XCHRX TSE WONG CHUN t/a KIN MAN GARMENT FACTORY v. I. J. LANGLEB LTD.

1994, No.A10516

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

----------------------

-----------------

-----------------------

J U D G M E N T

-----------------------

1. The defendant is appealing out of time against the summary judgment entered by the plaintiff pursuant to an order of Master Cannon made under Order 14 of the Rules of the Supreme Court. This is the decision on the defendant's application for leave to appeal out of time.

2. The dispute between the parties arose out of contracts made in November 1993. Goods giving rise to the dispute were delivered about mid-1994. The writ with the statement of claim endorsed was taken out in October 1994. Defence herein was filed on 12 December 1994, within the extended time granted by an order dated 29 November 1994. In March 1995 third party proceedings were issued with leave of the court. It was not until 21 September 1995, about nine months later, that the plaintiff took out his application for summary judgment under Order 14. On 30 October 1995, the application was adjourned to 15 May 1996 for argument. On 15 May 1996 summary judgment was ordered against the defendant.

3. It is necessary to set out in detail chronology the unusually chequered history to understand properly the twisted development of events leading to this appeal :

15 May 1996	Grewal & Co., then solicitors for the defendant, advised the defendant by letter on an appeal.
29 May 1996	Defendant instructed Arnberger, Kim, Buxbaum & Choy, its American lawyers, to appeal.
31 May 1996	Defendant's letter to its American lawyers asking for new solicitors to replace Grewal & Co. The American lawyers instructed Messrs Tony Lam & Harrace Lau, defendant's present solicitors to appeal. Plaintiff's solicitors wrote to Grewal & Co.
1 June 1996	Saturday
2 June 1996	Sunday
4 June 1996	Defendant's solicitors searched court file. Defendant's solicitors filed notice of change of solicitors. Defendant's letter to its American lawyers making enquiry about the appeal.
5 June 1996	Defendant's summons before master for leave to appeal out of time and stay of execution.
6 June 1996	Plaintiff's summons for security pending appeal.
7 June 1996	Master Cannon gave directions for filing affidavits and adjourned defendant's summons for argument.
11 June 1996	Defendant's solicitors sought advice from counsel on the proper way to appeal.
14 June 1996	Counsel advice to defendant's solicitors that leave to appeal should be sought from the judge.
15-17 June 1996	Public holidays.
18 June 1996	Defendant's solicitors wrote to plaintiff's solicitors with copy of notice of appeal for fixing a date for hearing of the appeal. Plaintiff's solicitors wrote objecting to the fixing of a date for appeal when the summons before the master was still pending. Defendant's solicitors sought advice from counsel to effect that a date should be fixed notwithstanding the plaintiff's refusal to attend before the clerk of court for that purpose.
20 June 1996	Public holiday.
21 June 1996	Defendant's solicitors stated they had an appeal as of right and would apply to fix a date.
24 June 1996	Defendant's solicitors unilaterally fixed a date and filed the Notice of Appeal.

4. The master's order was made on 15 May 1996 and time for appeal would have expired on 21 May 1996. In the premises, the notice of appeal issued on 24 June 1996 was late by 34 days. The only excuse put forward by the defendant for the delay was the negligence and incompetence of its solicitors. Notwithstanding initial objections taken on behalf of the plaintiff to the lack of material before the court upon which the discretion could be exercised judicially, the defendant was permitted to place a further bundle of documents without objection from the plaintiff to avoid an adjournment of the hearing. Nevertheless it should be noted that all that was initially placed before the court in support of the application for leave to appeal out of time was one sentence in a late supplemental affirmation of its manager (served on the plaintiff a week before the hearing and almost 4 months after the appeal was lodged) that Grewal & Co. advised the defendant that it had 14 days to appeal. The only document relied upon was the letter dated 15 May 1996 from that solicitor.

5. It is beyond any doubt that Grewal & Co. in the said letter of 15 May 1996, written on the same day when judgment was ordered, wrongly advised the defendant that it had 14 days to issue an appeal against the master's order. The appeal ought to have been issued within 5 days of the order pursuant to O.58 r.1(3). The solicitor's error was further compounded by another wrong advice that the appeal must be made to the Court of Appeal so that counsel must be retained. The fact of the incompetence of the defendant's former solicitor is beyond dispute. However, was that the only cause for the ultimate delay? I think not.

