XCHRX WYCOMBE INVESTMENT LTD. v. EDWIN LEONG SIU HUNG

HCA5665/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5665 OF 1997

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REASONS FOR DECISION

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1. This is an appeal by the plaintiff against the decision of Master HO refusing to strike out the defence and counter-claim of the defendant. The defendant was an investment manager in control of the Tai Hung Fai Enterprises Limited acting as its managing director.

2. According to the plaintiff, in July of 1991, at the request of the defendant the plaintiff remitted a sum of US$2 million to the defendant for investment purposes. The plaintiff alleged that the defendant was in breach of his contractual obligations and/or guilty of negligent mis-statement and/or negligence and/or failed to render a proper account in connection with the investment of the US$2 million.

3. The plaintiff therefore claimed for the return of this sum of money with accrued interest. One of the matters raised in the defence and counter-claim was that due to severe and unforseeable fluctuations in the foreign exchange market, the funds under the control of Tai Hung Fai, including the US$2 dollars was lost and that an additional liability of over US$4 million was incurred through the currency trading with Wardley James Capel Limited. The defendant is counter-claiming against the plaintiff for the such additional liabilities.

4. On 14 September the plaintiff requested from the defendant further and better particulars of the defence and counter-claim, including the particulars of the following assertions namely:

"Between 3rd and 10th January 1992 the foreign exchange markets experienced severe and unforeseeable fluctuations which resulted in the loss of the funds deposited by the investors." The plaintiff requested particulars of:-

(a) what fluctuations were foreseen either by Tai Hung Fai or the Defendant during this period;

(b) what fluctuations in fact occurred;

(c) identifying all foreign exchange contracts held either by Tai Hung Fai or the Defendant during the said period;

(d) giving the value of all such contracts immediately before the fluctuations herein referred to;

(e) giving the net position in the Tai Hung Fai B account at the close of business on each day between 3rd and 12th January 1992."

5. The defendant responded to the request and provided particulars on other matters but not those set out above. In the answers the defendant stated the following:-

"(a) Not entitled. The Request is in the nature of an interrogatory. Further and in any event, what was foreseen either by Tai Hung Fai or the Defendant during this period is irrelevant to the pleaded issue which is that the fluctuations which occurred were unforseeable by the market generally;"

And:

"(b) Sufficiently pleaded. The fluctuations which occurred are a matter of record which are as much in the knowledge of the Plaintiff as the Defendant;"

And:

"(c) Not entitled. This is not a request for particulars of the allegation pleaded. In any event, the Defendant's case is sufficiently pleaded and the Request in question is a matter which is properly dealt with by way of discovery;"

And then:

"(d) Answer (c) above is repeated."

And:

"(e) Answer (c) above is repeated."

6. Master LOK ordered that the particulars requested under (b), (c), (d) and (e) were to be provided within 35 days from 29 September 1998. There were two subsequent extensions of time for the defendant to comply with the order of Master LOK.

7. On 4 January, Master Jones made an Unless Order that the requested particulars had to be supplied by 4 pm on 8 February 1999 otherwise the defence and counter-claim was to be struck out and the plaintiff would be at liberty to enter interlocutory judgment against the defendant with damages to be assessed with costs.

8. It appears not in dispute that on 8 February shortly, in fact 15 minutes before the deadline of 4 pm, the defendant in purported compliance of the order, supplied the plaintiff with further answers in the following terms, and I quote:

"(b) it is impractical to specify each and every fluctuation or movement, minute by minute, for each currency being traded. Attached to these answers as a schedule marked "1" are tables containing the high, low, average and 'official' currency prices for the currencies traded, and graphs depicting the extremes and the general trend of the market during the relevant period. The sources of the information are noted.

Furthermore, the fluctuations which occurred are a matter of public record which are as much in the knowledge of the Plaintiff as the Defendant."

And then:

"(c) This is not a request for particulars of the allegation pleaded. In any event, the Defendant's case is sufficiently pleaded and the request in question is a matter which is properly dealt with by way of discovery. Nevertheless, without prejudice to this contention:

Tai Hung Fai held the following foreign exchange contracts on behalf of the investors during the said period:"

9. And then this is followed by more than three pages of particulars which were termed as "Spot Contract Transactions". And the particulars continue, and I quote:

"The defendant held no foreign exchange contracts on behalf of the investors during the said period."

And then:

"(d) Answer (c) above is repeated."

And:

"(e) Answers (b), (c) and (d) above are repeated.

It is not practically possible to answer this question as currencies and options were traded over a 24 hour period and thus there was no "close of business" on each day between 3rd and 12th January 1992.

Such further information as the Defendant is able to give in this respect is attached as a schedule marked "2", these being the combined commodity statements issued for the periods in question by Wardley James Capel Limited, and supplied to the Defendant by Wardley Financial Services Limited pursuant to an Order of the Court dated 21st January 1999."

10. Apparently Wardley initially refused to provide the relevant documents until 21 January when a consent order to that effect was made and according to the plaintiff production in accordance with that order by Wardley up to now is still incomplete. The schedule "2" included pages of documents many of which are titled "Combined Commodity Statement" issued by Wardley James Capel Limited to Tai Hung Fai Enterprises.

