FOSHAN CITY COMMERCIAL BANK v. HONGO PROPERTIES LTD.

CACV 285/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 285 OF 1999

(ON APPEAL FROM HCA 16190/1998)

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J U D G M E N T

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Hon Godfrey JA :

Introduction

1. This is an appeal from a decision of His Honour Judge To, sitting as a deputy judge of the Court of First Instance of the High Court. On 13 July 1999, the judge decided, in the exercise of his discretion, to extend the time, given to the defendant under an "unless" order made by Burrell J on 5 February 1999, to comply with the terms of that order (which required the defendant to put in evidence by way of disclosure of its assets), and to set aside a judgment subsequently entered in favour of the plaintiff. The plaintiff now appeals, contending that it was not open to the judge to exercise his discretion in that way.

The judgment below

2. The judge found, in effect, that the non-disclosure of which the plaintiff had complained was intentional and contumelious and was not due to circumstances beyond the defendant's control. The judge, however, in exercising his discretion in favour of the defendant, stated that the "unless" order, and the subsequent judgment which the plaintiff had obtained as a result of the non-compliance with it by the defendant, were "very draconian measures". He said :-

"These measures should be dispensed for the service to justice and not to create procedural injustice. Here, two considerations weigh heavily on my mind. These are whether there are any merits in the Defendant's case and whether there is any utility in the disclosure in the light of the present circumstances."

3. Among the circumstances to which the judge was referring was that there was a separate application, not before him, due to be heard on a subsequent date to discharge a Mareva injunction which had been obtained by the plaintiff against the defendant, in aid of which the disclosure orders had been obtained.

The question for this court

4. The question for this court is whether the judge was entitled to exercise his discretion in that way. The primary argument of the plaintiff is that in the circumstances the judge was wrong to consider, in exercising his discretion, whether there were any merits in the defendant's case. It is, as Mr Denis Chang SC for the plaintiff described it, "a short point".

Conclusion

5. In my view, that submission is quite untenable. The merits of the applicant's case must be one of the matters which a judge is entitled to take into account on an application to extend time, because it is relevant to the question whether it is in the interests of justice to grant the extension of time asked for. In The Mortgage Corporation v. Sandoes, reported in "The Times", 27 December 1996, a case in the Court of Appeal in England and Wales, the first two of the guidelines which the court suggested a judge should apply, in this sort of case, are these :-

"(1) Time requirements laid down by the rules and directions given by the court are not merely targets to be attempted; they are rules to be observed.

(2) At the same time the overriding principle is that justice must be done."

6. I do not see how a judge can embark upon a consideration whether this "overriding principle" applies without considering (the consideration need only be brief) whether or not there are any merits in the applicant's case.

7. I should add that the plaintiff argued, as an alternative to its primary argument, that the judge ought to have given the plaintiff an opportunity to file evidence on the defendant's application. But the plaintiff never asked for any such opportunity and did not ask for an adjournment of the defendant's application, apparently because of the subsequent application, due to be heard at a later date, for the discharge of the Mareva injunction and the plaintiff was of the view that there would be an opportunity for it to put in evidence later in connection with that application. It was, however, in my judgment, incumbent on the plaintiff, if it wanted an opportunity to file evidence in relation to the defendant's application for an extension of time immediately before the court, not to go into battle without first asking for an adjournment for the purpose of putting in such evidence. They did not do so. That is, in my judgment, the end of the alternative argument.

8. It follows that there is no good ground advanced here compelling us to interfere with the exercise by the judge of his discretion.

Addendum

9. I consider that I should add a few words about the nature of this case. The judge summarised the plaintiff's case as follows :-

"The Plaintiff is a bank in Foshan in the PRC. Kentime Industrial Corporation Foshan [Kentime (Foshan)] is a company incorporated in the PRC. Kentime Development Limited [Kentime (HK)] is an incorporated company in Hong Kong. In its Statement of Claim filed on 11.11.98, the Plaintiff alleges that the Defendant together with Kentime (Foshan) and Kentime (HK) and staff of the Plaintiff, namely Madam Ye, conspired together to induce the Plaintiff to advance RMB 95 million to Kentime (Foshan) for the purpose of purchasing equipment to enhance its business and for use within the PRC, The loan was then channelled to Kentime (HK) and the Defendant for use in real estate development projects in Hong Kong including one called 'Ka On Garden'. The Plaintiff claims against the Defendant as constructive trustee of all the money it received from Kentime (HK) and Kentime (Foshan)."

10. The defendant's evidence, however, appears to show that those involved in the affairs of the plaintiff at the material time were well aware of what was being done and that the loan granted by the plaintiff to Kentime (Foshan) formed part of a syndicate loan obtained by the Foshan Municipal Government for remittance to Hong Kong for the purpose of funding a number of property developments in Hong Kong and that the plaintiff had received a substantial payment from one of these projects.

11. I refer to these matters, not in order to express any opinion about the merits of the case, but in order to point out, as was pointed out by Rogers JA in the course of the argument, that this is a case of a nature which cries out for trial. Yet all it has generated so far are an enormous number of interlocutory applications, as has become all too typical in litigation in Hong Kong. This is no doubt just the sort of reason why the Chief Justice has felt obliged to institute a review of our whole system of civil procedure.

12. We have here a "court file" over a foot high. It contains a mass of documents brought into existence for the purpose of something like a dozen appearances before a judge or a master. Yet the case is nowhere near to being tried. This is quite unacceptable. It is to be hoped that litigation practitioners in Hong Kong will sooner rather than later come to understand that it is in their clients' interests as well as the interests of justice to cut out the production of these "mountains of costly nonsense" (to borrow a phrase from Charles Dickens) and to get on with the case. If that is so, the costs of litigation here will be greatly reduced, and Hong Kong will be the better for it.

Result

13. For the reasons I have given, I would dismiss this appeal.

Hon Rogers JA :

14. I agree that this appeal must be dismissed and would only add only a few words of my own because, as I see it, things have gone slightly wrong in this case.

15. The Mareva injunction and the disclosure orders stemmed from the ex parte order that was made on 23 December 1998. The defendant initially applied to discharge that very shortly after, on 29 December, and it may well have been that it simply did not have its tackle in order to do so.

16. By the time it had made its second application, however, which was made on 5 February at short notice, the plaintiff had issued a summons seeking an unless order for compliance with the ex parte disclosure order. Unfortunately, it seems to me, matters went wrong there because the application which the defendant had made was clearly made on different grounds and on new evidence which differed from that on which the original application for discharge be made.

17. The judge who considered the matter on 5 February seems to have thought that the matter should have been appealed rather than dealt with in the Court of First Instance. That is, I think, where the first error came. The matter should have been considered by the Court of First Instance. If the plaintiff was not ready at that stage to deal with the allegations which the defendant made, which were clearly substantial allegations, an adjournment should have been granted.

18. It is unfortunate that when this matter came before the deputy judge on the application to set aside the judgment which had been made as a result of default and on the defendant's further application to discharge the Mareva injunction, the deputy judge was faced with a series of events which had already happened. In my view, in the circumstances he dealt with it as best he could, in the face of the evidence and in the face of the fact that the plaintiff wished to proceed to maintain the judgment which it had obtained.

19. As Godfrey JA has already observed, I said in the course of argument that this case cries out now for a trial. Unfortunately, it is not for this court to give directions for the further conduct of this case, much though I would be inclined to do so should it have been appropriate.