Lee Fai t/a Fai Kee Timber v. Chan Kui

IN THE COURT OF APPEAL

1997, No. 84
(Civil)

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Coram: Hon. Godfrey, J.A., Gall and Cheung, JJ. in court

Dates of hearing: 23 and 24 September 1997

Date of handing down judgment: 7 October 1997

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. This is the defendant's appeal from an order of Jerome Chan, J. made on 22 April 1997 in an action for damages for personal injuries; the effect of the judge's order was to leave undisturbed (1) an order of the master, made on 9 July 1996, extending the validity of the writ in the action; (2) an interlocutory judgment against the defendant (for damages to be assessed), entered on 23 July 1996; and (3) a final judgment in favour of the plaintiff for HK$773,203.06 with interest and costs entered (following the assessment) on 17 February 1997.

2. The defendant now asks this court to set aside all this, and so free the defendant from any liability to the plaintiff in the present action; if we agree to do so, the result will be to free the defendant from any liability to the plaintiff at all, for any subsequent action brought by the plaintiff against the defendant in respect of his above-mentioned injuries will be statute-barred.

Background

3. The plaintiff, an employee of the defendant, was injured in an accident at work on 16 March 1992. He had 3 years from that date in which to issue and serve his writ claiming damages for his injuries; he also had a claim for employees' compensation, but this has been satisfied and we are not concerned with it.

4. On 14 February 1995, the writ in the action was issued, on behalf of the plaintiff, by his solicitors Messrs. Cheng Yeung & Co. But they did not effect service of the writ (as will be appreciated, until a writ is served the person named in it as the defendant cannot acknowledge service and cannot formally notify the plaintiff of his intention to defend the action).

5. On 1 April 1995 (an all too appropriate date, given the subsequent history of these proceedings) Messrs. Tsang, Chan & Wong, the solicitors who had acted for the defendant in the plaintiff's claim against the defendant for employees' compensation, wrote to the plaintiff's solicitors to inform the latter that they had instructions to accept service of "your statement of claim (sic) in respect of the captioned action". (The caption was "1995 PI 126" the reference allotted upon its issue to the writ in the action, a writ, be it remembered, not yet served.)

6. On 6 March 1996, the defendant's solicitors filed with the court (which accepted it) and served on the plaintiff's solicitors, a piece of paper headed "Notice to Act" serving no purpose recognised by the Rules of the Supreme Court, but intended, so we were told by counsel, to alert the plaintiff's solicitors to the fact that they had failed to serve the writ within the one year period from its date of issue during which it ought to have been served.

7. On 11 March 1996, the plaintiff's solicitors took out a summons inter partes addressed to the defendant's solicitors asking for an order under Order 6 rule 8 of the Rules of the Supreme Court, extending the validity of the writ.

8. On 9 July 1996, after a contested hearing, the matter made such an order, and on the same day the writ, and a statement of claim, were served on the defendant.

9. The defendant did not acknowledge service of the writ; instead, on 13 July1996, the defendant gave notice to the plaintiff of his intention to appeal against the order of 9 July 1996.

10. On 23 July 1996 the plaintiff obtained the interlocutory judgment for damages to be assessed to which I have already referred, "no intention to defend having been given" by the defendant; as the judgment correctly recites.

11. On 16 January 1997, the defendant took out a summons to set aside that judgment (in the summons described as a "regular" judgment) and for an order that the defendant be at liberty to defend the action by filing and serving an acknowledgement of service (the form provided for by the Rules of the Supreme Court which requires a defendant to state whether or not he intends to contest the proceedings).

12. On 28 January 1997, the application of the plaintiff for assessment of damages under the interlocutory judgment of 23 July 1996 was heard by the master. The defendant appeared by his solicitors at the hearing. They made representations on the merits on behalf of the defendant; but not without first informing the master that they appeared "under protest" and "without prejudice to the defendant's position".

13. As I have already stated, following the assessment, judgment was entered for the plaintiff on 17 February 1997 in the sum of $773,203 together with interest and costs. The defendant, having failed in an attempt to persuade the judge to set aside all this, now asks this court to do so.

The judgment below

14. The judge rightly described the inter partes application made by the plaintiff by the summons of 11 March 1996 as "most unusual". An application to extend the validity of a writ must of necessity be made ex parte; at that stage of the action, when the writ has been issued but not served, there is no defendant who can properly be made respondent to any inter partes application in the action. The result of an order made ex parte in favour of the plaintiff extending the validity of the writ is that the plaintiff will be free to serve the writ within the extended period; but the defendant is not thereby debarred from asserting that the validity of the writ should not have been extended. He may acknowledge service of the writ; give notice of his intention to defend the action; and apply to the court for the discharge of the order extending the validity of the writ : see Order 12 rule 7 and rule 8(1)(d). The issue whether an extension of the validity of the writ was justified or not will then be considered at an inter partes hearing at the conclusion of which that issue will be resolved in favour either of the plaintiff or the defendant.

