STAR INDUSTRIAL COMPANY LIMITED v. YAT KWONG CASSETTE MANUFACTURING LIMITED

1987, No. A5008

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an appeal from an order made by Master O'Donnell on the 9th November 1988, setting aside the interlocutory judgment for damages to be assessed, obtained on the 8th January 1988 by the defendant on its counterclaim in default of a reply and defence being served by the plaintiff.

2. The action relates to a claim by the plaintiff for monies due for goods sold and delivered to the defendant. By the amended counterclaim, the defendant alleges that the goods supplied by the plaintiff were defective and counterclaims for sums due by way of loss of profit. In a draft reply and defence to the counterclaim, the plaintiff denies that the goods supplied were defective.

3. Mr Tang, Q.C., counsel for the defendant, relies upon Alpine Bulk Transport Co. Inc. v., Saudi Eagle Shipping Co. Inc. [1986]2 Lld. L.R. 221, in which it was held that where a defendant seeks to set aside a default judgment regularly obtained, it must be shown that the defendant has a "real prospect of success", see Sir Roger Ormrod at p. 223.

4. The defendant relies upon documentary evidence including quality control reports to the effect that the goods supplied were defective. Upon the evidence Mr Tang submitted that the plaintiff's bare denial in the draft reply does not reveal that there are real prospect of success for no evidence by way of quality control or otherwise was produced by the plaintiff to refute the defendant's assertions. However, I do not consider that there was any obligation upon the plaintiff to produce such evidence, for if the goods were not defective at the time they were supplied, a denial is sufficient. The burden is upon the defendant to prove that the goods were defective and the plaintiff is entitled to challenge the defendant's evidence at the hearing. The instant case is distinguishable from the Saudi Eagle case which depended upon a construction of documents. I am not in a position, upon the evidence presented by way of affidavit, to decide that the plaintiff has no prospect of success. The issue must be determined at the trial.

5. Subsidiary issues of delay and prejudice were also raised by the defendant.  There was a delay of eight months before the application was made to set aside which was clearly the fault of the plaintiff's solicitor. However, the delay was not, in my judgment, inexcusable or inordinate that justifies the refusal of the plaintiff's application in the exercise of my discretion. Mr Tang also argued that the defendant has suffered prejudice by paying a sub-purchaser in Singapore with the result that the defendant will be placed in a difficult position to prove that the goods were defective. Apart from a possible absence of the actual goods in question, this complaint is not justified for there was no evidence to show that the relevant witnesses will not be available. In any event, if the defendant succeeds on the question of liability, the damages will still have to be assessed.

6. The appeal is therefore dismissed with costs to the plaintiff.