FOK CHUN HUNG v. LO YUK SHI

HEADNOTE

[PRACTICE and PROCEDURE - setting aside judgment in default obtained before process served by registered post is returned undelivered - whether "regular" judgment - whether terms to be imposed on setting aside]

IN THE COURT OF APPEAL

1994, No. 181
(Civil)

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J U D G M E N T

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Godfrey, J.A. :

1. This is an appeal from an order of Bokhary, J.A. (sitting as an additional judge of the High Court) made on 27 September 1994.

2. By this order the judge set aside, on terms, a judgment obtained on 22 June 1994 by the plaintiff (the respondent before us) against the defendant (the appellant before us) for HK$1,048,498 together with interest and costs, no notice of intention to defend having been given by the defendant. (The judge also discharged a charging order which the plaintiff had obtained on 6 July 1994 on the strength of the judgment of 22 June 1994.)

3. The writ in the action had been issued on 24 May 1994. The plaintiff did not attempt to serve the writ personally on the defendant. Instead, he attempted to serve the copy writ by registered post (as he was entitled to do). By 14 June 1994, when the defendant's time for acknowledging service of the writ, and for giving notice of intention to defend the action, had expired, the defendant had not in fact given such notice. But it transpired that the reason why the defendant had given no notice of his intention to defend the action was that the plaintiff's attempt to serve the copy writ by registered post had not succeeded. On 1 July 1994, the copy writ was returned, undelivered, by the post office.

4. The defendant, claiming (correctly) that he had never been served with the writ, asked the judge (pursuant to O.13 r.9 of the Rules of the Supreme Court) to set aside, unconditionally, the judgment which had been obtained against him (and the charging order which had been made on the strength of it). As I have said, the judge did set aside the judgment and the charging order; but he refused to do so unconditionally. He said that he would set aside the judgment, which he observed had been regularly obtained, and discharge the charging order, only if the defendant gave to the court a number of undertakings, which the defendant duly did; and he ordered the defendant to pay, in any event, the plaintiff's costs of the defendant's application to set aside the judgment and the charging order.

5. The defendant now appeals to this court. He says that, in the circumstances set out above, the proper course for the judge to have taken would have been to set aside the judgment (and the charging order) unconditionally and to order that the costs of the defendant's application to set aside the judgment (and the charging order) be the defendant's costs, or at least costs in the action.

6. There is no doubt that, when service of process by registered post is allowed, and the letter is not returned undelivered, it is assumed to have been delivered in the ordinary course of post. Any judgment by default obtained on the faith of that assumption will be treated as a regular judgment and will not, as a general rule, be set aside except on proof of merits and payment of costs. (In an appropriate case, the judge hearing the application to set aside would be perfectly entitled to impose terms on the defendant as a condition of his doing so.) On the other hand, if the letter is returned undelivered and, nevertheless, a judgment by default is afterwards obtained, the judgment will be treated as irregular and will be set aside without further ado: see R. v. County of London Quarter Sessions, Appeals Committee, Ex parte Rossi [1956] 1 QB 682.

7. But in the present case the plaintiff's judgment was obtained before, not after, the copy writ was returned, undelivered, to the plaintiff. Does this make any difference?

8. The plaintiff says that it does; he obtained his judgment regularly, and ought not to be deprived of it without proof of merits and payment of his costs by the defendant. The defendant says it does not; whether or not the plaintiff's judgment was regularly obtained, the fact is that at the date of the judgment the defendant had not been served with the proceedings, so the judgment against him ought to be set aside unconditionally, the plaintiff paying his costs. We have to decide who is right.

9. In considering this, it is to be observed at the outset that the difficulty with which we are concerned has been anticipated by the Rules of the Supreme Court, which make special provision for the case where a default judgment has been entered after service, or attempted service, of the writ by post.

