STATE BANK OF INDIA v. PATEL, UTKARSH HEMKAPUR t/a AMBICA DIAMONDS AND OTHERS

HCA 479/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 479 OF 2013

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R E A S O N S   F O R   D E C I S I O N

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1.  On 27 November 2013, I allowed the defendants’ application to set aside the default judgment for various liquidated sums that the plaintiff obtained against them on 24 April 2013. These are the reasons for my decision.

BACKGROUND

2.  The plaintiff is a bank carries on banking business in Hong Kong and Israel.  Both Tombar Dime Diamonds Limited (“Tombar”) and Naam Diamonds Limited (“Naam”) traded in diamonds in Israel.  Pursuant to various credit facilities letters, the plaintiff had extended credit facilities to Tombar since May 2007 and to Naam since January 2008.  As security for the repayment of the sums due under the credit facilities, Tombar and Naam entered into 2 charge agreements in favour or the plaintiff on 21 December 2009 and 21 March 2010 respectively (“the Charges”).

3.  Both Tombar and Naam subsequently defaulted. The plaintiff then commenced proceedings against them in Israel.  In June 2012, the plaintiff obtained judgment against them.  The judgment remains unsatisfied to date.

4.  Between August 2011 and January 2012, Tombar and Naam had sold and delivered polished diamonds to Ambica Diamonds (“Ambica”), Neelkanths Diamonds (“Neelkanths”) and Param Diajewels (“Diajewels”) under various invoices, totaling US$3,704,296.94. These invoices are covered by the Charges.  On 19 March 2013, the plaintiff commenced the present proceedings against the 1^st to 4^th defendants trading as Ambica and Neelkanths and the 1^st and 5^th defendants trading as Diajewels for the outstanding sums under these invoices.

5.  By the acknowledgement of service dated 2 April 2013, the defendants, through their solicitors, indicated that they would not contest the proceedings.  The plaintiff then obtained default judgment on the liquidated sums as specified under the invoices on 24 April 2013.

DISCUSSION

6.  At the outset of the hearing before me, Mr Ramanathan, SC, fairly conceded that the default judgment was a regular judgment for present purpose.  The burden rests on the defendant to show a defence with a real prospect of success.

7.  The defendants raised three points of defence.

8.  First, the 2^nd to 4^th defendants and the 5^th defendant were not partners of Ambica, Neelkanths and Diajewels at the material times.  They relied on the particulars of the relevant business registration of the companies at the time.

9.  Second, under the outstanding invoices, Tombar and Naam, had instructed Ambica, Neelkanths and Diajewels, as the case may be, to either make the payments for the diamonds or return the diamonds to the plaintiff.  It is common ground that in March 2013, the defendants had returned some parcels of diamonds to the plaintiff. The defendants’ case is that they are the same diamonds that Tombar and Naam sent to Ambica, Neelkanths and Diajewels under the outstanding invoices, less 20 carats that they sold.  The plaintiff disputes that they are the same diamonds because their value is less than 2% of the total values of the diamonds stated in the invoices.

10.  Third, the defendants claimed that although Ambica, Neelkanths and Diajewels were issued the invoices, they were in fact agents selling the diamonds for Tombar and Naam.

11.  Having reviewed the evidence with care, I am of the view that the defendants’ case that they had returned the same diamonds to the plaintiff is not something which I can reject on affidavit evidence alone.  On the whole, I think the evidence presented by the defendants on this point has some degree of conviction, although whether it can withstand closer scrutiny at trial remains to be seen.  As rightly conceded by Mr Leung, for the plaintiff, what follows is that the plaintiff must give credit to the value of the diamonds returned by the defendants.  The plaintiff would only be entitled to damages to be assessed and not liquidated sums.  That being the case, the default judgment that the plaintiff had obtained must be liable to be set aside.

CONCLUSION

12.  For this reason alone, I set aside the default judgment.  Since that is my conclusion, I do not think it is necessary or proper for me to say anything further on the three points of defence raised by the defendants.