JOYFUL DELIGHT LTD v. ACTIVE ACCESS HOLDINGS LTD AND OTHERS

bjbj [ gP [ gP , 14 & 21 June, 18 & 25 July and 1 August 2022 Date of Decision: 6 September 2022 -------------------------- DECISION -------------------------- THE APPEAL This is the plaintiff s appeal against the orders made by Master Alexander Tang dated 17 January 2022. THE PLAINTIFF S CASE The plaintiff s case has been helpfully summarised by its counsel Mr Martin Ho as follows. In about 2017, the 2nd and 4th defendants planned to arrange for their business (held through a number of corporate entities) to be listed on the Main Board of the Hong Kong Stock Exchange ( the Intended IPO Application ). The Intended IPO Application was intended to be implemented ( the Listing ) through the listing vehicle WFH Group Limited ( ). With a view to implementing the Intended IPO Application, there was a corporate restructuring exercise, pursuant to which the corporate entities referred to in paragraph 3 above were to be injected into the WFH group structure through an intermediate corporate entity Leading Talents , and WFH (through Leading Talents) was to be owned equally by the 2nd and 4th defendants through two corporate entities, namely, the 1st defendant ( Active Access ) and the 3rd defendant ( Tian-Yu ). On 28 April 2017, the plaintiff as purchaser, Active Access and Tian-Yu as vendors and the 2nd and 4th defendants as guarantors, entered into a written sale and purchase agreement ( the Pre-IPO Investment Agreement ). Pursuant to the Pre-IPO Investment Agreement, the plaintiff agreed to purchase a stake in the WFH Group by acquiring a certain amount of shares in Leading Talents owned by Active Access ( the AA Shares ) and Tian-Yu ( the TY Shares ) respectively (collectively, the Shares ). According to the Pre-IPO Investment Agreement, the consideration for the plaintiff s purchase of the Shares shall be $7.5 million. Clause 5.02 of the Pre-IPO Investment Agreement provided for the following guarantor obligations of the 2nd and 4th defendants (collectively, the Guarantors ): The Guarantors undertake to the Purchaser that if the Listing set out in Recital (E) fails to be completed on or before 31 May 2018 (or on such later date as the Vendors and the Purchaser may otherwise agree in writing), Active Access and Tian-Yu shall repurchase the Active Access Sale Shares and the Tian-Yu Sale Shares from the Purchaser at the consideration of HK$3,750,000 and HK$3,750,000, respectively, together with interest thereon at a rate of 6% per annum accruing from the date of receipt of the Consideration by [Leading Talents] (or at such consideration as the Vendors and the Purchaser may otherwise agree in writing). (original emphasis in the Pre-IPO Investment Agreement) In other words, if the Listing fails to materialise on or before 31 May 2018, the 2nd and 4th defendants (as Guarantors) undertook to procure Active Access and Tian-Yu to repurchase the Shares with interest on the sum of $7.5 million at a rate of 6% per annum. The sale transaction was completed on 28 April 2017, pursuant to which the plaintiff issued a cheque of $3.75 million to the 2nd defendant and another cheque of $3.75 million to the 4th defendant respectively. However, despite the lapse of the deadline as provided in the Pre-IPO Investment Agreement (i.e. 31 May 2018), the Listing had never been implemented even up to this date. It was therefore contended by the plaintiff that the obligations of the 2nd and 4th defendants as Guarantors under Clause 5.01 of the Pre-IPO Investment Agreement have been triggered, and that their failure to procure their respective corporate entities to re-purchase the Shares would mean that they are liable to pay damages to the plaintiff for the breach. PROCEDURAL BACKGROUND This action was begun by writ on 15 June 2020. In the Statement of Claim which was indorsed on the writ, the plaintiff claimed against the defendants for the following reliefs: Specific performance of the Pre-IPO Investment Agreement by: paying to the plaintiff the sum of $7,599,791.91 together with interest thereon at the rate of 6% per annum accruing from 15 June 2020 until the date of execution of the instrument of transfer and bought and sold notes for the purpose of transferring the AA Shares and the TY Shares by the plaintiff to Active Access and Tian-Yu; in the case of Active Access and Tian-Yu, executing the instrument of transfer and bought and sold notes for the purpose of transferring the AA Shares and the TY Shares by the plaintiff subsequent to the receipt of $7,599,791.91 together with interest; Alternatively, a declaration that the defendants have repudiated the Pre-IPO Investment