Hong Kong: Litigation: Service Of Process On The Elusive Foreign Defendant

The recent Hong Kong High Court case of Victor Chandler (International) Ltd v Zhou Chu Jian He (2006), involves Victor Chandler (the Plaintiff) a well known bookmaker registered in Gibraltar and Zhou (the Defendant) a wealthy Peruvian businessman. The Plaintiff’s business is accepting bets on line from its worldwide clients and the Defendant was born in Mainland China and ordinarily resides in Beijing. He had a home as well as substantial business interests and real property in Hong Kong. The Defendant opened an account with the Plaintiff for the purposes of betting on overseas soccer matches. He bet and lost what for most people a fortune. In purported settlement of his debt, the Defendant presented the Plaintiff with three cheques drawn on a Hong Kong bank account, which were later dishonoured.

The Plaintiff sued on the dishonoured cheques. The writ was served on the Defendant by inserting it in the letterbox of the Hong Kong address the Defendant provided to the Company Registry. He owned the property in Kowloon where he was served. The Defendant was not in Hong Kong at the time of service. The Plaintiff obtained judgment in default of appearance. The Defendant then made an application to set aside the default judgment and returned to Hong Kong to sign his affirmation in support of his set aside application. The court set aside the default judgment unconditionally on the ground that the judgment was irregularly obtained. The Plaintiff did not appeal from that order setting aside the default judgment.

Following the order to set aside, the Defendant served a notice of the intention to defend and then make an application under Order 12 rule 8 of the Rules of High Court for a declaration that the original writ had not been duly served on him, and hence, the court had no jurisdiction over him. Failing this part of his application, the Defendant applied to permanently stay the action on the basis that Hong Kong is forum non convenience for the trial.

The Plaintiff argued that the set aside order had the effect of submitting the Defendant to the court’s jurisdiction.

The court discussed the following 2 principles before ruling that the Defendant has not by conduct submitted himself to the court’s jurisdiction :-

1. The policy underlying Order 12 rule 7 and rule 8 of the Rules of the High Court was that a defendant should not be taken as having submitted to the jurisdiction of the court by reason only of the fact that he had appeared in the proceedings. A defendant’s filing of a notice of intention to defend should be viewed as entirely neutral. The court’s directions to file pleadings in the set aside order are not invited by the Defendant. It was up to the Defendant to react to the directions as they saw fit. The Defendant’s choice not to file pleadings was actually further indicative of the Defendant’s challenge to the jurisdiction.
2. The Defendant’s very act of contending the merits of the case in his application to set aside the default judgment was not a submission to the court’s jurisdiction either. It was merely made in response to the Plaintiff’s affirmations that there was no defence to the present action. It was reasonable for the Defendant to demonstrate that bona fide defences would be available.

The Court then went on to consider whether the writ was duly served on the Defendant. Order 10 rule 1(2)(b) indicated that the defendant must be physically within the jurisdiction if he was to be validly served. As the Defendant has raised sufficient evidence to prove that he was not in Hong Kong when the writ was served, he was not duly served with the writ and was not therefore subject to the court’s jurisdiction. As a result, the court granted the declaration sought by the Defendant that the Defendant is not subject to the court’s jurisdiction because the writ was not duly served on him.

The consequence of the declaration is that the Plaintiff will have to start service of the writ again. Since the Defendant is resident at Beijing, the Plaintiff may well have to apply for leave to serve the writ out of the jurisdiction.

If the Defendant is subject to the court’s jurisdiction, the court went further to rule obiter that the Plaintiff should be entitled to have the matter resolved in the courts of Hong Kong because the nature of the action was based on the cheques drawn on a Hong Kong bank account and dishonoured in Hong Kong. The Defendant had failed to demonstrate it correct to deprive the Plaintiff of the right to sue in the courts of Hong Kong.

The case demonstrates the difficulties that may occur when contracting with a foreign person and when legal action is taken against him/it in Hong Kong. The case should be of persuasive authority in all common law jurisdictions. It is therefore important to consider when dealing in all cross border transactions to include a local process server agent clause and a submission to jurisdiction clause in contracts involving foreign persons.

If you wish to know more about the judgment or have any query regarding how to commence or contest legal proceedings in Hong Kong, experienced lawyers in our Litigation and Dispute Resolution Department will be happy to assist you.

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