DUTFIELD INTERNATIONAL GROUP CO LTD v. NINE DRAGON INVESTMENT LTD AND OTHERS

HCCL 11/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 11 OF 2013

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D E C I S I O N

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1.  These proceedings are brought by the plaintiff to recover outstanding principal and interest due from the 1^st defendant, as borrower under a loan agreement dated 4 January 2010, and from the 3^rd defendant, as guarantor under a deed of guarantee also dated 4 January 2010. The proceedings were commenced by a writ of summons issued on 12 April 2013. The statement of claim in the action was filed on 8 May 2013. On 21 June 2013, the plaintiff took out summons for O 14 judgment against the 1^st and 3^rd defendants for outstanding principal of HK$57,000,000 and outstanding interest of HK$84,360,000 (calculated at the agreed rate of 4% per month for the period from 3 March 2010 and 3 April 2013) and further interest accruing at the agreed rate of 4% per month on the said principal from 3 April 2013 until payment. The summons was supported by the affirmation of Ms Ivy Chan Choi Har affirmed on 21 June 2013.

2.  On 28 June 2013, I gave directions that the 1^st and 3^rd defendants file and serve affirmations in opposition within 21 days and that the plaintiff file and serve affirmations in reply, if any, within 21 days thereafter, and that no further affirmations be filed without the leave of court.  I adjourned the application for summary judgment to be heard before me on 14 August 2013 at 10 am with half day reserved.  The hearing never took place on that day on account of the fact that Typhoon Signal No 8 had been hoisted and that hearing will now take place on 26 September 2013 before Mr Justice Godfrey Lam, one of the panel judges of the Commercial List.    

3.  Pursuant to my directions, the 3^rd defendant made and filed his affirmation on 19 July 2013 and the plaintiff filed affirmations in reply in the form of the 2^nd affirmation of Ms Ivy Chan Choi Har made on 9 August 2013 and the affirmation of Alfred Law Kin Ming made on 9 August 2013.  In his affirmation, Mr Law denied any personal knowledge of the matters raised by the 3^rd defendant in relation to the loan agreement dated 4 January 2010. 

4.  On 13 August 2013, the day before the scheduled O 14 hearing, the 1^st and 3^rd defendants sought leave to rely on the 2^nd affirmation that had been made by the 3^rd defendant on the same day to respond to this assertion of Mr Alfred Law.  In that affirmation, he exhibited a number of documents to prove Mr Law’s involvement with the loan agreement.  The 3^rd defendant also exhibited a number of other documents which, I conclude, could have been exhibited in his 1^st affirmation but which, as conceded by counsel for the plaintiff, was evidence that was relevant to the issues that had to be ventilated at the O 14 hearing.  The remaining parts of the 2^nd affirmation contained argument that the court could ignore, even if the leave was granted for the 2^nd affirmation to be adduced at the hearing of the O 14 application.

5.  It was fortuitous for the 1^st and 3^rd defendants that the O 14 hearing on 14 August 2013 was adjourned by the passage of Typhoon Utor.  With the passage of the Civil Justice Reform, the courts are very reluctant to grant leave to adduce additional evidence that might result in the adjournment of the substantive hearing. 

6.  Although the hearing of the O 14 application has been adjourned to be heard on 26 September 2013, I directed that the hearing of the summons, taken out by the 1^st and 3^rd defendants on 13 August 2013 for leave to file the 2^nd affirmation of the 3^rd defendant, be re-fixed to be heard on 28 August 2013.  I would not have hesitated, at that hearing, to grant the leave that was sought because, arguments therein aside, the affirmation contained relevant evidence which responded to the allegation of Mr Alfred Law and which was relevant to the issues to be ventilated at the O 14 hearing.  No prejudice would be caused by the grant of leave to rely on this affirmation because, as was conceded by counsel for the plaintiff, there was sufficient time for the plaintiff to respond to this new affirmation.  The grant of the leave that was sought would not have created any risk that the hearing fixed on 26 September 2013 might be derailed. 

7.  However, I did not on 28 August 2013 grant the leave that was sought but directed the parties to file further written submissions on the point raised by Mr Anson Wong, counsel for the plaintiff, that O 32 r 11A(4) of the Rules of the High Court (“RHC”) applied such that I ought not to grant leave to the 1^st and 3^rd defendants to file and rely on further evidence in the absence of exceptional circumstances.   

