WIN PROFIT CORPORATION LTD v. WORLD ORIENT INVESTMENT LTD

HCA1487/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1487 OF 2009

Dates of Hearing: 29 December 2009

Date of Judgment: 29 December 2009

J U D G M E N T

Introduction

1.  These are appeals against two orders made by Master Kwan on 17 and 24 August this year.  Both are out of time by 15 and 8 days respectively.  I am asked to enlarge time to allow the appeals to proceed.  I have heard out the appeals on their merits.  If I am of the view that they have merit, I will make orders extending time.  If the appeals have no merit, it would be appropriate to refuse the extensions of time and the appeals would therefore fail.

2.  This is an action by the Plaintiff to recover its losses from the Defendant on the sale of a whole floor of an office building in which the Plaintiff was vendor and the Defendant was the purchaser.  A sale and purchase agreement had been entered into on 23 October 2007, under which the Defendant agreed to purchase the premises for $107,200,000.  It paid two deposits totalling $10,720,000 but failed to complete the conveyance.  As a result, the deposits were forfeited, about which there is no complaint by the Defendant.

3.  Then some nine months after the scheduled completion date, the Plaintiff wrote a letter to the Defendant dated 18 June 2009, stating that it had sold the premises for $80,019,000 and demanded from the Defendant payment of $17,253,849.61, substantially being the difference between the agreed sale price to the Defendant and the eventual selling price of $80,019,000.  Seven days later, it issued its writ in this amount, claiming that sum or, alternatively, for damages to be assessed.  On 16 July 2009, it issued a summons for judgment under Order 14 in the amount of $17,253,849.61.  Its summons was supported by an affirmation by Mr Frank Chu, which provided the basis for its claim.

4.  On the issue of the Order 14 summons, the court provided the parties with a 15-minute call-over to be heard on 17 August 2009.  On 13 August 2009, Madam Cora Tung gave an affirmation on the Defendant’s behalf, the purpose of which was to ask that the call-over be adjourned for a period of three months, this in order to allow the Defendant more time to mount its defence, the basis of which is that, notwithstanding the Defendant’s failure to complete the conveyance, the Plaintiff should have suffered no loss because it had other offers made to it after the passing of the completion date which it had unreasonably failed to act on.  Madam Tung’s affirmation said that the Defendant was having difficulty in marshalling its evidence and that it required more time to do so.  It also required time to obtain evidence from a valuer and that it would require discovery from the Plaintiff.

The Hearing of 17 August

5.  The hearing was on a Monday and Madam Tung’s affirmation came to the notice of the Plaintiff’s solicitors on the previous Friday.  They instructed Miss Lan on the Saturday to appear on the Plaintiff’s behalf on the call-over.  Mr Ching, an assistant solicitor in the firm of solicitors acting for the Defendant appeared on its behalf.  I have a transcript of both hearings before the Master.  Mr Ching was provided with Miss Lan’s skeleton argument and an affirmation in reply to that of Madam Tung at the door of the Master’s chambers.  I have read Miss Lan’s skeleton argument and it is one directed to obtaining judgment on the Order 14 summons and not one which really addressed the matters which might usually arise on a first call-over. 

6.  When Mr Ching explained to the Master that he needed more time to get his evidence in order, she was unsympathetic to his request.  I am sorry to say that she proceeded to give him an extremely uncomfortable time for the next 50 minutes or so (on a 15-minute appointment) as to why, in her view, he had had more than enough time to get his evidence ready.  In the event, she persuaded herself to allow him a further four days to file his evidence on terms that the Defendant should pay the Plaintiff’s costs in any event with certificate for counsel, and directed that the Defendant should also pay $50,000 as security for the Plaintiff’s costs.  The order was in terms of an unless order with failure to comply being visited by judgment for the Plaintiff.

7.  On the resumed hearing on 24 August, Miss Tong was instructed to appear for the Defendant.  At this hearing, the Master directed that the $50,000 was not to be returned to the Defendant without leave of the court.  Without objection, the Master entered judgment on the claim with damages to be assessed and, based on her perception of the issues and the amount of time required to resolve them, directed that the assessment should be heard with a three-hour time estimate. 

8.  The three-hour time estimate was one that both counsel had told her was going to be insufficient with the matter inevitably having to go part-heard on a three-hour hearing.  The assessment for damages has now been fixed before Master de Souza for three hours on 5 February 2010, this with seven witnesses expected to give live evidence and be cross-examined. 

