CHAN HOI YAN t/a LEADER ENTERPRISES v. ARCTIC TRADING CO. LTD

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J U D G M E N T

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Clough, J.A. :

1. This is an interlocutory appeal from a ruling under Order 38 rule 29(1) by His Honour Judge Henry Wong sitting as a Deputy Judge of the High Court made on the 14th October 1987, during the hearing of an action in the running list whereby he refused to allow the defendant to adduce in evidence a number of telexes containing hearsay evidence in respect of which the defendant had failed to comply with the relevant rules regarding notice. Counsel for the defendant has told this court that there was also an application to amend a notice dated the 21st September 1987 served by the defendant on the plaintiff which was intended to be an Order 38 rule 21 notice. The judge does not appear to have dealt with this application. The defendant appeals on this issue also, but in my view the question of amendment arose at such a late stage that the real question was and remains whether the relevant telexes should have been admitted in evidence under Order 38 rule 29(1).

2. The judge's leave was sought and refused in respect of seven telexes but the defendant's appeal now relates to only five of them, being telexes expressed to have been sent to "Mr. D. Wong" by "J. Tiedemann" between the 20th March and the 26th May 1986.

3. The defendant is a Hong Kong Limited Company. The action is concerned with the defendant's alleged breach of a contract made on 17th July 1985 to take delivery of 20,000 plastic boxes, called "memo boxes", which it is alleged to have agreed to purchase from the plaintiff. The plaintiff claims that the delivery was to be affected within 20 days of the arrival of the necessary cardboard containers which were to be supplied by the defendant to a factory in Guangzhou where the memo boxes were. It is common ground that the price for the boxes was $3.30 per box, making a total purchase price of $52,800 of which 513,200 was paid in advance by the defendant.

4. The Plaintiff contends that the defendant has repudiated the agreement and claims damages including storage charges incurred by him in respect of the undelivered goods. The defendant contends that it is the plaintiff who is in breach of the agreement (referred to in the re-amended defence as "the 1st Agreement") because he is in breach of an implied term thereof that he was responsible to arrange for all necessary permits to be obtained from the Chinese Government to enable the defendant to ship the cardboard containers to Guangzhou. The defendant also pleads that at all material times the plaintiff failed to obtain or produce the relevant memo boxes.

5. The defendant alleges that in or about February 1986 it agreed, at the plaintiff's request, to cancel the agreement of sale and purchaseupon return of the $13,200 deposit, but the plaintiff failed to return the deposit. In the re-amended defence the cancellation agreement is referred to as "the 2nd Agreement".

6. The defendant further alleges what is referred to as "the 3rd Agreement" whereby on or about the 15th March 1986 the parties agreed that the plaintiff would sell the defendant 4,000 memo boxes at a reduced price of $1.50 per box on the footing that the defendant was to be responsible for certain additional charges and that the price of the 4,000 memo boxes and the additional charges would be deducted from the $13,200 deposit in the plaintiff's hands and the balance of that deposit would be returned to the defendant. The defendant goes on to allege that it was agreed as a term of the 3rd Agreement that, if the plaintiff failed to deliver 4,000 memo boxes by the end of May 1986, the plaintiff would pay the defendant $6,000 plus certain additional charges.

7. In the re-amended defence the defendant pleads that the plaintiff is in breach of the 3rd Agreement and claims to be entitled to set off $6,000 against the plaintiff's claim. The defendant also counterclaims to recover the $13,200 deposit and $6,000 and damages.

8. It is material to mention that the defendant has pleaded that before entering into the 1st Agreement it informed the plaintiff that the goods were required for resale to its customer Aylesford for profit. The defendant has also pleaded that before the signing of the 3rd Agreement if informed the plaintiff that the 4,000 memo boxes were required for resale to its customer at a profit. The plaintiff's amended reply and defence to counterclaim does not require to be summarised for the purposes of this appeal. Suffice it to say that most of the matters alleged by the defendant are contested.

9. The action was set down for trial on the 30th June 1987. No hearsay notice was served by the defendant within 21 days of that date as required by Order 38 rule 21(1)(a).Counsel for the defendant has informed this court that the case was warned on the 6th July 1987. By then an agreed bundle had been prepared including the relevant telexes but on the 8th July the plaintiff's solicitors indicated that there was disagreement about the telexes being agreed and that they were preparing a bundle which included both documents which had been agreed and documents (including the telexes) which had not been agreed. There was still time to serve an Order 38 notice regarding the telexes but this was not done.

