BANK OF CHINA (HONG KONG) LTD v. CHEN JIANREN

HCA 2844/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2844 OF 2001

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J U D G M E N T

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Introduction

1.  On 19 July this year, Master Hui made an order extending the validity of the writ in this action, which is dated 22 June 2001, for a period of three months from the date of his order so that it might be served on the Defendant.  Having made that order he then went on to deem that service of the writ on the Defendant had taken place on 16 November 2006.  Having made these orders, he then gave directions as to further pleadings in the action [see Bundle 6-9].

2.  This is the Defendant’s appeal from that order, who has also taken out two summonses under O.12 rr.7 and 8 of the RHC which cover the same ground as the appeal itself, variously seeking orders setting aside the writ, a declaration that the writ has not been duly served on the Defendant, a discharge of the Master’s order and for a further declaration that the court has no jurisdiction over the Defendant in the circumstances of the case to which I will come shortly.  These summonses are at pages 13 to 20 of the Bundle.

The Nature of the Claim

3.  This is a claim by the Plaintiff bank against the Defendant, for $27,300,000 plus interest said to accrue at the daily rate of $14,584.93 as from 25 July 2000, based on two Deeds of Guarantee dated 9 June 1993 and 24 October 1994 respectively whereby he guaranteed the liabilities of the principal debtor, a company called Gain Button Development Limited, of which he was a director and shareholder.  If this matter were to go to trial, the Defendant’s case will be that his signature on the guarantees has been forged.  He did not sign and therefore is not liable.

Chronology

4.  Mr Pow SC, for the Plaintiff, has provided a very helpful and complete chronology from which I propose to extract some important and relevant dates.  The matter started on 15 August 2000 with a letter of demand from the Plaintiff to the Defendant which had the effect of engaging the “on demand” provisions in the guarantees and which also started time to run for the purposes of the limitation period — in this case, because the guarantees were under seal, of 12 years.

5.  As is apparent from the Immigration Department’s records, the Defendant departed from Hong Kong on 18 June 2001, not returning until 4 August 2001.  On 22 June 2001, the Plaintiff issued its writ which it purported to serve on the Defendant on 27 June 2001 pursuant to O.10 r.1(2) RHC by leaving it at four addresses of the Defendant in Hong Kong being his “usual last known address” for him here.  When it did so it was not aware that he was not in Hong Kong on 27 June.  On 4 August 2001, the Defendant not having entered an appearance to the writ, the Plaintiff applied for and obtained judgment in default.

6.  On 10 April 2006, very nearly five years after it had apparently obtained a regular default judgment against the Defendant, the Plaintiff served a statutory demand on the Defendant, as a preliminary step to petitioning for his bankruptcy, by substituted service by advertisement in the Hong Kong Economic Times and on 29 August 2006 presented a Bankruptcy Petition which it served on him at his office in Zhongshan on 26 October 2006.  In November 2006, the Defendant instructed his present solicitors to represent him who filed a Notice to Act on his behalf in the action.  They proceeded to issue a summons to set aside the August 2001 default judgment which, after a certain amount of toing and froing relating to proof that the Defendant was outside Hong Kong when the writ was purportedly served on him, the Plaintiff consented to having the judgment set aside due to the Defendant’s absence from Hong Kong on the date of service of the writ.  This was done on 14 February this year by virtue of an order to that effect by Master De Souza [page 32]. 

7.  This was followed the next day [the 15^th February] by a letter from the Defendant’s solicitors [page 230] to the effect that they had no instructions to accept service of the writ.  On 23 February, the Plaintiff applied ex parte to renew the writ [60-1] under O.6 r.8 or O.3 r.5 RHC.  On 16 March, Master Hui adjourned this application for a contested inter partes hearing.  The Plaintiff also took out a summons dated 4 April this year which put this application on a formal inter partes basis by asking for a variety of orders [see 25(1-4)] including an extension of the validity of the writ and a dispensation from serving the writ because the writ had already come into the possession of the Defendant’s solicitors.  Alternatively, it sought leave to serve the Defendant out of the jurisdiction and additionally the summons suggested three methods of service on the Defendant, being on his solicitors in Hong Kong, advertisement in the Wen Wai Po, which freely circulates in Hong Kong and on the Mainland and, by registered post at the Defendant’s address in Zhongshan, or by such other means as the court might order.  This was heard on 19 July when leave to renew the writ was given from which there is this appeal.

