THE HONG KONG MORTGAGE CORPORATION LTD v. CHING KIT YU AND ANOTHER

HCMP 2226/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2226 OF 2002

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D E C I S I O N

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Introduction

1. This is the Defendants' appeal pursuant to Order 28 rule 4(1) of the Rules of the High Court against the decision of Master de Souza made on 10 March 2003 dismissing their application to set aside the default judgment granted under the Order of Master Ho dated 23 August 2002 and to set aside a Charging Order Absolute dated 19 November 2002 granted on the basis of the said default judgment.

2. The 1st and 2nd Defendants are, respectively, the mortgagor and borrower of a property at Sui Wo Court, Shatin. They claimed that they did not reside at the Sui Wo Court address but at Kam Ying Court. The Plaintiff is a bank which took over the mortgage from the original mortgagee bank. The Defendants fell into arrears in repayment of the loan. The Plaintiff's solicitors commenced a mortgage action by an originating summons served at the Sui Wo Court address which is the address provided for service in the deed of mortgage and obtained the default judgment. The Plaintiff's primary case is that service has been effected in accordance with Order 10 rule 1(2)(b) by inserting the process in the Defendants' letter box at the Sui Wo Court address, being the usual or last known address of the Defendants. Even if it was not, the service was effective in accordance with Order 10 rule 3. Lastly, in any event, the originating summons had been adequately brought to the attention of the Defendants. The issues before the court are:

(a) whether the Plaintiff, by serving the originating summons at the address of the mortgaged property had effectively served the originating processes on the Defendants in accordance with the requirements of Order 10 of the Rules of the High Court;

(b) whether the Plaintiff is entitled to rely on the provisions in the deed of mortgage in relation to deemed service, and whether, as a result, service at the address of the mortgaged property is good service in accordance with Order 10 rule 3 of the Rules of the High Court;

(c) whether, taking into account (a) and (b) above and in the light of all the circumstances of the case, the Plaintiff had sufficiently brought the originating summons proceedings to the attention of the Defendants.

Service of the various documents

3. The 2nd Defendant fell into arrears with payment of instalments since 24 September 2001. On 1 November 2001, the Plaintiff issued a demand to the 2nd Defendant by ordinary post to him at the Kam Ying Court address. Subsequent to such demand, the Defendants paid in a total of $16,000 and then defaulted again. On 3 January 2002, the Plaintiff issued another demand called "Cancellation of Loan" by ordinary post to the 2nd Defendant at the Kam Ying Court address demanding payment of the whole of the amount due. Both letters were not returned.

4. On 2 April 2002, the Plaintiff's solicitors issued demand letters to both the 1st and 2nd Defendants demanding payment of the whole of the amount then due under the legal charge to the Sui Wo Court address.

5. On 6 June 2002, the Plaintiff's solicitors issued the originating summons and effected service on the Defendants by inserting the summons into the letter box at the Sui Wo Court address and posting the originating summons on a conspicuous place at the main entrance of the mortgaged property. On 7 June 2002, copies of the summons were also sent to both Defendants by ordinary post to their Kam Ying Court address. None of these documents were returned to the Plaintiff's solicitors.

6. The notice of hearing of the originating summons was served by ordinary post to the Sui Wo Court address.

The Defendants' case

7. When applying for the loan from the Chase Manhattan Bank, both Defendants told the Bank that they would not reside at the Sui Wo Court address. The Defendants instructed that all the relevant statements and documents should be sent to the Kam Ying Court address. Later, the Plaintiff took over the mortgage from the Chase Manhattan Bank. The Plaintiff continued to issue bank statements and correspondence to the Defendants at the Kam Ying Court address.

8. The Defendants denied ever receiving the originating summons inserted into the letter box in the Sui Wo Court address or copies of the originating summons sent by ordinary post to the Kam Ying Court address. They only came to know about the proceedings in September 2002 when the Plaintiff instituted execution proceedings against the Kam Ying Court property.

Usual address and last known address

9. Miss Cheung, on behalf of the Plaintiff, submits that a person could have more than one usual or last known address, for example, a last known residential address and a last known business address. On the other hand, Mr Siu submits that "last known address" means the very last known address and that for the Defendants there was only one last known address and which was the Kam Ying Court address to where all the bank statements and correspondence about the mortgage had been sent.

