JOYTEX DEVELOPMENT LTD v. SUPER HOMES LTD

HCA 18/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 18 OF 2012

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DECISION
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THE APPLICATIONS

1.  There are two summonses before this court:

a. The plaintiff’s summons dated 22 April 2015 for leave to file and serve the Amended Statement of Claim; and for leave to file and serve its expert report out of time despite my order dated 12November 2014 (“the Order”) imposing a deadline for the plaintiff to do so, being 28 days from the date of the order, ie 10December 2014. Leave for amendment to the Statement of Claim has been disposed of.

b. The defendant’s cross summons to strike out from the plaintiff’s expert report the parts as set out in the schedule of the summons on the ground that they fall outside the scope of the Order and/or that they are inadmissible, irrelevant, unnecessary and/or insufficiently probative.

2.  These two summonses are contested. The parties are legally represented.

The cross summons – setting down issue

3.  I have noticed that the cross summons was taken out by the defendant on 25 July 2015 for a 3-minute hearing, which is a call-over hearing for interlocutory application but was fixed before me today. However, the parties have made written submissions on this cross summons as well. I shall deal with it as if it were an adjourned hearing for argument. The costs of this cross summons will be assessed for the time incurred today. The parties are not encouraged to adopt this approach because this kind of applications should have been within the contemplation of the defendant and should be taken out after the call-over hearing of the plaintiff’s summons. The time extension summons was only set down for one hour. It is, of course, not possible to dispose of the cross summons within 3 minutes. The argument for the cross summons will take more than one and a half hours, which will derail the hearing of other cases by the court following the time extension summons. Since I have no other cases this morning, I can hear argument of the cross summons together with the time extension summons. It is the defendant’s legal advisers’ responsibility to avoid this.

The disputed applications: time extension and striking out

4.  The disputed issues between the parties are leave for the plaintiff to serve the expert report out of time and the defendant’s cross summons to strike out parts of the plaintiff’s expert report if this court grants leave to the plaintiff to serve the expert report out of time.

THE FACTUAL BACKGROUND

5.  Relevant to the present applications, the brief factual background is that the plaintiff is the purchaser of unit 25/A (the “Flat”) in a building known as The Icon and the defendant is the developer of the building. The dispute arose because, as alleged by the plaintiff, aspects of the Flat were not in compliance with representations made by or on behalf of the defendant, in particular, the lack of an open kitchen as repeatedly represented and advertised by the defendant to the plaintiff. The plaintiff therefore sued the defendant for fraudulent or negligent misrepresentation, seeking rescission of the conveyancing contract, damages for and/or in lieu of fraudulent misrepresentation.

THE TIME EXTENSION APPLICATION

6.  I shall first discuss the application for extension of time for the service of the expert report by the plaintiff.

7.  There are common issues between the parties, viz. that the deadline for the plaintiff to serve the expert report is 10 December 2014; that the plaintiff applied for extension of time by summons dated 22 April 2015, therefore there is a breach of the Order and the delay is about four months; that the matter has not been set down for trial and there is no milestone date that may be affected. Other than that the defendant has stated in its solicitor’s affirmation filed on 22 July 2015 that the defendant was led to proceed to prepare its case on the basis that “no expert evidence would be called and did not actively seek out experts in the interim.”[1], there is no other prejudice suffered by the defendant.

8.  There is no dispute that under Order 3 of the RHC, the court has the discretion to extend the time for the plaintiff to serve its expert report. It is therefore an argument over how the discretion should be exercised in light of the factual situation and the legal authorities. It can be seen in the discussion below that, upon proper legal advice, the parties should have been able to know the courts’ attitude in exercising the discretion by reference to the trite legal principles as enunciated in the legal authorities. It may be due to the misconception of the meaning of the key elements such as the word “delay” in the authorities that they considered that they should put the argument before the court for determination. Alternatively, the legal advisors had adopted a pedantic interpretation of the words of the directions or order without proper regard to the practical effects of such directions or simply being unreasonable in the conduct of the proceedings. These have caused much concern to the courts because such conducts will inevitably waste costs and time for the parties unnecessarily and will take up the courts’ time, which should be more usefully utilized for other cases. The courts’ diaries and the waiting time for hearing are unnecessarily lengthened. It falls upon the legal profession to adopt a reasonable and practical approach for the resolution of the disputes between the parties.

