XCHRX YEE TUNG FIBRE GLASS MANUFACTORY ENG. CO. (A FIRM) v. FRP (HONG KONG) LTD.

HCA 17840/98

HEADNOTE

Unless order ~ proper sanction for non-compliance with order for exchange of expert evidence

HCA 17840/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 17840 OF 1998

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D E C I S I O N

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The Action

1. By its Writ issued on 21 October 1998 and amended on the next day, the Plaintiff brought an Action against the Defendant claiming $1,663,148.00 plus interest as the balance payable for the supply and installation of fibre glass products during 1995 and 1996.

2. The Defence and Counterclaim was not filed until 15 December 1998. The Defendant had earlier obtained a 14 day extension from the Master on 17 November 1998 and a further 14 day extension on 1 December 1998. On the latter occasion, the extension was in the form of an unless order made by Master Cannon.

3. In the Defence and Counterclaim, the Defendant alleges that the balance due is the lesser sum of $1,139,972.80 and that it has a valid set-off and counterclaim based on defective works and materials, over-payment and non-delivery sufficient to extinguish the Plaintiff 's claim.

Progress of the Action

4. On 5 February 1999, the Master made an Order in terms of the Summons for Directions, including an Order that expert reports "be served and filed with the Court by all parties within 42 days from the date of the Order". In the Court file, the learned Master noted that the parties were to seek further directions on the number of expert witnesses for trial.

5. A second unless order was made against the Defendant on 1 April 1999. This was because of delays in the Defendant serving its List of Documents. In particular, having secured agreement from the Plaintiff to extend time to 6 March 1999 for serving its List, the time limit was not met. The second unless order was made by Master Jones pursuant to a summons taken out by the Plaintiff on 9 March 1999.

The present Unless Order

6. On 19 April 1999, the Plaintiff's solicitors wrote to the solicitors for the Defendant stating that they expected their witness statements and expert reports to be ready within the next 21 days and seeking consent to exchange them. A chaser was sent on 28 April 1998 when no reply was received. When there was still no reply on 18 May 1999, the Plaintiff took out a summons seeking its third unless order in the following terms:-

"Unless within 28 days from the date of an Order to be made herein the Defendant files and exchanges witness statements and expert reports the Defendant will be debarred from adducing further evidence into court."

However, when the matter came for hearing before Ms. Registrar Chu on 20 May 1999, the unless order made ("the Unless Order") was in the following terms:-

"Unless by 4.00 p.m. on Monday, the 21st day of June 1999 or before the Defendant files and exchanges witness statements and expert reports, the Defence and Counterclaim be struck out and Judgment entered against the Defendant."

Non-compliance with the Unless Order

7. On 21 June, the Defendant served the statement of its only witness, Mr. Lo Wah Tek, but did not file it until some 24 hours later, on 22 June. No expert report was either served or filed.

8. On 25 June 1999, on the basis that the Defendant had failed to comply with the Unless Order, the Plaintiff entered Judgment for $1,663,148.00 plus interest and costs. This came to the notice of the Defendant's solicitors on 29 June and on 5 July, a summons was taken out to set aside the Judgment. This is the application now before me, having been adjourned by Master Lok for determination by a Judge.

9. Mr. Chan Kai Leung is the assistant solicitor in charge of the case on behalf of the Defendant. In his Affirmation dated 5 July 1999, he states that he was present when the Unless Order was made. He explains that by 11 June 1999, (a) he had received instructions from his client that no expert report would be prepared or relied on and (b) the witness statement of Mr. Lo was almost ready, with only slight amendments to be incorporated. However, Mr. Chan was to be away from the office from 18 June 1999 until 25 June 1999, during which time he was planning to get married.

10. Mr. Chan states that he gave his secretary, Ms. Peggy Lau, instructions to incorporate the amendments into the draft statement and to arrange for Mr. Lo to sign it in time for service and filing by 4:00 pm on 21 June 1999. He also told Ms. Lau that the Defendant had no expert report and that she should write to the Plaintiff's solicitors informing them of this.

11. On 19 June 1999, the Plaintiff's solicitors wrote referring to the Unless Order and proposing that the exchange should take place at 3.00 pm on 21 June 1999 at their offices. Mr. Chan says that on 21 June, while on leave, he telephoned Ms. Lau to remind her to file and serve Mr. Lo's statement. He also says that until he discovered the judgment entered against his client, he had assumed that Mr. Lo's witness statement had duly been served and filed.