10. The trial began on the 20th July 1987. On the second day it became apparent from the evidence of the plaintiff's first witness that the amended statement of claim required to be amended substantially. On the application of the plaintiff the trial was adjourned to facilitate this amendment. The judge gave directions regarding pleadings and adjourned the hearing to a date to be fixed.

11. During the adjournment the defendant's solicitors served on the plaintiff's solicitors a notice dated the 21st September 1987 which it subsequently transpired was intended to be an Order 38 notice. For understandable reasons it was not so regarded by the plaintiff's counsel. It bore the heading of the action followed by "NOTICE".

12. The body of the notice began with the following words:

"TAKE NOTICE that at the trial of this action, the Defendant desires to give in evidence that (sic) the statement made in the following documents, namely:-"

13. There followed a list of seven telexes, mentioning their respective dates and stating that each of the first five telexes were from "Mr. J. Tiedemann to Mr. David Wong". The remaining two telexes are not relevant to this appeal. Copies of all the telexes were annexed to the notice. In the first telex dated the 20th March 1986 (five days after the date of the alleged 3rd Agreement) the sender (J. Tiedemann) is informing the recipient (Mr. D. Wong) that he has been successful in selling 4,000 boxes and he asks Mr. Wong to issue his pro forma invoice to "Aylesford Ltd." Hong Kong stating a price of $4.00 per piece and so on. The remaining four telexes relate to the same transaction. All these telexes appear to be relevant.

14. Mr. Tang for the plaintiff has argued to the contrary, but at the very least the telexes are material to the issue of mitigation of damages by the plaintiff which has admittedly not been specifically pleaded but has been the subject of cross-examination of the plaintiff by Miss Pinto for the defendant.

15. At the resumption of the trial on the 13th October 1987 the telexes were not mentioned to the judge. The evidence of the plaintiff's witness and the plaintiff himself was concluded and the plaintiff's case was closed. The evidence of the first defence witness, Mr. Wong Shu-kin, then began. He is a director of the defendant and was the person who entered into the relevant transactions on behalf of the defendant.

16. It is clear from the excellent record kept by the judge that (ignoring hearsay evidence which was objected to) Mr. Wong said in chief, on the first day of the resumed hearing, that he had a friend called Tiedemann "of Taiwan" but with a company in West Germany. Mr Wong's evidence was inter alia to the effect that Mr. Tiedemann had introduced him to a Mr. Tse Sang Ng who had introduced him in turn to the plaintiff. Mr. Wong said that Mr. Tiedemann had signed the contract document dated the 17th July 1985 (the 1st Agreement) because he had been in Mr. Wong's office when the plaintiff's first witness (Mr. Chan Mai, the plaintiff's sales representative) had brought the document for signature by Mr. Wong.

17. Mr. Wong also said in chief that he had known Mr. Tiedemann for a long time, that the defendant traded with him and that he was the representative of the defendant's "client" for the lot of 20,000 memo boxes.

18. The evidence in chief of Mr. Wong continued on the 14th October 1987. At this stage of his evidence, when Mr. Wong was giving evidence about the alleged 3rd Agreement, he mentioned that Mr. Chan Mai had inter alia offered to supply 4,000 memo boxes at $3.3 each. Mr Wong added that he told Mr Chan Mai he would look for a customer who would be prepared to accept the goods. He went on to say that he related the matter to Mr. Tiedemann who promised to help out.

19. It was at this stage that counsel for the defendant sought to adduce the telexes in evidence and referred to the notice dated the 21st September 1987. The plaintiff's counsel objected to the evidence going in and pointed out that he had only been informed on the previous day by the defendant's counsel that the notice was intended to be a hearsay notice. He rightly pointed to the failure of the notice to comply with Order 38 rules 22 and 25. The judge declined to exercise his discretion in favour of the defendant under Order 38 rule 29(1) and refused to allow the telexes to he adduced as evidence.

20. At the time the judge recorded  the following ruling:-

"There is no mention of hearsay "Notice or the relevant Order of S.C. in Defendant's Notice of 21/9/87. Plaintiff therefore could not be expected to file a Counter-Notice. It is Defendant's explanation that it should be regarded as Hearsay Notice in spite of the lack of some requirements under O.38. I cannot accede to Defendant's application to exercise my discretion to allow these telexes to be produced as evidence, not so much on non-compliance with the Rules but on the absence of identity of D. Wong & David in the telexes from & to Mr. Tiedemann."