9.  This is not an isolated event. There is another case before the Honourable Mr. Justice A. Chan, in which the applicant served answers to the request for further and better particulars pursuant to an “unless order” a few hours beyond the time as set down in the order. The reason for the delay was the answers were wrongly served on the other party. Upon being notified by the 2^nd respondent’s solicitor, the applicant’s solicitors apologized and immediately served the answers on the 2^nd respondent’s solicitor, who insisted upon the sanction under the “unless order” as if it were a conveyancing transaction where the parties had agreed that time is the essence of the contract. The learned judge has passed the following comments in his judgment:

“13. With respect, these facts very much speak for themselves. Taking advantage of a genuine mistake by a staff of CWL when there was no prejudice suffered as a consequence of the short delay in receiving the Answers can only be seen as opportunistic (it will be seen below that this court is unable to find any merit in this appeal), and quite contrary to the objectives enshrined in O 1A, r 1 (“Objectives”).

14. If CJR has not achieved the desired change in attitude to litigation, this court would be forced to act. Unfortunately, the most effective, and possibly the only effective, way to enforce the Objectives is to penalise unreasonableness with costs. If similar or comparable circumstances arise in the future, this court would have to consider making an award of indemnity costs against the unreasonable party.”[2]

10.  I shall deal with the situation by way of costs below.

Discussion

11.  The defendant’s opposition to the plaintiff’s application for extension of time bases upon the grounds of delay with aggravating factors of (i) intentional default, (ii) no satisfactory explanatory, (iii) prejudice; and that the expert report is lack of probative value.[3]

12.  The plaintiff’s solicitor has in the 2^nd affidavit filed on 12 May 2015 set out the reasons for the non-compliance of the Order and the delay, as the defendant has put it. It was due to a number of factors: that the expert was unable to make revision of his former report in compliance with the Order as he was on leave to attend a wedding in Canada, the revised report being ready by 11 March 2015; that the plaintiff’s counsel was engaged in a long trial and was unable to give the timely advice. The revised expert report was finalized on 14 April 2015.[4]

13.  It is apparent that the plaintiff’s solicitor was aware that the plaintiff would not be able to comply with the Order as early as in early December 2014. Yet, no application was made to the court for time extension. Nor, as the defendant has submitted, had the plaintiff requested the defendant for an extension of time for serving the expert report. But to say that it was the plaintiff’s intentional default is an exaggeration of the situation as the plaintiff’s solicitor had been pursuing the preparation of the expert report all along. Pausing here, it will be advisable for the legal advisors to take an objective view of the situation when giving legal advice to clients to present a fair view for client’s consideration whether interlocutory application should be made or defended in order to save time and costs. The nature of the situation, as will be seen here, will be highly relevant in the exercise of the discretion by the court. If the defendant had agreed to extend the time in April or May this year, the defendant would have been able to serve the expert report in response in accordance with the Order. There has therefore been a delay of at least five months for the proceedings.

