MEI SHENG TEXTILES VIETNAM CO LTD v. CHINA GRACE GARMENT LTD

HCA 2311/2013

[2018] HKCFI 244

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2311 OF 2013

________________________

________________________

________________________

REASONS FOR DECISION

________________________

1.  By a summons dated 4 January 2018 (“the summons”) the defendant (“D”) applied for leave to file and serve the affirmation of Cheng Yuet Fong Yvonne (“Yvonne”) as per the copy attached to the summons. The hearing of the summons came before me on 11 January 2018 which was the date fixed for the substantive hearing of the plaintiff’s summons for judgment dated 19 April 2017 under Order 14, rule 1 of the Rules of the High Court (“RHC”) (“the O. 14 summons”). The hearing of the O. 14 summons was fixed for argument with 3 hours reserved.

2.  By the summons D was seeking leave to file further evidence to oppose the O. 14 summons.  After hearing the submissions of counsel, I made an order that the summons be dismissed with costs of the hearing before me and the costs of and occasioned by the summons to be costs to be paid by D to the plaintiff (“P”), such costs to be taxed on a common fund basis and to be paid forthwith.

3.  As the hearing of the summons took up all the time reserved and allotted for the substantive hearing of the O. 14 summons, I adjourned the substantive hearing of the O. 14 summons to a date to be fixed in consultation with counsel’s diaries before any judge with an estimated length of hearing of 3 hours.

4.  I indicated at the time that reasons in writing would be given.  This I now do. 

5.  P is a company incorporated in Vietnam.  At all material times, P has been and is still carrying on principally the business of the production and sale of yarn and fabrics.

6.  D is a company incorporated in Hong Kong.  At all material times, D has been and is still carrying on principally the business of the purchase of fabrics and the sale and purchase of garments.

7.  P’s claim against D is for the price of fabrics sold and delivered to D in 2013.

8.  At all material times, P sold and D bought fabrics manufactured by P. P’s claim against D is for the sum of US$196,747.50 being the outstanding price for fabrics sold and delivered to D, with interest thereon. 

9.  D denies P’s claim as set out in the defence and counterclaim.  D’s case essentially is that there was delay in deliveries of some of the fabrics by P to D and that some of the fabrics delivered were of defective quality.  These are pleaded and particularized in the defence and counterclaim.

10.  It is D’s case that as a result of P’s delay in delivery of some of the fabrics, additional air shipment costs were incurred by D.  D withheld a sum of US$192,853.72 owing to P as part of the additional air shipment costs.  D accepts that the sum of US$192,853.72 was payable to P but that it withheld that sum as D’s case is that the additional air shipment costs that it incurred exceeded that amount.

11.  D’s case is that as a result of P’s breaches by late delivery and the delivery of defective fabrics, it has suffered loss and damage.  D counterclaims for loss and damage in the total sum of US$773,030.48 as pleaded as para 14 of the defence and counterclaim which pleads:

“ 14. As a result of the Plaintiff’s breach of the Purchase Contracts, the Defendant suffered loss and damages.

PARTICULARS OF LOSS AND DAMAGES

        Loss and Damages                                                     Amount (US$)

Outstanding Additional Air Shipment Cost                             44,084.61

          Additional CM Cost                                                        42,466.78

               Additional FOB Cost                                                             33,979.05          

                  Trim Lost                                                                 39,679.53

Additional Transportation Cost                                                   12,820.51

Loss of Profit for 2 seasons                                                        600,000.00

___________________________________________________________

                              Total                                                              773,030.48

12.  At para 6(p) of the defence and counterclaim D gives some particulars of the loss and damage that it avers that it has suffered as a result of P’s breaches as follows:

“                                                                                     PARTICULARS

(i) Additional air shipment cost in the sum of US$236,938.33 for delivering garment to Paris, Madrid and Brussels for use by Carrefour was incurred. However, as pleaded in paragraph 6(k) hereinabove, a partial sum of US$192,853.72 was withheld by the Defendant. Therefore, a sum of US$44,084.61 is still outstanding (‘Outstanding Additional Air Shipment Cost’);

