CMIC FINANCE LTD v. KE JUN XIANG

                 CACV 175/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 175 OF 2005

(ON APPEAL FROM HCA 1711 OF 2004)

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JUDGMENT

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Hon Yuen JA :

1. I have had the benefit of reading in draft the judgment of Hon. Sakhrani, J. and agree with the reasons set out, and the order dismissing the appeal and the nisi order as to costs.

Hon Sakhrani J :

2. The plaintiff is a licensed moneylender.  The plaintiff’s claim against the defendant in this action is for the sum of HK$2,658,746.49 in respect of unpaid principal and interest on a loan made by the plaintiff to the defendant pursuant to a memorandum dated 26 June 2003.

3. The writ of summons was issued on 23 July 2004.  In an effort to effect service of the writ on the defendant, the plaintiff’s solicitors sent a copy of the writ by registered post on 23 July 2004 at two addresses in Hong Kong, one of which was stated in the loan memorandum and the other was the latest registered office of a listed Hong Kong company, CIL Holdings Ltd., of which the defendant was the Chairman.  Both of the addresses were addresses of commercial premises.

4. The evidence shows, however, that the copies of the writ so posted to the defendant were returned to the plaintiff’s solicitors and were thus not delivered to the defendant.

5. Apart from sending the writ by registered post at the two addresses, the plaintiff’s solicitors on 28 July 2004 also inserted a copy of the writ of summons enclosed in a sealed envelope addressed to the defendant through the letter box at one of the two addresses in Hong Kong.  This was not returned to the plaintiff’s solicitors.

6. The defendant was not in Hong Kong when the writ of summons was sent by registered post to the two addresses in Hong Kong.  He was also not in Hong Kong when the writ of summons enclosed in a sealed envelope was inserted through the letter box at one of the addresses.

7. The defendant was resident in Guangzhou in the Mainland and was not within the jurisdiction of the Court when the writ was sent by registered post or inserted through the letter box in an effort to effect service as permitted by O.10, r.1(2) RHC.

8. As the plaintiff failed to receive a notice of intention to defend, the plaintiff issued a summons on 14 September 2004 for final judgment under O.83A, r.4 together with a supporting affirmation.  This was returnable before a master on 1 November 2004.

9. Copies of the summons and supporting affirmation were sent by ordinary post at the two addresses in Hong Kong.  The copies of the summons and affirmation sent to one address were returned to the plaintiff’s solicitors but the ones sent to the other address were not returned.

10. On 27 October 2004 when the defendant was in his office in Guangzhou he received a fax from the plaintiff enclosing a copy of the plaintiff’s summons.  According to the defendant, he was surprised to receive this as he had never been served nor had he had notice of the writ issued by the plaintiff.  He, therefore, gave instructions to his solicitors to act for him.

11. On 28 October 2004 the defendant’s solicitors filed a notice to act.

12. On 1 November 2004 the defendant’s solicitors applied before the master for an adjournment of the plaintiff’s summons.  The plaintiff’s solicitors agreed to an order adjourning the summons and an order was made adjourning the summons.

13. On 15 November 2004 the defendant’s solicitors again applied for an adjournment of the plaintiff’s summons.  The summons was again adjourned by agreement.

14. On 30 November 2004 the defendant’s solicitors filed an acknowledgement of service of the writ of summons.  At the same time they also filed a summons that the writ and service of the same be set aside and for the action to be dismissed.

15. The defendant’s summons was dealt with by Master Lung on 24 January 2005 who dismissed the same with costs.

16. The defendant appealed against the order of the master.  The appeal was heard by Deputy Judge Saunders on 6 April 2005 with his judgment being handed down on 8 April 2005.  The judge dismissed the appeal with costs.

17. The judge held that prior to the filing of the acknowledgement of service and the defendant’s summons on 30 November 2004 the defendant’s solicitors had obtained an adjournment of the plaintiff’s summons on two occasions namely, on 1 November and 15 November 2004.  That being so, the judge was of the view that the defendant had taken steps in the action which invoked the jurisdiction of the court.  He held that the defendant had waived the procedural irregularity in service of the writ and had submitted to the jurisdiction of the court.  The judge therefore dismissed the appeal from the master’s order.

18. This is the appeal from the order of the judge.

19. O.10, r.1(1) RHC provides that a writ must be served personally.  Rule 1(2), however, provides for two alternative modes of service of a writ on a defendant within the jurisdiction.  One is by sending a copy of the writ by registered post to the defendant at his usual or last known address.  The other is by inserting a copy of the writ in a sealed envelope addressed to the defendant through the letter box, if there is a letter box for that address. 

20. O.10, r.1(3)(a) provides that where a writ is served in accordance with the alternative modes of service under (2) the date of service shall, unless the contrary is shown, be deemed to be the seventh day after the date on which the copy was sent to, or inserted through the letter box, for the address in question.

