XCHRX Tin Fat Manufactory Ltd. v. Kessel Electronics (H.K.) Ltd.

DCCJ10210/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 10210 OF 2001

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Judgment

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In this matter, the Defendant seeks an order pursuant to Order 13 rule 9 that the Judgment in default entered by the Plaintiff herein on 23rd July 2001 ("the Judgment") against the Defendant be set aside for irregularity on the ground that the Default Judgment was entered prematurely.

2. The sequence of events leading to the Judgment is not in dispute. The writ and Statement of Claim was sent by registered post to the Defendant's registered office on 3rd July 2001. The Defendant received the writ and Statement of Claim on 4th July 2001. Solicitors for the Plaintiff applied for judgment in default against the Defendant by submitting a draft judgment and an Affirmation of Service on 18th July 2001. This was exactly 14 days (inclusive of 4th July 2001) after the actual receipt by the Defendant of the writ and Statement of Claim.

3. The Affirmation of Service dated 18th July 2001 reads:-

"1. I did on Tuesday, the 3rd day of July, 2001 serve the abovenamed Defendant with a sealed copy of Writ in this action together with a notice for guidance with chinese version and three copies of acknowledgement of service which appeared to me to have been regularly issued out of the District Court against the abovenamed Defendant at the suit of the abovenamed Plaintiff which was dated the 30th day of June, 2001 by sending the same by registered post addressed to Block A, 7th Floor, MP Industrial Centre, 18 Ka Yip Street, Chai Wan, Hong Kong being the registered office of the abovenamed Defendant.

2. At the time of the said service, the said writ and the copies thereof were subscribed and indorsed in the manner and form prescribed by the Rules of the District Court.

3. Up to the date hereof, the said writ so sent by registered post to the Defendant has not been returned to this Office or to the Plaintiff through the dead letter service."

4. The Judgment was signed on 23rd July 2001. The Defendant's solicitors attended court on 24th July 2001 to file Acknowledgment of Service but were rejected on the ground that judgment had already been entered the day before.

5. In applying to set aside the Judgment, the Defendant complains that the Plaintiff had not indicated to the Defendant the provision under which service was effected. It was only in an affirmation dated 21st August 2001 by the solicitor having conduct of the Plaintiff's case that it was sated that:-

"Due service of Writ of Summons together with the Statement of Claim was duly effected pursuant to section 365 Companies Ordinance, Cap. 32, section 8 Interpretation and General Clause Ordinance, Cap. 1 and Order 10 and Order 65, Rules of District Court, Cap. 336H."

6. There is no doubt that service on the Defendant, being a limited company, could have been effected under section 356 of the Companies Ordinance, Cap. 32. Alternatively, service could have been effected under Order 10 rule 1 of the District Court Rules, Cap. 336. But the Defendant contends that the two methods of service under particular provisions are alternatives - each mode subject to its own rules and it was not open to the Plaintiff to simply pick and choose one or the other method or assert that all the alternatives were used.

7. The Defendant further contends that service could not have been effected pursuant to section 356 of the Companies Ordinance, Cap. 32 because the Plaintiff filed an affirmation of service when applying to enter judgment in default. In support of this contention, the Defendant relies on Ho Kwok Wah v. Group Jewellery Arts Ltd. [2000] 3 HKC 595 where Rogers JA at p. 599 adopted the judgment of Fuad VP in United Venture Navigation Co. Ltd. v. Shum Yuen Nim [1991] 2 HKC 73 at 86:-

There can be no doubt that service of the writ was effected on the company in accordance with section 356 which contains no requirement of the kind to be found in Order 10 rule 1(3)(b)(i).

8. Thus, so the argument runs, service must be deemed to have been effected under Order 10 rule 1. However, there are two problems for the Plaintiff if service was effected under the Rules of the District Court. First, the Affirmation of Service dated 18th July 2001 failed to comply with Order 10 rule 1 (3)(b)(i) which requires the deponent to state that "in his opinion that the Writ sent to the address in question will have come to the knowledge of the Defendant within 7 days thereafter." The deponent did not make such statement. Secondly, service under Order 10 rule 1, unless the contrary is shown, is deemed to be the 7th day after the date on which the writ was sent to the address in question. See Order 10 rule 1 (3)(a).

9. Lastly, the Defendant contends that since the Judgment was obtained irregularly, it must be set aside without considering the merits of the defence.

The Proper Mode of Service

10. Let it be said at once that for service on a body corporate such as the Defendant herein Order 10 rule 1 is at best a fall back provision. Order 10 rule 1 (7) says categorically that:-

This Rule shall have effect subject to the provisions of any Ordinance and these Rules and in particular to any enactment which provides for the manner in which documents may be served on bodies corporate. Thus when the Plaintiff sent the writ and Statement of Claim by prepaid registered post to the Defendant's registered office, service is good under Section 356 of the Companies Ordinance, Cap. 32. This is quite clear from the Court of Appeal decisions in United Venture Navigation Co. Ltd. v. Shum Yuen Nim and Ho Kwok Wah v. Group Jewellery Arts Ltd. cited supra.

11. The fact that the Plaintiff filed an affirmation of service, if such an affirmation of service is superfluous, of course does not vitiate good service. The fundamental principle in our judicial system is that service must be effected. Once good service has been effected, the purpose of giving notice to the Defendant has been achieved. Nothing falling short of direct communication of withdrawal of process can undo the notice or service.