14.  The defendant also complains that those reasons given above are not sufficient reasons to “explain the inaction on the part of the Plaintiff’s solicitors in failing to notify either the Court or the Defendant”. I agree with the defendant on this point. The question is will this point assist the defendant in the argument that leave should not be granted for the extension of time for service of the expert report? The defendant has not been able to show any authority that this factual situation will support its argument. It seems that the defendant relies upon Chau Hoi Shuen, Solina Holly v SEEC Media Group Ltd (unreported, HCA 1194/2010, 6 August 2012) at [15] per Deputy High Court Judge Lok (as he then was) (citing Chan Wing Cheung Allan v Ho Shu Yee Susana (10 January 2005, CACV 393/2004, Ma CJHC, as he then was, with approval). However, this case is on the proposition, as in the defendant’s submission, that indulgence sought from the Court should rarely be given for late application unless there is a satisfactory explanation.[5] Here, indulgence relates to the late application, by which, the court referred to the stage of the proceedings. In this case, the application was for leave to serve a lengthy supplemental witness statement of the defendant at the pre-trial review hearing before the trial judge, Waung J. one month before the trial (application on 13 December 2004, trial on 12 January 2005).[6] It was upon this basis that the Court of Appeal said that it was a late application. Obviously, those significant features do not apply in this case. Again, this demonstrates that the legal advisors had adopted an exaggerated view of the situation. If this is not the case, then they must have failed to take into consideration the appropriateness of the situations of the authority in citing this case in support of its argument. Either stance will not assist the court in coming to a just and fair solution for the application.

15.  The defendant has also relied upon Ip Sau Lin v Hospital Authority (unreported, DCEC 584/2007, 9 April 2009 at [11] per HH District Judge Marlene Ng (as she then was):-

“Parties/practitioners should note that under the new CJR regime failing to comply with court-imposed timetable… is tantamount to sabotaging the court’s case management function, and is and will be discouraged. … parties/practitioners are expected to proactively inform the court of any anticipated non-compliance prior to the court-imposed deadline or of any actual non-compliance immediately upon expiry of such deadline…”

16.  This Decision was delivered a week after the commencement of the CJR. The learned District Court Judge advised the parties to be conscious of the time-tables made the by court for case management in order to ensure that the CJR would run smoothly. I have no problem with the views above. But the defendant has failed to present a full view of the court as it has not set out the judge’s further comments:

“…Since inter partes directions …bind both parties, it is incumbent not only on the party who anticipates non-compliance or is actually non-compliant to so inform the court and to apply for time extension, but the other party(ies) is(are) likewise required to assist the court in discharging its active case management function by bringing to the court’s notice of any anticipated or actual non-compliance of court-ordered case management directions or timetable. …”

17.  It is obvious to the defendant that by December 2014 the plaintiff had not complied with this Court’s direction on service of the expert report under the Order. Yet, the defendant had not informed this Court of the plaintiff’s failure or taken out any application to enforce the Order. As the Court of Final Appeal has held in Wing Fai Construction Company Limited (in Compulsory Liquidation v Yip Kwong Robert & Others (2011) 14 HKCFAR935, “litigation is not to be treated as a game, but as a serious legal contest…. Rules do not exist for the sake of compliance with them as an end in itself; they exist for the purpose of ensuring that disputes before the courts are justly resolved. It does not, however, provide any excuse for parties or their legal representatives not to comply with the Rules or orders made by the court, nor does it relieve them of this duty under O.1A r.3. The emphasis must be placed on the word “just”.” §34. Letting the sleeping dog lie is no longer an attractive argument. See paragraph 47. The defendant’s conduct, to say the least, will not assist its argument against the plaintiff’s application for time extension.

18.  The defendant has also relied upon another Decision in Nam Ching Wun v Tsun Un Pawn Shop and Others (unreported, HCA 2151/2008, 7 October 2014) at [56] in support of its argument on prejudice. Again, the Decision discussed delay would cause prejudice to the other party (parties) in relation to the hypothetical situations such as milestone dates or other parties’ preparation of the evidence, none of which apply to the present case. It does not assist the defendant’s argument. I therefore find that the defendant has not been able to show any real prejudice because of the plaintiff’s delay in the application for time extension. To say that the defendant had been proceeding on the basis that the plaintiff would proceed without expert evidence is unreal as the Order has directed the parties to adduce the expert evidence. As far as I recall, in the case management hearing, it was the parties who proposed those directions to this court for expert evidence directions at trial.

