XCHRX THE PRUDENTIAL ENTERPRISE LTD. v. THE PRUDENTIAL ENTERPRISE LTD.

1996, No. A6995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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The Background

1. In this action, the plaintiff alleges that the deceased wife of the defendant was the holder of 100 shares of the plaintiff, and that defendant is the administrator of her estate. The plaintiff recites some of its Articles and says that , by reason of those Articles, the defendant is obliged to offer the shares to the members, but has refused to do so. The plaintiff asks for a declaration that members of the plaintiff have a right of pre-emption over the shares under them. The plaintiff also asks for an order that the defendant comply with the Articles and an indemnity.

2. The defendant says that the plaintiff has recognised his title to the shares and raises various grounds for contesting the claim. The defendant also makes a counterclaim for the payment of dividends, a declaration and various orders.

3. In its reply and defence to the counterclaim, the plaintiff makes various allegations. Amongst these is an allegation that Madam Lee Ng Chan Wa (Madam Lee Ng) paid for the shares in the name of the defendant's wife. Further, the plaintiff says that, in 1978, the defendant entered into a deed with Madam Lee Ng and said that his wife was holding the shares in trust for Madam Lee Ng. The plaintiff then says that "Pursuant to the terms of the Deed, Lee Tak Yan was put in charge of the shares on" behalf of Madam Lee Ng. This reply and defence was filed on 16 January 1997.

4. The defendant filed a rejoinder to this in which he pleaded to the allegations specifically mentioned in the last paragraph. This is not a case in which the plaintiff's pleadings are said to be defective, or that, without particulars, the defendant was unable to plead.

5. On 1 September 1997, the defendant requested further and better particulars of the reply. The request was for some 24 particulars of some 8 allegations. One of the 24 odd particulars requested was of the allegation by plaintiff that "Lee Tak Yan was put in charge of the Shares". What was asked was - "State how it is alleged, by identifying all facts, matters and acts relied upon, that Lee Tak Yan was put in charge of the Shares?".

6. On 8 October 1997, in a detailed document some 7 pages in length, the plaintiff responded to the request for further particulars. In relation to the request mentioned above, the plaintiff said -

"The Deed of 1978 referred to in Response 3(2) above states clearly that Lee Tak Yan is to have the power to manage the shares. In fact, Lee Tak Yan is in possession of the original of the Deed. The Defendant's signing the Deed was witnessed by old family friend, Madam Lee Wai Lim. During 19th November 1991, telephone conversation between Samuel Tak Lee and the Defendant, the Defendant confirmed that he was complying with the wishes of [Madam Lee Ng] and acceded to Lee Tak Yan being in charge of the shares. The conversation was recorded and a transcript thereof is produced herewith. [Madam Lee Ng] signed a proxy of the shares for the AGM of the Plaintiff on 28th January 1985 appointing Lee Tak Yan as her proxy."

7. On 16 October 1997, the defendant's solicitors wrote to the plaintiff's solicitors at that time. This letter said -

"We have now had the opportunity to consider your client's response to the request for further and better particulars of the re-amended reply and defence to counterclaim and we now seek further and better particulars of the said response as set out below."

8. There were 3 requests. Two of the requests were indeed for further particulars of the responses, but the request relevant to the matter before me was not, as the solicitors stated, a request for further particulars of the response. It was simply a repetition in different words of the original request. The letter did not indicate in any way why the question was asked again or why the solicitors thought that the original answer was inadequate or did not supply the particulars what they wanted. It may be that the defendant wanted to know, not how Lee was put in charge of the shares, but things like whether or not he was in possession of the share certificates, and, if so, when, where and by what means he acquired them. If so, the defendant should have asked that. This part of the letter says -

"Under the Response to Request no. 5 thereof

The Deed of 1978 referred to in Response 3(2) above states clearly . . . and acceded to Lee Tak being in charge of the shares . . . etc

(2) Request

Give full particulars of how it is alleged that the shares were in the charge of Lee Tak Yan."

9. The letter concluded by asking for the response by 29 October 1997, failing which the solicitors expressed the intention of applying to court without further notice.

10. On 31 October 1997, the defendant did apply for an order that the plaintiff "serve on the defendant . . .the further and better particulars" requested in the letter of 16 October 1997.

