ONWAY ENGINEERING LTD v. SHUN WING CONSTRUCTION & ENGINEERING CO LTD

FAMV No. 18 of 2009

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 18 OF 2009 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 357 OF 2008)

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Appeal Committee: Chief Justice Li, Mr Justice Bokhary PJ and Mr Justice Ribeiro PJ

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D E T E R M I N A T I O N

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Mr Justice Ribeiro PJ:

1.  At the hearing, we refused leave to appeal with reasons to be delivered later.  We now provide those reasons.

2.  The applicant brought proceedings against the respondent for an alleged debt of approximately $11.88m.  That action is barred under the Limitation Ordinance[1] unless the applicant can rely on an acknowledgment of debt.  It seeks to rely on two requests for confirmation of a debt issued by the respondent’s auditors, Ernst & Young (“E&Y”) and signed by the respondent’s then company secretary, Mr Sam Lo Yun Sang (“Mr Lo”).  Those requests ask for confirmation that there is a debt due and owing by the respondent to the applicant in the amount claimed in the action.

3.  The respondent issued a summons under O 18 r 19 and the inherent jurisdiction to strike out the action as time-barred on the basis that the audit confirmation requests were clearly erroneous.  It filed evidence from one of its directors, Mr Patrick Au Yu Fai (“Mr Au”), who stated that he had been informed by Mr Lo that the latter had signed the request without reading it.  Mr Au also exhibited a letter from E&Y explaining that there had been a clerical error, with the debt amount entered in the wrong box in a standard form audit confirmation slip.  On that basis, Mr Au stated his belief that the debt was not owed to the applicant but actually a debt owed by the applicant. 

4.  The Judge[2] accepted that the audit request forms had been erroneously filled in, that there had been no genuine acknowledgment of the debt, that the action was time-barred and that it therefore had to be struck out.  His Lordship was upheld by the Court of Appeal.[3]

5.  The applicant sought leave to appeal solely on the basis of a technical point not previously taken.  Relying on the note in the White Book at 41/5/2 and the cases there cited,[4] it contended that by reason of O 41 r 5,[5] the affirmations of the respondent’s director are inadmissible because they were made on information and belief.   It argued that they would only be admissible if the striking-out application was an “interlocutory” application falling within O 41 r 5(2) and that, on the authority of Gilbert v Endean,[6] the striking out application was not interlocutory but final since it aims to determine the parties’ substantive rights.  Reliance was placed in particular on Cotton LJ’s statement that:

“... for the purpose of this rule those applications only are considered interlocutory which do not decide the rights of parties, but are made for the purpose of keeping things in statu quo till the rights can be decided, or for the purpose of obtaining some direction of the Court as to how the cause is to be conducted, as to what is to be done in the progress of the cause for the purpose of enabling the Court ultimately to decide upon the rights of the parties.”[7]

6.  In the motion for leave, the applicant had sought to argue that O 41 r 5 deprives the court of jurisdiction to receive non-compliant affidavit evidence.  However, that point has rightly been abandoned by Mr Jat Sew Tong SC, appearing with Ms Janet Ho for the applicant.[8]  It is plainly not a matter going to jurisdiction and, as appears from Gilbert v Endean itself,[9] non-compliance with O 41 r 5 can be waived.  In civil cases, the parties are generally permitted to reach agreements regarding the admission of evidence.

7.  In the present case, not only was the O 41 r 5 objection not taken at first instance, counsel then appearing for the applicant in the Court of Appeal conceded that the respondent’s affirmations were admissible within O 41 r 5(2).[10]  Accordingly, even if there was non-compliance, it has plainly been waived and there is now no basis for complaint. 

8.  Moreover, as pointed out by Mr Russell Coleman SC, appearing with Ms Liza Jane Cruden for the respondent, the applicant faces a Flywin objection:[11] if the admissibility point had been taken at first instance, the respondent could have introduced primary evidence from Mr Sam Lo and E&Y themselves.