Agreement and that the plaintiff is entitled to liquidated damages in the sum of $7,599,791.91 against the defendants jointly and severally. The 4th defendant lodged his Acknowledgment of Service with the High Court Registry on 19 June 2020. He indicated therein that he did not intend to contest the proceedings. The 2nd defendant lodged his Acknowledgment of Service with the High Court Registry a week later on 26 June 2020. He also indicated that he did not intend to contest the proceedings. On 10 August 2020, the plaintiff obtained Final Judgment against the 2nd and 4th defendants ( the Default Judgment ) on the ground that no notice of intention to defend had been given by them, pursuant to which it was adjudged that the 2nd and 4th defendants shall jointly and severally pay the plaintiff the sum of $7,599,791.78 together with interest on the sum of $6.2 million at the rate of 8% per annum from the date of the writ. On the basis of the Default Judgment, the plaintiff obtained two Charging Orders: A Charging Order Absolute against a property owned by the 2nd defendant; A Charging Order Absolute against a property jointly owned by the 2nd and 4th defendants. (collectively, the Charging Orders Absolute ) On 17 August 2021, the 2nd and 4th defendants took out a summons to set aside the Default Judgment ( the defendants Setting Aside Summons ). Recognising the fact that it had entered the Default Judgment without giving credit to some repayments made by the defendants, the plaintiff took out a summons on 9 September 2021 ( the plaintiff s Amendment Summons ) and asked for, among other things, the following orders: The Default Judgment be amended so that the judgment sum be revised from $7,599,791.78 to $6,599,791.78; Alternatively, the Default Judgment be set aside and be regranted simultaneously such that the judgment sum be revised to $6,599,791.78 and the interest be reduced in the way set out in the plaintiff s Amendment Summons. On 14 September 2021, the 2nd and 4th defendants took out a summons ( the defendants A/S Summons ) for leave to: withdraw their respective Acknowledgments of Service; file their respective Acknowledgments of Service out of time; alternatively, amend their respective Acknowledgments of Service to the effect that they do intend to contest these proceedings. Having heard submissions from both parties on 17 January 2022, the learned Master made, among others, the following orders: The Default Judgment be set aside; The Charging Orders Absolute be discharged; The plaintiff s Amendment Summons be dismissed; and The defendants A/S Summons be dismissed. ( the Decision ) By a Notice of Appeal to Judge in Chambers filed by the plaintiff on 27 January 2022, the plaintiff appealed against the Decision and asked for the following orders: The defendants Setting Aside Summons be dismissed; The Default Judgment be amended pursuant to the plaintiff s Amendment Summons; The Charging Orders Absolute be amended pursuant to the plaintiff s Amendment Summons; Alternatively, the defendants be ordered to pay the sum of $6,299,791.78 into Court as a condition to set aside the Default Judgment. On the same day, the plaintiff also filed a summons for summary judgment ( the Summary Judgment Summons ) and sought summary judgment against the 2nd and 4th defendants if the appeal herein were dismissed. DISCUSSION THE APPEAL While the 2nd and 4th defendants had put forward various arguments in support of their application to set aside the Default Judgment before the learned Master, these arguments had all been rejected. In the present appeal, Mr Lam for the 2nd and 4th defendants made it clear that he would not rely on those arguments. The only ground which is relied on herein is that it is legally wrong for the plaintiff to seek judgment for liquidated damages of $7,599,891.91 . It was contended that the damages which the plaintiff was seeking against the 2nd and 4th defendants were in fact unliquidated damages, and therefore the plaintiff could not rely on Order 13 rule 1 of the Rules of the High Court (Cap.4A, Laws of Hong Kong) ( ). That was in fact the reasoning of the learned Master when he made the orders in favour of the 2nd and 4th defendants. Hence, the sole issue herein is whether the plaintiff s claim against the 2nd and 4th defendants is for a liquidated sum. Mr Ho for the plaintiff argued that the event guaranteed under Clause 5.02 of the Pre-IPO Investment Agreement, properly understood, is the refund of the exact amount of $7.5 million by the 2nd and 4th defendants corporate entities plus interest. He therefore submitted that, when Active Access and Tian-Yu refused to refund that amount as