CHITLINK ELECTRONIC INTERNATIONAL LTD v. GOLDEN EDGE ENTERPRISE LTD AND OTHERS

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13902 OF 1997

-----------------

-----------------

RULING

-----------------

Today I am concerned with proceedings arising out of the counterclaim, and I will refer to the plaintiffs on the counterclaim simply as "plaintiff" and the defendants on the counterclaim simply as "the defendants".

2. The proceedings as a whole concern copyright and, as far as the counterclaim is concerned, the plaintiff seeks, amongst other things, injunctive relief against the defendants. On 26 March this year, following an application by the defendants, Master Jones made an Unless Order. The order he made was that unless the defendants do file and serve their reply to Defence in counterclaim by 4pm on 23 April 1998, judgment be entered for the plaintiff against the defendants with costs.

3. The defendants were in default, that is to say they did not file and serve their reply by 23 April. On 14 May, the plaintiff's solicitor, Mr MOK Shui-tong, made an affirmation, which was filed with the court. Paragraph 2 said, "I make this affirmation in support of the application by the plaintiff to enter judgment against the defendants." That affirmation as well as being made on 14 May was also apparently filed on the same day.

4. There then seems to have been a hiatus in the proceedings, caused by I know not what, but, ultimately on 25 May an order was made by Mr Justice Sears giving judgment for the plaintiff against the defendants, that judgment including the injunctive relief sought by the plaintiff.

5. The defendants now seek to set aside that judgment. They have an amended summons, which follows the requirements of the rules and sets out the grounds upon which they seek the setting aside. There are a number of grounds, but I have heard at present only the first ground, namely that the order and judgment were obtained by an application made ex parte without any notice to the defendants by counterclaim in breach of the rules of natural justice wherefore the judgment was obtained irregularly.

6. So the ground with which I am dealing is that there was an irregular judgment, which should now be set aside. On behalf of the defendants, it has been contended by Mr MOK that Unless Orders fall into two categories. I have already given an indication of my view on this, but as a reminder Mr MOK said the first category is where there is wording in the Unless Order to the effect that unless certain things are done then the other party will be at liberty to enter judgment, or at liberty to do something else.

7. That, he said, implies a liberty on behalf of the successful party to make a further application to the court to obtain whatever relief has been granted to it, and such an application should necessarily be made inter partes.

8. The other category, he said, is where the Unless Order is complete, requiring no further step on the part of the successful party, except perhaps as is envisaged, for example, by Order 13, the informing of the court by way of certificate or endorsement or otherwise that a fault has in fact occurred. As I said, I reject that distinction.

9. Whilst there may be Unless Orders which explicitly require some further step, formal step, to be made by the successful party, I do not think the wording "at liberty to enter judgment", or similar wording, requires any formal application. Such wording, as far as I know, is not contemplated by the White Book, and I do not think there is any difference in principle or substance to be drawn between the two forms of wording.

10. It has long been understood that where an Unless Order is expressed "at liberty", judgment will be entered simply on the Certificate of Default, and that certificate is not made by way of formal application affording the unsuccessful party, usually the defendant, another bite at the cherry. Where the wording "at liberty" is used it simply means that the court will not, of its own volition, enter judgment as it might do for the wording simply "judgment be entered".

11. In practice, I have no doubt that in either case the court will in fact be prompted by the submission of a draft order on the part of the successful party's solicitors. I am not in the circumstances willing to make a decision which would have the effect of setting aside long-established and understood practice and procedure. But the matter does not end there. The judgment, as I have already indicated, was for injunctive relief. It is not in dispute that in proceedings involving injunctive relief, while the master may of course deal with interlocutory matters, he may not grant the injunction itself to a plaintiff or other party unless the parties consent. Hence, it is argued on behalf of the defendants, it became necessary to refer the matter to a judge.

12. Miss WONG, for the plaintiff, asserted that this was merely an administrative matter in accordance with what were effectively a master's directions. Again, as I indicated, I harbour doubts as to the propriety of the order made by the master. On its face, the master was in fact giving judgment in favour of the plaintiff, a judgment which he was not entitled to give, it being for injunctive relief.

13. It would perhaps have been better if the master had used the wording that "unless the defendants file their defence to counterclaim (by the time stipulated), then the defendants be precluded from defending". That, of course, would have not afforded the plaintiff a judgment on its own, and it would have been necessary for the plaintiff to make an application to a judge, an application which undoubtedly would have had to have been made by summons upon which the defendants would have been heard.

