XCHRX KAI YIP AIR-CONDITION ENGINEERING CO. v. MA HEI SUN t/a LUEN WAH AIR CONDITION ENGINEERING

HCA 2969/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2969 OF 2000

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REASONS FOR DECISION

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Introduction

1. After hearing the parties, I made the following order against the defendant:-

"Unless the defendant files and serves its signed witness statements as to fact by 4:30 pm [which should read "4:15 pm"] on 16 July 2001, the defendant's Defence be struck out and the defendant's Counterclaim against the plaintiff be dismissed and judgment be entered in favour of the plaintiff as claimed with costs to the plaintiff to be taxed if not agreed".

I indicated that reasons for the decision would be handed down later. These are the reasons.

2. The plaintiff commenced this action on 21 March 2000 against the defendant claiming the outstanding balance of charges for work done and materials supplied. The defendant denies the claim and counterclaims charges for work done and materials supplied. The Amended Defence and Counterclaim further avers in effect that the plaintiff's work were unacceptable and unaccepted.

3. By an order of the Master dated 23 June 2000, the parties were to file and exchange signed witness statements within 42 days. That period expired by 5 August 2000. The parties appeared before the Listing Judge on 29 November 2000. An order was made on that day in effect to extend the time for the defendant to file and serve signed witness statements for another 42 days. That period expired by 11 January 2001. It was also ordered on 29 November 2000 that the trial hereof be set down in the fixture list (for 5 days).

4. In the "Defendant's Check-List" dated 29 November 2000, the defendant indicated that 6 witnesses of fact would testify. Defence solicitor confirmed that to be the position at the hearing on 9 July. Despite the direction for doing so was given in June 2000 (and extended in November 2000), only one witness statement has been filed and served by the defendant up to the time of the hearing. The only reason given as to why the other witness statements were not filed or served was that the defendant had difficulties in finding the witnesses but it is still intended that they would be called at trial. There is however no evidence to substantiate the claim and, more importantly, no particulars given as to what steps have been taken to locate the witnesses.

5. The plaintiff's former solicitors applied to set down the case for trial on 8 January 2001. The trial was now scheduled to commence on 23 July 2001 (some 2 weeks from 9 July).

6. The defendant resisted this application on the ground that the court has no jurisdiction to make an "unless order" in default of the filing and service of signed witness statements. I disagree with this argument.

7. There were at least 3 Hong Kong decisions relating to this situation: Chow Kwok Fai v. Waysuntone Communication Ltd., HCA No. 8866 of 1996, 5 November 1997 (Cheung J); Ying Chow Lung v. The Kowloon Motor Bus Co. (1933) Ltd. & another, HCPI No. 74 of 1998, 17 November 1998 (Suffiad J) and Yee Tung Fibre Glass Manufactory Eng. Co. v. FRP (Hong Kong) Ltd., HCA No. 17840 of 1998, 17 September 1999 (Ribeiro J (as he then was)).

8. In Chow Kwok Fai, the learned Judge dismissed an appeal from the Master who made an "unless order" for default in filing and serving witness statements. By the time of the hearing before the learned Judge, the witness statements have in fact been exchanged. Having criticised the appellant for proceeding with an appeal which had no real value (which the learned Judge categorised as "satellite litigation"), the court disagreed with the appellant's argument regarding jurisdiction and said:-

"I... would say that the jurisdiction to make the unless order is available. The inherent jurisdiction of the Court and the provisions under O. 38, r. 2A gave the jurisdiction. Order 38, r. 2A(17) clearly provides that the Court may override the provisions of the rules. Mr. Li [for the appellant] submitted that subrule 17 applies only to matters regarding the content of the witness statement and how the evidence or witnesses should be dealt with at the trial. I do not think subrule 17 is to be construed in such a restrictive manner. It has already excluded specific provisions of O. 38, r. 2A. How subrule 17 is to be exercised depends on the facts of each case. The existence of subrule 17 is in accordance with the inherent jurisdiction of the Court to regulate its own procedure ... " (at pp. 2-3 of the transcript of judgment).

9. In Ying Chow Lung, the learned Judge allowed an appeal from the Master's "unless order" on the ground that appellant counsel indicated at the appeal hearing that there was no need to call any witness at trial. RHC Ord. 38 rr. 2A(10) and 2A(17) were also referred to by the court. The learned Judge said:-

"... O. 38, r. 2A(10) states:

'Where a party fails to comply with the direction for the exchange of witness statements, he shall not be entitled to adduce evidence to which the direction related without the leave of the Court'.

And although paragraph (17) of the same order and rule gives the Court power to vary or override any of the provisions of this rule and to give alternative directions as it thinks fit, in this case, I have been informed by Mr. Lim [for the appellant] that ... the driver of the van involved in the collision, could not be found ...

In the light of what I have been told by Mr. Lim, I am prepared to allow this appeal ... and make the following order: unless the 2nd Defendant do file signed witness statement as to facts by 4 pm on 1st December 1998, the 2nd Defendant shall not be entitled to adduce evidence without the leave of the Court at the trial of this action" (at p. 3 of the transcript of judgment).

Chow Kwok Fai was not referred to in the judgment in Ying Chow Lung.