9.  On 24 August, Miss Tong had also indicated that the Defendant was proposing to have two witnesses subpoenaed to give evidence, these being two estate agents whose employers had not permitted them to give witness statements or affirmations to the Defendant’s solicitors.  In respect of this, the Master has included in her order of 24 August a paragraph to this effect:

“For the avoidance of doubt, the three-hour estimation is based on the time required for the testimony of the deponents of the affirmations filed to the date hereof.  No allowance has been made for the Defendant to introduce additional witnesses such as Tony Kam or Jass Tai referred to in the first affirmation of Tung Chi-keung.  Therefore, if the Defendant makes an application for the writ of subpoenas to be issued for the attendance of Tony Kam and Jass Tai, the Defendant should be prepared to pay the costs of and occasioned by such an application.”

The Appeal

8. The appeal is brought on the basis that the Master has acted unreasonably and has not had proper regard to the nature of the task before her.  She has been driven by her desire to impose firm case management and, as a result, has done an injustice to the Defendant.  The tone of the exchanges between the Master and Mr Ching on 17 August - he was hectored by the Master for the whole of the 50-minute hearing - and Miss Tong on 24 August, indicated that the Master’s almost sole preoccupation was to case manage the Order 14 summons and to conclude it as quickly as possible without having any sufficient regard to what it was that the Defendant’s solicitors were trying to do in collating their evidence in opposition to a $17 million claim. 

9. Whilst there is no doubt that they could have done more in the eight weeks from the date of the Order 14 summons until the call-over and that there was never any prospect of them getting a further three months’ adjournment, which was an impertinent application to make when they already had had two months, the fact of the matter was that this was the first call-over.  It was not an occasion for the Master to aggressively question the Defendant’s solicitor on the detail of his client’s case and the evidence that it was proposing to call.  Whilst muscular case management undoubtedly has its place, and under the new CJR regime is to be expected where the circumstances require it, this was not such an occasion. 

10.  In saying this, it is worth considering what the rules provide for on the occasion of a first call-over such as this.  At page 225, 14/2/3, Hong Kong Civil Procedure 2010, the note says this:

“The summons should be made returnable before the Master save for claims for an injunction and commercial list actions where the summons is returnable before the judge.  The first hearing before the Master will be a 15-minute hearing.  Where the Defendant contests the claim and it is not clear that it can be disposed of there and then, the application will be adjourned for argument.  The Master will give directions for the filing of any further evidence if necessary and seek the parties’ estimate as to the length of the adjourned hearing.  However, if the Defendant has not filed evidence by the time of the first hearing, judgment may be entered for the Plaintiff unless the Master is not satisfied with some part of the Plaintiff’s claim.”

11.  It is also helpful to refer to 14/4/5 at page 229 which is in these terms:

“Though the rule does not specify any time for the service of the Defendant’s affidavit in opposition to the application for summary judgment, the form of summons generally in use contained an express notice of the Defendant requiring him to send a copy of any affidavit in answer to the Plaintiff or his solicitor to reach him not less than three days before the return day.  Defendants who produce an affidavit at or immediately before the hearing should not assume any adjournment will be granted.  Judgment may be entered on affidavits before the court, leaving an appeal as the Defendant’s only remedy with the difficulty of persuading the judge in chambers to admit further evidence.”

12.  What is clear is that Madam Tung’s affirmation was not intended to be the Defendant’s substantive or definitive answer to the Plaintiff’s summons.  Its purpose was to try and obtain an adjournment and to do so by indicating the efforts so far by the Defendant’s solicitors to obtain that evidence and the general nature of the defence to this $17 million-plus claim. 

13.  It must have been plain to the Master that what she had before her was to be a seriously contested assessment as to the quantum of the Plaintiff’s claim.  This was never going to be the occasion for any sort of final disposition.  Two matters needed to be considered.  Firstly, how much longer would the Defendant reasonably require to marshal its evidence, given the two months that had already passed, and secondly, having regard to what the Defendant had already done to obtain that evidence and its difficulties as it had presented them in obtaining that evidence, what the terms of the inevitable adjournment ought to be. 