15. Although what happened here was, indeed, different and "most unusual", does it matter? I do not think it does. The defendant (at that stage only a potential defendant) by his solicitors' curious communications of 1 April 1995 and 6 March 1996 must (I suspect) have thoroughly confused the plaintiff's solicitors, who, understandably, appear thereafter to have treated the defendant's solicitors as if they had accepted service of the writ on behalf of the defendant and given notice of the defendant's intention to defend the action, although in fact, they had not done so at all. At the end of the day, the defendant got what he was entitled to, an inter partes hearing for determination of the substantive issue whether the validity of the writ ought to be extended. He got there by an unauthorised route, on an inter parties application of the plaintiff, rather than an inter partes application of his own to discharge an ex parte order already obtained by the plaintiff, but I would for my part be prepared to treat this as a mere procedural irregularity : see Order 2 rule 1(1). The judge recorded that no-one had challenged the validity of the order made by the master extending the validity of the writ. The judge treated the order as having been validly made and, in my opinion, he was right to do so.

16. From that order, thus validly made, the defendant was entitled to appeal, without prejudicing his position. He did so; but the judge held his appeal incompetent, because the route prescribed by Order 12 rule 8 had not been followed.

17. In this, I consider that the judge was wrong. The master's order, having been validly made (however unusual the route taken which led to it) was clearly appealable to the judge in the usual way. The judge having held the appeal incompetent, did not go into the merits. So we must now do so.

18. It is well-settled that a plaintiff who wants the court to extend the validity of the writ must show good reason why it should be extended. In our case, the only reason why the writ was not served in time was that there was some confusion between two members of the staff of the plaintiff's solicitors, probably as to the file in which the relevant papers were to be found. It is, again, well-settled that a mistake of this sort is not a good reason for extending the validity of a writ.

19. Accordingly, the master's order extending the validity of the writ here, although validly made, was wrongly made.

20. If the matter had rested there, we would have had to set aside the master's order extending validity of the writ. But the matter does not rest there. The defendant did not content himself with appealing against the master's order extending the validity of the writ. He did not ask, as he might have done, for a stay of all further proceedings in the action pending the determination of his appeal. Instead, he applied to set aside the "regular" judgment obtained by the plaintiff on 23 July 1996; this application required him to show a defence on the merits, a task which he undertook (unsuccessfully) before the judge. And he took a full part, although "under protest", in the assessment of damages held under that "regular" judgment.

21. A defendant who invokes or utilises 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. The defendant here invoked the jurisdiction of the court to set aside the "regular" judgment obtained by the plaintiff on 23 July 1996; and he utilised the jurisdiction of the court to contest the assessment of damages. He has, in my judgment, clearly waived his right to object to the master's order extending the validity of the writ. It may be that the order should not have been made at all; but the defendant by his conduct has waived his right to take the point: cp. Cooze v. Neumegen (1842) 9 M & W 200, in which case there was an irregularity in the writ of summons but the defendant, although he protested against this at the trial, and indeed took no part in the trial, was held to have waived the irregularity merely by appearing, albeit under protest, at the trial. As Alderson B said (at p.292) :

"If a defendant wishes to take advantage of an irregularity in the proceedings, he should not appear at all at the trial, but should allow the plaintiff to go on at his peril."

Result

22. For these reasons, which in some respects differ from those given by the judge, I too would refuse to disturb the orders and judgment obtained by the plaintiff here; and I would dismiss the appeal, with costs.

Gall, J. :

23. I have had the benefit of reading in draft the judgments of my Lords, Godfrey, J.A. and Cheung, J. I respectfully agree with each of them that this appeal should be dismissed; there is nothing further that I can usefully add.

Cheung J. :

Wrong procedure

24. I agree with my Lord, Godfrey J.A. that the appeal should be dismissed. The Defendant had obviously adopted the wrong procedure when he lodged an appeal against the decision of the Master extending the validity of the writ for the purpose of service. The challenge by a defendant to this irregularity is a challenge to the jurisdiction of the court. This is clear from O.12, r.r.7 and 8. Mr Edward Chan, S.C., confirmed that the intention of the Defendant was to challenge the jurisdiction of the Court. Unfortunately the procedure under O.12, r.8 was not followed. This procedure was introduced as an improvement on the old one which contained many traps for a defendant who might find himself in a situation such as this. One of the pitfalls was that, although the defendant could challenge jurisdiction without entering appearance, by not entering an appearance, the plaintiff could enter judgment for default of appearance : see Note 12/7-8/1 of Supreme Court Practice 1997. This is precisely the situation the Defendant now faces by not filing any notice of intention to defend. The Plaintiff, as he was entitled to do, had entered default judgment against him.

