UNITED MERCHANTS FINANCE LTD. v. TONG SANG AND ANOTHER

IN THE COURT OF APPEAL

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JUDGMENT

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Sir Alan Huggins, V.-P.:

1. We are here concerned with applications to set aside two default judgments.

2. The respondent Plaintiff took out a writ in the District Court on 14th February 1984 claiming against the appellant 1st Defendant damages for breach of an alleged hire-purchase agreement. That writ claimed a small sum of liquidated damages for overdue rental and a further sum which was claimed in the alternative as liquidated or unliquidated but quantified damages. The Plaintiff sought to effect service by post and addressed the envelope containing the necessary documents to the 1st Defendant at the address said to be shown in the agreement, namely "G/F, 91 Man Lin Street, Kowloon". There is no such street in Kowloon or anywhere else in the Colony, but there is a "Man Nin Street" in Sai Kung, New Territories, and that was the address at which the 1st Defendant formerly carried on business in partnership.

3. The 1st Defendant not having filed a Defence the Plaintiff applied for judgment in default. Unfortunately we have not been supplied with copies of the judgments and orders given or made in the case, but we are told that on 9th March 1984 judgment was entered for damages to be assessed. It seems that the Deputy Registrar declined to enter judgment for the small liquidated sum and required that a separate application be made for that. This was done, and on 27th March judgment was entered against the Defendant for $460.33.

4. A summons to set aside the judgment of 27th March was taken out on 13th July and one to set aside the judgment of 9th March on 10th September. The first was dismissed on 14th August and the second on 5th November. A basis of both applications was that the writ had not been regularly served and, as regards the judgment of 9th March, it was further contended that there was no jurisdiction to enter a default judgment for unliquidated damages by reason of the provisions of r.22(6) of the District Court Civil Procedure (General) Rules ("the District Court Rules"). The judge rejected both contentions and further held that the Defendant was guilty of inordinate delay in making his applications.

5. The evidence of the 1st Defendant was that by reason of the failure to address the writ properly he did not receive it until 11th March. There was no evidence to the contrary before the judge, but, in spite of that, he expressed himself to be "thoroughly unimpressed" with the 1st Defendant's assertion and also with his explanation as to why delivery was so late. Indeed, he held that by virtue of r.20(1)(b) and s.8 of the Interpretation and General Clauses ordinance the writ was deemed to have been served on 16th February, the day after it was posted. With respect I cannot agree. The address to which the writ was sent was not, and never had been, the address of the 1st Defendant or of anybody else. The mis-spelling of "Nin" might not by itself have been fatal, but the naming of the wrong town was a grave error and might well have caused the delay. Had the Plaintiff been able to prove that the 1st Defendant himself had given it this wrong address, an estoppel might have arisen, but it appears that the defence of the 1st Defendant will be that he never signed the agreement and that his signature was forged, so, if an estoppel had been raised, he would no doubt have denied making any representation as to his address. I would hold that there was no presumption of service on 16th March (or any other date) which the 1st Defendant was required to rebut. If there had been, it is still contended that the judge was wrong in finding that the presumption had not been rebutted. It is not necessary to reach a final conclusion on this point. However, whilst a judge is not obliged to believe affidavit evidence which has not been contradicted, I cannot understand what made the judge here unwilling to believe that delivery was delayed. The 1st Defendant's explanation was not inherently incredible, even though the length of delay was nearly a month.

6. Although no presumption as to the date of service arises and the judgment of 9th March was clearly entered before service had been effected, I do not see how the 1st Defendant can maintain that the writ was not regularly served on 11th March, i.e. before the judgment of 27th March: he admits having received the writ through the post and that was good service under r.20(1)(b).

7. As to the judgment of 9th March it is said that the 1st Defendant is entitled to have it set aside ex debito justitiae regardless of any delay. No authority for that proposition was cited, but I find it stated in 1 Supreme Court Practice (1985) 128 (13/9/9) that a judgment entered before actual default is made by the defendant is irregular and the defendant is entitled to have it set aside ex debito justitiae. On that ground alone the judgment of 9th March should be set aside.

8. I turn next to the question of jurisdiction. What Mr. Yu submits is that, although there was power under r.22(1)(c) to enter a default judgment in respect of a liquidated claim, there was none to enter a judgment for an unliquidated claim unless it stood alone. The judge purported to do so by virtue of 0.19 r.6, which, he said, applied to the District Court under the provisions of r.9. Rule 9 reads:

"(1)    Subject to the provisions of the Ordinance and of these rules, the Rules of the Supreme Court as for the time being enacted and save as it therein may otherwise be provided shall apply to proceedings in the Court as they apply to proceedings in the High Court with such modifications as are necessary for that purpose.

