EMPEROR PRESTIGE CREDIT LTD v. KING PAK FU

CAMP 401/2021

[2021] HKCA 1800

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 401 OF 2021

(ON AN INTENDED APPEAL FROM HCA 1008 OF 2019)

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J U D G M E N T

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Hon G Lam JA:

Background

1.  This is an application by the plaintiff for extension of time for it to apply for leave to appeal from the decision of Au-Yeung J (“the judge”) on 19 February 2021.[1] By that decision, the judge dismissed the plaintiff’s appeal from the decision of Master Anthony H K Chan who ordered that a prior order for substituted service of the writ and the statement of claim be discharged and that service of the writ and the statement of claim be set aside.

2.  By a written decision dated 15 April 2021, the judge refused leave to appeal.[2] Instead of applying to this Court for leave to appeal within 14 days as it was entitled to do (under Order 59 rule 2B(3) of the Rules of the High Court (Cap 4A)), the plaintiff only filed a summons on 21 September 2021 asking for an extension of time to do so.  It was almost 5 months late.

3.  Having considered the materials, I think it is appropriate for the application to be dealt with on paper without an oral hearing.

4.  The plaintiff is a money lender in Hong Kong in the Emperor Group of companies.  The defendant is apparently a Mainland resident but also a Hong Kong resident, and is a major shareholder of a company listed in Hong Kong called Carnival Group International Holdings Ltd (“Carnival”).

5.  On 10 June 2019, the plaintiff issued a writ against the defendant claiming repayment of an outstanding loan of approximately $250 million together with interest.  On the same date, relying on the provisions of Order 10 rule 1(2), the plaintiff’s then solicitors sought to serve the writ by inserting it into the letterbox of the defendant’s usual and last known address in Deep Water Bay, Hong Kong (“Address”).

6.  It is not disputed that, unknown to the plaintiff at the time, the defendant had since December 2018 been kept in the Mainland to assist with certain investigation.  According to the defendant, there were restrictions placed on his movement and his ability to communicate with third parties.

7.  Meanwhile, the writ was collected from the Address by a representative of Carnival.  On 3 July 2019, the plaintiff’s solicitors received a letter from the firm of Hong Kong solicitors, Gall, which stated that they had been contacted by Carnival with a view to their acting for the defendant in the action but had not been able to take instructions from the defendant as he was involved in an investigation by the authorities in the Mainland.

8.  The defendant entered Hong Kong on 23 August 2019 for the first time since December 2018.  According to him, he had also been to Hong Kong again in September and October 2019, but had since early January 2020 been prevented from leaving the Mainland again because of another commercial dispute.

9.  On 6 September 2019, the plaintiff filed its statement of claim.  It was again inserted into the letterbox at the Address.

10.  On 8 October 2019 the defendant had a without prejudice meeting with the plaintiff’s representatives in Hong Kong.  According to the defendant (and the plaintiff has not adduced evidence to the contrary), nothing was mentioned at the meeting about the writ, the statement of claim or the action.

11.  On 8 November 2019, the plaintiff, acting by its new solicitors, filed an ex parte application with the court for an order for substituted service of the writ and the statement of claim on the defendant. The affirmation in support stated that the defendant intended to evade service and that there was no point trying to make an appointment with the defendant for service.  The application was granted and an order was made by Master Ho on 15 November 2019 that service of those documents by (1) ordinary post sent to the Address, (2) being left with a letter addressed to the defendant to the care of a specified representative of Carnival, and (3) despatch to the defendant’s WeChat account, shall be good and sufficient service.

12.  The plaintiff duly took steps to effect service through these steps.  In particular, there is no dispute that on 21 November 2019, the documents were electronically sent to the defendant by WeChat. According to the defendant, however, he was in the Mainland at the time.

The defendant’s application

13.  The defendant acknowledged service in the action on 4 December 2019, and applied by summons on 9 March 2020 for an order that the order for substituted service be discharged and that service of the writ and statement of claim on him be set aside. 

14.  The defendant succeeded before the Master.  On appeal, the plaintiff contended that the order for substituted service should not be set aside because the defendant must have acquired knowledge of the writ after its insertion into the letterbox on 10 June 2019 and service was validly effected on the day he came into the jurisdiction i.e. 23 August 2019, and the plaintiff was right to have resorted to Order 65 for substituted service rather than Order 11 for service out of the jurisdiction.

15.  The judge dismissed the appeal, principally for the following reasons:

(1)  Following Deng Minghui v Chau Shuk Ling [2007] 1 HKLRD 905, it did not matter that the defendant acquired knowledge of the writ during the time he was out of Hong Kong and brought that knowledge with him on the day he came to Hong Kong on 23 August 2019.  That did not render the service under Order 10 rule 1(2) valid.[3]

(2)  The plaintiff had not shown that service in Hong Kong was impracticable or that attempted service out of the jurisdiction was unsuccessful.  There were no grounds for substituted service.[4]

16.  As mentioned above, the judge refused leave to appeal but the plaintiff did not within 14 days renew its application in the Court of Appeal.

