AGFA HONG KONG LTD v. KING DRAGON INDUSTRIAL LTD AND OTHERS

HCA 13016/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13016 OF 1999

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J U D G M E N T

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The Application

1. By a Notice of Motion dated 11.12.2003 the 2nd Defendant applied for an Order to set aside the Judgment entered for the Plaintiff on 11.1.2002 pursuant to Order 35 Rule 2 of the Rules of the High Court ("RHC"). As the application was made 23 months out of time the 2nd Defendant also applied for extension of time to make such an application.

Decision made

2. I refused the 2nd Defendant's application after the hearing and made the following order:

(a) The 2nd Defendant's application be dismissed.

(b) Cost of and occasioned by the application be to the Plaintiff, to be taxed if not agreed.

I now give my reasons.

Reasons for failure to attend trial and delay in application to set aside

3. The reasons advanced by the 2nd Defendant were that at the time of trial before Deputy Judge Longley on 11.1.2002, the 2nd Defendant was prohibited and restrained by the Taiwan authority from leaving Taiwan as he was involved in a criminal matter. The 2nd Defendant was therefore not able to make 'appropriate application' during, before or after the said trial. The 2nd Defendant contended that he was not given a chance to dispute the Plaintiff's case nor to cross-examine the Plaintiff's witnesses.

4. According to the 2nd Defendant's affirmation in support of the application, he was arrested and detained by the Taiwan authority when he arrived at the Taiwan International Airport on or about 26.11.1998. He was tried and sentenced to 4 years imprisonment on or about 16.4.1999. He appealed against that decision and on 26.7.2001 the appeal court of Taiwan ordered a re-trial. He was not until July 2002 that he was allowed to leave Taiwan. He claimed to be too involved in handling the retrial to instruct lawyers in Hong Kong. The outbreak of SARS in Hong Kong in 2003 further hampered his consideration to return and instruct lawyers. He was eventually allowed to leave Taiwan on or about 25.6.2003. He made the present application after retrieving all court documents and evidence, and instructing his solicitors.

Brief Chronology

5. It is useful here to set out a brief chronology of the events:

26 Nov 1998	2nd Defendant detained by Taiwan authority
Feb 1999	2nd Defendant allowed bail but not permitted to leave Taiwan (Decision at p.123-128 of the Bundle)
16 April 1999	2nd Defendant sentenced to 4 years imprisonment but still allowed bail (Decisions at p.101-119 and 123-128 of the Bundle)
12 Aug 1999	Writ of Summons issued
07 Sep 1999	Joseph S.C. Chan & Co. filed Acknowledgment of Service on behalf of 2nd Defendant.
11 Sep 1999	Plaintiff applied for Order 14 Judgment
Sep - Dec 1999	3rd and 4th Defendants filed affirmation on behalf of all Defendants (including 2nd Defendant)
23-26 Nov 1999	2nd Defendant went to the Philippines from Taiwan and returned to Taiwan (2nd Defendant's affirmation made on 4.12.1999)
06 Dec 1999	Affirmation of the 3rd Defendant exhibiting an affirmation by the 2nd Defendant made in Taiwan on 4.12.1999
14 Dec 1999	Master Christie granted each of the four Defendants leave to defend on condition that the 1st Defendant made payment into court in the sum of $20,000,000, and that all Defendants to file and serve their Defence by 31.1.2000
20 Dec 1999	All Defendants appealed against Master Christie's Order
27 Jan 2000	Cheung J. dismissed 1st Defendant's appeal but allowed the appeal of 2nd to 4th Defendants
23 Feb 2000	Defence filed by 2nd to 4th Defendants
01 Mar 2000	Upon 1st Defendant's failure to make payment into court pursuant to Master Christie's Order, Judgment entered against 1st Defendant
Mar - May 2000	Various stages of proceedings, such as List of Documents, Check List etc. took place
15 May 2001	2nd, 3rd and 4th Defendant each filed a Notice to Act in Person. The 2nd Defendant gave his address for service Room 1007, 10th Floor, Tai Yau Building, No. 181 Johnston Road, Wan Chai, Hong Kong (which was the same as that given by 4th Defendant).
05 Jun 2001	2nd Defendant filed a statement for trial, stating that for personal reasons he could not leave Taiwan and would defend either by writing or via the 4th Defendant
07-10 Jan 2002	Trial before Deputy Judge Longley
11 Jan 2002	Judgment delivered
11 Dec 2003	2nd Defendant's present application

The Law

6. The time limit for making an application under the Order 35 Rule 2(2) is within 7 days after the trial (i.e. on or before 18.1.2002). The present application was made on 11.12.2003, almost 2 years out of time.