8.  O 32 r 11A appears in Part II of O 32 which deals with the powers of the registrar, judges and the court.  O 32 r 11A provides:

“(1) A master may-

(a) determine an interlocutory application without an oral hearing; or

(b) adjourn the application to be heard before him or another master or a judge in chambers.

(2) The master may fix a date on which he may-

(a) in the case of paragraph (1)(a), hand down his determination of the application; and

(b) in the case of paragraph (1)(b), make an order that the application be heard before him or another master or a judge in chambers on a date specified in the order.

(3) The master may give such directions as he thinks necessary or desirable for the purpose of determining the application, including directions for-

(a) the setting of a timetable for the steps to be taken between the date of the giving of those directions and the date of the determination of the application;

(b) the filing of evidence and arguments;

(c) the filing of a statement of costs in respect of the application; and

(d) the filing of a statement of grounds in opposition to the statement of costs referred to in sub-paragraph (c).

(4) 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.

(5)  Paragraph (4) is subject to a direction given under paragraph (3).”

9.  This new rule, enacted as part of the Civil Justice Reform, conferred a power on the master to determine interlocutory applications with, or without, an oral hearing, as he believed appropriate.

10.  In his further written submissions, Mr Anson Wong submitted that a master is entitled to decide the mode of determination (ie with or without hearing) and, at the same time, give directions for the filing of evidence before the date of determination of the application (r 11(A)(3)); that where a master directs the application to be adjourned for determination at hearing and the filing of evidence before the hearing (r 11A(3)), the parties are entitled to file evidence within the directions without any restriction (r 11A(5)); but where a party seeks to adduce further evidence outside the directions, then he has to show “exceptional circumstances” (r 11A(4)).

11.  He conceded that the present case fell within the 4 corners of the rules save for one aspect, namely, that the directions given by the court on 28 June 2013, for the adjournment of the O 14 application for hearing and for the filing of evidence for the purpose of such hearing, were given by a judge instead of a master.  However, he submitted that this should not affect the application of O 32 r 11(4) because it made no sense to draw a distinction between a direction given by a master and a direction given by a judge.  If such a distinction was to be drawn, the restriction on admission of further evidence imposed by O 32 r 11(4) could easily be avoided by the parties choosing to take out applications before judges or moving their cases from the general list to specialist lists such as the Commercial List.  He also pointed out that O 32 r 11A(4) did not contain any reference to a master or a judge and, instead, provided that no further evidence may be adduced unless it appears to “the Court” that there are exceptional circumstances.  This showed that the rule was applicable whenever the court was asked to admit further evidence after an interlocutory application was adjourned for determination by hearing.

12.  Mr Wong also relied on the decision of Saunders J in Fortune Assets Development Ltd v De Monsa Investments Ltd, HCA 167 of 2009, 21 August 2009, in which the learned judge applied O 32 r 11A(4) and refused the defendant’s application for leave to file further evidence to resist the plaintiff’s summary judgment application.  The application to adduce additional evidence was made to Saunders J at the hearing of the substantive application for summary judgment under O 86 and he could have refused to receive the evidence in the exercise of his discretion, applying post-CJR principles which require very strong grounds to move a court to accede to late applications to adduce additional evidence if doing so would result in hearing dates being adjourned or vacated (see § 11 of the judgment of Saunders J and see Parsad v Great Wealthy Engineering Co Ltd, [2012] 3 HKLRD 705).  However, Saunders J accepted counsel’s argument that the application had to be dealt with under O 32 r 11A(4).  He held that exceptional circumstances did not exist in the case before him where “a proper review of the potential issues that might arise in [the] proceedings ought to have resulted in the information contained in the affidavit being filed within the time limits imposed”.

13.  Mr Wong concluded his submissions by stating that there were no exceptional circumstances in the present case as would enable the court to grant the leave that was sought. 

14.  In his further written submissions, Mr Andrew Liao SC, who appeared for the 1^st and 3^rd defendants, submitted that O 32 r 11A was expressly aimed at interlocutory matters before a master; that r 11A(1), r 11A(2), and r 11A(3) all expressly referred to “master”; and that “master” as defined in O 1 r 4(1) did not include a “judge”.  He also referred to certain passages in the Final Report on the CJR and submitted that it was also evident, from those passages, that O 32 r 11A was aimed at interlocutory matters before a master:

“What is envisaged is that the master should be given a discretion either to determine the application on the papers without a hearing … or to adjourn the application for an oral hearing [§520];

The master may of course be mistaken. The safeguard against this is an appeal to the judge in chambers as of right [§522];

On the proposed system, many applications will have been decided on the papers or referred upwards to the next level of court [§524] [emphasis added]”.