stipulated in the said Clause 5.02, that sum represents the exact and fixed liability of the 2nd and 4th defendants under the guarantee, and that such an amount is capable of being ascertained as a mere matter of arithmetic by reference to the figure expressly stated in the said Clause 5.02. It was therefore submitted that the plaintiff s claim was for liquidated damages. If the obligation on the part of the defendants under the said Clause 5.02 was really to refund a sum of money to the plaintiff, then Mr Ho might well be right. However, the fallacy of his argument is that the said Clause 5.02 was not about a simple refund of monies, but the repurchase of the Shares from the plaintiff, who at the moment is still holding those shares. This is demonstrated by his own arguments (by which he argued that the residual value of the Sale Shares should not be taken into account when the amount of damages payable to the plaintiff is ascertained): 27.1 First, as a matter of fact, P has undertaken to do whatever acts are necessary to transfer the Sale Shares to Active Access and Tian-Yu. P has executed blank instruments of transfers and bought and sold notes in respect of the Sale Shares (the Executed Blank Documents ), which are currently stakeheld by P s solicitors. If necessary, P is willing to undertake to release the Executed Blank Documents to Ds solicitors within 3 days if the Default Judgment is not set aside. 27.2 Second, properly analysed, claimant 5.02 creates a specifically enforceable contract for the repurchase , which P is ready, willing and able to perform. As such, the vendor (here P), while retaining the legal title thereto, holds the beneficial interest in the Sale Shares on trust for the purchaser (i.e. Active Access and Tian-Yu), the latter enjoying a proprietary interest in the subject matter property/assets: Snell s Equity (34th edn, 2020) 24-002 to 24-003 (pp 716-718). 27.3 That being the case, there is no basis to take into account the residual value of the Sale Shares (if any), which proprietary interest is vested in Active Access and Tian-Yu, in assessing the judgment sum. 27.4 Third, the repurchase of the Sale Shares is to be undertaken by Active Access and Tian-Yu, and not D2 and D4. D2 and D4, as Guarantors, have nothing to do with the receipt of the Sale Shares. If Active Access and Tian-Yu fail to pay the repurchase price (or the refund), the only obligation of D2 and D4 is to guarantee the payment of that amount. 27.5 Fourth, there is nothing to show that the Sale Shares are worth anything, in circumstances where the Listing had failed, and the Sale Shares (in a private company which is not freely transferable) only represented an insignificant stake of 3.27% of Leading Talents before the Listing. As a matter of fact, (a) P was not even aware why the Listing failed; (b) no one sought to utilise or deal with the Sale Shares ever since they were assigned to P. The primary relief claimed in the Statement of Claim was for specific performance of the said Clause 5.02. The undertaking which Mr Ho now proposes the plaintiff to give as per paragraph 27.1 of his submission quoted above is in fact the plaintiff s part of the performance of the said Clause 5.02. While Mr Ho has tried to dress it up as if he is not pursuing a claim of specific performance here, I am afraid his effort is in vain. Paragraphs 27.1 and 27.2 quoted above are plainly about the repurchase of the Shares. If he is indeed not asking for specific performance of the said Clause 5.02 but damages, then such damages should be measured by reference to the loss which is suffered by the plaintiff due to the failure on the part of Active Access and Tian-Yu to repurchase the Shares from the plaintiff. Such damages, in my view, cannot be ascertained as a mere matter of arithmetic. Since the plaintiff is still holding onto the Shares, the value of such shares must be taken into account. Mr Ho argued that there is nothing which shows that such shares worth anything. I reject this argument because: There is also no evidence which shows that the Shares worth nothing; In any event, if it is accepted that the Court has to take into account the value of the Shares (if any) in the process, then that means the damages are not liquidated in nature. The amount thereof has to be assessed. In McGuinness v Norwich and Peterborough Building Society [2012] 2 BCLC 233, Patten LJ identified four classes of liability that may be imposed on a guarantor: [7] It is common ground that a guarantee of a loan may impose one or more of the following types of liability on the guarantor. These are: a see to it obligation: i.e. an undertaking by the guarantor that