6. The defendant had waited until the last of the 14 days advised by its said solicitor to give instruction to lodge the appeal, well knowing that that was the very last day for the appeal. The defendant was a local trader in garment products, being incorporated in Hong Kong and having its place of business in Tsimshatsui, Kowloon. It had chosen to instruct an American law firm who had no right to practice as solicitors in Hong Kong to defend the action on its behalf. The American lawyers would, to the defendant's knowledge, have to instruct locally qualified solicitors to act on behalf of the defendant. Initially, they used their in-house solicitor, Grewal & Co., a one-man entity. Apparently, the poor quality of service provided by Grewal & Co. was discovered that led to the decision to elicit outside assistance by instructing a proper local firm of solicitors to replace the said in-house solicitor. The defendant had provided no excuse for defending this action in this indirect manner through the American lawyers. Nevertheless, Mr Pirie speculated that it could have arisen out of the existence of a retainer, or for some other commercial considerations as the third party was an American company. The plaintiff was a manufacturer of garments, and the defendant claimed itself to be a mere agent of the third party in the purchase of the plaintiff's goods. The reason for the defendant's course of action is not as important as the fact that it must have realised that by taking such an indirect route, more time would be consumed in communication and the giving of instructions than if it directly instructed a local firm. The defendant did not seek to submit that it was not aware of such element of delay, or that such delay would not be apparent to it.

7. The indirect mode of instructing solicitors did result in unnecessary delay in pursuing the appeal. Though the defendant gave instruction to the American lawyers on 29 May 1996, it was not until 2 days later, on 31 May 1996, that the American lawyers instructed the new solicitors. The fact that the office of the new solicitors of the defendant was in the same building as the office of the American lawyers (though in different towers) made the delay even more outrageous. No explanation was ever proffered by the defendant to excuse this 2 day delay. It may be the fault of the American lawyers, it may not be; I have no wish to speculate.

8. In the letter of 31 May 1996 enclosing a copy of the statement of claim and the judgment, the American lawyers instructed the new solicitors in clearest of terms to file a notice of appeal on or before 4 June 1996. Notwithstanding the above instruction, and for reasons unknown, the said solicitors did not appear to have done anything to prosecute the appeal on the following Monday, 3 June 1996, i.e. the deadline to lodge the appeal as instructed by the American lawyers. Though I was informed by Mr Pirie that his solicitors did search the court file on 3 June 1996, an examination of the court file revealed that search fee was only paid at 10:19 am on 4 June 1996. It is therefore impossible for the solicitors to have searched the court file prior to that time. The notice of change of solicitors was filed on the same day as the search, 4 June 1996. One day later, on 5 June 1996, the solicitors issued a summons before a master for leave to appeal out of time, instead of issuing a notice of appeal as instructed. Apparently the said solicitors took it upon themselves to proceed with the appeal in a manner they thought fit, instead of complying with the clear instructions from a professional client. It has not been made known to the court as to what transpired, if anything at all, between the American lawyers and the said solicitors during this material period. In any event, no explanation was ever proffered for the unusual conduct of the said solicitors.

9. The course taken by the said solicitors was clearly inappropriate in that it would be the most inefficient, expensive and time-consuming way to get leave, let alone the issue of propriety in law. The said solicitors also subsequently entered into quite unnecessary and protracted argument with the plaintiff's solicitors by correspondence over the issuance of the notice of appeal. Time was further wasted by them in seeking advice from counsel over the dispute. It must be apparent to any reasonable solicitor that until the inappropriate summons for leave before the master was withdrawn, it would be improper for the defendant to issue the notice of appeal seeking, inter alia, identical relief from a judge. Such parallel applications before different venue is obviously an abuse of proceedings and the summons should first be withdrawn forthwith. Even as at today no action was taken to withdraw the said summons which is still pending; nor was any attempt ever made to comply with any of the directions given by the master for the adjourned hearing of that summons. The erroneous issue of the summons by the defendant's solicitors and their subsequent wasteful exercise in protracted argument with the plaintiff's solicitors, clearly caused further delay between 18 - 24 June before the notice of appeal was finally issued.

10. By a letter dated 4 June 1996, the defendant made enquiry with the American lawyers on the progress of and preparation for the appeal. As the only excuse put forward by the defendant was the negligence of its legal advisers, it must be obvious to the defendant that it should exculpate itself from any contribution to the delay thus caused. If the defendant was guilty of compounding or contributing to its legal adviser's delay, such fault must be explained away as well. The result of the Defendant's enquiry was not made known to me. I was never informed of the state of knowledge of the defendant as to the conduct of the American lawyers and its current solicitors after its instructions of 29 May 1996; and in particular, after its enquiry on 4 June 1996. There is complete silence as to the state of the defendant's knowledge at the material time. No explanation was proffered why the defendant should continue to repose complete trust and confidence in his American lawyers after its bad experience with their in-house solicitor, Grewal & Co. I was also not informed whether the defendant knew of its solicitors' non-compliance with its instruction of issuing an appeal by 4 June 1996, or of the subsequent advice of counsel on the errors of the said solicitors. If the defendant was aware of such matters, what, if any, instructions were given or steps taken regarding diligent prosecution of the appeal?