7. The principles to be applied in considering whether to grant the extension of time under Order 3 Rule 5 are set out in Chiu Sin-chung v Yu Yan-yan, Angela [1993] 1 HKLR 225. These are (where applicable to the present hearing), in short:

(a) Rules of the court must prima facie be obeyed. There must be material on which the Court can exercise its discretion to justify an extension of time;

(b) Where there is a failure to apply within the time limit and a further delay in applying for an extension of time, a clear statement as to the reasons are required;

(c) A successful party could only be deprived of the judgment in his favour on basis of discretionary balancing exercise;

(d) Factors normally taken into account in the balancing exercise are: (i) length of delay, (ii) reasons for the delay, (iii) chance of the application to set-aside succeeding if an extension of time is granted, (iv) the degree of prejudice to the Plaintiff if the application for extension of time is granted;

(e) Merits will play little part in the balancing exercise if the delay is short and whole excusable, but where the delay is substantial and is not wholly excusable, much more merit is required.

8. The 'general indication' to be taken into account when the Court is asked to set aside a Judgment is set out in the Hong Kong Civil Procedure 2004 (para 35/2/1). Of relevance to the present case are:

(a) Where judgment has been given after a trial it is the explanation for the absence of the absent party that is most important;

(b) Where the setting aside would entail a complete re-trial on matters of facts which have already been investigated by the court the application will not be granted unless there are very strong reasons for doing so;

(c) The Court will not consider setting aside judgment regularly obtained unless the party applying enjoys real prospects of success;

(d) Delay in applying to set aside is relevant;

(e) There is a public interest in there being an end to litigation and in not having two trials.

Consideration & Application of Principles

9. According to the Decision of the Taiwan High Court dated 25.7 [2002] (p. 123-128 of the Bundle) the 2nd Defendant was detained from 26.11 [1998] until early February [1999] when he was 'released on the provision of surety'. The Taiwan court noted that the 2nd Defendant 'appeared in court on time at every hearing thereafter and had never been absent'. He was restricted to leave Taiwan. Although from another Decision dated 16.4 [1999] (p.101-119 of the Bundle) it was said that the 2nd Defendant was sentenced to 4 years imprisonment, there is no indication that he was in fact in prison. The Decision dated 25.7 [2002] indicated that he was allowed bail since early February.

10. It should be noted that in his affirmation dated 4.12.1999, 2nd Defendant mentioned being in Taiwan since November 1998 but that he had travelled to the Philippines on 23.11.1999 and returned to Taiwan on 26.11.1999. This indicates he was actually allowed to leave Taiwan while he was on bail. No mention of this departure was made in the 2nd Defendant's affirmation in support of the present application. His ability to depart from Taiwan in November 1999 is also in direct conflict with his assertion that he was not allowed to leave until July 2002.

11. The Writ was issued when the 2nd Defendant was already in Taiwan (sentenced to 4 years imprisonment but allowed bail with restriction from leaving Taiwan). He filed a Notice of Acknowledgment via his solicitors. He was able to defend himself via his solicitors and he made the aforesaid affirmation dated 4.12.1999 to resist the Order 14 application while in Taiwan. He has never disclosed the real reason why he was not able to come to Hong Kong; instead, he claimed to be 'preoccupied with the recovery and restructuring' of his business in Taiwan so unable to come to Hong Kong to personally deal with the proceedings' (p.95 of the Bundle).

12. After he was granted unconditional leave to defend the 2nd Defendant knew full well that there would be a trial. His solicitors engaged in proceedings such as exchange of List of Documents, Check-list procedures etc. on his behalf.

13. When he filed a Notice to Act in Person, the 2nd Defendant gave a Hong Kong address for service without giving any indication that at the time of serving the Notice he was not physically in Hong Kong. The Notice for trial was sent to the very address he gave for service. As the 4th Defendant used the same address for service and she duly appeared in Court, it would be highly improbable that the 2nd Defendant was not aware of the trial date. The fact that the 4th Defendant applied for an adjournment at the end of the Plaintiff's case before Deputy Judge Longley and the manner of application (p.25 of the Bundle) led me to draw the irresistible inference that the 2nd Defendant was aware of the trial date. Mr. Arthur Yip, counsel for the 2nd Defendant, also conceded that the 2nd Defendant was indeed aware of the trial dates after taking instructions from his instructing solicitors.

14. No attempt was ever made, while the 2nd Defendant was legally represented or acting in person, to apply for an adjournment should the trial take place while he was still detained in Taiwan. Nor was there any application to have his evidence taken by deposition in Taiwan. In fact, the 2nd Defendant in his affirmation dated 9.12.2003 stressed and confirmed that he had never made any application for adjournment either at or prior to the trial (p.40 of the Bundle). There was also no indication that the 2nd Defendant had ever tried to obtain permission to leave Taiwan to attend trial; or that such an application has been refused.

15. One should not forget the fact that the 2nd Defendant has prepared a statement for the trial indicating that he would defend by writing or via the 4th Defendant.

16. While the 2nd Defendant was restrained by the Taiwan Authority from leaving Taiwan, the evidence before me clearly shows that it was not the case that he could not depart had he so-wished (as demonstrated by his trip to the Philippines in November 1999). His overall conduct of the case was such that he was unable to show that his absence at trial was either unavoidable or inevitable.

17. I also echo the very words used by the learned Deputy Judge in his Judgment when refusing an application for adjournment (p. 26 of the Bundle):

'..[e]ven on the account the 4th Defendant had given the court, the 2nd Defendant had been in his current position for a considerable time and yet no attempt had been made on his behalf to bring this matter to the attention of the court.'