the principal debtor will perform his own contract with the creditor; a conditional payment obligation: i.e. a promise by the guarantor to pay the instalments of principal and interest which fall due if the principal debtor fails to make those payments; an indemnity; and a concurrent liability with the debtor for what is due under the contract of loan. His Lordship then went on to say: [8] The obligations in classes (2) and (4) create a liability in debt. But it is well established that an indemnity is enforceable by way of action for unliquidated damages: see Firma C-Trade SA v Newcastle Protection and Indemnity Association [1990] 2 All ER 705 at 715-717, [1991] 2 AC 1 at 33-36. The liability arises from the failure of the indemnifier to prevent the person indemnified from suffering the type of loss specified in the contract. A guarantee of the see to it type has also been held by the House of Lords to create a liability in damages. The obligation undertaken by the guarantor is not one to pay the debt but consists of a promise that the debt will be paid by the principal debtor: see Moschi v Lep Air Services Ltd [1972] 2 All ER 393, [1973] AC 331. It is well established that an indemnity is enforceable by way of action for unliquidated damages: see Firma C-Trade SA v Newcastle Protection and Indemnity Association [1990] 2 All ER 705 at 715 717, [1991] 2 AC 1 at 33 The liability arises from the failure of the indemnifier to prevent the person indemnified from suffering the type of loss specified in the contract. (emphasis added) The above principles were followed by the Court of Appeal in Southwest Securities (HK) Brokerage Limited v Nieumarkt Investments Ltd & Another [2021] HKCA 740 (at 5.7 5.8). In the present case, it is clear that the obligation undertaken by the 2nd and 4th defendants by virtue of the said Clause 5.02 was a see to it obligation: they undertook that Active Access and Tian-Yu shall repurchase the Shares from the plaintiff. Their liability in damages created by their guarantee must thus be in the nature of unliquidated damages. Mr Ho then argued that it is unfair to the plaintiff for the learned Master to rely on this point about liquidated damages without any prior warning because this involved the construction of the said Clause 5.02 which was a fact-dependent point. Hence, it was said, it would be unfair if it was only explored for the first time after the evidence has been filed. I agree that this point was actually not raised by Mr Lam for the defendant in the hearing before the learned Master but by the learned Master himself. Having said that, I am aware that in fact, the learned Master did, by letter dated 13 January 2022 (4 days before the hearing), ask the parties to address him at the hearing on the question whether the damages should be regarded as liquidated damages under Order 13 rule 1 . If the plaintiff considered it necessary to adduce further evidence on the matter, it was up to it to make an application before the learned Master, but it did not do so. It is clear that while the learned Master rejected all the arguments raised by Mr Lam for the 2nd and 4th defendant, he proceeded to set aside the Default Judgment since he took the view that the damages claimed by the plaintiff herein were not liquidated damages. When the plaintiff filed the Notice of Appeal to Judge in Chambers, it must be apparent to it and its legal team that it would be, to say the least, highly probable that the 2nd and 4th defendants would rely on the point raised by the learned Master on appeal. Yet, the plaintiff did not make any application to adduce further evidence on appeal. In these circumstances, with respect, I do not think it is right for the plaintiff to complain that the point on unliquidated damages was allowed to be taken herein without the relevant facts placed before the Court. In any event, Mr Ho has not particularised what evidence the plaintiff would have placed before the Court for the construction of the said Clause 5.02. To conclude, I hold that the damages which the plaintiff sought against the 2nd and 4th defendants are unliquidated damages. That being the case, the Default Judgment which was granted on the basis that the claim was for liquidated damages must be set aside. It follows that the Default Judgment and the Charging Orders Absolute should not be allowed to be amended. Neither do I think it is appropriate to order the 2nd and 4th defendants to pay any money into Court as a condition to set aside the Default Judgment. DISCUSSION SUMMARY JUDGMENT As a fallback position, the plaintiff asked the Court to grant summary judgment against the 2nd and 4th defendants. In the