(ii) Additional cutting and making cost in the sum of US$42,466.78 was incurred due to the employment of subcontractor (‘Additional CM Cost’);

(iii) Additional FOB cost loss in the sum of US$33,979.05 was incurred due to the lack of replenishment from the Plaintiff for broken size ratio noted on the finished garment (‘Additional FOB Cost’);

(iv) Trim cost lost for the accessories purchased in the sum of US$39,679.53 was incurred due to the cancellation of some orders as a result of the Defendant’s breach of the Purchase Contracts (‘Trim Lost’);

(v) Additional transportation cost in the sum of US$12,820.51; and

(vi)    Termination of business relationship with Carrefour and the consequential loss of profit is US$300,000 per season and profit loss of 2 seasons is incurred.”

13.  D’s case is that the fabrics that it purchased from P in 2013 were to be used by D to perform its contractual obligations to Carrefour Global Sourcing Asia Ltd (“Carrefour”) and that because of P’s breaches D was unable to perform its contractual obligations with Carrefour resulting in the loss and damage it claims that it has suffered.

14.  The O. 14 summons was returnable before Master Leong on 22 May 2017.  In support of the O. 14 summons, P relied on the 1^st affirmation of Wong Pui Ching (“Wong”), a director of P, filed on 19 April 2017 which was served on D.

15.  By a consent order made by Master Leong on 18 May 2017 it was ordered that the O. 14 summons be adjourned for argument before a judge with 3 hours reserved in consultation with counsel’s diaries.  By the consent order, directions were also given for D to file and serve an affirmation in opposition to the O. 14 summons within 28 days of the date of the order.  P was to file and serve an affirmation in reply within 35 days thereafter. 

16.  Para 3 of the consent order made by Master Leong clearly provided that:

“ No further or additional affirmation(s) shall be filed without the leave of the Court;”

17.  Pursuant to the consent order, D filed and served the affirmation of Chun Kwok Leung, Deavy (“Chun”) which was filed on 16 June 2017.  D also filed and served the 1^st affirmation of Kam Fai (“Kam”) the handling solicitor in Hon & Co, solicitors for D.  Kam’s 1^st affirmation was also filed on 16 June 2017.

18.  On 20 July 2017 P filed and served the 2^nd affirmation of Wong in reply to the evidence filed by D.

19.  As I have said, the substantive hearing of the O. 14 summons was fixed to be heard on 11 January 2018.

20.  By the summons dated 4 January 2018 returnable before me on 11 January 2018 D applied for leave to file and serve the affirmation of Yvonne as per the copy attached to the summons.  I would observe that although it was clearly made known to D’s solicitors before the summons was issued that the summons would be opposed, D’s solicitors nevertheless gave a wholly inadequate estimate of 3 minutes for the length of the hearing as stated in the summons.

21.  The applicable principles are not disputed.

22.  In respect of interlocutory applications which have been adjourned by a master to be heard either by a master or a judge, Order 32, rule 11A(4) of the RHC provides that:

“ Where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.”

23.  By the consent order made by Master Leong on 18 May 2017 it was clearly provided that no further evidence should be filed without leave of the court.

24.  It is plain that in the post-CJR era, a late application to introduce further evidence has a fairly high threshold to pass (Wise Union Industries Limited v Hong Kong Science and Technology Parks Corporation(HCAL 12/2009, 21 September 2009, Andrew Cheung J (as he then was) at para 2).

25.  I would refer to what DHCJ Le Pichon said in Jose Miranda da Costa Junior and another v Lorenzo Yih, also known as Yu Chuan Yih and others (HCA 156/2010; 28 April 2014) at paras 9 to 13 of her reasons for decision:

“ 9. The October order made it abundantly clear that no further affidavit was to be filed without the leave of the court. In the post-CJR era, it is inconceivable that leave would be granted in the absence of genuine extenuating circumstances, for example, that the evidence was not available at the date of the earlier affidavit or only came into existence after the date for the filing of that affidavit. In other words, they would be exceptions that normally would fall within the rule in Ladd v Marshall.