21. Shortly after this ruling had been delivered the judge was informed that the defendant intended to appeal against it. He accordingly adjourned the trial sine die pending the outcome of the appeal which is now before us.

22. It appears from the judge's notes that counsel for the defendant applied before the adjournment for a copy of the court's ruling for the purpose of the appeal. However the appeal bundle does not contain a copy of the ruling set out above, but we have been given instead another written ruling dated the 14th October 1987. It is well settled that if a judge gives an oral judgment in the High Court he is not entitled to produce a subsequent written judgment containing his second thoughts. This is one of the reasons for the Practice Direction on interlocutory appeals requiring counsel to prepare an agreed note of the judgment for the judge's approval. However, in the present case the second ruling is merely an elaboration of the oral ruling. After setting out the arguments which' had been advanced before him the judge expressed his reasons for his ruling in the following concluding passage:-

    "It is within knowledge of all concerned that under 0. 38/29 the Court has discretionary power to allow a document to be given in evidence at the trial. In the present action Plaintiff's argument on the defects of Defendant's Notice appears to devolve upon procedural matters which are not incapable of being appropriately cured - it is the absence of information on D. Wong in the 5 telexes from, and David in the 2 telexes to. Mr. T. Tiedemann and the role these two unknown persons played in the instant case which in my view, is fatal to Defendant's application. In other words, the lack of identity of D. Wong and David is the last straw that broke the camel's back. In the event, I declined to allow the admissibility of the telexes as evidence."

23. Thus the judge indicated that he did not regard the failure of the defendant to comply with the procedural requirements of Order 34 rules 21, 22 and 25 as decisive. The crucial matter, in his view, was that the telexes themselves (we are only concerned with the first five telexes) did not identify or give information about the D. Wong or the role played by that person in this case.

24. With respect to the judge, whose exercise of discretion this court would be very loath to overrule, I cannot accept that it can be right to hold that for the purposes of Order 38 rule 29(1) a document containing first hand hearsay should be excluded on the ground that the identity of and the role played in matters relevant to the action by a person named therein as the recipient of the document is not ascertainable within the four corners of the document itself.

25. In my judgment there can be no objection to resort to extrinsic evidence to ascertain the identity and role of the D. Wong" referred to in the telexes and hence the relevance of the telexes in the proceedings. I have referred above to the evidence given by Mr. Wong Shu-kin to the judge which made it abandantly clear that he had known Mr. Tiedemann and had business relations with.him for some appreciable time and that it was to him that Mr. Wong turned when he was looking for a customer for the 4,000 memo boxes to he acquired under the 3rd Agreement.

26. The name Wong is very common in this jurisdiction but the combination of Wong and Tiedemann and telexes concerning 4.000 memo boxes to be invoiced to Aylsford Ltd., alleged in the re-amended defence to be referable to the 3rd Agreement, seems to me to leave no reasonable doubt but that the D. Wong mentioned in the telexes was the defence witness Mr. Wong Shu-kin and that the telexes are material to the alleged 3rd Agreement and to the issue of damages.

27. I therefore conclude that the judge was, with respect, in error when he refused the defendant's application for the reasons he gave because he wrongly excluded from his mind the evidence he had recently heard given by Mr Wong which made it clear why the telexes were material in the proceedings as evidence of the dealings between Mr. Wong on behalf of the defendant with Mr. Tiedemann in relation to memo boxes alleged by the defendant to be the subject of the 3rd Agreement.

28. Having concluded that the judge exercised his discretion under rule 29(1) on a wrong basis, it is necessary for this court to reconsider how that discretion should be exercised.

29. The matter has to be approached in the light of section 47(1) of the Evidence Ordinance Cap. 3 under which the material contentof the telexes being first hand hearsay, is made admissible in evidence subject in the present case, to rules of court, namely Order 38 rules 21, 22, 25 and 26 (which lay down procedural requirements for admissibility) and rule 29(1) which confers a residual and broad overriding power or discretion on the court to allow the hearsay statements to be given in evidence.

30. These principles are referred to in the notes to Order 38 at paragraph 38/20/2 in the Annual Practice where it is also pointed out that the purpose of part III of Order 38 is (a) to ensure that so far as practicable issues regarding the giving of hearsay evidence at the trial should be disposed of before the trial, and (b) to prevent one party from taking the other party by surprise at the trial in relation to hearsay evidence and make him disclose it to the other party before the trial thereby affording him the opportunity to resist the admission of the relevant evidence in hearsay form: see the citation of this note by Edmund Davies L.J. in Ford v. Lewis⁽¹⁾ at p. 632.

