FOK HING (HK) TRADING LTD AND ANOTHER v. GUNAWAN-INDRA, t/a BUMIPALA DHANADWIPA

CACV 74/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 74 OF 2014

(ON APPEAL FROM HCA NO. 1334 OF 2013)

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Hon Kwan JA (giving the judgment of the Court) :

1.  There is before us a summons issued by the plaintiffs to strike out a Notice of Appeal filed by the defendant against a judgment entered against him in default of serving a defence. Two grounds of striking out are relied upon.

2.  The first ground is that Order 19 rule 9 of the Rules of the High Court was not complied with.  It is contended that the defendant should have applied under that provision in the court below to set aside the default judgment, instead of appealing the default judgment in the Court of Appeal.  So the Notice of Appeal should be struck out for abuse of process.

3.  The second ground is that section 14AA of the High Court Ordinance, Cap 4 and Order 59 rule 2B of the Rules of the High Court were not complied with.  It is contended that the default judgment, although stated as a “final” judgment, is an interlocutory judgment and leave to appeal must first be obtained before an appeal could be brought against it.  As the defendant has not applied for leave to appeal, a valid Notice of Appeal cannot be served, so the Notice of Appeal should be struck out.

Background matters

4.  We will first relate the relevant background matters.

5.  The plaintiffs’ claim against the defendant is for passing off in respect of the plaintiffs’ product named “Indomie Instant Noodles” and for infringement of a registered trademark.  The 2^nd plaintiff is the manufacturer in Indonesia and the 1^st plaintiff its sole agent and distributor in Hong Kong of the said product, which was especially designed for the Hong Kong market and is different in significant ways from the “Indomie Mi Goreng” product made by the 2^nd plaintiff for the domestic market in Indonesia.

6.  The plaintiffs issued the writ against the defendant in July 2013 and served a statement of claim in September 2013.

7.  The defendant has acted in person throughout.  He filed an acknowledgment of service in August 2013 stating that he intends to contest the proceedings.

8.  In October 2013, the plaintiffs issued the first summons for judgment on their claim in default of defence.  This came before L Chan J in November 2013 and was adjourned for an Indonesian interpreter to attend court.  At the adjourned hearing on 10 December 2013, having ascertained from the defendant through an interpreter that he denied passing off and wished to file a defence, the judge granted him an extension of time of 14 days to file and serve a defence on the plaintiffs.  The judge also reminded the defendant to consult a lawyer having noted that his application for legal aid was refused.

9.  The defendant filed a defence on 17 December 2013, but did not serve it on the plaintiffs.  In the defence, he stated that the instant noodles sold in his shop in Hong Kong are different from the product sold by the 1^st plaintiff in Hong Kong, that he bought his goods from the 2^nd plaintiff in Indonesia, that the 2^nd plaintiff manufactured 50 types of noodles, and that he has a sale licence and health certificate for his goods issued by the authorities in Indonesia.

10.  As no defence was served on the plaintiffs within the extension of time granted by L Chan J, the plaintiffs filed a notice of intention to enter judgment and issued their second summons for judgment in default of defence on 20 February 2014.

11.  On 5 March 2014, the defendant filed an affirmation in which he exhibited a document headed “Defense” with supporting documents.  This defence was on the same lines as that filed in December 2013.  Again, it was never served on the plaintiffs.

12.  The summons came before Deputy High Court Judge S Wong, SC on 13 March 2014.  The defendant attended the hearing.  The judge brought up the defence filed by the defendant on 17 December and the defendant confirmed that he had not served the same on the plaintiffs.  The plaintiffs’ solicitor applied for judgment in default of service of defence.  The judge explained to the defendant the requirement of service of a defence on the plaintiffs, that default judgment would be given against him and that he could apply to set aside the judgment.  The judge told the defendant if he should later decide to apply to set aside the judgment, he should get a lawyer to assist him to present his case properly.  The judge then granted an order in terms of the draft annexed to the summons.  He did not give a reasoned judgment.

13.  By the order made on 13 March 2014, the judge entered final judgment against the defendant in default of his serving a defence for passing off in respect of the plaintiffs’ product named “Indomie Instant Noodles” and for infringement of a registered trademark.  By the judgment, various injunctions were granted against the defendant, and he was ordered to deliver up the offending items to the plaintiffs and make and file an affirmation disclosing his source of supply and clientele.  The plaintiffs would be at liberty to elect between an enquiry as to damages and an account of profits.  Costs were summarily assessed against the defendant at $60,000.  The order recited the defendant’s affirmation filed on 5 March 2014 and the exhibits therein, so it would appear that the judge had taken into consideration the document headed “Defense” with supporting documents filed by the defendant.