marginal note of the Summary Judgment Summons, both Order 14 and Order 86 of the RHC have been cited. However, only one of these two Orders can be applicable in the same case because it is provided by Order 14 rule 1(3) of the RHC that: This Order shall not apply to an action to which Order 86 or Order 88 applies. Although the same legal principles are applicable to both Order 14 and Order 86 of the RHC, there is a very significant difference in the procedural requirements between them: While an application for summary judgment under Order 14 of the RHC cannot be made until the defendant has given a notice of intention to defend the action, there is no such requirement if the application is made pursuant to Order 86 of the RHC. That is the effect of Order 14 rule 1(1) of the RHC which provides that: Where in an action to which this rule applies a statement of claim has been served on a defendant and that defendant has given notice of intention to defend the action, the plaintiff may, on the ground that that defendant has no defence to a claim included in the writ, or to a particular part of such a claim, or has no defence to such a claim or part except as to the amount of any damages claimed, apply to the Court for judgment against that defendant. (emphasis added) Paragraph 14/1/4 (pages 335 336) of Hong Kong Civil Procedure 2022, Volume 1 reads: Notice of intention to defend by defendant This is a preliminary necessity to applying for summary judgment under O.14. The words of r.1 preclude an application under O.14 before the defendant has acknowledged service of the writ and stated in his acknowledgment that he intends to contest the proceedings, i.e. has given notice of intention to defend. In the absence of any indication by a defendant that the plaintiff s claim is contested, there is no need to assess whether the defendant has shown that there is an issue to be tried; c.f. Incorporated Owners of Nos 3-3e Wang Fung Terrace v. Law Chi Wang (DCCJ 230/2006, [2006] H.K.E.C. 590), M Ng D.J., at paragraph 59-60 in relation to O.14, r.1 of the Rules of the District Court. If there is no acknowledgment of service or the acknowledgment does not state that the defendant intends to contest the proceedings, judgment in default of notice of intention to defend may be entered under O.13. [ Since the 2nd and 4th defendants have not given any notice of intention to defend the action, it is, on the face of it, not open to the plaintiff to apply for summary judgment under Order 14 against them. I will come back to this point later. Order 86 rule 1(2) of the RHC, on the other hand, stipulates that: An application may be made against a defendant under this rule whether or not he has acknowledged service of the writ. Hence, the first question is: whether the plaintiff may make an application under Order 86 of the RHC in the present case. To answer this question, the provision under Order 86 rule 1(1) of the RHC is important. It states that: In any action begun by writ indorsed with a claim (a) for specific performance of an agreement (whether in writing or not) for the sale, purchase, exchange, mortgage or charge of any property, or for the grant or assignment of a lease of any property, with or without an alternative claim for damages, or (b) for rescission of such an agreement, or (c) for the forfeiture or return of any deposit made under such an agreement, the plaintiff may, on the ground that the defendant has no defence to the action, apply to the Court for judgment. In my view, this action plainly falls within Order 86 rule 1(1)(a) of the RHC, because the plaintiff has indeed pleaded a claim for specific performance of the Pre-IPO Investment Agreement against all the defendants jointly and severally with an alternative claim for liquidated damages against them. Mr Lam for the 2nd and 4th defendants had forcefully submitted that this is simply not a case for specific performance. He referred to the case of Moschi v Lep Air Services Ltd. & Others [1973] AC 331 and submitted that when a guarantor undertakes that the principal debtor will carry out his contract, then if at any time and for any reason the principal debtor fails to act as required by the contract, the creditor can sue the guarantor, not for the sum(s) unpaid by the debtor, but for damages. Hence, it was argued that it follows from the legal nature of the obligation of the guarantor to which a contract of guarantee gives rise that it is not an obligation himself to pay a sum of money to the creditor, but an obligation to see to it that another person, the debtor, does something; and that the creditor s remedy for the guarantor s failure to perform it lies