14. For the defendants, Mr MOK argued that what occurred was not an administrative matter, as indeed the plaintiff's affidavit itself seems to accept, but was rather a formal step requiring a formal application inter partes. Upon that formal application, argued Mr MOK, a judge, who alone had jurisdiction to grant the injunctive relief sought, could evaluate whether the plaintiff should get that relief. In that evaluation, the judge would take into account - in the exercise of his discretion, because a discretionary exercise it surely would have been - first, any explanation by the defendants for their default, and, second, if necessary, any arguments on behalf of the defendant on the merits of their defence or claim.

15. Because this was not done, said Mr MOK, there was a procedural irregularity, and therefore the judgment should be set aside. He relied on the dicta of Mr Justice Godfrey, as he then was, in Jademan (Holdings) v Francis LEUNG Pak-to (1989) 2, HKLR, 151. The judge's remarks are to be found at page 159 between letters (a) and (c), and the remarks which relate to the granting of ex parte relief in relation to Mareva or Anton Pillar injunctions, said Mr MOK, are all the more cogent when a final judgment is in issue.

16. For the plaintiff, Miss WONG said that the point upon which Mr MOK now relies was not raised in the defendant's summons as point A. I disagree. The point, it seems to me, is there, namely that there was, or should have been, an application to a judge, but no notice was given to the defendants. The point is then fortified by the arguments which have been put forward by Mr MOK, and which I have outlined.

17. Miss WONG also relied on the decision in Premier Fashion Wears Limited v LI Hing-chung (1994)1, Hong Kong Cases, 213, where the judgment of the Court of Appeal was delivered by Bokhary J. It is encapsulated in the headnote as that the indemnity judgment would only be irregular if the court had no jurisdiction to enter it. That, of course, is a correct encapsulation of what the judge said, but it has to be looked at in the context of that case. The important word "only" is to be applied, only having regard to the circumstances of that case. It does not, in my judgment, preclude other grounds of irregularity if such grounds can be found in the particular circumstances of another case.

18. There was then considerable debate about the provisions of orders 13 and 19 which provide for default judgments. Insofar as any analogy is to be drawn with those orders, I agree that the closest analogy is to be found with Order 19, Rule 7, and the requirement for a summons or motion where inter alia injunctive relief is sought. I draw some comfort from that provision.

19. In the peculiar, indeed exceptional, circumstances of this case I am satisfied that Mr MOK is correct and that there was a procedural irregularity. There should have been an application, and indeed there appears to have been one, to a judge. The application, however, should have been made by summons so that the judge who had the jurisdiction to grant the relief sought could determine whether, and if so, what, relief should be afforded to the plaintiff. So I find there was a procedural irregularity.

20. It is accepted, I think, on the authorities that have been cited to me this afternoon that simply because there is an irregularity, the judgment should not necessarily be set aside, that is ex debito. The authorities, Mr MOK concedes, confer upon the court a discretion to be exercised after considering the circumstances surrounding the irregularity, how it came to take effect and how the subject or object of that irregularity has responded.

21. The essential complaint made on behalf of the plaintiff is as to the timing of the defendant's conduct. The default, it is pointed out, occurred on the 23 April. Over a month later, on the 27 May, the defendants took out a time summons seeking further time to comply with the order. In the meantime, two days earlier, the plaintiff had obtained judgment, and the judgment having been obtained the time summons was not proceeded with. As a consequence, the plaintiff took out the current summons on 12 June.

22. I do not think any great complaint can be made about the two weeks or so delay between the disposal of the time summons and the taking out of the new summons. The nature of the application to be made by the defendants had then changed and required rather more careful consideration. The relevant delay, in my view, is between the default and the time summons, something just over a month. That, of course, is a not inconsiderable delay, but in my view it is not such as to disentitle the defendants to the relief which they seek or to require that the relief should be granted on terms.

23. That being so, having found an irregularity upon which the defendants are entitled to rely, I grant the relief sought by the defendants.

24. The judgment will be set aside, and the defendants by counterclaim are to file their reply and defence counterclaim. When, Mr MOK - tomorrow?

MR MOK: Yes, my Lord, and also the counterclaim to counterclaim.

COURT: Right. So the judgment is set aside and the reply and defence to counterclaim, the counterclaim to counterclaim, are to be filed no later than 4 pm tomorrow. What else?

[Discussion re costs]