11. Both parties were represented at the hearing of this application on 7 November 1997. After hearing the solicitors for both parties, the Master ordered that the plaintiff serve "the further and better particulars of its Reply to Request for Further and Better Particulars of the Re-amended Reply and Defence to Counterclaim" to within 28 days. This order, in the terms in which it was made, was not a consent order. The defendant's evidence is that the solicitor for plaintiff "did not object to reply to the said request . . . but the plaintiff needed a longer period of time than 14 days to do so.".

12. On 8 December 1997, the defendant issued a summons seeking an "unless order" that the plaintiff comply with the order of 7 November 1997, failing which the plaintiff's claim be dismissed and the defendant be at liberty to enter judgment on the counterclaim.

13. On 15 December 1997, after hearing the solicitors for the defendant, the plaintiff being absent, the Master ordered that "Unless the plaintiff do within 14 days of service of this Order comply with the Order of . . . 7th November 1997 by serving . . . the further and better particulars . . . the plaintiff's claims in this action be wholly dismissed and the defendant be at liberty to enter judgment against the plaintiff for such declaration and orders as counterclaimed . . .". This order was sealed on 23 December 1997, and, presumably, served after that date.

14. On 24 December 1997, a notice of the change of solicitors for the plaintiff to the present solicitors was filed.

15. These solicitors filed particulars on 5 January 1998. In response to all 3 requests the plaintiff referred back to the original particulars supplied. In response to the request relevant before me, the plaintiff said -

"The particulars provided in response to Request 5(1) of the Further and Better Particulars of the Re-amended Reply and Defence to Counterclaim served 8th October 1997 is referred to and is therefore sufficiently pleaded."

16. On 26 January 1998, the defendant took out a summons seeking an order that the plaintiff's claim be dismissed and judgment be entered on the counterclaim "the plaintiff having failed to comply with the order of Master Kwan herein dated 15th December 1997 by replying to Request No. 2". Request No. 2 is that referred to above specifically. It should be noted that there was no complaint about the plaintiff failing to comply with the time scale of the order. The plaintiff did, of course, reply to that request. The defendant's complaint, it must be assumed, was not that the plaintiff did not reply, but that it did not supply the particulars it wanted, although he had not made clear what particulars in addition to those already supplied it did want. There was no complaint about the plaintiff dealing with the other requests at least partially by referring back to the original particulars supplied.

17. On 15 May 1998, after hearing counsel for both parties, the Master dismissed the plaintiff's claim and entered judgment for the defendant on the counterclaim. The judgment was dated 12 June 1998.

18. On 19 May 1998, the plaintiff filed a notice of appeal against the decision of 15 May 1998 in which the plaintiff sought orders granting leave to appeal out of time against the order of 7 November 1997, setting aside that order and that the defendant's application dated 26 January 1998 be dismissed.

19. This appeal is now before me.

Consideration of the Appeal

20. Although it is apparent that the defendant's complaint on 15 May 1998 was not that the plaintiff failed to serve the particulars within the time prescribed, but that the plaintiff "failed to comply with the order of Master Kwan herein dated 15th December 1997 by replying to Request No. 2" - my emphasis - this point of delay was taken in the appeal before me. Miss Eu argues that the reply to the request filed on 5 January 1998 was not within the 14 day period allowed by the unless order. I am not satisfied that this is so. The 14 day period was from the date of service of the order. The order was not perfected until 23 December 1997, and could not have been served effectively until after that date. So, even discounting the public holidays, the reply filed on 5 January 1998 was within the time prescribed. In any event, as I have said, any delay does not appear to be the basis on which the defendant applied for the order.

21. The next submission by Miss Eu is that court orders are not to taken lightly; they are made to be obeyed. With that, I fully agree. But the other side of that coin is that a court order must be stated in sufficiently exact terms so that it is quite clear what the person to whom it is addressed must, or must not, do in order to comply with it. A party should not ask a Master to make an order that does not spell out exactly what is required of the party to whom it is addressed. As was said in Reiss v Woolf [1952] 2 QB 557, cited with approval by Fuad, VP in Ka Wah Bank Ltd v Low Chung-song [1989] 1 HKLR 451, the act constituting the default must be an event defined with precision.

