CHEUNG SHING YUK TONG CO. LTD. v. HIP HING CONSTRUCTION CO. LTD.

1991 No. A6793

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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R U L I N G

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1. On 4 November 1996, the defendant gave a notice to adduce hearsay evidence under sections 47 and 49 of the Evidence Ordinance, Cap. 8 and Order 38 of the Rules of Supreme Court. The notice is that at the trial of this action, the defendant desires to give in evidence the witness statement of Mr Yeung Tung Tak dated 16 August 1995, on the ground that Mr Yeung cannot be called as a witness at the trial because he is beyond the seas. An affirmation of a trainee solicitor in the firm of the defendant's solicitors was filed during the course of argument to proffer an explanation for the delay in serving the notice, which is that Mr Yeung had left the defendant's employment and emigrated to Australia, and that fact was only realised by the defendant's solicitors on 4 November 1996 whereupon they immediately filed the hearsay notice.

2. Mr Yim for the plaintiff opposes to Mr Yeung's witness statement being admitted in evidence, on the ground that the hearsay notice has not complied with the time requirement of Order 38, rule 21(1)(a) of the RSC, which provides that a hearsay notice should be served "not later than 21 days before application is made to set down" for trial. As the time prescribed by the rule is nebulous, Mr Yim is quite content to rely on the period provided for in the parallel English rule, which is "within 21 days after" the case is set down.

3. The present case was set down on 17 April 1996 for trial on the fixture list, and the trial dates to commence on 6 November 1996 were fixed on 18 May 1996. The witness statement sought to be adduced was made on 16 August 1995. Mr Yim submits therefore that there was great delay in the service of the hearsay notice.

4. In view of the long delay, Mr Yim asks me not to exercise my discretion to allow Mr Yeung's witness statement to be given in evidence, although he cannot attack the veracity of the explanation for the delay. My discretion is based on Order 38, rule 29(1) of the RSC, which provides:

"Without prejudice to sections 47(2)(a) and 49(2)(a) of the Ordinance and rule 28, the Court may, if it thinks it just to do so, allow a statement falling within section 47(1), 49(1) or 50(1) of the Ordinance to be given in evidence at the trial or hearing of a cause or matter notwithstanding --

(a) that the statement is one in relation to which rule 21(1) applies and that the party desiring to give the statement in evidence has failed to comply with that rule; ..."

5. Mr Yim points out two areas in which he argues the plaintiff is prejudiced by reason of the hearsay notice, namely;

(a) Mr Yeung's statement states that 10% of the goods ordered from the plaintiff was for "future maintenance" whereas in a fax written by him and addressed to the plaintiff before the conclusion of the contract for the sale of the goods, the 10% was mentioned as for "wastage"; and

(b) Mr Yeung's statement mentions that a lump sum of $70,000 was agreed by the defendant to be paid to a sub-contractor Tricosal for remediable work caused by the defect in the goods supplied by the plaintiff, without any breakdown and on a basis which was unclear. The absence of Mr Yeung deprives the plaintiff of the opportunity to ask Mr Yeung to explain the actual basis for the amount, and to test the veracity of Mr Yeung's evidence, and especially in comparison with the evidence to be given by the only other witness to be called by the defendant.

6. Counsel for both parties have drawn my attention to a number of authorities. There seems to be some confusion as to what was decided by the authorities, and in deference to counsel, I feel I ought to deal with the rules established by the cases cited.

7. In Ford v. Lewis [1971] 1 WLR 623, where the defendant sought to put in evidence certain statements at trial but had not given any hearsay notice in compliance with Order 38, rule 21, the English Court of Appeal held that the exercise by the trial judge of his discretion to admit the statements was invalid as the defendant did not inform the trial judge that leading counsel for the defendant had taken the decision not to serve the hearsay notices because he had formed the view that the disclosure of the contents of the documents to the infant plaintiff and her parents before the trial might have affected their evidence. The Court of Appeal was divided, with Davies LJ dissenting. At p. 632F and 633E-G, Edmund Davies LJ said:

"In proper circumstances, a trial judge is undoubtedly entitled to admit evidence of an out-of-court statement notwithstanding non-compliance with the initially mandatory requirements. ...

In these most unfortunate circumstances, it seems to me impossible that the defendant should be permitted to rely upon the judge's purported exercise of his discretion under rule 29. I hold that there can be no valid exercise of such discretion if there has (for any reason) been a deliberate withholding from the court of the reason for non-compliance. Had Veale J. known that this was the result of a deliberate decision based upon the tactical value of surprise, I regard it as inconceivable that he would have ruled in favour of admitting the statement. But with the profoundest respect to Davies L. J. I go so far as to say that, even if he had, such an attitude ought not to be countenanced by this court. A suitor who deliberately flouts the rules has no right to ask the court to exercise in his favour a discretionary indulgence created by those very same rules. Furthermore, a judge who, to his knowledge, finds himself confronted by such a situation would not, as I think, be acting judicially if he nevertheless exercised his discretion in favour of the recalcitrant suitor. The rules are there to be respected, and those who defy them should not be indulged or excused. Slackness is one thing; deliberate disobedience another. The former may be overlooked; the latter never; even though, as here, it derives from mistaken zeal on the client's behalf. To tolerate it would be dangerous to justice."

