Thousand Jade International Limited (in Liquidation v. Su Su and Others

HCA 1710/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1710 OF 2014

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D E C I S I O N

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The Application

1.This is the plaintiff’s application for an order that the time ordered by this Court on 23 July 2015 for the plaintiff to apply for default judgment against the 2^nd defendant and the 3^rd defendant be extended to the trial of this action.

2.The 1^st defendant opposes this application.

3.The parties are legally represented.[1]

The Factual Background

4.The following factual background is agreed by the parties as accordingly to the plaintiff’s written submissions:[2]

“4. P commenced the action herein against D1, D2 and D3 for, inter alia, a declaration that the HK$17 million paid into Court in HCA 2225/2013 by D2 belongs to P (“the Declaration”).

5. D1 was, and still is, a Mainland citizen engaged in the business of import and export of merchantable goods in Xiamen.

6. D2 was also a Mainland citizen but has become a Hong Kong resident in 2007.  At all material times, D2 was, and still is, the sole shareholder and director of P.

7. D3 is a company incorporated under the laws of Hong Kong, having its registered office at Room H-01, 26/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong.

8. The proceedings herein were served on D1, D2 and D3 on 3 and 18 September 2014 (as the case may be).  Other than D1, D2 and D3 had failed to acknowledge service of the proceedings.

9. On 4 November 2014, P served its Statement of Claim on Ds; and on 4 February 2015, D1 served its Defence on P.  Again, D2 and D3 did not file any defence.

10. In D1’s Timetabling Questionnaire filed on 8 May 2015, D1 indicated that D2 and D3 had neither filed any Acknowledgment of Service nor Defence, but P did not obtain any default judgment against D2 and D3.  D1 said that this is “extremely unusual”.

11. In view of D1’s comments made in its Timetabling Questionnaire, P indicated in its Timetabling Questionnaire dated 23 June 2015 that it intended to apply for default judgment against the D2 and D3 within 28 days.

12. On 22 July 2015, P and D1 signed a Consent Summons for, inter alia, P to apply for default judgment against D2 and D3 within 28 days from the date of the Order to be made.  On 23 July 2015, Mr. Registrar K. W. Lung made an Order in terms of the Consent Summons.

13. On reflection, and having obtained Counsel’s advice, P believes that the usual practice of the Court is not to make a declaratory relief without a trial.  P therefore issued a Summons on 25 August 2015 for, inter alia, time for P to make an application for default judgment against D2 and D3 be extended to the trial of the present proceedings.  D1 disagrees and insists that P should comply with Mr. Registrar Lung’s Order and apply for default judgment against D2 and D3 forthwith.”

5.However, the above factual background only forms half of the picture of the full story, the other half being supplied by the 1^st defendant, who opposes this application, which can be summarized below.

6.The 1^st defendant is the plaintiff of another action, HCA2225/2013 against the 2^nd defendant in this action.  She had obtained a Mareva injunction restraining the 2^nd defendant from disposing of or dealing with his assets up to the value of HK$17.68 million.  The 2^nd defendant, being the sole shareholder and director of the plaintiff in this action, had caused the plaintiff to pay a sum of HK$17.68 million into court on his behalf.  The 2^nd defendant’s application to discharge the Mareva injunction was refused by the court and the sum of HK$17.68 million remains in court.  The 2^nd defendant, as the sole shareholder and director, caused voluntary liquidation of the plaintiff.  The liquidator then started this action for recovery of the money paid into court on the ground that the 2^nd defendant did not have its authority to pay the money into court for the defendant in HCA2225/2013.

7.The 1^st defendant will, in due course, make an application to the court to vary its order that the 2^nd defendant should pay the money into court, releasing the money in court to his company, the plaintiff in this case.  The 1^st defendant may, in her application for variation of the court order, rely upon the default judgment if the plaintiff company in this action has obtained a judgment against the 2^nd defendant.  This is the main reason for the 1^st defendant opposing this application.

