XCHRX CHOW KAI SANG v. SAMUEL TOI and Others

1995 No. A8306

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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[(i) The view expressed by Bokhary, J.A. in Tan Eddy Tansil v. P.T. Bank Pembangunan (Indonesia) Persero [1996] 1 HKC 231 that a failure by a solicitor to comply with an "unless" order should not adversely affect his client's interests if that can be avoided without injustice to the other party formed part of the ratio decidendi. It is therefore binding on masters and judges of the High Court.

(ii) The rule that on an application to set aside a default judgment it is necessary for the party in default to demonstrate by credible evidence that he has a real prospect of success does not apply to judgments entered in favour of defendants for the failure on the part of a plaintiff to comply with an "unless" order.]

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J U D G M E N T

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INTRODUCTION

1. This is another case in which an "unless" order was not complied with. On this occasion, it concerned the service of particulars. The twist in the story is that it was the Plaintiff's claim which was struck out rather than, as is usually the case, judgment being given in default against the Defendants.

THE RELEVANT FACTS

2. The Plaintiff is a composer of songs. He claims to be the copyright owner of a song which he says he composed in 1983. He alleges that the Defendants have all infringed his copyright in the song in various ways. In August 1995, he issued a writ against the Defendants claiming, amongst other things, an injunction and damages.

3. In due course, the solicitors for the 2nd, 3rd and 4th Defendants ("the Defendants' solicitors") requested the Plaintiff to give further and better particulars of various allegations in the Statement of Claim. That request was served on 20th September. The particulars were not provided, and eventually Mr. Registrar Betts ordered the Plaintiff to serve the particulars by 28th November. Again the particulars were not provided, and on 5th December Master O'Donnell ordered the Plaintiff to serve them by 12th December. Two comments should be made about Master O'Donnell's order :

(i) The order as drawn required the particulars to be served by 4.00 p.m. on 12th December. The uncontradicted evidence of the Plaintiff's solicitor is that when Master O'Donnell made his order, he did not stipulate a time on 12th December by which the particulars had to be served. That is not a compelling point. A document served on a weekday after 4.00 p.m. is deemed to have been served on the following day : see Ord. 65 r. 7. Accordingly, the order as drawn merely converted what was deemed to be the case into an express requirement.

(ii) Master O'Donnell ordered that if the particulars were not served by 12th December, the Plaintiff's claim against the 2nd, 3rd and 4th Defendants would be struck out.

In the event, the particulars were not served by 12th December. They were only served on the afternoon of 14th December. Accordingly, on 21st December, the Plaintiff's claim against the 2nd, 3rd and 4th Defendants was struck out with costs.

4. In due course, the Plaintiff applied for leave to file and serve the particulars despite the expiry of the time limit. That summons was heard by Master Jennings on 15th May 1996. He granted the relief sought, and as a result he set aside the judgment and the order for costs. The 2nd, 3rd and 4th Defendants now appeal against the order. They want the judgment in default restored. But if the judgment in favour of the 2nd and 4th Defendants is set aside, they nevertheless want the judgment in favour of the 3rd Defendant to stand.

THE REASONS FOR THE DEFAULT

5. On 28th November, the Plaintiff gave his solicitor the remainder of the information which he needed to draft the particulars sought. By 7th December (which was a Thursday), the Plaintiff's solicitor had prepared a suitable draft which he faxed to leading counsel for his approval and to junior counsel for him to settle. There is a difference of recollection between the Plaintiff's solicitor on the one hand and counsel on the other as to when counsel were informed of the fact there had been an "unless" order. The Plaintiff's solicitor says that it was on 11th December, whereas counsel say that they only knew of the "unless" order and its expiry well after 12th December. Whatever the state of counsel's knowledge, the Plaintiff's solicitor claims that he spoke to junior counsel over the telephone on 12th December. Junior counsel told him that the particulars had not been settled. They decided to ask the Defendants' solicitors for an extension of a day or two. They did not expect that that consent would be refused. Junior counsel is said to have a different recollection of this conversation as well, and it may be that he denies that this conversation took place at all. However, whatever the position was, the consent was not sought until 5.38 p.m. that evening, when a fax to that effect was sent to the Defendants' solicitors.

