LAU PING v. LIM GARY RADFORD

HCA 897/2020

[2021] HKCFI 1137

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 897 OF 2020

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REASONS FOR DECISION

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A.      INTRODUCTION

1.  By a Writ of Summons dated 5 June 2020, the plaintiff seeks declaratory reliefs relating to, and an order of specific performance of, a joint venture agreement between her and the defendant (“the JV Agreement”).

2.  The defendant acknowledged service of the Writ and indicated his intention to contest the proceedings on about 23 June 2020 through his solicitors, Messrs Kao Lee & Yip (“KLY”).

3.  On 5 October 2020, the plaintiff served her Statement of Claim on KLY.

4.  On 17 November 2020, Master Phoebe Man granted the defendant an extension of time for 28 days to file his Defence (and Counterclaim, if any).

5.  On 5 January 2021, Master Phoebe Man made another order (“the Unless Order”) in the following terms:

“Unless the Defendant do file his Defence (and Counterclaim, if any) on or before 9^th February 2021 at 4 p.m., the Defendant will be debarred from doing so and the Plaintiff will be at liberty to enter judgment.”

6.  On 8 February 2021, i.e. the day before the deadline for the filing of a Defence by the defendant under the Unless Order, the defendant took out a Summons, under Order 12, rule 8, of the Rules of the High Court[1], and the inherent jurisdiction of the Court, seeking the following (“the Stay Summons”):

“1. A declaration that in the circumstances of the case the Court has no jurisdiction or should not exercise any jurisdiction it may have over the Defendant in respect of the subject-matter of the claim or the relief or remedy sought in the action, and/or an Order that the proceedings herein be stayed, on the following grounds:-

(a) forum non conveniens;

(b) in respect of the same cause of action to which the proceedings herein relate, there are other proceedings pending between the Defendant and the Plaintiff in another court, namely, Shanghai No.1 Intermediate People’s Court (上海市第一中級人民法院); and/or

(c) considering the best interests and convenience of the parties to the proceedings herein and the witnesses in the proceedings herein, the proceedings herein should be conducted in another court, namely, Shanghai No.1 Intermediate People’s Court (上海市第一中級人民法院).

2. Alternatively, the time for the Defendant to file and serve his Defence (and Counterclaim, if any), if required, be extended to 28 days after the final disposal of this application.”

7.  The reference to the proceedings in Shanghai No 1 Intermediate People’s Court (“the Shanghai Court”) in the Stay Summons is a reference to proceedings commenced by the defendant there against the plaintiff in September 2019 in relation to the JV Agreement.  According to the defendant, the plaintiff had contested the jurisdiction of the Courts in Shanghai over the dispute but was unsuccessful.  Further, according to the defendant, the current proceedings are:

“in respect of precisely the same disputes as forming the subject matter of the proceedings in Shanghai, which proceedings in Shanghai has been ongoing at the [Shanghai Court].”

8.  No Defence having been filed by the defendant, on 25 March 2021 the plaintiff issued a Summons seeking the entry of final and interlocutory judgments against the defendant under Order 19, rule 7 (“the Judgment Summons”).

9.  The call-over hearing of the Stay Summons took place on 26 March 2021, at which the Registrar gave directions for the filing of evidence and adjourned the Summons to another call-over hearing on 7 May 2021.

10.  This is the hearing of the Judgment Summons.

11.  The defendant’s case is simple.  Since he has taken out the Stay Summons under Order 12, rule 8, the time limit for him to file and serve his Defence (and Counterclaim, if any) is automatically extended to 28 days after the final determination of the Stay Summons or such other period as may be specified by the Court, referring to Order 18, rule 2(3). Therefore, he says, the time for him to file his Defence has not expired on 9 February 2021 and therefore the plaintiff has no basis to issue the Judgment Summons.

12.  The defendant has also explained in his second affirmation why he did not file any Defence, and why he only took out the Stay Summons on the day before the deadline set in the Unless Order.  He says that the parties have been engaged in without prejudice negotiations since August 2020 in an attempt to reach a full and final settlement of the dispute, against the background of the proceedings pending in Shanghai and Hong Kong. That is why he withheld the preparation of a Defence and a stay application.

