E-TRADE SECURITIES LLC v. CEDALIAN CARE SERVICES CONSULTANTS LTD AND OTHERS

HCA 2312/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2312 OF 2016

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D E C I S I O N

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1.  I have before me an application by the plaintiff by summons filed on 28 November 2016 to enter final judgment against the 4th defendant in the form of a monetary judgment proposed and for continuation of a Mareva order made on 26 September 2016 against the 4th defendant until satisfaction of the judgment. 

2.  Until this morning, the 4th defendant was unrepresented and had not filed anything in opposition to the application.  This morning, however, a Notice to Act has been put before me, showing that solicitors will now act for the 4th defendant, and Miss Leona Chan, who had been instructed at very short notice, has appeared before me to oppose the application for judgment, seeking time to file a proper application for an extension of time to file a defence out of time. 

3.  The plaintiff is, on the evidence, the victim of an email fraud whereby it was induced to transfer out three sums of money.  The third sum was transferred to the 3rd defendant on 10 August 2016.  Information was later obtained from the 3rd defendant’s banks in Hong Kong, revealing that a sum of HK$466,500, out of that third sum, was transferred to a bank account of the 4th defendant. Accordingly, on 26 September 2016, the plaintiff obtained an order from this court joining the 4th defendant as a party to the action and obtained a Mareva injunction over the assets of the 4th defendant.

4.  On 30 September 2016, Chow J entered default judgment against the 1st to 3rd defendants.  The writ of summons was duly served on the 4th defendant at its registered office on 27 September 2016, but the 4th defendant failed to give any notice of intention to defend within time.  The plaintiff thereupon took out a summons for default judgment to be entered against the 4th defendant.  But at the last minute, an acknowledgement of service purporting to give notice of intention to defend was filed, forestalling the plaintiff’s application for default judgment.  That acknowledgement of service appears to have been prepared and signed by Mr Zhang, a director of the 4th defendant.  As a result, the plaintiff did not obtain an order for default judgment to be entered but the 4th defendant was ordered to pay the plaintiff’s costs.

5.  A statement of claim was duly prepared by the plaintiff and filed and served on 26 October 2016.  The period fixed by the rules for service of the defence by the 4th defendant therefore expired on 23 November 2016.   No defence was filed on behalf of the 4th defendant.  Accordingly, the plaintiff gave written notice by letter, served by hand and sent by email, on the 4th defendant that the deadline was expiring and should the 4th defendant fail to file its defence, the plaintiff would apply to enter default judgment within two days.  Nothing still was filed or served by the 4th defendant.  Accordingly, the summons dated 28 November 2016 that I mentioned at the outset was taken out by the plaintiff.

6.  As I have already said, up to now, still nothing has been filed on behalf of the 4th respondent and until its lawyers appeared in court this morning, nothing was done to oppose or in any way in response to the plaintiff’s application.  There is, even now, no affirmation from the 4th defendant explaining its delay and why it has not filed and served a defence.  There is no draft defence put before me, or any document or even oral submission indicating the line of the 4th defendant’s defence on the merits of their claim.  Miss Chan, for the 4th defendant, was - and I say this without any criticism of counsel personally - able to give only the barest of information as to why nothing has been done by the 4th defendant until last night, essentially asserting that Mr Zhang was not aware of the importance of the legal documents or the fact that there was a hearing fixed for today.

7.  I have had regard to the explanation of the principles and the relevant considerations set out in “The Decurion” [2012] 1 HKLRD 1063.  Having regard to those principles and to all the circumstances, I consider that my discretion should be exercised in favour of entering judgment for the plaintiff. 

8.  It is of note that this is the second time for the 4th defendant to be in default. It was faced with an earlier application for default judgment which it narrowly escaped.  There is no excuse for the 4th defendant not to know about these proceedings or the plaintiff’s intention to obtain judgment as swiftly as possible, which is understandable in the circumstances.  Notice has been given to the 4th defendant this time that the plaintiff would again apply for judgment to be entered in default of defence.  No acceptable explanation has been given by the 4th defendant for its failure to comply with the rules or make any response otherwise to the plaintiff’s action.

9.  Further, as Mr James, for the plaintiff, submitted, since I have not considered the merits of any competing argument at all on the substance of the action, it is still open to the 4th defendant to apply to set aside a default judgment if it can show sufficient merits in its substantive defence. 

10.  In these circumstances, I consider the appropriate course to be to enter judgment in favour of the plaintiff and to continue the Mareva order  pending satisfaction of the judgment. 

(Submissions on the terms of the orders)

11.  Execution of the judgment against the 4th defendant be stayed for 14 days from the date hereof. 

12.  I will make an order in terms of the order as amended and, therefore, judgment will also be entered in terms of the draft as amended.