Fing Lee Co v. Hung Kam Fung and Another

HCA000259/1969

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 259 OF 1969

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Coram: J. T. Williams

Date of Judgment: 24 June 1969

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JUDGMENT

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1. This is a summons dated 11th April, 1969 to set aside a judgment which was entered on the 12th April, 1969 in default of filing of a defence. The plaintiff, Fing Lee Company, sued two defendants, Hung Kam Fung (1st defendant) and Ka Fung Garment Factory (2nd defendant). It appears from the affidavits that the 1st defendant is the sole proprietor of the second defendant firm and in those circumstances it would appear that there is in reality only one defendant.

2. The creation of two defendants has produced anomalies in the proceedings which could lead to confusion. Thus on the 11th March 1969 an appearance was entered for "Hung Kam Fung trading as Ka Fung Garment Factory".

3. On the 2nd April 1969 the Assistant Registrar issued his certificate of non-delivery of a defence by the 1st defendant and by the second defendant. Judgment was entered as against the 2nd defendant. The application to set it aside is made by the 1st and 2nd defendants.

4. The claim filed on the 5th March is for $17,983 for goods sold and delivered between the 8th January 1968 and the 1st February 1969 and for a further sum of $29,861 on seven dishonoured cheques which became due on various dates between the 18th and the 28th of February 1969.

5. On the 19th February 1969 the defendant's premises were badly damaged by fire and on the 12th March 1969 the plaintiff applied for an injunction to restrain the insurance company from paying out the insurance moneys to the defendants. The affidavit of the 1st defendant in reply to that application which is dated the 28th March 1969 alleges that he is the sole proprietor of the second defendant firm' denies a debt of $49,844.88 to the plaintiff; and alleges that he was not infringing any legal right of the plaintiff, nor was the insurance company. The inevitable outcome of that application was that it would be dismissed and that is what occurred.

6. The summons to set aside the judgment was supported by only one affidavit sworn by the defendant's solicitor, Mr. T.M. Chow. It explains that the defence was not filed because the defendant had been trying to arrange a settlement; he had also been dealing with the aforesaid application for an injunction; and that on the 3rd April consent had been sought from the plaintiff for the filing of a defence out of time but the plaintiff had refused to give his consent. Of course that need not have been the end of the matter and the defendant if really anxious to defend could have made an application to the Court for leave to file his defence out of time. The summons to set aside the judgment was to be heard on the 19th April on which date it was adjourned for one week and it is not surprising to note that the judge ordered the defendant to file a further affidavit within that time.

7. On the 25th April 1969 in purported fulfilment of that order the defendant's solicitor, Mr. T.M. Chow, filed an affidavit which contained no more than a statement advising that the intended defence was annexed thereto. There was no accompanied affidavit from the defendant setting out any grounds on which he felt that he would be entitled to defend. The hearing was again adjourned and was adjourned from time to time. It eventually came before me on the 6th June 1969 by which time Mr. T.M. Chow had filed a further affidavit dated the 9th May 1969 in which he said that the first intended defence was incorrect and that on instructions he has attached a further defence.

8. Before proceeding further it would be as well to consider the way in which applications of this nature have been dealt with in the past.

9. In Richardson v. Howell⁽¹⁾ judgment had been entered in default of filing a defence. An application to set aside the judgment and for leave to defend was granted upon payment of the amount claimed into Court. On an appeal against that condition it was held that the defence revealed in the defendant's affidavit was not adquate and that therefore the condition for payment into Court was rightfully imposed. In Farden v. Richter⁽²⁾ judgment was entered against the defendant for his failure to answer interrogatories as ordered. The defendant who filed no affidavit claiming to have a defence on the merits nevertheless succeeded on his summons to set aside the judgment. The plaintiff appealed and it was held that the judgment should not be set aside in the absence of an affidavit from the defendant which displayed a defence on the merits.

10. In Cheung Kwok Ming v. Lau Hon Cheung⁽³⁾ judgment entered in default of appearance was set aside on condition that the sum claimed was paid into Court within fourteen days. On appeal it was noted that the affidavit had not in fact disclosed a defence and it was observed that there was little authority to guide the Courts as to the imposition of conditions in such cases. The Full Court stated that there were no exceptional circumstances arising in that case which could have justified the imposition of such a condition. The appeal was accordingly allowed.