8.  As I have already observed Master Hui deemed service to already have been effected on the Defendant by virtue of service of the writ on his solicitors on 16 November 2006 as appears in his Order of 19 July 2007 [6-9 supra.].

The Argument

9.  Mr Kenneth Chow, who appears for the Defendant, frankly admits and indeed asserts that the Defendant is entitled and intends to take every point available to him to defeat this claim both on the basis of technicality as to service and jurisdiction and, failing which, on the merits if the Plaintiff succeeds in bringing him to trial, when he will say that his signature on the guarantees had been forged.  It is for this reason that the Defendant’s solicitors, who have been on the record and representing him since November last year, have written to the Plaintiff’s solicitors to say that they have no instructions to accept service of the writ, even if they fail to have the Master’s Order extending the validity of the writ discharged.  Nevertheless, for that stance to have any effect they will also need to disturb the Master’s Order as to deemed service.

10.  The principal source of the court’s jurisdiction for the renewal of writ is O.6 r.8 RHC.  As will become apparent in a moment the facts of this matter remove this application for a renewal from the scope of an order under O.6 r.8.  This being so Mr Pow has to rely on O.2 r.1 and O.3 r.5 to which I will presently need to refer.

11.  It is helpful to start with the note at 6/8/1 [page 67 of the current practice] which sets out the primary position.  It is in the following terms and unsurprisingly, Mr Chow places strong reliance on what is said there:

“	Effect of rule— A writ is valid in the first instance for 12 months, and the court has power to extend the validity of a writ for up to 12 months.
	This rule provides a comprehensive code for the renewal of a writ, and therefore an irregularity in procedure caused by failure to renew a writ under the rule is such a fundamental defect in the proceedings that the wide powers of the court under O.2, rr.1 and 2 to cure non-compliance with the rules ought not to be exercised by treating a writ which has become invalid for service as though it had been renewed and is therefore valid for service (Bernstein v. Jackson [1982] 1 W.L.R.1082 at 1089; [1982] 2 All E.R. 806, CA and see Fabrique Ebel Société Anonyme v. MBO Far East (H.K.) Ltd [1985] 1 H.K.C.166)
	In Leal v. Dunlop Bio-Processes International Ltd [1984] 1 W.L.R.874; [1984] 2 All E.R.207, CA, the matter was put differently, but in a way that in most cases is likely to secure the same practical effect.  There it was held that O.2 r.1 was wide enough to give the court jurisdiction to cure irregular service of a writ, the validity of which had expired before the purported service, but that it would be an improper exercise of discretion under that rule to make good the irregular service retroactively where the writ could not properly have been renewed under O.6, r.8, if the plaintiff cannot properly enter through the front door of O.6, r.8, he should not be allowed to enter through the back door of O.2, r.1 (followed in Dixon v. Grand Hyatt Hong Kong Co. Ltd & Another [1994] 2 H.K.C. 489 and Mercedes-Benz AG v. Leiduck Herbert Heinz Horst & Another [1994] 3 H.K.C.216, considered in Tavera v. Macfarlane [1996] P.I.Q.R. P292 (CA (Civ. Div.)), but see Boocock v. Hilton International Co. [1993] 4 All E.R. 19 (followed in LG Electronics Hong Kong Ltd v. Bank of Taiwan [2001] 4 H.K.C.421; cited in Transamerica Occidental Life Insurance Co. (HK Branch) v. King Sound Industry Co. Ltd & Another [2005] 1 HKLRD 125, CFI) and Singh (Joginder) v. Duport Harper Foundries Ltd [1994] 1 W.L.R.769, paras 6/8/9 and 6/8/3.
	This rule applies to a concurrent writ, and also to an originating summons, subject to any special provisions to the contrary relating to particular types of proceedings, see para.7/7/8 ‘Duration’.”