21. The writ was not served personally.  As an alternative to personal service, the plaintiff’s solicitors on 23 July 2004 sent two copies of the writ in two envelopes by registered post to the two addresses in Hong Kong given by the defendant.  These were, however, returned and were undelivered.

22. On the evidence the other alternative mode of service was also used.  On 28 July 2004 a copy of the writ was inserted through the letter box at one of the two addresses in a sealed envelope addressed to the defendant.  This was not returned to the plaintiff’s solicitors.

23. On 23 July 2004 and 28 July 2004 the defendant was not in Hong Kong.  He came to Hong Kong on 17 August 2004 and left the next day.  He returned to Hong Kong on 11 October 2004 and departed again on 13 October 2004.  He returned on 15 October 2004 leaving again on the same day.  He returned on 29 October 2004, leaving again on the same day.

24. The short point in this appeal is whether the defendant has waived the irregularity in the service of the writ and has submitted to the jurisdiction of the court.

25. Mr. Lam, for the defendant, submitted that by applying for an adjournment of the plaintiff’s summons the defendant did not waive the irregularity in the service of the writ and did not submit to the jurisdiction of the court.  He relied on what Lord Denning MR said in Eagle Star Insurance Co. Ltd v Yuval InsuranceCo. Ltd  [1978] 1 Lloyd’s Rep 357.  That case, however, is distinguishable on its own facts.  The court was dealing with the situation whether by applying to strike out a defective statement of claim the defendant was debarred from applying for a stay of the proceedings for reference to arbitration. 

26. Lord Denning MR, after referring to a number of authorities, said at page 361 :

“On those authorities, it seems to me that in order to deprive a defendant of his recourse to arbitration a “step in the proceedings” must be one which impliedly affirms the correctness of the proceedings and the willingness of the defendant to go along with a determination by the Courts of law instead of arbitration.

Applying this principle, the defendants here were presented with a writ indorsed with a statement of claim which was very defective. They applied, quite properly, to strike it out. That was not an affirmation of the correctness of the proceedings.  Quite the contrary.  It was a disaffirmation of them. It was not a “step in the proceedings” such as to debar the defendants from applying for a stay.”

27. Mr. Lam also relied on SMAY Investments Ltd v Sachdev [2003] 1 WLR 1973 and submitted that the conduct of a defendant amounting to a submission to jurisdiction and a waiver of the right to challenge jurisdiction must be unequivocal.  It was held on the facts of that case that there was not such unequivocal conduct.  That case is also distinguishable on the facts.

28. The passage relied on in the judgment of Patten J, who set out the principle derived from the authorities, is at para. 41 of his judgment at page 1976 as follows :

“ It seems to me that when a defendant has complied with CPR Pt II with a view to challenging the jurisdiction of the court, and the time for making his application under CPR r II (4) has not yet expired, then any conduct on his part said to amount to a submission to jurisdiction, and therefore a waiver of that right of challenge, must be wholly unequivocal.  That was also the view of Colman J in relation to the provisions of the old Rules of the Supreme Court.  In Spargos Mining NL v Atlantic Capital Corpn The Times, 11 December 1995 he said:

“ In approaching the question of submission, I have in mind the following authorities.  In Astro Exito Navagacion SA v W T Hsu, otherwise known, more pronounceably, as The Messiniaki Tolmi [1984] I Lloyd’s Rep 266, Goff LJ said, at p. 270: ‘Now a person voluntarily submits to the jurisdiction of the court if he voluntarily recognises, or has voluntarily recognised, that the court has jurisdiction to hear and determine the claim which is the subject matter of the relevant proceedings.  In particular, he makes a voluntary submission to the jurisdiction if he takes a step in the proceedings which in all the circumstances amounts to a recognition of the court’s jurisdiction in respect of the claim which is the subject matter of those proceedings.  The effect of a party’s submission to the jurisdiction is that he is precluded thereafter from objecting to the court exercising its jurisdiction in respect of such claim.  Whether any particular matter, for example an application to the court, amounts to a voluntary submission to the jurisdiction must depend upon the circumstances of the particular case.’  In Sage v Double A Hydraulics Ltd The Times, 2 April 1992, Farquharson LJ said (and this is a report of the judgment which is not reported in oratio recta): ‘A useful test was whether a disinterested bystander with knowledge of the case would have regarded the acts of the defendant, or his solicitors, as inconsistent with the making and maintaining of his challenge.’  In arriving at the view to be imputed to the disinterested bystander, it seems to me that one has to bear in mind that there will be an effective waiver, or a submission to the jurisdiction, only where the step relied upon as a waiver, or a submission to the jurisdiction, cannot be explained, except on the assumption that the party in question accepts that the court should be given jurisdiction.  If the step relied upon, although consistent with the acceptance of jurisdiction, is a step which can be explained also because it was necessary or useful for some purpose other than acceptance of the jurisdiction, there will, on the authorities, be no submission...If the well-informed bystander had been left in doubt because what the defendants had done was equivocal, in the sense that it was explicable on other grounds in addition to agreement to accept the jurisdiction of the court, then the conclusion must be, on the authorities, that there would have been no submission to the jurisdiction.  The representationderived from the conduct of the party said to have submitted must be capable of only one meaning.”