11. In Fieldrank, Ltd. v. Stein⁽⁴⁾ the Court of Appeal considered a refusal of the Court below to give unconditional leave to defend. The defendant had filed an affidavit showing a triable issue and the judge had granted leave to defend on payment into Court of the sum claimed by the plaintiff. Devlin, L.J. in his judgment, which was the judgment of the Court stated:

"I think that any judge who has sat in chambers in R.S.C., Ord. 14 summonses has had the experience of a case in which, although he cannot say for certain that there is not a triable issue, nevertheless he is left with a real doubt about the defendant's good faith, and would like to protect the plaintiff, especially if there is not grave hardship on the defendant in being made to pay money into court. I should be prepared to accept that there has been a tendency in the last few years to use this condition more often than it has been used in the past, and I think that that is a good tendency; ......"

12. The Court of Appeal in Gordon v. Cradock⁽⁵⁾ approved the imposition of a condition when granting leave to defend in that case. They felt that the judge had properly exercised his discretion in imposing a condition.

13. In Fu Tai Company v. Wan Shing Fong ⁽⁶⁾ on a summons for judgment the judge had granted unconditional leave to defend against which the plaintiff appealed. The Full Court noted that there were inconsistencies in the affidavits filed by the respondent (defendant) which gave rise to a suspicion as to the bona fide nature of the defence. The order in the Court below was set aside and leave to defend was made conditional upon the sum claimed being paid into Court by the defendant.

14. In Fung Tin Keung v. Hong kong Wah Yuen Investment Company⁽⁷⁾ the Court below had refused unconditional leave to defend. The Full Court in considering that case concluded that the judge had wrongfully exercised his discretion and felt that he had given undue weight to some speculation of his own that a building project would not be finished within two years. At page 658 the Chief Justice said in his judgment:

"We are proposing to decide it on the basis that the courts in England, following the view expressed in the Fieldrank case, are more disposed to attach conditions to the grant of leave than formerly and that this view has been adopted in a number of Hong Kong cases and assuming, but not deciding, that this is the right approach the view which I take of the present appeal is as follows."

In that case it seems that the Full Court in Hong Kong was disposed to lean towards the views expressed by Devlin, L.J. in the Fieldrank case.

15. In Banque Nationale de Paris v. Chan U Tong⁽⁸⁾ the Full Court considered an appeal against a condition in the grant of leave to defend that $25,000 be paid into Court within ten days. The reason given by the judge for imposing that condition was that he suspected the grounds put forward in the defendant's affidavit. The Full Court on examining that affidavit and the surrounding circumstances felt that there was nothing suspicious about the grounds of defence raised in the affidavit and made the leave to defend unconditional.

16. In the foregoing cases, whether it be an application to set aside a judgment entered in default of filing a defence, or whether it be on a summons for judgment, the defendant in seeking leave to defend it invariably filed an affidavit which set out for the consideration of the Court the matters he relied upon by way of defence. It is clear that generally speaking in such application there should be an affidavit revealing a defence on the merits and if, as indicated in Fu Tai Company v. Wan Shing Fong above, there are inconsistencies in the affidavit giving rise to doubts about the defendant's bona fides, then conditions can be imposed.

17. Where the affidavit discloses a reasonable defence leave will of course be granted. Where circumstances justify the judge in suspecting that the defence is not bona fide, and that the applicant is merely endeavouring to delay judgment, he may impose conditions in granting leave to defend, per Devlin, L.J. in the Fieldrank case supra.

18. I have referred to the application by the plaintiff in the instant proceedings dated the 12th March 1969 for an injunction to restrain the Tai Ping Insurance Company from paying out moneys to the 2nd defendant. In his counter affidavit the defendant did not deny the allegation that he had a right to insurance money for damage to his property and goods therein. A defence should have been filed about the 28th March 1969.

19. The only affidavit in support of the summons to set aside the judgment is made by the defence solicitor, Mr. T.M. Chow, explaining that there had been negotiations for a settlement. They had not been successful, and for various other inconsequential reasons a defence had not been filed in time. He affirmed that he believed that there was a genuine defence. An affidavit from the plaintiff's solicitor denied that there had been any negotiations for a settlement and further stated that he believed the defendant had already recived $55,000 in insurance moneys.

