Joyful Delight Ltd v Active Access Holdings Ltd [2022] 5 HKLRD 1, [2022] HKCFI 2623

Timothy Lam represented the 2nd and 4th defendants in Joyful Delight Ltd v Active Access Holdings Ltd [2022] 5 HKLRD 1, [2022] HKCFI 2623.

As purchaser, P entered into an agreement with the first and third defendants as Vendors and the second and fourth defendants as Guarantors. The purchase was of certain shares for $7.5 million. It was in anticipation of a listing. The Guarantors undertook that if the listing failed to materialise by a certain date, they would procure the repurchase by the Vendors from P of the shares for $7.5 million with interest at the rate of 6% per annum. The listing failed to materialise by that date. Suing the Vendors and Guarantors, P claimed various items of relief. These included a claim for specific performance and, in the alternative, a claim for liquidated damages in the sum of $7,599,791.91. Both Guarantors acknowledged service and indicated that they did not intend to contest the proceedings. P obtained a default judgment against the Guarantors in the sum of $7,599,791.78. Then P, recognising that it had failed to give credit for certain repayments, asked that the judgment sum be revised from $7,599,791.78 to $6,599,791.78. On an application by the Guarantors, a Master set aside the default judgment. Against this setting aside, P launched an appeal to a Judge in chambers. On the same day, it took out a summons for summary judgment against the Guarantors for the sum of $7,599,791.78 if its appeal against the setting aside of the default judgment were to fail.

Held, dismissing P’s appeal against the setting aside of the default judgment but entering in its favour summary judgment for damages to be assessed, that:

• (1) The obligation undertaken by the Guarantors was a “see to it” obligation, being one to see to it that the Vendors repurchased the shares in the event of a listing failing to materialise by the stipulated deadline. So the Guarantors’ liability in damages created by their guarantee was in the nature of liability in unliquidated damages. The default judgment being for liquidated damages, it was rightly set aside, and the appeal against the setting aside failed accordingly (McGuinness v Norwich and Peterborough Building Society [2012] 2 BCLC 233, Southwest Securities (HK) Brokerage Ltd v Nieumarkt Investments Ltd [2021] HKCA 740applied). (See paras.32-35, 41.)
• (2) As for the application for summary judgment, it was open to P under O.86 of the Rules of the High Court (Cap.4A, Sub.Leg.), the Statement of Claim endorsed on its Writ including a claim for specific performance, to seek, in lieu, summary judgment. In any event, P would be entitled to so apply under O.14 of the RHC, the deeming provision in O.13 r.6(1) satisfying the requirement under O.14 r.1(1). As for the merits of P’s claim for summary judgment, it was plain that the Guarantors had no arguable defence on liability. The only question was as to quantum. Accordingly, summary judgment for damages to be assessed should be entered for P (Sullivan v Henderson [1973] 1 WLR 333, Canada Maritime Ltd v Oerlikon Aerospace Inc [1997] Lexis Citation 1189 applied; Incorporated Owners of Nos 3-3E Wang Fung Terrace v Law Chi Wing (DCCJ 230/2006, [2006] HKEC 590) considered). (See paras 54-75.)

[The above is excerpted from the headnote to the report in HKLRD.]