6. This explanation is contained in the Plaintiff's solicitor's 2nd affirmation. It is not entirely consistent with the explanation given in his 1st affirmation, which suggests that the failure to serve the particulars in time was "largely due" to the Plaintiff's difficulty in obtaining the information necessary to compile the particulars. That may have been the reason why the particulars could not have been drafted before 28th November. But it does not address at all the real point, which was why the "unless" order of 5th December was not complied with. Having said that, though, there is no reason why I should doubt the explanation given by the Plaintiff's solicitor in his 2nd affirmation, subject, of course, to the difference of recollection between him and counsel.

THE RELEVANT PRINCIPLES

7. In Samuels v. Linzi Dresses Ltd. [1981] 1 QB 115, Roskill L.J. (as he then was) said at p.126G-H :

"... a court has power to extend the time where an 'unless order' has been made but not been complied with; but that is a power which should be exercised cautiously and with due regard to the necessity for maintaining the principle that orders are made to be complied with and not to be ignored."

However, as Sir Nicholas Browne-Wilkinson V.-C. (as he then was) said in Re Jokai Tea Holdings Ltd. [1992] 1 WLR 1196 at p.1202F :

"In Samuels v. Linzi Dresses Ltd. the court did not give any direct guidance as to the approach to the exercise of the court's discretion in cases where a claim or defence has been struck out by reason of a failure to comply with an 'unless' order beyond saying that such discretion should be exercised 'cautiously'."

He went on at pp.1202F-1203B to give the guidance which Roskill L.J. had not given. He said this :

"Roskill L.J. referred to the analogous case where the question is whether a plaintiff's claim should be struck out for want of prosecution to which the principles laid down in Birkett v. James [1978] AC 297 applied. The first class of case considered in Birkett v. James is where the plaintiff has been guilty of 'intentional and contumelious conduct'. Disobedience to a peremptory order is 'generally' to be treated as contumelious conduct: Tolley v. Morris [1979] 1 WLR 592, 603, per Lord Diplock. Where there has been such contumelious disobedience not only the plaintiff's original action but also any subsequent action brought by him based on the same cause of action will be struck out : Janov v. Morris [1981] 1 WLR 1389. The basis of the principle is that orders of the court must be obeyed and that a litigant who deliberately and without proper excuse disobeys such an order is not allowed to proceed. The rationale of such penalty being that it is contumelious to flout the order of the court, if a party can explain convincingly that outside circumstances account for the failure to obey the peremptory order and that there was no deliberate flouting of the court's order, his conduct is not contumelious and therefore the consequences of contumely do not flow. ... In my judgment, in cases in which the court has to decide what are the consequences of a failure to comply with an 'unless' order, the relevant question is whether such failure is intentional and contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed."

8. Miss Audrey Eu Q.C. for the Plaintiff argues that these passages show that it is the litigant's conduct which has to be addressed as opposed to that of his solicitor. Note the words Sir Nicholas used : "a litigant who deliberately and without proper excuse disobeys such an order is not allowed to proceed", and "if a party can clearly demonstrate that there was no intention to ignore or flout the order ... , such failure to obey is not to be treated as contumelious". Accordingly, Miss Eu submits that since the Plaintiff was himself blameless for the failure to comply with the "unless" order, that failure to comply was not the result of intentional and contumelious conduct on his part but was due to the extraneous circumstances of his solicitor's conduct.

9. Were the matter free from authority, I would have rejected that argument. It would be tantamount to saying that a blameless litigant would always be able to avoid the consequences of his solicitor's failure to comply with an "unless" order, however deliberate that failure was and however much it constituted a defiance of the court's authority. That would be contrary to the approach usually adopted by the courts in other areas of litigation. Mistakes on the part of solicitors in the conduct of litigation are not generally regarded as justifying an extension of time. A litigant who is let down by his solicitor is usually left only with his claim for negligence against his solicitor.

