SIDEPEC INTERNATIONAL LTD v. CHEUNG HING

HCA 829/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 829 OF 2010

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REASONS FOR DECISION

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1.  Wong Chor Cheung (“Wong”) and the defendant each holds 50% issued shares in Wah Fung Forest Resources Ltd (“the Company”). As representative of the plaintiff, Wong concluded an agreement for the purchase of the defendant’s shares in the Company. The plaintiff is now seeking specific performance of the sale and purchase agreement. The defendant disputes liability; and counterclaims for, amongst others, rescission or termination of the agreement. Trial will commence on 1 August 2013; and is expected to last for 8 days.

2.  This was the plaintiff’s application for amendment of pleadings and introduction of additional evidence, oral and documentary.  The defendant opposed.  At the end of the hearing, I allowed the application for reasons which I now give.

3.  §34 of Practice Direction 5.2 regarding late application need no introduction.  Counsel referred to numerous cases, each of them demonstrating how the court exercised the discretion in different circumstances.  During the hearing, I referred counsel to Parsad v Great Wealthy Engineering Co Ltd [2012] 3 HKLRD 705. Bharwaney J said (at §6):

“Whilst the primary aim is to secure the just resolution of the dispute in accordance with the substantive rights of the parties, and which must include the right of a party to rely on admissible, relevant and probative factual evidence, the Court must also have regard to other relevant circumstances, such as the potential disruption to the trial, the prejudice to the other parties, and the explanation offered by the applicant for the late application. These matters have to be considered and weighed in the light of and against the underlying objectives of Civil Justice Reform to ensure cost effectiveness and economy, expedition, proportionality, and fairness between the parties.”

4.  His lordship said so in relation to late application for adducing supplemental factual evidence.  I see no reason why the same cannot be said to be true in relation to late application for amendment of pleading.  With respect, I say the above best summarises how the various concerns and factors would operate in the court’s mind when faced with an application like this in any given case.

LATE APPLICATION

5.  This was undoubtedly late application.

6.  By its listing questionnaire and submission during the case management conference in September 2012, the plaintiff’s solicitors already sought to amend its pleading and to adduce supplemental witness statement.  While giving leave to set down the case for trial, the court also gave 14 days to the plaintiff to take out any interlocutory application.  However nothing had since been done.

7.  At the pre-trial review on 8 May 2013, which was some 7 months later, Miss Tong for the plaintiff made an oral application for the plaintiff’s abovementioned purpose.  There was no explanation for the delay by way of affidavit.  Nor was there any draft amendment or witness statement for the defendant or the court to consider.  In this regard, the court has warned that an application for leave to adduce supplemental witness statements after the case has been or is ready to be set down for trial will not be considered without the provision of the signed statements containing statement of truth: see Parsad (at §7).  I see no reason why the same cannot be said about an application to amend pleadings taken out in similar circumstances.

8.  I therefore refused to entertain the oral application; but gave the plaintiff 14 days to take out a proper application.  The plaintiff did so in time by summons supported by the affirmation of Wong.  Hence this hearing.

9.  Wong essentially gave 2 reasons for the delay.  First, Chan Sai King (“Chan”), allegedly the beneficial owner of the plaintiff, has been physically unwell since October 2012 and had thus been prevented from confirming instruction to take out the application.  Second, Wong was too preoccupied by his own litigation with the defendant; and had been unable to give instruction to the plaintiff’s solicitors for the purpose of preparing for the plaintiff’s intended application.

10.  By indicating to the court prior to the last case management conference and seeking to amend the pleading and to adduce supplemental witness statements at the case management conference, the plaintiff’s solicitors must have already obtained instruction to do so from the plaintiff.  That Chan was unwell whether before or after that time could not be an excuse.

11.  Likewise, the physical condition of Chan had nothing to do with the preparation for the actual application.  From the existing pleading and witness statements, it is apparent that Wong was behind the steer driving the deal between the plaintiff and the defendant from conception to conclusion of the sale and purchase agreement. This became abundantly clear when the supplemental witness statement sought to be adduced was also that of Wong, not Chan.  As mentioned, the affirmation in support of the application also came from Wong, not Chan.

