SAM FAI CONSTRUCTION CO LTD v. YAT MING CONSTRUCTION & ENGINEERING LTD AND ANOTHER

HCCT 64/2020

[2022] HKCFI 1612

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 64 OF 2020

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D E C I S I O N

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1.  This is yet another case in which parties appear only to engage in a flurry of activities on the eve of trial, upon last minute preparations and review of their respective case when trial is imminent.

2.  These proceedings were commenced by the Plaintiff against the 2 Defendants by Writ and Statement of Claim issued in September 2020.  The Plaintiff as contractor for concrete works and plastering works (“Contract Works”)  claims against the 1^st Defendant as the alleged Main Contractor for superstructure works in a project on Henderson Road, Hong Kong (“Project”). The Plaintiff claims that the 2^nd Defendant was the 1^st Defendant’s agent in respect of the Contract Works.  In these proceedings, the Plaintiff seeks payment from the Defendants of a sum of $3,615,324.37 claimed to be outstanding in respect of the Contract Works carried out.

3.  The 1^st Defendant admits to being the Main Contractor for the Project, and claims that it had subcontracted the Main Contract works to the 2^nd Defendant.  The 2^nd Defendant engaged the Plaintiff to carry out the Contract Works.

4.  As early as 22 April 2021, this Court issued directions at the case management conference (“4/21 Directions”), on the parties’ consent application. These directions included the filing and service of witness statements by 10 June 2021, and for single joint expert (“SJE”)  evidence to be filed on quantum. Questions were framed to be answered by the SJE, for amounts payable by the Defendants to the Plaintiff for the Contract Works, and for alleged additional works and day works claimed in the SOC.  The directions included the manner of appointment of the SJE, and for joint instructions to be prepared and finalized for the SJE, within 21 days. The parties can be under no uncertainty as to the substance of and timetable for the instruction and filing of the expert evidence.  Such directions were proposed to the Court, jointly, by the parties themselves.

5.  In accordance with the 4/21 Directions, the case was set down for trial, with dates given in May 2021, for the trial to commence on 20 June 2022.

6.  Discovery was made by the parties in the course of 2021, with lists of documents filed by each side. However, no steps were taken for the service of witness statements, and it was only in January 2022 that the Plaintiff applied for leave to serve its own witness statements and for an unless order to be made by the Court for the Defendants’ service of their witness statements. Trial was already 5 months away. Expert evidence obviously cannot be finalized until witness statements on facts have been exchanged, as to the factual matters relied upon by the Plaintiff for its claims, and by the Defendants by way of defence.

7.  On 16 February 2022, this Court ordered witness statements to be filed and exchanged by 9 March 2022.

8.  The parties had throughout been represented by lawyers, but on 7 January 2022, the Defendants’ solicitors ceased to act. The Defendants claim that they required time to engage a new team of lawyers due to this “involuntary change”.

9.  Further activities then began. The Plaintiff applied on 1 March 2022 for leave to amend the SOC and made discovery of additional documents on 9 March 2022 by filing a Supplemental List.

10.  It was only on 14 March 2022 that the parties made joint application to the Court for appointment of the SJE, when the appointment and instructions to the SJE had already been the subject matter of the 4/21 Directions, and the time for doing so had already expired. The Court queried the late instruction of the SJE and sought explanation from the parties as to the impact of the late instructions to the expert on the milestone dates of the PTR and trial.

11.  By the time of the hearing of the pretrial review on 21 April 2022 (“PTR”), there were at least 4 outstanding applications made by the parties: the Plaintiff’s application for leave to amend the SOC (“Amendment Application”); the Plaintiff’s application for specific discovery against the Defendants (“Specific Discovery Application”); the 2^nd Defendant’s application for leave to adduce additional expert evidence on quantum (“Expert Evidence Application”); and the 2^nd Defendant’s application to strike out the Plaintiff’s Supplemental List of documents filed on 20 April 2022 (“Supplemental List Strike Out Application”).  The Supplemental List Strike Out Application was made on the basis that the Supplemental List was served late, without leave of the Court, and without justification shown for the new and additional documents produced. The Defendants indicated at the hearing of the PTR that a further application by the 2^nd Defendant for leave to adduce expert evidence would be issued.

12.  As the Court had queried before the PTR, on 11 April 2022, the parties did not appear to be ready for trial to commence on 20 June 2022. According to the parties, the instructions to the SJE had not been sent in April 2022, expert evidence could not be finalized before the Defendants’ application to adduce further expert evidence is determined, a Scott Schedule had to be prepared in good time before trial, and the Scott Schedule had to be delayed until the pleadings are finalized and the expert report is issued. It was against such background that this Court was not prepared to decide the Amendment Application piecemeal and separately to the matters to be considered at the PTR.