10. However, the matter is not free from authority. In Tan Eddy Tansil v. P.T. Bank Pembangunan (Indonesia) Persero [1996] 1 HKC 231, Bokhary J.A. expressed the view that a failure by a solicitor to comply with an "unless" order should not adversely affect his client's interests if that can be avoided without injustice to the other party. Mr. Geoffrey Ma Q.C. for the 2nd, 3rd and 4th Defendants attacks that view as being contrary both to principle and authority. However, whether that attack on Tan Eddy Tansil is justified or not, I am bound by it, and I must apply it to the facts of this case if Bokhary J.A.'s view represented the view of at least the majority of the Court, and if it formed part of the Court's ratio decidendi.

11. There is no doubt that his view represented the view of at least one other member of the Court : at the conclusion of his judgment, Godfrey J.A. agreed that the appeal should be allowed "on the grounds stated" by Bokhary J.A. I was troubled for a while as to whether their view was part of the ratio decidendi, but in the final analysis I have no doubt that it was. A careful reading of Bokhary J.A.'s judgment shows that it was the only reason given for allowing the appeals. Although Bokhary J.A. spent some time considering the arguments of Miss Eu for the Plaintiff, those arguments were the arguments in favour of upholding the judgments being appealed. The fact that the arguments did not justify the judgments appealed from being upheld did not amount to the reasons why the judgments appealed from were set aside. It follows that the observations of Bokhary J.A. represent the law which I must apply.

THE APPLICATION OF THESE PRINCIPLES

12. The explanation given by the Plaintiff's solicitor for the failure to comply with the "unless" order completely exonerates the Plaintiff from any responsibility for that failure. The failure to comply with the "unless" order was due to outside circumstances when looked at from the Plaintiff's point of view, namely the conduct of his solicitor. For that reason, therefore, the Plaintiff's solicitor's failure to comply with the "unless" order should not deprive the Plaintiff of his right to litigate his claims against the 2nd, 3rd and 4th Defendants.

13. But even if, contrary to the view taken by the Court of Appeal in Tan Eddy Tansil, the focus has to be shifted to the Plaintiff's solicitor, what the Plaintiff's solicitor's explanation shows is that at most he adopted a relaxed attitude to the importance of serving the particulars in time. He gave counsel too little time to settle the particulars, and on his own version of events he did not even tell counsel until 11th December of the need to serve the particulars by 12th December. And even on his own version of what he claims was said in his telephone conversation with counsel on 12th December, he was unduly and unjustifiably optimistic about obtaining the Defendants' solicitors' consent to a further short extension of time. Although it can therefore properly be said that the Plaintiff's solicitor was seriously at fault, I do not think that it can be said that his failure to serve the particulars by 12th December was intentional and contumelious, in the sense that he intended to ignore or defy the "unless" order. He set out to comply with it, but he did not give it either the priority or the urgency which was required. Accordingly, even if the focus is on the solicitor's conduct rather than that of the Plaintiff, this is not a case in which the Plaintiff's solicitor's failure to comply with the "unless" order was intentional and contumelious, though I accept that on this analysis the failure to comply with the "unless" order was not caused by outside circumstances.

OTHER FACTORS

14. Miss Eu relied on a number of other factors, which she argued supported the conclusion that the Plaintiff should not be deprived of his right to litigate his claims against the 2nd, 3rd and 4th Defendants. They included the following factors:

(i) the delay in serving the particulars was very short, only two days;

(ii) the delay did not cause any injustice to the 2nd, 3rd and 4th Defendants; and

(iii) the Plaintiff's remedy against his solicitor would be inadequate because the Plaintiff cannot be fully compensated for the loss of his claim as he is seeking an injunction to restrain future infringements of his copyright.

I have not found it necessary to take those considerations into account. The passage in Sir Nicholas Browne-Wilkinson's judgment in Jokai Tea which I have cited suggests that the only question is whether the failure to comply with the "unless" order was intentional and contumelious. Parker L.J.'s approach had a different emphasis. He said at p.1206C :

"... there must be degrees of appropriate consequences even where the conduct of someone who has failed to comply with a penal order can properly be described as contumacious or contumelious or in deliberate disregard of the order, just as there are degrees of appropriate punishments for a contempt of court by breach of an undertaking or injunction."