22. In these matters, I believe it is good practice to make an order in terms that the respondent should respond or reply to a request for particulars with a stated period; not supply the particulars. That response may supply the particulars requested or it may fail to do so, and state why. The applicant, if dissatisfied, must then apply for an order that specifies, with precision, the particulars that must be supplied. The judge or Master should then make an order that specifies, with the same precision, the particulars that must be supplied. This, I believe, is consistent with the approach approved by Somervell, LJ in Reiss v Woolf. In other words, as Devlin, J was quoted as saying in that case, initially the respondent must file "a document made in good faith and which can fairly be entitled 'particulars'. . . That is the test, in my judgment, and not, as the plaintiff contends, whether each demand for particulars has been substantially met."

23. In this case, the defendant's own evidence is that the plaintiff's solicitor "did not object to reply to the said request". He did not undertake to supply the particulars, but to "reply" to the request. I believe that approach is in accordance with good practice. And that is what the plaintiff did.

24. It is so, of course, that the Master did not order the plaintiff to reply to the request, but to serve the particulars. An order that obliges a party to serve particulars identified only by reference to the request and not by stating them precisely, if it is to be read literally, creates the difficulty that is well illustrated by the facts of the case before me and which led to the approach adopted in Reiss v Woolf.

25. The original request was - "State how it is alleged, by identifying all facts, matters and acts relied upon, that Lee Tak Yan was put in charge of the Shares?".

26. That request, on the face of it, is asking the plaintiff to specify the act or acts by which Lee was put in charge.

27. The plaintiff answered that request more than sufficiently; even generously. The answer says quite clearly that Lee was put in charge by the deed.

28. For some reason that has not been made clear to me, the defendant did not think the request was sufficiently answered. But he did not tell the plaintiff, and he has not told me, in what way he thought the answer was insufficient and did not tell the plaintiff precisely what he wanted to know. As Miss Eu accepts, he simply asked essentially the same question again.

29. I do not know in what way the plaintiff was then expected to answer the same question, except by giving the same answer. And that is precisely what it did. Miss Eu contends that the insufficiency of the defendant's first answer has already been decided by the order of 7 November 1997, and Mr Coleman cannot argue that matter again. In my view, however, it is simply not good enough for a party to ask for and obtain from the Master an order that tells the other party that he has not done what was required of him, without telling him in clear terms what he must do in order comply with what is required of him. The supply of further particulars should not be reduced to a guessing game. It is quite unfair for a party to be placed in a position in which he does know what to do in order to comply with an order of the court.

30. There are several possible ways of construing the order of 7 November 1997 -

1. Either as a time order, as a similar order was construed in Reiss v Woolf, so one does not test "whether each demand for particulars has been substantially met."; or

2. as a specific order to answer the same question again when it had already been sufficiently answered; or

3. as an order that did not tell the plaintiff with precision what it was required to do in order to comply with it.

31. On any of those bases, the order of 15 May 1998 should not have been made.

32. That being the case, it is not necessary to identify which of these situations applies here, although I am inclined to think that the order of 15 May should not have been made because there had been compliance by the plaintiff.

33. One can test the sufficiency of the plaintiff 's compliance with the order of 7 November 1997 by simplifying, but keeping the essentials, of what happened. The defendant asked - "By what act was Lee put in charge of the shares?". The plaintiff said - "By the deed.". The defendant then asked again - "By what act was Lee put in charge of the shares?". The Master ordered the plaintiff to answer that question. The plaintiff said, by reference - "By the deed.". On that analysis, how can it possibly be said that the plaintiff did not comply with the order? Surely, no one would say that, in order to comply, the plaintiff should not have referred back to its previous answer to the same question, but should have repeated that answer, word for word. That would be nonsense.

34. In any event, even if it could be said that the plaintiff should have given a different reply to the same question - although the defendant has not suggested what that reply should have been - it is the defendant's fault that this requirement was not made known clearly to the plaintiff, and it cannot possibly be said sensibly that the consequence of this understandable lapse, if it be such, should be that the plaintiff loses it cause of action permanently and has judgment against it on the counterclaim. That offends my sense of justice. At most, I would have thought, only the allegation of which particulars were not given, if that were the right conclusion to reach, should have been struck out. By the Master's order, the "punishment" by far outweighed the "crime".

The Result

35. In the result, I find that the order of 15 May 1998 should not have been made. That order and the judgment of 12 June 1998 are set aside.

The Costs

36. There seems to me to be no obvious reason why costs should not follow the event. I make an order nisi that the defendant pay the plaintiff's costs of the summons of 26 January 1998, the proceedings before the Master and before me.

JK FINDLAY

Judge of the High Court
Court of First Instance