10. The crucial words of Order 10 rule 1(2)(a) and (b) are "usual or last known address". The first point to note is the disjunctive, "or", between "usual" and "last known". In the context of rule 1(2), this word must be given its ordinary meaning, so that it must be read disjunctively. Had it been intended otherwise, the conjunctive "and" would have been used.

11. Secondly, according to the Oxford English Dictionary, the word "address" means "details of where a person lives, works or can be found, and where letters, etc. may be delivered." Thus the meaning of the word is not confined exclusively to a person's residence. The essence really is a location where the person may be reached or where contact or communication in written form, such as by letter, could be established. If so, a person may have at the same time a number of addresses. A student residing in hostel may have a home address and a hostel address in which he resides. Communication may be established with him through any of those addresses. Likewise, a person may be reached through his place of work, his home, or his quarters if the nature of his work so requires him to reside in quarters. None of those places ceases to be his address. Thus a person may have at the same time a number of addresses through which communication or contact with him may be established. Accordingly, at the same time, he may have a number of last known addresses. It would be absurd to say that he must be last known at his residential address and not at his place of work where he spends most part of the day or his quarters where he spends most nights of the week.

12. I now turn to the words "last known" or "last known address". This phrase means the address last known to the plaintiff. The plaintiff is entitled to ascertain from whatever available source that address, i.e. the details of where the defendant lives, works or can be found, and where letters, etc. may be delivered. There is no reason why it should be qualified to mean the address which the defendant last intentionally made known to the plaintiff. The rule would be render nugatory if such a qualification is added. With such a qualification, a defendant may intentionally make known to the plaintiff an address at which he could not be reached and hence evade service. The rule provides for the means as to how service may be effected. It could not have been drafted to defeat its own purpose. Hence, I hold the words "last known address" mean the address last known to the plaintiff from whatever source and a defendant may have a number of addresses last known to the plaintiff, depending on the circumstances and the diligence of the plaintiff's inquiries.

13. I now turn to the word "usual" or "usual address". This must mean one of the above addresses where a person may usually be reached. While the word "usual" conveys the idea of a habitual or frequent connotation, the rule does not say "the most usual address" as to require the address to be one where a person may in most probability be reached. Thus, a person may have a number of usual addresses. He may be usually reached during office hours at his office address or during other hours at his home address. This may be one of the last known addresses or an alternative address, for example, an address which the defendant intentionally made known to the plaintiff. Anyway, the "usual address" and "last known address" are alternative addresses for service under Order 10 rule 1(2) of the Rules of the High Court.

Service under Order 10 rule 1(2)

14. I now turn to the facts. There were two addresses known to the Plaintiff: the Kam Ying Court address to which the Plaintiff sent correspondences and bank statements and the Sui Wo Court address, which was the address of the mortgaged property. There is no doubt that the Kam Ying Court address was both the usual and a last known address of the Defendants. The Defendants gave this address to the Plaintiff and made known to the Plaintiff that this was where they could be reached. As the facts show, indeed they could be reached at that address. They responded to the correspondence sent to that address.

15. As for the Sui Wo Court address, the Defendants told the Plaintiff's predecessor, the Chase Manhattan Bank, that they would not reside there and that correspondence and bank statements should be sent to the Kam Ying Court address. The Plaintiff must be taken to have constructive notice of that instruction and be bound by the knowledge of the Chase Manhattan Bank.

16. On the other hand, when signing the deed of mortgage, the Defendants agreed to the terms of Clause 16 which provides as follows:

"16.01 Any demand for payment or notice by the Lender shall ... be deemed to have been sufficiently given ... if left or sent by prepaid post addressed to the Borrower or the Mortgagor at the Property or the registered office last known business or residential address of the Borrower or the mortgagor within 24 hours of posting, and in proving such service it shall be sufficient to prove that the notice or demand was properly addressed and posted or properly left as the case may be;

16.02 Any legal process including any writ or originating summons and any other summons in connection with this Charge to be served on the Mortgagor and/or the Borrower by the Lender in any legal proceedings ... shall be deemed to have been duly and sufficiently served on the Mortgagor and/or the Borrower forty eight (48) hours after the same having been left or sent by ordinary prepaid post to the Mortgagor or Borrower at the Mortgagor's and/or the Borrower's registered office or usual place of business or abode or at the address of the Property."

