BPOST HONG KONG LTD v. JADE INCORPORATION LTD

DCCJ 1150/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1150 OF 2016

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DECISION

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A. Introduction

1.  This is the defendant’s application filed on 8 September 2016 for an order that the default judgment entered herein on 25 April 2016 for the sum of HK$483,511.66 plus interest and costs (“Default Judgment”) be set aside. 

2.  As the plaintiff had issued garnishee proceedings based on the Default Judgment, the garnishee order to show cause dated 31 May 2016 (“Garnishee Order”) is also before this court. By an order dated 19 October 2016, the garnishee was excused from attending the hearing.

3.  This setting aside application raises the question of whether defects in a statement of truth filed in respect of a statement of claim would render a default judgment entered under O 13 irregular such that it is liable to be set aside ex debito justitiae. Counsel on both sides submitted there had been no earlier decision on this point, and if such a default judgment were to be held irregular, it would require development of the existing law.

4.  Before considering that question, I shall first set out the salient facts.

B.   Factual background

5.  The plaintiff is Hong Kong company and the international division of bpost NV, a major postal services operator in Belgium.  At all material times, it was engaged in the business of providing mail and parcel delivery services under the tradename “Landmark Global”.

6.  The defendant was at the material times a Hong Kong company engaged in e-commerce, selling consumer goods such as clothes, footwear and electronics to customers in France and Western Europe. 

7.  The majority of the defendant’s business was conducted on an internet platform called “Marketplace” hosted by a French website called “Cdiscount”.  According to the defendant, it was required to comply with certain performance standards in delivering goods to its customers from Marketplace under its contract with Cdiscount.  These standards included delivery time, delivery rate and the tracking of parcels after dispatch.

8.  Up until March 2015, the defendant had been using Hong Kong Post to deliver its customer orders.  In around March 2015, the defendant started to explore using the plaintiff’s delivery services.

9.  In between March and July 2015, the plaintiff and the defendant negotiated the terms and conditions of the delivery services to be provided.  The two sides conducted such negotiations verbally and by email.  The parties also looked into the technical issue of how the defendant could efficiently supply the plaintiff with a relatively large volume of daily order details for the purpose of parcel tracking.

10.  While the parties are in dispute as to what exactly were the verbally agreed terms, there is no dispute that the defendant initially opted for the plaintiff’s service solution called “MiniPak Scan” in July 2015, and then switched to another service known as “ADS” in November 2015. 

11.  According to the plaintiff, the two service solutions differed from each other in that “MiniPak Scan” was a “Delivered Duty Unpaid” service (or “DDU” in short), while “ADS” was a “Delivered Duty Paid” service (or “DDP” in short).  As the plaintiff’s sales support manager, Mr Guillaume Moser (“Mr Moser”), explained[1]:-

“8. DDU is where the seller (i.e. the Defendant) is responsible for making a safe delivery of goods to a named destination, paying all transportation expenses and assuming all risks during transportation without paying the customs duty or tax, which is payable once the goods arrived [at] the port. When the goods arrived [at] the port, the buyer (i.e. the Defendant’s customers) shall be responsible for paying the customs duty or tax and all other customs clearing expenses.

9. DDP is a transaction where the seller (i.e. the Defendant) is fully responsible for payment of all costs associated with the transportation of goods to its customers, including the shipping costs, insurance and any other expenses incurred during shipping of the goods, and most importantly as opposed to DDU, it is fully responsible for payment of customs duty, tax and all customs clearing expenses. DDP is a type of delivery agreement that puts all risks and charges to the seller when using the Plaintiff’s services.”

12.  In July 2015, the defendant the first batch of parcels to the plaintiff for delivery.  Since then, the defendant had continued to use the plaintiff to send parcels to its customers up until December 2015.

13.  Other than issuing an initial invoice in respect of delivery charges for July 2015 (which the defendant had paid), the plaintiff issued 6 further invoices to the defendant in the period between August and December 2015 for a total sum of HK$525,141.11, covering delivery charges, return charges and other expenses incurred in respect of deliveries.  Brief details of such further invoices are summarized below:-

No.	Date	Brief description	Amount (HK$)
1508188	31/08/2015	Delivery charges for August 2015 (MiniPak Scan)	108,338.88
1509191	30/09/2015	Delivery and return charges for September 2015 (MiniPak Scan)	237,064.33
1510159	31/10/2015	Delivery and return charges for October 2015 (Minipak Scan)	66,322.22
1512053	01/12/2015	Delivery charges and tax & import duty for November 2015 (ADS)	46,349.29
1512054	01/12/2015	Return charges for undeliverable return shipment for November 2015 (MiniPak Scan)	1,128.07
1512072	29/12/2015	Delivery charges and tax & import duty for December 2015 (MiniPak Scan and APS)	65,938.32
		Total	525,141.11

14.  Apart from invoices, the plaintiff also issued to the defendant a credit memo no. 15163 dated 9 September 2015 for a sum of HK$41,629.45 (equivalent to EUR 4,793.81 @ 1 EUR : HK$8.684).  That sum is described on the credit memo as “[c]ompensation for parcels not delivered or delayed in Jul and Aug 2015”.  It would appear that the credit memo was issued shortly after an email from the plaintiff dated 1 September 2015 in which Mr Moser said, inter alia, the following:-

“Following our call earlier today, we would like to apologize for the bad quality of service that caused several delays & non distribution of many of your parcels since mid-July.