11. Once a litigant places blame for delay on the incompetence and negligence of his legal advisers, it would be incumbent upon him to disclose dealings between him and that legal adviser in sufficient detail over all matters material to the court's consideration of the equity of the situation. A litigant cannot simply point to a few errors of his legal advisers and withhold from the court knowledge of his state of awareness of such errors at the material time. It would also be incumbent upon him to establish ignorance of such errors or the legal effect thereof, to excuse himself from any guilty association with such fault. If the litigant was fully aware of all relevant facts of such incompetence and negligence of his legal advisers and the legal effect thereof, and stood by allowing such faults to continue or even escalate, he cannot subsequently seek shelter behind such faults of his legal advisers in excusing delay thereby caused. In such a case, the litigant would be as guilty as his legal advisers in causing delay. Condonation or indifference with full knowledge coupled with a failure to redress forthwith the delay when it was within his ability so to do, would disentitle a litigant from reliance upon the faults of his legal advisers. The litigant must himself be innocent in the delay before he can be excused on the sole ground of that fault of his legal advisers.

12. The material placed before me are wholly inadequate for a proper exercise of my discretion. Initially the defendant only relied upon one sentence in its manager's late supplemental affirmation and a letter exhibited thereto. It was not until comments from the bench had befallen highlighting the inadequacy of information that the court was given material information and documents in a piecemeal manner. The hearing had to be adjourned for a fresh bundle to be prepared. Notwithstanding the generous opportunities given to the defendant to place material facts before the court, I was still left with a number of important questions unanswered. The burden is on the defendant to proffer a reasonable and credible explanation for the delay. It is thus incumbent upon the defendant to place sufficient and credible facts in support of its explanation. It is only upon a due consideration of the credibility and sufficiency of such facts that the court can determine if an excuse for the delay exists; and, if so, if it amounts to a good reason?

" The rules of court must prima facie be obeyed, and in order to justify a court in extending the time during which some step in procedure requires to be taken there must be some material upon which the court can exercise its discretion. If the law were otherwise, a party in breach would have an unqualified right to an extension of time which would defeat the purpose of the rules, which is to provide a time table for the conduct of litigation" (per Lord Guest in Thamboo Ratnam v. Thamboo Cumarsamy & Cumarasmy Ariamany [1965] 1 WLR 8 at p.12A-B).

13. I would supplement the principle by clarifying that not just any material will suffice, the material placed before the court must be of such quality and sufficiency that a court can properly act upon them. Inadequate partial disclosure of the circumstances, with obvious relevant material left out, would not amount to material upon which a court can properly act in the exercise of its discretion to excuse a non-compliance of the procedure or a delay. Truncated and selective disclosure is not proper or acceptable disclosure.

14. In the most recent Court of Appeal decision in Chow Ching Man v. Sun Wah Ornament Manufactory Limited, C.A.No.207 & 211 of 1995, judgment delivered on 10 July 1996, it was held that plaintiffs who were wholly innocent in their solicitors' fault in not serving the writ within the time required, should not be granted an extension of time for service. In the premises, the master's order granting leave to extend time and the subsequent service of the writ must be set aside. It is appreciated that case can be distinguished from the present in that the solicitors for the plaintiff made a conscious decision not to serve the writ with a view to save costs, and such deliberate act of non-compliance with the rules would be more culpable than negligent failure to comply. However, the rationale for the need to provide a good reason for the non-compliance is the same.

15. Heavy reliance was placed on the decision in Chiu Butt York v. Chiu Kwok Lim [1980] HKLR 459, a case when the court granted an extension of time to appeal. However, in that case the court had come to the conclusion that the delay was due entirely to the negligence of the appellant's solicitor; and was due to no fault of the appellant himself. The court also laid heavy emphasis on the huge amount at stake, i.e. $80,000,000; that the appellant would have no remedy other than taking action against his own solicitor for such a huge sum of damages; and that the appellant had always made it known to the respondent of his intent to appeal. That was a very different case from the present.

16. The insufficiency of material to exculpate the defendant from any contribution to the delay, and doubts as to the true position left by the lacuna in the material presented, rendered it inappropriate for me to exercise any discretion in the defendant's favour. Furthermore, the tardy manner of the defendant in preparing its affidavit in support of the application also did it no credit in coming to court to seek an indulgence. There had been a hearing on the merits of the case, albeit not a full trial. The plaintiff ought not be driven from his judgment seat save for a good reason. I am not satisfied on the material before me that it was entirely due to the negligence of its various legal advisers that the defendant had failed to prosecute the appeal with due diligence and to file the notice of appeal in time. The defendant has failed to persuade me that it had not contributed in any manner in prolonging the delay. In particular, I am satisfied that in going about defending the action in the indirect route it had chosen; and continued to proceed down the same indirect route after he experienced the incompetence of the in-house solicitor of its American lawyers when it was obvious that time for appeal was running out fast, the defendant had consciously assumed the risk of delay. It can hardly be said that he was entirely innocent for the cumulative delay.

17. Though the merits of the alleged defence and counterclaim and the attack on the plaintiff's pleadings were not argued before me, I have read the written skeleton submission of the defendant on these issues. There was nothing there that could change my view that no leave to extend time to appeal against the master's order for summary judgment ought to be granted to the defendant. In the premises, the defendant's application for an extension of time to appeal is refused. I also make an order nisi against the defendant for costs to follow the event.