Shanghai Land Holdings Ltd (In Receivership) v Chau Ching Ngai And Another

Judgment Date08 January 2004
Subject MatterCivil Action
Judgement NumberHCA2704/2003
CourtHigh Court (Hong Kong)
HCA002704/2003 SHANGHAI LAND HOLDINGS LTD (IN RECEIVERSHIP) v. CHAU CHING NGAI AND ANOTHER

HCA002704/2003

HCA 2704/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2704 OF 2003

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BETWEEN
SHANGHAI LAND HOLDINGS LIMITED Plaintiff
(IN RECEIVERSHIP)
AND
CHAU CHING NGAI (周正毅) 1st Defendant
MO YUK PING (毛玉萍) 2nd Defendant

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Coram: Deputy High Court Judge To in Chambers

Date of Hearing: 8 January 2004

Date of Decision: 8 January 2004

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D E C I S I O N

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Introduction

1. This is an appeal from the decision of Master Kenneth Wong made on 5 November 2003 in respect of the 1st Defendant's summons dated 29 September 2003 (the "Default Judgment Summons"), the Plaintiff's summons dated 10 October 2003 (the "Authority Summons") and the 1st Defendant's summons dated 29 October 2003 (the "Directions and Discovery Summons"). Subsequent to the Order of Master Kenneth Wong, the Plaintiff filed another summons dated 24 December 2003 (the "Handwriting Experts Summons").

2. The circumstances leading to the filing of these summonses are as follows. On 21 August 2003, the Plaintiff obtained a default judgment against the 1st Defendant in the sum of US$34,200,000. There was no statement of claim filed but a two-page endorsement of claim alleging that these monies had been misappropriated by the Defendants. On 29 September 2003, Messrs Morrison & Foerster ("M&F") issued the Default Judgment Summons on behalf of the 1st Defendant seeking to set aside the default judgment entered against the 1st Defendant. On 10 October 2003, Messrs Wilkinson & Grist ("W&G") issued the Authority Summons to challenge M&F's authority to act for the 1st Defendant. By this summons, the Plaintiff seeks to have the Notice to Act filed by M&F and the 1st Defendant's Default Judgment Summons set aside or stayed pending the final determination of the Plaintiff's Authority Summons. Following that, M&F took out the Directions and Discovery Summons on 29 October 2003. All three summonses were heard before Master Kenneth Wong on 5 November 2003.

3. In respect of the Default Judgment Summons and the Authority Summons, Master Kenneth Wong ordered, inter alia, that the 1st Defendant's Default Judgment Summons be heard after the final determination of the Plaintiff's Authority Summons and that the costs of hearing the Authority Summons be paid by the 1st Defendant. The 1st Defendant now appeals against these two orders. Master Kenneth Wong also gave the usual directions for filing of affidavits and costs in respect of the other parts of the summonses, for which there is no appeal.

Setting aside the default judgment

4. Since the making of the orders appealed against, M&F filed additional evidence which was not available before the master. Now, there is incontrovertible evidence that the 1st Defendant was out of Hong Kong since 5 May 2003 and has since been detained by the PRC Authorities. The submission on behalf of the 1st Defendant is essentially that the 1st Defendant is entitled to have the default judgment set aside as of right because the service of the writ was irregular in that the 1st Defendant was not within the jurisdiction at the time the writ was served or at the time the default judgment was entered. Mr Smith, SC quoted the case of Barclays Bank of Swaziland Ltd and Hahn [1989] 1 WLR 506 and Wing Lung Bank Ltd v Ho Man Iam [1999] 3 HKC 368 in support of his proposition.

5. Mr Fung, SC, referred me to the headnote in Chu Kam Lun v Yap Lisa Susanto [1999] 3 HKC 378 which reads:

"O 10 r 1(2)(b) authorised service of writ by inserting it enclosed in an addressed envelope in a letter box at the last known address of the party to be served. For such service to be effective the party must be physically within the jurisdiction and/or the proceedings were brought to the notice of the party."

He submitted that it is arguable that service was effective if the proceedings had been brought to the notice of the party.