We would like to present you a compensation plan concerning the parcels not delivered or delivered after more than 9 working days

- Delivered in more than 9 working days: 399 parcels (refund of 50% of the delivery fees)

- Not delivered: 261 parcels (refund of 100% of the delivery fees)

Up to the 21^st of August, we have invoiced EUR 12,224.45 for 1175 parcels. The average price per parcel is EUR 10.41.

Consequently, the amount that we will credit to your account is EUR 4,793.81. We will issue a credit note and send it to you in the coming few days.”

15.  After taking this credit memo into account, the total net balance of the above invoiced sums becomes HK$483,511.66.  There is no dispute that the defendant has not paid to the plaintiff that net balance.  For reasons that I shall further elaborate in Section E2 below, the defendant did not pay it because it was dissatisfied with the plaintiff’s services.

16.  On 14 March 2016, the plaintiff therefore issued the writ of summons herein against the defendant seeking payment of the net balance.

C.   Events leading to the present application

17.  The contents of the statement of claim and its statement of truth are of some importance in this application, as will become apparent below.

18.  The writ contains a section resembling a general indorsement written in Chinese and a full statement of claim in English.  Although the former is undated, the statement of claim is dated 14 March 2016.

19.  The statement of claim itself does not contain a statement of truth pursuant to O 41A. Instead, the plaintiff filed a statement of truth separately on 14 March 2016 (“SoT”).  This is permitted by virtue of O 41A r 5(3).  Insofar as material, the SoT reads as follows:-

“STATEMENT OF TRUTH NOT CONTAINED IN THE DOCUMENT

THAT IT VERIFIES FOR USE IN THE DISTRICT COURT

We believe that the facts stated in the following document(s) are true and (if applicable) the opinion expressed in it is honestly held:

þ Pleading: Writ of Summons together with Statement of Claim filed on the 14^th day of March 2016.

…

Name:   David Matthew Mays (Director)

For and on behalf of the Plaintiff

bpost Hong Kong Limited

Signed:   [signed]

Date:   March 1, 2016”

20.  On 15 March 2016, the plaintiff’s solicitors served on the defendant, inter alia, the writ (indorsed with the statement of claim), the SoT and a prescribed form of the acknowledgement of service by leaving them at 30/F, New Treasure Centre, 10 Ng Fong Street, San Po Kong, Kowloon.  That was where the defendant’s registered office was located.[2]

21.  Despite the service of the writ and the other documents, the defendant had failed to give any notice of intention to defend.  As a result, on 25 April 2016, the Default Judgment was entered against the defendant.  Shortly thereafter, on 31 May 2016, the Garnishee Order was made in respect of the defendant’s bank accounts maintained with the garnishee.

D.   Principles on setting aside default judgments

22.  The parties are not in dispute over the principles governing the court’s approach in setting aside default judgments, which are well-established.

23.  Where a default judgment is irregularly obtained, the default judgment is liable to be set aside ex debito justitiae or “as of right”.  As the Court of Appeal explained in Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 (at 162D-E), “as of right” simply means “without going into the actual merits of the defence”.  It does not however mean the court would shut its eyes from the relevant circumstances.  The court does have a residual discretion in the jurisdiction under O 13 r 9, including the discretion to impose terms when setting the judgment aside having regard to the parties’ conduct. 

24.  The unfettered nature of the court’s discretion to set aside an irregular default judgment was reiterated in Russell Peter Brown & Ors v Edward Eugene Lehman (unreported) CACV 119/2012; 29 July 2016, in which Barma JA (giving the judgment of the Court of Appeal) explained:-

“28. Where a default judgment is irregular, it is usually said that it will be set aside ex debito justitiae. Mr Barlow submits that this means that it must be set aside. However, it was established in Po Kwong Marble Factory Ltd v Wah Yee Decoration Co Ltd [1996] 4 HKC 157 that the court retains a residual discretion to decline to set aside an irregular default judgment, or to impose terms when setting it aside, where the circumstances of the case call for such a course to be taken.”

25.  Based on decided cases, the learned editors of HKCP (2017) have helpfully provided (in Vol 1 at §13/9/5) a list of 5 situations where a default judgment would typically be set aside by reason of irregularity.  Those situations are:- (i) bad or ineffective service of the writ, (ii) premature judgment, (iii) judgment entered for too much, (iv) judgment obtained by fraud, and (v) judgment entered against a minor or patient.