Discussion

8.The parties accept that this application is within this Court’s discretion.  To exercise its discretion, it is trite that the court must take into consideration of all the circumstances.  What follow are the circumstances as raised by the parties:

a. The 2^nd defendant was the sole shareholder and director, having full control of the plaintiff company, which was the company that paid $17.68 million into court in HCA 2225/2013 in order to stay the Mareva injunction granted by the court against the 2^nd defendant in that action;

b. The liquidation of the plaintiff company was decided and caused by the 2^nd defendant solely, himself being the sole shareholder and director;

c. The liquidator of the plaintiff company would have been influenced by the 2^nd defendant in taking out this action against the defendants;

d. The plaintiff company is now saying that the 2^nd defendant did not have its authority[3] to cause the payment of HK$17 million into court and it asks the court to make a declaration that the money is still belonging to it and it has also asked for payment out of the money[4];

e. The 1^st defendant argues that the plaintiff company is not permitted to say that the 2^nd defendant did not have the authority to cause it to make the payment in because the 2^nd defendant was the alter ego of the plaintiff company at the time of making the resolution to pay the money into court.  See Chow Shiu Kei (also known as Chow Kwong Kan) v Lee Wai Jane (unrep. HCCW 179/2006 by Barma J (as he then was) 23 March 2007 at §21)  The factor for such determination is whether the 2^nd defendant was in “complete control” of the plaintiff company at that time.

f. The plaintiff company argues that upon counsel’s advice, it should not proceed to ask for default judgment against the 2^nd defendant on declaration without a trial, noting that default judgment may still be entered on declaration, depending on the nature of the declaration;

g. The plaintiff company also argues that the 2^nd defendant may argue that the money paid into court is money belong to him, in which event, the court will have to consider his reasons not to defend;

h. However, if the 2^nd defendant were to raise the reasons, he should have filed his defence to the action.

i. It seems that the plaintiff company does not have any reason not to perform its agreement under the Order made by this Court by consent dated 23 July 2015.

j. If the plaintiff company honours its agreement under the consent order, the default judgment entered by the court will assist the 1^st defendant in her application to the court for HCA 2225/2013 to vary its order so that the 2^nd defendant will have to make payment into court for that case himself.  Absent the default judgment, the 2^nd defendant may argue that whether the money belongs to the plaintiff company remains an issue for this trial.

k. Therefore, it can be seen that the non-performance of the plaintiff of the consent order may prejudice the 1^st defendant in her application to vary the order in HCA 2225/2013.

9.This morning, there has been a discussion over why the action has been proceeding in the manner in which it has proceeded, that is to say, the plaintiff asks this Court to deal with the money retained in court under another court order for another case.  The nature of this claim is much akin to the dispute in the interpleaders’ claims.  However, this is something for the respective parties’ legal advisors to consider.

10.In the circumstances above, I refuse to accede to the plaintiff’s request to extend time for it to apply for default judgment against the 2^nd and the 3^rd defendants.

Costs and Order

11.As to the costs of this application, the plaintiff asks this Court to bear in mind that in fact the 1^st defendant is not really opposing the application if the plaintiff were to apply for default judgment within a short period of time, say 21 days.  I consider that this is for the plaintiff to put the agenda in its own summons for the Court’s consideration.  It is a fact that the 1^st defendant does oppose time being extended to before trial of this action, and for the reasons above, I hold in favour of the 1^st defendant.  On the issue of counsel’s certificate for this hearing, looking at the counsel’s written submissions, I consider that it is suitable to have counsel’s assistance in this hearing.  Therefore, I grant the counsel’s certificate for this hearing.  The costs should follow the event and they are to be assessed summarily under O.62, r.9A RHC at the agreed sum of HK$51,600 to be paid by the plaintiff within 30 days from the date hereof.

12.The court shall now make an order in terms as follows:

a. The plaintiff’s application is dismissed;

b. By consent of the parties, time for the plaintiff to take out the application for default judgment against the 2^nd defendant and the 3^rd defendant is extended until 19 February 2016, which application, if contested, shall be fixed before the Registrar for argument;

c. The costs of the application be as per paragraph 11.

Mr Ivan Ng, of Eversheds, for the plaintiff

Mr Christopher Chain, instructed by W.K. To & Co., for the 1^st defendant