CHINA CONSTRUCTION REALTY LTD v. SINO BUSINESS SERVICES PROPRIETARY LTD AND OTHERS

HCA 1294/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1294 OF 2005

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D E C I S I O N

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1.  This is an appeal against the decision of the Master dismissing the Plaintiff’s application for default judgment against the Defendants pursuant to Order 19 rule 7 of the Rules of High Court. 

2.  The writ in this action was issued on 7 July 2005 and it was a specially endorsed writ.  The writ was amended on 8 September 2005.  The amendment was wholly technical.  It was just an amendment to the registered address of the 2^nd Defendant.

3.  In fact all defendants are companies incorporated abroad.  The 1^st Defendant was incorporated in Victoria, Australia.  The 2^nd to 4^th Defendants were incorporated in the British Virgin Islands.  The 5^th Defendant was incorporated in Western Samoa.  Leave to serve the Defendants out of the jurisdiction was duly obtained on 12 September 2005 and by 7 October 2005, all the Defendants were properly served.  None of the Defendants has filed any acknowledge of service of the Writ and none files a defence.  On the basis that the Defendants had failed to file any defence, the Plaintiff issue a summons for judgment under Order 19 rule 7 on 15 December 2005.  The summons was heard on 9 February 2006 and the Master dismissed the Plaintiff’s application, and hence the present appeal.

4.  Order 19 r 7 (1) provides:

“Where the Plaintiff makes against a defendant or defendants a claim of a description not mentioned in rules 2 to 5, then, if the defendant or all the defendants (where there is more than one) fails or fail to serve a defence on the plaintiff, the plaintiff may, after the expiration of the period fixed by or under these rules for service of the defence, apply to the Court for judgment, and on hearing the application, the Court shall give such judgment as the plaintiff appears entitled to on his statement of claim.” (emphasis added).

5.  In the instance case, in broad terms, the Plaintiff’s claim was for damages for conspiracy and also for relieves under section 60 of the Conveyancing and Property Ordinance, and so plainly the plaintiff’s claim did not fall within the description mentioned in Order 19 rules 2 to 5.  Time for the filing and service of the defence having expired, the Plaintiff was entitled to apply for judgment under Order 19 rule 5.

6.  The Court’s power to grant judgment under Order 19 rule 7 is discretionary.  It is plain from the wordings of Order 19 rule 1 that the Court’s task is to see whether the Plaintiff appears to be entitled to judgment on his statement of claim.  Hence the main task of the Court is to examine the statement of claim to see if it appears that the Plaintiff is entitled to judgment.  Of course it is necessarily the case that the averments in the statement of claim have not been traversed by the defendant because there is no defence filed.  In approaching such application it is not necessary that the Court should be satisfied by evidence adduced by the Plaintiff to prove his case. 

7.  The Plaintiff’s causes of action were pleaded in considerable details in the statement of claim and there is little point for me to set them out again in this judgment.  Having read the statement of claim I am satisfied that the plaintiff has made out a case that the 1^st to 3^rd Defendants had procured the 4^th Defendant to enter into an agreement with the 5^th Defendant (hereinafter called the “Lucky Dragon Agreement”), pursuant to which all the equity interests held by the 4^th Defendants in Dalian Jinshitan Baotong Real Estate Development Company Ltd., China International Club Limited and China Entertainment Limited  (hereafter called the “Shares”) were transferred to the 5^th Defendant, and that by and in pursuance of this Lucky Dragon Agreement, the 1^st to 4^th Defendant had made a disposition of property, namely the beneficial interest in the Shares, with intent to defraud the Plaintiff who was a creditor or the 1^st Defendant and 3^rd Defendant.  Accordingly under section 60 of the Conveyancing and Property Ordinance, the Lucky Dragon Agreement and the subsequent transfer of the Shares to the 5^th Defendant in pursuance thereof were voidable at the instance of the Plaintiff who was a person prejudiced by such agreement and transfer.  On this basis I am prepared to grant the Plaintiff an order that the Lucky Dragon Agreement and the purported sale and transfer of the Shares to the 5^th Defendant be set aside.

8.  In consequence of the setting aside of the Lucky Dragon Agreement and the purported sale and transfer of the Shares, I am of the view that the Plaintiff is also entitled to other consequential relieves.  I am prepared to further order and direct that

(1)     there be an order compelling the 5^th Defendant to disclose to the Plaintiff on affidavit or affirmation whether it is still the legal and/or beneficial owner of the Shares or any part thereof and if so, to identify which part thereof

(2)     If the 5^th Defendant is still the legal and/or beneficial owner of the Shares of any part thereof, there be an order that the 5^th Defendant be compelled to take all necessary steps to reinstate and/or restore the 4^th Defendant as the legal and beneficial owner of the Shares.

(3)     If the Shares or any part thereof have been transferred by the 5^th Defendant to another party, there be an order that the 5^th Defendant shall disclose to the Plaintiff on affidavit or affirmation the details of such transfer(s) including the dates of such transfer(s), to whom such transfer(s) wee made and the consideration for which such transfer(s) were made.

9.  I am also satisfied that on the facts pleaded in the statement of claim the Plaintiff has made out a case against all defendants on conspiracy to injure the Plaintiff.  The Plaintiff however has not given any particulars of damages.  It is plain from the facts pleaded in the statement of claim that the amount of damages suffered by the Plaintiff would depend very much on what could be recovered as a result of the setting aside of the Lucky Dragon Agreement and the transfer of the Shares to the 5^th Defendant.  Accordingly I am prepared to give judgment to the Plaintiff for damages to be assessed by a master. 

10.  In relation to the Plaintiff’s claim for interest, such interest could only be in relation to a monetary claim, and in the instance case, it could only be in relation to the damages to be assessed.  Accordingly I would order and direct that the issue of interest on the damages is to be adjourned for the determination of the master assessing the damages.

11.  The Plaintiff is also entitled to have the cost of the action.