25. The hearing before the Master was initiated by an inter parties summons. Arguments were heard from both parties and an order extending the validity of the service of the writ was made. I prefer not to express any opinion on whether one could treat that hearing as a hearing of an application by the Defendant to set aside the order extending the validity of the writ. I observe that Litton J.A. in Mercedes-Benz AG v. Leiduck & Another [1995] 1 HKC 448 had stated that the notice of intention to defend is a necessary preliminary step before challenge to the court's jurisdiction can be made.

26. Order 12, r.8 provides the Defendant with the procedure of challenging the Court's jurisdiction without unwittingly submitting himself to jurisdiction by taking part in the proceeding. To observe O.12, r.8 is not merely a question of insisting on form over substance. In this case, the procedure was not followed. Instead the Defendant chose to lodge an appeal against the decision of the Master. Ms Eu, S.C., said that she would not rely on the appeal as a submission to jurisdiction and it is therefore not necessary to rule on this particular issue. However, I would say that it is meaningless to argue that an unqualified right of appeal against the Master's decision is provided by O.58, r.1 because the point is that by not adopting the O.12, r.8 procedure, such as not filing the notice of intention to defend, the Defendant will find that a judgment is being entered against him.

Submission to jurisdiction

27. The subsequent steps taken by the Defendant are clearly steps taken in submitting to the jurisdiction of the Court. The summons taken out to set aside the judgment, the prosecution of the summons and taking part in the assessment of damages, although under protest, are clearly steps taken inconsistent with the challenge of the court's jurisdiction. Cave J. in Rein v. Stein (1892) 66 LT469 stated that :

" It seems to me that, in order to establish a waiver, you must show that the party alleged to have waived his objection has taken some step which is only necessary or only useful if the objection has been actually waived, or if the objection has never been entertained at all."

28. The two steps taken by the Defendant are wholly unconnected with the challenge to jurisdiction. They dealt with challenge to the merits of the case. All these steps needed not be taken if the procedure under O.12, r.8 was observed. The learned judge was correct to dismiss the Defendant's appeal.

Conduct of Plaintiff's lawyer

29. It is necessary to comment on the conduct of the litigation by the Plaintiff's solicitor. Speaking as the judge in charge of the Personal Injury List, I must say that the time taken in commencing and prosecuting personal injury cases has been greatly improved in the past two years. However this case is a timely reminder that there are still unsatisfactory aspects in this practice. The accident took place on 16^th March 1992. The Plaintiff's lawyer (who had since left Cheng Yeung & Co.) was instructed by Legal Aid in January 1994 but the writ was only issued one month before the limitation period in February 1995 and it was not served for another one year. The explanation given by the Plaintiff's solicitor for not issuing the writ was that the Plaintiff had also commenced employees' compensation proceedings and the award there may well exceed the common law claim. He was concerned that costs incurred in the common law claim might not be recoverable from the Defendant and as a result such cost would have to come out from the Plaintiff's employees' compensation.

30. This decision simply does not stand to reasoning. The Plaintiff's lawyer had mixed up his priority. One may ask what is more important for a litigant in this case? Is it more important that his cause of action should be preserved or steps should not be taken so as to avoid incurring costs which might by chance be deducted from his compensation? The answer is obvious. If the Plaintiff's lawyer is concerned with saving costs in the common law action, there is nothing to stop him from issuing the writ, serve it and then reach an agreement with the Defendant that the proceedings is to be stayed pending the outcome of the employees' compensation proceedings. The costs to be incurred in such circumstances will be minimal. I would be surprised to see a defendant who would insist, in these circumstances, to proceed with the common law claim. As it turned out, the damage assessed in this action amounted to over $770,000 whereas the amount paid into Court and accepted by the Plaintiff in the employees' compensation proceedings was only about $154,000.

31. A lawyer who only issued the writ (containing a mere general indorsement) at the tail end of the limitation period and chose not to serve it before the end of the twelve-month period when the limitation had at that time already expired, is only courting trouble for himself and his client. Unfortunately it seems this practice is still prevalent in personal injury litigation. This is a bad practice. It is also a wrong practice and must be put to an end immediately.

Representation:

Mr. Edward Chan, S.C. & Mr. Kenneth C.L. Chan (M/s Tsang, Chan & Wong) for the Appellant/Defendant

Miss Audrey Eu, S.C. & Mr. Andrew K.N. Cheung (M/s Ng & Partners assigned by D.L.A.) for the Respondent/Plaintiff