HCCL 117/1994
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMMERCIAL ACTION NO.117 OF 1994
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BETWEEN
NANTONG ANGANG GARMENTS CO. LTD.
Plaintiff
and
HELLMANN INTERNATIONAL
Defendant
FORWARDERS LIMITED
and
SILKING DEVELOPMENT LTD.
1st Third Party
LERNER STORES INC.
2nd Third Party
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Before : Hon Stone J in Chambers
Date of Hearing : 13 December 2004
Date of Judgment : 28 January 2005
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J U D G M E N T
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The application
1. This is an application by the defendant, by summons dated 23 November 2004 pursuant to the provisions of Order 35, rule 2, RHC, for an order that :
(i)
the time for application under Order 35, rule 2 be extended;
(ii)
the Order of Stone J dated 20 November 2002, whereby Judgment in the sum of US$370,000, together with interest and costs, was entered in favour of the defendant against the 1st and 2nd 3rd parties, be set aside; and
(iii)
that the defendant do pay the costs of this application.
2. The provisions of Order 35, rul3 2 read as follows :
“
(1)
Any judgment, order or verdict obtained where one party does not appear at the trial may be set aside by the Court, on the application of that party, on such terms as it thinks just.
(2)
An application under this rule must be made within 7 days after trial.”
The facts
3. The facts are in short compass.
4. On 19 and 20 November 2002 the trial of HCCL No.117 of 1994 took place before this court.
5. Judgment was rendered on 20 November 2002, and the document entitled ‘Reasons for Judgment’ was subsequently handed down on 28 November 2002.
6. These Reasons speak for themselves, and describe that which took place at the trial.
7. In short, the head action between the plaintiff and the defendant was compromised, and the defendant thereafter was left to prove its case against the absent 1st and 2nd third parties. The third parties were unrepresented, and did not appear at the hearing of the action.
8. Paragraph 13 of these Reasons states thus :
“Whilst the non –appearance of the third parties and the absence of adversarial argument remains a less than satisfactory feature of this case, nevertheless I was satisfied on the evidence that the defendant had established its case as pleaded in the Amended Statement of Claim (leave to amend having been granted to the defendant) against each of the 1st and 2nd third parties, and accordingly that the defendant was entitled to the indemnity sought, together with consequential orders for the defendant’s costs of the third party proceedings and for the costs incurred in the defence of the plaintiff’s action. I so ordered.”
9. It is the Judgment thus entered that now is sought to be set aside in the present application by the 1st and 2nd third parties.
The evidence
10. The application is led by an affirmation of Mr Au Ho Fung sworn on 25 October 2004. Mr Au is a director of the 1st third party, Silking Development Ltd, and deposes on behalf of that entity and of Lerner Stores Inc., the 2nd third party.
11. This affirmation addresses the history of events. It canvasses a number of issues under subheads entitled ‘Explanation for default’, ‘Poor service of Messrs Simmons and Simmons’ and ‘Merits of third party defence’.
12. The thrust of the affidavit is that there has been no proper trial of the third party action. It is said that the judgment was irregular and wholly wrong in law and ought to be set aside. On the basis of the style and content of critical observations made as to the conduct of this trial by myself as trial judge — “fundamental and serious mistakes”, “disastrous scale of miscarriage of justice” provide an indication of the flavour of the narrative — I assume that this affidavit was drawn by a legal professional in the United States.
13. Evidence filed in this application on behalf of the defendant took the form of an affirmation of Mr William Chiu Hon Kin, an Assistant General Manager at the China Airfreight Division of the defendant.
14. His affirmation recounts the history of the proceedings between the plaintiff and defendant — a claim for misdelivery of 903 cartons of garments , and the consequent third party proceedings for an indemnity brought by the defendant against the 1st and 2nd third parties — and thereafter dealt with that which occurred at the hearing, the Order made by the court at the conclusion of that hearing, the compliance by the defendant with the order made in favour of the plaintiff (payment of the Hong Kong dollar equivalent of US$370,000), the failure of the third parties to comply with the order made against them, the taxation of costs that took place on 27 April 2004, together with service of the allocatur on the 2nd third party, and finally describes the enforcement proceedings taken out in the United States against the 2nd third party, proceedings which are currently contested.
15. The affirmation of Mr Chiu concludes that the defendant has at all times proceeded on the basis that it had obtained a valid and enforceable judgment against the 1st and 2nd third parties, that it had fully complied with its obligations to pay to the plaintiff the amounts ordered, and that to its knowledge the 1st and 2nd third parties took no steps to challenge the judgment of this court until about October 2004, when solicitors were instructed to handle the matter, that is, a full two years after this court had handed down its judgment.
Decision
16. As was recognized during argument, and as was canvassed on the face of the summons, this application necessarily consists of two parts, namely the element of extension of time, and thereafter consideration of the merits.