12.  It is plain on the facts of this case that this writ is not amenable to an extension under O.6 r.8.  By O.6 r.8(1) a writ is valid in the first instance for 12 months beginning with the date of its issue.  This writ therefore expired on 21 June 2002.  Rule 8(2) then comes into play.  Its effect is that where a writ has not been served on a Defendant within 12 months, the court may extend the validity of the writ:

“

… from time to time for such period, not exceeding 12 months at any one time, beginning with the date next following that on which it would otherwise expire, as may be specified in the order, if any application for extension is made to the court before that day or such later day (if any) as the court may allow.” [emphasis provided]

13.  In this regard Mr Chow has correctly analysed this sub-rule.  He refers to three requirements.  Firstly, that the validity of the writ can only be extended for a period not exceeding twelve months at any one time.  Secondly, the extension must begin with the date immediately following that on which the writ would have expired and lastly, the extension must be specified in the Order granting the extension.

14.  This writ having expired some five years before the Master’s renewal of it, O.6 r.8 would not have been the appropriate means by which such an order could be made.  It is difficult to imagine that a court would on one single occasion be able to grant five separate 12-month extensions.  Mr Chow has sought to attack the Master’s Order because he says it does not conform with the requirements of O.6 r.8.  Nevertheless, it seems to me that he has overlooked the provisions of O.2 r.1 and O.3 r.5.  Mr Pow is driven to accept that this is not an O.6 r.8 case, nor is it typical of such a case where a Plaintiff having issued his writ has, by oversight or bad judgment, allowed it to expire and then makes an application within the first year after its expiry.  In the present case, the Plaintiff had assumed that it had effected good service at four addresses, two of which were the Defendant’s business addresses and one of which was the address that he had provided when he signed the guarantees.  The necessity for having to make this application for renewal has been caused by the proven fact from immigration records that the Defendant was not in Hong Kong on the date of service.  Until that had been demonstrated it seems to me that the Plaintiff was entitled to the view that it had validly served the Defendant and that it had a good default judgment against him.

15.  Mr Chow has taken very strong issue with the integrity of the affidavits of service as to the presence of letter boxes (hotly denied by the Defendant) at the office building where service has been effected and through which the writ had been inserted.  At this stage, this is neither here nor there as Mr Pow has correctly pointed out, because the only basis upon which judgment has been set aside is the Defendant’s absence from Hong Kong on the date of service.  Once that fact had been proved the court had no option but to set aside the default judgment.

16.  Now much of Mr Chow’s complaints against the Plaintiff’s conduct as to service, which apart from calling into question the integrity of its solicitor’s process server, also extend to the Plaintiff’s knowledge that the Defendant was a resident of Zhongshan.  In such circumstances, Mr Chow submits that the Plaintiff should have applied under Order 11 RHC to serve him out of the jurisdiction.  It strikes me that none of these complaints are sustainable.  These two Deeds of Guarantee record that the defendant here bound himself to having any dispute decided in accordance with Hong Kong law.  He was guaranteeing the indebtedness of Hong Kong company of which he was both director and shareholder and had provided, as one of his addresses, the principal debtor company’s address at which he was served.  All the addresses at which service was effected came from the Plaintiff’s records of addresses at which the Plaintiff might be contactable.  For these reasons, it seems to me that the Plaintiff cannot be criticised for serving the Defendant in the manner that it had.

17.  A better point taken by Mr Chow is the unexplained delay of five years before an attempt was made to enforce this substantial judgment.  This is an aspect of the case that calls for explanation.  Nevertheless, I do not consider that Mr Chow is legitimately able to say that the delay is indicative of the fact that the Plaintiff was aware that it had failed to effectively serve the Defendant.  There is simply no evidence to support that view.  At present, it seems to me that a delay of this sort may well affect the period for which the Plaintiff may be able to claim contractual interest on the principal debt as well as interest as may be awarded by the court in the ordinary course of litigation.

18.  In terms of whether Mr Pow is able to hold this appeal, it seems to me that he is required to show that good reasons are present which support the renewal of the writ.  He needs to persuade me, as the Master had been persuaded, that the circumstances of this case are exceptional.  The references in the authorities to not allowing a Plaintiff to enter through the back door if he cannot enter by the front door [see 6/8/1 supra.] are not really applicable to the facts of this case.  I am entirely satisfied that the Plaintiff had made perfectly good and reasonable efforts to serve the Defendant in 2001.  That service was only invalid because, unknown to the Plaintiff, the Defendant happened to be outside Hong Kong on the day of service.  It is plain from O.2 r.1 that the court enjoys a wide discretion to cure irregularities of this sort.  The court also has express power to extend time under O.3 r.5 which is now the only route available to the Plaintiff for the reasons that I have previously discussed.