26.  As to the setting aside of a regular default judgment, the primary consideration is whether the defendant has a real prospect of success in defending the action.  In Maryo Development Ltd v Tsang Yau May & Ors (unreported) CACV 101/2015; 11 January 2016, Harris J (with whom Yuen and Barma JJA agreed), after revisiting the leading authority of Premier Fashion Wears Ltd v Li Hing-chung [1994] 1 HKLR 377 and some other relevant cases, helpfully sets out the court’s approach at §§12-14 of the judgment.  This may be summarized as follows:-

(a)   A defendant who seeks to set aside a regular default judgment must at least show that his case has a real prospect of success that carries some degree of conviction.  It is generally not sufficient for a defendant merely to show an arguable defence, even though that would justify leave to defend being given under O 14.

(b)   While it has been said that the court would be required to form a “probable outcome of the action”, it is not required to undertake a mini-trial on affirmations.  What is required is for the court to form a “provisional view as to whether or not the defendant has a realistic prospect of successfully defending the action”. 

(c)   Such determination will involve the court assessing whether or not the defendant’s evidence on disputed factual matters has a realistic prospect of being accepted and, if it has, that the defendant has realistic prospect of establishing a defence in law.  The assessment has to be carried out mindful of the interlocutory nature of the application with a sense of proportionality.

(d)   Although the merits of the defence is the primary consideration, it has to be balanced against other factors such as the reason why judgment was allowed to be entered, and any delay in making the application to be set side.  The court’s discretion under O 13 r 9 is unrestricted.

27.  A regular default judgment may be set aside on terms.  These terms could include payment of or giving security for the plaintiff’s costs, or bringing the money claimed into court. They may be imposed where the defence is shadowy, or there has been breaches of the procedural rules by the defendant so that a payment into court is necessary to ensure the proper future conduct.  A condition, if imposed, should be one which the defendant can reasonably comply.  However, a defendant who seeks to avoid or limit a financial condition because of his own impecuniosity bears the burden to adduce sufficient and proper evidence and make full and frank disclosure to show that the condition is impossible, and not just difficult, for him to fulfil.  See: HKCP (2017) Vol 1 §13/9/15.

E.   Grounds for setting aside

28.  The defendant submitted that the Default Judgment should be set aside ex debito justitiae because it was an irregular judgment.  Alternatively, the defendant argued that, even if the Default Judgment were a regular judgment, it had a real prospect of success in defending the action.

E1.    Regularity of judgment

29.  Mr Patrick Wan, counsel for the defendant, rested his argument for irregularity of judgment solely on a number of defects he identified on the face of the SoT.  In particular, he pointed to the facts that:-

(a)   The SoT only refers to the writ together with the statement of claim “filed” on the 14 March 2016, when O 41A r 5(3)(b)(i) requires identification of a pleading “served ” on a certain date;

(b)   When Mr Mays signed the SoT on 1 March 2016, the statement of claim “filed” on 14 March 2016 was not in existence.  It was impossible for Mr Mays to verify that statement of claim on 1 March 2016, and his representation that he did verify it was false; and

(c)   It was wrong for Mr Mays to state “We believe that the facts in [the statement of claim] are true…” in the SoT.  Based on the decision in Grandee Model & Casting Co Ltd v Grey Advertising Hong Kong Ltd [2012] 3 HKC 155 (Temporary Registrar C Lee), Mr Mays should have included his position in that statement.

30.  Mr Wan submitted that these defects are “fundamental” and “not curable”, since the identification of the document to be verified in the SoT is vital, especially when it is separately filed.  This, he argued, is clear from the wording of O 41A r 5(3)(b)(i) which was enacted to (i) prevent a signatory of the statement of truth from arguing that he is verifying another document but not the one filed with the court, and (ii) prevent new matters from “creeping” into the verified document before its actual filing.

31.  Drawing parallels to the decisions of the English Court of Appeal in Charlesworth & Ors v Focusmulti Limited & Ors (17 February 1993; Russell LJ and Hollis J) and Anlaby & Ors v Praetorius (1888) 20 QB 764, Mr Wan argued that these defects of the SoT are fundamental irregularities that rendered it and the statement of claim a nullity, invalid or at least irregular.  The overall effect, he submitted, is that the plaintiff’s application for the Default Judgment was premature, since the right to enter the Default Judgment had not yet arisen.  Mr Wan thus contended that the Default Judgment was also irregular and must be set aside.

32.  As a further or alternative argument, Mr Wan relied on the plaintiff’s failure to make full and frank disclosure of the same defects when applying for the Default Judgment ex parte.  He specifically referred to the fact that the plaintiff in its affirmation of service stated that the writ of summons “appeared to … have been regularly issued out of the District Court of Hong Kong” [3], which he said could not be correct given the presence of such defects.  On the basis of an applicant’s duty in ex parte applications to give full and frank disclosure of all material facts and matters (citing L & Ors v Y Regional Government of X [2015] 1 WLR 3948 per Hamblen J at 3960F-H), Mr Wan submitted that this was another reason why the Default Judgment should be set aside ex debito justitiae.