B.      DISCUSSION

13.  For the plaintiff, Mr Martin Ho submits that the mere act of taking out the Stay Summons does not absolve the defendant of his duty to comply with the Unless Order, and he did not.  Since no Defence has been filed by 9 February 2021, the sanction stipulated in the Unless Order would take effect and the proper course for the defendant, if he so wishes, is to apply for relief from sanction under Order 2, rule 4, rather than applying for a further extension of time, citing Waddington Ltd v Chan Chun Hoo Thomas[2]. No such application has been made.

14.  Mr Ho refers to東莞市東莞東祥裝飾有限公司v Universal Right Ltd[3]. In that case, the unless order was in the following terms:

“that unless the Defendant do file and serve its Defence pursuant to the Order herein dated 30^th April 1998 by 4:00 p.m. on Thursday, 4^th June 1998, judgment be entered in favour of the Plaintiff against the Defendant for the sum of RMB1,330,376.73 or its Hong Kong dollar equivalent at the time of payment together with interest thereon at the rate of 12.9% per annum from 2^nd April 1998 to the date of judgment and thereafter at judgment rate until payment together with costs of this action to be taxed, including the costs of this application.”

15.  Half an hour before the time stipulated in the unless order, the defendant there filed a summons under Order 12, rule 8, seeking a declaration that the Court had no jurisdiction on the ground of forum non conveniens.

16.  Rogers JA (as he then was, and with whom Godfrey JA (as he then was) agreed) said at 3-4:

“My view of the Order of 21^st May is that judgment was automatic as of one second past 4 p.m. on the 4^th June. The order says that judgment be entered in default of the filing of the Defence. Hence, if the Defence was not filed, the judgment was automatic. There was no need for anybody to do anything further in the matter. I would also say that it appears from the application itself under Order 12 rule 8 and, indeed, from the affidavit filed on behalf of the Defendant, that it appears for some reason that the Defendant, or its advisers, may have thought that an application for trial in another jurisdiction on the basis of forum non conveniens was a Defence which was maintainable in the Action. Hence, the application was that the Court has no jurisdiction. That, of course, only has to be considered to be realised to be erroneous. An application for a stay of proceedings on the ground of forum non conveniens is simply a request to the Court to stay the proceedings so that the matter can be litigated in a forum which is more convenient, it is not a denial of jurisdiction by the Court itself.

The reason which had been given by the Defendant for not filing the Defence was that advice had been given by Counsel to the solicitors that the point about forum non conveniens should be taken and that an application to the Court should be made and in the meantime, no Defence should be filed. Counsel based himself upon the Notes in the White Book under Order 12 rule 8. Those Notes are of course applicable in normal circumstances where time limits have not expired but they are not applicable, as is now conceded in this Court by Mr. Mok on behalf of the Defendant, in a case where the Court has made an Unless Order that a Defence should be filed. Indeed, no indication had been given to the Master on the two occasions on which extensions of time had been sought, that any application under Order 12 rule 8 would be made for stay of proceedings on the ground of forum non conveniens” [emphasis added].

17.  Rogers JA eventually ordered the default judgment to be set aside for a number of reasons, and granted an extension of time to the defendant to file its Defence.  However, in my judgment what was held by the Court of Appeal there, which is binding on me, is that where there is an unless order prescribing the time limit for the filing of the Defence by a defendant, then there is default when no Defence is filed by the time limit notwithstanding the taking out of a summons under Order 12, rule 8, by the defendant.

18.  While the unless order in that case is different in that it provided for the automatic judgment one second after the time limit has expired, and there is no such provision in the current Unless Order, for present purposes that is not relevant, as the issue is whether the taking out of a summons under Order 12, rule 8, means that there is no default by a defendant in the filing of a Defence when the time limit is set by a Court order for the purposes of Order 19, and not the consequence of a default. Rogers JA said that there is default in such circumstances.