8. Morris v. Stratford-on-Avon RDC [1973] 1 WLR 1059 is another decision of the English Court of Appeal on the point. There the Court upheld the trial judge's exercise of discretion to admit a statement at trial although prior hearsay notice as required by Order 38, rule 21(1) had not been given. At 1063G, Megaw LJ observed:

"There is no doubt that the judge has to consider all the relevant matters in exercising his discretion; and if the proper notices for which the Act and the rules provide have not been given, then the judge must consider that matter with care and must give the opposite party every opportunity to make submissions before he can properly decide whether or not the non-compliance with the rules is such that justice requires that the statement should be admitted.

Nothing that I say must be taken in any way as suggesting that non-compliance with the rules as to notices is a matter that can be lightly overlooked."

The learned judge went on to say, at 1065B, as follows:

"Another matter which in my judgment must always be carefully watched, when an application of this sort is made under the Civil Evidence Act 1968 without proper notices having been given, is for the judge to make sure, so far as he can, that no injustice will be done to the other party by reason of the statement being allowed to be put in evidence. If there is ground to suppose that there will be any injustice caused, or that the other party will be materially prejudiced or embarrassed, then the judge should either refuse to allow the document to be admitted or, in his discretion, allow it on terms, such as an adjournment at the cost of the party seeking to put in the statement."

9. In Rover International Ltd and Others v. Cannon Film Sales Ltd. (No. 2) [1987] 3 All ER 986, at 987j-988a, Harman, J. stated:

"Objection is taken to those statements by counsel for the defendant on the ground that this late production of documents prejudices his client in that it is not given adequate time to prepare to deal with the matter. In the normal way the period of 21 days from setting down is a period far more usually broken than observed because, in the usual way, the period between setting down and trial is some months at the least. In this particular case that period has in fact been about five weeks, and the three-week period has therefore been very material. In my view, as a general proposition, the court should not exclude evidence unless it is satisfied that real prejudice has been caused, or unless it is clear that a deliberate attempt has been made to take the other side by surprise, a practice which it is the exact purpose of the rules to prevent."

10. Mr Beaumont relies on the case of Cluett HK Ltd t/a Six Continents v. Hercules Knitters Ltd. [1986] HKLR 1112. A holding of the Court of Appeal in the case as set out in the headnote seems misleading. It reads: "Once the reason set out in Order 38, rule 25 had been established as correct, there was no discretion in the court to refuse to admit the evidence." That holding gives the impression that the trial judge has no discretion to refuse to admit a statement in evidence insofar as the reason for adducing the statement is within the ambit of Order 38, rule 25 of the RSC, contrary to the expressed provision of Order 38, rule 29(1)(a). It appears from the judgment of the Court as delivered by Power J (as he then was) at p. 1113H that the relevant hearsay notice was served after the expiration of the period under Order 38, rule 21(1). However, it is clear that the point that the hearsay notice was served out of time was not taken by counsel (see p. 1114C). That was the reason why the decision was purely based on the application of Order 38, rule 25.

11. In Technalloy Chemical Corp v. International Merona Ltd. [1993] 2 HKC 94, the Court of Appeal held that the court retained a discretion under Order 38, rule 29(1)(a) to grant leave to adduce hearsay documents in evidence where there had been delay in serving the required notice, even in the absence of an explanation of the delay. It went on to examine the circumstances of the case and the justice of the situation and concluded that no prejudice was caused to the party opposing the admission of the documents. The Court there distinguished Ford v. Lewis, supra. At p. 97B, Nazareth, J.A. observed that the judgments of Edmund Davies and Karminski LJJ who delivered the majority judgment in that case did not go so far as to hold that without explanation or evidence of the circumstances about the failure to serve the required notice under Order 38, rule 21(1), the court could not exercise its discretion. The learned judge went on to say at 97D:

"I am accordingly not persuaded that a court cannot exercise its discretion in favour of a defaulting party in the absence of an explanation because the result of that would be that it would not be in possession of all the facts."

12. Upon the above cited authorities, it is therefore clear

(a) where there is non-compliance with Order 38, rule 21(1), where no hearsay notice has been served or where a notice has been served out of time, the court has a discretion conferred by Order 38, rule 29(1) to admit or refuse to admit a statement in evidence;

(b) the court may still exercise its discretion to admit albeit there is no explanation for the non-compliance with Order 38, rule 21(1), while the court should not exercise that discretion if there is a deliberate flouting of the rule;

(c) the court should normally not exclude the statement unless it is satisfied that real prejudice or embarrassment has been caused to the other party;

(d) the court should look at all the circumstances of the case to ensure that no injustice will be done by allowing the statement to be put in, where the injustice can be saved by making an order on terms, such as an adjournment or costs, etc.; and

(e) in a case where a hearsay notice has been served complying with the requirement of Order 38, rule 21(1), the court has no discretion to refuse to admit a statement in evidence insofar as it is satisfied that the reason for adducing the statement within the ambit of Order 38, rule 25 is a correct one.

13. The alleged prejudice suffered by the plaintiff in the present case is nothing more than prejudice that will usually be suffered by any litigant in a trial when a witness for the other party, whose statement is admitted in evidence, is not called to give oral testimony. The prejudice is that the plaintiff is deprived of the opportunity to obtain evidence or admissions from the witness or to cross-examine him. The prejudice is not caused by or related to the lateness of the hearsay notice; rather it is caused by the fact that the witness does not go into the witness box. Anyhow, if any prejudice suffered by the plaintiff is caused by the lateness of the hearsay notice, an adjournment can surely remedy the situation. In the circumstances, being satisfied that Mr Yeung is overseas, I see no proper ground to refuse to exercise my discretion to allow his statement to be used in evidence. I am therefore prepared to admit the statement of Mr Yeung in evidence. If the plaintiff applies for an adjournment, I shall proceed to hear counsel. I shall also hear counsel on costs.