33.  Mr Martin Wong, counsel for the plaintiff, disagreed.  He submitted that the defendant’s arguments were pedantic, and ignored the practical purpose of requiring the filing of statements of truth. Mr Wong referred to Mr Moser’s affidavit evidence[4] in which he (i) explained that it took time for Mr Mays (who resided and worked in the USA) to sign and return the SoT to the plaintiff’s solicitors, and (ii) confirmed that the statement of claim sent to Mr Mays for verification was the same document which was later filed.  Mr Wong therefore submitted that the SoT is valid as Mr Mays had “sufficiently identified” the statement of claim in the SoT, and duly verified the “contents” of the statement of claim therein.

34.  In the alternative, Mr Wong argued that the defects of the SoT are curable under O 2 r 1(2) and would not render the Default Judgment an irregular judgment.  Unlike the usual situations where a default judgment is held to be irregular by reason of bad service or insufficient reckoning of time (which he accepts are incurable), Mr Wong submitted that the defects of the SoT were mere irregularities that could be cured by the court, and would not render the Default Judgment an irregular judgment.  In this regard, he drew support from the decision of the Court of Appeal in Sino Trifone Limited v Fond Express Logistics Limited & Anr (unreported) HCMP 2366/2012; 31 January 2013 and the decision of Chung J in 陳鈺麟對謝婉明 (unreported) HCA 310/2009; 28 June 2010.

35.  In my view, it is appropriate to approach the issue by asking 3 questions:- (i) first, do such defects as relied on by Mr Wan render the SoT irregular? (ii) second, do any such irregularities of the SoT render the Default Judgment irregular? (iii) third, taking all the circumstances into account, should the Default Judgment be set aside ex debito justitiae?

(i)   Do the defects render the SoT irregular?

36.  O 41A contains detailed provisions stipulating the type of documents that must be verified by a statement of truth (O 41A r 2), who must sign such a statement (O 41A r 3), and the prescribed wordings that must be followed (O 41A r 5).  As illustrated by the case of Grandee Model & Casting Co Ltd (supra), strict adherence to the prescribed wordings is required[5]. This is perfectly justifiable in view of the potentially serious consequences, including one of imprisonment, for a party who is found to have made a false statement of truth (see, e.g., Kinform Ltd v Tsui Loi [2011] 5 HKLRD 57 and 80 and [2011] 5 HKC 426).

37.  Mr Wong, quite sensibly, did not argue against the fact that the contents of the SoT do fall short of the express requirements under O 41A r 5.  In my view, this is indisputable in at least in 2 respects. 

38.  First, Mr Mays did not strictly comply with the prescribed wordings in O 41A r 5(3)(i) in that he referred to the date of filing but not date of service with respect to the statement of claim.  Secondly, Mr Mays also failed to include his position as a director of the plaintiff within the SoT itself, which constituted another count of non-compliance on the authority of Grandee Model & Casting Co Ltd (supra).  While it seems possible or even likely that Mr Mays was signing on a proforma statement of truth supplied by the plaintiff’s solicitors, this would not make the SoT any less irregular in view of the strict requirements under O 41A r 5.

39.  As to Mr Wong’s contention that when the SoT is read together with Mr Moser’s evidence (see §33 above), Mr Mays had “sufficiently identified” the statement of claim and that he had duly verified the “contents” thereof, I am unable to agree. 

40.  Although Mr Moser did explain on affidavit that the statement of claim sent to Mr Mays for verification was the same as the filed version, he did not state whether he was deposing on personal knowledge or otherwise.  He did not state whether he was personally involved in sending the statement of claim to Mr Mays, or whether he personally checked the pleading before it was filed.  If Mr Moser was deposing on information or belief, he did not give his sources or grounds (see O 41 r 5(2)).  It is also unclear why Mr Mays himself, being the signatory on the SoT, did not give such explanation.  Given these material uncertainties, I attribute no weight to Mr Moser’s evidence adduced to “fill in the gaps”.  In any event, even if Mr’s Moser’s evidence were to carry weight in this regard, it would not be sufficient to cure the indisputable irregularities identified in §38 above.

41.  For these reasons, I hold that the SoT is irregular for want of compliance with the prescribed formal requirements under O 41A r 5.

(ii)   Do such defects render the Default Judgment irregular?

42.  Despite the existence of such irregularities, does it follow that the Default Judgment is necessarily irregular?  Commonsense dictates that not every defect in the application process for a default judgment, however large or miniscule, would automatically render the judgment irregular and liable to be set aside ex debito justitiae. To his credit, Mr Wan did not advance such a sweeping proposition in his written or oral submissions.