10. The Rules provide that a writ for service on a defendant within the jurisdiction may, instead of being served personally on him, be served by sending a copy of the writ by registered post to the defendant at his usual or last known address: see O.10 r.1(2)(a). They also provide that any affidavit proving due service of the writ in such a case must contain a statement to the effect that the copy of the writ has not been returned to the plaintiff through the post undelivered to the addressee: see O.10 r.1(3)(b)(ii). But, where (as in our case) after judgment has been obtained, the copy of the writ sent to the defendant is returned to the plaintiff, undelivered, the plaintiff must, before taking any step, or any further step, in the action for the enforcement of the judgment either (a) make a request for the judgment to be set aside on the ground that the writ has not been duly served; or (b) apply to the court for directions: see O.13 r.7(3).

11. In my judgment, these rules, properly analysed, resolve the difficulty which faces the court in the instant case.

12. In our case, the plaintiff should have made an application under O.13 r.7(3), as soon as the copy of the writ was returned to him, undelivered,on 1 July 1994, either requesting that the judgment should be set aside on the ground that the writ had not been duly served, or for directions that, notwithstanding the return of the copy of the writ, it should be treated as having been duly served. (This direction is appropriate when a plaintiff shows that, despite the return of the copy of the writ, "the defendant has had knowledge of the copy writ of summons having been served on him by post": see The Supreme Court Practice 1995, at 13/7/5). The plaintiff did not do so. In the event, on 27 July 1994, the defendant took out his own summons to set aside the judgment.

13. Further, although the copy writ sent to the defendant had been returned to the plaintiff through the post, undelivered, on 1 July 1994, the plaintiff, despite the provision of O.13 r.7(3) precluding him from taking any step or further step in the action for the enforcement of his judgment, applied for and obtained, on 6 July 1994, the charging order to which I have referred above; so that, whether or not the judgment itself had been regularly obtained, the charging order made on the strength of it clearly was not.

14. But the judgment against the defendant had been obtained (it does not seem to me to matter whether one describes it as having been regularly or irregularly obtained) despite the fact that the defendant had not been duly served with the writ. Clearly, as a matter of fact, he had never been served with the writ, since the copy of it addressed to him was returned, undelivered, to the plaintiff on 1 July 1994; and clearly, as a matter of law, he cannot be treated as having been duly served with the writ in the absence of any direction under O.13 r.7(3).

15. In Rossi's case (above) the reason for holding that service could not be "deemed to have been effected" was that service was proved not to have been effected at all. So here. The correct approach to such a case is that adopted by Russell L.J. in White v. Weston [1968] 2 QB 647 where he says this (at p.659):

"I do not myself attach importance to the question whether it is proper to label a judgment obtained in circumstances such as this as 'irregular' or 'a nullity'. The defect is in my judgment so fundamental as to entitle the defendant as of right ex debito justitiae to have the judgment avoided and set aside. If as a technical matter it is a matter of discretion to set aside the judgment, 'in accordance with settled practice, the court can only exercise its discretion in one way, namely, by granting the order sought,' to quote Upjohn L.J. in In re Pritchard, decd.

(The approach of Russell L.J. in White v. Weston (above) was adopted in a recent case not cited to us, Willowgreen Ltd. v. Smithers [1994] 2 All ER 533.)

16. Does it follow from this that the plaintiff's judgment in our case ought to have been set aside unconditionally? I would hold that it does. I would not hold that the plaintiff's judgment was irregularly obtained; the copy writ was not returned to the plaintiff until after he had obtained his judgment on 22 June 1994. He had no knowledge or notice, on that date, that his attempt to serve the writ had not succeeded, and he had not been guilty of any failure to comply with any of the rules governing the obtaining of judgments in default of notice of intention on the part of the defendant to defend.