He also pointed to Practice Direction 5.4 (“PD 5.4”), Part D (1), where the scope was expressly stated to be “Disposal of an Interlocutory Summons by a Master on the Papers”.  Paragraph 18 of PD 5.4 stated that where the master “considers it appropriate to dispose of an interlocutory summons on the papers pursuant to O 32, r 11A, he may give directions for the filing of affidavits and/or skeleton arguments and set the date (“the order date”) for disposal of the summons [emphasis added]”.  The Final Report also stated that “[t]o enable the master to decide which course to adopt, he must have before him the evidence relied on by the applicant and the respondent, the skeleton arguments and any authorities [§521]”.  If the master decided to invoke the “Order Date” procedure, Paragraph 23 of PD 5.4 provided that “on the order date, appearance of the parties is not required”.  On the order date, the Master may make an order on the summons or adjourn the summons to a date for oral argument.  Under O 32 r 11A(1), the master may either “determine an interlocutory application without an oral hearing”, or “adjournthe application to be heard[emphasis added]”.  It is only if the application was “adjourned” that O 32 r 11A(4) came into play to exclude further evidence unless the requirement therein was satisfied.  Mr Liao submitted that the circumstances in the present case were entirely different and that O 32 r 11A was never engaged or applicable.

15.  I conclude that Mr Liao’s submissions are correct and that O 32 r 11A(4) only applies to proceedings commenced before a master who has given directions for the exchange of evidence.  Although the reference to “the Court” in O 32 r 11A includes a judge, I construe O 32 r 11A(4) as applying to proceedings before a judge in chambers only in the event that the master, after giving directions under O 32 r 11A(3), comes to the view, or accedes to an application, that the matter ought to be disposed of by a judge in chambers. In that event, the judge ought not to allow further evidence to be adduced in the absence of exceptional circumstances.  O 32 r 11A(4) does not apply to proceedings that are transferred by a master to a judge in chambers without any directions being made by the master to exchange evidence.  Nor does O 32 r 11A(4) apply to interlocutory applications made to a judge who has adjourned the application for argument and has given directions for the exchange of evidence to be deployed at the adjourned hearing. 

16.  I conclude that the exercise of my discretion, to grant the leave that has been sought by the 1^st and 3^rd defendants, is not constrained by the provisions of O 32 r 11A and, for the reasons set out above, I grant leave to them to rely on the 2^nd affirmation of the 3^rd defendant at the coming O 14 hearing.  I also grant leave to the plaintiff to file affirmation evidence in reply, if any, within 14 days.

17.  I depart from the decision of Saunders J in Fortune Assets Development Ltd v De Monsa Investments Ltd, HCA 167 of 2009, 21 August 2009, who held that the application to adduce additional evidence before a judge in chambers had to be dealt with under O 32 r 11A(4). Saunders J. did not have the benefit of the submissions that I have received on this point. 

18.  If I had concluded that O 32 r 11A(4) applied to the proceedings before me, I would only have granted leave to the 1^st and 3^rd defendants to rely on paragraphs 7 to 26 of the 3^rd defendant’s 2^nd affirmation, and to the exhibits referred to in those paragraphs, on the ground that exceptional circumstances existed in the present case in that it would have been a denial of natural justice if such leave had not been granted.  The 1^st and 3^rd defendants would have been denied their right to be heard if they were unable to respond to the new allegation raised in the affirmation in reply filed by the plaintiff.  A party ought to be permitted to adduce relevant proportionate evidence to rebut a new case raised by the opposite party, if the grant of leave to do so does not jeopardise milestone dates.  In this case, the grant of leave to rely on paragraphs 7 to 26 of the affirmation in question would not result in any adjournment of the substantive hearing.

19.  I make costs orders nisi as follows.  The 1^st and 3^rd defendants are to pay the costs of the application for leave to adduce additional evidence, summarily assessed in the sum of $1,000 and to be paid forthwith.  The plaintiff is to pay the costs of the hearing on 28 August 2013, summarily assessed in the sum of $40,000 and to be paid forthwith.