43.  In support of his contention that such irregularities are “fundamental” and “not curable”, Mr Wan cited Charlesworth (supra) and Anlaby (supra) (see §31 above). In those cases, the plaintiffs obtained default judgments during the period when the defendants were still entitled to serve a defence.  The court in both cases set aside the default judgment ex debito justitiae.  In Charlesworth, Russell LJ described the premature entry of judgment as “fatal and irretrievable” and amounted to “a defect of a fundamental nature incapable of being cured”.  In Anlaby, Fry LJ held that the plaintiffs had “no right to obtain any judgment at all”.  By reference to these cases, Mr Wan thus argued that the plaintiff’s right to enter the Default Judgment had not yet arisen as the SoT was not valid.

44.  Mr Wan’s reliance on Charlesworth and Anlaby was, in my view, misplaced.  Those cases concerned the issue of premature entry of judgment and are plainly distinguishable.  Other than asserting that the defects in the SoT would taint every step that followed it with irregularity (including the entry of the Default Judgment), Mr Wan offered no real analysis on how such defects would affect the plaintiff’s entitlement to enter judgment under O 13, or any compelling legal, procedural or policy reasons as to why the existing law should be so developed.  At the adjourned hearing on 20 February 2017[6], the defendant’s director, Mr Louis-Pascal Legal (“Mr Legal”), did not advance any submissions of his own on this point, but was content to adopt Mr Wan’s arguments.

45.  Default judgments, though binding, are not entered on substantive merits (see Oppenheim (L) & Co v Mohomed Haneef [1922] 1 AC 482).  They are entered purely as a result of the defendant’s default, either in failing to give notice of intention to defend (O 13), or failing to serve a defence in response to a statement of claim (O 19).  The trite justification for default judgments is that the defendant is treated as having impliedly admitted the plaintiff’s claim by reason of his default (see Cribb v Freyberger [1919] WN 22 and Wu Ka v Wu Kuo Cheng & Anr [2003] 3 HKLRD 658 per DHCJ Wong Yan Lung SC at §6).  A plaintiff’s entitlement to obtain default judgment is governed by rules of court.

46.  To the extent relevant, O 13 contains the following provisions:-

“1. Claim for liquidated demand (O. 13, r. 1)

(1) Where a writ is indorsed with a claim against a defendant for a liquidated demand only, then, if that defendant fails to give notice of intention to defend, the plaintiff may, after the prescribed time, enter final judgment against the defendant for a sum not exceeding that claimed by the writ in respect of the demand and for costs …”

“6A. Prescribed time (O. 13, r. 6A)

In the foregoing rules of this Order, “the prescribed time” (訂明的時限), in relation to a writ issued against a defendant, means the time limited for the defendant to acknowledge service of the writ or, if within that time the defendant has returned to the Registry an acknowledgment of service containing a statement to the effect that he does not intend to contest the proceedings, the date on which the acknowledgment was received at the Registry.”

“7. Proof of service of writ (O. 13, r. 7)

(1) Judgment shall not be entered against a defendant under this Order unless—

(a) the defendant has acknowledged service on him of the writ; or

(b) an affidavit is filed by or on behalf of the plaintiff proving due service of the writ on the defendant; or

(c) the plaintiff produces the writ indorsed by the defendant’s solicitor with a statement that he accepts service of the writ on the defendant’s behalf … ”

47.  Thus, the two key conditions for default judgment to be entered under O 13 r 1 are:- (i) a writ containing a liquidated claim has been duly served on the defendant, and (ii) the prescribed time for the defendant to acknowledge service has expired.  Once the plaintiff demonstrates that those conditions have been met, the plaintiff is normally entitled to judgment.  There is no requirement under O 13 for a statement of truth to be filed or served before default judgment can be entered.  It is not apparent to this court why the irregular SoT filed in the circumstances of the present case would, as Mr Wan submitted, necessarily affect the plaintiff’s entitlement to judgment under O 13.

48.  Could it be said (as Mr Wan seemed to suggest) that the defects in the SoT rendered the writ and hence the Default Judgment irregular?  For default judgments to be entered under O 13, the only thing that the plaintiff needs to have served on the defendant is a writ.  O 6 r 2 provides that a writ may be indorsed with either a statement of claim or a general indorsement.  Under O 41A r 2(1), a generally indorsed writ is not a document that needs to be verified by a statement of truth.  A plaintiff could therefore obtain default judgment under O 13 without even serving a statement of claim or a statement of truth.  If that is the case, I see no reason why an irregular statement of truth would affect the plaintiff’s entitlement to obtain default judgment, or render the judgment irregular.

49.  The two most commonly seen situations where a default judgment is held to be irregular are where there has been bad or ineffective service or premature entry of judgment (see §25 above).  Other than non-compliance with the provisions under O 13, the defendant is invariably prejudiced in these two situations, either from not having had due notice of the proceedings as in the former, or from having been deprived of time to give notice to defend in the latter.  While the other three situations referred to §25 above may be categories of their own, the defendant there could still fairly be said to have been prejudiced to a material extent. 

