HAIFA INTERNATIONAL FINANCE CO LTD v. CONCORD STRATEGIC INVESTMENTS LTD AND OTHERS

                   HCA 2308/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2308 OF 2006

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J U D G M E N T

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1. This is an application to strike out certain paragraphs in an affirmation filed on behalf of the plaintiff in opposition to an application by the 2^nd defendant to set aside a default judgment that has been entered against him.

2. The facts leading to this application are slightly peculiar.  The default judgment entered against the 2^nd defendant was based on the statement of claim indorsed on the writ of summons.  After the entry of default judgment against the 2^nd defendant, the 1^st defendant took out an application to strike out the statement of claim.  That application was unsuccessful before the Master, who also gave leave to the plaintiff to amend the statement of claim.

3. Pausing here, it should be added that the plaintiff relied on fraud and deception against the defendants in its action.

4. On appeal, the Master’s order dismissing the application to strike out was reversed by Suffiad J on the ground that the plaintiff had not pleaded a reasonable cause of action, whether in the statement of claim or in the amended statement of claim, based on fraud and deception.  His Lordship’s decision was upheld by the Court of Appeal.

5. In those circumstances, when the 2^nd defendant took out his application to set aside the default judgment, so far as the merits of his intended defence were concerned, he only took the point that the plaintiff had not pleaded a reasonable cause of action in the statement of claim or, for that matter, the amended statement of claim, against him, the 2^nd defendant.

6. The plaintiff, through a director, filed evidence in opposition to the application to set aside.  A substantial part of the affirmation evidence so filed dealt with the allegations of fraud and deception touched on in the statement of claim and dealt with more fully in the amended statement of claim.

7. The 2^nd defendant now applies to strike out the particular part of evidence in question on the ground that it is irrelevant, scandalous or otherwise oppressive.

8. Having heard Mr Roy Lau, appearing for the 2^nd defendant at today’s hearing, it is quite plain that the 2^nd defendant’s intention at the setting-aside hearing is simply to argue that the plaintiff has not pleaded a reasonable cause of action against the 2^nd defendant, so far as showing merits is concerned.  The 2^nd defendant does not intend to challenge the plaintiff’s case on fraud or deception by way of any evidence, and it is precisely for that reason that Mr Lau has submitted that therefore, the evidence that the plaintiff has filed going to the alleged fraud and deception is wholly irrelevant.

9. Mr Kam Kwok, appearing for the plaintiff, has sought to argue by reference to Hong Kong Civil Procedure 2009, vol 1, para 13/0/10 that by making default in giving notice of intention to defend, the 2^nd defendant has admitted all the allegations in the statement of claim indorsed on the writ or in the amended statement of claim.

10. I need not dwell on whether the present basis of the default judgment is the original statement of claim indorsed on the writ or the amended statement of claim, which only came into being after the entry of the default judgment.  What Mr Kwok has submitted does not assist his client’s opposition to the 2^nd defendant’s application today precisely because the 2^nd defendant is taken to have admitted all the allegations in the statement of claim or, for that matter, in the amended statement of claim.  There is simply no need for the plaintiff, in opposing the application to set aside the default judgment, to put in evidence to establish or prove the allegations already admitted by the 2^nd defendant and contained in the statement of claim or the amended statement of claim, given that the 2^nd defendant is only taking a pleading point so far as showing merits is concerned.  To do so would only increase unnecessarily the costs of the proceedings.

11. Mr Kwok has hinted during his able submission before the Court this morning that in case the Court should be with the 2^nd defendant on the pleading objection and find that the plaintiff has not pleaded a reasonable cause of action against the 2^nd defendant in the statement of claim or the amended statement of claim at the hearing of the setting-aside application, the Court may still wish to exercise its discretion not to set aside the default judgment if it should find in the evidence filed by the plaintiff on the fraud and deception alleged that the plaintiff has indeed got a good yet unpleaded case based on fraud and deception against the 2^nd defendant.

12. I can understand the logic of Mr Kwok’s submission, but I do not think this is a proper basis for retaining the objectionable part of the affirmation evidence that the plaintiff has filed.  If the plaintiff wishes to argue, by way of an alternative argument, that arising from the evidence it has thus far filed it does have a good cause of action against the 2^nd defendant although it has not been properly pleaded in either the statement of claim or the amended statement of claim, it behoves the plaintiff to inform the Court and the 2^nd defendant immediately what that unpleaded good or reasonable cause of action or case is by means of a draft re-amended statement of claim.  But quite obviously, Mr Kwok is not prepared or is unable to do so at today’s hearing.

13. In my view, this alternative argument is a half-baked one, which is quite insufficient to salvage the part of the affirmation evidence now objected to by the 2^nd defendant in this application.

14. Having considered the matter carefully, including the respective arguments of counsel for both parties, I have come to the view that to save further costs and time and to make the parties, and indeed the Court hearing the setting-aside application, more focused on the real issues between the parties, the part of evidence contained in the affirmation in question cannot be allowed to remain.  It should be struck out for being irrelevant.

15. For those reasons, I make an order in terms of the substantive application of the 2^nd defendant.

[Submissions on costs]

16. Having heard counsel on both sides on the question of costs, I think the fairest order today would be the 2^nd defendant’s costs in the cause (of the setting-aside application).  This is because of the peculiar situation that the 2^nd defendant is only contesting the merits of the plaintiff’s claim on a pleading point only.  If the 2^nd defendant should succeed on that pleading point and be successful in setting aside the default judgment, I do not see any reason why he should not get the costs of today’s application.

17. On the other hand, if the 2^nd defendant should fail on the pleading point, then I think the plaintiff should not be made to bear the costs of the 2^nd defendant for the plaintiff’s putting in evidence on the merits of the case, which, ex hypothesi, the 2^nd defendant ought to deal with when making his application to set aside the default judgment.

18. So in my view, the 2^nd defendant’s costs in the cause (of the setting-aside application) would be the fairest order to make.