CLUETT H.K. LIMITED t/a SIX CONTINENTS v. HERCULES KNITTERS LIMITED

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JUDGMENT

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1. On 11th March 1986 Deputy Judge Saied adjourned the trial of this action and ordered, inter alia, that three documents contained in the plaintiff's hearsay notice dated 26th February 1986 be admitted as evidence without calling their respective makers and that the Defendant pay the plaintiff's cost thrown away by the adjournment. The Defendant appeals against both of those rulings.

2. Mr Chain, who appears for the Defendant, asks that the Order admitting the documents be set aside and that they be ruled inadmissible without the makers being called and that the costs order be set aside and the plaintiff ordered to pay Defendant costs of and occasioned by the adjournment.

3. The plaintiff is suing the Defendant under certain contracts for the supply of fashion clothing. It is alleged that the clothing was defective, in that, in breach of a condition of the contract, the goods did not match the colour samples.

4. A compendious defence has been entered but it is sufficient, for the purposes of this application, to say that it is denied that the goods did not match the colour samples.

5. The disputed documents are :

6. On the 19th December 1985 trial dates were fixed for the 11th to the 14th March 1986. On the 20th December 1985, the period for the giving of a hearsay notice expired without any such notice having been given. On the 26th February 1986, 13 days before the date for trial, a hearsay notice was served on the Appellant by the Respondent. This notice stated that at the trial of the action the plaintiff desired to give in evidence the statements made in the documents set out above on the ground that the makers of the statements "cannot be called as witnesses at the trial because they are beyond the seas, namely in the United States of America". No counter notice was served.

7. On the 11th of March 1986 when the matter came on for trial, Mr. Graham, who appears for the plaintiff, asked the Court in the course of opening his evidence to deal with the documents which were the subject matter of the hearsay notice. He stated that the first two documents were business documents written in the course of business and were not documents prepared for the purposes of litigation but that the report was prepared because of the likelihood of litigation. He submitted that the position in England is that once it was shown that the maker of the statement was overseas, that was the end of the matter and the statement could as a matter of right be produced to the Court (Rasool v. West Midlands Transport Executive, 1974, 3 All E.R. 638).

8. But he argued that the position is different in Hong Kong, where an element of discretion remains in the Court ( A.G. v. Lui Lok (1984) H.K.L.R. 275) and that this was a proper case for the Court to exercise its discretion, as the plaintiff should not, because the defence for tactical reasons desired it, be put to the expense of bringing the makers of the statements to Hong Kong.

9. Mr Chain did not dispute that in Hong Kong the Judge has a discretion but submitted, relying upon the decision of Hunter, J. in Lui Lok's case, that this was not an appropriate case in which to exercise it. When making this submission, Mr Chain did not seek to rely upon the fact that the hearsay notice was out of time. He submitted that the makers should be called as, until the 26th of February, 13 days before the trial, the case for the defence had been prepared on the basis that two witnesses would come from the United States to give oral evidence.

10. The trial judge said that the documents fell into the category of first hand hearsay (although issue might be taken with this statement it was not argued before us on appeal) and that both their contents and the conflicts therein and the status and qualifications of the experts were matters which could be argued at the trial.

11. A point which was taken neither before the trial judge nor before this Court was that the rules relating to the admission of expert evidence had not been complied with. This not having been raised, we proceed upon the basis that an appropriate application will, in due course, be made.

12. The judge gave weight to Mr Chain's submission that the defence had been looking forward to having the witnesses available for cross-examination but noted that the defence had given no other indication of the prejudice which it was suggested it would suffer.

13. The judge was satisfied in the outcome that "the authors of those reports are beyond the seas and they could give evidence on those documents which in my opinion are admissible and I order that they be admitted without calling those witnesses".

14. He did not so state specifically, but it appears that he accepted the authority of Lui Lok's case and acted upon the basis that the matter called for the exercise of his discretion.

15. This ruling having been made, Mr Chain applied for an adjournment saying that the Appellant had approached the trial upon the basis that there was to be viva voce evidence from the United States and that the defence would be prejudiced if the trial were to proceed forthwith. He submitted that the defence should be given time to deal with what was now uncontradicted evidence. Mr Graham opposed any adjournment, submitting that the application was simply a delaying tactic.

16. The judge found himself unable, although he clearly thought there was some weight in Mr Graham's submission to "avoid the nagging thought that the Defendant may well feel himself to be on the receiving end because in the first place the hearsay notice was taken out about a fortnight ago and in the second place the plaintiff's application this morning was allowed. In order to ensure that injustice is not done to either party, I am inclined to agree that there is sufficient cause to allow this application, and I order that the hearing dates be vacated."