19.  Mr Chow has referred to the impact of a renewal on the limitation period.  It seems to me that on a proper appreciation of the chronology in this matter (this being a Deed of Guarantee) that Mr Pow is quite right in submitting that the limitation period will not expire until 2012.  There is no limitation defence available to the Defendant of which he might he deprived by a renewal of the writ.  His defence is the fundamental one that he did not sign the Deeds in question.

20.  On these exceptional facts, it strikes me as entirely proper that the plaintiff should have its writ renewed and accordingly, I propose to uphold that part of the Master’s Order providing for the extension on the terms ordered by him.

21.  There is no reason why this perfectly good order should be discharged thereby requiring the Plaintiff to issue a new writ which it would be able to do, with some five years of the limitation period still to run.

22.  Another contentious issue has been the order made by the Master deeming service to have taken place when the Defendant’s solicitors obtained a copy of the writ on 16 November 2006.  Mr Chow has addressed a trenchant submission criticising the making of such an order in the face of the Defendant’s and his instructing solicitor’s position that those solicitors have no instructions to accept service of the writ, their remit being limited to applying to set aside the default judgment and now to resist the Plaintiff on the question of whether the writ should be renewed.  What the Defendant would like to see happen is the Plaintiff having to re-serve the writ in mainland China, obliging it to run the gauntlet under Order 11 RHC with all the attendant delay and expense that such an application can result in including a potential appeal process from such a proceeding.

23.  It strikes me that the remarks of Stone J in Transamerica Occidental Life Insurance v King Sound Industry [2005] HKLRD 125 at page 133 D-G are apposite:

“

The object of service of process upon a party is to bring the process to the notice of the party to be served, and such manifestly has occurred.  The manner in which service has been effected has caused no prejudice, and none is alleged … if and insofar as there is some technical failure, that falls to be cured under the provisions of O.2 r.1 … and if and insofar as such be necessary in this regard I exercise my discretion in favour of the plaintiff.”

There can be no doubt whatsoever that the Defendant has received the writ and knows what the case is all about and is able to respond to it.  Mr Pow accuses him of playing games with the court and in my judgment there is much force in that comment.  Deputy Judge Muttrie had a similar situation before him in Bank of Austria v Surwardi Sukamoto, HCA 15309/1998 [6^th December 2001 unreported].  He said this:

“

In effect the defendant is saying ‘catch me if you can’.  This is further borne out by the fact that in June this year the plaintiff’s solicitors asked the defendant’s solicitors whether they had irrevocable instructions to accept service if the Master set aside the judgment and the orders for service on which it was based.  The answer was that they did not think they had.  Obviously the defendant wishes to keep his bolt-hole open so that he can go to ground again if necessary.”

Similar sentiments were expressed by Findlay J in China Ocean v Whistler International, HCCT 20 of 1999 [26^th April 1999 unreported]:

“

it ill lies in the defendant’s mouth to say — ‘I will not tell you where I am so that you can effect conventional service on me, but you cannot serve me by service on my solicitors who are representing me in the matter with which the court is concerned’.  There can be no doubt that the defendant does not suffer any prejudice by the substituted service. … it can be safely assumed that the defendant’s solicitors are in touch with their client and able to obtain instructions.”

24.  I respectfully agree with the remarks made by both judges in those two cases.  In the absence of any prejudice, in circumstances that the writ had been brought to the Defendant’s attention in November 2006, it seems to me that the Master was perfectly right to have deemed service to have taken place in the way that he did in his Order.  The Order is perfectly sensible and practical and I uphold it.

25.  This being my view, the whole of the Master’s Order will remain in place with the consequence that the appeal must stand dismissed with an order nisi that the Defendant must pay the Plaintiff’s costs of the appeal.  Consequentially, I will also dismiss the Defendant’s summonses also with costs nisi to the Plaintiff.