18. After the trial was heard, the 2nd Defendant applied to the Taiwan Court for leave to depart from Taiwan. In granting leave the Taiwan Court expressly referred to the need of the 2nd Defendant to come to Hong Kong to deal with matters concerning the Plaintiff (p.123-128 of the Bundle). He was free to travel out of Taiwan from July 2003 to end of December 2003, a period of at least 1/2 year. Yet, the 2nd Defendant then said he was too busy engaging in dealing with the criminal trial still pending in Taiwan.

19. As the 2nd Defendant saw fit to go and seek permission to leave Taiwan, citing the urgent need to go to Hong Kong to attend the matter concerning the Plaintiff, and then decided the criminal matter in Taiwan was more pressing after all, he had made a conscious decision not to pursue the matter relating to the Plaintiff when he clearly had the opportunity to do so. How can he now come before this Court and say that he did not have the opportunity to deal with the matter in an expedient manner?

20. Not only that the 2nd Defendant failed to act promptly to bring his predicament to the Court's notice, his failure to pursue his application in 2002 after he was granted leave to depart from Taiwan further indicated that he had unreasonably delayed the matter.

21. In any event, the 2nd Defendant has initially given his instructions to his solicitors while he was physically in Taiwan (i.e. prior to him giving Notice to Act in Person), and he is legally represented to pursue the present application. Had he really wanted to set aside the judgment he could have done so through his lawyers. There is no need for him to be present for the application (as clearly demonstrated by his absence before this Court during the hearing).

22. While SARS was a concern to a lot of people, again, had the 2nd Defendant wanted to set aside the Judgment there is no reason why he could not have instructed lawyers to pursue the matter in the early part of 2003.

23. After the 2nd Defendant has come to Hong Kong sometime after June 2003 (I note that he never spelt out when he had actually arrived), he did not lodge the application until 11.12.2003. His explanation was that he had to 'retrieve all court documents and evidence'. I do not find such an explanation acceptable. The 2nd Defendant retains the same firm of solicitors who has represented him before. The solicitors were engaged from the beginning and knew the Defence case well (particularly after a full-hearing on an Order 14 application and an appeal to Cheung J). They were involved, to an extent, in the preparation of the trial until they ceased to act for the 2nd Defendant in May 2001. It would not have taken long to search and retrieve court documents or gather evidence, even if such a need was required. This yet further delay is neither reasonable nor excusable.

Merits of the Defence

24. The Plaintiff claimed against the 1st Defendant for money due under a Credit Agreement, alternatively for price due for printing equipment and chemicals delivered to the 1st Defendant. Its claim against the other Defendants (including the 2nd Defendant) was as guarantors of sums due to the Plaintiff from the 1st Defendant up to a limit of HK$60 Million.

25. The learned Deputy Judge sets out succinctly the Defence in his Judgment as follows (at p. 26 of the Bundle):

(1) that although the relationship between the Plaintiff and the 1st Defendant had originally been that of seller and buyer, that relationship had changed in about January 1997 when it was agreed that the 1st Defendant would simply act as a middleman in selling the Plaintiff's products in China. As a result, the 2nd and 4th Defendant were under no liability under the instruments of guarantee to pay the Plaintiff for goods supplied to 1st defendant later in respect of which the Plaintiff claimed.

(2) Alternatively that the guarantees in the sum of $60 million were only executed in August 1998 and that since the Plaintiff had granted no trade credit to the 1st Defendant thereafter there was no consideration for those guarantees.

26. The 2nd Defendant contended that since the 4th Defendant was not present at the meeting in which the Plaintiff and the 1st Defendant came to an agreement to change their seller-buyer relationship, whereas the 2nd Defendant was the one who did the negotiation, his absence during the trial handicapped the Defendants' case, thus affecting the consideration to be given to the weight of the evidence.

27. The learned Deputy Judge heard oral testimony from witnesses for the Plaintiff and the 4th Defendant. In the statement filed by the 2nd Defendant one of the options he chose was for him to defend via the 4th Defendant. The learned Deputy Judge was fully aware of the defence, which was identical in the case of 2nd and 4th Defendants. He had seen documents indicating the relationship of 'buyer and seller' had continued between the 1st Defendant and the Plaintiff. He found the evidence pointing to the sums owed to the Plaintiff by 1st Defendant as buyer 'overwhelming'. He found that all contemporaneous documentation showed that the relationship between the Plaintiff and the 1st Defendant were seller and buyer. There was no document indicating the contrary. The learned Deputy Judge also found there was consideration for the respective guarantee signed by the 2nd and 4th Defendant.

28. One can readily see the difficulties faced by the defence in trying to adduce evidence in contradiction to those documents in writing. On the information before me, I cannot say that there is a real prospect of success.

Conclusion

29. Applying the applicable principles mentioned earlier, I am not persuaded that I should exercise my discretion to accede to the 2nd Defendant's application for an extension of time. On the evidence before me, I am not persuaded that the Judgment should be set aside either. For these reasons, the 2nd Defendant's application is refused with costs.