in damages for breach of contract only. I accept Mr Lam s argument on the relief available to the creditor in such circumstances. However, that is beside the point. The crux of the matter is whether the action begun by writ is indorsed with a claim for specific performance as required by Order 86 rule 1(1)(a) of the RHC. In my view, if this requirement is satisfied, then the operation of Order 86 of the RHC is triggered, no matter whether at the end of the day the claim for specific performance is successful or not. Mr Lam had also drawn this Court s attention to the case of Cotteen Investments Limited v Tomases Investments Limited & Another (HCA 5015/1982, unreported, 1 March 1983), in which Liu J (as he then was) held that since the liability of the 2nd defendant therein as a guarantor did not fall within any of the categories prescribed by Order 86 rule 1 of the RHC, the Order 86 summons issued therein was irregular. However, as pointed out by Mr Ho for the plaintiff, it does not appear from the case report itself whether the writ therein was indorsed with a claim for specific performance in the first place. Furthermore, it seems that the Liu J took the view in that case the cause of action against the guarantor only arose from the Guarantee Agreement between the plaintiff therein and the guarantor and therefore the guarantor s liability did not arise out of the Agreement for Sale and Purchase, and it was in these circumstances that he held that Order 86 was not engaged. The situation in the present case is not the same. Mr Ho s argument that Order 86 is engaged herein is also supported by the case of Sullivan v Henderson [1973] 1 WLR 333. In this case, the plaintiff claimed for an order of specific performance. However, Megarry J took the view that such a claim must fail in the circumstances of that case. Be that as it may, Megarry J held that Order 86 was applicable because the writ therein was endorsed with a claim for specific performance of an agreement. Accordingly, his Lordship gave judgment for the plaintiff therein for damages to be assessed. I therefore hold that it is open to the plaintiff to apply for summary judgment against the 2nd and 4th defendants pursuant to Order 86 of the RHC. If I am wrong in the above analysis, then the plaintiff can only apply for summary judgment under Order 14 but not Order 86. As mentioned, in such circumstances, the plaintiff would encounter a procedural difficulty in that both the 2nd and 4th defendants have filed Acknowledgments of Service indicating that they did not intend to contest these proceedings. As aforesaid, their application to withdraw or amend such Acknowledgements of Service or to file fresh Acknowledgements of Service had been dismissed by the learned Master, in respect of which they had not appealed. Hence, the current position is that there is still no notice of intention to defend the action coming from either the 2nd or the 4th defendant. Order 14 rule 1(1) is thus not satisfied. However, in my view, that is not the end of the matter. Order 13 rule 6(1) of the RHC provides that: Where a writ is indorsed with a claim of a description not mentioned in rules 1 to 4, then, if any defendant fails to give notice of intention to defend, the plaintiff may, after the prescribed time and, if that defendant has not acknowledged service, upon filing an affidavit proving due service of the writ on him and, where the statement of claim was not indorsed on or served with the writ, upon serving a statement of claim on him, proceed with the action as if that defendant had given notice of intention to defend. (emphasis added) Hence, in a case where the claim is not for the relief covered by Order 13 rules 1 to 4, and if the defendant fails to give notice of intention to defend (such as the present), the plaintiff cannot apply for default judgment under Order 13, but can proceed with the action as if such a defendant has given notice of intention to defend upon satisfaction of the following conditions: upon filing an affidavit proving due service of the writ on the defendant; and where the statement of claim was not indorsed on or served with the writ, upon serving a statement of claim on the defendant. There is no dispute that these conditions have been satisfied herein. In such circumstances, when the plaintiff proceeds against the 2nd and 4th defendants as if they have given notice of intention to defend, can it be said that Order 14 rule 1(1) is deemed to have been satisfied? Mr Lam for the 2nd and 4th defendants argued that it cannot be so said. Reliance was placed on the case of The Incorporated Owners of Nos. 3 3E Wang Fung Terrace v Law Chi Wing & Another (DCCJ 230/2006, unreported, 28 March 2006), in which HH Judge M Ng (as her Ladyship then was) held that: 57. I am not satisfied that the Plaintiff is entitled to take out the Order 14 Summons against the 1st Defendant. Order 14 rule 1 of the RDC provides that a plaintiff may apply for summary judgment only where the defendant has given notice of intention to defend the action. The 1st Defendant has not done so. 58. Mr Wong argues that Order 13 rule 6 of the RDC provides that if any defendant fails to give notice of intention to defend, the plaintiff may, after the prescribed time and, if that defendant has not acknowledged service, upon filing an affidavit proving due service of the writ on him proceed with the action as if that defendant had given notice of intention to defend . However, this only allows the action to proceed so that if the defendant does not file his defence, the plaintiff can apply for default judgment under Order 19 of RDC. 59. This is reflected in Hong Kong Civil Procedure 2006 Vol.1 para.13/6/1 at p.149 as follows : If the statement of claim is not already endorsed on or served with the writ, the plaintiff must serve a statement of claim upon the defendant and if the defendant does not serve his defence within the time limited he will be in default of pleading under O.19, and the plaintiff may then proceed by summons or motion for judgment under O.19 r.7. In para.19/7/2 at p.343, the learned editors further stated as follows in relation to Order 19 rule 7 : By the combined effect of O.13, r.6, and this rule, this rule applies to cases in which the defendant is in default of notice of intention to defend as well as of defence. 60. This must be right because without actual indication by a defendant of any contest against the plaintiff s claim, there is no need to apply the relevant test of assessing whether there is a believable or credible defence under Order 14 of the RDC. The appropriate course is to proceed with the Default Judgment Summons against the 1st Defendant. In the circumstances, I dismiss the Plaintiff s application for summary judgment against the 1st Defendant. I can understand why the learned Judge had taken the view that she did. If a defendant has not given notice of intention to defend, and if the writ concerned is indorsed with a claim not mentioned in Order 13 rules 1 to 4 of the RHC, the plaintiff would normally apply for default judgment pursuant to Order 19 rule 7 of the RHC. If the Court considers it appropriate to do so, it would grant judgment accordingly. However, there may be reasons why the Court decides that no judgment should be granted right away. A commonly seen reason is where the claim is for declaratory relief. In such a case the plaintiff would be required to proceed to trial . The Incorporated Owners of Nos. 3 3E Wang Fung Terrace (supra) is another example, in which the learned Judge considered that the application for default judgment against the 1st defendant therein should stand over to trial because the grant of default judgment might affect the 2nd defendant s defence if the plaintiff s claim against the 2nd defendant proceeded to trial. In the above examples, it is obvious that, despite the engagement of Order 19 rule 6(1) of the RHC/RDC (i.e. the action being proceeded with as if the defendant had given notice of intention to defend), an application for summary judgment would be totally inappropriate. I can envisage that such inappropriateness would be applicable to most other scenarios in which default judgment are for one reason or another not obtained successfully by the plaintiff. I should further add that, in the normal course of event, since the defendant has not filed any evidence (because the defendant has not appeared at all), there is no question of considering whether there is a believable or credible defence under Order 14. That is why the learned Judge in The Incorporated Owners of Nos. 3 3E Wang Fung Terrace took the view that there is no need to apply the test of Order 14. Having said that, I do not think it can be said that it is theoretically impermissible for a plaintiff to apply for summary judgment in a case which is proceeded with pursuant to Order 19 rule 6(1) of the RHC (even though such cases must be rare for the reasons mentioned above), because there is nothing in that rule which limits the way the action may proceed further. Mr Lam has also referred this Court to the case of Sum Chi Chung v Tsang Kwok Hung [2022] HKCFI 166, in which the approach adopted in The Incorporated Owners of Nos. 3 3E Wang Fung Terrace was followed. However, the facts therein are very different from those before this Court. I