi that the defendant should pay the plaintiff’s costs of this appeal.