12. As I have stated, in fact Mr. Lo's statement was duly exchanged but not filed until the next day. Ms. Lau also failed to inform the Plaintiff's solicitors that there was to be no expert report on the Defendant's behalf.

13. According to Mr. Chan, Ms. Lau reported that on 21 June, she gave Mr. Lo's signed statement to a Mr. Eddy Wong, evidently an office messenger employed by King & Co., telling him that it should be filed on the same day. However, Mr. Wong, states in his Affirmation that he does not recall being told that it was the last day for filing. He also says that he was unaware of the Unless Order. Accordingly, Mr. Wong states that he delegated the task of exchanging the witness statement to "his subordinate", a Ms. Petty Koo, telling her that "so long as she exchanged the witness statement with the Plaintiff's solicitor, she could leave the filing to the next day."

The present application

14. Mr Benjamin Chain, who appears on behalf of the Defendant, submits that I should set aside the Judgment since the learned Registrar's order relating to expert reports was inappropriate in the first place and since non-compliance with the order regarding service of the witness statement was merely technical, causing the Plaintiff no prejudice. He has made it clear that his client has irrevocably determined not to rely on any expert evidence at the trial and seeks relief on that basis.

15. I shall deal first with the Unless Order in relation to the exchange of expert reports. Two features should be noted.

16. In the first place, the order made was not the order sought by the Plaintiff. The Plaintiff's summons had sought orders de-barring the Defendant from relying on any factual or expert evidence if the corresponding witness statement or expert report was not exchanged within the time limited by the order. However, the learned Registrar, apparently of her own motion, ordered that the consequence of non-compliance should be that the Defence and Counterclaim be struck out and Judgment entered against the Defendant.

17. Secondly, although directions had earlier been obtained for expert reports to be exchanged, the Defendant had decided against relying on any expert evidence at the trial. Accordingly, no expert report was prepared.

18. Given the existence of an unless order in the terms made, and given that the Defendant had evidently not sought to appeal the order, it would have been prudent and indeed, commonsense, for the Defendant's solicitors to ensure that the Plaintiff was told of the Defendant's decision not to adduce expert evidence and to seek consent to a variation of Ms. Registrar Chu's order so that the consequences prescribed would be avoided. This was not done, although Mr. Chan's evidence is that he told his secretary to write the appropriate letter before himself going on leave. It appears that no other solicitor in the firm was given supervision of the case during Mr. Chan's absence.

19. I think it likely that Ms. Registrar Chu was (quite understandably) reacting to the Defendant's poor past record in meeting deadlines, including the fact that two unless orders had already been made. Nonetheless, with respect, it is my view that the Unless Order was not appropriate.

20. In Derby & Co. Ltd. v. Weldon (No. 9) The Times, November 9 1990 (Dillon, Ralph Gibson and Staughton, L.JJ.), the English Court of Appeal held that in principle, the court had no power to order a party to litigation to disclose expert evidence on an issue on which that party did not intend to adduce evidence at the trial. Dillon L.J. pointed out that before the Order 38 provisions on expert evidence came into being, an expert witness's report prepared for the purpose of litigation was a privileged document protected from orders for disclosure, although a party could of course waive the privilege and disclose the same voluntarily. What the Rules now provide for is machinery requiring, as a condition of a party being able to adduce expert evidence at a trial, that it should previously have served on the other party a statement of the substance of such evidence. The Rules do not override the prima facie privileged status of the document, nor do the Rules (or any inherent jurisdiction) provide the court with power "to call for the bringing into being and disclosure of expert evidence on an issue which the party did not intend to adduce evidence on at the trial." In my judgment, this was effectively what the Unless Order sought to do so that it was made without jurisdiction.

21. Although the order originally made on the Summons for Directions for expert reports "to be served and filed with the Court by all parties within 42 days from the date of the Order" has a mandatory ring to it, on the abovementioned principle, such an order should not be read as requiring the parties to exchange expert reports notwithstanding that subsequently one or both may be advised to adduce no expert evidence at the trial. It should be read as prescriptive only in relation to the time for filing expert reports sought to be relied upon, if any.