9.  The aforementioned points are sufficient to dispose of this application.  However, as we have heard submissions concerning the proper test for ascertaining whether a matter is interlocutory or final for the purposes of O 41 r 5(2), we will deal briefly with those submissions and also take the opportunity to indicate that the note in the White Book at 41/5/2 needs revision.  That note unsatisfactorily omits reference to Savings & Investment Bank Ltd v Gasco Investments (Netherlands) BV (No 2).[12] 

10.  In that case, Nicholls LJ (as he then was) stated of Gilbert v Endean:

“I do not think that, when giving their ex tempore judgments on an appeal which was completed inside one day, and on which the court did not call on the respondents, either Jessel MR or Cotton LJ was attempting to state an exhaustive definition of interlocutory proceedings.”[13]

11.  Indeed, Gilbert v Endean is a decision from 1878 based on the 1875 Rules of the Supreme Court, Ord XXXVII then in force, providing:

“2.  Upon any motion, petition, or summons evidence may be given by affidavit; but the court or a judge may, on the application of either party, order the attendance for cross-examination of the person making any such affidavit.

3.  Affidavits shall be confined to such facts as the witness is able of his own knowledge to prove, except on interlocutory motions, on which statements as to his belief, with the grounds thereof, may be admitted...”[14]

12.  The modern rule contained in O 41 r 5 has important differences.  Order 41 r 5(1) expressly[15] allows affidavits and affirmations on information and belief in relation to summary judgment applications.  This may well be a measure designed to counteract the restrictive approach of Gilbert v Endean.  It is difficult to see any basis for suggesting that affidavits on information and belief should be permitted for use in applications for summary judgment – which are obviously capable of finally determining the parties’ rights – but not for striking-out applications. 

13.  In the Gasco case,[16] the English Court of Appeal moved away from the Gilbert v Endean approach.  Nicholl LJ thought that the proper approach to O 41 r 5, involved the contrast between “interlocutory” and “final” applications, with O 41 r 5 read as permitting the use of affidavits on information and belief in proceedings “other than trials”:

“It seems reasonably clear that in using the expression ‘interlocutory proceedings’ without further definition or elaboration, the rule is drawing a contrast between interlocutory and final.  Proceedings vary so widely, covering so many different situations, that comprehensive definitions of ‘interlocutory’ and ‘final’ are probably impossible.  But the essence of the distinction seems to me to lie in the connotation, implicit in the phrase, that in general ‘interlocutory proceedings’ are proceedings other than the trial of the action or the equivalent hearing in the case of an originating summons or other originating process.  The trial of an action or the equivalent stage of other originating processes would, in general, be regarded as ‘final,’ but even here there may be exceptions, depending on the nature of the claims in the proceedings. For example, the trial of a Norwich Pharmacal Co. v. Customs and Excise Commissioners [1974] AC 133 type of action may be an exception, and there may well be others.  Broadly that is how, as it seems to me, the terms ‘interlocutory’ and ‘final’ in this context would be understood by lawyers.”[17] 

14.  And Purchas LJ specifically held that a striking-out application was interlocutory for the purposes of the rule:

“An application for a new trial is interlocutory (Salter Rex & Co v Ghosh [1971] 2 QB 597); so is a summons to sign summary judgment under RSC, Ord 14 or to strike out under Ord 18, r 19.”[18] 

15.  Gilbert v Endean should not be treated as the guiding authority on the scope of O 41 r 5.  The word “interlocutory” in O 41 r 5(2) should be given the same meaning as “interlocutory” in the context of applications for leave to appeal to the Court of Final Appeal where the “applications test” is used: a matter is “interlocutory” unless determination of the application will finally dispose of the action or finally determine a substantial issue in the action, whichever party succeeds on the application.[19]  As we held in Sam Woo Bore Pile Foundation Limited v China Overseas Foundation Engineering Limited,[20] a striking-out application is “interlocutory” applying that test. 

16.  Mr Jat SC sought to argue that the present case meets the applications test since determination of the striking-out application would finally dispose of the limitation argument whatever the outcome of the hearing.  We do not agree.  The whole thrust of the applicant’s case has been to contend that the striking-out application should be dismissed so that the limitation issue could be further explored at trial with an investigation of the circumstances in which the audit confirmation requests were filled in and the underlying debt position.

17.  Mr Jat also invited us to adopt a different test for what is “interlocutory”, submitting that there is some support for this in Hip Hing Timber Co Ltd v Tang Man Kit (2004) 7 HKCFAR 212.  Although he was reluctant to put his case in such stark terms, he was essentially advocating a test which would treat as “final” any application which, on being resolved in a particular way (but not in any event), would finally determine the substantive rights of the parties.  We do not accept that submission.  Hip Hing Timber applies the usual applications test[21] and nowhere advocates a different approach.  For the aforesaid reasons, the application was dismissed with costs.