31. The proper exercise of the broad and overriding power or discretion conferred upon the court under Order 38 rule 29(1) requires the consideration of the question whether it would be just in the light of all the relevant facts to allow the documentary first hand statement to be given in evidence. Rule 29(1) in terms provides for the court to allow a statement to be given in evidence "if it thinks it just to do so". That is the test which was applied by Edmund Davies L.J. in Ford v. Lewis⁽¹⁾ at p.633A.

32. The notes on the English practice under rule 29, to be found in the Annual Practice at paragraph 38/29/1 and the cases there cited, make it clear that the rule is remedial in its intent and operation and is designed to enable the court to do what is just in the particular circumstances of the case. Each case will turn on its own particular facts and clearly non-compliance with the procedural requirements of the rules should not by itself result in the exclusion of material hearsay evidence which is otherwise admissible where the court considers it just that the evidence should be admitted.

33. Applying the above principles in the circumstances of this case where it seems to me they were not applied below, it is manifest that there has been a total failure to achieve one of the purposes of the rules, namely to dispose of hearsay issues before the trial of the action. The notice dated the 21st September 1987 was served long after the expiration of the time prescibed by Order 38 rule 21(1)(a) and no application has been made before the trial for an extension of that time. Furthermore the failure to comply with all the requirements of rules 22 anti 25 has deprived the plaintiff of the opportunity of serving a counter-notice under rule 26.

34. On the other hand the relevant telexes had been disclosed at the discovery stage of the action and the element of surprise was confined to the plaintiff being unaware until the 13th October 1987 that it was not proposed to call Mr. Tiedemann as a witness.

35. Bearing in mind that non-compliance with the procedural rules should not by itself result in exclusion of material hearsay evidence unless that non-compliance was a deliberate tactical move or wilful, or otherwise culpable, it seems to me that in the present case there is nothing to show that the irregular notice was other than the result of regrettable ineptitude on the part of the defendant's solicitors who have not been shown to have had any intention to manipulate the rules to their client's advantage.

36. The crucial question in the circumstances of this case, which the judge does not appear to have asked himself, is whether admitting the relevant evidence, notwithstanding  the defendant's non-compliance with the procedural requirements of the rules, would cause prejudice or injustice to the plaintiff. I have no difficulty in answering that question in the negative.

37. Mr Tang for the plaintiff has done his best to persuade us that prejudice would result to the plaintiff from the admission of the telexes. He points to the possibility of further inquiries to obtain evidence in rebuttal and the fact that if the judge had let in the evidence such inquiries would not have been possible. Asked to be specific about the inquiries he had in mind he mentioned inquiries about the state of the market and the price of memo boxes. But Mr. Tang had already informed us that the market in such goods was confined to a small circle. The plaintiff is a member of that circle. He surely knows the state of the market he deals in.

38. The action arises from a commercial dispute. In such cases the practice of the court is not to attach undue weight to the technicalities of the rules of evidence but to incline to admit documents if they are relevant and are not alleged to be false in order to get to the heart of the matter in dispute. The plaintiff has been given reasonable notice of the content of the telexes which are almost contemporaneous with the alleged 3rd Agreement. If they are admitted the weight to he given to their contents will be determined in accordance with section 51(3)(a) of the Evidence Ordinance. Whilst this court is not to be taken to condone or encourage any non-compliance with the procedural requirements of any rules of court, it does seem to me that this is a case where the residual discretion of the court should have been exercised in favour of the defendant.

39. I would therefore allow the appeal and make an order under rule 29(1) allowing the relevant five telexes to he given in evidence. I can see no practical reason for granting leave to amend the defendant's notice at this stage of the proceedings. The trial, which was estimated to be a two-day action, has already run four days below and reached the stage where the costs must exceed the amount at stake which may well prove to be within the jurisdiction of the District Court. It is clearly in the best interest of the parties that the trial should continue and be concluded with the minimum of further delay.

Fuad, J.A. :

40. I agree for the reasons given by my Lord Clough J.A. that the appeal should be allowed and I also agree with the order he proposes.

(1) [1971] 1 W.L.R. 623 (C.A.)