However, I have not adopted Parker L.J.'s approach and taken the other factors relied upon by Miss Eu into account, because even without them, I have concluded, for the reasons I have already given, that this was a case in which the Plaintiff's time for filing and serving the particulars should be extended.

THE RELEVANCE OF THE MERITS

15. The skeleton arguments of Mr. Ma and Miss Eu addressed the merits of the Plaintiff's claim against the 2nd, 3rd and 4th Defendants. That is because of the rule that on an application to set aside a default judgment, it is necessary for the party in default to demonstrate by credible evidence that he has a real prospect of success. I question whether that principle has any application to the present case. The primary relief sought by the Plaintiff on his summons was for leave to file and serve the particulars despite the expiry of the time limit. It was in effect an application for an extension of time. That is apparent from the rule cited in the margin of the summons - Ord. 3 r. 5. Indeed, it is not without significance that the relevant principles which I have extracted from the judgment of Sir Nicholas Browne-Wilkinson are referred to in the Supreme Court Practice 1997, Vol. 1, in the commentary on Ord. 3 r. 5. Of course, if leave to file and serve the particulars despite the expiration of the time limit is given, the consequential order which the master would have to make would be the setting aside of the judgment and the order for the costs of the action. But the issue which Master Jennings had to decide was whether the Plaintiff's time for serving and filing the particulars should be extended. I am not convinced that the merits of the case are relevant to applications for an extension of time even if the consequence of the refusal of that application is that the action is prematurely brought to an end.

16. However, there are two reasons which convince me that the merits of the Plaintiff's claim have no relevance to the present case. Firstly, that is what Sir Nicholas Browne-Wilkinson himself said in Jokai Tea at p.1203C :

"... if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed."

In other words, once the failure to obey an "unless" order is not regarded as contumelious, the action should proceed as it would have done if the default had not taken place. After all, Sir Nicholas Browne-Wilkinson had already said that "the relevant question is" (and the use of the singular suggests that this is the only relevant question) "whether such failure is intentional and contumelious". That is borne out by the way Sir Nicholas dealt with the inter-relationship at pp.1201H-1202D between the application for leave to amend the Defence and the consequences of the failure to comply with the "unless" order. It is also borne out by the observations of Parker L.J. at pp.1205H-1206A. It is true that the merits were in fact taken into account in Jokai Tea, but only in connection with the concomitant question as to whether leave to amend the Defence should be granted. It is correct that the merits are not normally considered on an application for leave to amend but it was the complicating factor of the failure to comply with the "unless" order which triggered the need for the merits to be addressed on the application for leave to amend. It is also true that a default judgment had not been entered in Jokai Tea, but I do not regard that as significant because if time is not extended it is inevitable that judgment in default will be entered in due course.

17. Secondly, the principle that a party in default has to demonstrate by credible evidence that he has a real prospect of success has only been applied in the past to judgments entered in default against defendants. Again, it is not without significance that the principle is discussed in the Supreme Court Practice in the commentary on Ord. 13 r. 9, which gives the court power to set aside or vary any judgment entered as a result of the defendant's failure to give notice of intention to defend the action. I am not convinced that the rationale for the rule applies with equal force to defaults by plaintiffs. After all, save in the case of a plaintiff who has failed to serve a Statement of Claim, the nature of the plaintiff's claim is known, whereas the defence of the defendant who has not given notice of an intention to defend is not.

THE SUFFICIENCY OF THE PARTICULARS

18. Mr. Ma complains about the sufficiency of one of the particulars pleaded against the 3rd Defendant. The pleaded allegation is as follows :

"Each of the acts complained of against the 2nd Defendant was instigated, directed, counselled and procured to be done by the 3rd Defendant who thereby renders himself personally liable together with the 2nd Defendant."

The particulars sought were particulars of all facts and matters relied upon to support that allegation. The particulars served read as follows :

"The Plaintiff will rely on the fact that the 3rd Defendant was at all material times one of the two directors of the 2nd Defendant, the lyricist and the performer of the Infringing Song. In such capacities and in particular as a director, the 3rd Defendant personally instigated, directed, counselled and procured the 2nd Defendant to commit the acts complained of."