17. I deal with each in turn.
(i) Extension of time
18. The objective observer might think this an ambitious application.
19. The framers of Order 35, rule 2 saw fit to state that an application under this rule must be made within seven days after the trial. Notwithstanding this stricture, this application has been taken out almost two years to the day after the judgment which it is now sought to set aside, and a full decade after the third party action itself was commenced.
20. The issue of delay in applying to set aside the judgment is clearly relevant, as the marginal notes to this rule make clear : see MN 35/2/1, Hong Kong Civil Procedure, 2004 , in particular when, as in this instance, the successful party has acted upon the judgment.
21. It follows that, in considering the application for extension of time, the court must have regard to the reason proffered for such delay, so that, for example, ignorance of the judgment complained of may constitute a material factor.
22. No such excuse is proffered here. In fact, the position is quite the opposite. It is not said that the 1st and 2nd third parties were unaware of the judgment at the time it was handed down. To the contrary. It was known about, but ignored until the motion for summary judgment against the current incarnation of the 2nd third party, Lerner New York, was filed on behalf of the defendant on 10 September 2004.
23. In this regard, counsel appearing on this application on behalf of the applicants, Mr Thomas Lai, was disarmingly frank: he noted that since nothing seemed to be happening in terms of the judgment it had been decided to “let sleeping dogs lie”, but that after enforcement proceedings had been commenced in the United States there had been no further delay, and thus the “ball had been set in motion” in terms of the present application to set aside.
24. Mr Lai further commented that the delay had not been “calculated”, and since no third party rights had intervened, it would be appropriate for the case to be retried.
25. For his part Mr Haynes, counsel on behalf of the defendant, emphasised that the timing of this application and that of the enforcement proceedings was co-extensive.
26. He drew attention to the reasons proffered for the delay by the deponent, Mr Au, who stated that shortly after the hearing he was “surprised” to receive notice of the judgment from the court, and that separate copies of the judgment were sent by the court to the address of the 1st third party in Hong Kong and also to the address of the 2nd third party in the United States. Mr Au observed that since the 1st third party was basically playing an agency role in Hong Kong for the 2nd third party, he awaited instructions from the US principal on the next step, and that he had been informed that legal advice thereafter was sought from US attorneys. This took some time, and that “meanwhile nothing much seems to happen in Hong Kong about the judgment”, and thus he continued to await instructions.
27. Ultimately, said Mr Au, in September 2004 he had received news from America that the defendant was trying to enforce the judgment in the United States against the 2nd third party, and he was informed that on US attorney’s advice the matter “had to be sorted out with the original court in Hong Kong.”
28. Hence the instruction of local solicitors in the matter, and the mounting of the present application.
29. Against this background, wherein there is no factual dispute about that which occurred to account for the delay, I have no hesitation in declining to exercise the court’s discretion to grant the extension of time as sought by the applicants.
30. In my judgment the delay which occurred was both calculated and self-serving. It is tolerably clear that had there been no attempt to enforce in the United States, nothing whatever would have been done about a judgment that belatedly now is characterised by the draftsman of the affirmation as a miscarriage of justice.
31. In reaching my conclusion upon the issue of extension of time I have borne in mind not only the conduct of the applicants subsequent to the judgment, but also the position of the defendant, who over the intervening two years has acted on the basis of the judgment in its favour, and last, but not least, the public interest in there being an end to litigation. The present case, it seems to me, provides a paradigm example of the policy underpinning this latter principle.
32. Accordingly, the application for extension of time, as reflected in subparagraph (1) of the summons dated 23 November 2004, is dismissed.
(ii) Merits
33. The foregoing decision effectively decides this application. However, in case I be wrong in this conclusion I turn briefly to consider the underlying merits, in particular the reasons given for the absence of the third party at trial.
34. I note that in the affirmation leading the application Mr Au sees fit to state that “the learned judge was factually wrong in thinking that both third parties were absent whereas in truth and in fact they were both present and represented by me.”
35. I do not think that Mr Au can be asserting that he was actually present in court at the time that Mr Kat, then counsel for the defendant, proceeded to argue the third party case. The fact of the matter is that at this time there was no-one present in court to represent the third parties.
36. That to which Mr Au appears to be referring when making this statement is that on the case papers there was evidence of third party participation in this case. He further makes reference to the issue of a subpoena, which I understand had been issued to Mr Au on behalf of the defendant when apparently it was anticipated that viva voce evidence would be required in the head action.
37. At the time of the compromise, and of the hearing of the third party action, the court was not aware, nor was it informed by counsel that there was any purported representation on behalf of the third party, and certainly none was evident in court. Had the situation been otherwise, it is safe to assume that the proceedings would not have taken the course that they did.
38. The issue of representation of the 1st and 2nd third parties in this case is a matter that looms large in the affirmation of Mr Au. This is dealt with under the heading “Poor service of Simmons and Simmons”, and recounts “the very disappointing nature of the service we received.”