17. Clause 16 provides three addresses for service, the mortgaged property address at Sui Wo Court, the last known business address or the last known residential address of the Defendants. The question is whether the contractual addresses for service as provided for in Clause 16 was usual or last known addresses for the purpose of Order 10 rule 1(2). There is no doubt the second and third addresses were. The issue is what about the Sui Wo Court address. Mr Siu submitted that Clause 16 could not prevail over Order 10 rule 1 and service on the Sui Wo Court address was not effective service. I think that argument is relevant to the Plaintiff's secondary case based on service in accordance with Order 10 rule 3, but is irrelevant to the Plaintiff's primary case that the Sui Wo Court address was the usual or last known address of the Defendants.

18. The Sui Wo Court address was the address of the mortgaged property, over which the Defendants had a vested interest. Even assuming that neither of them resided there and that the property was rented out, the tenants would bring the process served to their notice. Even if the property was vacant, it nevertheless did not cease to be an address they would go to and to where letter delivered would be received by them. They had an interest to attend to the premises to check its conditions, to show the property for rent or for sale or to collect mails.

19. Mr Siu submitted that the agreement may not prevail over the Rules of the High Court and the parties may not by contract change the rules. I do not agree. Order 10 rule 1 provides for service, personally or at the usual or last known address if the defendant is within the jurisdiction. It does not prevent service at a contractual address for service from being the usual or last known address of a defendant. Quite on the contrary, Order 10 rule 3 specifically permits such service. It provides:

"(1) Where -

(a) a contract contains a term to the effect that the Court of First Instance shall have jurisdiction to hear and determine any action in respect of a contract or, apart from any such term, the Court of First Instance has jurisdiction to hear and determine any such action and

(b) a contract provides that, in the event of any action in respect of the contract is being done, the process by which it is begun, may be served on the defendant ... in such manner, or at such place ... as may be so specified, then, if an action in respect of the contract is begun in the Court and the Writ by which it is begun is served in accordance with the contract, the Writ shall, subject to para. 2 be deemed to have been duly served on the defendant."

Indeed, in Kenneth Allison Ltd and Others v. A. E. Limehouse & Co. [1992] 2 AC 105, the House of Lords held that nothing in Order 10 prohibited agreement by the parties on a mode of service of process outside its provisions. Thus service at a contractual address for service is not anything excluded by Order 10.

20. In Kenneth Allison Ltd and Others v. A. E. Limehouse & Co., an assistant of the defendant acting on the instruction of one of the partners of the defendant agreed to accept service and signed the appropriate form in acknowledgement. The House of Lords held that while the writ had not been served personally on the defendants' partner in accordance with Order 10 rule 1 of the Rules of Supreme Court, the rule did not prohibit agreement by the parties on modes of service of process outside its provisions; and the service on the personal assistant with the partner's express authorisation had constituted valid service. Mr Siu submitted that the mode of service in Kenneth Allison Ltd and Others v. A. E. Limehouse & Co. was an ad hoc arrangement and the service was acknowledged. I think that does not detract from the principle decided in that case by the House of Lords that there was nothing in Order 10 to prohibit the parties from agreeing as to the mode in which service may be effected on him. I think acknowledgement is not relevant. It is just evidence of the service. Its absence does not affect the question of effectiveness of the service. At the highest, the defendant may argue that he has no actual knowledge of the service, but that is besides the point.

21. In the present case, the Defendants agreed by the terms of the mortgage that service at the Sui Wo Court address shall be sufficient service and executed the mortgage deed to that effect. As a matter of law, the terms of the mortgage in relation to service are binding on the parties. They represented that they could be served at that address, that they could be reached there and that mails or documents sent there would be brought to their attention. There is no reason why they may retract from that representation or agreement. They are bound by the terms of the deed of mortgage. Thus, the Sui Wo Court address is one of their last known addresses. Whether in fact they have notice of the process served at that address is a separate issue.

22. As the Defendants are within the jurisdiction, I hold that the originating summons has been duly served on the Defendants in accordance with Order 10 rule 1(2)(b). By Order 10 rule 1(3), the date of service shall be deemed to be the seventh day after the originating summons was inserted through the letter box of the Sui Wo Court address.