10. It appears that it was recognised in Ying Chow Lung (as has been expressly found in Chow Kwok Fai) that there is jurisdiction to make an "unless order" in the event of a default in complying directions regarding the filing and service of signed witness statements.

11. In Yee Tung Fibre Glass, the learned Judge allowed an appeal against an "unless order" regarding default in relation to exchanging (a) expert reports and (b) witness statements. Following Derby & Co. Ltd. v. Weldon (No. 9), The Times, 9 November 1990 (the English Court of Appeal), the learned Judge found that, in relation to expert evidence, the court has no jurisdiction to make an "unless order" striking out pleading and entering judgment and the appropriate order is one barring reliance on such evidence. However, in relation to witness statements, the learned Judge allowed the appeal on the grounds that (a) the default was only of a technical nature and (b) it was not contumelious because the default was the conduct of the solicitors and not the appellant's.

12. It is well recognised that there is inherent jurisdiction for a court to regulate its own procedure, including making "unless" or conditional orders to extend time: see Hong Kong Civil Procedure 2001, para. 3/5/6 to 3/5/8. In this connection, it is useful to remind ourselves of the general principles set out at para. 3/5/7:-

"... An unless order was an order of last resort, not made unless there was a history of failure to comply with other orders. It was the party's last chance to put its case in order.

... Because it was the last chance, a failure to comply would ordinarily result in the sanction being imposed.

... The sanction was a necessary forensic weapon which the broader interests of the administration of justice required to be deployed unless the most compelling arguments were advanced to exonerate the failure.

... It seemed axiomatic that if a party intentionally flouted the order he could expect no mercy.

... A sufficient exoneration would almost invariably require that he satisfied the court that something beyond his control had caused the failure.

... The judge would exercise his judicial discretion whether to excuse the failure in the circumstances of each case on its own merits, at the core of which was service to justice.

... The interests of justice required that justice should be shown to the injured party for procedural inefficiencies causing the twin scourges of delay and wasted costs. The public administration of justice to contain those blights also weighed heavily. Any injustice to the defaulting party, though never to be ignored came a long way behind the other two ... " (emphasis supplied)

(citing Hytec Information Systems Ltd. V. Coventry City Council [1997] 1 WLR 1666 which was approved in Lessy Sarl v. Pacific Star Development Ltd. [1997] HKLRD 1248).

13. The defendant's argument is in essence that Ord. 38 r. 2A(10) implicitly removed the court's inherent jurisdiction in relation to directions regarding witness statements. I do not consider Ord. 38 r. 2A(10) to have such effect. First, that rule only expressly provides for a consequence where there is a failure to comply with a court direction, namely, the defaulting party is barred from adducing the related evidence. Secondly, a statute is presumed not to have ousted the court's jurisdiction save where it clearly does so either expressly or by necessary implication: see, for example, Craies on Statute Law (1971) 7th Ed., pp. 122-124; Bennion: Statutory Interpretation (1997) 3rd Ed., pp. 74-78 (especially pp. 76-78); Cross: Statutory Interpretation (1995) 3rd Ed., pp. 171-172. Thirdly, it is a recognised practice for "unless" or conditional orders to be (and they are often) made in relation to non-compliance with directions regarding pleadings, discovery of documents or other procedural matters. It is difficult to see why it is appropriate to make such orders in relation to those matters, but inappropriate to do so in relation to signed witness statements. If anything, witness statements are normally even more closely related to the merits of a party's case at trial than pleadings or documents.

14. The defendant further contrasted Ord. 38 r. 2A(10) with Ord. 24 r. 16(1) which empowers the court to make an order (among other things) to dismiss the action or to strike out the defence and enter judgment accordingly. I do not find this comparison meaningful and will only repeat that a statute is presumed not to have ousted the court's jurisdiction in the absence of a clear intention to do so. Neither Ord. 38 r. 2A(10) nor Ord. 24 r. 16(1), whether read individually or together, has that intention. In my view, both provisions only intend to set out clearly what legal consequences can follow from a default. There is nothing to show that the legal consequences provided for are intended to be exclusive or exhaustive.

15. There may be cases where it would be inappropriate to make an "unless" order even though there has been default in complying with directions to file and serve witness statements. There may even be cases where even after the "unless" order has been made, the defaulting party should be exonerated (and thus the sanction of the "unless" orders not imposed) even if it has breached the order. One such case is when the defaulting party has clearly indicated that it does not intend to file or serve any witness statement or to call such witness(es) (even though there was an early indication to do so).

16. With the above matters in mind, I turn to the present case. No argument was advanced by the defendant that the court should not make an "unless" order as a matter of discretion. There has been a history of non-compliance of the relevant orders. As a result, up to now (about 2 weeks before the trial commences) it is uncertain how many witnesses will be called by the defence, and thus the length of the trial is unknown. This situation should not be tolerated, whether from the plaintiff's point of view or from the angle of the public administration of justice. I therefore considered it appropriate to make the "unless" order sought.

17. Having so decided, I should clarify the position by saying that if the defendant should decide not to call any other witnesses (except the ones where witness statement(s) have already been filed and served), the sanction in the "unless" order will not be imposed provided the defendant expressly inform the plaintiff of this before the deadline.