39. A short factual history of the case, and of the engagement, in February 1994, of Simmons & Simmons is profferred, and of the instruction to represent the 1st and 2nd third parties upon receipt of the Third Party Notice. Thereafter it is said that there was a “constant change” of handling solicitor, as to which Mr Au opines that he felt “rather uneasy”.
40. There is then recounted that consideration was given to a possible strike out by the defendant of the plaintiff’s claim, an application which ultimately was not mounted, and complaint is made of the bills of costs for the advice then tendered. Mr Au states that “having lost all faith” in Simmons & Simmons he had decided that “we could act in person for the trial”, so much so that he did not respond to letters from the handling solicitor, Mr Ng, requesting instructions as the date of trial approached.
41. No date is given by Mr Au for the aforesaid decision to act in person, but this must have been in the months prior to October 2002 given that the solicitors had notified him, by letters dated 2 and 11 October 2002 of the court appointment for the hearing of their application to cease acting in this case.
42. In any event Mr Au sees fit to conclude that in discharging themselves from acting, his former solicitors simply “walked off” and did nothing by way of guidance as to future conduct, so that “we were left completely on our own.”
43. In light of the decision which he says by then had been taken, this latter conclusion seems neither fair not accurate; it is abundantly clear on the evidence that the decision had been made by Mr Au, for good reason or bad, I know not, not to retain solicitors or counsel for the trial, and to proceed in person. There is what has been described by Mr Haynes as a “stream of correspondence” from Messrs Simmons & Simmons wherein the necessity to be placed in funds in order to instruct counsel is stressed, and it is clear that the decision had been taken, either by Mr Au or his superiors, not to expend any further funds on this case.
44. Against this background, therefore, on the face of Mr Au’s affirmation no reason is advanced as to why he was not present in court to represent his client after the compromise of the head action. In this connection Mr Haynes points out that the order of this court that the head action and the third party action be heard at the same time had been made as far back as March 2002, and that until Messrs Simmons & Simmons came off the record on 29 October 2002 the third parties must have been aware of the position.
45. There was a suggestion by Mr Lai in argument that the 1st third party, in the form of Mr Au, had been “sent away” by a lady from the defendant’s then solicitors, who had called him and told him that the action was settled, and that that was the reason for his non-attendance. However, this information was vouchsafed from the bar, and does not find its way into the sworn evidence; in any event, as Mr Haynes observed, the suggestion that the defendant’s solicitor should be advising the third party in adversarial litigation is, on the face of it, extraordinary.
46. This court thus is presented with the stark position whereby the representative of the third parties, who had decided not to use lawyers and to seek to act in person (as to which no application for leave so to do appears to have been made) did not appear in court at the time of the trial, the case having been duly called, and wherein the court was not advised by the defendant’s then counsel, Mr Kat, that there had been any advice given by those instructing him that there was no necessity to attend.
47. Having compromised the plaintiff’s claim, the defendant thereafter was required by this court to prove its case against the third parties; in the judgment of this court, it succeeded in doing after having been granted leave to amend its pleading upon that which, if I recall correctly, related specifically to the issue of implied indemnity.
48. The reasons for judgment reflect the reasons of this court in acting as it did. Having reread those Reasons, and further having considered the apparent merits of the case of the third parties in what was a chain action arising from the misdelivery of a quantity of garments manufactured by the plaintiff and wrongly released by the defendant to the 1st third party, I see no reason to change the views expressed therein. As a matter of completeness I note that the reference to ‘defendants’ (at paragraph 4 of the ‘Reasons for Judgment’) clearly is a reference to the third parties, as the context makes entirely clear.
49. It follows from the foregoing, therefore, that in so far as it may be necessary further to have considered this application in light of the refusal of this court to extend time, the application pursuant to paragraphs (2) and (3) of the summons dated 23 November 2004 also would stand dismissed.
50. I have been able to perceive no procedural or substantive merit in this application.
Order
51. For the foregoing reasons, the order of the court consequent upon this application is as follows :
(i)
The application of the 1st and 2nd third parties, by summons dated 23 November 2004, is dismissed.
(ii)
There is to be an order nisi that the costs of and occasioned by this application be paid by the 1st and 2nd third parties to the defendant upon a common fund basis, to be taxed if not agreed, such order to become absolute save in so far as application be made to vary the same within 14 days of the date hereof.
(William Stone)
Mr Thomas Lai, instructed by Messrs Lo, Chan & Leung, for the 1st and 2nd third parties/applicant
Mr Timothy Haynes, instructed by Messrs Coudert Brothers, for the defendant/respondent
(I) Appeal to Court of Appeal by the 1st and 2nd Third Parties. Retrial of Third Party action before a different judge. Please refer to the appeal judgment of CACV64/2005 (II) Please refer to CACV106/2011 for the relevant appeal(s) to the Court of Appeal.