10. Further, in exercising the discretion to grant leave, the court is bound to have regard to the objectives of the CJR set out in O 1A, r 1 and to seek to promote the attainment of such objectives.

11. For those reasons, where a direction prohibiting further evidence to be adduced without leave has been given, it has to be read with RHC O 32, r 11A(4). That provides that where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.

12. It will be seen that the rationale of O 32, r 11A(4) is to ensure that a case is dealt with as expeditiously as is reasonably practicable and to ensure fairness between the parties (those being the objectives of the CJR stated in O 1A, r 1(b) and (d)): Fortune Assets Development Ltd v De Monsa Investments Ltd, HCA 167/2009, (unrep) 21 August 2009 at §§10 – 11 and the annotation in Hong Kong Civil Procedure 2014 at 32/11A/3 which states that the sort of ‘exceptional circumstances’ envisaged are likely to be along the lines of the exceptions laid down in Ladd v Marshall [1954] 1 WLR 1489.

13. ‘Special circumstances’ are not made out if a proper review of the potential issues that might arise in proceedings ought to have resulted in the information contained in the affidavit being filed within the time limits imposed: Fortune Assets at §12.  I agree with that approach which is in line with the rationale underlying O 32, r 11A(4) and furthers the CJR objectives identified above.”

26.  There is no doubt that the summons was taken out very late.  It was a very late application for leave to adduce further evidence.  The further evidence is contained in the affirmation of Yvonne.  She used to work for D as a merchandising and sales manager since 2010 for about 5 years. Yvonne exhibits voluminous documents in her affirmation which are contained in 4 lever arch files running into over 900 pages in total.  D’s case is that these documents support D’s counterclaim on the various heads of claim as pleaded at para 14 of the defence and counterclaim.

27.  In support of the summons, D relied on the 2^nd affirmation of Kam also filed on 4 January 2018.  In his 2^nd affirmation, Kam referred to and relied on what he had said in his 1^st affirmation namely, that he had been told by Chun that D had not reasonably expected that P would pursue its claim in this action as since June 2014 when P and D filed their timetable questionnaires and lists of documents, P had not proceeded with this action apart from a failed attempt to mediate on 20 October 2016.  Chun told Kam that D did not expect that P would suddenly proceed with an application for summary judgment by the O. 14 summons.  Kam said that as some of the key staff of D dealing with D’s business with Carrefour and P had left the employment of D:

“ it would take quite a while to extract the relevant information and business records in support of the Defendant’s defence and counterclaim against the Plaintiff.”

28.  In his 1^st affirmation Kam went on to say that he had been told by Chun that he had planned a long holiday with his family and would not be back in Hong Kong until 11 August 2017.  He said that Chun would not have time to access and dig up the relevant documents among the huge bulk of business records of D dated 2013.  Kam concluded his 1^st affirmation by saying that he was instructed that D reserves its right to apply for leave to adduce further evidence at a later stage out of time.

29.  Kam purports to explain the delay in preparing Yvonne’s affirmation at para 2 of his 2^nd affirmation where he said that after Chun returned to Hong Kong in late August 2017 he sought the assistance of key staff of D including Yvonne for assistance to retrieve and dig up the relevant documents with Carrefour and related documents.  He further said that he was given to understand that most of the documents were in storage and that Yvonne was in full time employment elsewhere and had to travel away from Hong Kong frequently.  That being so, she could only help out during her spare time when she was in Hong Kong.  This was an attempt to explain the delay in making the late application for leave to adduce the further evidence.