17. We first consider the ruling on the hearsay notice under 0. 38 of the Rules of the Supreme Court. Both counsel and the judge appear to have acted upon the basis of the decision in Lui Lok's case, Hunter, J. said at 278 -

"In that state of play, the true construction of the act and the rules came before Finer, J. in England in Rasool v. West Midlands Transport Executive (1974) 3 All E.R. 63$. The matter again, came before the Court in England in Piermay Shipping Company S.A. & Anr. v. Chester (1978) 1 W.L.R. 411. Now Finer, J. concluded that there was simply one question which arose, the question advanced by Mr Lee. In the Piermay decision, Donaldson, J., as he then was, described himself as a 'reluctant convert' to that conclusion. The matter was treated as plain in the Court of Appeal on the construction of the Act, and the Court of Appeal declined to give any extended or differing meaning to the Rules."

Hunter, J. felt that he was not constrained to follow these decisions -

"…… because in 1980 there was enacted here the Evidence Amendment Ordinance and that basically did two things. First of all it repealed s. 53 of our ordinance, which was the rule making power, and likewise it repealed a parallel rule making power in s. 57, which related to that part of the ordinance which followed the 1972 Act in England. So that the specific rule making power with its limitations was struck out. In its place there was put a general rule making power, based upon s. 54 of the Supreme Court Ordinance".

The judge was persuaded that as the rules, although unchanged in themselves, derive their validity from the "general rule making power" they were not subjected, as they had formerly been, to a statutory strait-jacket and that the Court now has a discretion.

18. We find ourselves unable to agree with Hunter, J. when he says that "the matter was treated as plain in the Court of Appeal on the construction of the Act.....".   Both Finer, J. in Rasool's Case and the Court of Appeal in the Piermay Case were satisfied that the rules themselves, properly construed, left no discretion in the Court. Finer, J. said at 642 -

"Nevertheless, I find it a clear conclusion from the provisions of the statute and the rules which I have earlier mentioned that if the Court is satisfied on any of the five specified reasons, the statement becomes admissible, and there is no residuary discretion to exclude it by reference to other circumstances. The relevant provisions leave no room for such a discretion. The scheme of the law is that the counter notice is ineffectual unless it raises an issue regarding the reason alleged in the notice which is ultimately determined in favour of the giver of the counter notice. If the counter notice is ineffectual, the notice takes effect. I consider that this would be the result even apart from S.8(3)(a) but that provision clenches the point by providing in terms that the rules cannot - without the exceptions provided for in s.8(3)(b), which has no application to the present case - confer on the Court a discretion to exclude a statement where requirements of the rules effecting its admissibility had been complied with."

The judge was in our view, clearly saying that the wording of the rules left no room for the exercise of discretion. Megaw, L.J. who delivered the judgment in the Piermay Case said at 414 -

"..... I agreed in its entirety with the reasoning of the judgment of Finer, J. which I do not propose to restate in my own words. I would go further and say that, even if Mr Mustill be right in his submission that the argument was not put before Finer, J. as to the powers of the Rules Committee by virtue of S.8(1), and even if Mr Mustill was right in saying that that does enable the Rules Committee to go outside the actual provisions of the Act by laying down other conditions which are different from, additional to, or inconsistent with, the provisions of the Act, nevertheless, I would still arrive at the same conclusion - that, on the true construction of the Rules themselves, taking them as a whole, the decision of Finer, J. is right".

The Court of Appeal also, in our view, made it clear that the rules themselves properly interpreted, left no discretion in the judge.

19. Having carefully examined the rules, we are satisfied that this is correct and that once the applicant states one of the reasons set out in 0. 38, r. 25, the only attack that can be launched is upon the correctness of that reason. If the reason is not challenged, there is no discretion in the Court to refuse to admit the evidence. The reason in the present case, absence beyond the seas, was not challenged and the admission by the trial judge of the statements cannot, therefore, be called into question on the grounds advanced on behalf of the Defendant below and in this Court.

20. When so holding, we make it plain we are giving no indication either as to the admissibility of individual parts of the statements or as to whether the credentials of the experts have been properly established. These will be matters for the trial judge to decide, in accordance with the relevant provisions of the Evidence Ordinance and the Rules of the Supreme Court.

21. We turn to consider the second matter of appeal. Mr Chain urged that the appellant had been successful in seeking an adjournment and that costs should follow the event. Mr Graham submitted that the trial judge had been in considerable doubt as to the bona fides of the applicant in making the application for an adjournment and that he had properly exercised his discretion when ordering that the defendant pay the Plaintiff's costs. No adjournment would have been necessary had the Plaintiff not been very late in filing in his Hearsay Notice. The trial judge was not prepared to hold that the Defendant would not be prejudiced in the conduct of his defence by the fact that he had had no notice until the decision made on that day that oral evidence would not be called. In the circumstances, we are satisfied that Mr Chain is correct in urging that costs should have followed the event.

22. We therefore refuse to set aside the judge's order that the three documents be admitted in evidence but order that the plaintiff pay the Defendant's costs of the adjournment.

23. As the judge who embarked upon the original hearing is about to leave Hong Kong for a substantial period, we direct that the matter be commenced afresh in front of another judge.

24. There will be no order as to the costs of the appeal.