17. But, as Denning L.J. pointed out in Rossi's case (at p.651), it is a fundamental principle in our law that no one is to be made liable by an order of any tribunal unless he has been given fair notice of the proceedings to enable him to appear and defend them. The common law has always been very careful to see that the defendant is fully apprised of the proceedings before it makes any order against him. Denning L.J. went on to mention (at p.692) that the merit of registered post in this regard is that the postman will only deliver the letter to the person to whom it is addressed or to someone who will take responsibility for seeing that he gets it. Otherwise he will return it to the sender, who will then get a note, sooner or later, if the letter is not received. (It may be added, however, that the demerit of registered post is that it gives the person to whom the registered envelope is addressed the opportunity not to take it in. This is why, in the Rules of the Supreme Court applicable in England and Wales, provision for service by post is limited to ordinary, not registered, post, which is eschewed by the English rule: see the Supreme Court Practice 1995, at 10/1/4 and 65/5/3.)

18. It is true that Denning L.J., in Rossi's case (at p.694), summed up the position by stating that if the letter was returned undelivered and nevertheless, notwithstanding its return, a judgment by default should afterwards be obtained, that judgment would be irregular and would be set aside ex debito justitiae. He did not expressly deal with the case where the judgment in default had been obtained before, rather than after, the return of the letter. But what matters, as I see it, is that a judgment obtained on the footing that the writ had been duly served must be set aside when in fact this was not the case (unless the court expressly otherwise directs).

19. I have, for my part, no doubt that a judgment obtained in these circumstances, even if regularly obtained, must be set aside unconditionally, just as it would be if it had been irregularly obtained. To take any other course would be a perversion of justice; whether the judgment was obtained before, or after, the return, undelivered, of the copy of the writ, such a course would involve treating the defendant as one who is craving an indulgence, rather than one who is (rightly) protesting at having been given no chance to be heard. That is what distinguishes our case from a case in which the defendant, having been duly served with the writ, but having for whatever reason let time go by for his giving notice of intention to defend, is required by the court to show a defence on the merits before he is granted the indulgence, at his own expense, of being given leave to defend despite his own failure to comply with the rules.

20. In support of his argument that we should take the opposite view, counsel for the plaintiff cited to us the local case of Honour Finance Co. Ltd. v. Chui Mei-mei [1989] 2 HKLR 146, in the Court of Appeal (in which the court did not have the benefit of adversary argument). To that, counsel for the defendant riposted that the case could not stand with the subsequent decision of the House of Lords in Barclays Bank of Swaziland Ltd. v. Hahn [1989] 1 WLR 506. I think there is much force in this, but the question does not arise for decision in the instant case and should be left to be considered on some other occasion. It does not arise for decision in the instant case because, in the local case, the service had been by ordinary post (as was then allowed) and the copy of the writ had not in fact been returned, so the case is distinguishable both on its facts and because the provisions of O.13 r.7(3) did not fall to be considered by the court. It is, however, worth adding that part of the court's reasoning in the local case is inconsistent with that of the English Court of Appeal in Willowgreen Ltd. v. Smithers (cited above) in which Nourse L.J. (with whom Thorpe J. agreed) said this (at p.539) :

"The judgment having been obtained in proceedings initiated by a summons which was not properly served on the defendant, it seems plain that it must be set aside ex debito justitiae. [Counsel] has submitted that there is some sort of discretion in the matter, but it is clear both on principle and from White v Weston that that is not the case."

21. A considerable number of other authorities were cited to us; but none of them turned on an analysis of the provisions of the local rule now in force and in none of them had the process in question been returned, undelivered, to the party who had posted it (other than Saga of Bond Street Ltd. v. Avaton Promotions Ltd. [1972] 2 QB 480, which was decided before O.13 r.7(3) was introduced into the English Rules of the Supreme Court and is therefore no longer authoritative). In these circumstances, I do not find these authorities of any assistance in resolving the question we have had to decide.

22. I would allow the appeal; set aside the judgment and the charging order obtained on the strength of it; and order (following Peter Cox Ltd. v. Thirwell (1981) 125 Sol.Jo. 48) that the defendant's costs of his application to set aside the judgment and the charging order, and of this appeal, be costs in the cause.

Mortimer, J.A. :

23. I agree and would allow the appeal with the order proposed.

Power, V.-P.:

24. I agree and have nothing to add.