therefore do not think that may assist the 2nd and 4th defendants. The argument that the deeming provision in Order 13 rule 6(1) of the RHC would satisfy the requirement of Order 14 rule 1(1) is supported by the case Canada Maritime Limited v Oerlikon Aerospace Inc [1997] Lexis Citation 1189, in which Tuckey J quoted (and agreed to) what Rix J held as follows: The important words there are the further words: proceed with the action as if that defendant had given notice of intention to defend . That is what has happened in this case. It seems to me that that gives to the plaintiffs the counterclaim the right in any event to issue summary judgment proceedings under Ord. 14 against [M.V. and T.F.], even though they have not, in fact, given notice of intention to defend, because the plaintiffs to the counterclaim are entitled to proceed with the action against them as though they had given notice of intention to defend. The condition of Ord. 14, Rule 1 is, thereby, in any event met. In the present case, the facts are quite unique. Although the 2nd and 4th defendants had indicated that they did not intend to contest these proceedings by their respective Acknowledgements of Service, they have taken active steps in defending this action: They had set aside the Default Judgment; they had also filed affirmation evidence in support of their defence herein; they had even applied to amend their Acknowledgments of Service (even though that had been refused by the learned Master). In the present circumstances where a full trial has not been demonstrated to be desirable by reason of, for example, any claim for declaratory relief, I do not see why the plaintiff should not be allowed to make use of the Order 14 mechanism. I therefore hold that the plaintiff would in any event be entitled to apply for summary judgment against the 2nd and 4th defendants in the present case under Order 14 of the RHC, and the deeming provision in Order 13 rule 6(1) of the RHC would satisfy the requirement under Order 14 rule 1(1) of the RHC. Coming to the merits of the plaintiff s summary judgment application, the only counter-argument raised by Mr Lam was that such an application is not really a fallback for the plaintiff, as it would rise or fall together with the plaintiff s appeal, because the plaintiff is seeking herein a final judgment for a liquidated sum. It was therefore said that the plaintiff suffers the same problems as that concerning the Default Judgment and the plaintiff s appeal. I have explained above my view that the plaintiff s claims against the 2nd and 4th defendants are for unliquidated damages. However, I do not think that the plaintiff s application for summary judgment should be dismissed because of this. I take the view that the 2nd and 4th defendants plainly have no arguable defence in this action. One only has to refer to Mr Ho s argument that they had repeatedly acknowledged their indebtedness and liability in respect of which Mr Lam had made absolutely no response. It is also evident that the 2nd defendant stated in his affirmation that: I must say that neither Mr. Ip nor I am trying to dispute our obligation to repurchase the Sale Shares from the Plaintiff pursuant to the Pre-IPO Investment Agreement as a result of the failure of the Listing. The only remaining issue is quantum. I therefore enter interlocutory judgment in favour of the plaintiff against the 2nd and 4th defendants for damages to be assessed. ORDER For reasons of the aforesaid, I order that: The plaintiff s appeal be dismissed; Interlocutory judgment be entered against the 2nd and 4th defendants for damages to be assessed. COSTS Cost should follow the event. I make a costs order nisi that: The plaintiff shall bear the 2nd and 4th defendants costs of the appeal, to be taxed if not agreed; Subject to (1) above, the 2nd and 4th defendants shall bear the plaintiff s costs of the action up to the order for interlocutory judgment, including the costs of the Summary Judgment Summons, to be taxed if not agreed. The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof. ( H. Au-Yeung ) Deputy High Court Judge Mr Martin Ho, instructed by Hui & Lam LLP, for the plaintiff Mr Timothy Lam, instructed by Fung, Wong, Ng & Lam, for the 2nd and 4th defendants See for example: Leung Pak Ki v The estate of Pau Kau, deceased (HCA 624/2009, unreported, 1 March 2016), in which Deputy High Court Judge Paul Lam SC dismissed the plaintiff s application for a declaration made pursuant to Order 13 rule 6 and Order 19 rule 7 of the RHC and held that the plaintiff might proceed to trial if he continued to pursue his claim. 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