19. Mr. Ma argues that this is no more than a bald re-statement of the pleaded allegation. My initial reaction was that that was correct, and that the sufficiency of the particulars given were only capable of being justified by reference to the proviso in the Amended Statement of Claim :

"The Plaintiff is unable, prior to discovery and/or interrogatories, to give full particulars of all the wrongful acts of the Defendants but will seek relief in respect of such acts."

However, Miss Eu has persuaded me that the particulars given are sufficient. The allegation in the particulars is that the 3rd Defendant instigated, directed, counselled and procured the 2nd Defendant's acts of copyright infringement by doing two things : by writing the words of the infringing song, and by performing the song. Those are the acts of infringement, direction, counselling and procurement alleged. That is sufficient to dispose of the argument that the particulars given did not comply with the order for particulars.

20. In the interests of completeness, though, I should add that Mr. Ma argued that the original allegation as pleaded and the particulars provided do not plead a sufficient cause of action against the 3rd Defendant. He relied on what Litton V.-P. said in Green Cartridge Co. (Hong Kong) Ltd. v. Canon Kabushiki Kaisha [1996] 2 HKC 180 at pp.202I-203A :

"... the mere fact that a director gave instructions for an act which turned out to be tortious would not, by itself, be sufficient to establish liability. There must be something more : for example, he knew that it is likely to be tortious, and nevertheless directed the infringing acts to be performed, making it his own."

However, it is pleaded against the 3rd Defendant that he knew that the acts complained of were tortious. That allegation is contained in para. 4 of the Statement of Claim, which reads :

"Insofar as is necessary, the Plaintiff will rely on the Defendants' knowledge at all material times that the making of recordings of the Infringing Music constituted or would have constituted an infringement of the copyright in the Musical Work."

THE COSTS BELOW

21. Finally, Master Jennings ordered the Plaintiff to pay the costs of the 2nd, 3rd and 4th Defendants on the summons on a common fund basis. However, he made one exception to the generality of that order. He ordered the 2nd, 3rd and 4th Defendants to pay the Plaintiff's costs of the hearing on 15th May on a party-and-party basis. The 2nd, 3rd and 4th Defendants appeal against that part of the order which required them to pay the Plaintiff's costs.

22. The basis of Master Jennings's order was that in correspondence marked "Without prejudice save as to costs", the Plaintiff's solicitors had agreed to pay all the Defendants' costs if the judgment was set aside. The sticking point related to whether the judgment against the 3rd Defendant should be set aside as well. Since the Plaintiff won on that issue before him, Master Jennings took the view that the Plaintiff's costs of the hearing should be paid by the 2nd, 3rd and 4th Defendants, because the hearing would have been unnecessary but for the insistence on the part of the 2nd, 3rd and 4th Defendants that the judgment in favour of the 3rd Defendant should stand.

23. Although I see the force of the argument which appealed to Master Jennings, he should have awarded the 2nd, 3rd and 4th Defendants all of their costs on the summons. The failure to comply with the "unless" order meant that the Plaintiff had to apply for an extension of time. The Plaintiff was seeking the court's indulgence. That was a privilege for which he had to pay. The fact that Master Jennings set aside the judgment against the 3rd Defendant as well does not mean that the costs of that hearing had to be borne by the 2nd, 3rd and 4th Defendants, even though the hearing only became necessary because of the stance taken by the 2nd, 3rd and 4th Defendants on the judgment in favour of the 3rd Defendant.

CONCLUSION

24. For these reasons, the appeal of the 2nd, 3rd and 4th Defendants from Master Jennings's order of 15th May must be dismissed, save that I set aside his order that the 2nd, 3rd and 4th Defendants pay the Plaintiff's costs of the hearing on 15th May, and I direct that the Plaintiff pays the costs of the 2nd, 3rd and 4th Defendants of the hearing on 15th May on a common fund basis. I shall now hear the parties on the costs of the appeal.