50.  By contrast, I do not think a defendant could be said to have suffered any prejudice from the plaintiff having made a blunder and filed an inappropriately worded statement of truth before entering default judgment.  Despite the invitation of this court, Mr Wan was unable to identify any real prejudice suffered by the defendant at the hearing.  This is unsurprising as a default judgment is entered on the basis of the defendant’s implied admission but not on the strength of the plaintiff proving his substantive claim.  Despite Mr Wan’s effort, it is plain and obvious that an irregularity in the SoT is totally different from the presently recognized situations where a default judgment is considered to be irregular and would be set aside ex debito justitiae.

51.  There is no dispute in the present case that the writ was duly served at the defendant’s registered office, and the Default Judgment was entered after the prescribed time had elapsed.  Despite the presence of defects in the SoT, and for the above reasons, I am not persuaded that such irregularities affected the plaintiff’s entitlement to enter the Default Judgment or rendered that judgment irregular in any way.  If there were to be consequences arising from such defects of the SoT, there are sufficient provisions dealing with this under O 41A, in particular rr 2(3), 6 to 9.

52.  Even if I were wrong in so holding, I would have no hesitation in accepting the plaintiff’s undertaking, offered at the hearing, to file and serve a fresh statement of truth to cure any such irregularity.  I draw support from the cases of Sino Trifone Limited (supra) and 陳鈺麟(supra).  In both cases, different irregularities in relation to statements of truth were held to be curable under O 2 r 1.  In particular, in Sino Trifone, even though an irregular statement of truth was filed in respect of a pleading based on which summary judgment was granted, Fok JA (as he then was) held that such irregularity was curable and refused to set aside the judgment.

(iii)   Should the Default Judgment be set aside ex debito justitiae?

53.  Finally, as to Mr Wan’s argument that the plaintiff had failed to make full and frank disclosure when applying for the Default Judgment (see §32 above), I am not persuaded that it would assist the defendant either.

54.  To start with, since the SoT was filed and served as a separate document, I see nothing wrong with the statement in the affirmation of service that the writ “appeared to … have been regularly issued out of the District Court of Hong Kong”.  In any event, although material non-disclosure could be a ground for setting aside a default judgment (see Deng Minghui v Chau Shuk Ling [2007] 1 HKLRD 905 per Cheung JA at 909; Upper Like Investments Ltd v Sino-Rank International Ltd (unreported) HCA 17637/1999; 19 November 2012 per Recorder A Ho SC at §30), I am not satisfied, as explained above, that the irregularities of the SoT had any material bearing on the plaintiff’s entitlement to judgment under O 13.  Even if I were wrong on this, I would have exercised my discretion against setting aside the Default Judgment ex debito justitiae, for the reason that the defendant had suffered no prejudice whatsoever.

55.  For these reasons, I therefore hold that the Default Judgment is a regular judgment and decline to set it aside ex debito justitiae.  In light of this conclusion, I shall now turn to the merits of the defence.

E2.     Merits of defence

56.  The material part of the plaintiff’s case against the defendant is pleaded in §2 of the statement of claim, which reads as follows:-

“2. The Defendant is indebted to the Plaintiff in the aggregate sum of HK$483,511.66 being the invoice amount for services rendered to the Defendant’s order(s) and at the Defendant’s request(s) throughout the period from August 2015 to December 2015, particulars whereof have been supplied by the Plaintiff to the Defendant through the following invoices delivered … ”

57.  While this pleaded claim could well be understood as one for quantum meruit in respect of services rendered, it appears undisputed from the affirmations filed[7] that the parties were in a contractual relationship, and the plaintiff is enforcing its contractual right to payment of delivery charges as the parties earlier agreed based on destination, weight and units.

58.  The defendant’s case is that the plaintiff is not entitled to full payment[8].  As shown in affirmations filed on its behalf, the defendant’s complaint is 3-fold:- (i) late delivery, (ii) lack of full tracking, and (iii) non-delivery of parcels between August and December 2015.  In Mr Wan’s skeleton, he placed no reliance on late delivery per se, but rested his argument on lack of full tracking and non-delivery of parcels.  He cited Hunter v Prinsep (1808) 10 East 378 for the proposition (at 394) that a freight charge is earned only when the goods are delivered to the place of destination, and the case of Montedison S.p.A. v Icroma S.p.A. [1980] 1 WLR 48 for the proposition (at 53B-G) that a freight charge is not payable if there has been a total destruction of mercantile character of the goods.

59.  On lateness, the defendant contended that the plaintiff acted in breach of an oral guarantee, made by Mr Moser to Mr Legal in April 2015, that the transit time for delivery would not exceed 9 to 10 days[9]. On the other hand, the plaintiff’s stance was that such transit time was only an indication and not contractually binding, and would in any event be subject to the defendant’s compliance with customs clearance requirements with import duties paid by its customers[10]. In particular, Mr Moser explained that some parcels were seized by French customs because import duty had not been paid, or they had been suspected to contain counterfeit products[11].