12. The complaint of failure to indicate the method of service used at or soon after service of the writ and Statement of Claim is beside the point. There is no statutory or common law requirement at all for such indication. All that a party has to do to effect service of process is to deliver the process, in this case the writ and the Statement of Claim, to the other party. In the case of service of a writ, the Defendant is not supposed to, nor entitled to, speculate on the effective date of service. The effective date of service is the day the Defendant received the writ.

The Default Judgment

13. The real issue in this matter is whether the Judgment obtained in default is regular. The Judgment was obtained under Order 13 of the District Court Rules, Cap. 336. One must, therefore, refer to the relevant provisions in that Order:-

"1. Claim for liquidated demand (O.23, r.1)

(1) Where a writ is indorsed with a claim against a defendant for a liquidated demand only, then, if that defendant fails to give notice of intention to defend, the plaintiff may, after the prescribed time, enter final judgment against that defendant for a sum not exceeding that claimed by the writ in respect of the demand and for costs, and proceed with the action against the other defendants, if any. (See Appendix A, Form 39)

6A. Prescribed time (O.13, r.6A)

In the foregoing rules of this Order, "the prescribed time"(訂明的時限), in relation to a writ issued against a defendant, means the time limited for the defendant to acknowledgement of service containing a statement to the effect that he does not intend to contest the proceedings, the date on which the acknowledgment was received at the Registry.

7. Proof of service of writ (O.13, r.7)

(1) Judgment shall not be entered against a defendant under this Order unless

(a) the defendant has acknowledged service on him of the writ; or

(b) an affidavit is filed by or on behalf of the plaintiff proving due service of the writ on the defendant; or

(c) the plaintiff produces the writ indorsed by the defendant's solicitor with a statement that he accepts service of the writ on the defendant's behalf.

(2) Where, in an action begun by writ, an application is made to the Court for an order affecting a party who has failed to give notice of intention to defend, the Court hearing the application may require to be satisfied in such manner as it thinks fit that the party failed to give such notice.

(3) Where, after judgment has been entered under this Order against a defendant purporting to have been served by post under Order 10, rule 1(2)(a), the copy of the writ sent to the defendant is returned to the plaintiff through the post undelivered to the addressee, the plaintiff shall, before taking any step or further step in the action or 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.

(4) A request under paragraph (3)(a) shall be made by producing to an officer of the Registry and leaving with him for filing, an affidavit stating the relevant facts, and thereupon the judgment shall be set aside and the entry of the judgment and of any proceedings for its enforcement made in the book kept in the Registry for that purpose shall be marked accordingly.

(5) An application under paragraph (3)(b) shall be made ex parte by affidavit stating the facts on which the application is founded and any order or direction sought, and on the application the Court may

(a) set aside the judgment; or

(b) direct that, notwithstanding the return of the copy of the writ, it shall be treated as having been duly served; or

(c) make such other order and give such other direction as the circumstances may require."

For "the time limited for the defendant to acknowledge service of the writ", one has to refer back to Order l2:-

"5. Time limited for acknowledging service (O.12, r.5)

References in these Rules to the time limited for acknowledging service are references

(a) in the case of a writ served within the jurisdiction, to 14 days after service of the writ (including the day of service) or, where that time has been extended by or by virtue of these Rules, to that time as so extended; and

(b) in the case of a writ served out of the jurisdiction, to the time limited under Order 10, rule 2(2), Order 11, rule 1(3), or Order 11, rule 4(4), or, where that time has been extended as aforesaid, to that time as so extended."

14. It is clear that the Affirmation of Service dated 18 July 2001 was filed pursuant to Order 13 rule 7. It is not a superfluous device. On the face of it, there was due service of the writ on the Defendant herein.

15. It is also clear that the Plaintiff was entitled to judgment after the Defendant failed to acknowledge service within the prescribed time. The prescribed time runs not from the date of deemed of service, but from "service of the writ (including the day of service)". There is no excuse for the Defendant not to acknowledge service within 14 days from the 4th July 2001 because on the face of the writ, and indeed in every writ, there is this paragraph:-

" Within (14 days) after the service of this Writ on you, counting of service, you must either satisfy the claim or return to the Registry of the District Court the accompanying ACKNOWLEDGMENT OF SERVICE stating therein whether you intend to contest these proceedings."

16. The Defendant did receive the writ and Statement of Claim. The Defendant had 14 days to acknowledge service. The Defendant did not act in time believing that it was entitled to a fictitious 7 more days under Order 10 rule 1(3)(a) which as I have held does not apply to the Defendant as a body corporate.

Merits of the Defence

17. By insisting that the Judgment ought to be set aside for irregularity without consideration of the merits of the defence, the Defendant implicitly accepts that if the Judgment is regular the Judgment should be upheld despite merits in the defence. It is an unwise position to take but then perhaps the Defendant does not have much of a defence to stand on and it is merely seeking a tactical advantage to stall for time.

18. On the Plaintiff's side, it is pointed that there is no merit in the defence in any event.

19. There is a draft defence exhibited to the affirmation dated 31st July 2001 by the Finance Manager of the Defendant. All that the draft defence says is that there were delays in delivery of goods and that the Defendant used to settle accounts with the Plaintiff by payment on average 150 days after invoice. There is a counterclaim for loss and damage as a result of delay but no particulars are given. Such defence is worse than a bare denial and non-admission.

20. In the premises, the Judgment is in all respects regular. There is no ground to set it aside. Nor is there any ground to give conditional leave to defend. The Defendant's summons to set aside judgment is dismissed with costs to the Plaintiff, such costs to be taxed if not agreed.