升力科技有限公司 V. C & C INTERNATIONAL TECHNOLOGY LTD

DCCJ 4751/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4751 OF 2016

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DECISION

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1.  By a Summons filed on 5 December 2016 (“Summons”), the plaintiff applied for a default judgment on 9 heads of relief (not counting the usual relief for interest and costs). The written submission filed by counsel for the plaintiff also argued on the basis that all 9 heads were pursued.

2.  At the hearing, counsel for the plaintiff abandoned 7 heads of the relief sought and pursued only the following 2 under Order 19 rule 7 of the Rules of District Court:-

(1)  a return of the sum of US$26,891.01 by the defendant as money had and received from the plaintiff together with interest, and

(2)  a declaration that the defendant holds the sum of US$26,891.01 received by him in fraud of the plaintiff as resulting or constructive trustees for the plaintiff. 

Service of the proceedings and the Summons

3.  The plaintiff had filed affirmations confirming that it has duly served the Writ with statement of claim, the Summons, and a notice of intention to enter judgment by leaving the same at the registered office of the defendant.

4.  No notice of intention to defend nor any defence was filed.

5.  At the hearing, I queried the basis on which the plaintiff pleaded that the defendant is a Hong Kong company since all the documents relating to the company with whom the plaintiff had the agreement showed address and contact details in the Mainland.  Counsel for the plaintiff accepted that there was no evidence before the court on this point but submitted that the plaintiff can file further affirmation to explain that it obtained the information from the administrator of the supplier’s online platform with whom the company has registered.

6.  I allowed time for the plaintiff to file an affirmation on this point, which they had.  I now give the decision.

Order 19 rule 7

7.  The court’s power to grant judgment under Order 19 rule 7 is discretionary.  In exercising its discretion, the task of the court is to see whether the plaintiff appears to be entitled to a judgment on its statement of claim.  The statement of claim must show a case for the order that the applicant seeks to obtain.  (Hong Kong Civil Procedure 2017 §19/7/14)

8.  The court cannot receive any evidence in the case but must give judgment according to the pleadings alone.  It is not necessary on the hearing of the summons for judgment to prove the plaintiff’s case by evidence.  (Hong Kong Civil Procedure 2017 §19/7/11; Lam Shing Shou v Lam Hon Man and others, unreported, HCA 361 of 2001, 15 January 2002; Tsui Ming Sin (formerly known as She Ming Sin) v Tsui Chi Ping and another, unreported, HCA 2550 of 2014, 2 February 2016) 

The plaintiff’s pleaded case

9.  It was the plaintiff’s pleaded case that it came to know the defendant from a suppliers’ platform on the internet.  After some negotiations by exchange of emails, it has entered into an agreement (“Agreement”) with the defendant for the purchase of certain electronic components (“Electronic Components”) for a sum of US$26,891.01 (“Contract Sum”).  The plaintiff relies on 3 documents, namely:-

(1)  The Purchasing Order issued by the plaintiff dated 28 December 2015;

(2)  The Confirmation of Acceptance of the Purchasing Order signed by or on behalf of the defendant dated 28 December 2015; and

(3)  The Proforma Invoice issued by the defendant dated 28 December 2015.

10.  The plaintiff remitted the Contract Sum to the defendant’s account on 11 April 2016.

11.  On 12 April 2016, the defendant confirmed receipt of the Contract Sum and further alleged that the sale prices of the Electronic Components had been adjusted upwards and asked for a higher price.

12.  After further rounds of email correspondences, on 15 April 2016, the plaintiff decided to rescind the Agreement and demanded a return of the Contract Sum.

13.  On 16 April 2016, the defendant replied by saying that it has already converted the Contract Sum into an equivalent value of RMB currency and it has completed the purchase of the Electronic Components with the upstream supplier on 15 April 2016.  The defendant did not have any US dollar currency to refund.  If the plaintiff insisted on a return of the Contract Sum, it can only be done by monthly instalments.

14.  This was not accepted by the plaintiff.  Further rounds of negotiations ensued.  The plaintiff said that the defendant refused to answer phone calls and emails from the plaintiff, and refused to provide a reachable contact number or physical address to the plaintiff. 

15.  The plaintiff paid a visit to the defendant’s address in the PRC but found no presence of the defendant at that address.  The plaintiff alleged that the defendant was fraudulent.