30.  The reasons for the delay as provided by Kam in his 2^nd affirmation are neither convincing nor satisfactory. 

31.  The voluminous documents exhibited to Yvonne’s affirmation are business records of D which were in existence in 2013 and which were at all times in the possession, custody or control of D.  D still carries on business.   The fact that Chun went away on holiday until late August 2017 does not assist D.  There is no explanation given as to why no one else in D could not have retrieved the documents earlier.  D is and was carrying on business at all times and there is no reason why a staff member could not have retrieved D’s documents which were in D’s possession, custody or control. 

32.  I would observe that although Kam at para 2 of his 1^st affirmation states that both P and D “filed their respectively Timetabling Questionnaire and List of Documents in relation to the proceedings”, a perusal of the court file does not show that D ever filed a list of documents.  P filed its list of documents on 12 April 2016. 

33.  I would also observe that in D’s timetable questionnaire filed on 24 June 2014, which was signed by Kam, it was clearly stated at Section D that he intended to file and serve a list of documents within 21 days.  As I have said, a perusal of the court file does not show that D ever filed a list of documents. 

34.  There is also no evidence as to when Chun first approached Yvonne to assist D to retrieve the relevant documents and to provide an affirmation to exhibit and to explain the voluminous documents with reference to the counterclaim.  The defence and counterclaim was filed on 21 February 2014.  I find it surprising that D was able to plead its loss and damage with precise figures as set out at paras 6(p) and 14 of the defence and counterclaim without having had access to the documents at that time.

35.  It was pointed out by Mr Wong, for P, that Yvonne’s affirmation was made on 21 December 2017.  Yet it was only on 28 December 2017 that D’s solicitors provided a copy of the same to P’s solicitors.  No explanation has been provided as to why there was this delay in providing a copy of the affirmation to P’s solicitors. 

36.  Also, although a copy of the affirmation was provided only on 28 December 2017, none of the voluminous exhibits to Yvonne’s affirmation were provided at that time.  They were only provided to D’s solicitors on 29 December 2017 which was the last working day before the New Year. 

37.  There is, in my view, no merit in the assertion of Kam in his 1^st affirmation that D had reasonably expected that P would not pursue the action any further until it issued the O. 14 summons. As Mr Wong, for P, submitted, the parties were actively involved in mediation proceedings which were unsuccessful in October 2016.  

38.  On the evidence, P had very limited time to consider the further evidence of Yvonne with the voluminous exhibits before the substantive hearing of the O. 14 summons fixed for 11 January 2018.  In my view, the very late application taken out by D has prejudiced P.

39.  I would also refer to what DHCJ Le Pichon said in Jose Miranda at para 18 of her reasons for decision:

“ … Such a last-minute manoeuvre creates a dilemma for the innocent party: to seek an adjournment which would mean having to derail the hearing (when the innocent party was anxious to have its summons heard as soon as possible) or to live with it and doing what was possible within the limited time available. It has been said that ‘[t]he unenviable position that such a party finds himself in its in itself a prejudice’: see per A Cheung J (as he then was) in Wise Union Industries Ltd v Hong Kong Science and Technology Parks Corporation, unreported, HCAL 12/2009, 21 September 2009 at §9.”

40.  As I have said, the substantive hearing of the O. 14 summons had to be adjourned because the hearing of the summons took up all the allotted time which was fixed for the hearing of the O. 14 summons on 11 January 2018.   P has in fact been prejudiced by the delay in the hearing of the O. 14 summons brought about by the late application to adduce further evidence.

41.  D has failed to satisfy me that the further evidence could not have been obtained earlier with reasonable diligence.  I am not satisfied that there are exceptional circumstances to justify the granting of leave for D to adduce the further evidence.

42.  For those reasons, I dismissed the summons with the costs order that I made. 

43.  P asked for the costs to be taxed on an indemnity basis.  I did not consider it appropriate to do so but I did consider that it was appropriate to order the costs to be taxed on a common fund basis in view of the lateness of the application and further, the lack of any explanation as to why a copy of Yvonne’s affirmation which was made on 21 December 2017 was only supplied to P’s solicitors on 28 December 2017 without the voluminous exhibits, which were only supplied on 29 December 2017, the last working day of the New Year.