PSI ELECTRONICS LTD v. BMS CHINA LTD

HCA 2477/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2477 OF 2005

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D E C I S I O N

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1. In an application to set aside default judgment, it is of utmost importance to remember that the burden is on the defendant to show by credible evidence that there is a real prospect of success of the defence.  This is a higher threshold than showing triable issues in an Order 14 summons.  In the present case, I additionally accept that the fault of legal advisers should not work to the prejudice of the defendant. 

2. There is no dispute that the judgment as entered was a regular judgment.  In the premises, the defendant has to satisfy me on the merits that there is a real prospect of success.  Three major defences have been put forward:

(i) The sale was by sample and the subject goods failed to correspond to the samples;

(ii) The sale was by description and the plaintiff’s goods failed to comply with that description;

(iii) There is a potential counter-claim by the defendant.

Sale by Sample

3. It is not enough to say that by practice since 1982 specifications were given, samples were prepared and tested before purchase orders were issued.  What is important is that in respect of the subject goods, there were specific descriptions and specific samples referable to their orders.  In the present case, the defendant has simply failed to show that there had been samples fulfilling the dB70 standard and that test reports thereon had been in existence.  It is no use saying that the plaintiff has failed to deny that samples were made.  The fact remains that what the defendant had done was simply put in a draft defence with some affidavit evidence.  The burden is on the defendant to satisfy the court with credible evidence.  Given the plaintiff’s protest in correspondence over the additional requirement by dB70 standard, it is simply not difficult to infer that the plaintiff was never required to, and did not produce samples that met that standard.  In my view, the first line of defence does not get off the ground and the defendant has failed to show a real prospect of success. 

Sale by Description

4. It is not enough to say that the defendant had purportedly given descriptions to the plaintiff and that the defendant was keen that the plaintiff complied with those descriptions.  The plaintiff had asserted that they only came to know of the new requirement in about the year 2004.  Even so, the plaintiff had there and then protested.  The defendant continued to place orders as usual.  This assertion of the plaintiff was not a bare one.  There was contemporaneous e-mail showing the plaintiff’s rejection of this additional standard.  The defendant cannot point to a single document showing the plaintiff’s acceptance of the requirement.  Once again, the absence of a related sample and test report that conforms to this new requirement was a deafening omission. 

5. The sum total of the evidence was that the dB requirement was the unilateral wish of the defendant. 

Potential Counter-Claim

6.  The potential counter-claimant was a different company or companies from the defendant.  It may be arguable that that company or companies was the defendant’s sister company acting as purchasing agent for the defendant.  However, the defendant has failed to address the issue of there being an alleged final settlement of a past dispute between the parties. 

7.  It was clear from the correspondence and the affidavit evidence that the plaintiff has made good certain defects by sending over goods in replacement.  Although the defendant wanted more in return, the plaintiff had bluntly refused.  Thereafter, the defendant had not pursued the matter - not in the year 2003 when the dispute was fresh between the parties.  It might be because the defendant wanted to maintain good business relationships with the defendant and could not change to another supplier overnight.  However, this supplier had continued to supply goods to the defendant for the following two years.  The defendant never pursued any compensation over that past dispute - not in the audit confirmation; not when the plaintiff pressed for payment of the subject goods.  This failure was again a deafening silence.  In the correspondence over the subject goods, the defendant cared to ask for return of tools and was frank enough to admit a cash problem but made no mention at all of a breach of the dB70 standard or made a claim in relation to the cadmium-infected goods.

8.  What was more fatal was that the cadmium-infected goods clearly had nothing to do with the subject goods.  The counter-claim cannot even form an equitable setoff and Mr Szeto has very fairly not pressed on with that as a defence to the claim.  That being the case, I see no reason for depriving the plaintiff of a judgment rightfully entered, nor staying the enforcement of the same pending an entirely unconnected and dubious counter-claim. 

9. I make an order, therefore, that the judgment shall stand.  The rest of the summons is dismissed.  There will be costs to the plaintiff with certificate for counsel.  I would add that it will be seen from this conclusion that any fault of the legal advisers actually spared the defendant the costs in pursuing an unmeritorious defence and counter-claim.