The plaintiff’s explanation for the delay

17.  Meanwhile, another company in the Emperor Group, namely Goldteam Group Ltd (“Goldteam”), was involved in a separate action (HCA 1217/2019) against a different individual, Mr Qin Hui (“Qin”), as defendant.  The writ was sent by registered post to Qin’s address at a time in July 2019 when he was outside the jurisdiction but when he returned to Hong Kong shortly afterwards he already had knowledge of the writ.  Default judgment was entered against Qin in August 2019; he applied in June 2020 to set it aside; on 19 January 2021 Master Jonathan Wong dismissed the application, holding that the default judgment had been entered regularly; the appeal was heard by Linda Chan J on 5 August 2021.  Her ladyship held in her decision dated 18 August 2021 that in those circumstances, service occurred at the time when the defendant’s presence within the jurisdiction and his knowledge of the writ coincided.[5]  She declined to follow Au-Yeung J’s decision in the present case which she considered to be inconsistent with previous authorities.

18.  Against the background of such parallel proceedings in Goldteam v Qin, the plaintiff has given the following explanation for its delay in applying to this Court for leave to appeal herein:

(1)  The prospect of a renewed application for leave to this Court was seriously considered in time but “the Emperor Group did not wish to pursue the matter further for the time being” given that the plaintiff had already incurred a mounting bill of legal costs; that a decision on leave to appeal in the present case was very likely to precede the appeal in Goldteam v Qin; that if the Court of Appeal decided against the plaintiff on the point about service, it would damage Goldteam’s case in the appeal before Linda Chan J; that it was “of paramount importance not to jeopardise Goldteam’s prospects” in its action; that it was thought to be the “wiser and more prudent course” for the point on service to be argued in Goldteam v Qin based on the existing authorities.

(2)  Although it may be said that the plaintiff ought to have had more confidence in its own case, “the broader surrounding circumstances facing the Plaintiff were not particularly encouraging at the time”.

(3)  The plaintiff therefore decided not to make an application for leave to appeal in the present case before the hearing of the appeal in Goldteam v Qin.  It was a “legitimately cautious, practical and cost-effective decision”, based on “commercial and tactical considerations”.

(4)  The plaintiff made the renewed application for leave to appeal in the present case very shortly after Linda Chan J’s decision in Goldteam v Qin was handed down and the time for seeking leave to appeal against it had expired.

19.  It is also asserted that there would be no prejudice to the defendant for time to be extended, whereas there would be prejudice to the plaintiff otherwise.

The parties’ submissions

20.  On behalf of the plaintiff, Mr Justin Ismail submits that the delay in bringing the application for leave before this court was not inexcusable or substantial and that there is no conceivable prejudice to the defendant, and that the merits threshold for the application for leave to appeal is therefore “reasonable prospect of success” rather than the higher threshold of “real prospect”.  He submits that as shown by Linda Chan J’s decision in Goldteam, there is anyhow real prospect in establishing that Au-Yeung J’s decision herein as regards service under Order 10 rule 1(2) was contrary to established authorities and wrong.  He also submits that it will be in the interests of justice for the Court of Appeal to provide much needed clarification on the point.

21.  For the defendant, Mr Ernest Ng submits that the plaintiff’s delay is substantial, the result of a conscious decision, and inexcusable.  The application was eventually prompted by the decision in Goldteam and an extension of time on that basis should only be granted in exceptional circumstances.  He submits that refusal of leave will not cause any prejudice to the plaintiff who needs simply to take steps to have the writ served again.  The plaintiff needs to show a real prospect of success on the merits, which it cannot, because: (1) the plaintiff deliberately opted for substituted service and is estopped from relying on its initial attempt under Order 10 rule 1(2) as valid service; (2) the defendant stated he did not have knowledge and Au-Yeung J did not find he had knowledge of the writ when he entered Hong Kong on 23 August 2019; the question of law therefore does not arise.

Discussion

22.  In my view, the defendant’s objection to the application is well-founded.  If the plaintiff had wished to preserve its position in this case pending the development in a different case, it could have taken out a renewed application for leave to appeal within time, and it would then have been for this court, having allowed both parties an opportunity to make representations, to decide whether to adjourn the application pending the proceedings in Goldteam.  Given that the plaintiff has deliberately and no doubt upon advice chosen simply not to apply to this court for leave to appeal within the time limit laid down by the law, it must in my opinion abide by the consequences in the absence of exceptional circumstances.  The fear that a decision by this Court against the plaintiff in the leave application here would somehow “cause irreparable damage to Goldteam’s case” (as stated in the plaintiff’s affirmation in this court) seems to me to be quite irrational, and in any event not a matter relevant to the interests of the defendant, or indeed the plaintiff, in the present case.  The fact that the decision in the Goldteam case turned out to be favourable to the plaintiff’s related company is not a sufficient reason for time to be extended.