60.  There seems to be no serious dispute that delays (and non-deliveries) did occur initially.  In an email dated 1 September 2015 from Mr Moser to Mr Legal (see §14 above), Mr Moser apologized for the problems that happened since mid-July 2015 till then. He offered to pay the defendant a compensation of EUR 4,793.81 and competitive rates for the ADS service.  Eight days later, on 9 September 2015, the plaintiff accordingly issued a credit memo to the defendant for HK$41,629.45.

61.  There is no evidence before this court showing that the defendant had rejected that credit memo at the material time.  Although Mr Legal did state in his affidavit[12] that, in his email dated 7 December 2015[13], he specifically rejected the compensation offered in the 1 September 2015 email, I am unable to detect any specific reference to such rejection in that email. 

62.  Based on the lack of further communication regarding that credit memo, I consider it to be highly probable that the parties had reached agreement on compensation for the problems that had occurred prior to 1 September 2015.  Neither Mr Wan nor Mr Legal addressed this court in this regard during the hearing. 

63.  For these reasons, I do not think that the defendant has discharged its burden of showing a real prospect of success in defending the plaintiff’s claim on the basis of delays or non-deliveries that occurred prior to 1 September 2015, when the defendant had already been offered and received compensation for such problems.

64.  As to the lack of full tracking, Mr Wan’s argument is directed only against the invoiced items delivered using the MiniPak Scan service in August, September and October 2015, but not against the invoices issued in respect of November and December 2015[14].  Although Mr Wan, in his skeleton, pointed to a number of complaints regarding the alleged failure of tracking service[15], most of those email complaints were made in relation to August 2015.  There was no email complaint in relation to September 2015, and there was only a single complaint in relation to October 2015[16].

65.  Mr Wan submitted that the plaintiff “was at least not entitled to the sum of numbers of items times rate per items under August to October Invoices”, and proposed to vary the Default Judgment by the amount of HK$146,924.28 to reflect the lack of full tracking[17].

66.  With respect, I do not agree.  As stated above, the plaintiff had received compensation in respect of the problems that had occurred prior to 1 September 2015.  For September and October 2015, I do not think a single complaint in October 2015 (which was more in the nature of an enquiry) is sufficient to make out a defence that carries conviction. In any event, I do not agree with Mr Wan that the plaintiff should be deprived of the entire “per item” charge for all parcels in the whole period, simply because of complaints received in respect of certain individual deliveries. 

67.  In the absence of any alternative method of calculation, it is impossible for this court to carry out any apportionment to reflect the value of the lack of full tracking.  On the basis of the present materials, I do not think the defendant has made out a defence on the lack of full tracking with a real prospect of success.  Even if I were wrong, I would hold that the defendant has failed to discharge its burden of showing how much the Default Judgment should be varied to reflect this head of defence.

68.  Finally, on non-delivery, the defendant asserted that out of about 3,990 parcels sent by the plaintiff from August to December 2015, 1,347 parcels were undelivered[18].  While the defendant had produced some raw data in an attempt to back up the figure of non-deliveries, it is by no means clear as to how that figure was arrived at. It is also unclear why all those alleged non-deliveries were attributable to the plaintiff’s fault such that it would not be entitled to payment.  As stated above, the plaintiff has in fact adduced evidence to show that some of the parcels were seized because of suspected counterfeiting activities.  On the entirety of the evidence, there is, in my view, at most a triable issue on the partial defence of non-delivery, which falls short of the burden the defendant has to meet.

69.  Even if I were wrong on this, and if there were a real prospect of showing that all such 1,347 non-deliveries were caused by the plaintiff’s fault, the defendant has provided no real assistance to this court as to how the Default Judgment should be varied to reflect this partial defence.  Mr Wan simply submitted that the plaintiff “is at least not entitled to payment of 1/3 of the freight charges (to be assessed)”[19] but without putting forward any specific figure.  Mr Wan made no submissions on how to “assess” the relevant quantum at all.  Given that the burden in a setting aside application rests firmly on the defendant, I would have been unable to set aside the Default Judgment to reflect this partial defence in any event.

70.  For these reasons, I have come to the view that the defendant has failed to make out a meritorious defence with a degree of conviction.

F.    Explanation of default

71.  According to Mr Legal, the reason why the defendant has failed to give notice of intention to defend after service of the writ was because the defendant did not operate at the address of its registered office, which was run by a secretary company.  He did not have any notice of the present proceedings until around May or June 2016 when the defendant’s bank account held with the garnishee was frozen by the Garnishee Order.  Mr Legal also explained that he and his assistant are both Frenchmen, and did not know that court documents can be served on a limited company by simply leaving the documents at the company’s registered office address.[20]

72.   In Ho Kwok Wah v Group Jewellery Arts Ltd & Ors [2000] 3 HKC 595, in explaining that a writ may simply be served by leaving it at a defendant company’s registered office, Rogers JA said (at 598I-599A):-

“A company after all, apart from its servants, agents and its directors, has no other animate entity but at least it has a registered office which may be determined by a simple companysearch in the Companies Registry and it is to that which, inevitably, people should look, in my view, when serving documents.”