19.  Taking the defendant’s case to the highest, the plaintiff’s default in notifying the defendant or applying to court for time extension for the service of the expert report in a timely manner, the sanction as proposed by the defendant, that is to say, to debar the plaintiff from adducing the expert evidence at the trial, is disproportionate to the default and contrary to the primary objective to secure the just resolution of disputes in accordance with the substantive rights of the parties. See O.1A, r.2(2).

20.  In my view, leave should be given to the plaintiff to serve the expert report. I so order.

Costs

21.  I shall reiterate here that the court will be vigilant against any party taking out unnecessary interlocutory applications or defend interlocutory applications without good reasons. This is in accordance with the administration of justice and the spirit of the Civil Justice Reform, as the Chief Justice in the judgment of Wing Fai Construction Company Limited at §31, in which he set out the principal themes of the CJR, one of which being;

“(5) To reduce, if not eliminate, those steps in proceedings, particularly interlocutory applications, which serve little purpose other than to prolong or render more costly civil proceedings.”

22.  I have taken this into consideration in the case of Hishinuma Machery Co Ltd & Another v Mini Diecast Machine Ltd & Another (unrep. HCA 236/2013, 5 May 2015at §§23 & 24) where I held that if a party has notice of the other side for the reasons of non-compliance with the “unless” order and having known the relevant authorities, which showed that it has no reasonable ground to oppose the application, it should take steps to alleviate the costs. The court, when dealing with the costs, will take this into account. Here, the defendant should have the reasons for the plaintiff’s late application for time extension as late as the service of the 2^nd affidavit of Yip Ki Chi Luke, the plaintiff’s solicitor. All the costs up to that date will be considered to be given to the defendant although the defendant had not taken the step to redress the plaintiff’s delay. However, the costs for today’s hearing should be given to the plaintiff, who has succeeded in his argument. I shall make the assessment below.

THE CROSS SUMMONS

23.  I shall now deal with the defendant’s cross summons.

24.  The paragraphs of the expert report that the defendant seeks to strike out are §§4.1 – floor layout, 4.2 – kitchen, 4.3 – living & dinning, 4.4 – bedroom, 4.5-bathroom, 4.6-balcony & utility platform and 5.1.[7]

25.  The defendant’s grounds for striking out those paragraphs are that “those parts fall outside the terms of the Order and/or are inadmissible, irrelevant, unnecessary and/or insufficiently probative.”[8]

Paragraphs 4.1 to 4.6

26.  The defendant submits that those paragraphs are “Mr. Chan’s comments and observation on the “Floor Layout”, “Living & Dining”, “Bedroom”, “Bathroom” and “Balcony and Utility Platform” of the Flat. These are clearly irrelevant.”

27.  The plaintiff’s views on those parts are that they form the factual background of the findings and conclusions that the expert had reached in his conclusion. They are necessary in order to make his report comprehensible and persuasive. Paragraph 5.1 is the conclusion that the expert has reached. He has found that the space for the kitchen is too small for cooking appliances, which will be relevant to the cost of alteration of the kitchen.

28.  As I have mentioned above, those directions in the Order were put forth by the parties for the expert evidence directions.

29.  It will be useful to look at the related directions in the Order.

30.  Paragraph 1.a of the Order provided that the parties should adduce expert evidence at trial of the issues as set out in the Defendant’s letter dated 12 June 2014. This does not cause any dispute between the parties.