19.  In Tremendous Success Holdings Ltd v Sinosoft Technology Group Ltd[4], DHCJ Anita Yip SC, referring to the judgment of Rogers JA, said, which I respectfully agree:

“… the Court of Appeal decision was not simply based on counsel’s concession but was clearly of the view that Order 12, rule 8 did not automatically extend the time under Order 18, rule 2(3) where there was an unless order.”

20.  For the defendant, Ms Lo cites a number of first instance decisions which said that default judgment should not be applied for or granted when there is a pending application under Order 12, rule 8. However, they did not decide the specific issue of the effect of an unless order on the question of extension of time.   In any event, it is the Court of Appeal’s decision which matters.

21.  Ms Lo also suggests that the judgment of Rogers JA was decided per incuriam because his Lordship did not consider Order 18, rule 2(3). 

22.  With respect, I cannot accept that his Lordship would have overlooked, or did not have in mind, a common provision such as Order 18, rule 2(3), even though he did not refer to it expressly.  The whole basis of a Defence not having to be filed in “normal circumstances” when an application is made under Order 12, rule 8, which his Lordship referred to, is because time is extended by Order 18, rule 2(3).  He must have had that provision in mind.  The per incuriam argument must be rejected.

23.  In the premises, it is my view that notwithstanding the Stay Summons, the defendant has failed to comply with the Unless Order and is in default in filing a Defence.  Order 19, rule 7, is engaged.   The question is whether I should exercise my discretion to enter judgment against the defendant, it having been accepted that I do have a discretion whether or not to do so.

24.  I take into account the fact that there is a Stay Summons, and proceedings in the Shanghai Court, pending between the parties, which would be very substantially affected by a default judgment granted by me, if not being rendered nugatory.  In all the circumstances, with the evidence currently before me, but noting that evidence in this aspect has not been filed by the plaintiff, I cannot take the view that the Stay Summons and the proceedings in Shanghai Court are not genuine, bona fide, matters that have to be resolved between the parties, or that they (in particular the Stay Summons) are tactical moves by the defendant.  It is in the best interest of the administration of justice for the dispute between the parties to be properly litigated and resolved between the parties. 

25.  I accept of course that the defendant is, as I have ruled above, in default.  However, whilst accepting that the plaintiff has not filed any evidence in answer to the second affirmation of the defendant, as matters stand with what is said in the said second affirmation, there is in my judgment some basis to say that it is at least plausible for relief from sanction for breach of the Unless Order to be granted to the defendant had a proper application thereof been made. 

26.  I must stress that the plaintiff has not filed any evidence in answer to the second affirmation of the defendant which the latter now relies on to support a case of relief from sanction, nor have I heard arguments from Mr Ho, who is understandably not fully armed with such arguments today.

27.  In such circumstances, the fairest manner going forward is, in my view, not to enter judgment pending the resolution of the question of whether the defendant ought to be relieved from sanction for failing to comply with the Unless Order, and that question has to be resolved with proper evidence and preparation by both sides.  In the premises, on the undertaking of Ms Lo on behalf of the defendant to issue a summons within 7 days to apply for relief from sanction formally[5], I adjourn the Judgment Summons sine die with liberty to restore so as to see what transpires from the Stay Summons and the application for relief from sanction.  I stress again that nothing I say herein is to be taken to be an attempt to deal with an application for relief from sanction, or an expression of any views (no matter how provisional) on any such application, which must be considered properly with evidence and properly prepared submissions from both sides.  

28.  For proper case management purposes, the summons applying for relief from sanction should be fixed to be heard at the same time as the Stay Summons on 7 May 2021, so that directions for the disposal of both can be made at the same time.

29.  As to costs, the plaintiff has succeeded on the question of default and the hearing is adjourned for a proper application for relief from sanction to be made but which ought to have been made earlier, in my judgment the proper order is for the plaintiff to have the costs of this hearing.  The question of costs of the Judgment Summons other than this hearing is reserved.  At the hearing I have already directed the filing and service by the plaintiff of her bill of costs and the comments thereon by the defendant, and I shall assess costs summarily.  Such assessed costs are to be paid by the defendant forthwith.

30.  I thank the legal representatives for their assistance.