73.   On the lack of notice of a writ, in United Venture Navigation Co Ltd v Shum Yuen Nim [1991] 2 HKC 73, Fuad VP held (at 86B-E):-

“… the company, while it remained on the Register of Companies … and maintained its … registered office, cannot seek to derive any benefit from the fact that due to their own inadequate administrative arrangements, they did not in fact learn of the writ until March 1987.

… If the company found themselves in difficulties wholly brought about by the improvident management of their affairs by their officers or staff, blame for any consequential problems faced by the insurers cannot be laid at the plaintiff’s door.”

74.  Although there is no evidence before this court that would cast doubt on Mr Legal’s explanation, given the above well-settled principles, I do not think his explanation for default would assist the defendant at all.

G.   Disposition

75.  Having taken all the above circumstances into account, in the exercise of my discretion, I would refuse to set aside the Default Judgement.

76.  In view of this conclusion, but for one factor which I shall turn to immediately below, I would have made the Garnishee Order absolute and ordered costs in favour of the plaintiff with a certificate for counsel.

77.  Shortly before the handing down of this decision, on 14 June 2017, the plaintiff’s solicitors informed this court that the name of the defendant was struck off from the Companies Register on 7 April 2017 and the defendant was dissolved on the same day. According to the documents supplied by the plaintiff’s solicitors:-

(a)   On 19 October 2016, a notice was published under section 744 of the Companies Ordinance (Cap 622), stating that the striking off of the defendant’s name from the Companies Register was under consideration;

(b)   On 2 December 2016, the Registrar of Companies published a gazette notice under section 745 of the Companies Ordinance, stating that unless a cause is shown to the contrary, the name of the defendant would be stuck off the Companies Register and the defendant would be dissolved at the end of the 3 months after the date of the notice; and

(c)   On 7 April 2017, the Registrar of Companies published a gazette notice under section 746 of the Companies Ordinance that the name of the defendant was struck off the Companies Register and the defendant was dissolved as from the date of the notice.

78.  Based on these documents, it is clear that the defendant was still in existence when the Default Judgment was entered, when the Garnishee Order was served, when the defendant’s summons for setting aside was filed, and even when the hearing of this application took place. 

79.  However, the impendent dissolution of the defendant may have escaped both parties’ attention as nothing was submitted by the plaintiff or the defendant on this subject during the hearing.

80.  It is trite that a court order made against a company which at the time of the order has been dissolved is a null and void.  In Lazard Brothers and Company v Banque Industrielle de Moscou [1932] 1 KB 617, the plaintiff there obtained a default judgment against the Moscow Industrial Bank and a garnishee order nisi against the Midland Bank attaching money due from it to Moscow Industrial Bank.  The garnishee order nisi was subsequently made absolute.  On Midland’s appeal, the English Court of Appeal held that the default judgment was null and no garnishee proceedings could be found on it.  Scrutton LJ held (at 624):-

“… if it comes to the knowledge of the Court that it has entered judgment in default of appearance against a man who was at the time dead, or a company which was at the time dissolved, or non-existent according to the law of its country of origin, the Court is bound, after hearing the parties interested, of its own motion to set the judgment aside. Such a judgment is null and void …”

81.  Unlike the Moscow Industrial Bank in Lazard Brothers, the defendant here was still in existence when the Default Judgment was entered and the Garnishee Order was made.  That said, even if the Default Judgment was validly entered and the Garnishee Order was validly made and served, I do not think that this court is able to make a costs order against the defendant at this time when it has already been dissolved. 

82.  Other than informing this court of the defendant’s dissolution, the plaintiff’s solicitors made no submission on the effect of the dissolution on this application.  It also appears that the plaintiff’s letter to this court dated 14 June 2017 was, contrary to usual practice, not copied to any other parties, including the garnishee.  In the absence of submissions in this regard, while I feel able to make the Garnishee Order absolute, I am not inclined to make a costs order against the defendant as such an order would, on the authority of Lazard Brothers, be null and void.

83.  I do recognize that the parties including the garnishee may wish to be heard and make further submissions on the effect of the defendant’s dissolution on the garnishee proceedings and/or on costs of this application.  I would therefore grant liberty to the parties including the garnishee to apply for further directions to deal with these aspects.

H.   Order

84.  I therefore order as follows:-

(1)  The defendant’s application to set aside the default judgment herein dated 25 April 2016 be dismissed;

(2)  Unless the parties or the garnishee shall apply for further directions within 14 days from the date hereof:-

(a)  The garnishee order herein dated 31 May 2016 be made absolute; and

(b)  There be no order as to the costs of this application.

85.  I thank Mr Wong, Mr Wan and Mr Legal for their assistance.