STUDIO CICO (a firm) v. YAO KEE TRADING & ENGINEERING CO. (a firm)

1985, No. A5790

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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DECISION

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1. This is an appeal against two decisions of Master O'Donnell given on 29th May last. Both arise out of an application by the defendant to set aside a judgment obtained in default of defence.

2. The basis of the 1st application is that the judgment was irregularly obtained. The 3rd claim in the Statement of Claim was said to be for monies paid, by the plaintiff at the request of the defendant. The two sums in question are set out as $7,688 and $3,396.90, in the relevant paragraph in the Statement of Claim. They were then transposed first into paragraph 6 where they were totalled. The actual total is $11,064.90. Someone made a mess of that, and made it $11,084.90. That total was then transferred into the prayer with the result that the default judgment were signed for $20 too much because of that arithmetical error. This seems to me a classic case for the application of the slip Rule 0. 20 r. 11. That was my immediate reaction when I saw the problem. I much comforted to discover that the Court of Appeal in England as long ago as 1908 in a case called Armitage v. Parsons (1908) 2 KB 410 reached the same conclusion.

3. The second point is more difficult. It is really the question which arises when any regular (as corrected) default judgment is obtained, as to whether the defendant had shown a good defence on merits. His first problem here, which I confess does raise doubts in my mind, is the delay that has taken place. The judgment was in fact signed in November, following the return by this defendant of the Acknowledgement of Service which tells him, in Chinese characters, that he has to file a defence. He does not actually say he did not read it. He did not serve a defence. There were then discussions about payment because one of the other subcontractors was claiming a sum of $30,700. That sum was, in fact, paid by this defendant, as a "partial payment", and a receipt was given, using those words. The next thing that happened was that in January, the bailiff attended to levy execution, and found nothing. The Principal of the defendant firm, Mr Yau was not there. But he says he was told of this after the event, that someone calling himself a bailiff had been to the premises. He apparently associated that with this action, because he goes on to say that because he had entered an Acknowledgement of Service, saying he was defending, he was not worried. But he made no further enquiry at all, and I do find that very very strange. It was not, in fact, until successful Garnishee Proceedings were taken, and a Garnishee Order nisi was obtained, as against his bank account, with the Bank of China, which had enough in it to satisfy the indebtedness, that any step was taken to set aside the judgment. I go along with the plaintiff to this extent. I think with that history, one does have to look at what is now said by way of defence with some considerable circumspection.

4. Really two points were taken on the contracts. The first point on the first contract says, first of all, a number of items were omitted. The answer is 'yes', but the plaintiff then says that in substitution there was a string of items done in their place. There is no issue raised that those items were done. One only has to look At the list to see that there were substantial items; many square yards of paint work among other things. They were done with the defendant's agent (as I understand it) on site watching that work being done, and work no doubt which was required to be done by this defendant under its main contract. But it is said that those items should not be paid for because I, Mr Yau, did not give my approval to these items before this happened. I find that a totally unconvincing account. The work was done. The work was not challenged by Mr Yau's agent on site. In those circumstances it seems to me plain that this defendant would have to pay a reasonable sum for that work. I do not see how he is going to escape the liability which is asserted against him under this contract. I am applying a test here as to whether or not he shows on material he has put before me a good arguable defence on the merits. What he says, amounts to me to the sort of defence which would be dismissed as shadowy on an 0. 14 application.

5. The second part of the defence to the first contract is simply a non runner. It said that some doors were going to be done. The short answer to that is that there is no reference to doors in the contract at all. I do not quite see how where contract does not provide for doors, and the claim is under a contract for the specific contract sum, how they can come into the matter at all.

6. Then there is the claim under what is called contract two in the Statement of Claim which is based upon a quotation dated the 27th January. Here the defence is just hopelessly contradictory. It starts off (the draft defence) saying: "save that the defendant orally requested the plaintiff to provide labour and material to execute the additional works more particularly set out in this quotation. Paragraph 2 of the Statement of Claim is denied". In other words, he was saying, "I received this quotation, and I instructed the plaintiff to do this work." Now that means that there was a contract made for the performance of that particular work at those particular prices. It then goes on to say at the end of the work, at the time when the agent on site Mr Ho signed a document in the same terms as the quotation, acknowledging that all, I think, but one item had in fact been done; at that stage there was an agreement between Mr Ho and the plaintiff, that no sum was to be charged for certain items in that work. Looking at this as a strict matter of law, that is a nudum pactum. The work had been done on the face of the defence for reward for those sums of money. A contract at the end of the work saying that I will not charge you for some of those items, is an empty shell. This is what is being asserted. So that I ask myself is this a good arguable defence in the circumstances? With the background I have given, and up to this point my answer is firmly 'no'.

7. There are then two other items. There was a counterclaim which is put forward in the most superficial manner you could imagine. It is so thin that no one would allow this to rank as a set-off on an 0. 14 application. If there was anything in it, the Court would simply say that, you can pursue it, but I am not going to give you a stay of execution on the claim.

8. It then comes down to transportation charges as being the only arguable item I can see in this case. It is common ground that the plaintiff's obligation was to pay for the transport. The plaintiff says that he has never received any claim for the transport. He could not get a figure out of the defendant. But the figure the defendant now puts forward at $13,448 is much too big. But there is an obligation to pay for transport. The only question to my mind here is whether this is sufficient to set this judgment aside in part, or whether I should say "No, the judgment can stand and this can be added to the counterclaim which this defendant is perfectly free to run if he wishes to do so. ” I think, taking, everything into account as best I can, the proper answer here is No, I should not interfere with this judgment. I think it must stand and this claim for transportation expenses can be proved by this defendant as part of his counterclaim. I would not give it any credence at the moment by way of set-off, having regard to the circumstances in which it was raised and all the other consideration which I have referred to.

9. So in my judgment this appeal fails and must be dismissed with costs. But I do direct (if it has not already happened) under the slip Rule that the judgment is to be amended by the reduction of $20.