XCHRX COLMAN AIRFLOW CO. LTD. v. COLLECTIONS CONSTRUCTION LTD.

HCA 13456/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13456 OF 1999

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J U D G M E N T

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1. This is the appeal of Collections Construction Ltd ("CCL") against the order of Master Christie dated 2 December 1999 whereby he ordered:-

(1)	pursuant to R.H.C. Order 2 rule 2, leave to the Plaintiff to amend the Writ by substituting for "CCL" with "Collections Interior Ltd." (CIL);
(2)	pursuant to Order 20 rule 11, the default judgment dated 13 September 1999 be corrected from "CCL" to "CIL";
(3)	execution of judgment is stayed until the Plaintiff files an amended Writ and amended Judgment in the above terms; and
(4)	no order as to costs.

2. CCL asks for (a) paras (1) to (3) of the learned Master's order to be set aside; (b) the default judgment dated 13 September 1999 to be set aside; (c) the Defendant (meaning CCL) be given unconditional leave to defend this action; and (d) the costs of CCL's summons to set aside Default Judgment, of the hearings before the learned Master on 29 November 1999 and 2 December 1999 and of this appeal, be to CCL.

3. There are 2 main parts to the order dated 2 December 1999, one part gave the Plaintiff leave to amend both the Writ and the Default Judgment and the other part was the costs order. They will be dealt with under separate headings. Before doing so, I propose to set out briefly what brought about this appeal.

4. On 23 January 1997, the Plaintiff received a fax asking for a price quote for the supply of its air diffuser. The letterhead appearing on this fax bore 3 names: a "CIL Holdings Ltd", CCL & CIL with the same address, telephone and fax number. Mr Anthony Chu signed the fax. Not sure which company sent the fax, the Plaintiff naturally telephoned Mr Chu and asked which company sent it. Here the evidence of the parties parts company. The Plaintiff said in its affirmation that the other side informed it the purchaser was CCL. The Defendant in its affirmation (made by a Mr Man Pui Kwan who described himself as a General Contracts Manager of CIL Holdings Ltd, the parent company of CCL) said that the Plaintiff was told that it was CIL.

5. There were quite a number of the Plaintiff's documents exhibited to the Plaintiff's affirmation. The Plaintiff almost always consistently addressed all the documents to CCL. Only 1 or 2 documents were signed or chopped by the purchaser and whenever that happened CIL's name appeared: see, for example, the quotation dated 6 June 1998 (exh. "MA-5") and the delivery order dated 12 June 1997 (exh. "YWHR-4"). The fax dated 23 January 1997 also shows the name of CIL.

6. Based on the evidence of the Plaintiff, the Plaintiff's solicitors commenced this action against CCL. The Plaintiff's solicitors claimed that service of the Writ was duly made on CCL by leaving it at the registered office of CCL. This was disputed by CCL which claimed that it had an elaborate system of registering incoming mail, especially legal correspondence, and there was no record of such document being served on CCL. I shall deal with this point further later on.

7. Whether it was because the Writ was not received by CCL (or CIL) or because CCL (or CIL) defaulted in defending the action, no notice of intention to defend was given and Default Judgment was entered on 13 September 1999.

8. The Defendant (CCL) applied for that Judgment to be set aside. That application was heard by Master Christie on 29 November 1999 and 2 December 1999. At the end of the hearing on 2 December 1999, the learned Master made the order referred to earlier.

9. Obviously because of the way in which the case was advanced in the Plaintiff's affirmation, Plaintiff's counsel in his written skeleton submissions dated 29 November 1999 argued that CCL was the true purchaser of the Plaintiff's goods: see paras 16 to 42, especially paras 19, 31, 34 and 42, thereof. However, as Mr Lau for the Plaintiff confirmed in this appeal, both he and the learned Master were convinced at the end of the hearing on 2 December 1999 that the proper Defendant should be CIL.

Is there Good Ground for Objecting to the Order Giving "Leave to Amend"?

10. CCL has been represented by Messrs William W L Fan & Co. in this action. Mr Eric Yung of counsel was instructed by that firm to represent CCL at the hearing before the learned Master. That position remains the same in this appeal. With this in mind, it is quite incomprehensible why the Notice of Appeal seeks inter alia to set aside the learned Master's order giving leave to amend the Writ and the Judgment so that both the action and the Judgment are now directed against CIL instead of Mr Yung's client CCL. At common law each limited company is a separate and independent legal person. In this case, CCL has maintained in its affirmation that it is distinct and separate from CIL and the 2 companies carry on completely different businesses: see para. 16 of the affirmation of Man Pui Kwan dated 12 October 1999. The learned Master must have accepted this part of CCL's evidence.

11. To my great surprise, even after I explained to Mr Yung that it appears to me there is no valid reason (practical or legal) why his client should object to the action and the Judgment being directed against some other company, he insists on objecting to this part of the learned Master's order.