29. It is useful also to bear in mind what Godfrey J A said in Lee Fai (t/a as Fai Kee Timber) v Chan Kui [1997] 3 HKC 228 at 233 :

“ A defendant who invokes or utilizes the jurisdiction of the court with a view to his own advantage waives by doing so his right to object to any earlier procedural irregularity (unless fundamental).  A defendant who wishes to dispute the jurisdiction of the court over him must be careful not to take any step in the action which may be regarded as a submission to the jurisdiction of the court.”

30. Each case, of course, depends on its own facts. 

31. The facts here are that on 27 October 2004 when he was in his Guangzhou office the defendant received a fax from the plaintiff enclosing a copy of the plaintiff’s summons.  He gave instructions to his solicitors to act for him.  A notice to act was filed on 28 October 2004. 

32. On the same day, 28 October 2004, the defendant’s solicitors wrote to the plaintiff’s solicitors pointing out that the summons had been faxed to the defendant’s office in Guangzhou on 27 October 2004 and that the defendant had never received or been served with the writ or notice of proceedings before that time.  They also made the point that the defendant was ordinarily resident in Guangzhou and was and is still out of the jurisdiction.  They asked for certain documents (including the affidavit of service of the writ) to be supplied and pending the supply of the same, they indicated that they had instructions to apply for an adjournment of the hearing of the plaintiff’s summons fixed for 1 November 2004.

33. On 29 October 2004 the plaintiff’s solicitors sent the requested documents to the defendant’s solicitors.  The defendant was also in Hong Kong on 29 October 2004.  It is not disputed that on that day he also met a representative of the plaintiff and issued a post-dated cheque to the plaintiff for payment of his debt although the defendant disputes the circumstances under which the cheque was issued.

34. On 1 November 2004 the defendant’s solicitors appeared before the master and applied for an adjournment of the plaintiff’s summons.  The plaintiff’s solicitors agreed to an order adjourning the summons and an order was made adjourning the summons.  At that hearing, there was no indication by the defendant’s solicitors that the jurisdiction of the court was being disputed or that the defendant wished to consider that question.

35. By the time of hearing on 1 November 2004 the defendant had already received through his solicitors all the requested documents from the plaintiff’s solicitors.  All the material circumstances were known to the defendant by that time.  Despite this the defendant invoked the jurisdiction of the court and applied for and obtained an adjournment of the plaintiff’s summons for judgment by default. 

36. It matters not that the application for adjournment was agreed to by the plaintiff’s solicitors.  There can be no doubt that the defendant invoked the jurisdiction of the court to adjourn the plaintiff’s summons and obtained an advantage.  On the material before the court at that stage, the writ was also served by insertion of the same in a sealed envelope addressed to the defendant through the letter box at one of the two addresses of the defendant.  In the absence of evidence to the contrary, the writ would have come to the attention of the defendant within 7 days after the date of such insertion as deposed to at para. 5 of the affirmation of Poon Mei Ying.  There was no evidence to the contrary placed before the master on 1 November 2004.  That being so, there was at least a good chance that judgment would have been obtained by the plaintiff on 1 November 2004 had there not been an adjournment of the summons.  The defendant thus obtained an advantage by applying for and obtaining the adjournment.

37. Looking at the matter objectively, by applying for the adjournment on 1 November 2004, the defendant did in my judgment take an unequivocal step in the proceedings manifesting an intention to waive the irregularity in the service of the writ and the defendant has submitted to the jurisdiction of the court on 1 November 2004. 

38. It is immaterial that on 15 November 2004 the defendant’s solicitors indicated to the master that the plaintiff’s summons was being opposed on the ground of jurisdiction.  By that time the defendant had submitted to the jurisdiction of the court.

39. It seems to me that the defendant having waived the irregularity in the service of the writ and having submitted to the jurisdiction of the court the appeal must be dismissed.

40. In the circumstances it is not necessary to deal with the point raised in the respondent’s notice namely, that the writ was duly served on 29 October 2004 after the writ came to the defendant’s knowledge and when he was within the jurisdiction.

41. I would dismiss the appeal.  I would also make an order nisi that the costs of the appeal be costs to the plaintiff.