12.  The record of the case management conference revealed that it was the plaintiff’s solicitors who proposed 14 days for taking out the application.  In any event, there was then no indication of potential difficulty in meeting the deadline as directed.  As submitted by Mr Lam SC (appearing with Mr Lung), it was not the case that all the other litigations between Wong and the defendant were commenced in late 2012.

13.  Further, those other litigations between the Wong and the defendant actually concerned the Company as their property holding vehicle.  By the existing pleading, the defendant actually put in issue the relevance of the background for those other litigations between him and Wong.  In his supplemental witness statement, Wong indeed sought to deal with the defendant’s allegations in this respect.  In the circumstances, describing his litigation with the defendant as distraction from what he was supposed to deal with in the present case was also not entirely accurate.

14.  In short, I did not find the explanation for the delay to be impressive.

THE AMENDMENTS

15.  Of the statement of claim, the major amendments proposed were those of paragraphs 6 and 7.  The paragraphs concern the alleged orally agreed terms of the sale and purchase of the defendant’s shares during the conversation between Wong as representative of the plaintiff of one part and the defendant of the other.  As Mr Lam SC pointed out, the proposed amendments reflected change of the plaintiff’s pleaded case as to when, where and some of the terms allegedly agreed between Wong and the defendant.

16.  Mr Lam SC submitted that if the proposed amendments were put forward as the correct version, one asked how the existing version came to be verified by the statement of truth.  Miss Tong submitted that that the current pleaded version was verified by statement of truth did not prevent it from being amended.  She submitted that amendments should not be refused solely because they had been made necessary by the honest fault or mistake applying for leave to make them.

17.  As I understood, what Mr Lam SC meant was that any attempt to amend the pleading, which had been verified to be true, should be explained.  That must be right.  In the present case, the evidence that the amendments were necessitated by an honest mistake did not come from the plaintiff or Wong.  It came from Miss Tong in her submission.

18.  Miss Tong submitted that it would be fundamentally unfair to force a party to run a case known to be incorrect simply because the application to amend the pleaded case was refused for being late.  This might sound reasonable from the point of view of the applying party.  However, if the application to amend was indeed made so late that it would be allowed at the expense of substantial justice to the other party or the scheduled trial, then the correct decision might well be one of dismissal of the application; and the applying party might well have to accept that he was the author of his own predicament.  In other words, it all depends on circumstances.

19.  As to the proposed amendments to the reply and defence to counterclaim, Mr Lam SC submitted that most of them were unnecessary.  But I accept that some of them were indeed introduced so as to reflect what was covered by the existing witness statements for the plaintiff.  Then there was also mere pleading of the legal effect or position on the basis of the existing pleaded facts (eg, §6A). The more controversial ones included those (§§3(p); (q); (r)) that were introduced to align this pleading with the proposed amendments to the statement of claim (§§6 and 7).  They fell to be considered together; and I repeat the discussion above.

SUPPLEMENTAL WITNESS STATEMENT (AND DISCOVERY)

20.  Mr Lam SC had no objection to part of the supplemental statement of Wong (ie, §§16-28; 32-33; 35-36; 38-39; 59-60; 62-63).  He objected to some (eg §§14-15) which would effectively be evidence consequential upon the amendment of the statement of claim being sought in this application.

21.  Part of the supplemental statement related to the dealings between Chan and Wong before and after the conclusion of the sale and purchase agreement between the plaintiff and the defendant (eg §§4-13; 34; 37; 40; 46-50; 51-57).  They together with the rest, Mr Lam SC submitted, were irrelevant.  Mr Lam SC submitted that the core dispute should be how and what oral terms of the agreement came to be agreed between the parties.