14.  On 7 April 2014, the defendant filed a Notice of Appeal against the default judgment.  Annexed to the Notice of Appeal was a document headed “Defense” setting out his defence in terms similar to the defences filed in December 2013 and exhibited in March 2014.  He did not take the judge’s advice to apply to the court below to set aside the default judgment.

15.  Before issuing the present summons to strike out Notice of Appeal, the plaintiffs’ solicitors wrote to the defendant on 11 April 2014 requesting him to withdraw the Notice of Appeal on the basis that the appeal process initiated by him was misconceived, as contrary to the process indicated by the judge on 13 March, and that the Notice of Appeal was filed without leave.  As the request was not met, this summons was issued on 29 April 2014.

16.  We will deal with the second ground for striking out first, as this is straightforward and determinative of the application.

If the default judgment is an interlocutory judgment

17.  Section 14AA of the High Court Ordinance provides that except as provided by rules of court, no appeal lies to the Court of Appeal from an interlocutory judgment or order unless leave to appeal has been granted.  Order 59 rule 2B(1)(a) provides that an application for leave to appeal against an interlocutory judgment or order may only be made to the Court of First Instance in the first instance within 14 days from the date of the judgment or order.  The defendant has not applied to the Court of First Instance for leave to appeal within time.

18.  Order 59 rule 21 provides as follows:

“(1) Judgments and orders to which section 14AA(1) of the Ordinance (leave to appeal required for interlocutory appeals) does not apply and accordingly an appeal lies as of right from them are the following –

(a) a judgment or order determining in a summary way the substantive rights of a party to an action;

…

(2) Without affecting the generality of paragraph (1)(a), the following are judgments or orders determining in a summary way the substantive rights of a party –

…

(h) an order refusing to set aside a judgment in default;

…”

19.  The test of what constitutes an interlocutory judgment for the purpose of section 14AA(1) of the High Court Ordinance is the “applications” test as laid down in Shell Hong Kong Limited v Yeung Wai Man Kiu Yip Co Ltd (2003) 6 HKCFAR 222 and Hip Hing Timber Co Ltd v Tang Man Kit (2004) 7 HKCFAR 212.  As explained by Lord Millett in the latter case at §38, the test is as follows:

“ … an order is a final order if, whatever the outcome of the application on which it is made, it is finally determinative of the entire cause or matter. An order is also regarded as a final order if, although not finally determinative of the entire cause or matter, it is finally determinative of a crucial or substantive issue in the cause or matter.”

20.  Applying the “applications” test, notwithstanding that the default judgment entered pursuant to the order of the judge was stated to be a “final” judgment, the judgment and order is not a final judgment for the purpose of section 14AA(1) and Order 59 rule 2B.

21.  Order 59 rule 21 makes provision where certain classes of interlocutory judgments are deemed final judgments for the purpose of section 14AA(1) and thereby exempt from the requirement to seek leave to appeal in an appeal to the Court of Appeal (Bank of China (Hong Kong) Ltd v Twin Profit Ltd & Ors, CACV 94/2010, 12 January 2012, §20).  Rule 21(1)(a) provides for “a judgment or order determining in a summary way the substantive rights of a party to an action” and rule 21(2) gives a non-exhaustive list of “judgments and orders determining in a summary way the substantive rights of a party”.

22.  Where judgment is sought to be entered in default of defence, the court gives judgment according to the pleading alone.  It does not receive evidence in support of the plaintiff’s case.  The only enquiry it makes is whether the statement of claim shows a right to the relief claimed (Hong Kong Civil Procedure 2014, vol 1, §19/7/11).  Further, under Order 19 rule 9, a judgment in default of defence may be set aside on such terms as the court thinks just.  It is not therefore “a judgment or order determining in a summary way the substantive rights of a party to an action” within Order 59 rule 21(1)(a).

23.  In contrast, where an application is made to set aside a default judgment, the court may enquire into the merits of the case.  And where the court makes an order refusing the application to set aside the default judgment, it is provided in Order 59 rule 21(2)(h) that such an order is “a judgment or order determining in a summary way the substantive rights of a party to an action”.

24.  As the judgment and order that is the subject of this appeal is an interlocutory judgment and is not a “judgment or order determining in a summary way the substantive rights of a party to an action” within Order 59 rule 21(1)(a), leave to appeal must first be obtained by the defendant before filing his Notice of Appeal.  And as no leave to appeal has been obtained, the Notice of Appeal is invalid and must be struck out.