6. I do not think the headnote is an accurate summary of the principle stated in that case. At 382, Leong JA, as he then was said:

"In my view, O 10 r 1(2)(b) authorised service of writ on a defendant within the jurisdiction otherwise than personally by inserting it enclosed in an envelope addressed to the defendant in a letter box at the last known address of the defendant. The authorities are clear that for service under this rule to be effective, the defendant has to be physically within the jurisdiction at the time of service (Barclays Bank of Swaziland Ltd v Hahn [1989] 1 WLR 506 applied in Desirable International Fashions Ltd v Chiang Shi Chau [1997] 3 HKC 170). Other authorities have held that service is effective when the proceedings are brought to the notice of the defendant and not on mere delivery of the writ to the last known address of the defendant (Forward v West Sussex County Council [1995] 1 WLR 1469; Fok Chun Hung v Lo Yuk Shi [1995] 2 HKC 648)."

7. In Forward v West Sussex County Council, quoted by Leong JA, the writ was served by post to the last known address of the defendant who had moved from that address. At 1476, Sir Bingham MR held:

"Thus rule 1(1) provides, as in past days, for personal service. The virtue of this of course is that it brings the proceedings to the notice of the defendant. But paragraph (2) provides for two alternatives to personal service: service by post and insertion through the letter box. Paragraph 3(a) provides that the date of service shall in either of these two cases be deemed to be the seventh day after sending or insertion as the case may be.

So far as the post is concerned, we could understand seven days being allowed as a safe if rather gloomy estimate of the time taken for delivery of a letter by ordinary first class post. So it would be a possible construction of paragraph (3)(a) to hold that in order to show the contrary the defendant would have to show that the letter had not been delivered by the seventh day, or perhaps at all, it being irrelevant (if the letter had been duly delivered) whether it had come to the defendant's notice or not. But it is not possible to apply this construction to insertion through the letter box: if a letter is inserted through a letter box it can make no sense to treat the seventh day after insertion as the deemed date of service if service takes place on delivery and is not concerned with notice. Reading paragraph (3)(a) in relation to both the alternatives to personal service provided for in (2), it seems to us that the generous time limit provided for deemed service by first class post and the allowance of seven days after insertion through the letter box are to allow for the possibility that the letter may not come to the defendant's notice at once. If this is the correct construction, a defendant could show the contrary by showing either that the letter had not come to his notice until after the seventh day or that it had not come to his notice at all.

This construction is in our view strongly reinforced by paragraph (3)(b). An affidavit proving due service must contain a sworn statement not simply that there has been compliance with paragraph (2)(a) or (b) but also of the deponent's opinion that the letter, whichever mode of delivery was adopted, "will have come to the knowledge of the defendant within seven days thereafter."

It is clear from the above well considered dicta of the Master of Rolls that the issue before the court was whether the service of the writ was effective if sent by post to or inserted in the letter box at the last known address of the defendant or that it must be brought to the notice of the defendant. The defendant in that case was within the jurisdiction. It is clear that the requirement that the proceedings be brought to the notice of the defendant is not an alternative to the requirement that he must be within the jurisdiction.

8. In Fok Chun Hung v Lo Yuk Shi, another case quoted by Leong JA, service by post which was subsequently returned was also held to be ineffective and the default judgment set aside. There is nothing said by the Court of Appeal in the judgment in that case to suggest that service would be effective if the proceedings were brought to the notice of the defendant who is not within jurisdiction.

9. Thus, in my opinion, in Chu Kam Lun, Leong JA was stating the well established principle that the defendant must be within the jurisdiction for the service to be effective. When he referred to the other authorities, he was stating another requirement for an effective service. Look at the matter from a common sense point of view. If a defendant is out of jurisdiction in a place where telecommunication is not readily available or where there are restrictions in travelling and a writ was served on his last known address in the jurisdiction, he certainly cannot attend to the matter within seven days even if the proceedings were brought to his notice. The law could not have intended that under such circumstances, he should be exposed to the risk of a default judgment. I agree with Mr Smith, SC's submission that the 1st Defendant is entitled as of right to have the default judgment set aside.

10. Mr Smith, SC's secondary attack on the default judgment is that the Plaintiff must have known of the 1st Defendant's detention in China before the issue and service of the writ of summons on 23 July 2003 because in the receivers' report exhibited in the Plaintiff's affirmation was annexed an article in the South China Morning Post dated 21 July 2003 which reported the 1st Defendant's detention in Shanghai since May 2003. Hence, Mr Smith, SC, submitted that the Plaintiff benefited from the 1st...

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