22. In my view (except perhaps in the most exceptional of cases, instances of which do not presently occur to me), where there has been delay in the provision of expert evidence, the appropriate final order is an unless order de-barring reliance on such evidence as the consequence of non-compliance. Especially where a Defendant is concerned, the fact that he chooses to call no evidence or is precluded from calling evidence, does not ipso facto mean that judgment must be entered against him. He is entitled to put the Plaintiff to proof. Accordingly, it appears to me to be wrong in principle to prescribe the entering of judgment, as opposed to the exclusion of evidence as the sanction for non-compliance with an order for exchange of expert reports.

23. The non-compliance in relation to the witness statement was, as Mr. Jeevan Hingorani appearing for the Plaintiff accepts, only of a technical nature. Once again, because of an unsupervised delegation of responsibility from Mr. Chan, to Ms. Lau to Mr. Wong and finally to Ms. Koo, the urgency of not only exchanging, but also filing, Mr. Lo's witness statement was lost sight of. It appears clear that Mr. Lo and the Defendant company were not in any way personally to blame for this but that the default was that of the solicitors in question.

24. As I recently pointed out in Chan Chun Lung Allen & Anr. v. Ryland Limited & Ors. (Unreported) HCA 4904/96, 26 August 1999, the test to be applied in considering an exercise of discretion in unless order cases is that laid down in PT Bank Pembangunan Indonesia (Persero) v Tan Eddy Tansil [1997] HKLRD 57 by Bokhary JA, as he then was, as follows (at p 59):-

"The test to be applied here is, in my judgment, the one laid down by Sir Nicolas Browne-Wilkinson VC giving the leading judgment in the case of In re Jokai Tea Holdings Ltd [1992] 1 WLR 1196 when he said this at p. 1203 B:

'In my judgment, in cases in which the court has to decide what are the consequences of a failure to comply with an "unless" order, the relevant question is whether such failure is intentional and contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed.'"

25. The Court of Appeal has applied this principle, holding that where non-compliance with the unless order is due to the default of the solicitor rather than the litigant himself such default should generally be regarded as an extraneous cause of non-compliance so far as the litigant is concerned. Such approach has been followed inChow Kai Sang v Toi Samuel [1996] 4 HKC 330; Ming Pao Enterprise Corp Ltd v CIM Co. Ltd. [1999] 1 HKC 497; and Dongguan Dongxian Decoration Co. Ltd. v Universal Right Ltd [1999] 1 HKC 790 at first instance and not departed from by the Court of Appeal in Lessy SARL v Pacific Star Development Ltd [1997] HKLRD 1248.

26. Accordingly, the defaults of the Defendant's solicitors in the present case are to be viewed as extraneous considerations capable of excusing the Defendant company for non-compliance with the Unless Order. I have no hesitation in exercising my discretion accordingly. The solicitors' defaults were clearly not the result of the Defendant's instructions or conduct. Moreover, the Plaintiff was not in any way prejudiced by the fact that the witness statement was filed 24 hours later as it had duly been served with a copy within the time allowed. The solicitors, although open to criticism for lack of proper supervision and laxity, plainly did not act contumeliously. Mr. Chan attempted to meet his obligations. However, the firm is at fault for not ensuring, through proper supervision, that the order was complied with.

27. As I have stated, the order in relation to expert evidence was inappropriate and therefore non-compliance with such order is of little or no weight.

28. In all the circumstances, I will make an Order setting aside the Judgment and will hear counsel as to any necessary directions for the further conduct of the proceedings.

29. In response to an inquiry from the court, Mr. Chain has helpfully indicated that his instructing solicitors in principle accept that they, and not their client, should bear the costs of the application to set aside the default judgment. However, he urges upon me a costs order limited to the taking out of the summons to set aside with the affirmation in support. He submits that the Plaintiff should have consented to an order setting aside the Judgment without forcing the Defendant to come to court, with counsel instructed on both sides. With respect, I disagree. It appears to me that in the light of the Defendant's previous record of delays, the Plaintiff was entitled to require the Defendant to satisfy the court that it should exercise its discretion in favour of setting aside the Unless Order. Accordingly, on the footing that the Defendant's solicitors are to give an undertaking that they will bear such costs personally and not seek to recover the same from their client, I will order that the costs of and occasioned by the application to set aside the Judgment, including the costs of this application, certified fit for counsel, be to the Plaintiff. If such undertaking is not forthcoming, I will set dates for the solicitors to show cause why they should not bear such costs.