GIANT PROFIT ENTERPRISES LTD v. RUNDONG FORTUNE INVESTMENT LTD AND ANOTHER

HCA 1295/2019

[2020] HKCFI 2722

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1295 OF 2019

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DECISION

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Introduction

1.  This is an appeal against the decision of Master Sabrina Ho dated 8 April 2020 where she dismissed an application by the defendants to set aside service of the Writ of Summons dated 18 July 2019 (the “Writ”) on the 1^st defendant (D1) and held that it was validly served.

The facts

2.  On 10 April 2014, P (together with two other investors who do not feature in this action) entered into a Note Purchase Agreement with D1 as issuer and D2 as guarantor to purchase senior secured guaranteed notes issued by D1 in the principal amount of US$15,000,000 (the “NPA”).

3.  On 16 October 2017, D1 issued to P a Senior Secured Guaranteed Notes Certificate for the principal amount of US$2 million (the “Notes”) pursuant to the NPA.

4.  Separately, D2 also executed a personal guarantee in favour of P dated 15 April 2014 (the “Guarantee”).

5.  By a Writ of Summons herein, P commenced proceedings against D1 and D2 to enforce, inter alia, the NPA, the Notes and the Guarantee.  P’s substantive case is that the Notes matured on 15 April 2019, and Ds have failed to repay the principal amount (with interest) under the Notes.

6.  On the same day, P purported to serve the Writ on Ds through Tricor Representatives Limited (“Tricor”) in reliance of clause 7.22 of the NPA (the “Process Agent Clause”), which provided that:

“The Warrantors [which includes the Ds] irrevocably appoint Tricor Representatives Limited… as their respective authorised agent for service of any legal process in Hong Kong… Nothing in this Agreement shall affect the right to serve process in any other manner permitted by Law.”

7.  D2 does not dispute that the Writ was validly served on him.  D1, on the other hand, claims that P was not entitled to rely on the Process Agent Clause in serving the Writ on it.

Discussion

8.  Before Master Ho, the parties’ arguments mainly focused on whether the Writ was properly served pursuant to Order 10 Rule 3 of the Rules of the High Court (“RHC”).

9.  Order 10 Rule 3 of RHC, insofar as material, provides as follows:

(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) the contract provides that, in the event of any action in respect of the contract being begun, the process by which it is begun may be served on the defendant, or on such other person on his behalf as may be specified in the contract, in such manner, or at such place (whether within or out of the jurisdiction), 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 paragraph (2), be deemed to have been duly served on the defendant.

10.  Ms Rosa Lee, who appeared for Ds, submitted that Order 10 Rule 3 is “contract specific”.  As the NPA and the Notes are separate contracts, P could only rely on the Process Agent Clause to effect service on D1 in respect of claims under the NPA and not those under the Notes.

11.  However, the focus on Order 10 Rule 3 is misplaced. That is because the provisions in Order 10 of RHC do not constitute an exclusive code with regards to the permissible modes of service of originating documents.

12.  This much is clear from Kenneth Allison Ltd v Limehouse [1992] 2 AC 105.  In that case, the defendant instructed its receptionist to accept service of the plaintiff’s writ on an ad hoc basis.  The defendant later sought to argue that service was invalid, because it did not comply with Order 10 of the Supreme Court Rules 1965 (which is materially similar to Order 10 of RHC).  The House of Lords held that there was nothing in the Rules which prohibited parties from agreeing on a mode of service outside its provisions.  As a result, the service of the writ in that case, being effected pursuant to the agreement of the parties, was valid notwithstanding the fact that it did not comply with the procedural rules.

13.  Lord Bridge of Harwich at p.116 cited with approval a passage of Collin LJ’s judgment in Montgomery, Jones & Co v Liebenthal & Co [1898] 1 QB 487.  Collins LJ held that:

In the present case the parties have put into operation the machinery as to service which they themselves have provided, and now when that machinery has been put into operation the defendants ask the court to treat that agreement as non-existent, and to set aside the service.  I do not think we can do that.  There is no prohibition, express or implied, in the rules against their coming to such an arrangement.

14.  Ms Lee sought to distinguish Allison on the basis that it concerned an ad hoc agreement in which the defendant actually agreed to accept service in respect of specific proceedings.  By contrast, the current case concerns a pre-existing contractual clause.

15.  This argument is inconsistent with Lord Bridge’s judgment in Allison.  In Allison Lord Bridge cited with approval two earlier authorities: Tarsis Suphur and Copper Co Ltd v Societe des Metaux (1889) 60 LT 924 and Montgomery (supra).  In both Tarsis and Montgomery the court held that the parties had by their own contractual provision created an alternative mode of service outside the civil procedure rules.  Lord Bridge made it clear that he saw no reason for distinguishing contractually agreed modes of service with ad hoc agreements to accept service: see Allison, at p.116D-F.

16.  It is clear that parties may contract for a mode of service independent of Order 10 of RHC.  In any event, the principle for which it stands is eminently sensible and I see no reason why it should not be followed.

17.  The only question is therefore whether the Process Agent Clause covers the present proceedings.  Ms Lee sought to persuade me that this went against a proper construction of the NPA and the Notes.  She referred me to the respective provisions of the NPA and the Notes, and submitted that each document constituted a self-contained contract, and that the parties intended to have two separate sets of agreements governing different aspects of their commercial relationship.  She suggested that to read the Process Agent Clause as covering proceedings under the Notes would be to “rewrite the [Notes] to supplement what the parties have expressly agreed”.

18.  The obvious difficulty with this submission is that, on its own terms, the Process Agent Clause provided for the appointment of Tricor as D1’s agent for the “service of any legal process in Hong Kong” (emphasis added).  The language used by the parties could not be any clearer, and is certainly wide enough to cover P’s present claim against D1.  Whether the NPA and the Notes should be read as separate contracts is beside the point. In my view, D1 is seeking to rewrite the Process Agent Clause by reading in qualifications or limitations not present on its terms.

19.  For the reasons above, P was entitled to rely on the Process Agent Clause in serving the Writ on D1.  As D1 does not challenge any aspect of the manner in which service was effected on Tricor, it follows that the Writ was validly served.  The appeal must be dismissed.

20.  I will now hear submissions on costs.

Submissions on costs

21.  Costs should follow the event.  Costs of the appeal is summarily assessed at HK$90,000 payable to P forthwith.