23.  The plaintiff argues that the defendant would not suffer any prejudice from the extension.  However, the proper approach is that, as stated in Chiu Sin-chung v Yu Yan-yan Angela & another [1993] 1 HKLR 225, 228, “[o]nce the time for appealing has elapsed, the respondent who was successful in the court below is entitled to regard the judgment in his favour as being final.  If he is to be deprived of this entitlement, it can only be on the basis of a discretionary balancing exercise, however blameless may be the delay on the part of the would-be appellant”.  In contrast, I can see no prejudice or hardship caused to the plaintiff by the refusal of this application.  There is no question of limitation arising from the facts of this case.

24.  The plaintiff has also in my view failed to demonstrate a real prospect of success, which is the merits threshold given that the delay is substantial and not wholly excusable: see Lee Chick Choi v Best Spirits Co Ltd (HCMP 371/2015, 21 May 2015), §19.

25.  In this connection it needs to be recalled what the judge’s decision was about.  It was a decision on the defendant’s application to discharge the order for substituted service and to set aside the service of the writ and the statement of claim on the ground that they were served by substituted service out of the jurisdiction without leave granted under Order 11. 

26.  Substituted service may be ordered under Order 65 rule 4 if it is “impracticable” for any reason to serve a document in the manner prescribed by the rules.  The judge noted that even on the plaintiff’s own case, the defendant was “seen to be roaming free in Hong Kong” and attended a meeting with the plaintiff in Hong Kong in October 2019, and yet the plaintiff did not try to serve him personally in Hong Kong and did not even mention the action at the meeting.[6] On these facts it is impossible to challenge the judge’s conclusion that the plaintiff had failed to show that service in Hong Kong was impracticable and that there was simply no ground to apply for substituted service.[7]  The challenge against this conclusion, which was included in the application for leave to appeal before the judge, has been abandoned in the application to this court.

27.  That leaves the plaintiff’s argument run before the judge that because the defendant must have acquired knowledge of the writ after its insertion into the letterbox, service was effected on the day he entered Hong Kong thereafter, i.e. 23 August 2019, and that, as a result, the validity of the subsequent substituted service ceased to be a live issue.[8]  The defendant has, however, denied on oath that he had knowledge of the writ when he re-entered Hong Kong at that time.  This is in my view not something so incredible as to be capable of being rejected out of hand without hearing live evidence. Although there are passages in the judge’s decision that appear to suggest that the defendant did have knowledge of the writ,[9] they can only be assumptions the judge was prepared to make for the purpose of considering the plaintiff’s argument, rather than actual findings, for the factual dispute was not dealt with by the judge at all.

28.  In these circumstances, it seems to me that there is no real prospect that the plaintiff can establish on the intended appeal that the defendant did in fact have knowledge of the writ when he entered Hong Kong on 23 August 2019.  Consequently, irrespective of the point of law raised, there is no real prospect of the plaintiff being able to prove that the writ had in fact been served on the defendant on 23 August 2019, and therefore no real prospect of establishing grounds for the court somehow to exercise a residual discretion (assuming it exists) not to set aside the substituted service even though Order 65 rule 4 had not been satisfied.

29.  In the circumstances this is not an appropriate case for this court to deal with the difference between the judge’s decision and Goldteam in relation to service under Order 10 rule 1(2).

30.  For the above reasons, I would dismiss the plaintiff’s application and award costs to the defendant summarily assessed in the sum of $80,000.

Chow JA:

31.  For the reasons given by G Lam JA in his judgment, a draft of which I have the benefit of reading in advance, I agree that the plaintiff’s application for extension of time to appeal should be dismissed.  I also agree with his summary assessment of the defendant’s costs. The plaintiff’s application is put on the basis that the intended appeal raises an important point of procedural law, namely, whether service of a writ is valid under Order 10, rule 1(2)(b) of the Rules of the High Court, Cap 4A (“RHC”), in circumstances where a defendant, who was not within the jurisdiction at the time of the “service” of the writ, nonetheless acquires knowledge of the same and subsequently returns to the jurisdiction prior to the writ’s expiry.  It is important to appreciate, however, that the issue before the judge was whether the order for the service of the writ by way of substituted service out of the jurisdiction without leave of the court under Order 11, r 1 of the RHC should be set aside, not whether the writ had previously been properly served on the defendant under Order 10, r 1(2)(b) of the RHC.  The procedural point of law raised by the plaintiff was irrelevant to the question that the judge had to decide.  The draft Notice of Appeal dated 21 September 2021 put forward by the plaintiff in support of the present application fails to engage the judge’s decision that the plaintiff has failed to show, at the time of the application for substituted service, that service of the writ on the defendant in Hong Kong was impracticable.  It also fails to address the question of whether substituted service of a writ is permissible in circumstances where the person to be served is not within the jurisdiction.  Accordingly, the intended appeal has no reasonable prospect of success, and there is no other reason in the interests of justice why the appeal should be heard.

[1] [2021] HKCFI 403.

[2] [2021] HKCFI 1013.

[3] §§22-29 of the judgment.

[4] §§30-42 of the judgment.

[5] [2021] HKCFI 2422, §§31-33 & 51.

[6] §30 of the judgment.

[7] §42 of the judgment.

[8] §11(1) & (3) of the judgment.

[9] e.g. §§23 & 29 of the judgment.