Båsløkka Invest As v. Lambert and Sons Incororated and Others

HCA 654/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 654 OF 2016

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R E A S O N S   F O R   J U D G M E N T

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1.These proceedings are brought by the plaintiff as a result of an email fraud in which the plaintiff was induced to make certain payments to the 1^st defendant as an investment in a company listed on the NASDAQ exchange. The payments were made to the 2^nd, 3^rd and 4^th defendants. It is now clear that the plaintiff was induced to make the payments as a result of fraudulent conduct on the part of the 1^st defendant. Despite that, the other defendants have failed to refund the monies due.

2.On 11 March 2016, a writ was issued by the plaintiff against the defendants alleging that the payments had been made as a result of fraudulent misrepresentations. Judgment was sought against the 1^st defendant for both a money sum and damages to be assessed.  Mareva injunctions were sought against all four defendants.  On the same day the Mareva injunctions were granted.

3.The writ was served by both email and fax on the 1^st defendant using three email addresses that had been supplied to the plaintiff by three persons with whom he had dealt, each of whom purported to represent the 1^st defendant. The Hong Kong fax number that was used had been supplied to the plaintiff by the 1^st defendant.  The steps taken to effect service were duly proved by affidavit.

4.The writ was served on the remaining defendants by hand to the registered office of each defendant and duly proved by affidavit.

5.None of the defendants took any steps whatsoever and no acknowledgements of service were filed.

6.On 18 March 2016, Au‑Yeung J made an order permitting service by email and fax to the number and addresses supplied by the 1^st defendant to the plaintiff.  Plainly there has been good service on all defendants.

7.The plaintiff issued a summons for default judgment pursuant to Order 13 rule 5 of the Rules of the High Court.  The summons came on before Recorder Linda Chan SC on 1 April 2016.  The Recorder took the view that she had no jurisdiction under that rule to give a final judgment in default and dismissed the application.  The matter that apparently concerned the Recorder was the provisions of Order 13 rule 6, and the following passage contained in Hong Kong Civil Procedure 2016, §13/6:

“ Effect of rule — The effect of para.(1) is to preclude a plaintiff from entering judgment in default of notice of intention to defend in every case in which the indorsement on the writ contains or includes a claim which is not squarely within rr.1 to 4 of this Order, and to require him to proceed with the action as if that defendant had given notice of intention to defend. If, therefore, there is indorsed on the writ a claim for an account, injunction, specific performance, declaration or rectification or other remedy or relief which falls outside the descriptions specified in rr.1 to 4, the plaintiff cannot enter judgment in default of notice of intention to defend, unless he expressly and finally abandons every such remedy or relief.”

8.The Recorder dismissed the summons for judgment, but continued the Mareva injunction.  The Recorder expressed concern about the adequacy of service on the 1^st defendant.

9.On 13 May 2016, having considered the problems raised by the Recorder, the solicitor for the plaintiff filed a new summons for default judgment.

10.Unfortunately, it appears that the Recorder’s attention was not drawn to the next paragraph of the notes to rule 6 which records:

“ On the other hand, the court has power under its inherent jurisdiction to give the plaintiff leave to enter judgment for a debt or liquidated demand, notwithstanding that the writ is indorsed with a claim for an injunction and the plaintiff has in fact obtained a Mareva injunction against the defendant, and at the same time the court can order that the Mareva injunction should continue in force, after the judgment, in aid of execution, for only so could effect be given to the policy underlying the Mareva injunction (Stewart Chartering Limited v. C. & O. Managements SA [1980] 1 W.L.R. 460).”

11.The short judgment of Robert Goff J in that decision, at 460H, identifies:

“… the paradoxical situation that, because the plaintiffs have obtained an injunction designed to prevent the defendants from removing assets from the jurisdiction in order to prevent the plaintiff’s from satisfying any judgment, they are inhibited from signing judgment in default of appearance which is, in the present situation, the next step which would ordinarily be taken by them with a view to enforcing their claim.”

12.The judge said that if the plaintiffs were unable to obtain a judgment without abandoning their Mareva injunction it would be open to a defendant to defeat the very purpose of the proceedings simply by declining to enter an appearance.  He described such conduct as an abuse of the process of the court, an abuse which could be remedied by the inherent jurisdiction.

13.I accept Mr Shaw’s submission that the course adopted by Robert Goff J should be adopted here.  It would be quite wrong if the plaintiff were not able to obtain a judgment enabling its money losses to be properly assessed only upon the basis that it must lose the Mareva injunction.  That would have the effect of immediately permitting the defendants to defeat the purpose of the Mareva injunction and to spirit their funds (if any) out of the jurisdiction.

14.There will be an order for final judgment in default against the 1^st defendant for all loss and damage caused by the 1^st defendant’s breach of contract and fraudulent misrepresentations, to be assessed; and the costs of the action against the 1^st defendant, to be taxed on a party and party basis if not agreed.

15.There will be an order for final judgment in default against the 2^nd defendant in the sum of HK$ 85,866.84 and the costs of the action against the 2^nd defendant, to be taxed on a party and party basis if not agreed.

16.There will be an order for final judgment in default against the 3^rd defendant in the sum of HK$91,708.92 and the costs of the action against the 3^rd defendant, to be taxed on a party and party basis if not agreed.

17.There will be an order for final judgment in default against the 4^th defendant in the sum of HK$134,095.52 and the costs of the action against the 4^th defendant, to be taxed on a party and party basis if not agreed.

18.The money sums so ordered shall bear interest at HSBC prime rate plus 1% from the date of payment by the plaintiff to each of the respective defendants (2^nd defendant: 30 July 2015; 3^rd defendant: 13 November 2015; 4^th defendant: 14 December 2015), up to the date of judgment and at judgment rate thereafter.

19.There will be an order for an injunction prohibiting the distribution of assets worldwide against the Defendants granted on 11 March 2016 by Madam Recorder Linda Chan SC, as extended by Madam Justice Au-Yeung on 18 March 2016 and as extended by Madam Recorder Linda Chan SC on 1 April 2016 be continued until the damages have been assessed and the judgments have been satisfied.

20.I am grateful for Mr Shaw’s comprehensive skeleton, which accurately identified the issue and the solution.

Mr Geoffrey Shaw, of Haley Tam & Co, for the plaintiff

The 1^st, 2^nd, 3^rd and 4^th defendants did not appear and were not represented