11. The plaintiff now contends that the documents from Wardley are incomplete, illegible and not in right sequence. The plaintiff suggests that it is not open to the defendant to shift the blame to Wardley as Wardley is not a party to the proceedings and is not subject to the Unless Order whereas the defendant is.

12. The plaintiff also suggests that there could not be any ambiguity as to which account the request specified or the reference to the close of business or the meaning of net positions.

13. When the defendant suggested that those matters were ambiguous, they were no more than lame excuses to try to excuse what was described as blatant disregard of the court's order. The plaintiff contended that if there was any ambiguity in any of those matters, the defendant could have sought clarification earlier, either through correspondence or in any of those hearings before the Master.

14. The plaintiff also contended that the defendant could have been able to provide better particulars and that the failure to do so is an intentional and contumelious conduct, thus the plaintiff was justified in seeking a striking out of part of the pleadings, at least.

15. The law on the striking out pleading for failure to comply with an Unless Order is well established. In considering the consequence of a failure to comply with an Unless Order, the relevant question is whether such failure was intentional and contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the court was the foundation on which its authority was found.

16. But if a party could 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 was not to be treated as contumelious and therefore did not disentitle the litigant to rights which he would otherwise have enjoyed. See the dicta of Sir Nicholas Browne-Wilkinson VC in the case re Jokai Tea Holdings Limited [1992] 1 WLR 1196, and then another case Tan Eddy Tansil v PT Bank Pembangunan Indonesia (Persero) [1996] 1 HKC 231, Bokhary JA, as he then was, expressed the view that a failure by a solicitor to comply with an Unless Order should not adversely affect his client's interest if that could be avoided without injustice to the other party.

17. The issues that I have to decide in this dispute are not whether the defendant could have provided better particulars or whether he could have taken steps of seeking clarification if he had difficulty in understanding the nature of the request or in complying with the Unless Order. It may well be that solicitors for the defendant could have done a better job, particularly with the supplying of legible copies of documents, properly arranged.

18. The issues that I have to decide in this particular case, and I have to be satisfied that the defendant was guilty of intentional and contumelious conduct in his failure to comply with the Unless Order, before the plaintiff's application can be successful.

19. In that regard, I must not ignore that the requested particulars, though covering only a short period of time, in fact, involved hundreds of transactions. It is also not disputed that the defendant himself, on the evidence, did not have full particulars of those transactions nor documents pertaining thereto. The defendant had to rely on information or documents supplied to him by Wardley.

20. It is clear from the evidence available to this court that both before and shortly after the order made by Master LOK for the particulars to be supplied on 29 September 1998, the defendant had, through his solicitors, chased Wardley for the disclosure of the relevant documents, and indeed, the request had to be repeated on a number of occasions. It was not until, on the record, 21 January 1999 and after the defendant had made an application to court that Wardley agreed to disclose some of the relevant documents, and by the time the defendant obtained those documents which are voluminous and complicated, it was just over two weeks before the deadline on 8 February 1999.

21. And indeed, there is suggestion and evidence by the correspondence between the solicitor for the defendant and Wardley that Wardley had not, in fact, supplied to the defendant all the relevant documents despite the further request and the order on 21 January 1999. If the defendant had intended to ignore or flout the order of the court, he would not have taken the step as he did in order to comply with the order in question.

22. Despite the argument by counsel for the plaintiff, I subscribe to the view that in the light of the background of the case, the requests for the particulars of the plaintiff are ambiguous, and because of the attitude of Wardley, it may be difficult for the defendant's solicitor to give proper advice to the defendant to provide answers to the request of the particulars which are satisfactory to the plaintiff.

23. I must not, of course, ignore the fact that in supplying particulars, a party to the litigation must take particular care because those particulars would form part of the pleading, and the party would be bound by such particulars. To strike out a party's pleading resulting in a default judgment or resulting in a party not being able to advance all the defence that he wishes to advance in a litigation is a very serious step to take. Despite the observation by Godfrey J in the case of YEUNG Man-fung v HUNG Fan-keung, Henry reported in [1995] 2 HKLR 48, such a step, namely, the step to strike out a pleading, in my view, should only be taken in the most unusual circumstances.

24. A case of this nature in any event involves the exercise of the discretion in accordance with the merits of each case and the circumstances of each case. Looking at the history of this case, I am not persuaded that the defendant was trying to drag his feet as such, an observation by Mayo J in one of the cases cited by counsel for the plaintiff. I have considered the background of the case as well as the able submission of Miss EU on behalf of the plaintiff.

25. Whether the plaintiff will be sensible enough to provide better particulars now or whether the plaintiff still find it necessary to apply for better particulars after, is a matter for the party to resolve themselves. It is not necessary for the court to enter into the arena, as such, at this stage.

26. Speaking for myself, it appears that the defendant now should have provided or could have provided better particulars than those that have been provided so far, but I am not persuaded that the learned Master had come to a wrong conclusion in refusing the plaintiff's application to strike out the defendant's defence or part of the defence. There is, in my view, no valid basis to upset the decision of the learned Master. In the circumstances, the appeal by the plaintiff has to be dismissed, and I so order.