20. On the hearing date of the summons to set aside, that is on the 19th April 1969, it is not surprising as I have said that the judge ordered a further affidavit to be filed by the defence. Again it was Mr. Chow the defendant's solicitor, and not the defendant, who swore an affidavit. The affidavit set out no grounds for the defence or for believing that there was a reasonable defence to the claim. It simply referred to a statement of defence exhibited along with the affidavit. In paragraph 1 of that defence the defendant admitted that he had received $17,851 of goods but he alleged that those goods had been paid for by was of cheques which matured in March 1969. With regard to that part of the claim based upon dishonoured cheques the defence was that the cheques were for goods purchased by was of description and/or sample, that they did not conform to the description not to the sample, and that they were rejected by the defendant, that the plaintiff refused to accept a return of those rejected goods and they were consequently destroyed in the fire. It alleged they had remained on the defendant's premises at the risk of the plaintiff.

21. The plaintiff filed a counter affidavit exhibiting photostat copies of the six contracts for sale of the goods in question to the defendant. They are dated 25th, 26th, 27th, 28th, 29th of March 1968, the 2nd May 1968 and the 13th November 1968 and are for coating materials of a quality and colour "per attached cuttings". Those contracts all refer to shipments and that delivery is to be from a godown within thirty days after the steamer's arriving. They do not refer to a date of arrival or to the name of any particular steamer. The affidavit refers to a certain conditions printed in those contracts to the effect that the goods are deemed to be approved of if no objection in writing has been made within seven days after the arrival of the steamer; that the buyer cannot reject the goods but that an allowance can be made following an arbitration in respect of any defect.

22. Mr. Chow, the defendant's solicitor, then filed a further affidavit saying he had wrongly instructed and exhibited a further defence annexed to his affidavit in which it was no longer claimed that the $17,983 had been paid by way of cheques, but that the goods were not up to sample, and again that the cheques issued had been issued for materials that were inferior in that the colour had faded and that they were not according to sample. No attempt at all was made to deal with the matters raised in the plaintiff's affidavits.

23. It is clear that the defendant received the goods. Presumably the defendant collected them from the godown on their arrival. However, there is nothing to indicate this in the affidavit of the plaintiff or the proposed defence of the defendant. The defence does not indicate when the goods arrived, nor how long the defendant had them before the fire, nor does it indicate the ways in which they did not come up to sample. It does not indicate how the defendant came to take delivery from a godown of goods which were not up to sample. It does not indicate the dates on which complaints were made to the plaintiffs; nor whether they were in writing as required by the terms of the contracts for sale.

24. The orders referred to by the plaintiff are dated from the 25th March 1968 up to the 13th November 1968. Presumably the goods must have arrived in Hong Kong on widely differing dates. Each order is a separate order. The defence alleges that all the material received was defective. If such is the case I wonder why orders were placed in May and November 1968 by the defendant whose experience had been that the materials could not be relied upon. None of these matters are referred to in any affidavit by the defence and the defence have had two opportunities of filing affidavits and have failed to do so.

25. The defendant has not denied in any way the allegation that he has received $55,000 from the insurance company. He has not denied that part or all of the materials supplied under the contracts were covered by the insurance.

26. In the circumstances I am left in very serious doubts about the defendant's bona fides. The proposed defence is extremely inadequate and would require considerable amendment. I feel that an affidavit should have been filed by defendant No.1 setting out his reasons for believing that he has a good defence to the plaintiff's claim. This seems to be a case in which the plaintiff is entitled to some protection if leave is given to defend.

27. Leave to defend is granted provided the defendant pays into Court the sum of $47,844.88 within fourteen days from the date hereof.

28. The defence to be filed within seven days after payment in. Reply if any within a further fourteen days. The costs of this application to be paid by defendant in any event.

24th June, 1969.

Representation:

...(illegible)

Sakhrani (T.M. Chow & Co.) for Defendants.

(Judgment read)

(1) (1891-92) 8 L.T.R. 445

(2) (1889) 23 Q.B.D. 124

(3) (1960) H.K.L.R. p.1

(4) (1961) 3 A.E.R. 681, 683

(5) (1963) 2 A.E.R. 121

(6) (1966) H.K.L.R. 3

(7) (1967) H.K.L.R. 650

(8) (1968) H.K.L.R. 151