CHAN WOON CHEUNG v. CHAN YUK CHING AND OTHERS

HCA 1377/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1377 OF 2001

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D E C I S I O N

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1. This is an application by the Plaintiff for an adjournment of the trial. The circumstances leading to the application are as follows. One of the issues raised by the defence to the Plaintiff's action for trespass on the land allegedly in the Plaintiff's possession is that the land had been leased to the Defendants from its owner, Chan Kwong Un Tong ("the Tong") by a lease dated 7 March 2001 duly signed by representatives of the Tong. The Defendants further pleaded that the sole surviving manager of the Tong, Chan Koon Hing, had signed a declaration dated 25 July 2001 confirming his agreement to the lease. To that defence, the Plaintiff replied by their pleading in October 2001 that it denied the purported lease had been executed by any manager of the Tong and put the 1st Defendants to strict proof, that the Tong had divested all its rights and interests in the land and that the purported lease is not admissible in evidence as it has not been stamped.

2. While Mrs Dora Chan was referring to the lease in the course of her opening of the Plaintiff's case, Mr Li, for the Defendants, drew her attention to the Defendants' list of documents dated 23 May 2003 to which a stamped copy of the lease stamped on 22 May 2003 was annexed. Mrs Chan took great exception to the late production of the stamped lease. She said that the Defendants never disclosed or discovered the stamped lease until the Friday before the trial and the lease was inconspicuously described as "copy of lease agreement from Chan Kwong Un Tong and its translation", which she thought was just a copy of the un-stamped lease with English translation. She submitted that the Defendants should have properly filed a supplementary list of document clearly disclosing the document as a copy of the stamped lease. She said the Plaintiff was frustrated by the late production of the stamped lease and applied for an adjournment.

3. The grounds for the application are that as no stamped lease had been discovered before the trial, the Plaintiff could not foresee the Defendants would run such a defence. Mrs Chan said the Plaintiff would be prejudiced if the lease was received in evidence. She need to obtain evidence to contradict Chan Koon Hing's appointment as manager, evidence as to whether other managers have been appointed in substitution of those who deceased and to obtain expert evidence as to whether the only surviving manager of the Tong has capacity to enter into the lease on behalf of the Tong. She said that the Plaintiff had not collected such evidence earlier because much costs would have to be incurred for such an inquiry and the costs would be unnecessary if the Defendants would not produce a stamped lease and the costs wasted would be irrecoverable. She submitted that if the lease was admissible, she would consider requiring Chan Koon Hing who purportedly made the declaration as manager of the Tong consenting or ratifying the lease to be called for cross examination.

4. In my view, as a general proposition, the stamp duty point is not a very valid reason for an adjournment. Though section 15(1) of the Stamp Duty Ordinance provides that no instrument chargeable with stamp duty shall be received in evidence in any proceedings, section 15(1A) gives the court power to receive such instrument in evidence in civil proceedings upon the personal undertaking of a solicitor to cause such instrument to be stamped and to pay the penalty payable under section 9 of the Ordinance. Usually, the party seeking to rely on the instrument would before the hearing have made good the instrument by having it stamped and paying the penalty. Even if that has not been done, his solicitor would give a personal undertaking to the court to seek leave for the instrument to be received in evidence. The purpose of section 15 is to protect government revenue by ensuring stamp duty is paid on any instrument chargeable with stamp duty. It is not enacted for the purpose of shutting the truth out of the court. Thus, leave to receive an un-stamped instrument in evidence is invariably granted on the solicitor's undertaking. Solicitors and counsel alike must realise that any point taken on an un-stamped instrument is not likely to advance their case a great deal and that they should be prepared for the most likely event that the instrument would be stamped before hearing or would be received in evidence at trial with the leave of the court on the opponent's solicitor's undertaking. Any prudent solicitor or counsel must prepare their client's cases on the assumption that the un-stamped instrument would be received in evidence.

5. In the present case, in the light of the pleadings, it is obvious that the validity of the lease is of vital importance to all the parties. It is so important that on the part of the Plaintiff, Mrs Chan said she could not proceed without an adjournment to enable her to obtain additional evidence and on the part of the Defendants, Mr Li would not be prepared to abandon the stamped lease in order to save an adjournment.

6. The real question to consider is whether the late production of the stamped lease has caused the Plaintiff any prejudice. I have said that, as a general proposition, the stamp duty point is not likely to be one which may receive favour from the court as the Plaintiff should prepare himself in anticipation that the lease will be received in evidence. So far as the Plaintiff's pleadings are concerned, the production of the stamped lease does not raise any new issues which have not been pleaded. The Plaintiff has put everything in issue, the authenticity and capacity of the manager of the Tong and put the Defendants to strict proof. The Plaintiff should have prepared its case on that basis. However, in the present case, this is not a lease in an ordinary run of the mill case. It is concerned with lease of Tong land. The lease itself is not an old one, but issues about Tong land always involves lengthy and difficult inquiries into events long past and managers or people who could give information may have died or otherwise become unavailable. I cannot lose sight of the large amount of costs likely to be incurred in challenging the validity of the lease. If the Defendants with knowledge that the lease they wished to rely on has been challenged by the Plaintiff as not having been stamped and did not take steps to have it stamped even before the pre-trial review or produce a stamped lease copy in the course of discovery or at a reasonable time before trial, they are in part to blame for encouraging the Plaintiff in the belief that the Defendants may not rely on the lease.

7. One important point taken by the Plaintiff is that the lease was not signed by the manager of the Tong, but by the purported beneficiaries. Hence, ratification of the lease by the managers is necessary in order that the lease may be valid. Mrs Chan argued that had she known that the lease would be stamped, she would have required Chan Koon Hing, the maker of the manager's declaration ratifying the lease, to be called. She had not done so on the assumption that the lease would be inadmissible in evidence. This affects the Plaintiff's position substantially. This may be due to an unduly optimistic assumption on the part of the Plaintiff's legal representatives who should be to blame, but it does cause the Plaintiff prejudice. And it is the late production of the stamped lease which gives the Plaintiff the excuse for an adjournment. I think in fairness to the Plaintiff an adjournment should be granted.

8. Mrs Chan argued that as the adjournment was occasioned by the late production of the stamped lease, the Plaintiff should be granted the costs of the adjournment. Mr Li submitted that the stamped lease was the same lease but bearing the stamp duty stamp, that no new issues had been raised and there was no real prejudice. He said that the adjournment was necessitated because the Plaintiff was not ready and he asked for costs of the adjournment.

9. In my view, both parties are to blame. As I have said, the Plaintiff should have prepared its case on the assumption that the lease would for one reason or another be admitted in evidence. But on the other hand, the Defendants should not have surprised the Plaintiff by including the stamped lease in their bundle of documents giving it in such an inconspicuous description and at such a late stage. I do not think the costs of adjournment in the present case could be determined purely as a matter of causation as both parties are to blame. At this stage I cannot be sure if the adjournment was occasioned by the Plaintiff's failure to prepare his case properly or by the Plaintiff deliberately engaging in a fishing exercise. If it was, he should bear the costs of the indulgence. On the other hand, it is the Defendants who provided the Plaintiff the excuse for an adjournment. In the circumstances, making a final costs order at this stage based on causation alone might run the risk of making an order which upon a mature consideration of the case I would not have made. Accordingly, I reserve the costs of this adjournment.