13.  Needless to say, the delay in the making of all these late applications 9 weeks before trial must be explained with good reasons.

14.  At the PTR, Counsel for the Plaintiff confirmed that the Amendment Application would be withdrawn. The Court ordered the remaining outstanding summonses to be adjourned for argument, together with any application for adjournment of the trial, but Counsel for the parties could not even agree on a date for the hearing before the commencement of trial.  Ultimately, the Court directed paper disposal of the outstanding applications.

15.  After the hearing of the PTR, the Defendants issued on 10 May 2022 a summons to strike out specific paragraphs of the Plaintiff’s witness statement (“Striking Out Witness Statement Application”), on the ground that it dealt with unpleaded claims, and a summons to adjourn the trial (“Adjournment Application”). The Defendants also issued a summons on 11 May 2022 for expert evidence to be adduced on issues of defect and delay referred to in the pleadings.  The Court did not permit the Striking Out Witness Statement Application to be included in the direction for paper disposal, as it was a new matter not contemplated at the time of the PTR.

16.  Directions were finally issued on 17 May 2022 for written submissions to be filed by 23 May 2022 for paper disposal of the Specific Discovery Application, the Expert Evidence Application (including the application by summons issued on 11 May 2022), the Supplemental List Striking Out Application and the Adjournment Application.

17.  The essential question is the impact of these applications on the trial dates.  As such, they will be considered conjunctively, rather than individually and separately without regard to the others.

18.  Needless to say, with the imminent trial dates, it is for the applicants to justify the delay.

19.  The Defendants’ change of legal team in January 2022 is clearly not a good reason for their delay and inactivity. This is trite. The legal advisers’ failure in April 2021 to obtain directions for expert evidence on the relevant issues of quantum for the Counterclaim, defect, programming and delay as raised in the pleadings (as this Court pointed out at the PTR)  is no excuse for the Defendants’ late applications in April and May 2022 for the missing and necessary leave. If the Defendants have a claim against their own legal advisers, that is for them to pursue.

20.  There is no excuse whatsoever in this case for any of the summonses to be issued only in March, April and May 2022, when the directions had been issued on 22 April 2021 in respect of the trial dates which were fixed in May 2021, for trial to commence on 20 June 2022.  No explanation whatsoever has been given by either party as to why witness statements had been deferred and were only exchanged in March 2022.  On the Plaintiff’s own case, it was only in January 2022 that it sought to file its own witness statements and applied for an unless order in respect of the filing of the Defendants’ statements. Under the 4/21 Directions, witness statements should have been exchanged by 10 June 2021.

21.  There was no reason whatsoever why the instructions to the SJE could not and were not finalized in the interim between April 2021 and April 2022. The Plaintiff’s solicitors claimed that the appointment of the SJE was only agreed on 3 March 2022, and that the Defendants’ comments on the joint instructions were received on 11 April 2022.

22.  If the Defendants had delayed the progress of the action in whatever way, the Plaintiff cannot sit idly by and condone such inactivity, unless it was itself procrastinating, or had no genuine intention to proceed with the trial in June 2022. The Plaintiff should have pressed for action to be taken by the Defendants and could have obtained from the Court orders for the instructions to be sent to the SJE in good time before early 2022, which was when the parties finally decided to commence preparations.  5 months (from 25 January 2022 when the Plaintiff applied for the unless order for the filing of witness statements to 20 June 2022)  cannot be said to be adequate time to finalize the witness statements on facts, and to collate the necessary materials to finalize the instructions to the expert, for an expert report to be prepared and issued in good time before the commencement of trial. The PTR was scheduled for 21 April 2022, and witness statements and expert reports should have been ready by then at the very latest.

23.  The summonses issued by the parties were all inexcusably and unduly late, with serious and disrupting effect on the milestone dates.  In my view, both parties were guilty of inordinate and inexcusable delay.

24.  The Plaintiff abandoned the Amendment Application because of the Court’s concerns on the impact of the application on trial, and the Amendment Application was dismissed at the PTR on 21 April 2022. Since the hearing on 21 April 2022, the Plaintiff further indicated that it would withdraw the Specific Discovery Application. It was on that basis that the Plaintiff claimed that it was ready for trial, but for the Defendants’ late applications.

25.  The more substantial applications are the Defendants’ summonses for leave to adduce expert evidence on issues of the amounts payable to the Defendants on their counterclaim, on defects, and on delay.  The expert evidence on quantum depends on expert evidence on whether the Plaintiff had used the wrong material for the drainage work, which allegedly necessitated a change in design and amendment of the drawings for approval.  According to the Defendants’ case, these caused a delay of 3 months and necessitated additional site expenses and contra charges, resulting in damages being sustained by the Defendants, including their liability to indemnify the employer for liquidated damages. All these were pleaded in paragraphs 42 to 44 of the Defence and Counterclaim.  As such, expert evidence on whether the Plaintiff had used the wrong materials, whether delay was caused as a result, and what damages and additional costs resulted, are relevant issues, on which expert evidence is required. The Defendants highlighted the fact that a director of the Plaintiff had admitted in contemporaneous correspondence that the wrong materials had been used as a result of his inadequate supervision, and that they have strong merits on their Counterclaim.