Return of Contract Sum as money had and received

16.  The plaintiff’s first claim is on unjust enrichment.

17.  The framework for approaching an unjust enrichment claim involves asking the following questions:-

(1)  Was the defendant enriched?

(2)  Was the enrichment at the plaintiff’s expenses?

(3)  Was the enrichment unjust?

(4)  Are any of the defences applicable?

(See: Shanghai Tongji Science and Technology Industrial Company Limited v Casil Clearing Limited (2004) 7 HKCFAR 79; Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd and another (2015) 18 HKCFAR 364)

18.  On the plaintiff’s pleaded case, the defendant has received payment from the plaintiff pursuant to the Agreement but has not delivered the Electronic Components. The defendant was enriched by the receipt of the Contract Sum at the expenses of the plaintiff.  The plaintiff submitted that the enrichment was unjust as there was a total failure of basis for the defendant to have the Contract Sum.

19.  In paragraph 11 of the statement of claim, the plaintiff has also pleaded that according to the defendant, it has already converted the Contract Sum which was denominated in US currency into RMB currency and had completed the purchase of the Electronic Components from an upstream supplier.  Will these facts give rise to any defence on change of position?

20.  To establish a defence on change of position, the defendant has to prove that its position has changed in circumstances which make it inequitable for the defendant to make restitution to the plaintiff. (Lipkin Gorman v Karpnale Ltd [1991] 2AC 548).  In light of the facts pleaded in the statement of claim, and noting that the defendant had agreed to return the Contract Sum but only asked for time, I am not satisfied that the matters pleaded in paragraph 11 of the statement of claim would render it inequitable for the defendant to return the Contract Sum to the plaintiff. 

21.  I am satisfied that the plaintiff was entitled to a return of US$26,891.01 by the defendant.

Declaratory relief

22.  Turning to the declaratory relief sought by the plaintiff that the defendant holds the Contract Sum in fraud of the plaintiff as resulting or constructive trustees for the plaintiff.  

23.  The normal practice and approaches of the court on application for declaratory relief in default of defence stated in the Hong Kong Civil Procedure 2017 §19/7/20 are summarised below:-

(1)  the normal practice of the court is not to make a declaration without a trial, particularly where the declaration is that the defendant in default of defence has acted fraudulently (Wallersteiner v Moir (No 1) [1974] 1 WLR 991; Top One International (China) Property Group Company Ltd v Top One Property Grp Ltd [2011] 1 HKLRD 606);

(2)  this is only a rule of practice. It should not be followed when the plaintiff had a genuine need for the declaratory relief and justice would not be done if such relief was denied (Lam Shing Shou v Lam Hon Man [2002] 1 HKLRD D3; Lai Wai Kuen v Wong Shau Kwong [2004] 4 HKC 528);

(3)  the court will scrutinize the application for default judgment carefully and will not hastily grant the relief sought;

(4)  the court expects maximum assistance to be provided in order for the relief to be granted. However straightforward the applications may seem, the court should not be expected to deal with the matter on a do-it-yourself basis and rubber-stamp the uncontested application; (Ho Kwai Chun v Lai Yu, unreported, DCCJ 916 of 2013, 3 July 2014; Shue Huei Yue v Tan Chung Meng, unreported, DCCJ 2294 of 2013, 1 August 2014);

(5)  the declaratory relief to be granted should not be in terms wider than what the plaintiff is entitled to and what is necessary to do justice to it (Lee Kwok Leung v Li Foa Shang, unreported, DCCJ 2165 of 2014, 10 April 2015)

24.  To support its allegation of fraud, the plaintiff largely relied on the inability to contact the defendant after the dispute. I do not agree that this is sufficient to find fraud on the part of the defendant in the absence of any trial.  It is trite that allegation of fraud should not be made without clear evidence.

25.  There is no reason to depart from the normal practice of the court, and I decline to make the declaration sought.

Orders

26.  In summary, I order judgment be entered against the defendant in default of defence that the defendant shall return to the plaintiff a sum of US$26,891.01 together with interest at the best lending rate plus 1% from the date of the writ until the date of judgment, and thereafter at the judgment rate until full payment. 

27.  I make an order nisi that the defendant shall pay the costs of this action including the costs of this application on a party and party basis, to be taxed if not agreed, with certificate for counsel for this application. This order nisi will become absolute if there is no application to vary the same within 14 days from today.