25.  The defendant failed to apply to the court below within time for leave to appeal against the default judgment.  The Court of Appeal has power under Order 59 rule 2A to extend time to apply for leave to appeal.  There is no such application to this court.  In any event, we are not prepared to extend time for the defendant to apply to this court for leave to appeal.  There is no good basis to extend time, the defendant’s only explanation for his failure to apply for leave to appeal was that he was acting in person and did not know the procedure in the rules of court.  He had been reminded twice by the judges below to seek legal advice and assistance.  His failure to apply for leave to appeal is not excusable, he must therefore show a real prospect of success (not just a reasonable prospect of success) on the merits of his intended appeal for this court to exercise discretion to extend time in his favour (KNM v HTF, HCMP 288/2011, 7 September 2011, §§16 to 20).

26.  We are not satisfied he has shown a real prospect of success in his intended appeal against the default judgment.  Deputy Judge Wong had discretion whether to give judgment in default of defence or to extend time for the defendant to serve his defence (Hong Kong Civil Procedure 2014, vol 1, §19/7/13).  Notwithstanding that the defendant had filed a defence in December 2013 and exhibited another in March 2014, Deputy Judge Wong declined to further extend time to the defendant to serve his defence on the plaintiffs.  He decided to enter default judgment against the defendant and indicated to him he could apply to set aside the same.  So if the defendant should decide to continue to resist the plaintiffs’ claim, he would have to show an arguable defence on the merits.  The judge was clearly aware of the lines of defence proposed to be taken.  No doubt, the judge had taken into consideration that L Chan J had already been given the defendant an extension of time to file and serve a defence in December 2013 and had explained to him what he was required to do.  There is no basis to impugn the exercise of discretion of Deputy Judge Wong in entering default judgment.

27.  This is sufficient to dispose of the application to strike out the Notice of Appeal.

If there is abuse of process

28.  It is unnecessary to deal with the first ground for striking out.  The plaintiffs’ counsel, Ms Carol Wong, made involved submissions on this, drawing an analogy with the situation where an order has been made ex parte or in the absence of a party (which is not apposite, as the defendant had attended the hearing of the inter partes summons before Deputy Judge Wong).  She sought to rely on dicta in Tennero Ltd v Arnold [2007] 1 WLR 1025 at §17 which was said by Jack J in the context of the interaction between the right to set aside an order made in the absence of a party under rule 39.3(3) of the Civil Procedure Rules (“CPR”) and the right to appeal against such an order under Part 52 of the CPR, in support of her proposition that to appeal the default judgment where Order 19 rule 9 has laid down a procedure to apply to set it aside would be an abuse of process.

29.  The interaction between the two separate courses of action in rule 39.3(3) and the general right of appeal in Part 52 of the CPR was considered by the English Court of Appeal in Attorney-General of Zambia v Meer Care & Desai [2008] EWCA Civ 754 and in Bank of Scotland plc v Pereira [2011] 1 WLR 2391.  In the latter case, it was held that the existence of the remedy under rule 39.3(3) does not affect a party’s right to appeal directly against the order and Lord Neuberger of Abbotsbury MR gave six points of guidance on the interrelationship between the two courses of action.  Whilst Lord Neuberger agreed with much of Jack J’s judgment and his actual conclusion in Tennero, he did not agree with some of Jack J’s remarks.  Ms Wong submitted to us that we should not follow the approach in Pereira, which has been applied in a number of English cases subsequently.

30.  For the reasons already given, we do not think it necessary to go into the second ground for striking out the Notice of Appeal and we decline to express a view on the contentions of Ms Wong.

Conclusion and costs

31.  For the above reasons, we would strike out the Notice of Appeal.

32.  Costs of the application to strike out the Notice of Appeal should follow the event.  The plaintiffs seek costs on an indemnity basis, on the ground that the appeal proceedings constitute an abuse of process and an affront to the court. They also seek summary assessment of costs.

33.  The procedural errors of the defendant were due to his failure to seek legal advice and assistance notwithstanding he had been urged by the judges below to do so. In these particular circumstances, we decline to award costs on an indemnity basis.

34.  The plaintiffs have submitted a revised skeleton bill of costs for $99,000.  We would reduce the time spent by the solicitors by 14.75 hours and assess reasonable costs on a party and party basis at $40,000.  The defendant is to pay costs to the plaintiffs in this amount.