31.  Paragraph 1.b of the Order provided that the parties shall adduce expert evidence in the form of written reports in relation to the open kitchen as shown or referred to in (i) the Open Kitchen Layout (as defined and referred to in paragraphs 4.1 and 21 of the Statement of Claim); …i. whether the defendant (as Developer) is permitted to build the subject Unit with an Open kitchen (or alternatively with the layout as represented in Appendix II of the Statement of Claim); and ii. if the plaintiff intends to alter/build/construct an open kitchen for the subject Unit after issuance of the Occupation Permit, is it permissible; if yes, what procedure have to be done and what would be the costs.[9]

32.  Having considered the pleaded case, it seems that the main ground of the plaintiff for the claim is that the plaintiff had relied upon the representations in the brochure supplied by the defendant’s agent and the oral representation, coupled with the showing of the show unit by the agent to enter into the contract with the defendant for the purchase of the unit in question. In paragraph 4.1 of the Amended Statement of Claim, the plaintiff pleaded that “difference versions of sales brochure prepared by Centaline as agent of the defendant had been supplied to the plaintiff. The illustrations and layout plans therein showed that a typical unit A of the Development, including the Property, would have an open kitchen which abutted the bathroom (“the Open Kitchen Layout”)

33.  The scope for the expert report by reference to paragraph 4.1 would be quite wide, which, I consider, would be the common intention of the parties when they proposed the expert directions to me at the case management hearing.

34.  To say that paragraphs 4.1 to 4.6 are outside the scope of the court direction would be far-fetched and untrue. It will be unrealistic for the expert simply to answer the questions yes or no without setting out the reasons in support of his conclusions by reference to what he has seen in his inspections and what he has considered in the process of the survey of the property in question.

35.  However, I agree with the defendant that at paragraph 4.2(b) that “It would be unreasonable for a luxury apartment at mid-levels to require these appliances to be put in the Living and Dining area” should not be included in the expert report because this is not an issue for expert opinion and the court does not require an expert to tell him/her the outlook of a luxurious apartment. The expert simply gives his aesthetic value to such an apartment, which is not necessary. As such, it should be expunged from the expert report.

36.  I agree with the plaintiff that apart from the part above in paragraph 4.2(b), these paragraphs should be included in the expert report for the court’s consideration. Of course, the defendant still has the opportunity to make submissions to the trial judge about these paragraphs at trial.

Paragraph 5.1

37.  This paragraph is one of the conclusions of the expert. Suffice it for me to say here that after reading this paragraph, it is relevant to the issues in dispute and the expert has a duty to make the findings as he has done in his report here.

38.  Except for the part in paragraph 4.2(b), the defendant’s cross summons should be dismissed with costs.

COSTS AND ORDER

39.  As to costs, there is no dispute that the costs should follow the event. The plaintiff has succeeded in both applications and should be awarded costs. The defendant asks this Court to take into consideration that the costs incurred for the works prior to the 2^nd affidavit of Mr. Yip, the plaintiff’s solicitor, should be to the defendant as the defendant had no idea of the reasons for the delay. He asks for a nominal sum of $4,000 to be awarded to his client, which the plaintiff has no objection. The second issue is that there is one sentence that this Court has ordered to be expunged and the costs should also take that into consideration. I consider that this minor issue should be ignored for the purpose of the costs assessment as the plaintiff is overall successful in its argument of the cross summons. On these bases, I allow the costs of the plaintiff, as stated in its schedule to be $69,911 be deducted by $8,000 ($4,000 for Mr. Yip’s affidavit and $4,000 for the defendant’s costs before that affidavit), the net amount being $61,911, which, in my view, is the reasonable amount of costs for today’s hearing. To avoid doubt, I award counsel’s certificate for today’s hearing.

40.  I shall make an order in terms as follows:

a. There be an order in terms of the plaintiff’s summons and the plaintiff shall serve the expert report within 7 days from the date hereof;

b. Paragraph 4.2(b) that “It would be unreasonable for a luxury apartment at mid-levels to require these appliances to be put in the Living and Dining area” should not be included in the expert report and be expunged. Apart from it, the defendant’s cross summons be dismissed;

c. The costs of the plaintiff’s time summons application and the defendant’s cross summons be as per paragraph 39 above.

d. The Case Management Conference fixed on 25 November 2015 be varied to 10:30 am on 11 May 2016 and the costs are in the cause.