LEUNG KIN FOOK AND OTHERS v. EASTERN WORLDWIDE CO LTD

HEADNOTE

                    Application to amend involving withdrawal of an admission that a contractual relationship existed between the Plaintiffs and the 1st Defendant. Affidavit by 1st Defendant's solicitor seeking to advance "a convincing and credible explanation of the circumstances in which the admission was made" stated simply that it was made "from facts and matters within my own personal knowledge or from information derived by me in the course of my conduct of this action." Objection being taken by the Plaintiffs that this did not comply with O.14 r.5(2) of the Rules of the Supreme Court. It was held on appeal that where the Defendant was relying upon the making by someone, of a mistake of some magnitude, the statement by his solicitor that the information had been derived "in the course of my conduct of the action" fell considerably short of the particularity required and that the affidavit should not have been admitted.

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JUDGMENT

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Power J.A.:

1. The plaintiffs in this matter LEUNG Kin-fook, FOK Chi-wah and YU Yuet-han, as owners of the barge "Shui Nam No. 1" ("the barge"), sue Eastern Worldwide Co. Ltd., the 1st defendant, as charterer and/or hirer of the barge and CHENG Sau-mui, the 2nd defendant, as owner of the tug "Mee wing 404" ("the tug''). The Statement of Claim filed on 8th June 1988 alleges that the plaintiffs by an oral agreement made between them and the 1st defendant on about 27th November 1987, agreed that the 1st defendant would hire and/or charter the said barge for a voyage from Hong Kong to Macau.

2. It is pleaded that the barge, having been delivered to the 1st defendant, was lost while being towed by the tug in the course of a journey to Macau. The plaintiffs claim a sum of $1.2m alleging a breach by the 1st defendant of an obligation under the agreement to redeliver the barge and, further or in the alternative, negligence and/or breach of duty by the 2nd defendant, causing the loss of the barge

3. The 1st defendant filed Points of Defence on 22nd July 1988 which admitted the ownership of the barge by the plaintiffs and pleaded an oral agreement made between the plaintiffs and the 1st defendant on or about the 26th of November 1987, a day earlier than the date of the oral agreement alleged by the plaintiffs, whereby the plaintiffs agreed to hire and the 1st defendant agreed to charter the said barge for a return voyage between Hong Kong and Macau.

4. About two years later, on 2nd April 1990, the defendant's solicitors sought the consent of the plaintiff's solicitors to make amendments to the Points of Defence. This was refused by a letter of 7th May 1990.

5. The 1st defendant on 6th June, 1990 took out a Summons seeking leave to amend his pleading. The summons specified the 8th of November 1990 as the hearing date.  The purpose of amendment was to strike out the admission of an oral agreement between the 1st defendant and the plaintiff and to allege an oral agreement between the plaintiff, acting through a miss Lau and a Mr. NG Chiu Yin, whereby the 1st defendant agreed to charter the barge from Mr. Ng. The proposed amendment specifically denied that the plaintiffs were party to the alleged or to any contract with the 1st defendant in respect of the barge. It further sought to plead that at all material times, possession and control of the barge remained with the plaintiffs through the agency of the master and crew and expressly denied that the 1st defendant became the bailee of the barge.

6. The application to amend, which involved the withdrawal of the admission that there had been a contractual relationship between the plaintiffs and the 1st defendant, was granted by Mayo J. and this appeal lies from that decision.

7. There is no issue that an applicant who seeks to withdraw an admission is required to place before the court "a convincing credible explanation of the circumstances in which the admission was in fact made, which is sought to be said to have been made under a mistake", per Hunter J.A. in TSE Yuk-tin v. Chee Cheung-hing & Co. Ltd. [1984] HKLR 391 at 395.

8. Mr. Waung, who appeared for the plaintiffs both here and below, before turning to canvass the merits of the explanation, took objection, as he did before Mayo J., to the admission of the affidavit in support of the application sworn by Miss Diana Crawford Mills, the solicitor for the 1st defendant. Miss Mills in a very late affidavit which was not served on the plaintiffs' solicitors until the 5th of November 1990, stated:

"2.    I make this Affidavit in support of Eastern Worldwide's application by summons dated 6th June 1990 for leave to amen its Points of Defence herein. I make this Affidavit from facts and matters within my own personal knowledge or from information derived by me in the course of my conduct of this action, which information I verily believe to be true."

The explanation was set out as follows:

9. Although the credibility of the explanation will not in the outcome be the issue, I cannot help but remark that, it might be strongly urged, the explanation addresses itself rather to a change of instructions than to a mistake.