14.  The rules, as I have set them out, clearly expect a party to get on and prepare its case well in advance of the first call-over.  On this occasion, I am satisfied that the Defendant could have done more than it had to get itself ready.  Unsurprisingly, the Master was not going to be impressed with what had been achieved by 17 August but, equally, I am satisfied that she grossly over-reacted, firstly, in the manner in which she dealt with Mr Ching who did remarkably well in the circumstances in arguing his corner but, more importantly, in making the peremptory orders that she did.  This was not the occasion for a four-day unless order where there had not been any previous breaches of a court order.  The correct course, given the nature of this claim for a not insubstantial amount, would have been to give 14 days for the completion of the Defendant’s evidence and for its solicitors to prepare the praecipe for the two subpoenas. 

15.  As to costs, I would have thought that the best that the Plaintiff would have expected to obtain was Plaintiff’s costs in the summons, thereby protecting it from ever having to pay the Defendant’s costs of the first call-over, and certainly not an order requiring the payment into court, within five hours, of $50,000.  Whilst she undoubtedly had jurisdiction to order such a payment (see Order 1B rule 3(a)) it seems to me that such a direction is one that should not be made except where a party’s conduct is considerably worse than the Defendant’s was on this occasion and in these circumstances.

16.  Accordingly, where I am satisfied that this is an appeal with merit, I will enlarge time to allow it to proceed and I will allow the appeal on the order for costs and the order directing the payment in of the $50,000.  This was an unreasonable order in the circumstances and it should be replaced with an order of Plaintiff’s costs in the summons.  This better reflects the relative rights and wrongs of the matter where the Plaintiff could have done better to prepare itself but, nevertheless, a request for further time - I would have allowed 14 days - ought to have been given in all the circumstances of this case.

17.  The final matter in respect of this order relates to certificate for counsel.  Whilst the Plaintiff was fully entitled to instruct Miss Lan, this is not something which the Defendant should ever be expected to pay for.  It needs to be stressed that this was always going to be a 15-minute call-over and the issue was always going to be for how long any adjournment should be for and on what terms.  This sort of issue was well within the range of advocacy that a solicitor would be expected to undertake.  This part of the order should also go.

The Hearing of 24 August

18.  In this case too, I find the appeal has merit and time should be enlarged to allow it to proceed.  Firstly, the order relating to the $50,000 in court will be revoked where I have found that it should never have been made.  I direct that the money should be paid out to the Defendant’s solicitors immediately. 

19.  As to the hearing date of the assessment now fixed for three hours on 5 February 2010, this simply cannot stand.  It was made by the Master who was determined to deal with the matter expeditiously without, in my judgment, sufficient regard to the nature of the dispute before the court.  There are real issues here which require consideration and resolution.  Up to seven witnesses will have to give live evidence.  All of this will inevitably take time.  Miss Lan appreciated this before the Master and said so, but now, on appeal, she has changed her mind.  Miss Tong says three days and I agree with her.  The way these things go, even that may not be enough but, hopefully, the evidence can be concluded within two and a half days, leaving over half a day for speeches.

20.  So I vacate 5 February 2010 and I direct that the assessment should be re-fixed before a master in consultation with counsel’s diaries, with a three-day estimate.

21.  Finally, as to paragraph 13 of this order - which I have already set out - the Master should not have made any reference to this which was all part and parcel of her wish to manage the Order 14 summons to a swift conclusion.  In the event, having provided a hopelessly inadequate time estimate, she added this paragraph in respect of something which was never before her.  In the event, these subpoenas have been issued by Master de Souza.  The date before him has now been vacated and the Defendant should not be at risk of any cost implications over the issuing of these subpoenas.  This part of the order will therefore also be set aside.  To this extent, the appeal against this second order will be allowed.

The Costs of the Appeal

22.  Finally, the costs of the appeal.  It seems to me that the costs of the appeal should follow the event and that the Plaintiff should pay the Defendant’s costs.  The appeal has succeeded in respect of matters which the Plaintiff had supported before the Master and sought to uphold on the appeal.  This order will be an order nisi and any submissions to the contrary must be put in writing, with the Plaintiff going first, within 14 days, the Defendant’s reply within 14 days thereafter, and any consequential response by the Plaintiff within seven days thereafter. 

Gekko Lan, instructed by Messrs V Hau & Chow for the Plaintiff

Sara Tong, instructed by Messrs Alfred Lam, Keung & Ko for the Defendant