26.  It is true, as the Plaintiff sought to emphasize, that for reasons not explained, the Defendants’ legal advisers had not, when applying for the 21/4 Directions on expert evidence, sought directions for expert evidence on these issues of defect and delay to be included. Yet, I accept the submissions of the Defendants, that without the necessary expert evidence on liability for the defects, on whether the alleged defects had effect on the program of works, and on assessment of the reasonableness of any additional costs incurred, the Court will not be in a position at trial to decide on the defence and the Counterclaim.

27.  Whilst the Court does not condone the delay in this case, I agree with Counsel for the Defendants, that the Court must bear in mind and pay heed to its primary objective and aim in exercising its powers, which is to secure the just resolution of disputes in accordance with the substantive rights of the parties. To refuse leave to adduce the additional and necessary expert evidence sought by the Defendants would gravely affect the just resolution of the substantive rights of the Defendants. It would also seriously hamper the Court from making the necessary findings on the disputed issues in this case.

28.  For these reasons, I accede to the Defendants’ Expert Evidence Application (which includes the applications by summonses of 13 April 2022 and 11 May 2022). In my view, this necessitates the adjournment of the trial, as the parties obviously need time to instruct the SJE on defects and programming, and for all the expert reports to be prepared before trial, which cannot sensibly be done in the remaining 3 weeks.

29.  I will give the parties 21 days to confer and agree on the directions for SJE evidence on quantum, defect and delay, and to submit these directions for the Court’s approval by 4 pm on 21 June 2022.

30.  The delay in the instructions to the expert was mainly caused by the delay in the exchange of factual witness statements. Both parties cannot be excused for either the delay in the exchange of witness statements or the delay in the instructions to the expert. The Plaintiff’s last minute withdrawal of the Amendment Application and the Specific Discovery Application do not alter the overall situation of the disruption in the preparations for trial and the parties’ lack of readiness for trial to commence on 20 June 2022.

31.  As for the Supplemental List Strike Out Application, I agree that for last minute discovery which is not done by way of consent, a party has the burden to provide to the Court a good and credible explanation, by affidavit, as to why the documents had not been disclosed earlier, and why the documents are said to be relevant to the issues before the Court, stating the provenance and identifying the makers of the documents, with an indication as to whether the maker is available to attend Court for cross-examination, and if not, why not. The applicant must also satisfy the Court that the late document will not cause any prejudice to the other side, and that the trial will not be unduly disrupted by the late production of documents (see Big Island Construction (HK)  Ltd v Wu Yi Development Co Ltd HCA 1957/2005, 22 February 2010). The continuing obligation of discovery does not excuse the Plaintiff from the need to satisfy the Court of any of the foregoing.

32.  When the Plaintiff’s Supplemental List was served on 9 March 2022, there was no affidavit to explain the late production of the documents, or the provenance and relevance of the documents, and how they are sought to be relied upon by the Plaintiff’s witnesses in their evidence.  It was only when the Supplemental List Strike Out Application was made on 20 April 2022, that the affidavit of the Plaintiff’s solicitor was filed on 28 April 2022.

33.  I bear in mind that the trial dates have to be vacated now.  Since the Plaintiff’s solicitor has, in the affidavit of 28 April 2022, explained the nature and relevance of the new documents, in the exercise of my discretion, I will allow the Supplemental List to stand, but without prejudice to the Defendants’ right to seek further discovery or information relating to the documents now disclosed, or to seek to file further evidence in response thereto.

34.  The essential question which remains is liability for the costs of the adjournment of the trial.

35.  Bearing in mind my views on both parties’ apparent procrastination, the orders nisi I make on costs are as follows:

(1)  The costs of and the withdrawal of the Specific Discovery Application be paid by the Plaintiff to the Defendants;

(2)  The costs of and occasioned by the Expert Evidence Application be paid by the Defendants to the Plaintiff;

(3)  The costs of and occasioned by Supplemental List Strike Out Application be paid by the Plaintiff to the Defendants; and

(4)  50% of the costs of, occasioned and thrown away by the Adjournment Application be paid by the Defendants to the Plaintiff and 50% be borne by the Plaintiff.

36.  All costs orders will include certificate for Counsel, and shall become absolute unless application for variation is made within 14 days.

37.  A date shall forthwith be fixed for a case management conference to review the status of the proceedings, before new trial dates are to be fixed.