10. The objection taken by Mr. Waung relied upon 0.41 r.5(2) of the Rules of the Supreme Court, which states:

         "(2) An affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief with the sources and grounds thereof."

The note at paragraph 41/5/3 of "The Supreme Court Practice 1991" states:

"Although in practice the grounds of the witness's information and belief are frequently not stated, nevertheless a party against whom such an affidavit is made is entitled to take the objection, and if the objection is one of substance, the Court is bound to pay regard to it, and the C.A. has commented strongly on the irregularity of an affidavit founded upon information and belief merely, without giving the source of such information and belief."

I refer to the well-known decision of Blair-Kerr, J. in WANG King-fong v. Fook-hong CHAN [1961] HKLR 448 in which, having referred to earlier authorities, and in particular to the observations of Kay J. in Bidder v. Bridges (1884) 26 Ch. D. 1, he stated at p.454 :

"It is quite true it is common knowledge to all of us that in the negligent way in which affidavits are continually prepared and brought before the Court, this rule is systematically ignored. But does it follow that when a person against whom such an affidavit is made brings it to the knowledge of the Judge the Judge is bound to ignore the rule, and that the Court can say, because the rule is systematically disregarded by those whose duty it is to regard it, therefore the rule must be treated as absolete and of no consequence? I dissent from any such proposition. If it be the case that the parties do not choose to bring the attention of the Court to the defect of an affidavit made in this way, and are content to take the judgment of the Court upon such an affidavit, that is one thing. It does not follow that the Court is always bound to take the objection, but where the objection is taken, and where it is an objection of substance, an not a mere technical and frivolous objection, it seems to me that the Court would be acting contrary to its plainest duty if it refused to observe the rule."

11. Mr. Fok, who appears for the respondent, points out that the wording of the affidavit follows that set out in Atkin's Encyclopaedia of Forms and Precedents. Such a situation was a matter of particular comment by Blair-Kerr J. where he said at p.456:

"It is said that the affidavit follows a form in Atkin's Encyclopaedia of Forms and Precedents. It must be emphasised that, although the skeleton forms in this famous Encyclopaedia are of the greatest assistance in carrying on the work of the Courts, they do not have the force of law; and these forms have frequently to be adapted and expanded."

The defendant was well aware that this application would be strictly contested and that the onus was on him to place before the Court in accordance with the rules an explanation as to how the mistake had come to be made.  There could have been no misapprehension that, as often occurs, strict compliance with tire rules would be overlooked. It was incumbent upon Miss Mills in such circumstances to comply with O.41 r.5(2) by indicating with reasonable particularity the sources of her information. In circumstances such as these where the defendant was relying upon the making, by someone, of a mistake of some magnitude, the statement by Miss Mills that the information upon which reliance was being placed had been derived by her "in the course of my conduct of the action" fell considerably snort of the particularity required. The judge was, I am satisfied, wrong to nave admitted the affidavit.  It is not necessary to determine whether the explanation was convincing and credible as, without the affidavit, there is no explanation. The application should in the premises have been dismissed. This appeal is allowed and the application to amend is refused.

Kempster, JA:

12. I agree with the Order proposed by my Lord and with his reasons. The ruling of Mayo J admitting the affidavit of miss Mills, who did not adequately identify her sources of information, was made in error having regard to the significance of an application to withdraw an admission and the terms of RSC Order 41 Rule 5(2). That in itself is sufficient to determine the outcome of the appeal.

13. Had it been necessary I would also have found that the judge erred in finding that the most important matter was the fact that :

"notwithstanding any lack of particulars the defendants are sufficiently convinced of the validity of their beliefs that they are prepared to conduct the defence on the basis of their present understanding of the situation."

In consequence it would have been appropriate to exercise our own discretion. In so doing we would have been faced with Mr Fok's creditable submissions, made on behalf of the first defendants, which, on analysis, showed only that on unchanged instructions as to fact a different and more favourable legal construction had lately been put on them by his instructing solicitors.

14. I should mention that this court afforded the first defendants the opportunity of offering the "payment-in" of HK$1.5 million as a condition of leave to amend. They were unable to avail themselves of it.

15. The appeal should be allowed with costs here and below and the Order of 8 November 1990 be set aside.

Nazareth J.:

16. For the reasons given by my Lords Kempster and Power JJ.A., I also think that the appeal must be allowed and I would make the order proposed by them.