XCHRX KAILAY ENGINEERING CO. (HK) LTD. v. SILVER FAITH HOLDINGS LTD. AND ANOTHER

1998, No. CON14

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. On 24 July 1998, I heard applications by the first defendant to set aside a default judgment and to strike out its name. On 29 July 1998, I handed down my judgment on these applications. I set aside the default judgment, and, in relation to the application to strike out, I decided that there was not then a clear case for this relief, although continuance of the proceedings without amendment might be a abuse of process. In relation to costs, I said -

"The matter of costs has not been argued. It seems to me, however, that, without argument, the proper order is that the first defendant pay the costs of the applications under the summonses dated 20 and 27 February 1998 on an unopposed basis, and that the plaintiff pay the costs of the opposition. I make an order nisi in these terms."

2. The plaintiff now asks me to reconsider this order, and to order that the first defendant pay the plaintiff's costs. I should say now that, although I mentioned it, I did not have the application to strike out in mind when I made this order nisi. Sensibly, the parties have agreed that there should be no order for costs on the summons of 27 February 1998, and I order accordingly. That leaves only the order relating to the summons of 20 February 1998

3. Mr Coleman, on behalf of the plaintiff, argued that, where a defendant was successful in having a regular judgment set aside, according to practice and principle, the defendant should pay the costs of the application. He quotes the 1999 Supreme Court Practice at 13/9/18 where it is said "On setting aside a regular judgment, where the defendant has been at fault, the usual practice is for the plaintiff to be awarded his costs in any event . . .". Mr Coleman submitted that "applications to set aside regular default judgments are applications of a class which can properly be resisted by the plaintiff, albeit eventually unsuccessfully, without being penalized in costs. It is not for the plaintiff simply to concede such applications; it is for the defendant to persuade the Court to accede to them."

4. During the course of argument, I said to Mr Coleman that, if this meant that a plaintiff could oppose an application to set aside a regular judgment to the bitter end, regardless of the merits, secure in the knowledge that he would get his costs, this was not an attitude that should be encouraged by the courts. In the face of this, Mr Coleman stuck to his guns. He said, in so many words, that this was the situation. It is not, I must say, a situation that I am prepared to accept. More and more, these days, the courts demonstrate an anxiety to use their powers to save costs and time by seeking to control proceedings, to avoid pointless litigation and to discourage unworthy opposition to meritorious orders. It was my preliminary view, when I made the order nisi, that the plaintiff should not have opposed the setting aside of the default judgment after having seen the first defendant's evidence. I have now re-examined that view in the light of the arguments addressed to me.

5. In my judgment, the plaintiff should have started its consideration of whether or not to oppose the setting aside from the basis that the first defendant had demonstrated a clear intention of defending the action, but there had been a slip-up in its solicitors' office resulting in a default judgment in the huge sum of over $26 million. I believe that the plaintiff should have realised that no judge in his right senses would want a defendant to suffer this consequence from a minor error in office efficiency if it had a defence that was worthy of the attention of the court. The plaintiff should then have examined the case thoroughly to see if it was the kind of case that merited opposition. If it had done that, it would have realised that its own evidence did not support its case, and, indeed, established precisely the case pleaded by the first defendant. Having reached that stage, I believe the plaintiff should have consented to the judgment being set aside. I do not think I should give my blessing to further unjustified opposition by the plaintiff by allowing it to recover its costs of this.

6. As a fall-back position, Mr Coleman argued that, at least, the plaintiff should only be deprived of its costs; not that the costs should be awarded to the first defendant. I have considered this view, but it seems to me that, once I conclude that the plaintiff should not have offered further resistance to the order, it follows that it is just that the first defendant should have the costs incurred as a consequence of this resistance.

7. In the result, I believe the order nisi made on the summons of 20 February 1998 should stand , subject to this clarification: The plaintiff is to have its costs up to the point of considering and taking instructions on the first defendant's evidence; thereafter, the plaintiff is to pay the first defendant's costs, both in any event.

8. As to the costs of this application, it seems to me that they should follow the event. I make an order nisi that the plaintiff pay the costs of this application.