23. I may as well mention about the service at the Kam Ying Court address on 7 June 2002. Copies of the summons were sent by ordinary post and not registered post as required in Order 10 rule 1(2)(a) nor were they served by inserting into the letter box in accordance with Order 10 rule 1(2)(b). That service must be ineffective. However, the evidence if accepted, is some evidence that the Defendants had notice of the proceedings.

Service under Order 10 rule 3

24. Miss Cheung argued in the alternative that the service was effective as being in accordance with Order 10 rule 3. I have no difficulties in dismissing that argument. The mode of service as provided for in Clause 16.01 is by leaving or sending by prepaid post addressed to the Defendants at the Sui Wo Court address. The originating summons was neither left at the Sui Wo Court address nor were they sent there by post. They were inserted into the letter box. That was not in accordance with the agreed mode of service.

25. Even if I were wrong and the service was effective, the judgment obtained would be irregular. The judgment was a default judgment obtained in the absence of the Defendants. As the Defendants were not before the court, it is an essential requirement of justice that all formal requirements before a judgment will be granted must be proved, including service of the originating summons. The Plaintiff's process server said in the affirmation of service that the originating summons was served at the Sui Wo Court address "being the usual or last known address" of the Defendants. He then went on to recite the requirement under Order 10 rule 1(3)(b)(i) that in the opinion of the deponent, the process inserted through the letter box will have come to the knowledge of the Defendants within 7 days thereafter. This would be a material irregularity or non-disclosure as the address relied upon for service under Order 10 rule 3 was the contractual address for service. When considering whether to enter judgment, the Master would be led to the belief that the process has been served on the usual or last known address of the Defendants and would have been brought to the Defendants' notice within 7 days thereafter. Had the Master been alerted to the fact that the address was the contractual address for service, he might have asked whether the Defendants were residing at that address and whether the service would have been sufficiently brought to the attention of the Defendants within 7 days or at all. He might have ordered re-service by post at the same address or parallel service at the Kam Ying Court address. Or he might not. But withholding the truth from him is an irregularity which must result in the default judgment having to be set aside.

Whether Defendants have notice of the proceedings

26. Miss Cheung referred to certain events referred to in the Plaintiff's affirmations filed for the purpose of the appeal as evidence of the Defendants' knowledge of the proceedings, which were not before the Master when the judgment was entered. Mr Siu argued that the inference to be drawn from those affirmations were neutral and referred to the Defendants' affirmation that they had no knowledge of the proceedings. It is not appropriate for me to conduct a minute trial on affirmations and make finding of facts. In fact, such findings would be unnecessary for determining this appeal. For reasons as I have explained, I find that the originating summons has been duly served in accordance with Order 10 rule 1(2)(b).

Conclusion

27. Upon my finding that the originating summons was duly served on the Defendants in accordance with Order 10 rule 1(2), the inescapable conclusion is that the judgment obtained was regular. The Defendants are not entitled to have it set aside as of right.

28. The Defendants denied to have knowledge of the service. I think that incredible or suspect to say the least. The Defendants shied away from saying whether such bulky documents as the originating summons was not found in the letter box at the Siu Wo Court address. The 2nd Defendant had been in arrears since September 2001. Demand letters and Notice of Cancellation of Loan had been sent to the Kam Ying Court address. The 2nd Defendant responded by negotiating for payment and refinance. However, I refrain from making any finding that the allegation of lack of knowledge is untrue as it is inappropriate to do so on the basis of conflicting evidence contained in the affirmations. Giving the Defendants the benefit of doubt, I am prepared to set aside the judgment on conditions.

29. In my view, the Defendants' affirmations have not disclosed any meritorious defence. This appears to me to be a very straightforward case of a borrower having difficulties and was unable to pay. Mr Siu said he had no instruction as to what the defence was. I find that disturbing as it would serve his client dis-service to set aside a judgment without even knowing if his client has a meritorious defence in the event that he was successful. Assuming he is, it would be a waste of costs to set aside the judgment when there is no valid defence. Both Defendants said in their affirmations that they were willing and able to pay any instalments. Accordingly, I allow the appeal and set aside the default judgment on condition that the Defendants pay the adjudged sum into court within 14 days. I order that the costs of this application be to the Plaintiff in any event and to be taxed on an indemnity basis.