12. In Part D of Mr Yung's skeleton submissions, he raises the point that CCL was not liable to the Plaintiff. In giving leave to the Plaintiff to "amend" the documents in this action the learned Master must have accepted this part of Mr Yung's submission as well. The more I hear Mr Yung objects to the first part of the learned Master's order, the more he makes me feel that at least CCL and CIL are concerned, they are one and the same establishment with a different "front". Since Mr Yung insists on objecting to the first part of the order, I shall deal with it on the merits of Mr Yung's objection.

13. The first ground of Mr Yung's objection is that the court had no jurisdiction to amend the Default Judgment after it had been drawn up. He relied on 2 cases in support:

(a) Molnlycke AB v. Procter & Gamble [1993] FSR 154;

(b) Chiron Corp v. Organon Teknika [1994] FSR 252.

With respect to Mr Yung, I do not find either case to assist this part of his argument. Both cases dealt with the court's power to amend a judgment drawn up after "the action had come on for trial, the action had been decided and the court had given final judgment" : headnote (1) of Molnlycke. In Vol. 26 of Halsbury's Law of England (1999) 4th ed., the learned editors dealt with the amendment of final judgments under a separate heading (paras 556-7) and dealt with the variation of default judgments under another heading (para. 559). Further, R.H.C. Order 13 rule 9 provides that:-

"Without prejudice to rule 7(3) and (4), the Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order." (underline supplied)

14. For the above reasons, I find that the two cases relied on by Mr Yung have nothing to do with variations to default judgments.

15. Mr Yung's second ground of objection is that the Plaintiff intended to sue CCL and not CIL. However, as Mr Lau confirmed to me during the appeal, that stance was changed towards the end of the hearing before the learned Master. Further, as Mr Yung stated in his skeleton submissions for this appeal, the learned Master accepted this part of Mr Yung's argument at the hearing below and he therefore gave leave to the Plaintiff to amend: see para. A4 of Mr Yung's skeleton submissions.

16. At para. 13/9/8 of The Supreme Court Practice 1999, the learned editors stated:

"[there is power of the court] ... as expressly provided for by Order 13 rule 9, to vary a judgment in an appropriate case so as to correct an irregularity ... (This has long applied to an irregularity which was due to an error arising from an accidental slip or omission..... to allow amendments to correct the irregularity under Order 2 rule 1(2)."

There is no authority cited in The Supreme Court Practice 1999 which indicated that the Court's power is only limited to accidental slips or omissions when the court exercises its power to vary. I consider that there is a residual discretionary power of the court (whether under Order 13 rule 9 or its inherent jurisdiction) to vary a default judgment although such power should only be exercised in an exceptional case.

17. I consider that the facts of this case are exceptional enough for the Court to exercise its discretion to vary the Default Judgment in the way it was varied (or, to use the word used by the learned Master, "amended") by the learned Master.

18. Mr Yung's third ground of objections is that CIL had not been given a right to be heard on the amendment of the court's documents: see para. F11 of his skeleton submissions. I consider I need to deal with the issue of whether the Writ has been duly served in relation to this point. In the affirmation of Mr Man Pui Kwan, CCL (through the manager of its parent company, CIL Holdings Ltd) said that it had not received the Writ. In the 2nd affirmation of Mr Chang Tat Ming, the back sheet of the Writ herein was exhibited. The endorsement thereon stated "by leaving at Defendant's registered office on 19/8/99". The chop of CIL was put onto the back sheet by the receptionist of (presumably) the 3 companies sharing the office there. In these circumstances, I do not agree that CIL had no knowledge of this claim. Although I have not heard from CIL yet, it is highly arguable, given the unusual facts in this case, that CIL stands in a similar position as the defendant in Singh v. Atombrook [1989] 1 WLR 810.

19. There is a even more fundamental hurdle to Mr Yung's objection to the first part of the learned Master's order. In a sense, CCL is relying on the technical rules of the law, such as those regarding the separate legal identity of a company or the proper service of legal documents. That being the case, I consider that there is ample reason that CCL should establish why it would have the necessary locus standi to challenge an action which, since the date when leave to amend (or variation) was given, has nothing to do with it (but a different entity called CIL). I find that Mr Yung has not been able to establish locus standi. CCL therefore should not be allowed to object to the first part of the Master's order on this ground alone.

Was the Costs Order Erroneously Made?

20. The learned Master ordered that there be no order as to costs of the application. The reason he gave for doing so was "no order will be made on CCL's own application because, it turns out, CCL has no standing in these proceedings". I will not say whether he was unreasonable or erred in law in so concluding. But leaving aside the correctness of the reason he gave, I consider that if a litigant chooses to conduct its business so that it causes any reasonable person to be confused as to how properly to commence a court action, or to effect proper service, such a litigant runs the risk that the court will consider it (at least) equally blameworthy if confusion occurs as a result. I consider that this was what happened in this action. For this reason, I agree with the Master's conclusion on the question of costs.

Conclusion

21. I agree with the conclusion of (though not necessarily the reasons given by) the learned Master as reflected by the order he made. The appeal is therefore dismissed.