22.  As a matter of pleading, the defendant actually also seeks to rescind the sale and purchase agreement for fraudulent misrepresentation on the part of the plaintiff (through Wong).  The alleged misrepresentation related to whether the plaintiff is genuinely an independent entity or in fact mere nominee or agent of Wong.  Now the plaintiff chose to answer the allegation by leading evidence of the details of the dealings between Chan and Wong leading to and in connection with the sale and purchase agreement.  In the circumstances, I would not rule out the relevance of such evidence.

23.  As to further discovery, I am referring to the documents sought to be introduced by way of annexure to the supplemental witness statement.

PREJUDICE

24.  In view of the above discussion, I thought the consideration boiled down to that of the risk of injustice to the parties respectively as a result of allowing or disallowing the application to amend the pleadings and to adduce the additional evidence.  This inevitably entailed the consideration of the prejudice to the defendant who was at the receiving end of this application.

25.  Essentially, I considered what the defendant would fairly be expected to be entitled to do in response to the amendment of the pleadings and the new evidence; and whether that could fairly be done without jeopardising the commencement of the trial. Considering the nature of the amendments to the pleadings and further evidence of the matters concerning the defendant personally, I expected him to be readily able to respond in accordance with his personal knowledge.  As to the further evidence of the dealings between Chan and Wong, I expected the defendant to be unable to say much in any event.

26.  There was no indication by the defendant that the amendments to the pleadings and the further evidence would entail time-consuming further investigation or discovery of documentary evidence.  Indeed Mr Lam SC put the effect of allowing the application on the trial date as no higher than a mere possibility.  At the pre-trial review, one day was actually added to the original estimated length of the trial.  The timetable proposed by Mr Lam SC (consequential upon allowing the application), as apparent from the order made (below), actually suggested that the time before the scheduled trial date should still suffice.  The prejudice in the form of time and costs to be incurred by the defendant as a result could well be compensated.

27.  It was after the above consideration of the circumstances of the present case that I came to the conclusion that discretion could and should be exercised in allowing the application.

ORDER

28.  For the above reasons, I made the following order at the end of the hearing:

(1)   The plaintiff do have leave to amend the statement of claim as per the draft attached as Annex 1 to the summons; and that the amended pleading shall be filed and served by 4:00 of the following day (i.e., 31 May 2013);

(2)   The defendant do have leave to file and serve amended defence and counterclaim within 21 days from the date hereof;

(3)   The plaintiff do have leave to amend the reply and defence to counterclaim as per the draft attached as Annex 2 to the summons but:

(a)    subject to leave to the plaintiff to make further amendment strictly consequential upon the amendments to the defence and counterclaim pursuant to (2) above; and

(b)   the amended reply and defence to counterclaim incorporating the amendments pursuant to (a) above shall be filed and served within 14 days after service of the amended defence and counterclaim pursuant to (2) above;

(4)   The plaintiff do have leave to file and serve the supplemental witness statement of Wong Chor Cheung (as per the draft attached as Annex 3 to the summons) and to rely on the same at the trial;

(5)   The defendant do have leave to file and serve supplemental witness statement in respect of the contents of the plaintiff’s supplemental witness statement within 21 days from the date hereof.

29.  As to costs, I saw no room for reasonably arguing that the plaintiff should not bear the costs of and occasioned by its application.  The real dispute lies in the costs of the hearing.  As the applying party, it was to begin with the burden of the plaintiff to satisfy the court why discretion ought to be exercised in its favour at this stage.  It was never the burden of the defendant to show why the application should not be allowed.

30.  As discussed above, the plaintiff’s affirmation in support would have caused the defendant to insist on bringing this application before the court for determination.  The hearing was not unnecessarily or unreasonably occasioned by the defendant’s objection in the circumstances.  The court has also pointed out that the applicant in a late application should normally be expected to face an adverse order (and in appropriate circumstances on indemnity basis): see Li Xiao Yun & Anor v China Gas Holdings Ltd, CACV 39/2013 (11 March 2013) at §18.  It was only fair that the defendant ought to have its costs including those of this hearing in any event.  So I ordered.  Being asked, the defendant did not seek summary assessment of his costs.  I therefore ordered those to be taxed, if not agreed, with certificate for one counsel.