 

(2)    Those parts of the Rules of the Supreme Court which are listed in the Schedule shall not apply to the Court or to any proceedings in the Court. "

Order 19 r.6 of the Rules of the Supreme Court is not one of the rules listed in the Schedule and is, therefore, not expressly excluded. The matter of default judgments is dealt with in the District Court Rules in r.22, the material parts of which are:

"(1)    Where the plaintiff's claim against the defendant is for -

 

        (a) the possession of land;

        (b) the return of any specific chattel; or

        (c) the payment of any debt or liquidated demand, and no defence or counterclaim has been filed accordance with rule 21, the plaintiff may apply to enter judgment. "

"(6)    where a writ is endorsed with a claim against a defendant for unliquidated damages only, then, if that defendant fails to file a defence in accordance with rule 21, the plaintiff may apply to the Registrar to enter interlocutory judgment against that defendant for damages to be assessed by a judge in chambers and costs, and may proceed with the action against the other defendants, if any. "

No express provision is made for mixed claims, i.e. actions brought for both liquidated and unliquidated damages, as is done in relation to the High Court in 0.19 r.6. It is contended on behalf of the 1st Defendant that the omission of any such provision was deliberate and indicates an intention that no default procedure should be available where neither para.(1) nor para.(6) of r.22 applies. This involves reading r.9 as being 'subject to the provisions, express or implied, of the Ordinance and of these rules'', whereas the argument on behalf of the Plaintiff is that the Rules of the Supreme Court apply unless they are contrary to the express provisions of the District Court Rules. The Plaintiff relies upon LEE Ting v WEI Sau-hung 1977 H.K.D.C.L.R. 17, which is said to exemplify the practice of the District Court. There plaintiffs claimed unliquidated damages for slander and an injunction to restrain a repetition of the slander. It was held that the plaintiffs could invoke 0.19 rr.3 & 7 of the Rules of the Supreme Court, although it is not clear why those rules were thought to be relevant when the case came before the court not upon an application for judgment in default (which had previously been refused by the Deputy Registrar on the ground that the claim was outside the ambit of r.22) but "for formal proof" upon the trial of the action. 

9. It is understandable that there should be some doubt as to the proper construction of the rules, but I think the arguments on behalf of the 1st Defendant are to be preferred. It was clearly intended that the default procedure in the District Court should be different from that in the High Court. This appears from r.22(1). Yet r.22(6) is to all intents and purposes in identical terms to those of 0.19 r.3 of the Rules of Supreme Court and, if the Plaintiff's contention were right, would be unnecessary. As was suggested in argument, the intention may have been that default judgments should not be so readily obtainable in the District Court. The proper interpretation of the District Court Rules indicates not just an omission to deal with "mixed claims" but the exclusion of such claims from the default procedure. I think Mr. Yu was right when he sought to gain some support for his contention by pointing out that no one appears to have sought to contend that 0.13 of the Rules of the Supreme Court (relating to failure to give notice of intention to defend) is applicable to the District Court, even though it is not one of the Rules of the Supreme Court listed in the Schedule to the District Court Rules: it is implicitly excluded by the provisions of the District Court Rules. Accordingly I am of the view that, as this was a mixed claim, there was no jurisdiction to enter the judgment of 9th March and, on this ground also, it should be set aside. The judgment of 27th March is not defeated in like manner, because the word "only" does not appear in r.22(1).

10. All that remains is to consider whether the judge was wrong to hold that there had been inordinate delay in relation to the judgment of 27th March. The delay was in two parts, delay in filing a defence (which led to the entry of judgment) and delay in applying to set aside the judgment once it had been entered. As soon as he became aware of the contents of the writ, the 1st Defendant knew the nature of the claim and that he had 14 days in which to file a defence. Unfortunately he went for advice to someone who felt unqualified to give it and who, whether or not he also recommended immediate action, made an appointment for the 1st Defendant to see a lawyer on a day after that on which the time for defence expired. The judge was influenced in reaching his conclusion that there had been inordinate delay by his belief that the 1st Defendant must have been alerted on 13th March "to the urgency of taking action". Such evidence as there is seems to me to suggest the contrary.

11. After the judgment had been entered, the 1st Defendant had professional advice on 28th March (a Wednesday). Although the advice then sought was in relation to the writ and there is no evidence that the 1st Defendant was then aware of either of the judgments which had been entered, - indeed, the evidence before us does not disclose when, if at all, notice of the judgments was given - it must have been obvious that the time for filing a defence had already expired and that entry of judgment was at least imminent. Be that as it may, the 1st Defendant did not make formal application for Legal Aid until the next week. That delay cannot be justified. Although Legal Aid was at first refused, the 1st Defendant appealed against the refusal and he was granted Legal Aid on 5th June. Solicitors were instructed on 9th June. In the circumstances a delay of 16 days thereafter before the Plaintiffs' consent to Getting aside the judgment was sought was unreasonable. After that consent was refused, only three days passed before a summons was taken out, which, I consider, cannot fairly be complained of. Again, in finding that the delay was inordinate the judge appears to have been influenced by his belief that the Legal Aid Department would have advised the 1st Defendant on 2nd April of the need to take action of some kind. With respect I am not convinced that that assumption, either, could properly be made, especially as the Legal Aid Department might well not have been aware of the judgments.

12. The total of the unexplained delays was about five weeks, and it must be remembered that until the end of June the Plaintiff had no idea that any judgment was under attack, although he almost certainly knew on 12th March that the 1st Defendant was then disputing the agreement. Of course, no attempt was made to enforce the judgment and the 1st Defendant had not been wholly idle: rather had he been insufficiently advised. We do not know what view the judge would have reached had he been uninfluenced by the assumptions to which I have referred. As it is, we must substitute our own discretion and try to balance the legitimate interests of both parties. I think it is not entirely irrelevant that the judgment of 9th March has to be set aside in any event and that the merits of the claim to unliquidated damages will have to be heard. Not without hesitation I would set aside the judgment of 27th Marchaalso.

Cons, J.A.:

13. I entirely agree with what my Lord has said.

Fuad, J.A.:

14. I agree and have nothing to add.

21st December 1984